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Author: Marguerite Arnold

Rumbles In The German Cannabis Distribution Jungle

As Germany opens up its economy again, cautiously, of course in the aftermath of the first COVID-19 scare, there are certainly moves afoot in the cannabis industry on the B2B side.

Most of this is also due to shake out this year as events beyond the Pandemic continue to develop in a predictable path.

Here are the broad, general outlines:

  1. The German distribution contract for all German grown cannabis has been delayed YET AGAIN. For those who missed it, the contract bid was issued by the Federal Institute for Drugs and Medical Devices (BfArM) earlier this year, and like the original cultivation contract that kicked off the entire shebang, this too has been delayed several times (now to June 23). This tender competition is seeking the fairest cannabis distributor of them all to deliver the entire domestically cultivated crop to any pharmacy in the fair (German) land who places an order for any kind of it. This fairy tale is also likely to go down to the same kinds of shenanigans seen during the cultivation bid except that this time there are a few more sources available. Look for an established Mittelstand to take the bid this time. This ain’t start-up territory.
  2. In an act of remarkably well-timed (or badly timed) government interference in the market, the Dutch government, home of Bedrocan, has recently announced a change in policy. Namely, it will be limiting the number of German importers it will sell medical product to. As of late, this had gotten to be fairly ridiculous territory. Namely that any qualified German distributor could show up and get an equal share of the regular allotment. This led (predictably) to smaller and younger distributors in the market reselling their Bedrocan product to others, also predictably driving up the cost of Dutch medical cannabis in the German market.

Both developments spell a period of intense competition in the domestic distribution market for cannabis. There are according to recent reports, 40 cannabis distributors who were showing up for Bedrocan product although even this is not the entire picture. All one needs to do to distribute the drug is to have a general narcotics license (not a cannabis license specifically). This means, predictably also that there will be a shakeout in the entire landscape – and in the works now. The larger producers have established a bulwark with both flower and extract. But the only way to survive, as the most nimble of the distributors have already discovered, is to source product from several different international supply chains.

The International Cannabis Business Conference will be returning to Europe soon!

Where Goes The Canadian-German Export Market?

For the past several years (since 2016), Canadian exporters have sent ever-larger amounts of medical cannabis to Germany. The amount grew from a mere 44 kilograms to 3,740 by the end of last year according to Health Canada.

But will this exponential growth continue?

The answer is largely no, and for a variety of market-driven reasons although savvy Canadian exporters should be paying especially close attention now:

  1. German grown cannabis is coming (finally), with a few bumps and hitches, and expected to be here by the end of 2020. While this will not be nearly enough to meet the growing demand here, it will clearly put a damper in Canadian sales especially because:
  2. The Dutch government is getting more efficient with cannabis distribution – namely, it is beginning to limit the number of distributors it will work with. This downward pressure on the market in terms of the competition will also create German distributors in desperate search of product, but that is another issue.
  3. As popular as Germany has been as a destination (on the medical market), there are no other countries which regularly import as much Canadian product as Germany.
  4. There are other factors which will now impact the medical market, namely the growth of legitimate cannabis cultivations around Europe and the entry of Israel into the cannabis market globally.

One thing is for sure. The market will never “be the same” as it was in 2016 and 2017. That period has morphed into one where deep-pocketed cannabis companies approach the entire proposition as a medical product. That is a world, so far (major pharma) that the Canadian market with a few major exceptions has not jumped into, namely because there is so far little need to for domestic sales. The market there may be driven by medical sales, but the recreational question changed the entire conversation.

Here, while that may also happen too, as the next decade countries all over Europe will be grappling (as Israel is currently) with the recreational question, it will almost certainly happen more slowly.

However the change will not be fast enough to save many of the newer, exclusively cannabis focussed wholesalers unless they develop tactics that take them outside of just Germany, or perhaps beyond this one drug.

The distributor market, in other words, is about to go through a series of mergers and buyouts just as the first German cultivated product hits the shelves. Canadian producers who are smart and savvy would do well to look for hungry distributors no longer getting products from across the Dutch border.

