Tag Archives: Italy

March 1, 2018

Q1 European Cannabis Industry Update Report

By Marguerite Arnold

While the American cannabis industry deals with both unparalleled opportunity and new risks, Europe is setting itself up for a spring that is going to be verdant.

The ongoing drumbeat for reform in countries across the continent is bringing both money and high-grade medical product into the market. Even if volume is still really at a trickle, it will rapidly widen to a steady stream. It is also very clear that the next two to three quarters are going to deliver news that the cannabiz has arrived, and with authority.

The following is an overview of what is happening, where, and with an eye to informing foreign investors, in particular, about new opportunities in an awakening market.

Germany

Without a doubt, the country is priming itself for a medical market that is going to be large and partially government supported, driving regulation of medical use across the continent. On top of that, the idea of selling 28 grams (1 oz) of product to end consumers who only pay about $12 for their medication has gotten the attention of global producers. Opportunities here for those who did not submit a bid for federal cultivation (see the big Canadian LPs) are still unfolding.

german flag — Photo: Ian McWilliams, Flickr

However here is what is now on the table: an import market that cannot get enough cheap, GMP certified product. Producers from Australia to Uruguay are now actively hunting for a way in, even if cutting a supply deal for the next 18 – 24 months as the German green machine starts to kick into production-ready status. What a bad time for Israel to be so publicly out of the ex-im biz! In fact, Israeli entrepreneurs are scouring the country for opportunities into the market another way (and there are a few efforts afoot in a sleeping giant of a market waking up from a long snooze to find they cannot get enough product). Right now, however, the legal market is absolutely dominated by Canopy, Aurora, Aphria and Tilray along with Dutch Bedrocan.

The German parliament is clearly also going to do something about another piece of reform which will also drive market expansion – starting with announcement of additional cultivation possibilities (potentially this time even open to German firms). On Friday, the day after the British parliament wrangled over the same thing, the German Bundestag debated decriminalization along with a few other hot button topics (like abortion). With only the AfD (right wing) still in the “lock ‘em up camp,” and even the head of the police calling for reform, it is clear that decriminalization is on the legislative agenda this year.

Spain, Italy, Switzerland, Portugal, Denmark & Holland

While it may seem presumptuous to lump all these very different countries under one label, the reality is that the level of reform is generally in a similar state (transition to medical), and that drives potential political and market risk as well as evaluation of investment decisions.

In Spain, federal reform has not come yet, but medical deals involving pharmaceutical companies (both exclusively cannabinoid focussed and otherwise) are afoot. Plus of course there is Barcelona (the Colorado of the country in many ways).

Italy, Portugal and Denmark are all the battlegrounds for the big Canadian (and German) companies now set on having a country-by-country footprint in opening markets across the EU (see Canopy, Aurora, Aphria and their German counterparts of Spektrum Cannabis, Pedianos and Nuuvera). Licensing is political, happening at a high level, and only for those with the bank to back deals that come with high capex attached. That said, there are lucrative opportunities for those with local contacts and liquidity.

Holland is another animal altogether, but for the most part everyone is so confused about the state of reform domestically that the only people really in position to take advantage of it are the Dutch, at least for now. That said, Dutch-based plays (in part financed by Canadian backing) for other Euro markets are absolutely underway. Who else has so much experience here, let’s be honest? Regardless, investments in these canna markets, particularly for the Euro-focussed but North American investor, for now, will tend to be through public stock acquisitions of Canadian parents or direct investments in Dutch companies (see Bedrocan, but they are not the only game in town).

Switzerland, for the most part, is setting its own pace, but reform here means the CBD market, including for medical grade imports, is a place for the savvy medical investor to look for cultivation and ex-im opportunities. Including in the home-grown, Swiss pharma space.

Greece

The recent pronouncement of government officials that Greece was opening its doors to investment and a medical cannabis business means that there will be a federally legal, EU country that is promoting both investment and tourism opportunities just for domestic consumption, let alone export. Scouts from all the major canna companies are combing both the Greek mainland and its islands.

Poland

If there was ever such a thing as a “virgin” cannabis market, Poland might well qualify. For those distributors with cheap product that has not (yet) found a home, the country is poised to start to announce (at least) distribution deals to pharmacies with producers now establishing themselves in other markets. Medical legislation has just changed, in other words, but nothing else is in place. And with Polish patients now having, literally, to scour the continent for product not to mention foot the bill for the travel costs to get it, the next obvious step is a national pharmacy chain distribution deal or two with producers from all over the world now looking for Euro market entry possibilities. Domestic production is some time off.

The BalticsThe ongoing drumbeat for reform in countries across the continent is bringing both money and high-grade medical product into the market

If there were such a thing as the “Berlin” of the cannabis market in Europe (namely sexy but poor), it is probably going to be here. Cheap production markets and opening opportunities for export across the EU for high quality, low cost cannabis are not going unnoticed. Look for interesting plays and opportunities across the region. Scouts from the big international canna companies already are.

