The recent decision in Germany on the reclassification of CBD (kudos to the European Industrial Hemp Association) as something other than “novel” has now opened an interesting new discussion in Germany and by extension, Europe.
It basically means that hemp plants, if they are European in origin, can be grown (under the right regulatory structure starting with organic) and even extracted without ever being considered a “novel food.”
Look for (hopefully) similar discussions now across Europe and the UK where the Food Safety Authority is also examining similar policies.
What this ultimately means, however, is that the market is clearly opening on the CBD front, but only for products that make the grade.
What should the average producer or manufacturer from North America think about when setting up a supply chain for export?
Thanks to the new treaties in place between the United States, Canada and Europe right now, there are market openings in the cannabis industry in Europe. Starting with the fact that the cannabis bug has clearly hit the continent, but there is actually not enough regulated product to be found yet and just about anywhere.
This is keeping prices high right now, but do not expect that to last.
Regardless, pricing of imports will not be like anything you have experienced if your background is state or even national market in the U.S. or Canada. There are higher regulations in every direction in Europe. Understanding how to translate the same into equivalencies that do not bankrupt you, overprice your products, or worse, get you in trouble with authorities is a critical first step, and not one to be taken lightly.
Get professional guidance from the country you are hoping to export to, at minimum. And that includes the legal kind. Every step of the way, you have to be certified with, at minimum, federal if not at an international certification.
No matter what cannabinoid is in the mix, this is ultimately a plant-based product. All rules one would normally think about when talking about other food products (for starters) are in the room.
While it is far from “this easy” (although thanks to the USDA’s decision about hemp, not to mention the FDA update on its own deliberations, there are now federal standards), think about the problem this way: If you were the world’s best chocolate bar, or even tomato juice, how would you hit Europe right now?
They have tomatoes here, and unbelievably great chocolate already. What is it about your offering that can stand out? This is the million-dollar question. There are a few people and companies doing this right now, but it takes experience, and understanding the multiple regulatory guidelines involved. Once you figure that out, then you need to look at your supply chain, piece by piece and literally from the plant through end production for where you fit, and where you might not, into the regulatory discussion and market you hope to enter.
The Medical Discussion
There is now the possibility of exporting medical grade hemp and hemp extracts from the United States to Europe. However, everything must be GMP-certified to a medical standard, from organic production on up. This is an international standard, not an American one.
That qualification does not exist much in the cannabis industry in the United States (although ISO very much is) yet. Although it is dawning. On the Canadian side, there are plenty of companies in the discussion, because there is already a beaten path to export.
As the German cultivation bid proved, European certification, certainly is a high barrier to reach. Indeed, it is not only GMP certification in the room on the medical side but also rules about the import of all plant products.
From this perspective, it is also easier to import “finished” product rather than plant.
The Recreational Discussion
Before anyone gets too excited about recreational reform, the reality is that Europe is not going to step ahead of the UN (which has now pushed its next deliberation on the topic to the end of 2020). Yes, there are trials in a couple of places, but far from earth-shaking (recreational trials in the land of the coffee shop anyone?)
More interesting, of course, is what has just happened on the CBD side. But before American hemp farmers get too excited about this, they have hemp and farmers in Europe. And quite a few people have seen the light on this one already.
Sure New York state exports to Europe are probably in the offing, but so are hemp exports from the Southern states where the weather is warmer and the labor cheaper.
Certified labs, processing and extraction, and labelling are all in the mix. And every step must be documented as you go.
How to Proceed?
Whatever your crop or product is, take stock of the certifications you have now. If your plant was not organic, forget export anywhere. You are out of the international game.
However, with this taken care of, look at the certification requirements in Europe for extraction, processing and import of food and plant products and obtain production partners with the same – either in the US or abroad.
With luck, patience, skill and knowledge, yes, the doors are slowing opening, even to U.S.-based cannabis trade of the international kind.
Just don’t expect it to be easy, and leave lots of time for workarounds, pivots and even re-engineering at every point of the way.
In India’s ancient Vedas texts, religious scholars described cannabis as “one of the five most sacred plants.” Cannabis has been a part of India’s religious rituals and festivities for millennia. Ancient Indian Ayurvedic practices used cannabis as an active ingredient in medicines, ranging from digestion problems to blood pressure. Nearly 191 formulations and more than 15 dosage forms have included cannabis as a key ingredient in the Ayurvedic texts. The plant grows wild throughout India’s Himalayan foothills and the adjoining plains, from Kashmir in the west to Assam in the east. This accessibility and abundance of cannabis presents India with the unique opportunity to harness the plant for economic growth.
Despite the country’s long history of cannabis use, the plant remains illegal except for in government-authorised premises that produce and sell bhang (which can be either ground cannabis balls or a drink made by mixing cannabis in milk), or for research and medicinal purposes.
Regulation of Cannabis in India Today
Cannabis is misunderstood legally and industrially in India. Under the Narcotic Drugs and Psychotropic Substances (NDPS) Act of 1985, trade and consumption of both cannabis resin (charas) and the bud (ganja), are illegal and anyone found with them could face up to 20 years imprisonment. There is also a strict ban on cannabis (including hemp) production in India. Although some powers are given to the state government to grant licenses to cultivate cannabis under certain circumstances (such as for research and medicinal use), relatively few research organisations have obtained them. In fact, only the Uttar Pradesh and Uttarakhand regions, which are both in northern India, have received hemp cultivation licenses.
