High Hopes for a Slow-Moving German Cannabis Market

By Oliver Bennett, Special Contributor to New Frontier Data

Germany, the most populous nation in in the European Union (EU) with an estimated 83.7 million residents, is also the world’s third-largest medical cannabis market behind the United States and Canada, respectively.

Unsurprisingly, it is also the EU country having seen the most investment in the legal cannabis industry (both for medical cannabis and CBD), with German medical cannabis distribution companies involved in about 80% of European investment activity.

Western Europe’s medical cannabis market was estimated last year at between €230-€280 million, with German shares at between €150–€175 million.

In the first half of 2020, insured medicinal cannabis sales in Germany were worth about €75 million. As the first wave of the COVID-19 pandemic wanes, market momentum is building from a bullish 2019 market in which more than a dozen cannabis-related deals over €5 million saw German-based businesses accounting for four-fifths of them.

The movement started in earnest in 2017 when Germany decided to change its regulations on medical cannabis. marked by its Cannabis Agency (Cannabisagentur) responsible for oversight and licensing of medical cannabis as part of the government’s German Federal Institute for Drugs and Medical Devices (BfArM). By 2019, it began awarding contracts for cultivation in the country.

Now legal for medical use in Germany, cannabis must be carefully cultivated and distributed, through prescription by a doctor. Regulations aside, medical cannabis is relatively accessible compared to other Western European countries, and patients can be covered through the country’s statutory health insurance.

A survey begun last year (and due to run through 2023) has thus far shown that 71% of prescribed patients were being treated for pain. While the rolls of German medical patients climbed to 60,000 last year from 1,000 in 2017, they nevertheless represent but 0.1% of the country’s population, as opposed to the 1.5%-2% of users seen in the U.S. and Canada, respectively.

Those numbers suggest room for growth, and new data reveals continued progress in the German medicinal cannabis market, with cannabis flower receding to less than half of sales, and extracts and preparations with Dronabinol increasing. That trend reflects the pattern as seen in Canada, where oils and capsules are becoming preeminent.

Optimism resounds in Germany’s cultivation sector, though its first domestic harvest (slated for last autumn) was disrupted by the pandemic, meaning that Germany’s supply for now remains dependent on imports.

Germany’s three in-country growers are licensed cultivators Aphria and Aurora (both subsidiaries of Canadian companies) – and domestic producer Demecan. All three are looking to 2021 for rekindling the domestic harvest, but even so will be unlikely to meet the country’s demand.

To deal with their combined product and imports, the distributor Cansativa  – having sold over 50,000 units of medical cannabis in Germany – won the German tender to become the nation’s sole distributor of all domestically grown medical cannabis.  While the application process suffered from delays, the plan remains to start supplying German-grown cannabis flower to pharmacies before 2020, with other players seeking participation. IM Cannabis Corp has announced the first shipment from its supply partner to Germany. AgraFlora Organics International of Frankfurt has its subsidiary Farmako (founded last year) to supply ZenPharm with 1,500 kilograms of cannabis flower over the next three years – and is joined by the likes of Ilios Sante, founded in 2018.

Even in lockdown against the coronavirus, the market saw a spike in March, and a subsequent return to pre-pandemic sales levels of medical cannabis (i.e., 40% higher than the same period in 2019. In July, cannabis imports had risen 63% year-over-year in domestic production.

Indeed, through the pandemic there have been signs of growth. Cannamedical recently announced a capital increase of €12 million in Germany in April 2020. Medical cannabis suppliers CanPharma, Emmac Lifesciences, Foliumed, and Wundr’s iuvo are also looking at Germany’s market.

For now, Germany has been fully dependent on imports. It accepts produce from any country that formally issues licenses for cannabis cultivated exclusively for medical purposes, provided that certain other conditions are met.

For now, most imports currently arrive from the Netherlands, though supply shortages have been seen due to the pandemic. Producers otherwise hoping to fill the gap include Alcaliber from Spain (with a German import application approved), along with Colombia-based Clever Leaves  and Poland-based Pharmacann Polska (parent of a Macedonian subsidiary which holds EU Good Manufacturing Practice [GMP] certifications, and aspirations to export to Germany from its indoor facility in the Balkans). Further afield, New Zealand’s Rua Bioscience aims to export dried cannabis flower along with extracts and pharmaceutical products.

Still, the German infrastructure struggles. Beyond pharmacists unable to procure produce, difficulties also arise in finding doctors to prescribe medical cannabis, and insurance companies willing to reimburse patients. Nevertheless, public demand persists both for the plant and CBD, the latter drawing widespread German support as demonstrated through a recent petition to prevent its prohibition.

Thus, despite growing pains and disruptions from the pandemic, Germany remains fertile ground for investment – not only in terms of its potential market, but also by benefit of a liberal state where business practises maintain a traditional reputation for transparency and efficiency.