Canadian Cannabis Producers..

A consultancy firm based in London has unveiled some valuable insights into the European cannabis market, with two industry professionals from Hanway Associates claiming that Canadian cannabis producer investments in the European Union are likely to dwindle over the coming months.

 

Why? Because, amid rising pressure to turnover profit and slash costs, investors are grappling to prevent more money from slipping through their fingers.

 

Although the green plant is not completely legal across the European continent just yet, cannabis’ popularity and potential for growth cannot be ignored. According to Brightfield Group – a Chicago-based research firm – the European cannabis market is projected to inflate at a compound annual growth rate (CAGR) of 52% over the next five years, reaching $3.1 billion in sales by the year 2025. Furthermore, the European CBD market is on-track to grow to almost $1.7 billion by 2023.

 

In spite of the sector’s undeniable success, analysts project that the current market value is merely a tenth of the total forecasted value. Because of this, Canadian companies are expected to follow two of the sector's big players – Aurora Cannabis Inc. and Canopy Growth Corp – in reducing spending outside of North America.

 

"Though they remain a tremendous force in Europe, forward momentum among (Canadian) liquidity providers will slow in the future, especially in newer or smaller markets," the consultants professed, as they noted how scaling back would enable some of the less valuable European players to get first dibs on the market.

 

According to their report, Aurora already boasts a sturdy network of distributors in Germany, meaning that the company is unlikely to look for additional investments in Europe. Nonetheless, Aurora's managing director for the UK & Ireland, Don Perrott, does not agree.

 

"We have not changed our view that this market represents a significant opportunity, despite slower-than-expected growth to date across many EU member states," Perrott said when questioned about the company's motives here on out. "Europe remains a core part of Aurora's growth strategy and we are constantly evaluating opportunities to expand our business in the region."

 

The report goes on to discuss how Denmark is home to the production hubs of well-known Canadian cannabis companies Aphria and Tilray. Since these hubs are churning out ample supply to meet demand, analysts don't expect to see any more investments in Europe for quite some time. Then again, the truth remains to be seen.

 

North American investors are increasingly interested in Europe

Over the last three years – since Canada made history as the first major country to legalize recreational cannabis – investments in the North American cannabis space have surged. Following Canada's rollout of a legal adult-use cannabis market, industry leaders have been actively seeking out opportunities to raise money, go public, and expand operations overseas.

 

This meant that Canadian investment firms were able to dip their fingers in the legal cannabis pie at a point when rules remained restrictive in Europe and the U.S.  Europe’s cannabis market, in particular, is still in its nascent stages. Nonetheless, Brightfield Group analysts predict that the European medical cannabis market will inflate to almost $8 billion by 2023 — a forecast based on the recent legal changes adopted by the European Union (EU) and the World Health Organization (WHO) that could specifically fuel CBD markets.

 

It's not just the continued swelling of Europe's cannabis market that is luring in investors, but also the legalities surrounding the market. Since hemp-derived CBD in Europe is deemed to be legal and completely separate from cannabis, Canada could certainly learn a thing or two from the EU sector. Currently, hemp-derived CBD is tightly regulated under Canada's Cannabis Act. Because of this, Canadian consumers can only legally obtain the product inside a licensed dispensary; although the Canadian Health Food Association is trying to amend this rule.

Recent European Cannabis Industry Developments 

Efforts to spur on cannabis reform in Europe have gained plenty of traction as of late. On November 19, 2020, the EU Court of Justice ruled that CBD is not a narcotic. This ruling effectively propelled CBD into the limelight and paved the way for Europe's cannabis industry to cultivate a whole host of new investment opportunities.

 

Additionally, a few years back, the European Medicines Agency granted British drugs company GW Pharmaceuticals authorization to use Sativex for multiple sclerosis treatment. Furthermore, in September 2019, GW Pharma bagged European Commission approval for a seizure-relief medication called EPIDOLEX®, making it the first plant-derived cannabis-based medicine to gain approval from the European Medicines Agency (EMA).

 

Here are some more evolutions in the realm of European cannabis that make this developing market a magnet for investor interest:


In November 2018, the supply of cannabis-based products was made lawful in the U.K. for patients with specific medical conditions. Then, in September 2020, updated FCA guidance provided clarity for foreign cannabis companies hoping to deal in the country's medicinal cannabis market.


On December 14, 2020, residents of Ireland were alerted of the Irish Minister of Health's decision to allow individual cannabis prescriptions. This new rule means that patients no longer have to make the journey to the Netherlands in order to obtain their medicine.