The Indian cannabis market has gathered significant attention recently, with various activists/NGOs filing court petitions demanding legalization of cannabis. They argue that the medicinal benefits of cannabis are hard to ignore, and the ideal climatic conditions for cannabis cultivation have the potential to boost the Indian economy and create millions of jobs. One of these NGOs is the Great legalization Movement, which is working to legalize the use of cannabis for medical and industrial purposes in India. In the summer of 2019, the Delhi High Court admitted a writ petition filed by GLM seeking decriminalisation of cannabis under the NDPS. The public interest litigation argues that the grouping of cannabis with other chemical drugs under the NDPS Act is “arbitrary, unscientific and unreasonable.” Although originally planned to be heard in February 2020, the hearing has been pushed back to May 1, 2020.
There is also traction among some government officials for the legalization of cannabis. Officials including Maneka Gandhi and Tathagata Satpathy have spoken in favour of cannabis decriminalisation. In November 2019, Madhya Pradesh, the second largest state in India, decided to legalize the cultivation of cannabis for medicinal and industrial purposes. As one of the poorest states in the country, it is hoped that the legalization will attract new businesses to the fore. Even more recently, it was announced in February 2020 that the BJP government in Manipur is also considering the legalization of cannabis for medical and industrial purposes.
The Market for Cannabis in India
According to a report by Grand View Research Inc., the global legal marijuana market is predicted to reach USD $146.4 billion by the end of 2025. For India, with a population of approximately 1.4 billion and a growing middle class, the potential market for cannabis products is substantial.
A number of promising Indian cannabis start-ups have arisen in recent years, some of whom are collaborating in order to grow in the domestic market. These start-ups are generally focusing on medicines, cosmetics, textiles, accessories and foods. One of the most promising is Boheco (the Bombay Hemp Company), which is backed by high-profile investors including Google India’s Managing Director Rajan Anandan, and Ratan Tata of Tata Sons. The company is agro-based and intends to reimagine the future of Indian agriculture and sustainable living with hemp. It is also a major supplier of raw material to fellow start-ups, Hempster and B.E. Hemp.
In February 2020, the India-based healthcare start-up HempStreet (who concentrate on the use of cannabis in Ayurvedic medicine) raised USD $1 million in pre-series A funding. The company will use the funding to support its technology growth, research development and to launch a new set of cannabis-based products. Abhishek Mohan, HempStreet’s co-founder said they intend to set new milestones for the medicinal cannabis sector in the country. They are also building blockchain technology to track the cannabis from seed to sale, eliminating the risk that the cannabis they grow will add to the substance abuse problem.
According to HempStreet’s founder Mohan, globally about one in five, or 1.5 billion people suffer from chronic pain. India is predicted to be ranked highest in terms of chronic pain cases by 2025, presenting a huge market for those companies who intend to create treatments for chronic pain with cannabis.
In government authorised research premises, India has begun its medical research of cannabis. In order for cannabis to be used for medicinal purposes, it must have both CBD and THC components in the required proportion. Research is needed on Indian cannabis to study the chemistry and breeding of the plant to ensure it is appropriate for use in medicine.
The Indian Institute of Integrative Medicine (IIIM) have taken legal license to cultivate cannabis for scientific and medical research purposes to develop products for epilepsy and cancer treatment. Under a tripartite agreement, the Council of Scientific & Industrial Research (CSIR), the India Council of Medical Research (ICMR) and the Department of Biotechnology have agreed to develop the epilepsy and cancer treatment products. The CSIR will cultivate the cannabis product and then carry out clinical work. The ICMR will then administer the clinical trials at the Tata Memorial Centre in Mumbai and AIIMS in Delhi. In February 2020, the IIIM and CSIR entered into a cross-border agreement with the Canada-based cannabis research company IndusCann. This research & development collaboration aims to create ample opportunities for developing varied medicines from cannabis. Union minister Jitendra Singh described the agreement as a “historic” achievement, and that Jammu and Kashmir will be the first in the country to develop medicines from the cannabis plant. Singh noted that, incidentally, this is happening at a time when the government is making efforts to encourage foreign investment.
Medical Cannabis Clinics
The doors of Bangalore’s Vedi Wellness Center opened for the first time on February 1, 2020, establishing itself as India’s first medical cannabis clinic. After five years of extensive research, HempCann Solutions will sell tablets and oils made from cannabis at the center. Since opening, the center has received over 100 calls and 25 drop-ins. The company regards Bangalore as a place that is open to new ideas and treatment methods. It was also where The Great legalization Movement began. The establishment of this center mirrors a trend in Europe, Canada and Australia in the opening of medicinal cannabis clinics. One year after the UK’s first cannabis clinic opened, it was announced in January 2020 that the UK’s Medical Cannabis Network plans to open more sites in the coming months.
Despite being a trusted ingredient in the treatment of various ailments for thousands of years, the use of cannabis in modern medicine is restricted by India’s outdated cannabis laws. Although legalization is still some way off, the rising number of cannabis and hemp start-up companies, and the growing popular support for the plant’s legalization , is encouraging. Considering the medical and economic reasons in favor of legalizing cannabis, it may not be long before the Indian Government unlock the full potential that legalization would bring. For now, it will be interesting to track the success of India’s first medical cannabis clinic, and whether it will pave the way for others clinics to open across the country.
