How the German Demand for Flower Opens Opportunities Across South America
By Esteban Rossi I., Ph.D., New Frontier Data Analyst
Dry (cured) flower is the world’s most widely used cannabis product. In South America, Uruguayan firms have since 2019 sold their cannabis flower in Switzerland and Germany, with numerous South American firms subsequently focusing their attentions in Western Europe. The German market, as the continent’s largest national cannabis importer and consumer, represents long-term opportunities for South American producers.
The German market exhibits great potential for several reasons. As increasingly demonstrated, patients and doctors recognize the therapeutic benefits and safety of cannabis to manage pain, anxiety, epilepsy, MS, and other pathologies. Given Germany’s sizable estimated population of 83.9 million, numerous firms could find a niche in its market, yet its outsized regional influence further suggests that the development of the German medical market will encourage legislative advances among other European countries.
Indeed, in recent years, numerous European Union members including Denmark, the Czech Republic, Malta, Poland, Italy, and the Netherlands have taken decisive steps toward establishing a foundational market for cannabis flower. Although regulatory approaches and market characteristics vary, New Frontier Data expects that the European market will continue to evolve in line with public interest in health and drug policy reform.
According to the Federal Institute for Drugs and Medical Devices (BfArM), German imports of certified flower for medical purposes in 2020 reached 9,231 kg. Although suppliers did not report the wholesale value of these shipments, New Frontier Data estimated (from aggregate governmental figures) the price to be between €4 and €7 per gram. Interestingly, flower imports grew consistently over the last three years: 3,129 kgs in 2018, increasing to 6,740 kg in 2019, and 9,231 kg in 2020. Those figures indicate growing demand and market consolidation.
Though detailed sales data are unavailable, the public insurance system (GKV) publishes aggregate reimbursement records: Between January-September 2020, GKV figures show doctors filling over 241,000 prescriptions for an undisclosed number of patients. The value of those transactions added up to EUR €111 million (USD $134 million). The prescriptions included flower, magistral preparation isolates, and finished medical products. During that period, flower sales comprised EUR €54 million, including both processed and unprocessed flower.
The total size of the German medical market is difficult to estimate as the government does not publish data from private insurance information, and lacks a system to record out-of-pocket purchases. Moreover, patients’ needs and ticket sizes vary widely. Models developed by New Frontier Data indicate that approximately 22 million patients with chronic diseases in Germany could benefit from medicinal cannabis. Across Western Europe overall, more than 100 million people live with one of 12 well-researched chronic conditions that can be managed with cannabis products.
Considering the large number of patients who could benefit from cannabis-based medicines, Germany offers interesting opportunities for flower producers. During the past three years, the government has established a sound regulatory framework, facilitated the development of distribution networks, and included cannabis in the list of products covered by public insurance system. Moreover, as patients increasingly experiment with cannabis products, demand will logically continue to grow.
Since Uruguay was able to sell more than four tons (i.e., 4,500 to 4,800 kg) of flower between 2019 and 2020, Colombian firms redirected their focuses toward Europe. In late 2020 and again this year, numerous Colombian associations and firms requested that the administration of President Ivan Duque update the governmental regulations especially Decree 613 (2017) to allow exports of dry flower. Meantime, the lawmakers have yet to issue an official response.
While the Duque administration remains demonstrably lukewarm towards their industry, Colombian cannabis trade representatives have since 2019 noted how regulatory and administrative processes involving the drug agency Invima and officials with the Fondo Nacional de Estupefacientes (FNE) — which issues quotas on THC production — have undergone considerable delays. In their defense, government officials claimed that the large number of license applications surpassed their operational capacities.
Just a few days ago, however, the Colombian government shared a new draft of Decree 613 including some language to allow flower exports. Still, the current (draft) version of the decree remains deeply ambiguous, as flower exports will require further publication of revised regulations. Nevertheless, industry representatives remain committed to building stronger relationships with the government to leverage emerging opportunities in Europe.
In sum, the export flower market remains a key target for Latin American producers. Yet, regulatory barriers and technical requirements in the European market should not be underestimated. South American firms interested in exporting medicinal flower must comply with good agricultural and manufacturing practices (i.e., Global Gap, EU-GMP). In addition, successful exporting requires building strong commercial networks. Colombian firms are well aware of that being a tall order, but Uruguay has helped paved the way, and the region has already attracted the necessary resources, talent, and capital to fulfill it.