France's medical cannabis patient sector is set to blossom from 2021 onwards, with a national medical trial set to commence. The trial's primary goal is to broaden patient access. Approximately 3,000 people will participate and all products will have to comply with pharmaceutical standards, including the Good Manufacturing Practice (GMP). The first prescriptions are to be dished out by March.


Germany's medical cannabis market is on a constant incline. Aside from granting reimbursements for approximately two-thirds of prescriptions – something that has sparked an increase in prescription requests – the European country has also developed a robust supply chain that is completely integrated into the mainstream medical system. No other country in the world, besides Israel, has accomplished this mission.


Denmark is emerging as a prominent player in the supply chain for European cannabis. On January 1, 2018, the Danish Medicines Agency established the official medicinal cannabis program — a four-year pilot scheme that awarded 12 companies permits for growing, cultivating and distributing medicinal cannabis countrywide. Then, on July 1, 2018, the possession and sale of CBD oil containing less than 0.2% THC was legalized. Now, the Danish pilot program is well underway in the European country, where Sativex, Marinol, and Nabilone have been approved for medicinal use.


A 2017 coalition agreement included a pledge to facilitate an experiment into regulated cannabis sale and cultivation across the Netherlands. The Dutch experiment strives to understand whether or not it is feasible for a quality-controlled supply of cannabis to be distributed among regulated coffee shops.


Public health, crime and safety will be assessed under the plan, which received 149 cultivation applications as of July last year. No more than 10 growers will be selected at some point during early 2021.

Canada Boasts some of the most well-known cannabis producers on the planet

Since cannabis was legalized across the “Great White North” on October 17, 2018, the industry’s annual turnover has exploded to $7 billion. What’s more, the legal market has spawned some of the best global cannabis producers. Some of the most famous names include Aphria, Aurora Cannabis Inc., Emerald Health Therapeutics Canada Inc., Hydropothecary, MedReleaf Corp., Organigram, THC Biomed, The Green Organic Dutchman, Tilray, WeedMD Inc. and Zenabis.

 

Licensed cannabis producers in Canada – of which the above are just a drop in the bucket – are companies that have bagged a license to grow and/or sell cannabis of medicinal and recreational varieties to different brands. Otherwise referred to as “Authorized Licensed Producers”, the country’s licensed cannabis cultivators and sellers must first gain approval from the federal department for public health — Health Canada.

 

As of December 30, 2020, the North American Marijuana Index tracked Canopy Growth Corporation (CGC), Curaleaf Holdings Inc. (CURLF) and Green Thumb Industries (GTBIF) as the leading cannabis stocks operating throughout the United States and Canada.

 

“The Canadian legislative situation has given Canadian companies a big advantage over those based in countries with more restrictive cannabis laws, especially when it comes to accessing capital markets,” said Canopy’s European chief, Pierre Debs.

 

Canadian interest in European cannabis isn't expected to slow down anytime soon

Nowadays, amid the rise of legal weed, numerous European cannabis deals are being snapped up left, right and centre. With so much activity igniting across the EU market, it's safe to say that investments are likely to continue pouring in from North America (and further afield.) An abundance of deals have already been struck by Canadian companies interested in the EU.

 

In mid-2019, Canopy Growth acquired a German medical cannabis firm called C3. During the same year, Canopy purchased an award-winning everyday British skincare range called This Works and a Spanish start-up called Cafina. As if that wasn't enough to prove that the European cannabis market is stirring up excitement, consider the fact that Aurora took control of Portuguese cannabis producer Gaia Pharm in February of the same year. Two months later, Tilray celebrated the launch of its cannabis research and cultivation campus in Portugal; valued at €20 million (CAD $30 million).

 

“We expect the European Union to become the largest medical cannabis market in the world. And we expect this to be driven by the availability of medical cannabis through government-subsidized health care systems,” reads an emailed statement from Tilray.

 

Notwithstanding the success that Europe’s cannabis market is achieving, the rules – in spite of the long-standing coffee shop industry that proliferates throughout the Netherlands – remain overly conservative. Conversely, medical cannabis legalization recently rolled out across France, Germany, Italy, the Netherlands, Portugal, Spain and the U.K.

 

However, while the EU could seriously benefit from outside investments, growing acceptance of medical cannabis shouldn’t be misconstrued as a sign that the continent will flourish beyond the level that North America has accomplished.

Written and Published By Bethan Bee Rose in Weed World Magazine issue 150