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The Impact of the Canadian-German Cannabis Licensed Producers

Marguerite Arnold

August 18th, 2017

Policy

Germany Flag on cannabis background. Drug policy. Legalization of marijuana

One of the more interesting trends underway in the last 18 months is the growth of the established, federally legal, cannabis companies just north of the American border. Known in the biz as “LPs” or licenced producers, these enviable firms are in a position few would have dreamed just a decade ago.

For the most part, they have begun to attract a great deal of attention just because of the obvious. It is hard to feel depressed right now if you are a registered Canadian LP. There are few places in the world right now where companies can look forward to a decade (at least) of unparalleled growth opportunities just domestically. And a consumer base – for both medical and recreational product – that is already woefully underprepared to meet even domestic demand. Further, and even more importantly, this is a “direct ship” medical market. Customers can mail order their stash.

The cannabis medical market itself is an interesting place right now, just because it is growing so fast. Recent numbers from Health Canada put patient numbers around 170,000 right now. At 10% monthly growth, this means that this will double and then some by next year.

While an industry which has stockpiled its own stash for the last couple of years can handle this explosion in just its reserves, there is something else to consider. The industry right now can produce about 80,000 kgs a year. That is expected, thanks to quick expansion, to at least quadruple if not triple output by next summer.

And Here Comes The Recreational Market

The Canadian recreational market will begin next year in an environment where recreational users already consume a huge amount of cannabis no matter where they currently source it. Even if this number stays relatively stable, there is likely to be a huge uptick in sales. Just like every other legalizing locality. See Colorado in 2014. See Nevada of 2017. The difference? Federal rescheduling.

However this will place an extraordinary new demand on a market that is just getting going.

What this also does, of course, is vaunt those companies into equity markets globally. In fact, the biggest companies in Canada right now are floating their stock on equity exchanges that include the U.S., and Europe, including Germany.

And that is where things begin to get even more intriguing.

With a more than capacity market at home for the foreseeable future, no matter where it comes from, these companies are suddenly flush with cash, expanding grow capacity dramatically, in some cases five fold, and looking to other markets.

Could Canada’s Rec Market Shape Other Global Markets?

The answer to that question right now is absolutely yes. In fact, four out of five of the top apparent top contenders for the German bid are some of the largest Canadian LPs. It is hard not to be impressed with any of these firms. They are smart, strategic and loaded for bear on a frontier that they are literally defining. Further, should any or all of these companies then win grow and distribution rights in Germany, that means that these companies are actually embarking on an international expansion right as their market domestically goes through the roof.

In the beginning, particularly for the next two years, this means that Canadian cannabis will also be exported to supply a German market, in particular, that is slated to be in the range of 15,000-30,000 patients by 2019. All that cannabis (as much as 150 grams a month per patient), will also be coming from Canadian producers – in Canada. And these German patients can buy their prescription for about $12.

What this might also mean, also is that after 2019, when grow facilities are established in Germany, any excess grown or processed in Europe could conceivably be shipped elsewhere. Including back to Canada.

The establishment of a bi-country (at minimum) cannabis market that is federally sanctioned, internationally approved, and both medical and recreational is an astounding story if not development. Further, the fact that Germany and Canada, with the former in the lead, are trying to implement insurance coverage for patients, means that just the development of customers in both markets is a 20 year business plan for a start-up getting into the game now.

In legitimate, regulated market growth, this is the next “game in town” globally. The opportunities in the United States, while more and more tempting, absolutely pale in comparison. No matter how rich the Nevada and California markets are, there are a still a myriad of issues to deal with. Starting with raising equity in the first place. Particularly on the public markets.

What is going on in the United States right now absolutely pales in comparison in other words, to what is going on right outside its borders.

Will U.S. Cannabis Firms Suffer?

The answer of course is yes and no. There are many places where the U.S. federal ban on cannabis of course does stunt market growth. That starts with the right to ship across state, let alone international borders.

It also means that U.S. firms are far less competitive and in fact are being deliberately excluded from federal cannabis markets elsewhere (like Europe), although even this has not been the case across the board. Charlotte’s Web, a Colorado based company, for example, has managed to secure medical export licenses of CBD oil to Argentina. But they are by far the exception rather than the rule.

However, what it does mean is that foreign firms, including Israeli tech and grow firms, are also coming into the U.S. market looking for partners – often with a research tie in directly in Israel too. These are also companies that tend to already look like pharmaceutical firms, so they are relatively immune from federal harassment (although not always).

At minimum, however, it also means that the U.S. market is already benefitting from a cannabis universe far different and in many ways more advanced (certainly on the medical front) that is coming to it.

That exchange, however, is of course still severely limited by federal restrictions.

A New And Changing World

There are other interesting currents moving internationally right now of course. In the meantime both Spanish regional and Dutch federal markets are formalizing the infrastructure and supply chains of both the coffeeshops and cannabis clubs. However important and interesting they are to a land where such models have not yet made their debut, they still pale in comparison to the industry development now going on between Canada and Germany.

And one thing is absolutely also certain. The global world of cannabis for the near to immediate future is highly likely, and on a global basis, to have both a tang of both Canadian and Deutsch extraction.

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Marguerite Arnold

Marguerite Arnold is a veteran investigative and markets journalist, American expat and author. She has covered the cannabis industry from Germany for the last six years. Her book, Green: The First Year of Modern American Cannabis Reform about the American market in 2014 has just been republished as she is writing the sequel about Europe and the global revolution this year. Green II: Spreading Like Kudzu will be published in 2020. She is also a noted technologist and entrepreneur. Her blockchain-based digital prescription platform MedPayRx was just shortlisted by the German Ministry of Health as one of the "Top 20" use cases for blockchain in healthcare.

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