Find out more about trends on the ground in Europe’s largest cannabis market when the International Cannabis Business Conference returns to Europe this fall.

Zimbabwe Flips Cannabis Policy To Create Total Privatization Of The Market

As South African lawmakers miss a deadline to change the law, finally enshrining cultivation, possession and consumption as a constitutional right (set by the Constitutional Court in 2018), neighbouring Zimbabwe has moved forward on a new course of its own.

Namely, full privatization of the industry.

In an abrupt turn of events, the country’s Health Ministry has just announced that all local and foreign investors who enter into the production of cannabis (known locally as mbanje), will be allowed to own 100% of their farms and the necessary licenses.

The logic? Competitiveness.

The Zimbabwean government-approved medical cannabis production in 2018. By last year, 37 entities had expressed interest in owning a license. However at least some firms had subsequently entered into a private-public partnership with the government. Those agreements are now  being voided, giving the original investors full control and ownership of any projects.

Initial licenses will be good for five years before requiring a renewal.

This is, of course, a vast improvement. Formerly production and possession of the plant were illegal and could be sentenced for up to 12 years in jail.

It also seems like Zimbabwe is now actively trying to compete with the developing market just south of its border in South Africa if not Lesotho.

Where And Why Is African Cannabis Relevant?

So far, the continent’s legal market has been as problem strewn as just about anywhere else. Delays and amendments if not “exceptions” have been the hallmark of development in Africa, even if they are slightly different in form than anywhere else.

However, there are clearly developing pockets of cannabis activity, with an eye to three markets: domestic consumption, and export somewhere else – either within the continent, or, beyond. At least one German distributor has successfully completed an import from South Africa and there are likely to be more. Israel recently imported from Uganda.

However, the Africa trade itself is not insubstantial and on both the medical and recreational front.

This continental market, in other words, is starting to get going, and in some interesting ways, no matter how laggard the imposition of the final regulations are. That is true just about everywhere.

For an in-depth summer update on the state of the cannabis industry globally, be sure to catch the International Cannabis Business Conference’s first-ever global convention on June 9.

Cannabis: The Ultimate “Cure?”

The COVID-19 Pandemic will absolutely divide our sense of history into “before” and “after.”

2020 was the year the global economy shut down for months as scientists and governments raced to find first “stop gap” measures to limit the spread, and then of course, began to focus on finding “the cure.”

As the world begins to unclench from the months-long lockdown, however, it is also clear that cannabis is front and centre in several discussions, right as the global discussion about how to treat the plant finally brings all such issues firmly into the global limelight.

Economic Stimulation From Ending Prohibition

There are many who are now calling for an end to global prohibition of cannabis and arguing that this is just the ticket for economies reeling from COVID related economic hits. The logic is that the industry creates jobs, if the drug is a safe medicine, it can also be used recreationally with little harm, and the industry is already considered “essential.” Not to mention a jobs and revenue creator.

There are a few places in the world (see Greece and the British Isles) where cannabis is beginning to be taken seriously as an economic development tool. This is likely to increase in the months to come as whole countries and regions try to chart a new economic pathway forward. But will this be enough to create federal recreational reform in places like say, the U.S. or the European Union? 

One thing is for sure. It won’t hurt.

Cannabis As COVID “Cure?”

There are several intriguing studies that seem to indicate that cannabis can frustrate the spread of the virus by causing cell immunity and or at least resistance to infection. It also may be useful in helping people tolerate any “cure” on the horizon (much like it helps AIDs patients).

As research progresses, expect to see converts jumping on the bandwagon, just from the medical side. 

In addition, the World Health Organization (WHO) is widely expected to reschedule cannabis globally as at least a “Schedule II” in the fourth quarter of the year, effectively ending criminal prosecution in many jurisdictions for mere possession, especially for medical use. That said, few believe that this change in status is safely in the bag (the decision has already been delayed twice), much less that this alone will end the debate about recreational reform.

Regardless, there are many signs afoot that not only is “medical” use about to hit mainstream stride, but the next conversation, ending prohibition for rec users, is finally, almost around the corner.

