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european union states

International Supply Chains: Considerations for European Imports

By Marguerite Arnold
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european union states

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?

Regulations

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.

european union states
Member states of the EU, pre-Brexit

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.

GMPThat 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.

The European Union’s logo that identifies organic goods.

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.

A Year In Review: Canadian Recreational Reform Year 1

By Marguerite Arnold
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There is certainly, in retrospect, much to be proud about in Canada – home of one of the most disruptive international cannabis industries in the world. And certainly an early mover.

That starts with having the national mojo to begin this journey in the first place, not to mention pivot and even admit faults along the way. For all the complaints and whinges, however on the ground, most Canadians are proud that they tackled the canna question at a federal level.

As the industry now does a bit of an annual review and revisit, what are some of the largest accomplishments, takeaways (and let’s be honest, major f*ckups) so far? And where is this all headed as the industry at least tries to gear up for another year, if not quite Cannabis 2.0?

The Big Bravos

Launching in the first place. Yes Full Monty Recreational was scary, and delayed a few months last year. And even though there have been many problems (retail outlets, online sales, privacy, supply chain issues in every direction, ex im, foreign markets and etc.), it is up and running.

In comparison, the Brits have been haranguing over Brexit for the last three years and are still not really there.

Further, it is also apparent that the agencies in charge of the new industry are themselves giving a bit of a shake after CannaTitanic (CannTrust). That was embarrassing for them too, although of course, while a bit of a negative compliment, the recall system seems to work.

Even if it needs a few jump starts via whistleblowing.

That in and of itself is a fact that is still in the room, although perhaps the pancaking of the stock price of most of the public industry of late was also another much needed wakeup call.

The Devil In The Details

Domestic Requirements. Health Canada is getting hip to the fact that the industry needs a bit more of a heavy hand. See the book thrown at CannTrust. No matter what, Canadians are demanding to know where their cannabis comes from, and further are also demanding that it be at least free of pesticides that can harm them.

Licensing. Many cannapreneuers are complaining, still, about the delays in licensing, particularly for retail outlets in the provinces who are taking the cannabull by the horns.  That said, there are still lots of enterprises who are perfectly happy to dodge the requirements all together and sell to the black or gray market. No licensing fees, and no taxes is a wonderful dream, but that is not exactly how regulated democratic capitalism works – at least at this level.

Supply Chain Logistics and Related Technologies. Canadians are struggling to implement a regulated industry in a country where patient home grow is constitutionally protected, and in an environment where who can sell what, and to whom including online, is still evolving. Predictably, no matter how groovy the solution works at home, (or the U.S.), no it will not fly in Europe. See GDPR regs, for starters.

Seed Culture (Aka Strain Protection). No matter how much the lawyers in the colonies are gearing up to sue each other over Huey’s Half Baked, in Europe, there are tomato and pepper farmers who are laughing, literally, all the way to the bank on this one. While hip to be a “strain defender,” the reality in a medical market looking for cheap cannabinoids is rather different. Effective, clean product, which can be reproduced reliably and cheaply, is the name of the game. Girl Scout Cookies, and such ilks will be a long time in coming as anything but highly expensive, niche products you can find in a Dutch Coffee Shop.

GMPDomestic Requirements Vs International Export. Canadian standards, so far, have been widely divergent in an environment where exports to Europe in particular are part of the story for the biggest companies. That said, GMP, and in particular EU GMP, has become at least a buzzword if not a standard to live up to.

Privacy. California might be considering its own form of GDPR (European privacy legislation) but so far, the industry has largely failed to protect consumers (from themselves). Ideas about owning huge data troves on cannabis users for someone else’s profit are still very much in the room. After all, data is the new oil, whether people know their data is being harvested or not. And just like big oil has done for most of its existence, those in the driver’s seat so far show little compunction about harvesting personal information, to become in the words of the now departed CEO of Canopy Growth Bruce Linton, “the Google of Cannabis.” Won’t happen. Starting with the fact that in not just Europe but now even California, people, far beyond pot users are tired of a world where privacy is a second class right.

While the issue first hit in Canada on the recreational side, the reality is that companies know who their clients and patients are in a way that is not only disturbing but increasingly being challenged.

currencies around the world

The Global Price of Cannabis

By Marguerite Arnold
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currencies around the world

Cannabis pricing, globally, is a topic that is going to remain heated if not highly fluid for some time to come. Why? Government regulation (or lack thereof), compliance and even transport along with different models for commerce and consumption are creating an odd and absolutely uneven map of commodity pricing. We live in a world where accurate information is hard to come by. Even from ostensibly “official” sources that track operational markets. Black or legit.

It may sound complex today but it used to be a lot harder. As of just 2014, the UN’s Office of Drug Control listed the price of a gram of (black market) cannabis in Lichtenstein at $1,020 (as reported by a bemused Business Insider). While this could have been a simple matter of misunderstanding that Europeans frequently use commas rather than periods as decimal points in numbers, the fact that this was later corrected to $10.13 suggests human error in transcription rather than reporting. And the world has certainly changed since then.

Yet with no international legal marketplace or even platform yet in existence to track the global price of legal cannabis in different jurisdictions, this is the kind of issue that faces not only those in the industry but those trying to analyze it.

