Domestic Cultivation is the Next Step for European Cannabis

The cannabis industry in Europe and abroad has been marked by a series of landslide shifts in regulations. As it’s happening, and related stocks skyrocket, onlookers rush into the cannabis space with the next brightest idea. Few, however, have thoroughly examined this ambiguous period before the regulatory shift.

Related: All You Need To Know About CBD Regulations In Europe

What did you know about a little company called Tweed Marijuana Inc. before 2017, for instance? How you answer this question will tell a lot about how you’re approaching cannabis in Europe.

 

From darkness to light

To answer the above for readers, Tweed Marijuana Inc. was the first name of the Canadian cannabis heavy-weight Canopy Growth Corp.

And before Bruce Linton, a co-founder of the company, started enjoyed tours around the world during which he preached the good green word, he was first supplying Canada’s budding medical space. Even before the legalisation of recreational pot, Canopy was hailed as cannabis’ first unicorn in 2016. It was a mega-hit for a wacky entrepreneur.

Now, in Europe, these same Tweed-like startups are springing up all over. Each is matching cultivators with manufacturers and marketing folks all the way down the supply chain. And just like Linton’s company, cannabis companies in the EU are focused on medical cannabis.

Unlike in Canada, Europe is moving much slower — or so it seems. The extreme FOMO (fear of missing out) is being interpreted as slothfulness, when, in fact, many countries are following a tried-and-true trajectory. Remember, Tweed was founded in 2013, and cannabis wasn’t legalised in Canada until four years later.

By these standards, Europe should see its watershed moment by 2021, right? Well, it depends.

Are you looking at when medical cannabis was legalised in Holland or in Germany? The former began offering medicinal marijuana in 2003, while the latter only started in 2017.

(Source: Prohibition Partners, The European Cannabis Report — 5th Edition)

Nations are adopting medical cannabis on a state-by-state basis. There are, however, several critical jurisdictions that are working to speed this process up. Prohibition Partners, a UK-based cannabis research firm, has identified France, Denmark, Ireland and the UK as key drivers in this regard.

Related: How Far is the UK from Legalising Marijuana?

Although the French medical trial is highly-anticipated, bringing other EU member states into the fold will create a snowball effect. It’s not farfetched to assume that, once the larger European economies allow for medical cannabis, the rest of the continent will quickly follow suit. Plus, the data from states that have already made room for these kinds of products are incredibly valuable.

In Germany, for instance, patient demand for cannabis skyrocketed as soon as policies changed. This quickly revealed supply issues as well as offered sage advice for other countries. Without formal national infrastructure built-in before the policy change, the price of cannabis products will either be marked up or unavailable entirely.

During the Danish medical trial, this truth has already revealed itself.

Launched in 2018, the four-year program is scheduled for evaluation this year. Strangely, the scheme has seen very little patient growth. In Q2 of 2019, 1,045 patients redeemed 1,844 cannabis prescriptions. A quarter earlier, the experiment treated a modest 1,007 patients with 1,765 prescriptions, according to Marijuana Business Daily. There are specific reasons for this that are unique to Denmark, but there are also broader lessons for any European jurisdiction.

First, the fall of CannTrust disrupted much of the supply for this particular trial. If readers recall, Health Canada suspended the companies licence to grow and sell cannabis in 2019. The company stated that ‘it is necessary to destroy approximately [~€8.3M] of biological assets and approximately [~€45M] worth of inventory.’

This setback rippled across European markets, specifically those relying on CannTrust products. The domestic cannabis cultivation environment couldn’t compensate for this, and, thus, prices skyrocketed. High prices and low accessibility have also led sclerosis patients, the prime recipients of cannabis treatments, to leave the Danish trial and purchase products on the black market.

Danish news source MS Tidsskrift cited Magnus Heunicke, a member of Denmark’s social-democratic political party, as saying that the medical trial has not succeeded. Heunicke added:

You have to be honest and say that those who were skeptical from the start were right that there was no market ready in Denmark. You can clearly see that. You have not been able to get production ready quickly in Denmark, it has been far more difficult than expected.’

In this context, the calls for urgency in the cannabis sector seem slightly premature. It may also indicate that many of these medical trials are unfit to serve real patients. Indeed, the issues continue to turn around one central problem, that of supply.

But, what comes first, supply or policy changes? Regulators say none of the above, and, instead, actively promote further trials to scrape more data. Although the Danish trial looks to be failing for obvious reasons, one can be sure that policymakers abroad are watching this unfold very closely.

Keeping an eye on this trend will also be beneficial to investors.

Although recreational cannabis is still far from reality, policymakers are clearly eager to help prop up a medicinal marijuana industry via capital injections. This interest also means coordinating various disparate players throughout the ecosystem. From investors, medical professionals and politicians to entrepreneurs and so forth, each has a part to play.

Related: How Far is Germany from Legalising Marijuana?

The arrival of cannabis agencies all over the world is helping align all of these interests. In Germany, the Czech Republic, Belgium, Luxembourg and Holland, these agencies are already in place. It thus comes as no surprise to see each of these countries enjoying the early bounties of this emerging market.

(Source: Prohibition Partners, The European Cannabis Report — 5th Edition)

As a side note, the proposed agency in North Macedonia likely won’t see the light of day anytime soon. It was included in a draft bill last year that laid out a plan to turn the country into a powerful cannabis supplier for the continent.

But due to political instability related to entry into the European single market, the parliament that is overseeing this draft bill dissolved last week. The country will host snap national elections on Apr. 12, 2020, after which parliament will return to work.

The rest of the countries’ agencies mentioned above are, however, fully operational. Holland, in particular, enjoys a unique advantage.

Bedrocan, a premium medical cannabis supplier, has enjoyed a head start compared to most other cannabis companies in Europe. This is because of its close relationship with Holland’s respective cannabis agency, the Office of Medical Cannabis (OMC).

Since 2001, Bedrocan and the OMC have established a monopoly in the country. This means that as the demand for cannabis in the Netherlands has grown, so too has Bedrocan’s cultivation and manufacturing facilities.

Soon, other countries looking to include medical cannabis on patient menus began their search for reputable suppliers. The location, experience and high-quality of Bedrocan’s products have turned them into a staple for the European cannabis community.

This may change though as other countries make room for national cultivation projects. Denmark, Italy and Germany are all pursuing various schemes to inspire domestic growth.

Critically, establishing domestic supply chains is the next step in turning the various cannabis trials into viable data troves. As evidenced by the Danish cannabis trial, if there isn’t at least some kind of local marijuana supplier, European countries will be tapping the same sources as every other country. This means high profits for Canadian companies entering the EU and Bedrocan so long as they can keep pace.

Related: European Cannabis Discourse Is Mostly Canadian, and That’s a Problem

In any case, if a country can barely service small samples of the medical community, how does it expect to bring relief to an entire nation? As much as some hate to admit, this is a legitimate question for companies like Tweed Marijuana Inc.

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