Be sure to check out the International Cannabis Business Conferences’s first global digital conference on June 9 for an update on the cannabis industry just about everywhere it currently exists!

The Legal Cannabis Coalition “Organizes” Holland’s Canna Expertise

Just when you thought that Europe was about to just lie down and give in to Brussels (on anything, but including all things cannabis), here comes the rear guard.

Organizing on both a regional and even country basis is hot stuff these days. Starting in, you guessed it, Holland.

The Legal Cannabis Coalition (or LCC) is a newish organization that is also pretty straightforward in its organizing mission. A dozen Dutch horticultural companies who have participated in a joint study to optimize greenhouse cultivation of medicinal cannabis, organized by the Wageningen University and Research (WURR) over the past several years, has (unsurprisingly) decided to formalize its association, with the goal of helping the industry grow.

The Netherlands is known for its agricultural product (Tulips anyone, beyond cannabis?). Much of that product, no matter what it is, is also grown in greenhouses. As a result, Dutch horticulture is not dominated by a few big firms, but many hundreds of much smaller businesses, who specialize in one or two products.

Members of the LCC have been active in setting up licensed cannabis producers in North America (see Canada in particular) but also other places around the world.
The LCC’s aim is to become a one-stop-shop destination for a wide variety of industry challenges. This ranges from setting up compliant greenhouses to increasing plant productivity.

The Dutch Do It Better?

There are few who can really compete with the Dutch right now, certainly in terms of longevity in providing medical cannabis product to countries globally. Bedrocan, a staple of the medical industry in several countries (including of course Germany) is a powerhouse in its own right.

But beyond this of course, the Dutch have pioneered a legal cannabis industry, even if it is still grey market-ish, that is widely admired and still not fully implemented anywhere else in the world. Namely, in the still nebulous areas if not red-light districts of an industry, the Dutch model of “coffee shops” and sources of horticulture to supply the same, has been not only a model and beacon of “canna freedom” for the past generation but also a model still widely not even on the regulatory cards anywhere.

For the latest updates on what is going down and who is doing what in Europe, be sure to attend the International Cannabis Business Conferences’s online Virtual Global Cannabis Symposium on June 9.

The European Court Of Justice Throws Down On Hemp

Apart from the Herculean task of normalization of cannabis generally, the battle for regulatory definitions over hemp has definitely taken some strange twists and turns of late. May the Hemp Be With You. Certainly within the EU.

After regulators in Brussels last year declared the hemp plant (leaves and flowers) to actually be “novel,” (which the British Food Safety standards, sadly seem to indicate they will follow), a bevy of lawsuits began appearing in all the strangest places. The proverbial “Little Gaulish Village” was determined to fight.

This May, it appears that one legal skirmish may have actually (excuse the pun) born fruit. If not challenged the (Brussels) “Evil Empire.”

The Legal Skinny

Here is the overview. A company named Kanavape, whose CBD was extracted from hemp in the Czech Republic (in accordance with both Czech and EU law), exported their products to France in 2014. They were prosecuted in a country where the only thing that is legit is the plant’s fiber and seeds (products made from the entire plant or flower are outlawed and have been even before regulators in Brussels changed the catalogue for Novel Food, apparently to reflect the French interpretation of the same as of 2019).

However, like the plucky Gaulish village of the resistance (Asterix anyone?), these Czech cannapreneurs have appealed all the way through the French court of Appeals in Aix-en-Provence, to the European Union’s Court of Justice. The principle at stake? Whether France’s restriction on hemp products violated the free movement of goods principle – a critical part of the EU covenant itself.

Ding, Ding, Knockout For CBD?

According to the Court of Justice’s advocate general’s decision last week, hemp-derived CBD (even from the flowers and leaves of the plant) is not a narcotic. Ergo, it is protected by the EU’s free movement principle. Per the Advocate General Evgeni Tanchev, the French CBD ban is not appropriate or proportionate for the purpose of protecting public health.