HMS Great Britain has now set forth from its European home port for another intriguing and very British escapade on the high seas.
So far the jury is out.
It could be the beginning of the next British Golden Age, Spanish Armada and all that. Or could it could end up (more likely) somewhere up the Khyber Pass (a sordid misadventure of British Imperialism that did not go well in the 19th century with global implications still reverberating to this day). For Netflix fans of The Crown, think “Suez Crisis” as a more recent and apt analogy. Starting with as much as a 6.7% reduction in domestic GDP already on the horizon.
Snarky historical analogies and nostalgia aside, how will Brexit influence and shape a global cannabis industry, starting at home?
The UK Is Not Actually in Regulatory Free Fall
The first thing to realize is that most of the puffery around Brexit was that with the exception of labor conditions, there is little free choice in the world of trade anymore. The players who get export and import licenses, for anything, have to conform to basic equivalency rules, no matter what they are called.
This applies to cannabis in a big way. No matter how the UK market develops domestically in other words, and that is a separate discussion.
Currently, shamefully, the domestic medical guidelines for prescription of cannabis exclude chronic pain patients and a few other obvious groups. The NHS medical market in other words, is a monopoly, set up by the current and previous governments, mainly serving GW Pharmaceutical patients who qualify for Sativex and Epidiolex. Not to mention company shareholders.
Everyone else, including those for whom these drugs do not work well, or work less well than other alternatives, are left in an international trade negotiation in their living rooms as they and or their children suffer.
The import barriers for cannabis – both from Europe and from Canada are absolutely in the room and in a very personal way for the British right now.
How they actually define cannabis, will also clarify. This will be driven now by the UK’s biggest import partners – namely Europe, the United States and Canada (although South Africa and Australia of course, will always be in the picture).
Which regulatory scheme the UK adapts, including for cannabis and of both the THC and CBD variety (not to mention other cannabinoids), in other words, will at minimum have to be broadly equivalent with all of the above. Not the other way around. No matter how much the Food Standards Agency (FSA) wants to fuss and fiddle with “Novel Food.” That alone is a canard.
Cannabis is a plant. It is time to start acting like that. And it is no more “novel” than tomatoes in many, easy-to-understand environments, including commercial ones. Not to mention will increasingly be regulated like commercial food crops – even if those crops are then also bound for dual purpose medical use.
The regulators will eventually get there – but not without a lot of tortuous twists and turns.
A “New” Market? Not So Much…
There is a lot of consultant palaver and baloney in the room right now. There is no more a new market in the UK as there was in Germany (or Canada or Colorado). Local producers are already organizing, and on the hemp front. The big ones are hip to regulations and are getting certified to enter it. Everyone else is being left on the dangerous sharp end of police raids, even with prior local approvals.
That said, foreign producers are of course looking at the UK right now, and in a big way. The lock GW Pharmaceuticals has on the domestic market will not hold long. European producers are absolutely in the room (starting with Tilray in Portugal and Alcaliber in Spain). Not to mention what is going on in other places right now, even if of less well-known corporate branding.
Every big Canadian company is already in the room in the UK, and many Americans are now beginning to show up in the market.
However, for the most part, such ventures are doomed outside of conference sponsorships until the regulatory questions are answered if not met.
And that includes federal certifications that are easy to find – there is no one single authority that handles cannabis internationally. And there never will be. Supply chains are already global.
A Perfect Export Market
One of the biggest, so far widely discussed questions is who in Europe will start exporting to the UK (forget Holland for the moment). Not to mention producers in Spain, Greece, Poland if not Macedonia. That conversation is also on the table now. For the first time, so is Germany, and on the medical side.
Pharmaceutical producers in particular who meet international pharma standards may be the best hope yet – although right now policy makers are still looking at cars rather than cannabis to help keep Germany’s trade export quota where it feels “comfortable” domestically.
That too will change. And fairly quickly. See Greece, if not South Africa.
The political roil of branding and politics afoot in Germany right now makes this new kind of export market idea as a part of economic development, an inevitability.
Not to mention, at least for the present, a reverse trade in regulated British CBD products – if producers are smart about regulations – throughout the continent right now.
Of all countries, outside Switzerland, the UK has the ability to develop a broad and intriguing market in the EU – but only if they are compliant with regulations in Europe.
And this is where the policy makers in Parliament and 10 Downing Street have already misjudged if not broadly misled, not in a regulatory environment of their own, but in fact in a diplomatic “room” where the rules are already set via international standards and certifications, not to mention treaties.
There is a strange, if yet so far undetected, regulatory hum in the air right now in Europe that will begin to increasingly occupy those who are in the certified industry here or looking to get in.
And no, it’s not imminent “recreational,” although it will also have vast impact on the same.
A little understood regulatory structure (so far at least within the cannabis industry) called EU-BIO is now firmly in the room.
What that is and how it will impact the industry is already starting to show up in a few places (see the new announcement by the Swiss that their recreational trial will be organic). This is of course before any dates have even been decided upon for said trial (although others have been set up in the country for about a year).
Beyond this, there are vast implications for every part of the industry, THC or CBD, medical or “lifestyle” focused.