That said, there are beginning to be data points for those who are interested and those who must have this information for professional reasons. Here is a break-down of regional (legal) prices, per gram from a selection of sources generally considered fairly accurate. This is also made a bit more difficult by the difference in measurement systems and currency fluctuations. For ease of reference, these figures are in grams and U.S. dollars. An ounce is about 28 grams.currencies around the world

Medical grade cannabis also means different things in different markets. Outside the U.S., in Canada and the EU in particular, medical grade cannabis must meet a certification process that adds to the cost of production considerably. Certainly in comparison with outdoor grows. It is still, for the most part, imported, from either Canada or Holland, although look for that to start changing this year as domestic cultivation in multiple countries finally gets seriously underway.

The U.S.

Pricing really depends on where you are. It is also dropping fairly dramatically in established markets. The most recent example of this is Oregon – which has seen its higher-than-normal state retail market begin to normalize with California, Washington and Colorado. This is the price of establishing regulatory schemes on a non-federal level. That said, the competition is so extreme at the moment that Oregon, in particular, is a buyer’s market, with recently reported prices as low as $1 and change for a gram.

Retail pricing, in particular, will remain all over the place on a national level, especially given the amount of local competition between dispensaries underway. On average, however, medical grade-ish cannabis runs between $6-30 a gram, retail.

According to the website Cannabis Benchmarks, which tracks U.S. wholesale prices, the domestic spot index of wholesale cannabis was at $1,292 per pound at the end of January. Or about $5 per gram.The theory that the legit market has to price the black market out of existence is unpopular with those who want to collect more taxes from rec sales.

Nationally, at the moment, uncertainty over how the new post-Cole Memo world will play out, plus oversupply in certain markets, is creating strange pricing. Note to consumers, particularly in recreational markets: There are deals to be had.

Canada

This market is interesting for several reasons. The first is that several of the regional governments are considering establishing a Canadian $10 per gram price for the recreational market. Medical grade runs about $8 at the moment in local currency. That means, with a 20% differential in current f/x rates, a recreational gram will be set at USD $8 and a medical gram at about $6. That said, the theory that the legit market has to price the black market out of existence is unpopular with those who want to collect more taxes from rec sales.

Theories abound about the future of recreational pricing, but for the moment, a great deal of supply and new producers will keep prices low at least through 2019. After that? It is impossible to even guess. At that point, Canadian producers will still be supplying at least German medical patients with some of their imported bud. Regardless, the country will continue to play an important role in global pricing – even if it is to set a recreational and medical standard that plays out in markets already from the EU to Australia.

Israel

Like Canada’s market, although for different reasons, the Israeli official price on legal cannabis is absolutely constant. It is set by government policy. Those who have the drug legally, in other words with a doctor’s prescription, pay about $100 for a month’s supply. That amount on average is about 28 grams. That means that a medical gram in Israel will set you back about $3.50 per. U.S. not Canadian.

Europe

Price deltas here are the most impacted by changing national laws, standards and medical legalization. There are only two semi-legitimate recreational markets at the moment that include THC. Those are Holland and Spain. In Holland, via the coffee shops, the low-end of passable bud starts at between $12-15 per gram and goes up to about $30 for the really exotic breeds. This being Holland, they exist and are obtainable. In Spain, add the cost of joining a social club (about $50), but in general, the cost of a gram is about $10.Price deltas here are the most impacted by changing national laws, standards and medical legalization.

Medical markets in places like Germany are still skewed by integration of the drug into the country’s healthcare system and the fact that it is still all imported. The horror stories are real here. Patients must pay out-of-pocket right now for cannabis flower that is also being pre-ground by local apothekes for an additional price per gram that is eye-wincingly high. However, once the price and supply normalize, look for a medical standard here of about $10 for a month’s supply. That will be about 28 grams too.

Germany, in other words, will eventually be one of the cheapest markets for patients after reimbursement by insurance. That shapes up to be about $0.50 per gram at point of sale. It could be far less for those who are able to obtain authorization for higher amounts up to five ounces per month. The flat fee stays the same. Do the math. That works out to some pretty cheap (high grade) medical relief.

Black market cannabis and hash, which is also far more common in Europe than the U.S. at least, is fairly widely available for between $12 and $20 a gram.

The rise of cannabis production in Eastern Europe and the Baltics (which is also still largely pending and based on ongoing government talks and emerging distribution and cultivation agreements) will also dramatically drive down the cost of legal cannabis in the EU within the next several years. Production in this part of the world, along with Greece, may well also source rec markets all over the continent once that happens.

Africa & Central and South America

While the African cannabis trade has yet to break out – even in the media much of yet, there is definitely something green growing in several African countries including South Africa and Ethiopia. That trade unlike most of what is going on in South America with the possible exception of Uruguay is already looking for export opportunities globally. With African cannabis going for less than a buck a gram in most places (as in about a fifth of even that), look for certified African medical cannabis in select Western markets where price is going to be a major issue. Think medical standards. On the South American front, prices are equally low. However, remember that these are not regulated markets yet. And domestic government standards, starting with GMP and both indoor and outdoor grow requirements are basically non-existent. Growers who want to export to higher regulated markets are planning accordingly.

Assorted Outliers

It goes without saying that in places where cannabis is both illegal and carries the death penalty or other harsh penal retaliation, that the price is not only much higher, but the source is black market. In the UAE for example, a gram will set you back well over $100.