Germany’s flourishing medical cannabis market is now forecast to top €420m this year, according to Prohibition Partners’ upcoming German Cannabis Report.
With the passage of CanG, streamlined regulations, more accessible prescriptions and a flood of new companies and funding entering the market, its authors believe the ‘second wave of German cannabis’ is now well underway.
Ahead of its release later this month, Business of Cannabis sat down with Prohibition Partners lead analysts Lawrence Purkiss and Alex Khourdaji to discuss the unexpected path Germany’s cannabis industry has followed and what hurdles remain for businesses hoping to establish a foothold in Europe’s most exciting cannabis market.
The German Cannabis Report will be published later this month, and is available for pre-order now here.
BofC: The report notes that in 2017, there was a forecast of 800,000 cannabis patients in Germany, but the actual market has evolved quite differently. How is the ‘second wave of German cannabis’ developing differently from these initial projections?
In 2017 it was assumed that the rapid pace of regulatory progress which was apparent in North America and Europe would continue, and that Germany was opening up to cannabis in the same way that Canada and US states like California or Colorado had in the recent past – i.e. large-scale medical cannabis treatment and widespread acceptance, leading to the eventual opening of an adult-use market.
The development of the medical cannabis market in Germany in fact took a different path, and remained heavily regulated, with patient numbers growing significantly, but not at the scale of those early projections. This was not due to the lack of demand in Germany for medical cannabis, but simply a restriction on the growth of the market due to the regulatory framework implemented, which was bureaucratic and imposed high costs on patients, doctors and supply chain operators in terms of both time and money.
This ‘second wave of German cannabis’ can be thought of as a streamlining of that regulatory framework, reducing the costs associated with medical cannabis for all actors, making medical cannabis treatment more easily administered by doctors, products more easily sourced and stored by pharmacies, and medical cannabis more easily accessed by patients. The costs and bureaucracy associated with dealing with cannabis have been drastically reduced, so more of the demand for medical cannabis across the country will be met.
BofC: Since April 01, how has Germany’s medical cannabis market has exploded in size? What challenges remain for businesses hoping to capitalize on the flourishing market?
PP: Currently the German medical cannabis market is experiencing a high. We actually forecast that medical cannabis sales in Germany will reach just above €420 million in 2024, which is quite timely if you ask us. Following the new regulations under MedCanG, cannabis is no longer a narcotic, hence its prescription, dispensation, storage, distribution and even cultivation has been eased significantly thereby allowing the market to flourish. This opening of the market will bring forth a competitive German medical cannabis market with the already existing producers expanding their offerings, new cultivators entering the market and high-quality medical cannabis imports and distributors fighting for market share. There is no doubt that this competition is great, not only for patients, who benefit from diverse product ranges and prices but also for the German national market to gain a competitive edge on the international stage.
In terms of the challenges medical cannabis businesses may face in Germany is that they will need to stay competitive in every aspect of their activities as nearly every medical cannabis producer in the world wants to enter the German market. Its a saturated market with over 400 cannabis flower products and nearly 100 extract products which means producers and distributors have to offer ranges of strains and products that are exotic, memorable and consistent in terms of price and quality to remain competitive. As patients are more informed then ever and are using social platforms to rate and review medical cannabis products, it is important for operators to keep a close eye on patient preferences and trends.
BofC: When Canada legalised cannabis in 2018, the market was soon saturated with supply and businesses struggled to compete, how does Germany differ? And what should foreign companies hoping to break into the market keep in mind?
PP: In any country, in any context, cannabis has proven to be a difficult industry for companies to operate in. That said, there were factors at play in Canada that are not relevant in Germany. The sky-high expectations for Canadian companies to be at the forefront of a global industry growing exponentially year-on-year caused a race among Canadian producers to establish huge production capacity. The domestic market has been restricted in some ways, but has still grown to be a USD$4 billion market, so there has certainly been large-scale growth there. The global demand which the businesses operating in Canada expected just never materialised, so of course the market was oversupplied.
Germany differs in many ways, there is not the same exuberance as in 2017/2018. The industry in general is more realistic about the probable pace and scale of growth, German companies are not racing to become the number one cannabis producer by capacity in the world. In comparison to Canada in 2018, the current German legalisation is far more small-scale, the overwhelming majority of the commercial opportunities which are being created by the new legislation are on the medical side. In adult-use cannabis, the new laws are like a far-reaching decriminalisation, rather than a legalisation. So the differences in scale and expectation are vastly different in Germany now than was the case in Canada in 2018.
