Contrasting Medical Markets: Germany vs. Colorado

By Noah Tomares, Research Analyst, New Frontier Data

Germany legalized cannabis for medical purposes in 2017. Since, the nation has seen substantial increases in prescriptions. Lacking domestic production, it has had to consistently increase its flower imports to meet the growing demand. That can be complicated, as the German Federal Institute for Drugs and Medical Devices (BfArM), requires that countries importing cannabis be compliant with the 1961 U.N. Single Convention in addition to other regulatory requirements.

Historically, Germany has imported from Canada, the Netherlands, and Austria. Recently, the BfArM approved new countries including Switzerland, Israel, Columbia, Portugal, Spain, and Uruguay. Germany has also began working towards larger-scale domestic production with a target of late 2020.

While increasing demand, an expanded list of importing nations, and the beginnings of domestic production can paint a picture of an exploding cannabis market, comparing Germany to a smaller, though more established market can provide some context. In 2000, Colorado approved Amendment 20, which effectively legalized medicinal marijuana for patients and caregivers. Patient counts steadily grew (apart from a 2011 decline associated with a processing backlog) until recreational use of cannabis was legalized in 2012. From there, while tax revenue and sales increased, average patient counts plateaued before gradually declining.

Germany is a substantially larger potential market, with a population roughly 14.5x larger than Colorado’s (82.5 million vs 5.7 million). In addition, Colorado’s medicinal market has been gradually cannibalized to an extent by its recreational market. Despite these differences, Colorado’s medicinal cannabis economy consistently sells far more cannabis than Germany’s more nascent industry imports.

In 2018, Germany imported approximately 3 metric tons (~6,600 lbs.) of medical cannabis flower and a similar quantity of oil. In the same period, Colorado sold 147,863 lbs. of flower and 14,700 lbs. of oil. A similar pattern appeared in the first half of 2019. Germany imported roughly 5,500 lbs. of cannabis flower and 5,500 lbs. of oil — up substantially from 2018 — while Colorado sold 60,184 and 8,046 lbs., respectively.

Germany’s medicinal cannabis market is often touted as the largest and fastest-growing in the EU due to its population, growing patient counts, and limited domestic production. It is expanding at an impressive rate despite the regulatory hurdles it has established. However, it is important to note that the establishment and development of such a market is a lengthy process.

Germany’s medical cannabis industry is growing rapidly, overcoming some early bureaucratic obstacles. In but two years, Germany has Europe’s largest medical cannabis market — and the largest market outside of North America. Nevertheless, the fact that Coloradans consume more than do 14.5x as many potential customers in Germany underscores the yet nascently small nature of the German market, and how much more growth is to be expected before its market reaches its full potential.

For now, banking on Germany (or other European markets) to scoop up all the excess supply being grown worldwide would be premature by any measure before demand has time to fully emerge. Investors seeking a path to profitability may find that Germany’s cannabis market has a long way yet to develop.