Prohibition Partners is proud to present The European Cannabis Report: 7th Edition, intended to be the most comprehensive and up-to-date publication on the commercial and regulatory landscape for cannabis in Europe to date.
Patient access steadily progressing
As legislation and regulations are reformed across Europe, many thousands of patients are now able to access safe, regulated cannabis products with medical supervision in Europe, instead of buying from illicit sources. Prohibition Partners estimates that around €354 million worth of legal, unlicensed medical cannabis will be sold throughout Europe in 2022, and we project this will grow to around €2.3 billion by 2026. Unlicensed here refers to the fact that the products have not passed through the normal route of clinical trials and approvals.
This growth is being driven not only by the continued evolution of regulations in established markets such as Germany and Italy but also by the rapid advances in patient access seen in young markets, especially in the UK. Prohibition Partners is proud to present the 7th edition of the European Cannabis Report, which delves into the regulatory, scientific and business forces driving the liberalisation of the cannabis plant in Europe. We present the latest information and analysis on medical cannabis, CBD and adult-use cannabis.
A supply chain in flux
As explored in The European Cannabis Report 7th Edition, the supply chain providing the products for patients in Europe is currently in flux, and will be for some time. The early years of medical cannabis liberalisation in Europe saw many shortages and a heavy reliance on Dutch and Canadian exports, but this is changing fast. In the first half of 2021, over 18 countries supplied medical cannabis to Germany alone and this list has since grown. At least 15 European countries are currently allowing for commercial cultivation of medical cannabis, with more expected to come online soon. Much of the supply of medical cannabis that previously came from Canada has now moved to the continent, e.g. Tilray has moved most production for Europe to Portugal, while Aurora and Little Green Pharma have moved much of their production to their facilities in Denmark. 2021 saw the arrival of the first domestically cultivated product on the shelves of German pharmacies. Domestic cultivation is expected to be an increasing trend, with increasing quantities expected to be grown in key regions such as the UK and the Netherlands in the near future.
Pilot trials are progressing in several regions
While full medical cannabis access schemes are developing, e.g. in the UK and in Germany, many countries are currently operating pilot schemes to assess the feasibility of more permanent access schemes. These trials are emblematic of Europe’s more gradual and cautious approach to medical cannabis legalisation compared with the rapid liberalisation seen in North America.
France started its pilot trials in 2021, which aim to treat 3,000 patients by 2023 before assessment and potential permanent establishment. As of February 2022, 1,218 patients had received their initial treatment. Ireland treated its first patient under a pilot trial in early 2022, with assessment of the trial expected in five years’ time. Denmark’s pilot scheme, which began in 2018, has been extended by the Danish parliament until at least 2025, and the laws allowing for medical cannabis cultivation in the country have been made permanent. In Germany, an official Government assessment of medical cannabis access is expected in 2022.
A new wave of investment from North America
Over the past five years or so, North American cannabis businesses have invested hundreds of millions in staking a claim on the European cannabis market. As legalisation has rolled out more gradually than expected in many jurisdictions, some players have struggled to justify their lofty initial investments across a range of market segments. There has been an increased demand from investors to prove a path towards near-term sustainable profitability, which has prompted withdrawals from Europe for some companies, e.g. the divestment of German cannabinoid company C3 from Canopy Growth’s portfolio in December 2021 at a considerable loss, or the closure of cultivation facilities in Denmark by Canopy and Aurora, both at considerable losses.
Due to the progress in legislation of CBD, medical and adult-use cannabis, we are now seeing new waves of investment in the European cannabis market, and North American companies remain heavily invested in the budding market. Tilray, Aurora, Canopy and Curaleaf maintained combined non-current assets in Europe of ~US$620 million as of Q3 2021. Several companies from the US have recently begun investing in Europe in advance of adult-use regulations opening up. Curaleaf has acquired vertically integrated player EMMAC; Village Farms has acquired a stake in Leli Holland, who is producing legal adult-use products in the Netherlands; and Cookies has recently announced the opening of stores in the UK.
These investments are justified by these operators based on the huge potential addressable base of medical and adult-use cannabis users in Europe and the fact that sales to these patients and consumers are transitioning towards a fully legal, regulated market, which will eventually be worth billions of euros.
