North American Cannabis Companies Are Looking To Germany For Growth Outside Domestic Markets

As the North American cannabis market faces an overcrowded sector, persistent illicit trade and a variety of legal twists and turns, companies from the U.S. and Canada are turning their attention to Germany for growth opportunities. This strategic pivot follows Germany’s partial legalization of marijuana use, positioning it as a lucrative market for international investment.

German Market Potential

Germany, the largest medical cannabis market in Europe, decriminalized cannabis possession and small-scale home cultivation in April, simplifying the process for doctors to prescribe marijuana. However, the market remains underdeveloped with only a few local firms licensed to cultivate the plant. This has created an opening for North American companies to provide capital and export products to meet the growing demand.

Challenges in North America

Industry experts attribute this shift to significant challenges within the U.S. and Canadian markets. Canada struggles with an oversupply and a runaway illicit market, while the U.S. grapples with regulatory hurdles and the absence of a clear timeline for federal legalization.

Industry Experts Weigh In

“The Canadian market is very challenging for these producers, and Germany is probably the largest opportunity for them,” Frederico Gomes, an analyst at brokerage ATB Capital Markets, told Reuters.

Strategic Investments In Germany

German companies, including the country’s largest cannabis producer Demecan and online seller Bloomwell Group, have confirmed ongoing discussions with U.S. and Canadian companies for potential investments. Niklas Kouparanis, CEO of Bloomwell, emphasized the global industry’s focus on Germany. “We see a big movement in the global market. Everybody needs to be in Germany and wants to be in Germany now.”

Significant Financial Commitments

Canada’s OrganiGram recently announced a €14 million ($15.21 million) investment in Berlin-based Sanity Group, another significant financial commitment North American companies are making to penetrate the German market. This investment accounts for 16.5% of OrganiGram’s overseas investment funds.

Demand Projections

Projections from cannabis research firm BDSA anticipate a surge in demand, with Germany’s marijuana sales expected to reach $1.5 billion in 2024 and $3.7 billion by 2027. Following the reclassification of cannabis, Bloomwell reported a substantial increase in patient numbers over three months, surpassing the growth of its first four years in business.

Competitive Pricing Advantage

Another attractive aspect of the German market is its competitive pricing structure. Unlike Canada, Germany does not impose high taxes on medical marijuana sales, allowing prices to remain competitive with the illicit market. OrganiGram CEO Beena Goldenberg pointed out that this tax advantage is a significant draw for investors.

As North American cannabis companies navigate domestic challenges, Germany’s burgeoning market is becoming a promising avenue for growth and expansion.