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New Year, New Steps Towards Adult-Use Cannabis for Germany

By Niklas Kouparanis, Bloomwell Group CEO and Co-Founder

In October 2022, Germany’s Health Minister Karl Lauterbach released a cornerstone paper outlining plans for the legal sale and consumption of cannabis in the country. While this is a big step forward toward adult-use legalization in Germany, the European Union (EU) Commission  will not decide whether the country can move forward with an adult-use market based on the 12 pages of the cornerstone paper. For this reason, Health Minister Lauterbach will need to draft the adult-use legislation before the EU makes its decision. Also, a “Gutachten,” an expert report, is needed to help determine whether the EU Commission would allow adult-use legalization based on the German approach. Both the draft of the law and the “Gutachten” can be achieved at the same time. However, to be proactive, Health Minister Lauterbach should also consider a “plan B” scenario in case the EU Commission won’t accept the legislation draft. Most likely, the German-all-in-plan in the cornerstone paper is also a strategic approach.

But at the end of the day, the law, which will now be written by the German government and which needs to pass the Bundestag and Bundesrat, will be based on the contents of the cornerstone paper. To understand the potential of a German legal adult-use market, it’s worth reviewing a few points.

The cornerstone paper outlined the following points, which can be viewed as potentially beneficial to advancing the goals of adult-use cannabis in Germany:

  • Cannabis and THC will no longer be classified as narcotics.
  • Production, supply and distribution of cannabis are permitted within a licensed and federally-controlled framework.
  • Decriminalization of the possession of 20 to 30 grams of cannabis for personal consumption by adults in public and private spaces.
  • Cannabis would be sold in licensed shops and, if necessary, within pharmacies.
  • No limits on THC were included for consumers over 21 years old.
  • Limits on THC would only apply to 18 to 21-year-olds.
  • Strict age restrictions on the sale of cannabis in licensed retail shops.
  • Considerations are also open to cannabis being sold within “specialty stores with consumption options.”
  • The introduction of a “cannabis tax” is planned. Cannabis tax rates must be set in a way that would not lead to a retail price substantially higher than the illicit market price.
  • The licensing process will be without limited tenders.
  • There will be a federal approach, but the states can adjust. It’s very important not to have one strong law and to limit the possible adjustments on a state level.

The following points from the cornerstone paper may have some potential drawbacks:

  • Allows the cultivation of up to three plants at home.
  • Prohibition of advertisements for cannabis products. Information needs to be necessary to a certain limit.
  • Only cannabis cultivated in Germany may be sold for recreational purposes. No imports are planned.
  • E-commerce sales of cannabis are still to be debated.

Potential Benefits

There are some clear progressive key points within the framework to help reach its goals of protection of minors and quality control with the health of consumers in mind. For example, aiming to provide cannabis at prices that are competitive with the illicit market can help deter unregulated, untested products from getting into the hands of minors and consumers.

Other positive aspects of the current proposal include that rural regions are also being recognized as an important part of Germany’s cannabis market, as the framework notes the development of a comprehensive sales infrastructure beyond the major cities. But to reach these rural regions, the allowance of online sales is crucial. It’s also encouraging to see the omission of THC limits for adult users over age 21 and amnesty for those who have been convicted of prior cannabis offenses.

Also, because there isn’t a limit on the number of businesses that can access licenses, founders and operators will have equal opportunities to apply for licenses under the same conditions.

The historic step to no longer classify cannabis as a narcotic will significantly ease the administrative burden of medical cannabis therapy and may finally lead to more chronically ill people benefiting from cannabinoid-based therapy.

Potential Drawbacks

That being said, the draft framework, in its current state, thwarts its own goals with certain measures. To meet the demand for adult-use cannabis, the country should also permit cannabis imports for the adult-use market. As seen in the early days of the medical-only market within Germany, domestic production alone is not enough to meet public demand.

In 2017, medical marijuana was legalized in Germany and, since then, has experienced significant growth. However, this growth did not come without serious setbacks in the market’s infancy due to the low supply of medical cannabis and the high premiums patients were forced to pay. Once medical marijuana came online in 2017, the country saw a sharp increase in demand for cannabis, with suppliers unable to meet demands amid long import times from the Netherlands and Canada, which was facing a cannabis shortage at this time.

To make matters worse, patients are still struggling to find a physician who is willing to prescribe medical cannabis. These challenges are still driving many patients to the illicit market for lower costs and easier access to the plant.

Since then, Germany has taken steps to increase both patient access and affordability of medical cannabis. Germany increased imports of medical cannabis and now allows imports from Canada, Denmark, the Netherlands, Portugal and many more countries all around the globe. In the first half of 2022, Germany imported a record amount of cannabis for medical and scientific purposes, on track to match or surpass 2021’s total, according to the country’s Federal Institute for Drugs and Medical Devices.

With an estimated minimum of 400 tons per month for s needed to satisfy the introduction of an adult-use market in Germany, the industry must be prepared to satisfy consumer demand or risk pushing them into the illicit market. Germany should allow imports from like-minded nations both within and outside of the EU to keep supply consistent and accessible to consumers as soon as the program rolls out. To keep costs analogous to the illicit market, Germany should also refrain from strict Good Manufacturing Practice (GMP) standards which would slow imports and increase costs. This is already planned in the cornerstone paper.

But what about indoor cultivation? Can’t that satisfy supply issues? No, at least not in Germany on a high scale in the short term, because indoor cultivation often comes with higher costs of production compared to legal outdoor or greenhouse cultivation. In addition, wartime conflict due to Russia’s invasion of Ukraine has increased energy prices significantly following halts on supplies. With these higher costs associated with the production of cannabis indoors legally, it would be extremely difficult to keep the costs in line and competitive with sellers in the illicit market. In addition, a challenging climate would make relying solely on legal outdoor cultivation improbable.

To increase consumer accessibility to cannabis, e-commerce should also be permitted with the rollout of legalization, as previously mentioned. In addition to reaching rural regions, e-commerce access allows for another tier of consumer education, Nowadays, even large transactions and very important contracts can be conducted online, and confirming that buyers are at least 21 years and older to purchase products can be done just as easily and accurately online and through mail order, as it is in person.

To further prevent the illicit market from becoming an ongoing roadblock to the licensed market’s success, as seen in U.S. legal states like California, Germany should go above and beyond its current amnesty proposal. It would be optimal to also extend considerations to current players in the illicit market and help them transition into the legal adult-use market instead of continuing to operate under the radar.

Niklas Kouparanis

Niklas Kouparanis

Niklas Kouparanis, CEO, Bloomwell Group,is one of the first entrepreneurs in Germany to successfully gain a foothold in the medical cannabis market and, over the years, has built up several companies, most recently Bloomwell Group. Frankfurt-based Bloomwell Group is one of Germany’s largest legal private cannabis companies. Founded in 2020, the company’s vision is to become the centerpiece of a new cannabis ecosystem that maps nearly the entire value chain (excluding cultivation), both potentially for cannabis as a future adult-use consumer product, as well as cannabis’ current use for medicinal purposes.

Bloomwell Group’s portfolio of operating businesses currently includes licensed distributor, importer and product developer Ilios Santé; Europe’s leading cannabis telemedicine company, Algea Care; and Breezy Brands, the incubator platform for technology solutions and consumer brand building. Among other things, Breezy Brands operates Germany’s first marketplace for cannabis dispensaries. For more information, visit: www.bloomwell.eu.

 

 

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