Stephen Murphy – Managing Director
The European Cannabis Report: 5th Edition comes at a time of great, yet gradual change in the nascent European cannabis sector. Industry players are gearing up for further medical cannabis legalisation across the continent, as experts and lawmakers continue to take on board lessons learned from the cannabis legalisation process in North America.
In this latest report, Prohibition Partners provides an individual assessment of the key countries and companies that are leading the way in the evolving market. The report also identifies a number of key trends that are impacting the region and looks at how these trends will shape the European cannabis market moving forwards.
‘Legal Lag’ and the ‘Domino Effect’ will shape European opportunities
Prohibition Partners have identified a number of key trends at play in the European cannabis market; many of which are unique to Europe, and some of which reflect the more general narratives inside the global cannabis space.
‘Legal Lag’ and the ‘Domino Effect’ are two of the most important global trends that looked at through a European lens inside the new report.
The Legal Lag trend, coined by Prohibition Partners, describes the general tendency for countries to legalise cannabis before the necessary legal infrastructure can be established, hence leading to shortfalls in supply. This has already been seen in Europe, specifically within the UK and Denmark, where reliance on international imports to sustain initial medical cannabis programmes led to widespread problems with accessibility. Any successful European medicinal cannabis market in the near-future will be dependent on the seamless integration of medical cannabis products into the preexisting national healthcare system.
It is also expected that a ‘Domino Effect’, as seen in North America and Asia, will similarly be seen in Europe. Due to the proximity and cultural similarity of many European countries, it is probable that major cannabis reform actions taken by one country will be echoed by its neighbours.
Where this trend may be the most influential is in Luxembourg. The Duchy intends to become the first European country to legalise the recreational use of cannabis, with their government pledging to do so during its current legislative term. It is thought that a successful legal cannabis industry in Luxembourg could prompt its neighbours to reform policies on adult-use, if the same commercial and societal benefits exhibited in the North American market could be exemplified.
Other notable trends
Prohibition Partners has also observed a number of other happenings that will be relevant to the future of the European cannabis sector.
As an emerging industry, the cannabis industry so far has been characterised by large companies that leverage investor-backed financing in order to secure a foothold in local markets before they become profitable. As the European cannabis market has the potential to become the most lucrative in the world, this pattern has been especially true so far in Europe. But in 2020, and beyond, it is expected that these types of acquisitions will slow, as the available market niches continue to fill up. It is also true that, with the tough year cannabis stocks had in 2019, companies will be trying to control their expenditures a little more tightly.
Companies are also expected to continue to diversify their offerings in the European cannabis space, with a great many international investors choosing to acquire European CBD brands in addition to their investments in local cannabis companies. Currently, the regulations surrounding CBD remain unclear in most of Europe, however, it is expected that governments will move to implement more comprehensive rules as exemplified by recent statements by the EFSA and the FSA in the UK.
The area that European governments appear to be most concerned with is medical research. As of January 2020, the report outlines that there are 19 active clinical trials that are currently investigating the efficacy of cannabinoid medications against conditions ranging from schizophrenia to endometriosis. As medical research continues, it is expected that more governments from across the continent will begin to consider medical cannabis legalisation, while others reassess their existing medical cannabis programmes and access schemes.
Areas to watch in 2020
As things stand, Luxembourg is set to move from being a country with no cannabis programmes at all to pioneering the way to adult-use legalisation, in the space of just two years. But Luxembourg is not the only European country worth watching at the moment.
In Malta, the country’s pro-business frameworks and relatively liberal cannabis policies have positioned the nation as a key prospect for investors, operators, and importers looking to get involved in the European cannabis industry. Despite a small domestic market, the country boasts strong expertise in pharmaceuticals, cultivation, and exports, and so could well become a lucrative hotspot for investment.
North Macedonia, Greece, and Cyprus are also areas of interest for the future. North Macedonia has employed a free-market approach to medical cannabis, rather than having the process be wholly run by the state. Similarly, Greece and Cyprus have identified cannabis as a major economic opportunity, and consequently are looking to use the region’s ideal cannabis growing climate to build thriving international cannabis export industries.
Elsewhere, France, Ireland and the United Kingdom are embarking on ambitious medical cannabis pilot programmes, designed to extend patient access to medical cannabis and to gather high-quality medical data on the effects of long-term usage.
There are momentous changes occurring across the continent. While commercial and regulatory expansion is certain, it is perhaps occurring at a slower rate than previously anticipated. However, patient-access schemes are being established and expanded in multiple jurisdictions, the CBD consumer goods market is prospering and conversations around recreational legislation are beginning to occur. As the market develops, the key to progress will be education, data and public perception, which, fortunately for the market, is at an all-time high.
To learn more about the current European cannabis sector, and its future potential, download The European Cannabis Report: 5th Edition, here.
