European Cannabis Q1 2022 Quarterly Update

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2022 started with an incredible amount of progress and hope with European cannabis fast becoming a hot emerging market. Just like the United States’ state-by-state movement, Europe is moving country-by-country toward providing access to cannabis. The best way to highlight the progress in the first quarter is to look at three markers: Merger and acquisition (M&A) activity, progress in the medical markets in the top eight European countries, and current legislative pushes for adult-use cannabis.
 

Bustling European Cannabis M&A Activity

The cannabis industry continues to forge ahead with a blistering pace of money entering to build necessary infrastructures and to fuel significant buyouts. Although a small piece of Columbia Care (CC, CCHWF) is based in Europe, the Cresco buy for $2 billion was a strong move by Cresco (CRLBF) to gain EU access as well as strong U.S. assets of CC. Dr. Reddy’s (RDY), a $9 billion Indian pharmaceutical company, bought Nimbus Health GmbH, a premier distributor in Germany for an undisclosed amount. Celadon Pharmaceuticals purchase of Vertigrow for 80 million euros was the largest reverse takeover. Casa Verde — a Snoop Dogg cannabis investment firm — led a 15 million euro round for Cansativa Group, another German distribution pioneer. Kanabo Group bought GP Services UK telemedicine group for 14 million pounds. Telemedicine and distribution have been on fire with many raises and deal announcements by Lyphe Group in the UK, Revmed in Italy, German Vayamed and Telaleaf’s joining to make a more powerful offering, among many other distributors. Distribution has been in vogue as it requires a limited amount of capital and has a faster road to profitability, while growers and producers continue to struggle to reach sustainable volumes.


European Medical Cannabis Market Progress

The top eight cannabis-consuming countries in the medical European market are Germany, Italy, Poland, the United Kingdom, Czechia, Denmark, Netherlands, and Malta. 

Although reported European numbers come a quarter behind, individual company polling shows another stellar quarter for the start of 2022. Shortages have plagued the market since 2021 and continued through 2022 for countries like Italy, Poland, and Malta. These shortages are expected to go away in 2022 since Portugal has emerged as the second-largest exporter to Europe (next to Canada) with the largest European Union infrastructure. Portugal saw a 566% increase in medical cannabis exports for 2021 with 18 licensed facilities that exported a combined 30 metric tons of flower. And that is a mere fraction of the current capacity as 2022 has already seen exports of 10 metric tons for January and February only.

Germany continues to add more patients in both categories of insured and private sales, and it is believed that private sales are much higher than the 50/50 reported mix. One dichotomy in the 2021 German market is that pharmacies published 9007 Kg of flower sold, while the German regulators published 20,566 Kg were imported. Suggesting either that extracts sales which started in 2021 remained unaccounted for, or that Germany is hoarding product that remains unsold due to high pricing. Italy is one of the countries to watch as the second-largest EU market with over 60,000 patients and growing. Italy was known for supplying their entire market internally, but as of 2021 Italian production only accounted for 3% of total demand. Poland and Czechia have made significant strides in 2022 to create more access for their patients and are expected to increase significantly through the year. France announced in Q1 2022 that they are entering the cultivation arena and rules surrounding that will be forthcoming.

Meanwhile, the UK, with 15,644 patients, continued to go backward in 2022 with confusing regulatory guidance from the National Institute of Health (NIH). Likewise, Denmark has always been a pioneer in the EU cannabis world but continues to slide backward as new indications to prescribe cannabis have not increased and are currently focused on severe indications like cancer.


Current European Efforts to Legalize Recreational Cannabis

At the turn of 2022, the Netherlands, Malta, Luxembourg, and Switzerland opened their markets to early stage recreational sales and Germany likewise signaled imminent adult-use sales. Internationally in Europe, governments are busy coming out of COVID lockdowns, grappling with crippling debt and inflation, and now facing a war on the continent, leaving meaningful change for cannabis laws on a distant agenda. 

Luckily, this general trend hasn’t completely stalled out the movement. Denmark announced in 2022 it would pass a 5-year pilot program for recreational cannabis. As stated above, Denmark has been one of the friendliest, earliest adopters of cannabis legislation. Switzerland still has not announced the winners of the 10 club licenses in Zurich, while other cities in Switzerland have begun the process of vying for their own recreational pilot programs. In Malta, a small shockwave went through the cannabis world when a doctor was arrested for legally giving prescriptions of cannabis and clouding the recreational launch in that country. 2022 will also see the first grow products in the Netherlands from the 10 recreational licenses that were given out last year.

One thing is certain when you look at the success of the U.S. and its 13,000+ cannabis licenses: with only about 30 proper producers and 100+ small distributors, Europe has a long way to go in building infrastructure to support almost twice the population the U.S. has. As 2022 develops, there will be more facilities opening, increased pushes for recreational legislation, and much more investment into growing the EU cannabis infrastructure.

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