Lessons from Canada: Germany’s Cannabis Market at a Crossroads

As Germany liberalizes its medical marijuana program, removing cannabis from its narcotics list, the country stands at a pivotal moment. With patient numbers expected to surge from hundreds of thousands to potentially millions in the next couple of years, industry experts are drawing parallels – and important distinctions – with Canada’s experience.

Canada’s recreational cannabis market launch in 2018 serves as a cautionary tale. Operators, anticipating millions of new consumers, raised vast sums to build cultivation facilities. However, demand fell short of expectations, resulting in a notorious oversupply that led to significant product destruction.

At the Cannabis Europa conference in London, industry leaders Paolo De Luca of Organigram Holdings, George Scorsis of Entourage Health Corp., and Benedikt Sons of Cansativa gathered to discuss whether Germany might face similar challenges.

The panel highlighted key differences between the German and Canadian scenarios. Germany’s focus on medical cannabis, coupled with its existing pharmaceutical framework, provides natural barriers to oversupply. Sons emphasized that Germany’s market evolved from undersupply, unlike Canada’s immediate boom.

The experts stressed the importance of responsible capital raising and market understanding. Scorsis noted a shift from public market funding to alternative sources, such as labor unions seeing cannabis as an opioid alternative. De Luca advised caution on raising money for cultivation until persistent shortages emerge.

On licensing policies, Sons explained that Germany’s limited number of licensed cultivators and established international supply chains create a balanced market dynamic. Scorsis suggested implementing better cultivation metrics to help companies gauge their competitiveness and make informed decisions about production versus purchasing.

Forecasting demand emerged as a critical skill. Sons revealed that smart data analysis has led to minimal product destruction for Cansativa. De Luca noted that forecasting has become easier, with major market shifts now primarily driven by product innovations or new high-THC strains.

The potential for exports as a solution to oversupply was discussed, but with caveats. While Canadian companies see international markets as opportunities, regulatory challenges persist. Sons cautioned against relying on exports as a primary strategy for managing inventory, emphasizing the importance of incorporating export demand into initial sourcing plans.

As Germany’s cannabis market evolves, the lessons from Canada loom large. The experts agree that understanding the market, responsible capital management, and data-driven decision-making will be crucial in navigating the path ahead. With careful planning and learning from past experiences, Germany’s cannabis industry has the potential to avoid the pitfalls that challenged its Canadian counterpart.