While Tanchev’s opinion, like in fact, all of the dictates on Novel Food of late from Brussels, are not “legally binding,” this case may in fact, finally normalize if not overturn the increasingly tortured legal logic on the same emanating from Brussels. Namely that hemp, a plant used in Europe for thousands of years, is somehow “novel.” At least when its flowers and leaves are used in anything edible. Seeds apparently are still excluded?

Stay tuned. This case may in fact have a huge and positive effect on the overall hemp industry, as well as rolling back some very strange decisions of late at nosebleed, regional levels and finally reinvigorate a hemp industry that is, along with being a rather vital potion, ready to bust out all over.

For an update on the moving target that is the EU’s hemp industry, be sure to book your tickets to the International Cannabis Business Conference Virtual Cannabis Symposium that is taking place on June 9, 2020

Albania Moves Closer To Legal Cannabis Cultivation

Albanian Prime Minister Edi Rama announced that the country’s legislators are close to concluding a draft law allowing the cultivation of medical cannabis. He made the announcement during a live conference of “Europe Day” on May 9.

Albania has long been criticized for being a major transit point for drugs of all kinds entering Europe from Asia and Latin America as well as a major source of black market cannabis grown in the country itself.

The Albanian proposal appears to be modeled on its neighbour, North Macedonia’s model, with a long stretch of coast on the Mediterranean. The country, like North Macedonia, also borders Greece to the south.

However, like North Macedonia, successful companies will be required to have a million euro bank guarantee and at least 15 employees. This means that only the largest cultivators, and presumably those with foreign contacts, will be able to qualify for licenses. Like North Macedonia, Albania is not yet a part of the EU. Indeed efforts to control illegal trafficking are part of the country’s plan to become an EU state.

Currently, cannabis possession in the country is still illegal. There is no medical marijuana program, although presumably, the passage of the new law will begin to create a structured pathway for patients to access the drug and doctors to prescribe it.

Illicit cannabis trafficking first came to the attention of authorities in the 1990s after the fall of the communist state, when cannabis cultivation that had mainly been concentrated in the south of the country became more widespread – and for the simple reason of trying to find some kind of economic stabilization in the turbulent years that followed, including a bloody civil war.

In 2012, Albanian police seized almost twice as much illicitly grown cannabis as they had the year before. In 2013, Albania made global headlines when police tried to shut down production in Lazarat, a region considered the centre of illicit production in the mountainous southern region of the country. About 90% of the villages in the region were thought to be involved in the illegal trade of cannabis in some way. Indeed villagers mounted an armed resistance that involved the populace of all ages.

Between 2014 and 2018, police in Albania cracked down dramatically on illegal cultivation of the plant. In 2016, estimates placed the illegal market at 3.5 billion euros – or about half of the entire Albanian GDP for the year. By the mid-2000’s, 77% of the cannabis in Italy actually originated in Albania, carried across the Ionian Sea in speedboats.

For an up-to-date snapshot of the European cannabis market, be sure to book your tickets for the return of the International Cannabis Business Conference to Europe in Fall 2020

Is Joe Biden Finally Coming On Board With Cannabis?

Remote campaign stumps, and a flagging economy aside, one of the key issues for the 2020 presidential campaign in the United States will absolutely include cannabis reform.

So far, the Democratic Party itself, which dates back to the back door squabbling seen since 2014, has been less than progressive on the topic of cannabis. Bernie Sanders put the issue squarely in the national spotlight, but this issue alone was not enough to get him to the top of the Democratic nominee ticket.

However, in another sign that Biden is taking policies straight from the Bernie playbook, in early May, the former VP and this year’s Democratic presidential contender, appears to be incorporating certain aspects of normalization into his policies, should he become president.

Biden’s platform for racial justice released plans for modest drug reform proposals, focusing rather on decriminalization for the use of cannabis rather than full legalization. He also proposed expunging all prior cannabis use convictions which his campaign released earlier this month.

While the proposal also talks about normalizing all drug sentencing (i.e. eliminating harsher sentencing for crack rather than cocaine) as well as changing broader criminal justice policies such as mandatory minimum sentencing and diverting people with minor drug convictions to treatment rather than prison, many advocates are still hoping that he will up the ante on cannabis a bit more. If not before the election, then certainly after it.