What is EU BIO?
All food in the European Union is regulated on a “federal” level much like in the United States. The difference in Europe however, is that every European “state” or country (like Germany, Spain or Holland) also then has their own regulatory structure which is also equal to the federal standards of the U.S. – including via treaty on both the pharmaceutical and “consumer” side. In general, as a result, regulations, including in all things cannabis space related, are much stricter in Europe.
What this also means, generally, is that all food, cosmetic and human-use lebensmittel (to use the German word for everyday consumer goods like food, cosmetics and lifestyle products) must pass through regulatory agencies that are very much like the USDA and FDA in every country and on a regional European level before being approved on a national sovereign one. Where those are, and who handles what, however, is a patchwork of agencies across the continent. There is no homogenization, in other words, for an organic producer looking for the right agency to get certification from in Germany and Austria.
The distinctive green logo that is omnipresent in particularly German grocery stores also comes with a few high standards of its own. Namely that the logo must appear on all pre-packaged EU food products claiming to be organic within the EU and all member states as well as all imports. Even more importantly, the logo cannot be placed on “transition” projects – namely those which are hoping to fulfil the regulatory standards but are not there yet.
To complicate matters even further, of course all product that ends up as EU GMP must begin life as an organic product. Forget pesticides – radiated product is a hot topic right now as well as its certification in the German medical market.
And that also means, by definition, that all cannabis production in Europe as well as products hoping to be sold via relatively normal channels, must also meet these certifications.
The only other option of course, is what is called “Novel Food.” And even here, thanks to changes in EU BIO on the table for the next couple of years, those who hope to gain access via this kind of labelling, still need to pay attention to organic production. No matter where you are. Or what you want to sell.
Are All “Organics” Made Equal?
Just as in the medical industry and GMP, the strictures of “certified organic” are supposed to be fairly straightforward, but are interpreted by different countries and regions.
Generally speaking, however, national or even regional “organics” are not exactly the same. For example, Canadian “organic” is not the same as EU-BIO, starting with the fact that the plants in question are not necessarily of European origin (see the same logic here as behind Novel Food). In other words, there is no automatic equality, starting with the source of the seed. But there are also other issues in the room including processing.
That said, being organic is going to be the watchword of the industry. And in this, a bit surprisingly, the US will also have a lasting impact. Why? Because many countries want to export to the US (far from cannabis) and are required to adopt similar agricultural standards (see Latin America for starters).
Bottom line: it is better to be “green”, through and through, no matter where you are, or where you are from, in the global industry going forward. By the end of 2021, certified organic supply, at every level of the industry, won’t be a “choice” anymore.
Europe continues to be the new frontier of medical and wellness developments in the cannabis industry, with various sources predicting that Europe will become the world’s largest legal cannabis market over the next 5 years. Key related statistics, include:
A population of over 740 million (over double US and Canada combined)
Total cannabis market estimated to be worth up to €123 billion by 2028 (€58bn medical cannabis (47%), €65bn recreational cannabis (53%))
Over €500 million has been invested in European cannabis businesses (including significant expenditure in research and development, manufacturing and distribution)
To reiterate this belief, this month, hundreds of industry experts and delegates will be attending Cannabis Europa in Madrid, to discuss the expansion of cannabis across Europe and the challenges facing the industry across the member states of the EU and the UK.
Global mainstream leans to European strength
Since late 2018, major global operators have made substantial moves into the cannabis sector. Anheuser-Busch InBev, the world’s largest beer company and maker of Budweiser, entered into a partnership to research beverages infused with two types of cannabis. Constellation, owner of Corona beer, announced a commitment for $4 billion investment in Canadian cannabis company Canopy Growth. BlackRock Inc, through five actively managed BlackRock funds, has invested into Curaleaf Holdings Inc, a dispensary operator, for a not too insignificant investment sum of $11 million (as at March 2019). Such international investments prove that cannabis has moved from the fringes and into the mainstream.
When considering the impact of mainstream cannabis, it should be recognised that major European countries have approved or are planning on implementing, legalisation of medicinal cannabis. The UK, Germany, Italy and the Netherlands already have legal systems in place for medicinal cannabis and France and Spain are currently reviewing key legislative reform to align themselves with international practices. At present the German market is the third largest cannabis market (in terms of size) behind the US and Canada.
In addition to medicinal cannabis, several key European countries have systems in place, or are developing systems, or considering the reform of existing systems, to approve cannabis with THC content at a recreational level. The Netherlands already has a system and Luxembourg’s health minister in August 2019 announced the intention to legalise cannabis for Luxembourg residents. The Luxembourg government is lobbying EU member states to follow suit.
Whilst the EU has a labyrinth of laws in relation to edible CBD (as a novel food) which make the regulatory landscape complex, there has been an explosion of CBD products for vaping and cosmetics. Of course, with each of these products being subject to different local laws (some aligned between EU members states) in relation to vaping and cosmetic related regulations. The Brightfield Group has predicted a 400% increase in the European CBD market (including vaping liquid) from $318m in 2018 to $1.7 billion by 2023. There is also an expansion into applications for CBD with animals with many US manufacturers of CBD-infused pet food.
