Michael Sassano, CEO of SOMAÍ Pharmaceuticals Unipessoal LDA, shares his thoughts on recreational cannabis reform in Germany.
Leaks of the long-awaited first draft of Germany’s recreational cannabis reform have set the EU cannabis industry abuzz with just a few bullet points from the German Health Ministries Narcotic Drug Commissioner Burkard Blienert’s desk.
Cannabis advocates will be celebrating cannabis decriminalisation. It’s early, and legalisation takes time and delicate political steps, but this is undoubtedly a positive start.
However, if one of Germany’s main objectives was to combat the unregulated market, the country may have missed the mark on the first go-around.
Read more: Leaked report reveals draft German cannabis legalisation plans
Who wins big in Germany’s recreational cannabis push?
Cannabis justice advocates
The biggest winner is social justice. Possession and buying cannabis are proposed to be exempted from punishment for up to 20g of cannabis flower.
Proponents for underage protections
Although the legal consumption age will be 18, younger people will not be punished for cannabis use and may be subject to recommendations to the youth welfare office for some prevention courses if caught using cannabis underage. In addition, there are protections for schools and youth centers preventing cannabis from being sold within a certain distance.
Home growers
There is a small window for private growers who are allowed to cultivate two cannabis plants. Although two plants are insignificant, it is still a win for those wishing to grow the cannabis plant.
Online cannabis retailers, in-person dispensaries, lounges and clubs
Online sales look to be a logical step to increase the reach of legalisation and benefit the consumers with ease of transfers. An additional benefit to German consumers is that there are likely to be brick-and-mortar dispensaries specialising in cannabis that may even have the social aspect of lounges or private clubs.
Germany will soon join a small list of countries that have decriminalised cannabis use and acknowledge that one of the main goals is to control the illicit market. However, it turns out that the unregulated market has inadvertently become the bigger winner.
Who is left hanging post-legalisation?
THC caps leave consumers wanting
THC levels will be capped at 15 per cent, and for consumers 18 to 21 years old, the cap is 10 per cent. These caps have proven ineffective in other developing markets in curbing the illicit market. There is already little interest in 15 per cent and under strains and varieties of cannabis in mature legal markets.
There is even less interest in consuming 10 per cent maximum THC cannabis genetics. States in the US that attempted THC curbs have not grown like other states that have no curbs and a variety of products.
Even in contemporary European medical cannabis, the market demands 25 per cent+ THC flower, just like all other developed markets. These curbs will only extend the unregulated-market dominance as people seek out the more desirable strains. Consumers will then have a choice of buying recreational low-THC flower, getting the higher THC flower from the medical side through a prescription or paying an even lower price and continuing to buy from the unregulated market since all possession under 20g is not punishable.
Rug pulled out from under EU cannabis players
The large cannabis grows outside of Germany have also lost. Germany is taking the approach of only selling flower cultivated in Germany. With only three licenses issued to date and minimal current canopy, there will need to be an investment in expanding the German cultivation.
Portugal, as an example, is home to Tilray and has 20 operating licenses, three of which are entirely European Union-GMP and will only be able to sell to the medical market. Even recently, Tilray announced big plans for the recreational market, which now look like dismal prospects. To make matters worse, it´s doubtful investors will have an appetite to invest in German infrastructure if the product caps are not highly desirable, nor will significant revenues be derived. To some extent, this was expected since UN and EU regulations need to be revised to accept legal adult use of regulated narcotics.
The illicit German cannabis market will continue strong
There are mixed feelings about how these rules may play out for the proliferation of cannabis and competing with the illicit market, assuming investment is made into growing locally low-THC products. Global medical cultivators would definitely continue to produce the higher level of THC strains while local growers would try and limit expensive techniques to produce simple low THC strains that probably wouldn’t require things like supplemental lights or advanced nutrients.
Online sales could easily be the elephant in the room for distribution, which would most likely only require a website and delivery service plugins. Would WeedMaps plus Uber or any of the many deliveries service in Germany be the winning model? Will the tech community create multiple websites that compete locally or country-wide? The jury is out on how online businesses will navigate.
Dispensaries and social clubs will also be capital constrained as the low caps will not be heavily in demand. CBD stores have seemingly done well so investors may lower their return expectations with hopes of changes later. There are certainly questions about winners and losers, but it’s hard to imagine the unregulated market not being happy.
Regardless of stumbles, German market still looks promising
All and all, this is very positive for cannabis and the fight to decriminalise its use. Germany is taking a bold and meaningful step to right the wrongs with cannabis. Whether medical or recreational, Germany still leads the way in the EU.
More and more countries will follow over time, and the rules will adapt. Most of these negatives will turn into positives eventually, and borders will not be an issue. Germany will undoubtedly pivot to changing United Nations and EU regulations that have prevented further legal progress and begin the slow but sure continent-changing process.
Michael Sassano
CEO
SOMAÍ Pharmaceuticals Unipessoal LDA
