Election results claim first victims
The results of the German election are already having a ripple effect throughout the market, with the shift in attitudes towards cannabis reform making it a far riskier investment.
It comes just days after the Christian Democratic Union (CDU), which has stated its intention to crack down on the industry and even repeal the country’s newly established liberal cannabis laws, received the most seats in Germany’s federal election.
Yet, with the CDU required to form a coalition with another party to form a government in the coming weeks, it remains unclear whether it will have the political capital to enforce these campaign pledges.
However, the shift in rhetoric has already impacted a number of both domestic and international companies moving into the market.
Today, Cannovum Cannabis AG, which had shifted its business model away from medical cannabis towards the promise of a fledgling adult-use market, announced that it had now entered into liquidation.
In a short update to investors this morning, the German listed company said the ‘implementation of the strategy pursued by Cannovum’ is now ‘a distant prospect’, impacting investments in the company.
The shareholders in Anbau-Allianz für Deutschland GmbH, a collective aiming to supply Germany’s cultivation associations in which Cannovum owns a majority stake, have ‘therefore decided to initiate the liquidation of this company’.
Furthermore, it is also looking to sell its stake in its sister company Cannovum Health eG in the first half of this year.
It attributed this directly to ‘political decision-makers in Germany’ who have ‘not yet been able to bring themselves to fully legalise recreational cannabis as in other countries’.
“Due to the associated uncertainty about future developments, it is to be feared, especially after the Bundestag elections, that small steps already taken towards the legalization of recreational cannabis could be frozen or even reversed.”
International companies also pull away
Canadian cannabis giant High Tide has announced that its entrance into the German market has been ‘paused’ indefinitely.
Meanwhile, US hemp and CBD retailer CBD of Denver has also announced that it is ‘shifting its focus and will no longer seek to provide services to the German cannabis market’.
While only the latter has explicitly cited the current political situation as a reason for its change of plans, both come just days after the results of the German federal election.
Last month, High Tide announced that it had acquired a 51% stake in Purecan GmbH, a German pharmaceutical wholesaler with established supply chains throughout the country and a license to import medical cannabis.
The €4.8 million acquisition marks the company’s entrance into the thriving German medical cannabis market.
Its CEO, Raj Grover, told Business of Cannabis at the time that this was already a pivot away from its original plans due to the turbulent political landscape in the country.
Initially, it had hoped to break into Germany’s adult-use market, but given the rhetoric and political will quickly moved away from expanding the adult-use market beyond its existing, restrictive state.
As such, Grover explained that its acquisition of PureCan forms part of its ‘secondary strategy’ to break into the medical market.
When the German government collapsed late last year, this ‘impacted (the company’s) initial plans’ to capitalise on its retail experience and enter the market via physical retail locations.
However, in a brief market update earlier this week, High Tide announced that during ongoing due diligence, the company has now ‘reassessed the optimal structure for this transaction’ and is now exploring alternative arrangements with Purecan.
While it says it ‘continues to be committed to the German medical cannabis market’, and will explore other points of entry both with and without Purecan, it cautions that there is ‘no certainty that an alternative arrangement with Purecan will proceed’.
Last year, CBD of Denver also announced its intention to expand its European footprint into Germany via its Luxora cultivation equipment brand, hoping to sell equipment to hopeful cultivation associations.
However, given the results of the election and a lack of clarity around the future of its 9-month-old cannabis liberalisation programme, it announced this week that it was shifting its focus away from the territory.
It cited the ‘complexities of navigating political uncertainties’ and the government’s ‘failure to guide acceptable business models’.
“2024 was a year of hard lessons, particularly in Germany, where political uncertainties and bureaucratic roadblocks derailed our plans,” said Jan Schwager, CEO of CBD of Denver.
“We remain committed to leveraging these experiences to refocus on markets and opportunities with greater potential.”
