Germany's Approach to Gorwing its Cannabis Market

Though legalisation is being explored in Germany and other European countries, the prospects for this new sector of the economy may not be as promising as they initially seem.

FREMONT, CA: The federal government in Germany is currently aiming at the full legalisation of the domestic cannabis market. It appears likely that this will happen by the beginning of 2024. This might make it possible for other European nations to legalise it.

Theoretically, such opportunities ought to have creators and investors interested in them. But take caution, as legalisation is being considered in Germany and other European nations, the expectation for this new industry may not be as bright as it first appears. Given the size of its economy and the fact that it has open borders with nine of its neighbours, makes it simple for citizens to hop over to Germany to get their fix.

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Many European nations, like Malta, Luxembourg, the Netherlands, Spain, the Czech Republic, and others, have already begun the process of creating laws of a similar nature, but they are delaying it because they would rather decriminalise possession than legalise the entire market. This is partially due to the fact that several European nations have ratified the UN's Single Convention, which obligates them to combat drug trafficking and restrict the use of legal drugs to medical contexts. Therefore, any nation that launches an adult-use market might be in violation of international law.

With the exception of a legal cannabis market, the only method to circumvent this would be to withdraw from the agreement and reenter it. Similar work with coca leaves has already been done by Bolivia, but it needs time and other member states' consent.

The fact that European nations are bound by significant European treaties, like as the Schengen Agreement, which expressly criminalises cannabis, only serves to exacerbate the problem. Because of this, Luxembourg has changed its mind about enacting cannabis legalisation legislation.  The legalisation in Germany might serve as a template for the rest of Europe. But the trial is, the fact that the federal government can only support the legal market by suppressing the illicit one. This makes it crucial for lawmakers to establish precise and practical guidelines for how cultivation, importation, and sales should be carried out. In the end, whether customers choose to purchase banned substances lawfully from a retailer or illegally from a dealer will depend on availability and cost.

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High margins at present have encouraged new competitors to enter the German market despite initial shortages. Currently, there is an oversupply on the market, and there is fierce pricing competition for medical marijuana. The enterprises that are in direct contact with patients or distributors with low-cost sources have the best possibility of surviving.

Domestic cultivation in Germany is still in its infancy because each state has its own regulation system. The regulations established by the federal government are strict rules as they prioritise the safety of customers and the protection of minors. Entrepreneurs should be aware and look out for which governments allow them enough freedom and flexibility because regulation can be hard.

In the case that marijuana is fully legalised throughout Europe, there will be stringent quality criteria. Businesses with no connections to trustworthy, affordable, and high-quality cannabis producers won't stand a chance. Furthermore, in order for entrepreneurs of cannabis-related enterprises to launch successfully, they will need prior knowledge in the medical sector regarding logistical requirements, product quality, import and export processes, and certifications. In order to assure product security and education, businesses must comprehend the data gathered so far by patients.

Germany is a good example of what might occur once more. In 2017, corporations from North America with prior experience in legal cannabis markets dominated the medical sector, but today domestic firms are also doing well. Therefore, the business owners who stand to gain from the current consolidation are in a prime position to act as the first mover in developing a new and unquestionably greater stimulating market.

Companies can achieve quick revenue growth right away, unlike many solely digital businesses, depending on how policymakers sculpt the market. The overstock of medical marijuana and the consolidation of startups, however, demonstrate that organisations that maintain their long-term focus are those that succeed in the long run.

Similar to the digital economy, there are uncertainties and opportunities in the cannabis industry. Though the willingness of US venture capitalists to fund and invest in cannabis businesses in Europe has so far outpaced that of their European counterparts, local VC interest in this fast-growing industry is growing.