Foreign companies hoping to break into the market should bear in mind that quality requirements are high – products need EU GMP. There is already a large number of companies participating, so competition is already fierce. Marketing is tightly restricted, so differentiation on the basis of branding is extremely difficult. The market is increasingly digital, and based around telemedicine, so that’s where companies should focus their efforts.
BofC: What impact are these factors likely to have on product prices?
PP: While high quality requirements will keep prices from falling too far, the fact that there are many players in the market competing for market share is currently driving prices down. Less bureaucracy for those producing and handling cannabis products also means less cost, and those savings are also being passed on to the patient in the form of lower prices.
BofC: Cultivation associations have been spreading throughout many German states, what business opportunities are available in this strictly regulated market?
PP: We have been following the growth of cannabis cultivation associations closely and between the 1st July 2024, (when cannabis associations could start applying for permits) and the first week of September, German states received over 300 applications and we expect this number to continue to grow. In the same period 14 cannabis assocations recived a permit to begin their operations, with Lower Saxony taking the cake by approving 11 cannabis associations. As the law grants federal state authorities significant control over the licensing and monitoring of cannabis associations, there are going to be significant discrepancies between states in terms of application approval rates and permits issued, which may be driven by political, social, cultural attitudes and stigmas towards cannabis in a given state.
In terms of business opportunities associated with cultivation associations, they are very limited – this is by design. The associations themselves will never be profitable enterprises, they are restricted by law in this. There are some opportunities for businesses which interact with and supply associations, but there are even restrictions in how many services or supplies which one business can provide to associations. Associations will have need for specific goods and services, so if there are many of them, then the opportunities for businesses which supply them will be greater. It really depends on how many associations are established.
BofC: Many had hoped for full legalisation of cannabis, but the CanG bill is significantly more restrictive than truly legal markets as seen in North America. What is the outlook for an expansion of cannabis liberalisation with Pillar 2?
PP: Obviously, the current state of cannabis legalisation in Germany is not the same as the once envisioned commercial liberalisation we all in the industry hoped for following the 2021 election. As Germany is bound to international laws (EU & UN), federal legalisation as seen in Canada was off the table. Thus, the government came up with the Two Pillar model which legalises personal access to cananbis in the first pillar and sets up pilot projects for the second pillar. This model is obviously a lot different to North American markets, however it is still massive progress in the region.
With Pillar 1 now established (cannabis assocations, removal of cannabis in Narcotics Act, legal home cultiavtion etc.), and the German public getting accustomed to and normalising cannabis every stakeholder in the industry has their eyes set on Pillar 2, however the Government has been really silent on its progress, which is rather worrying. We know that multiple federal states, cities, universities, and operators are eager to commence pilot projects but currently there has been silence from the federal government.
However, it has been suggested that Pillar Two could commence earlier without the need for another law as in the CanG Act it states that the Federal Office for Agriculture and Food (BLE) will be responsible for scientific projects, thus the Federal Ministry of Food and Agriculture released draft ordinance assigning the BLE as the responsible authority for pilot projects. It is important to mention that time is of the essence for Pillar Two, as if it is not implemented by the end of the legislative period (October 2025), there is a considerable chance that conservative and right-leaning parties (CDU/CSU, Alternative for Germany (AfD)) may halt the procedure. So the pressure is on.
BofC: In a wider context, what impact is the success of Germany’s cannabis programme likely to have on other European countries?
PP: It is hard to say in concrete terms what the impact is, but Germany’s cannabis programme is part of a wider trend towards the development of adult-use programmes that we are seeing in Europe, with programmes developed in the Netherlands, Switzerland, Malta and soon the Czech Republic. With these developments also comes the expansion of medical cannabis frameworks, as we see in Germany. Germany’s programme is probably the most significant out of these, as Germany has a more leading role in Europe compared to the others. The development of these programmes has happened in consultation with the EU, so the path to developing similar programmes in other countries has probably become more clear in a regulatory context at the European level. The taboo associated with widening cannabis legalisation programmes has also been reduced for other countries, as they would not be taking a step that has not already been taken elsewhere in Europe.