The European Parliament’s health committee has been calling for properly funded scientific research and there are motions to establish policies to seek to incentivise member states to advance the studies of medical cannabis, with a priority on scientific research and clinical studies – the first step necessary to drafting legislation, designed to better support the industry.
Where does the UK sit within cannabis?
Medicinal cannabis famously saw a legalisation, of sorts, by the then Secretary of State, Sajid Javid, who provided the authorisations for prescriptions for the high profile cases of Billy Caldwell and Alfie Dingley. Subsequently, on 1 November 2018, this was codified into law by an amendment to Schedule 2 of the 2001 Misuse of Drugs Regulations. This allows clinicians to prescribe cannabis as an unlicensed medicine.
There have, of course, been some high profile licensed medicines. The UK company, GW Pharmaceuticals, is the largest exporter of legal medical cannabis in the world, cultivating medical cannabis for production of cannabis-based medicines (e.g. Epidiolex & Sativex). Epidiolex (manufactured by subsidiary Greenwich Biosciences) became the first cannabis-derived medicine approved for use in the US for treatment of seizures caused by Lennox-Gastaut and Dravet syndromes (both severe forms of epilepsy).
When considering the level of research development and investment in the medicinal field, it is no surprise that the UK is the world’s largest producer and exporter of medical cannabis. Research published by the International Narcotics Control Board indicates that the UK produces over 100,000kg a year of medicinal cannabis.
Previous guidance from the National Institute for Health and Care Excellence (NICE) indicated that further research is required to demonstrate the benefit of medicinal cannabis, citing its cost versus evidenced benefit. However, there is now renewed confidence in the UK following NICE’s approval of two cannabis-based medicines produced by GW Pharmaceuticals, Epidiolex (cannabidiol) oral solution and Sativex (nabiximols), for routine reimbursement through the NHS.
Following the re-categorisation of medicinal cannabis in November 2018, a number of clinics have been established where specialised clinicians can start the process of prescribing cannabis based medicinal products (CBMPs). Whilst this route is not fast, and challenges are well documented as to the satisfaction of prescriptions made in the UK, there is momentum behind the development of this as a means for providing genuine and established medical care. A significant step in October 2019, was the CQC registration of one such cannabis clinic, Sapphire Medical Clinics Limited.
The UK medicinal cannabis sector is establishing a research-based approach to expand usage in the UK and across Europe.
How North America compares to Europe
Canada, as a first mover within the cannabis sector, has a multitude of large companies which are well-capitalised and have substantial international footprints. The Canadian exchanges have large listed companies looking to Europe with the intention of acquiring or investing into European operations. As of the date of writing, the 10 largest cannabis companies in Canada have an aggregate market cap of over $23.5 billion (and all registered cannabis companies in Canada having an aggregate market cap of over $46.5 billion).
Listed companies have had a tough time over the last 6-12 months with a slowdown in the market as a natural re-balancing occurs – part of which is due to rapid expansion and heavy investment into cultivation by all the major participants in the market. Over the next 6 -12 months we can expect to see management changes (some of which will be voluntary and some of which will be imposed by institutional pressure) to introduce different skill sets at board and senior management level to facilitate the oversight and leadership necessary for large pharmaceutical companies. Many operations have expanded into highly regulated products and complex supply chains whilst still operating with fundamentally the same team that established the operations with entrepreneurial efforts but, perhaps, a lack of experience in these sectors. The recent announcements by Aurora Cannabis and Tilray demonstrate that these restructurings and costs reductions have already commenced. However, with increased experience at board level and an improvement of profitability focused on sustainable business practices, should come new opportunities on a global scale for these North American operations.
The US market, because of the complexity of state and federal laws not being fully aligned, is closer to its infancy than the Canadian market. This is not too dissimilar to the European market. That said, there are a number of well-funded and quite large US enterprises. A limited number of these, such as Tilray, are looking to expand into Europe.
Many of the companies in the US have, and continue to, expand quickly so we can expect to see a number of mergers and acquisitions. We are likely to witness Canadian and US entities merging with one another with the potential for acquisitions for operations within Europe. It is unlikely that the North American companies will risk their capital through organic growth so would be expected to be identifying “turnkey” solutions.
One of the major challenges facing US companies is the complexity of supply and distribution. This is largely a result of the complexities for state and federal laws interacting with one another as well as international importation and exportation with US states.
How you can invest within the UK and Europe
Developments in the fields of research and development are anticipated to add further weight to the lobbying of government and regulatory bodies across Europe.The UK remains, despite the events of Brexit, a major financial hub for Europe. The London market has seen the growth of several investment and operation cannabis companies. This includes private companies such as; EMMAC Life Sciences Limited and the operations formerly trading as European Cannabis Holdings (now demerged into several new entities including NOBL and LYPHE) as well as publicly listed companies; including Sativa Group PLC (the first publically listed cannabis specific company in the UK) and World High Life Plc, both operating on the NEX Exchange.
The Medical Cannabis and Wellness Ucits ETF (CBDX), Europe’s first medical cannabis ETF fund, domiciled in Ireland, and which has been passported for sale in the UK and Italy, has also caused a renewed stir within the market with a further platform for listed investment.
As the regulatory framework evolves further there is an anticipation that more medicinal cannabis and CBD related enterprises should have the opportunity to list on public exchanges, whether in the UK or in European countries.
