GERMAN medical cannabis operator Cannovum Cannabis AG announced on Friday that its Cultivation Alliance for Germany (Anbau-Allianz für Deutschland), first announced in February, had now seen its founders sign a contract for its establishment.
Though this alliance is squarely targeting products and services for Germany’s upcoming cannabis club operators, Cannovum says it now believes that ‘scalability and focus in the medical market is really important’.
Its CMO Klaus Madzia told Business of Cannabis: “It’s going to be a year, probably a year and a half, before substantial revenue is going to be generated through regulation of cannabis. So, that puts pressure and focus on the medicinal side.”
Renewed focus on medical industry
Cannovum, like many German and international cannabis operators, has been working over the past few months to prepare its business to capitalise on the prospect of a full-blown commercial adult-use cannabis market.
However, April’s announcement from the country’s Health Minister, Karl Lauterbach, that a commercial recreational market remained for now in the mid to long term forced the company to pivot its strategy.
Cannovum’s CEO Pia Marten said: “We’re happy that the legalisation in Germany for cannabis for adult use is moving forward. Did we expect more? Yes, obviously, we did. Are we disappointed? Yes, we are.
“They served us the entrée after they promised a whole seven-course menu. That didn’t happen, so obviously that changes things.”
The startup, which already has an established medical cannabis operation in Germany as an importer, wholesaler and manufacturer, is now doubling down on this arm of its business.
It is now ‘actively pursuing’ a strategic partner that will enable it to scale the business it has already built and ‘take it to the next level’, and is understood to already be in talks with a number of potential suitors.
While Ms Marten says she believes the ‘medical cannabis market is here to stay in Germany’ and will continue to grow, consolidation is on the way.
“I’m still very happy about the developments in the market, but I think to be successful, we need to join forces.
“The market will consolidate. There are too many players in the market right now. I think it’s just a natural process of an industry, and we want to find good partners that want to realise that and want to scale their medical business.”
Although Germany’s adult-use-lite policy has helped to shift the spotlight back onto the booming medical market, which remains the biggest in Europe by some margin, some have raised concerns that the looming cannabis clubs could initially see up to 30% of the country’s patients exit the market in favour of home-grown flower.
This exodus may well happen, Ms Marten suggested, and would likely see the medical market shift its focus away from flower and towards other formulations such as extracts where there is no competition.
“So, I think some obviously will go into the home-grown markets, I think that’s fair to say. But long term I don’t think so… Growing cannabis plants at home – it’s not that easy to get a product in the end suitable for a patient.”
‘Two avenues at once’
Despite this renewed focus on its medical arm, Cannovum is adamant that it is not only ‘not disregarding recreational’, but that it is also ‘ideally positioned’ to capitalise on the opportunities as they stand.
In early February 2023, Cannovum announced that it was to become a founding member of a cultivation alliance for adult-use cannabis in Germany.
At the time, the alliance was designed to create a network of companies that could ‘meet the demand for high-quality legal cannabis’ grown in Germany.
According to the previous iteration of the country’s prospective cannabis regulation, only cannabis cultivated in Germany could be sold for recreational purposes, forcing Europe’s largest importer of medical cannabis to quickly and dramatically expand its domestic cultivation industry, with estimates suggesting this could create 27,000 new jobs.
The latest announcement has once again encouraged the company to pivot, seeing the alliance shift its focus to providing ‘products and services that enable cannabis club operators to grow high-quality recreational cannabis’.
“After the announcements of the German Health Minister, Karl Lauterbach, regarding the cannabis legalisation in Germany, the Cultivation Alliance is an important step to strengthen producers and club operators,” the group said in a press release.
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“The goal is to actively shape the future of cannabis legalisation in a sustainable and ecologically valuable way and to provide high-quality and controlled cannabis products with the upcoming legalisation.”
In this vein, and as a method of establishing some form of commercial presence in the new framework, Cannovum and its alliance are also developing ‘cultivation kits’ aimed at helping ‘newcomers grow high-quality cannabis plants’, offering additional digital tools and online courses to support club approvals.
Mr Madzia continued: “We’re looking for any legal context that’s going to appear in the next couple of weeks. It’s very, very important to understand that this kind of product development will only work in strict accordance and adherence to whatever legal situation and legal framework will be in place.
“We’re a startup, so we need to focus on the immediate benefit, and we’re lucky to be able to aggressively pursue two avenues (medical and recreational) at once.”