Emerging Cannabis Economies Taking Root Internationally
By Oliver Bennett, Special Contributor to New Frontier Data
So far this year, the mood in the European cannabis industry has been buoyant. Consumption rates are rising, and public support for legalization continues to grow. Several milestones achieved during 2021 hinted at growing momentum toward cannabis normalization, along with acceptance of elements from adult-use consumption, to medical programs, to the popularity of CBD.
Developments across the continent include major strides made in Luxembourg, Malta, and Germany, respectively, toward legalization of recreational consumption. In particular, Germany’s potential creation of a regulated adult-use market is expected to further stimulate cannabis reforms across Europe.
As detailed by New Frontier Data in our proprietary Equio cannabis industry intelligence platform, five of the world’s 10 largest markets of cannabis consumers are in Europe (i.e., France, Italy, Spain, Germany, and the United Kingdom [U.K.]). Among top legal revenue producers, Germany (at $311 million), the Netherlands ($113.7 million), Italy ($30 million) and Poland ($14.3 million) stand out as Europe’s biggest hitters. While those totals remain well below the money being spent in those countries’ rival illicit markets, they nevertheless represent an upward trend echoed across much of the world, and with particular urgency in Europe. Nearly one-third of the world’s consumers is contained within the planet’s 10 largest consumer markets, with European territories representing the lion’s share.
The tendency seems to have been bolstered throughout the past two years during the COVID-19 pandemic. Back in mid-2020, New Frontier Data found that European cannabis demand, already strong, had continued to evolve during the pandemic. The European cannabis market then serving an estimated 42.6 million people (5.9% of the total population) throughout 28 European countries spent 62.7 billion euros (USD $68.5 billion) across both their regulated and unregulated markets.
Countries rated with a score of less than 1 – meaning that “low- THC products are legal in some form, including pharmaceutical cannabis products like Sativex” – include Belgium, Croatia, Cyprus, Romania, Estonia, Greece, Ireland, Lithuania, Macedonia, Slovenia, Sweden, and Switzerland.
Many of those, notably, are Eastern European nations and more recent European Union accession states, with the remainder being rather smaller nations by population in Europe (in the case of Switzerland, a neutral state which is not a European Union [EU] member state). The study also tracks European countries where medical cannabis is legal, including the Czech Republic, Denmark, Finland, Malta, Norway, Poland, Portugal, Luxembourg, France, Germany, Italy, the U.K., and influential non-European market Israel. The last category of countries among the vanguard for legal medical cannabis and some liberalization of non-medical use includes the Netherlands, Spain, and – as something of an outlier – Georgia in the Caucasus, which in 2018 became the first former Soviet country to legalize cannabis. Indeed, that year marked something of a turning point for legal cannabis internationally, with 33 countries legalising medical cannabis since.
Managing Market Expectations
Given recent events, it is imperative to note some unavoidable if uncertain caveats due to the Russian invasion of Ukraine. Though as of January the Ukrainian government had been making headway in Parliament toward legalizing medical cannabis, only chaos and uncertainty are expected in the short term. Regardless of any other more pressing pending outcome, the war will leave a deleterious if not disastrous outcome for the country’s cannabis market.
Ukraine is the world’s second-biggest shipper of grains and largest exporter of sunflower oil, and millions of people in the developing world depend on its national wheat harvest. Given some already manifested constraints on cannabis and all manner of other businesses, and similar fallout including economic inflation, higher energy and commodity prices, and far-flung disruptions to the supply chain, the G7’s agriculture ministers are already calling on all nations to maintain open trade channels and safeguard against unjustified limits on exports as risks of hoarding and profiteering are introduced.
As Alain Menghé à Menghé, CEO of German company Lio Pharmaceuticals, understatedly suggested, “deprioritization of other issues (than the war) could slow the dynamic of regulatory change.”
For now, there remains momentum toward gradual change. France, slow among its Western European peers to take up with cannabis reforms despite having the most national consumers on the continent, last month issued a decree to authorize cultivation and development of medical cannabis. Coming into force on March 1, the measure enables France’s Code of Public Health to allow the production of cannabis under medical authorization and supervision by the National Agency for the Safety of Medicines and Health Products (ANSM).
Meanwhile, Tilray Brands recently announced that its Tilray Medical cannabis division, had begun selling medical cannabis in pharmacies across Malta, providing patients with access to its branded products. As Denise Faltischek, Tilray’s Chief Strategy Officer and Head of International Business described, “As demand for cannabis continues to grow across Europe, we’re incredibly proud to partner with established and reliable distribution partners to supply new markets with high-quality medical cannabis which patients can rely on.”
In The Global Cannabis Report: Growth & Trends Through 2025 (released 9/15/21), New Frontier Data projected the EU medical market to see a compound annual growth rate (CAGR) of 23.9% from 2020 to 2025.*
In an unrelated setback, though Italy’s referendum on cannabis was led by a nationwide petition of 6 million people last year and touted as a positive sign for European adoption of adult-use cannabis, it was recently knocked back by Italy’s Supreme Court as inadmissible.
In general practice, legalization of medical cannabis typically precedes a given market’s adoption of adult-use programs. Medical cannabis remains more acceptable throughout Africa, Asia, and Latin America, where conservative attitudes are thawing against medical use, if not yet for recreational use.
Since 2020, countries either legalizing medical use or allowing its possession for personal use have included Lebanon, Malawi, Panama, and Rwanda, and more recently Ghana and Morocco, both of which approved medical cannabis measures last year. Those developments are bound to raise the stakes for Europe’s cannabis industry. Morocco – already the biggest exporter of illicit cannabis to Europe – has identified three provinces selected by its government to cultivate legal cannabis, representing a gateway to Europe that will “undoubtedly facilitate access to the largest market for cannabis products.”
Kickstarted in 2017-2018, and by 2020 accepted by the United Nations for having medicinal attributes, European medical cannabis reforms followed examples set in the United States a decade ago. Yet, the European market, which is distributed through pharmacies and doctor’s prescriptions, is already arguably more mainstream than is the U.S. medical dispensary model. Moreover, the EU-GMP certification has given that market a measure of a stringency that neither the U.S. nor Canada enjoys, and provided a bedrock sense of legitimacy to the industry.
Improving access for patients to medical cannabis will be the central challenge for Europe over the next few years as patient registration rolls increases, and as adult-use cannabis legislation follows at a slower pace. While the arcs of social acceptance and scientific legitimacy seem bound to trend upward, for the foreseeable short term the cannabis industry seems once again fated to test its resilience in uncertain trading conditions.
* Editor’s Note: Those projections were calculated based on sales as of Q2 2021, and preceded both recent legalization measures in Germany, Malta, and Luxembourg, and the military hostilities in Ukraine.