Germany is currently home to Europe’s largest legal cannabis industry. Part of that is due to Germany’s population of roughly 83 million people and part of that is also due to Germany being home to the fourth-largest economy on earth.

Another contributing factor is Germany’s approach to medical cannabis policy and the nation’s medical cannabis industry framework. Germany has embraced the medical cannabis industry in ways that most other countries have yet to do, both in Europe and abroad.

Every passing year results in Germany’s medical cannabis industry becoming larger, and that is being accelerated by domestic cannabis production. Initially, Germany imported all of its medical cannabis products which resulted in Germany being the world’s largest importer of medical cannabis (over 9,000 kilograms in 2020 alone).

Germany is no longer the largest importer of medical cannabis. Israel recently took over that title. However, the industry is as strong as ever, and when Germany legalizes cannabis for adult use and launches an adult-use industry in the near future, the nation’s emerging cannabis industry will be enormous.

Hints Of Regulations

Germany’s Federal Justice Minister Marco Buschmann (FDP) recently participated in an interview during which he provided quite a bit of insight into what Germany’s eventual adult-use cannabis industry may look like.

The governing coalition previously indicated a desire to legalize cannabis for adult use, and part of the policy change would include regulations for adult-use sales. Below are additional emerging details via Radio Eins (translated from German):

The goal agreed by the SPD, Greens and FDP in the coalition agreement is clear: “It should be legally possible for adults to buy cannabis in licensed shops,” said the Minister of the German Press Agency. This could be pharmacies, for example, “but we may also continue to draw the circle”. A prerequisite could be a “required expertise of the sales staff”. This would enable the salespeople to “provide information about the products and counteract risky cannabis use, especially in the case of recognizable addicts”.

For him, as Minister of Justice, it is clear: “If there are shops that are legally allowed to sell cannabis, then there must also be producers who are allowed to grow and sell it legally”. Possession must then also be legal for adults up to a maximum limit to be stipulated in the law. And cannabis will be “subject to some form of taxation, like other consumer products”.

Adult-Use Cannabis Taxation

Cannabis taxes were also discussed during the interview, and the Minister indicated that he was not worried about taxation making it harder to compete with the unregulated market.

As long as the taxation is not too burdensome, most consumers will not care about higher prices up to a point. The benefit of being able to go into a fixed location during set business hours to choose from a variety of products in a legal setting is well worth an additional cost within reason.

A new study by the Institute for Competition Economics at the University of Düsseldorf estimates that the German recreational market could be worth 4.7 billion euros – but what is all this estimating based on?

A new study by the University of Düsseldorf has estimated that legalizing cannabis could bring in as much as 4.7 billion euros a year to the German economy. In Germany, this includes not only the size of the market but the impact on tax revenues, social security contributions from the legalized business, and savings to the police and justice system. The study estimated that 1.8 billion euros of this amount would in fact flow directly into the state treasury.

Of course, all of this is just conjecture at this point. However, given the current furore over the possibility of recreational legalization here of late, a study on the potential worth of said industry was bound to get attention.

But what do such estimates really have to do with reality? After all, when it comes to cannabis, German consumers are just like consumers everywhere else. Not to mention an estimate, before the market has even started, anywhere, is just that. However, here are some contributing factors to consider (beyond the nitty-gritty of getting there).

Size Matters

Here is one way to think about the potential market here. Colorado’s population is just over 5 million and the recreational market there tops $10 billion as of this year (in real-time). Germany has a population of 80 million. It does not take a huge imagination to figure out that Deutschland may turn out to be the EU’s most valuable recreational market, beyond its medical one.

There are a couple of differences to consider right off the bat of course. The first is that there is a real medical market here – and unlike in Colorado, health insurance does cover medical cannabis. Indeed, there are about 100,000 patients in the German system. That number is also going to increase over time – potentially to as much as 10% of the entire population.

What happens beyond that – in other words, a purchase of cannabis without a doctor’s prescription – is literally the great unknown. It is also established that consumers begin to use not only fewer illicit and prescription drugs but drink far less alcohol when cannabis is legal (at least in legalizing states and countries to date). In Germany, this is potentially a huge market – limited at this point by legalization and imagination. Culturally, Germans are ready for something new – particularly a plant they are hearing a great deal more about of late.

Beyond speculation, in other words, however, one thing is very clear. Germans are getting ready for some kind of recreational cannabis reform. And that is pretty massive.

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Germany is home to the largest legal medical cannabis market on the European continent. That is not surprising considering that Germany is home to the fourth-largest economy on the planet behind only the United States, China, and Japan.

