As Canada works out how to deal with calls from its southern neighbour to become the 51st US state, it is expanding its own invasion on a very different front.
Canadian cannabis’ dominance in the European market is stronger than ever, and the financial returns from some of its biggest players make it easy to see why.
But as operators turn to Europe to escape the saturated and intensely competitive domestic Canadian market, could this flood of cheap, high-quality cannabis into Europe simply export the problem?
Last year, industry giants Aurora Cannabis and High Tide posted impressive earnings thanks to their expansion efforts. Now, both companies are hoping to strengthen their foothold in the European market, betting that its appetite for Canadian cannabis will remain insatiable.
We spoke with High Tide CEO Raj Grover and Aurora CEO Miguel Martin to discuss their plans, and their outlook for the future of this supply chain.
The state of the Canadian cannabis market
Having been one of the first countries to legalise medical cannabis in 2001, and having become the largest country to legalise adult-use cannabis federally in 2018, Canada represents perhaps the most mature market on the planet.
Canada has also played a vital yet often overlooked role in the ‘seeding’ of medical cannabis markets around the world since the implementation of the Marihuana for Medical Purposes Regulations (MMPR) in 2014.
As such, Canadian cannabis has always had a presence in European markets, and ten years later, most countries continue to receive a significant portion of their market supply from Canadian producers.
Numerous factors are now supercharging this dynamic, seeing Canadian medical cannabis exports in the first six months of 2024 nearly double.
Meanwhile, domestic sales have been under pressure, declining by nearly 13% in the last financial year, according to Prohibition Partners’ latest Global Cannabis Report.
As the European market has grown over the last few years, both in terms of size and in its acceptance of cannabis, Canadian producers have increasingly looked towards it to secure better margins and less competition, aided by many producers existing adherence to EU GMP standards.
European growth
One of the key benefactors (and instigators) of this has been Aurora, which reported total net revenue of C$88.2 million in its latest quarter, a 37% increase year-over-year.
It also reported a record net income of C$31.2 million, marking a 282% increase from the prior year, and achieved a record adjusted EBITDA of C$23.1 million, up 316% year-over-year.
This growth was primarily driven by a 51% surge in global medical cannabis revenue, which reached C$68.1 million and accounted for 77% of the company’s consolidated net revenue.
“Much of our growth—if not all of it—has come from Europe and Australia,” Martin told Business of Cannabis.
“Our three primary markets in Europe, moving west to east, are Poland, Germany, and the UK. Australia is also a major market for us.”
Asked whether he expected this level of growth to continue, Martin said that while they may not maintain the same levels of seen in 2024, he expects ‘all of these markets to continue growing.’
“Right now, less than 1% of the adult population is part of the medical system, which means there’s still significant room for expansion. As long as the industry moves forward in the right way—and we certainly intend to do it the right way—companies like ours will be well-positioned to navigate and succeed in these markets.”
Aside from the higher margins it can achieve selling into the European medical market, avoiding Canada’s hefty tax levy, Martin points out that operating in a ‘highly conservative medicinal pharmaceutical model’ like medical cannabis means Aurora is less affected by market fluctuations.
Its Canadian stablemate, High Tide, has been less involved in the European market to date, but it’s working on changing that quickly.
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, explained, “It has been two years in the making, as we’ve explored different entry points into the lucrative German market.”
High Tide also had a standout year in 2024, solidifying its position as Canada’s top revenue-generating cannabis company for the third consecutive year.
However, unlike Aurora, its growth was largely found in the domestic adult-use market via an aggressive retail expansion, opening 29 new Canna Cabana stores in 2024.
Initially, it had hoped to break into Germany’s adult-use market, but given the rapidly shifting political landscape, it appears this is significantly delayed, if not entirely off the table.
As such, Grover explained that its acquisition of PureCan forms part of its ‘secondary strategy’ to break into the market.
“At our core, we are retailers. Our primary business is brick-and-mortar cannabis retail, with 191 operating stores across Canada. Our main goal was to enter Germany through physical retail locations.
“However, the German government collapsed, impacting our initial plans. In response, we have partnered with a reputable academic institution in Germany and engaged professors to assist with a research pilot project.
“This research initiative serves as our secondary strategy for entering the German market, and we find ourselves well-positioned within this evolving value chain.”
Stay with Business of Cannabis for part two of our deep dive into Canadian cannabis in Europe, set to be published in the coming days.