Despite a period of slow down following the natural rebalancing of the fast-growing North American markets for the cannabis sector, there is renewed confidence in the expansion of the industry. Developments in the fields of research and development are anticipated to add further weight to the lobbying of government and regulatory bodies across Europe.
There is an increased push for a public dialogue and consultation in relation to medicinal and recreational cannabis in the UK, backed by several mainstream media platforms. This is likely to be shaped in some parts by national debates in Luxembourg and other European countries as they consider their own domestic laws.
With European parliaments across the EU (including the UK) hopefully having time freed up to discuss other political matters now that Brexit is progressing, the next 18 months should prove an exciting time within the European cannabis sector.
Germany, for all of the other developments going on right now (globally) is still chugging forward, in integrating medical cannabis. It is slow going – but certainly going.
In terms of overall numbers, there is certainly an interesting story to tell. The import of medical cannabis grade flowers also more than doubled last year over 2018.
But does the “average” German patient have easier access even with more product in the market?
Answer: There are certainly more Germans with more cannabis prescriptions. See the increase in imports and the numbers from the statutory health insurers.
But even though these are clearly positive signs, it has not necessarily gotten much easier so far. That said, it is about to get quite a bit cheaper.
The Mainstreaming of the German and EU Cannabis Market
National pride aside, the German government is in fact the entity which got this whole ball of wax rolling here, and it is they who still determine the pace of regulated change. The cultivation of medical cannabis is now fully underway in the country, with Demecan still in the most interesting position. Aurora has just gotten another certification and is back on the ground in pharmacies.
But many issues remain.
On the ground, pharmacists cannot get enough product on a reliable basis. Patients are still caught in the never-ending merry-go-round of chasing down willing doctors, battling insurance companies for reimbursement and trying to have a good relationship with their local pharmacist. If, of course, they can afford both the drug itself, along with its outlying costs and frustrations to access, and their health insurance company plays ball.
Even then, chances are, the most seriously ill patients are still relying on “other” sources. A reference wholesale price (of €2.30 a gram set by the German government last year) is likely to stabilize the market if not pricing. For everyone – not just those on public healthcare.
The plant is becoming commoditized, even if slower than most people in the industry long to see.
On top of that, while certification is currently gaining steam in the industry, especially in Europe, there are many problems and issues remaining – on everything from processing of the flower to registration of products made from it. And in both the medical and recreational market.
Overall, in other words, markers are all good. But the process is going to be (very) slow if steady for the next several years.
Don’t Expect Continual Explosive Growth
Dronabinol is still at least a third of the public healthcare market. The majority of patients who receive the drug still fit the same overall treatment profile (chronic pain). And doctors are still highly reluctant to consider it as a more standard practice.
But the most important conversation, by far, is still basic legalization and regulation beyond that. That too will change. Not to mention the recreational discussion now absolutely on the table. Four years of a medical market only continue to open doors, not close them. And elsewhere, across the continent, reform is generating new producers from not only southern Europe but just about everywhere else on the globe where cannabis is becoming legit.
For the next year, however, as all of these issues continue to be debated, and at both a national and increasingly local level, don’t expect “explosive” anything.
Those who have established themselves are dug in. It is going to be trench warfare from now on out, barring a major surprise, for the next few years.
What Is Likely To Change The Equation?
CBD battles are absolutely strategic manoeuvres through the intricacies of this regulatory shift (legalization of the plant). This alone, particularly for the next few years, is likely to also move the conversation forward – and not just on the medical front.
It is also patently obvious that governments (starting with Italy) are beginning to again consider the topic of limited home grow and recreational reform.
But the most important conversation, by far, is still basic legalization and regulation beyond that. And until that happens, nothing will be “normal” about a market that is clearly being allowed to grow, in a market which is being carefully tended and managed.
“Explosive” in other words, is far from the agenda of anyone in authority who is making the decisions. And that includes regulated market growth and numbers for the next 48 months at least.
If you were at Davos this year, you heard alot about CBD. The cannabinoid will again be a headliner in business analysis and bottom line reports this year. But as the market matures, globally, what is the real temperature of the industry? And how fast will regional hiccups resolve?
Regulatory Issues Are In The Room
From the US state markets to the EU, hemp is coming into its own, even though almost everyone also refers to it as CBD (cannabidiol).
In the United States, things are even more murky because of a lack of federal reform and the individual rules and regs of existing state markets. To an extent, the market is being “federalized” on the testing front (see ISO for example) and GMP (at the federal pharmaceutical level), producers are beginning to be able to get certified on a global scale. However, the vast majority of the U.S. market is not anywhere close to the regulatory muster now required of even the most-humble commercial hemp farmer anywhere in the EU.
In Europe, the entire cannabis discussion is already far more defined, and as a result, very much likely to set the rulebook globally, especially as so many people want to import here. And this is going to be a bugbear for the next two years. The rules on EU Bio for starters, are still in flux. And where this ties into GMP downstream, those who brave such waters are in for choppy seas for the time being.
Tie this into Novel Food, and this is an area right now that should only be charted by the most experienced navigators, and not just using the stars.
The Battle Is On – Both On The High Seas And The High Streets
For all the desire to bring “whole plant” into the room, (in other words recreational cannabis and medical cannabis with the THC still attached), CBD fever at least has spread in Europe faster than any pending flu epidemic from China.