Until recently, Germany imported more medical cannabis products than any other country and it was only recently that the country was passed on that front by Israel.

Part of that is due to the rise of domestic production in Germany and it’s also partly due to ongoing issues in Israel that have resulted in a spike in their medical cannabis imports.

It’s likely a safe bet that adult-use legalization in Germany would be huge. Germany is a massive domino and when it falls, the public policy repercussions will be felt throughout Europe and beyond.

A lingering question regarding adult-use legalization in Germany is how much money would such a public policy change yield for public coffers in Germany?

A recent study provides an answer to that very question. Excerpts about the study below, via Reuters:

Legalising cannabis could bring Germany annual tax revenues and cost savings of about 4.7 billion euros ($5.34 billion) and create 27,000 new jobs, a survey said on Tuesday as politicians thrash out rules for the budding sector.

The survey by the Institute for Competition Economics (DICE) at the Heinrich Heine University in Duesseldorf, and commissioned by the German hemp association, found that legalising cannabis could lead to additional tax revenues of about 3.4 billion euros per year.

At the same time, it could bring cost savings in the police and judicial system of 1.3 billion euros per year while creating tens of thousands of jobs in the cannabis economy.

Those numbers are very encouraging, and lead to the next logical question – when will Germany legalize cannabis for adult use? Germany legalized cannabis for medical use in 2017.

Earlier this month Bloomberg broke the news that a legalization coalition in Germany is gaining momentum and that the drafting of a strong legalization measure is nearing completion. Per Bloomberg:

Germany’s likely next ruling coalition is closing in on a deal to legalize cannabis for recreational use, the strongest signal yet that long-awaited growth of Europe’s marijuana market is gaining traction.

Negotiators for the Social Democrats, Greens and pro-business Free Democrats are hammering out the details, including conditions under which the sale and use of recreational cannabis would be allowed and regulated, according to people familiar with the talks, who asked not to be identified because the discussions are private.

At this point, it’s not a question of if Germany will legalize cannabis for adult use, it’s a question of when. Whether this latest measure passes or not, some type of legalization measure is going to pass sooner rather than later in Germany.

Luxembourg has already announced plans to legalize cannabis for adult use in 2022, and Italy also appears to be on a path to legalization in the near future. Countries like Switzerland and the Netherlands have adult-use pilot programs ramping up.

It’s very unlikely that lawmakers in Germany are going to sit by and see other countries reap the benefits of legalization. As we now know from the study cited in this article, there’s way too much money being wasted on prohibition and too much potential profit potential to keep prohibition in place.

The excitement in Germany is enormous, and support for cannabis reform and the emerging cannabis industry grows every day throughout Europe. Join us in Berlin in July 2022 at our flagship conference to get in on the action.

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By Brautinvest.de Editorial Team

How do Germany’s industry leaders view a potential cannabis legalization? We asked around: In overall, the founders and CEOs of successful cannabis companies are hoping for growth opportunities, more control and thus better prevention than on the black market. They point to tax revenues and falling costs for the public budget. At the same time, they discuss the concrete design: Distribution through specialized stores or pharmacies? Cultivation in Germany or imports? And in view of the half-roll backward in Luxembourg – where only home cultivation is legalized – they also point out that nothing is yet set in stone. Critical voices are also being heard: Cannabis is more of a pharmaceutical product, not one for consumption. We were on the hunt for statements.

Growth market, tax revenues and relief for the state budget

Timo Bongartz, General Manager Fluence: “In Germany, we already have a strong ecosystem of companies that can successfully implement cannabis legalization in a structured way. Whether startup or corporation, whether industry, trade or capital provider, the market participants are ready. Now it’s a matter of sounding out politically and socially whether and how to go down the legalization path.”

Niklas Kouparanis, Co-Founder and CEO of Bloomwell Group: “Legalization is clearly on the horizon, even if cannabis will certainly not be legalized overnight in Germany. After all, it is one of the few issues on which all coalition partners are largely in agreement. The crux is the concrete, regulatory demanding, design – I strongly assume a future recreational sale through pharmacies. Product safety for the consumer must be the top priority here. Remind you, in the event of legalization in Germany, we are talking about the largest legal market in the world to date. From a business perspective, it would be negligent not to develop a strategy for this market. ‘The traffic light is green.'”

