European Cannabis Q1 2023 Quarterly Update

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For the third quarter in a row, the European Union cannabis market has eked along. Europe benefited from renewed regulatory promises, but the constant needs of cash-strapped companies proved a hindrance. Many EU companies held longer-term visions and exercised prudent budgeting, while many young start-ups thought they could raise at various stages. 

Like all emerging markets in cannabis, patience and realistic expectations of volumes and development of those markets have been and will always be a must. As in any industry, there will always be winners and losers, and slow-coming cannabis regulations by politicians and bureaucrats have always been the industry's Achilles heel.

Promising Q1 EU Cannabis Regulatory Moves

On the positive side, regulatory news has been mostly positive, pushing forward agendas or not taking opposing stances. The German Health Minister, Dr. Karl Lauterbach, signaled he believes the EU Parliament will approve his plan for recreational cannabis. And then after the quarter ended, Lauterbach signaled a “recreational light” approach and forecasted his release of the German regulatory rules drafts after Easter. France took the Health Minister’s EU comments seriously and announced they would closely watch the German regulation proposal and EU decision. Most EU countries' Health Ministers are watching the German and EU decision.

Interestingly, Spain recently rejected a movement for recreational cannabis and decriminalization but still has left a medical program on the table as the politicians of Spain accuse the Health Ministry of fragging their feet. Germany made no further significant changes to their access for patients to medical cannabis, which was met with cheers. Australia will adopt EU-GMP specifications for all cannabis products opening the door for EU producers to become the dominant supplier of cannabis products as well as other country EU-GMP producers that exist outside Europe. 

European Cannabis Q1 Financial News is Mixed

The financial news has been good, bad and ugly, reflected in few raises or deals and some closures and insolvencies. 

The Good

Avextra comprised the only big money-raise: 17 million euros to expand operations and R&D. Avextra is a German-based corporation that owns and operates a 600-square-meter grow in Portugal and has a management-aligned contract manufacturing relationship with one of the larger herbal remedy pharmaceutical companies in Germany. 

The Bad

Clever Leaves (CLVR) decided to divest from Portugal cultivation to concentrate on their massive Columbian cultivation and pharmaceutical manufacturing complex spanning almost 200,000 square meters. Tilray (TLRY) shifted focus to burn and reduced its European staff significantly to achieve a more reasonable executive structure. Notably, Tilray’s European division is growing and is one of the few bright spots inside the Canadian portfolio, which made the curious announcement that they would grow food products

The Ugly

The third quarter saw Materia Ventures, CiiTECH, Love Hemp, and VF 1883 — not unexpectedly — enter insolvency and close operations after years of struggling with capital raising to keep going. Lyphe Group returned to the market to seek capital less than one year after a successful raise, renewing worries for the largest United Kingdom distributor of cannabis products. Additionally, a handful of cultivators have been struggling to raise capital. Those cultivators may close doors or sell at a discount if plugs don’t happen soon.

Q1 2023 Highlights a European Cannabis Market Poised for Glory

The EU cannabis sector and global export market for producers are only accelerating, and all eyes continue to watch Germany. Producers and industry experts are positioning for an enormous boom should Germany ignite the fire. Monster raise, focus on burn, and closures show that cannabis is like any other high-growth industry; it needs good management and bold corporate moves to survive and fight for another day. 

Despite the seemingly negative news, these are not industry issues so much as mismanagement missteps by those hoping for a never-ending spigot of cash raises. The last three quarters have been slow-going for corporations, but the industry growth continues and is expected to boom.

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