There are positives and negatives that come with this discussion. Namely, the ever pounding need to commercialize the legal industry and remove all Drug War stigma and barriers from the discussion.
CBD-only legalization is also a powerful answer to those who claim that if CBD is legit, then the police will not chance busting people, no matter how much THC is or is not in the offending substance in question.
These are also the same people frequently who also have a stake in some level of the industry as it legalizes. And this is also where some of the fiercest battles for regulatory control and definition have also begun to happen.
Where they have come to a head (see Italy), it appears that governments are indeed reconsidering the whole “insurance” if not “home grow” discussion. Not to mention, as a result, recreational after that. The conversation in Italy, of all places, right now, is a good indication of this trend. It is a conservative country in every way, yet it is the first to not only cancel a government controlled monopoly license, but also the largest country in Europe to again tinker with limited home grow of cannabis plants.
Ironically this is also the place where the most dedicated “CBD revolutionaries” have also hit. In places like the UK right now, the lack of appetite for EU regulatory control generally (see Brexit) has resonated, particularly with a pro cannabis crowd sick and tired of more delay on a topic whose day in the sun has finally come. If not more government wobbles on discussion on the medical side (see the recent NHS decision to ignore cannabinoids and chronic pain).
In other places like Europe however, and this certainly showed up at Davos, CBD is a hardy foot soldier if not cannaguerilla from the hills that is beginning to chalk up discussions if not yet wide-ranging sovereign victories.
This is absolutely clear to see in places like the African market (and Lesotho is about to become a hot ticket globally if not within the African continent). Indeed, the first seeds were sown several years ago).
Yes, it is ridiculous that CBD is being banned. And it is also obvious that governments are unwilling to be bankrupted over medical cannabis of any kind or THC concentration, and know they must also seek other ways to deal with the issue.
CBD, in other words, is a kind of Che Guevara that is going to take down a few of the established orders in this revolution that is now global. And for that very reason, taking on a character if not place at the table all of its own.
Constellation Brands, the beer brewer behind Corona and Modelo, has finally admitted the obvious. Its four-billion-dollar bet on the Canadian cannabis company Canopy Growth in 2018 was a long-term play for market share, not immediate profitability. Indeed, Canopy has yet to turn a profit and its shares are down 30% from this time last year. So far Constellation has lost $71.1 million of its investment in the cannabis industry company leader. That is 19.25% of its total investment in 18 months. In other words, hardly insignificant.
That said, Canopy is not, by any stretch of the imagination, “down for the count.” If their overexpansion plans and statements over the last three years have been, at best, optimistic, they have not done anything broadly different than any of their other major competitors (see Aurora for example). And have still emerged, financial bloodbath although it has been so far, four years after entering the European market at least, with global presence that is not going anywhere. Even if in some markets overall sales are lower than hoped or anticipated.
At least two quarters of real reorganization and reshuffling in every office on every continent the country does business in have at least resulted in a major victory in Luxembourg at least that will bear fruit for years to come. That is a strategic victory worth a few dings along the way.
Starting, almost certainly, in 2021, when changing laws in Europe will also allow the company to bring together its background and reach in the spirits industry to a world that is finally opening to the blending of the cannabis world into the same.
This year, in other words, will almost certainly see the company continue to service its existing steady business in multiple countries – however unfancy that may be. And it is decidedly not glam here. In places like Germany the company is essentially only holding onto market share in the medical market by its purchase of the largest dronabinol maker in the country.
That said, beggars cannot be choosers. Aurora in contrast, is looking at a serious review of its cultivation licenses and practices. In the meantime, Canopy snagged a lucrative contract for a strategic, central country in the European debate – Luxembourg – that no matter how small, that will create at least a trickle of medical sales until the country changes its laws.
One of the things that the Canadian cannabis industry has in spades, and this is absolutely true of Canopy, is accurate business acumen about market entry timing and overall strategy.
No matter how much cannabis industry execs, in other words, have only been positive and upbeat before, this statement by Constellation also signals a change in the way Canopy presents itself externally.
Mistakes have been made. It is time to clean house and move on.
What other new industry in the lifetimes of those alive today, continues to admit its mistakes and pivots less than a decade after its global birth in continual pivot and expansion mode? The only other one that comes close is of course the internet. And these days, more specifically, Internet 2.0.
So, as the world says hello to 2020, Canopy seems to be sending its new year message. Trimming the sails after a wild, wild year, and setting course again, for a greener horizon.
Canndoc, an Israeli medical cannabis producer, just received a shipment of 250kg of dried whole flower cannabis. The company, a subsidiary of InterCure, just signed a strategic cooperation agreement with Canada’s Tilray.
Interestingly the agreement is both for the import and export of flower. So don’t count out a stream coming the other way. Or, more likely, the export of seed and cannatech related to the same.
Everything goes both ways – yin and yang. Even in this industry.
However what this also does is set up Tilray to have an excellent shot at being partnered at least with the first Israeli exporters when local demand is satisfied. And that, given their strategic footprint globally, but particularly in Europe, is a very unique advantage in a cannabis map that is shifting, literally, as the year becomes the new decade.
What Gives With The Ex-Im Discussion Anyway?