The UK

Britain comes last because of the political uncertainty in general, surrounding the island. However, last week Parliament appeared on the verge of being embarrassed into acting on at least medical reform. There will be a market here and of course, there is already one globally known cannabis company with a 19-year track record and a monopoly license on canna-medical research and production (GW Pharmaceuticals) that calls the British Isles home. This will be a no-brainer, particularly for foreign English-speaking investors still leery of continental Europe. However it will also be highly politically connected. Expect to see a few quick arranged marriages between such landed gentry and foreign capital – potentially even this year.

January 30, 2018

Aurora Leads Cannabis Import Race in Italy by Winning (Mostly) Exclusive Rights

By Marguerite Arnold

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Just as the dust had settled on the news that Canadian LP Aurora had signed agreements to finance a major growing facility in Denmark, the company also added another European feather to its cannabis cap.

On January 18, the company announced that it is the sole and exclusive winner of an EU-wide tender bid to begin to supply medical cannabis to the Italian government through the Ministry of Defense. Why is this federal agency in charge instead of the federal ministry of health? So far, the Italian cannabis program has been overseen exclusively by the Italian military.

Pedanios cannabis, produced in Canada and imported through Germany

But the military just isn’t cut out to cultivate cannabis for the entire medical needs of a country, which should seem obvious. And that is where the Canadian LPs apparently are coming into play.

There were two stages to the bid, with Pedanios, Aurora’s German-based arm prequalifying in the first. In the final round, Pedianos won exclusive rights to begin supplying the government with medical cannabis.

What is interesting, however, is what this says not only about the potential growth of the cannabis market in Italy, but beyond that, Germany.

A German-Canadian Sourced Italian Product?

Pedanios, who won the bid, is the German-based arm of Aurora, one of Canada’s largest LPs. And Italian medical cannabis is now about to be routed by them from Canada, via Berlin, to market locally via pharmacies. It is certainly one of the stranger paths to market globally.

This announcement is even more interesting given that Aurora is widely suspected to be one of the top contenders in the still-pending German bid.

Could this herald a German-sourced cannabis crop for an Italian neighbour?

And what does this say about the sheer amount of volume potentially needed for cultivation next door (or even in Italy) as Germany begins its own cultivation program, presumably this year, to source an already undersupplied domestic market where growing numbers of patients are getting their medical cannabis covered under public health insurance?

Will Germany further antagonize its neighbours over a cannabis trade imbalance? Or does this mean that a spurt of domestic Italian cannabis production is also about to start?

There are 80 million Germans and about 60 million Italians. Who will be the cannabis company to supply them?

Nuuvera Also Makes Italian Moves

Less widely reported, however, was the news that Aurora/Pedanios would not be the only private supplier to the Italian market. Nuuvera, which just announced that they had become finalists in the competitive Germany cultivation bid, also just acquired an import license to Italy for medical cannabis by buying Genoa based FL Group.

One thing is clear. The pattern of establishing presence here by the foreign (mostly Canadian) firms has been one of acquisition and financing partnerships for the past 2 years.

Import until you cultivate is also clearly the guiding policy of legalizing EU countries on the canna front.

The question really is at this point, how long can the import over cultivation preference continue? Especially given the expense of imported cannabis. Not to mention the cannabis farms now popping up all over the EU at a time when the Canadian market will have enough volume from recreational sales to keep all the large (and small) LPs at production capacity for years to come.

In the next year, in fact, look for this reality to start changing. No matter who has import licenses now with flower and oil crossing oceans at this point, within the next 18-24 months, look for this pattern to switch.

The distributors will be the same of course. But the brand (and source) of their product will be from European soil.

Foreign Invasions, Domestic Cultivation Rights & More

One of the more interesting professional conferences this year globally will clearly be the ICBC in Berlin, where all of these swirling competitions and companies come together for what is shaping up to be the most influential cannabis business conference in Europe outside of Spannabis (and with a slightly different approach). Nowhere else in the world now are international companies (from bases in Canada, Australia and Israel primarily) competing in such close proximity for so many foreign cannabis markets and cultivation rights to go with them.

With the average cultivation facility in Europe going for about USD $30-40 million a pop in terms of sheer capital requirements plus the additional capital to finance the inevitable delays, such market presence does not come cheap.

It is increasingly clear that the only business here will also be of the highly regulated, controlled medical variety for some time to come.

That said, when the move towards recreational does come, and within the next four years or so, the global players who have opened these markets on the medical side, will be well positioned to provide product for a consumer base that is already being primed at the pump. Even if for now, the only access is via a doctor’s prescription.

