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Germany’s New Coalition Supports Adult-Use Cannabis Legalization

The three parties that will likely replace Chancellor Angela Merkel as Germany’s next governing coalition support adult-use cannabis legalization, and regulators have a lot to learn from not only the nation’s existing medical cannabis market, but also adult-use legalization in other countries, according to Niklas Kouparanis, CEO of Frankfurt-based cannabis holding company Bloomwell.

The Social Democrats (SPD), the Free Democrats (FDP) and the Greens plan to introduce legislation to legalize cannabis, which would be sold to adults through specialized shops like the dispensaries in the United States, as soon as the parties sign formal coalition papers to officially become the new government after Germany’s elections in September.

The Road to Legalization

Germany legalized medical cannabis in 2017, and all the nation’s physicians, barring veterinarians and dentists, can prescribe pharmaceutical cannabis to their patients.

“We had a very dramatic increase of patients, and … we needed to supply these patients somehow,” Kouparanis told Cannabis Business Times and Cannabis Dispensary. “We had a supply shortage in the beginning days.”

Bloomwell was founded in 2020 as a holding entity for multiple companies, including Ilios Sante, a medical cannabis wholesaler and distributor, and Algea Care, a telemedicine provider that has more than 70 specialized doctors on its platform to treat Germany’s patients with medical cannabis.

Supply and demand regulated over time, Kouparanis said, and while domestic cannabis production totals only about 2.6 tons annually, multiple companies are now importing cannabis into Germany for medical use.

As SPD, FDP and the Greens negotiate the coalition papers—which are expected to be signed by Dec. 6—the parties have agreed to legalize adult-use cannabis, which will likely cause another supply shortage in Germany’s market.

“If the rec market opens up, we expect … [a demand of] 100 to 200 tons annually, immediately,” Kouparanis said. “So, with 2.6 tons [domestic production capacity], it will not be sufficient to actually satisfy the rec market and patients that we need to supply.”

With a population of roughly 83 million, Germany would be one of the largest adult-use cannabis markets in the world. By comparison, Canada, which legalized adult-use in 2018, has a population of 38 million, while Uruguay, which legalized cannabis in 2013, has a population of 3.5 million.

“It’s a big opportunity, of course, for the cannabis industry, but on the other side, there are still a lot of questions,” Kouparanis said.

Once the coalition papers are signed, the new government must draft formal adult-use cannabis legislation, which must then pass the German Parliament, called the Bundestag. Kouparanis said he does not anticipate full legalization to happen until at least 2023.

“Still, these are, for the cannabis industry, very exciting times,” he said. “Another market is very likely to open up, and … for our company, it’s very interesting times.”

Lessons Learned

Germany has much to learn from other countries that have legalized adult-use cannabis, Kouparanis said, pointing to Canada as an example.

“I think the issue in Canada back in the day and still, actually, is that a lot of bureaucracy … hindered legalization to take place and encouraged the black market instead of actually draining it,” he said.

Canada does have distinct advantages over Germany, he added, such as a sufficient supply of cannabis. For example, according to March 2021 reporting data from Health Canada, 63.7 million packaged units of cannabis products were held in inventory by the nation’s cultivators, processors, distributors and retailers for the month, representing 5.5 times the number of total sales (11.6 million packaged units).

“They had the infrastructure to produce a lot of cannabis, but the disadvantage was … they didn’t have significant distribution channels,” Kouparanis said. “What we need is infrastructure in place, which needs to be built very fast, and also supply or distribution of cannabis to customers and consumers in Germany.”

Germany can also look within to its nearly 5-year-old medical cannabis market for lessons on how to regulate adult-use, Kouparanis added.

Medical cannabis legalization happened “overnight,” he said, which left many industry stakeholders scrambling to get a foothold in the market. Doctors weren’t educated on medical cannabis, for example, and importing product into Germany was difficult, contributing to the country’s supply shortage early on.

“When we look at the medical market, we missed [an] opportunity in the medical market to get all stakeholders [at] one table,” Kouparanis said. “I would like to see that happen this time when we open up the recreational market, to actually get regulators involved, to get politicians involved, and … get entrepreneurs in the cannabis space involved to actually sit together and discuss how we can make that happen efficiently to … drain the black market, which is the most important part of the whole exercise. And on the other side, of course, [discuss how we can] generate tax revenue for Germany, … satisfy customers, and have the right quality and supply in place to do so.”

Cannabis imports will be key to adequately supplying Germany’s adult-use market, he added, since domestic production remains limited.

“If Germany doesn’t allow imports, we’ll have a huge problem,” Kouparanis said. “It will take a long time to satisfy the needs of consumers in Germany.”

Pharmacists should be on staff in adult-use retailers, he added, to help maintain the quality of the cannabis sold and educate consumers on the products.

Market Potential

If the new government succeeds in passing its legalization proposal, Germany would become the first European nation to have a regulated adult-use cannabis market.

Although Luxembourg announced adult-use legislation in October, the bill is still pending.

Legalization in Germany could generate more than €4.7 billion in annual tax revenue, as reported by Forbes, and create roughly 27,000 in new jobs, according to POLITICO.

“That’s a big number, and of course, we all suffered from the pandemic,” Kouparanis said. “Germany had to invest heavily in their economy and these tax revenues are badly needed, so I think it’s a great opportunity … for politicians to gain a tremendous amount of money to support the economy. Why should that be not happening?”

Legalization would also save the country money on law enforcement, he added. “The current status is not acceptable. … They’re criminalizing people and spending a lot of money on police and that is something that shouldn’t happen any longer.”

While many questions remain about Germany’s cannabis policy reform efforts, Kouparanis is optimistic about the new government’s legalization push.

“The program is still in its infancy,” he said. “There are a lot of question marks left and a lot of people still have to come together—every single stakeholder—and discuss how we can make this big change in policy happen."

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