Businesses talk profit as Germany moves to legalise cannabis for recreation

If Berlin legalizes cannabis, it could create one of the largest markets worldwide – but some legal issues need to be clarified first

 

Alexander Sturm and Christiane Oelrich, dpa l Monday, April 3, 2023

BERLIN – From leading industrial power to leading cannabis market: If Germany’s government legalizes the drug for recreational use as planned, approved suppliers will hit the jackpot.

Proponents and critics are still wrangling over the idea of selling cannabis in licensed shops in German pedestrian zones. But firms able to meet demand are getting ready here and abroad – especially in Switzerland, which fully legalized medical cannabis and allowed export last year, and is able to produce it more cheaply.

Since Germany legalized medical cannabis in 2017, the country has around 300,000 eligible recipients. But the biggest earnings lie in the recreational users who currently acquire the drug illegally.

“There are already around 4 million cannabis consumers in Germany today,” says Lars Möhring, who heads licensed medical cannabis retailer Enua Pharma. His industry expects wider legalization to expand the country’s growth volume to 400-800 tons a year.

Since prohibition hasn’t stopped non-medical consumption, the idea now is that state-supervised retail to adults would curb crime, improve protection of minors and keep contaminated products off the market.

“Legalization can’t be stopped,” says Benedikt Sons, co-founder of medical cannabis supplier Cansativa. “Legalization will see the emergence of one of the largest cannabis markets, maybe even the largest worldwide.”

Germany’s government even wants to go further than licensed shops: In autumn, a white paper on the issue stated that a limited amount of home cultivation should also be allowed. Health Minister Karl Lauterbach is to present a draft law on legalization this spring.

For now though, producers and distributors are positioning themselves for the big day. “We are always talking to customers and thinking through scenarios,” says Cansativa co-founder Sons, who does not expect legalisation before 2025. “We don’t want to grow cannabis for the time being, we want to stay in the trade.”

Cansativa is the only company in Germany allowed to sell medicinal cannabis from local cultivation, offering pharmacies the full range of common cannabis products, including flowers and extracts, on one platform. Last year, it sold 2.5 tons of cannabis, offering more than 200 products compared with only five in 2017.

At its nondescript premises in the industrial zone near Frankfurt, 10-20 tons of medicinal cannabis can be stored under strict security measures. A sweet smell fills the warehouse, where workers in protective suits pack cannabis flowers into 10- to 100-gram pharmacy bags in a sterile environment, with documentation of every gram.

However, Cansativa is far from being the only company preparing for legalization. In November, the Berlin-based start-up Cantourage went public and will use the proceeds to expand production, open up new markets and prepare for release for consumption. The Frankfurt-based medical cannabis company Bloomwell, which has German actor Moritz Bleibtreu as an investor, is also gearing up.

Additionally, listed companies from North America are also ready to leverage their advantages over start-ups: cannabis cultivation is dizzyingly expensive, requiring regulated room temperature, artificial light, and stringent documentation and safety precautions. Just electricity, including air conditioning, can account for 40% of cultivation costs.

That’s also where Swiss companies have a head start: “We don’t have such high safety requirements for cultivation as in Germany and only a quarter of the electricity costs,” says Mike Toniolo, founder of TB Farming in Schönenberg an der Thur, near Lake Constance.

Toniolo has been cultivating for 27 years and offers around 450 of his own high-quality breeds. In 2022, he received the first Swiss licence to produce medical cannabis and also has customers in Germany.

If recreational cannabis were legalized in Germany, Toniolo says he could quickly supply quality products with a high content of THC, the main psychoactive compound that produces the cannabis high. The company already plans to increase production from 1.2 to 6.5 tons a year, with room to grow further.

In total in Switzerland, there are about a dozen companies that could deliver to Germany, he says. “We have the know-how through years of experience, we have high quality standards, and can produce cheaper than would be possible in Germany. The German market could hardly get better cannabis.”

But even if all sides come to an agreement in Germany, there are still legal hurdles to legalization. For example, the European Union could veto the German plans if – in the opinion of the European Commission – they contradict international narcotics law.

In turn, the government in Berlin is working to convince the EU that legalization and strict regulation of the cannabis market would better cater to EU treaties on health and youth protection.