The German Health Ministry made a big splash in October, from news of floated leaks to interviews about the recreational path to the initial 15 page filings. Nothing happens overnight for cannabis, but there is plenty to talk about and forecast.
Moving forward with cannabis legalisation isn’t just the will of German politicians or even the health ministry; it’s about European Union rules and, to some extent, United Nations rules.
Germany has taken another big step and seems committed to the legalisation process. All of Europe is listening — especially as this is the first hurdle — to hear what the EU will say.
Cannabis entrepreneurs are weighing the current proposal, which is likely to change before being finalised. Even countries like Czechia are jumping ahead with their own proposals.
High-cost cannabis
Germany seems intent on creating a German seed-to-sale industry, and it sounds expensive for entrepreneurs. It is unclear if Germany will require strict pharmaceutical GMP regulations.
Still, smart money says the German Health Ministry isn’t going to sacrifice safety and quality for consumers. CBD and hemp have had enough issues in Europe passing under the novel foods GMP and GACP regulations, so the likelihood of cannabis pharmaceutical GMP rules is high.
Read more: Germany recreational cannabis winners and losers
Accordingly, anticipate a long time for products to enter the market. Currently, there are only three medical licenses in Germany with a very small collective footprint.
German rules to build a growing facility are high-cost requirements resembling the construction of Fort Knox. There are also strict fire codes and high costs to build that take time for approvals and time to finish. If that wasn’t bad enough, all expenditures from labor to electricity are uber high in Germany compared to southern and eastern European countries.
In order to accomplish internal self-sufficient growing, the electrical needs would be comparable to powering a city in Germany, thus the proposal that only renewables be used to power cannabis. When you wrap this all together, you’re looking at the most expensive place on the planet to grow cannabis, perhaps second in Europe to only Denmark, currently.
Time to develop infrastructure
The time it takes to get products into the market is a major factor of success. For pharmaceutical-GMP-accepted flower to reach the market, it can take a minimum of three and a half to five years from the day you decide to go forward. Even if you are an experienced cannabis builder, it will take two years from the day you start planning your project to get it permitted and built.
For new cannabis entrants, plan for closer to three years, assuming there are no problems. Then from the day you open to when you certify your grow and then certify your products, it will take a minimum of 18 months under pharmaceutical GMP standards.
Unlike the United States, where your product can be sold as soon as it is made, stability and validation of GMP-processed flower takes a long time. When you add all the time in, there will most likely be a significant shortage of product for the first four to five years while the first grows come online.
Assuming the supply of biomass will exist, extracts and all the other products are limited to the pharmaceutical mains like drops, sprays, gel capsules and even non-pharma vapes. This is an excellent start. And manufacturers actually could come before a robust flower market because extract manufacturers can start from GACP flowers rather then wait on GMP flower biomass. And for sure, more products will come with time.
Retail
Retail-style dispensaries and social clubs like the Netherlands coffee houses, Zurich and Malta social clubs, or the Vegas dispensary lounges are a very avant-garde approach by the Germans. If we can get past the shortage of products for the first years, brick-and-mortar establishments will increase access for retail consumers, address the social aspects of cannabis and make a successful challenge to the illicit market.
Online sales and delivery are rumoured in Germany, which would all but ensure a robust and competitive market landscape with a total cannabis experience for consumers. Undoubtedly, retailers, lounge groups, and the tech world will be lining up to position models into the newly minted “California of Europe.”
The problem
Germany has made a great step but could improve in many areas if the goal is to control the illicit market.
High-cost cannabis that will take four or more years to develop the basics will not be a winner for the German market. The decriminalisation of possession encourages people to seek lower-cost flower since there are no penalties. Additionally, the illicit market is likely to have the best strains for the next five to seven years with a slow rollout of grow infrastructure.
Additionally, concentrates, edibles, drinks and the many other cannabis products sold in the U.S. and Canada make up nearly two-thirds of sales. This helps push consumers to the legal market since there isn’t a booming illicit extracts market.
People generally trust labeled brands and products they have heard about when consuming these products. If flower and basic pharma products roll out slowly over the years, retail will suffer in the early days, and again, the illicit market will take advantage of the gaps. Vapes being the hands-down winner out of all of this.
The solution
There are solutions, since the EU is a borderless society developed on the premise of the free exchange of products and people.
GMP cultivators have been growing in places like Portugal for years and are developing better genetics daily. The lower-cost and high-quality producers would speed up adoption for Germany and ensure cannabis will compete with the illicit market. Almost every country will follow the German lead once the EU rules on Germany’s programme.
Consequently, without question, borders will go away naturally as the EU and UN change their rules. High-cost cannabis will only work for small craft growers — not an entire country or economy — so like most products consumed by Germans, “made in Germany” hasn’t and will not be the winner over time because it’s too expensive, and sticking to that will only increase illicit markets.
Let’s see what the EU says before we pass judgment if Germany pivots to accepting sales from within the EU. There are no doubts Germany is starting a brush fire with cannabis legalisation and that all eyes are on the EU rulings for these rules. Nothing is expected to be finalised until the end of 2023 at best.
However, you can be sure cannabis entrepreneurs around the globe are jockeying for positions in one country market and the 26 more that will follow. Evolution takes time and patience, but you cannot race if you don’t hear the gun at the starting line. Germany has called us to that starting line.
