When it comes to Europe’s fledgling cannabis sector, 2019 has seen the arrival of conquerers who have moved at a speed perhaps at odds with their relaxed reputation.
Yes, the Canadian cannabis companies are coming—as hard and as fast as they can manage.
In recent months: Canopy Growth bought German medical cannabis firm C3, Spanish weed producer Cafina, and British skincare and wellness outfit This Works; Tilray cut the ribbon on its €20 million ($22 million) Portuguese research and cultivation campus; and Aurora took over Gaia Pharm (another Portuguese marijuana producer) while also winning a tender to produce and distribute the plant in Germany—and commencing sales of cannabis oils in British and German pharmacies.
The companies are bringing with them a huge advantage: since Canada has legalized marijuana, even for recreational purposes, the country’s industry leaders been able to go public, raise money, and look abroad to expand.
“The Canadian legislative situation has given Canadian companies a big advantage over those based in countries with more restrictive cannabis laws, especially when it comes to accessing capital markets,” said Pierre Debs, Canopy’s European chief.
“No one else is really positioned like [Canadian firms] are, capital-wise and opportunity-wise,” said Jamie Schau, a research manager at cannabis-industry analyst house Brightfield Group. The upper-hand comes with a sense of urgency, says Schua.
After all, “they’re only going to have this first-mover advantage once.”
But the market that Canopy, Tilray and Aurora are invading is a complex one. When it comes to cannabis, Europe’s rules remain highly fragmented and largely conservative—despite the Netherlands’, in particular, reputation for coffee shops and relaxed drug laws.
Medical marijuana products have recently become legal in Germany, the U.K., Italy, the Netherlands and Portugal, with France and Spain also on track to allow them soon, but they remain banned in many other countries.
That leaves companies confronting a regulatory patchwork, but Toronto-based Tilray said there’s lots of room for growth.
“We expect the European Union to become the largest medical cannabis market in the world. And we expect this to be driven by the availability of medical cannabis through government-subsidized health care systems,” Tilray said in an emailed statement.
Halo Labs, which recently bought a producer in the southern African nation of Lesotho in order to supply the European and African markets. “Where the issue really lies is how long will the snowball [effect] take in Europe that has occurred in the U.S. and Canada.”
However, even as medical marijuana becomes more accepted in certain EU countries, it would be a mistake to draw too close a comparison with the permissive scene in North America.
“The important thing for Europeans to understand is that the actual use of these medicines is far more limited than in some U.S. states or Canada, according to the patient numbers we are seeing,” said Brendan Hughes, the principal scientist for drug legislation at the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA), an EU agency.
A few years ago, the European Medicines Agency authorized the use of GW Pharmaceuticals’ Sativex for multiple sclerosis treatment, but people shouldn’t think that acceptance of that specific medicine means they can smoke a joint for their backache, Hughes said. “There currently seems to be a difference between perception and reality,” he said.
The CBD opportunity
Meanwhile, there is also a booming European trade in products containing cannabidiol (CBD), a non-psychoactive compound in the marijuana plant that is increasingly touted as an ingredient in various wellness products—albeit with little evidence for most of its supposed benefits. This sector also includes smokable plant material that looks an awful lot like regular cannabis, but contains extremely low levels of tetrahydrocannabinol (THC) the compound that gets people high.
The CBD opportunity
CBD is broadly legal across Europe, where Brightfield reckons the market is worth $416 million this year (compared with $5.7 billion in the U.S.).
However, at the start of this year EU food regulators created stricter guidelines for the sale of foods that contain the substance—like CBD cookies—and different countries are interpreting those guidelines in different ways. EU member states also have different rules about the claims companies can make regarding the benefits of CBD.
“We don’t believe the regulatory outlook is bad, but it is uncertain, and it is rapidly changing as governments try to get their heads around this new market, and to understand the distinction between CBD and cannabis,” said Barnaby Page of CBD sector market intelligence firm CBD-Intel.
And then there’s recreational marijuana, which has as yet not been fully legalized in any European country. That is about to change, though: the government of Luxembourg (population just south of 600,000) announced earlier this year that it would fully legalize cannabis consumption by resident adults, with strict controls on its sale. In other words, it is following the Canadian model. The question now is how influential its decision will prove elsewhere in Europe.