Before he occupied the White House, Biden’s record was far from progressive on drugs, and during his time in the Senate, he both authored and supported punitive drug laws that contributed in no small part to mass incarceration, including many in the African American community. The Obama White House, in which Biden served as a Vice President, also moved slowly on the cannabis issue, although it was during the Obama Presidency that the legal state movement finally took off. Under Trump, those procedural protections for the states, known broadly as the Cole Memo, were unraveled although new states have come online during his presidency, on both the medical and recreational front.

While it is clear that Biden is shifting his position, in part due to Trump’s intransigence on federal reform and also to try to attract Sanders’ supporters, who have so far been lukewarm about the Democratic contender, it will clearly not be enough.

The cannabis industry has continued to power through the Covid Pandemic, although clearly it has also been affected by shutdowns and restrictions in every state. But five and a half years after the start of the Colorado and Washington State recreational markets, and numerous states following suit, it will inevitably be a source of jobs in a country now in the midst of the worst economic crisis in ninety years. Federal reform is necessary if only to normalize a now wide-spread industry that generates billions of dollars and creates thousands of American jobs.

Time will tell how convincing the now large and established cannabis industry will be over the summer and into the fall election in pushing Biden to take a stand Americans want and have been advocating for, for decades. That said, legalization might well be the issue that helps Biden clearly not only distinguish himself from Trump in a world where healthcare concerns are increasingly a priority for Americans, and indeed, where cannabis itself might help prevent future infections, if not help those inoculated with a future vaccine better tolerate their medicine.

For the best global updates on the state of the cannabis industry, be sure to attend an International Cannabis Business Conference event as the world starts normalizing later this year.

Is There A Medical Cannabis Price War Brewing In Germany?

Germany is undisputedly the market leader in Europe when it comes to sales and overall numbers of cannabis consumers. However, prices have remained high here for a number of reasons. That is now coming to an end.

Pharmacies Have Been Forced To Lower Their Markups
Until the beginning of March 2020, German pharmacies were allowed to mark-up cannabis from distributors by 100%. This has now been renegotiated between the German Pharmacy Association and the German Association of Public Health Insurers. Until now, pharmacies have been unconcerned with price. Now, with markups lower, they will have to change their procedures.

More Competition Among Distributors
There are currently 50 distributors who are authorized to distribute medical cannabis in Germany. That is up from 17 last year. At the same time, the amount of cannabis entering the country has remained relatively stable over the last year. In addition to flower, there is now another competitor for the dronabinol (synthetic) market. Price competition between distributors is about to heat up. They have sold floss product to pharmacies for upwards of $10 a gram for about the last year. Before that, prices were even higher. 

Price Wars Between Producers
Producers have sold into the German market at prices that have steadily dropped. Until the beginning of 2019, there were reports of Canadian LPs selling floss at CA $13 dollars a gram. As of now, with price impacts felt just about everywhere in the chain, the standard price per gram is still about 5 euro a gram. Expect that too, to drop as German domestic production comes online (set by the government at 3.20 euros a gram). On the dronabinol side of the market, this too is expected to drop with a new competitor now aiming for the German market, to compete with Canopy Cannabis, who bought the domestic German producer at about the time that the German cultivation bid was decided in the first half of 2019.

Direct Impact On Patients
While the “average” German patient who obtains cannabis by prescription and has been approved by their public health insurer, the vast majority of cannabis patients are still stuck in a very difficult place. Obtaining pre-approval for coverage is a long and drawn-out process. With that approval, publically insured patients pay only $12 for their prescriptions. Without it, they are forced to pay more than $20 per gram. Private patients, who may represent as much as a quarter of the market (but nobody is sure) also have to pay out of pocket. And nobody is quite sure how many cannabis patients there actually are.

Domestic Production Is Coming
The biggest existential threat to all importers right now is German domestic cultivation. That is expected to become available starting at the end of 2020. 

Bottom line? There are big shakeups coming, and in every direction.

For an up-to-date analysis of the German market, be sure to book your tickets for the International Cannabis Business Conference when it returns to Berlin.