The Spanish Cannabis Social Club Model, Explained
By New Frontier Data Europe
In Spain, the cannabis social club (CSC) model for cannabis distribution has become a well-established if furtively reported system capable of annually drawing millions of consumers in to purchase and consume its locally supplied cannabis. In practical terms, the system serves more than 4 million Spanish cannabis consumers, while attracting a broader canna-tourism market of 6.6 to 12.4 million consumers each year.
Spain’s cannabis market is based on a decriminalized model in which commercial cannabis operations are prohibited, but personal cultivation and use is decriminalized. In the CSC model, clubs can cultivate cannabis on behalf of their members while also providing social spaces for it to be consumed. As CSCs have proliferated in both numbers and memberships, they have become increasingly recognized and normalized socioeconomic elements in their respective communities. The political dynamics between the national government and the country’s autonomous regions will complicate the course to full legalization, but given growing public support, the prospects for national reform raise significant questions about how social clubs will evolve in Spain’s future cannabis economy.
Though no definitive numbers are maintained or verified, estimates gathered from industry stakeholders describe CSCs ranging between smaller clubs (with fewer than 3,000 members) to the largest (including up to 50,000 registered if not active members). Across that range, about 2/3 of clubs reportedly maintain rolls of between 3,000-10,000 consumers.
Notably, given the large number of tourists who visit Spain’s clubs each year, the clubs’ active members are likely a fraction of the total membership, since few tourists return to the same club(s) with frequency.
The private CSCs operate in a grey legal area, hinging on the basis that if cultivation for an adult’s personal use has been decriminalized, they likewise are ostensibly free to collectively cultivate and distribute it through a private club. The unofficial policy intentions in allowing CSCs were to create a closed loop of cultivation, processing, distribution, and consumption while tacitly encouraging members to avoid the illicit market. Clubs typically distribute dried cannabis flowers, hash, and other concentrates, but rarely offer edibles.
With the social clubs producing and distributing significant quantities of cannabis to a large consumer base, the question becomes what will happen to Spain’s existing market if cannabis were made nationally legal.
Based on New Frontier Data’s analysis of legal market activations globally, Spain’s ecosystem is unique in the prevalence and scale of its CSCs. Indeed, the model is one of the most robust cannabis distribution systems seen among any countries where cannabis is illegal under national law (the United States and the Netherlands being other notable outliers).
As such, there would be utility in transitioning the existing providers into the legal market, rather than replacing them with newly licensed operators, for reasons including:
- Supply displacement: If the transition between the CSCs’ supply and the new legal market is not effectively managed, and consumers face shortages in the legal market, the illicit market will proliferate, making it more difficult for the legal market to gain traction.
- Economic disruption: The existing CSC model employs thousands of people across a range of sectors, from cultivation and processing to security, retail, and professional services. While many of those already engaged in cannabis business operations would be subsumed into the legal market, the employment disruption would be far greater if all the existing operators were replaced by entirely new businesses, rather than with existing operators being restructured to meet the new regulatory requirements.
- Experience loss: The social clubs have addressed many of the operational issues that slow the launch of a new market, ranging from how to consistently grow high-quality products at scale, to the retail cannabis economics based on each local market’s dynamics. Such experience would be a valuable accelerant in the operationalization and efficiency of a fully legal market.
In other markets, governments have been reticent to fully dismantle well-established market structures as they formalize cannabis regulations, opting instead allow existing operators to transition to the new regulatory model. That approach expedites the launch of a legal market, reducing economic disruption by avoiding the closure of well-established businesses, while also preserving local market expertise which supports each region’s unique cannabis economy. Further, by accelerating the legal market’s deployment, it also neutralizes the ability of the illicit market to take root.
Given the size and entrenchment of the social club economy it is therefore likely that the CSCs will play a central role in any future regulated cannabis market in Spain.