Benedikt Sons, co-founder and CEO of Cansativa: “Positive! A real growth driver for Germany as a business location: increasing tax revenues and numerous new jobs could boost the German economy. This is accompanied by the relief of the judiciary and authorities through the elimination of petty cannabis-related offenses – these not only swallow up time and paper, but also cost the state an enormous amount of money. From our point of view, the topic of cannabis will soon be socially acceptable, is gaining more and more support, and the task now is to create good conditions for a successful legal cannabis program with the right regulatory framework. Nevertheless, cannabis is not a product without concerns and it is important that dispensing takes place under certain conditions in order to reduce risks of abuse and, in particular, to protect vulnerable people or educate them about dangers.”

Lars Müller, CEO of Synbiotic: “The new government in Germany now gives us additional tailwind once again. The details are not yet known, but we expect a significant step forward in terms of legalization and commercialization.”

Ensuring individual and entrepreneurial freedom

Kai-Friedrich Niermann, lawyer and industry consultant: “The legalization of cannabis is overdue. A new cannabis policy is essential for the state and societal modernization that the new government is announcing. Individual personal freedom and corporate economic freedom of operation, embedded in a well-regulated framework of social responsibility, must be strengthened and failed government repressive policies replaced.”

Controlled dispensing instead of black market excesses

Finn Age Hänsel, founder Sanity Group: “Of course, a lot depends on the regulatory design of the dispensary, but in general I have been fighting for a liberalization of cannabis use for more than 20 years and I am happy to see something moving in politics now. Controlled dispensing and proper regulation solves more problems than continuing to accept the excesses of a growing black market. And by the way a cannabis tax also to plug Corona-related holes in the federal budget without burdening anyone more.”

Tobias Pietsch, owner: “Cannabis legalization is socially indispensable. We will be able to improve many of the problems that have arisen.”

Dr. Adrian Fischer, physician and natural scientist, co-founder and managing director of Demecan: “Instead of blanket legalization, smart deregulation is needed. This includes education and the protection of minors. In addition, there needs to be strict quality controls on cultivation and production, e.g. by the already existing German cannabis agency, which also controls medical cannabis, and a restriction of production to certified producers, ideally from Germany. Of course, cannabis as a stimulant is also a potential billion-dollar market that promises tax revenues and jobs. And in addition, law enforcement agencies and courts could be relieved. However, it is clear that legalization will also have to answer questions such as how to compensate for the actual risks that the healthcare system would face. Or where consumers should obtain cannabis. In licensed specialist stores or in pharmacies that have been dispensing cannabis as a medicine since 2017? One thing is certain: Pharmacists already have the relevant knowledge about the active ingredients, and can assess dose and purity. Because in the end, the goal must be to give citizens access to a controlled, high-quality product and protect them from dangerous goods from the black market.”

Regulatory challenge

Stephen Murphy, CEO & Co-Founder Prohibition Partners: “I do believe the legalisation will proceed in Germany, but both developing and executing the framework will take some time. This is a public health exercise and not an economic one by the government so it will require a more considered approach which is to say that the supply chain won’t vary too much from current expected standards. I’d place a (small) bet on Germany going legal before the US!“

Coordination at the European level

Daniel Kruse, entrepreneur and EIHA President: “EIHA welcomes cannabis legalization in Germany, which will provide another boost to the European hemp industry and help end decades of hemp stigma. However, we urge the German government to closely coordinate the new legal framework with its European partners and to advocate for a harmonized commercial hemp and cannabis strategy across Europe. In addition, legalization must be designed to be as socially responsible and fair as possible, including in terms of youth protection, prevention and participation in road traffic.”

More than home cultivation – skepticism remains

Alfredo Pascual, Vice-President of Investment Analysis at Seed Innovations: “It’s still too early to know with certainty when and how adult-use cannabis will be legalized in Germany.

In neighboring Luxembourg, the government promised full-blown legalization in its 2018 Koalitionsvertrag, yet three years later it looks like they will settle on only allowing to grow a few plants at home for personal use, which is a step in the right direction but far from ideal.

I hope that if German policymakers in the new government agree that cannabis should be legalized, that they will have the courage to go beyond what their peers in Luxembourg did.”

Cannabis is a pharmaceutical product

Linus M. Weber – Founder & M.D.: “Cannabis is a legal pharmaceutical product and we need to enforce that more broadly in Germany so that more patients can be treated. For this, legalization as a stimulant is not conducive, but pushes potential prescribers and patients back again. In my opinion, the only right way is to continue to offer cannabis only pharmaceutically. However, whether it must continue to be prescribed or whether products with low THC content can also be made available in pharmacies without a prescription should be examined in detail.”

This article was first published on krautinvest.de in German: https://krautinvest.de/potenzielle-legalisierung-das-hoffnungsvolle-echo-aus-der-cannabis-industrie/