CBD is becoming increasingly legitimised
In Europe, CBD is well on its way to becoming a legally protected CPG. A large, legally grey industry has already developed in the absence of clear regulations, with products marketed openly in almost every country on the continent, and now the process of transitioning this to a fully regulated industry has begun. This progress stems from decades of work from CBD and hemp advocates, which is now being reflected in legislation and regulation. The European Court of Justice ruled in November 2020 that CBD should not be considered a narcotic under the 1961 UN Convention. Furthermore, the court ruled that EU states cannot ban the marketing of CBD legally produced in another member state unless a risk to public health ‘appears sufficiently established’. As such, CBD is no longer considered a narcotic substance under EU or, subsequently, UK law.
In February 2021, CBD was included in the European CosIng (Cosmetic Ingredients) database. The CosIng is the European Commission’s database for information on cosmetic substances and ingredients. Inclusion in the database does not have legal value, but it is an indication that EU regulators recognise the legitimate nature of CBD products.
In ingestible foods:
In January 2019, the European Food Safety Authority (EFSA) released a disputed guidance on handling cannabinoid-infused food products, declaring that ‘cannabinoids are considered Novel Foods’. This means that most CBD products intended for consumption as food, drink or dietary supplement must pass an onerous review as a Novel Food by the EFSA, with a parallel system of regulation operating in the UK under the Food Standards Agency (FSA). While the European Court of Justice was reviewing the legal status of CBD, all Novel Food applications were frozen but, as of 2022, these are now being processed. The European Commission has now listed at least 12 valid applications, with more expected in the very near future. The EFSA must now perform a risk assessment for each product before each application is finally approved for marketing by the Standing Committee on Plants, Animals, Food and Feed. Late in March 2022, the FSA in the UK released a list of ~3,500 valid products listed on applications for Novel Foods. These are the large steps towards the establishment of CBD as a regular consumer good on the continent.
Adult-use use cannabis begins to stir in Europe
The announcement of the incoming German government in December 2021 that it intends to legalise has reverberated around the global cannabis industry and beyond, as the success and opportunities seen in North America are now being envisaged for the even larger potential markets of Europe. While many nations in Europe are still developing their own medical cannabis regulations, a few are taking the first steps to legalising and commercialising the cannabis plant to its full potential. Both Switzerland and the Netherlands are launching pilot trials to assess the viability of adult-use cannabis sales in their own countries and they will likely be operational in Switzerland by the end of 2022 and in the Netherlands by Q2 2023.
Past-year consumption of cannabis in Europe and North America. Prohibition Partners incorporates such data into its market-sizing projections for the future adult-use market in Europe. Source: EMCDDA (2020), Health Canada (2020), US Centers for Disease Control and Prevention (2019), Prohibition Partners.
At the same time, the long process of decriminalisation of cannabis across Europe is progressing steadily. Malta and Luxembourg have already introduced legislation to completely remove criminal penalties for cannabis possession, and also legal protection for those growing small quantities at home. Many more countries are reducing criminal penalties in various ways, and this can be seen as a likely precursor to full legalisation on the mid-term horizon. The Netherlands and Spain already host two examples of ‘legally grey’ recreational markets in their coffeeshops and cannabis clubs respectively.
The first-ever sales of fully legal adult-use cannabis in Europe are expected in late 2022. For this reason, many businesses are now anxious to learn about how to become involved in this embryonic, multi-billion-euro market. Prohibition Partners has prepared a 25-page deep dive, which is designed to bring readers up to speed on the progress of adult-use regulations, specifically in Germany, Switzerland and the Netherlands, and identifies clear timelines for these projects, some of the key business opportunities and detailed information on adult-use licensing on the continent. In addition, we provide a market-sizing projection for the next five years, based on the current and known regulations that will govern this embryonic market.
The European Cannabis Report 7th Edition is the single most comprehensive and up-to-date publication on the commercial and regulatory landscape for cannabis in Europe. In addition to the points mentioned above, the report covers in some detail:
- Exclusive and official statistics on official consumption in key markets such as the UK and the Netherlands
- Updated official data on consumption of medical cannabis in all key markets such as Germany, Italy, the UK, the Netherlands, Poland, Czechia and Denmark
- An in-depth study of the supply chain in Europe
details on product shortages in several regions
- A consideration of the public and private insurance regimes governing medical cannabis use in key regions
- The demographics and behaviours of patients in Europe and the products they are using – medical cannabis and CBD
- In-depth market sizing for the medical, CBD and adult-use cannabis industries.