June 29, 2017

European Cannabis News Roundup- Summer 2017

By Marguerite Arnold

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Obstacles to American cannabis reform are creating a quirky if valuable market. Cannabis is still a “Schedule I” drug. From a practical perspective, this has created a multi-billion dollar industry that as of yet, cannot get reliable banking services. It also means that patients cannot get the drug covered under health insurance. There are no national safety requirements for growing, packaging, labelling or consumption.

This is certainly not the case elsewhere. Other countries are rapidly outpacing the U.S. in such regards even if their commercial markets are not (yet) of the same size. Outside of Canada right now, Europe is the place where most of these things are happening.

Just as in the U.S., however, there is no one single path to reform.

Who Is Interesting In Europe?

This is an evolving question, but here, for the moment are the market leaders and what is going on locally:

Germany. Cannareform auf Deutsch currently underway makes this the most exciting country in Europe right now. The country is basically the “California of the EU” as it were, with about 20 million more people.

As of January 19, the lower house of the German parliament voted unanimously to legalize cannabis for medical use. Further, they voted to cover it under public health insurance which covers 90% of Germans. Yes, this is a system in process. Yes, there are problems. Health insurance companies appear to have launched a tepid attempt to slow this down, but just as in Canada, they are already facing court challenges. It is a losing battle here. Both legal and legislative mandate are very clear.

This is an industry that will also begin to grow, per government estimates, at between 5-10,000 patients per year for the next couple of years. It could grow faster than that. With over 1 million potential patients already, and a high interest in plant-based and natural medicine, this is a market more than ready for cannabis products. There are now up to ten growing bids up for grabs here and those who have applied are waiting anxiously as the government is set to announce the winners this summer. The big push right now on the ground is doctor and patient education as well as getting patients signed up for trials.

Recreational reform is also far from dead here. The medical question, in fact, has only inspired activists to redouble their efforts to get recreational reform finalized sooner than later. Especially given developments elsewhere, including locally.

Bern, the capital of Switzerland
Photo: martin_vmorris

Switzerland. The Swiss are approaching the question of legalization in another unique way not seen anywhere else. That said, they are clearly inspired by events in other places. Since 2011, low-THC cannabis has been for sale in regular shops. However in the last quarter of 2016 and into the first of this year, the market all of a sudden seems to have woken up. There are now over 160 shops either selling the drug or applying to sell it. This is all product that is taxable.

Thanks to this, reformers are now pushing a bill federally that would legalize and tax the sales of all THC products – no matter their concentration. In effect, in other words, the Swiss are looking at tax revenue first. If they succeed, they will be the first country to enter the market this way. It will also push other countries, starting with their closest neighbours, to examine the question of legalization just on this front. The economic justification alone is compelling. Expect Austria to also look at the problem this way.

Spain. The country is widely billed as the “next Holland.” Why? Cannabis reform has been very similar procedurally. Due to loopholes in the current law, the Spanish have been able to establish a thriving “cannabis club” market. These clubs are member-driven and non-profit. However locals who are over the age of 21 can sign up and smoke in “semi-private.” Legislation now pending in the Spanish legislature would focus on better regulation of both the clubs and the existing grows that support them. The way the Spanish seem to be approaching the issue is to give larger cities and regions direct control over regulation of the industry. However for now, this is a market that is steadfastly resistant to commercial development on the scale seen in other places. Investors – especially from overseas, are avoiding the market because of this uncertainty.

De Wallen (Red Light District) in Amsterdam, where a number of cannabis shops are.
Photo: Bert Kaufmann

Holland. Generation X reformers are used to the idea of the grey market created by the unique nature of Dutch culture and the plant. For the better part of 40 years, the entire industry here has been based on a unique market of seed producers and growers. That, in turn, supports the coffee shop culture. There are many proposals to change the law here, and the industry will probably begin to better regulate – starting with cultivation, as the rest of Europe turns its attention to this issue. It was Holland after all, that started this. What is next for Holland 2.0? It is likely that regional developments will also shape this market too. It is still part of the EU.

Italy. While a bit of an outlier, the Italians are also in the game now. How further reform will proceed here, however is anyone’s guess. The Italian military began growing and distributing cannabis to pharmacies last year. The first medically focused canna café has now opened in Rome.

The Eastern Bloc

Eastern European countries are all over the map on legalization – although most are approaching this as a medical issue. In Czech Republic, legalization has moved forward here steadily in large part because of existing national drug policy. Croatia began importing from Canada last year in the form of cannabis concentrates. Both of those countries have digital prescription systems to integrate with medical cannabis, as part of the legislation legalizing medical use in 2015. This digital dispensation system is also unique so far in Europe, although other countries will be entering this area quickly. Even Turkey has begun to implement reform, allowing producers to begin to grow the plant domestically for local medical use.