Israeli producers have longed for the day when they can bring their considerable tech and research advantage if not plant genomes and medicines to a global market. The medical program in Israel was originally funded largely by American federal money while domestic reform was fought, tooth and nail until the middle of the last decade. And of course so far, at least, despite Illinois clocking over into the 11th recreational state as of January 1 of this year, has remained stalled on a federal level in the U.S.
However, no matter the shifting politics of Israel (where lets not forget, the government is also mired in scandals and it appears the Israeli president, Benjamin Netanyahu delayed the export of cannabis in a deal with the U.S. to move the capital to Jerusalem), one thing was made clear last year by government officials: Israelis come first.
It is likely to be an attitude that spreads – particularly in places like Europe and even more so Germany. So far, the entire market here has been met with imports. This is the first year that there is regular medical production hitting pharmacy shelves thanks to Demecan and the former Wayland (now ICC).
Indeed, Wayland basically did the same thing in Germany as Tilray is doing now in Israel, although the firm had to sink a huge capital expenditure into setting up its cultivation sites. And at far greater cost.
Tilray appears to be hitching a ride on an existing industry to expand its reach, markets and of course, IP. Israeli cannatech, for sure, is going global.
How Could This Impact Other Discussions?
There are two places this development is likely to impact policy discussions outside of Europe where home grow has, let’s not forget, also hit Italy in the last months. But similar ripples are afoot everywhere right now – from Portugal and Spain to Greece. While exporting can be a lucrative game, should it come at the expense of domestic citizens?
The first place this issue has already been a theme is obviously Canada, where this spectre was much in the room last year as the country transitioned to recreational while its top companies also established themselves abroad. In Europe this was mostly done without cultivation domestically except in a few rare instances. See Tilray in Portugal, Demecan in Germany, ICC in Italy and all of the partnerships between the top Canadian cultivators and Danish, Greek and Maltese producers.
The second place this will undoubtedly have an impact, however, is very much likely to be the United States. While most pundits agree that federal reform is at least a year or so off (roughly equivalent with European change of a recreational kind), this discussion is already in the room.
These days, six years after Colorado and Washington State upped the ante, companies may operate separate operations in multiple states, but of course, cannot ship across the border of any of them.
As soon as federal reform hits however, also expect to see these discussions going on at a state level across the United States. With healthcare devolving very much to the states, locally grown cannabis is going to play a major role in all of these discussions (starting with the opioid epidemic). If not, as many expect, an influx of cannabis from south of the border.
Those days, however at least in the U.S. are still several years away. In Israel, however, as Tilray lines up a unique profile across all of said jurisdictions, look for intriguing cannabis developments coming soon, in multiple jurisdictions.
Here is the headliner: As of the second week in January, there will be a cannabis related exchange-traded fund (ETF), trading on the Frankfurt Stock Exchange (or Deutsche Börse), the third largest stock exchange in the world and the meeting point between equities and the vast majority of institutional investment globally.
The Medical Cannabis and Wellness UCITS ETF (CBSX G) will trade on Deutsche Börse’s Xetra.
London-based ETF provider HANetf is the creator of the fund.
The idea is to create a fund with targeted exposure to the European market. And as a result, it is bound to be interesting. Especially as the companies included must go through a due diligence process that will only include equities traded on stock exchanges like the NYSE, Nasdaq and TSX.
This of course is no guarantee, particularly given the scandals of the major Canadians last year (who are listed on all or an assortment of the above).
Indeed, in the eyes of German authorities, this is not necessarily all that significant. And that in and of itself is a watchword of caution here. Namely the Deutsche Börse put the entire North American cannabis equity market under special watch two years ago and that has not changed since then. That said, with legalization now clearly in Europe, things in general look a lot different on the ground.
What will be really intriguing is when the fund (or the ones inevitably to follow) that look at the discussion from a European market perspective.
Purpose Investments, the Canadian partner involved, has over CA $8 billion in assets under management as of last month and across a range of ETFs.
Solactive, the German company which independently calculates the index, may also be unknown to North Americans in particular. In Germany, particularly Frankfurt, they have developed, since their founding in 2007, a reputation for being not only quirky, but not risk averse. In other words, decidedly “non-German,” at least by stereotype. And cannabis right now, particularly with this approach, is an inevitable development. This could, in fact, do very well. The problem, however, that is still in the room is the vastly different levels of compliance – but that too is a risk calculation that is to the people at the table, no different than certain kinds of commodities.
That alone makes this ETF intriguing simply because it will indeed be evaluated by German eyes – if not processes.
Things are clearly normalizing on both the accounting and reform front. The growth of the regulated Canadian market and the increasing focus on regulation of all kinds is only going to make things less risky for investors.
Bottom line: Good development, but won’t be the last. By far.Further, there are not many public European companies, yet. That may also change. However, for the moment, they are still a trickle (and all over the map).
What is intriguing is the timing of the fund. If not what it potentially spells for the public markets. And further the obvious research the Auslander team have done in finding the right European-based partner. Look for interesting things indeed.
This is the first real foray into Europe by anything outside a single stock offering on a European equity market.
For Germans, in particular, who are extremely risk averse, and tend to invest in other kinds of securities if not insurance to build up their pensions, the equity markets sniff a bit too much for most of “North American scam.” Far from cannabis. Yet some Germans do invest in the markets. As do other Europeans.
Bottom line: Good development, but won’t be the last. By far.
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