How to Enter the Global Cannabis Market While Minimizing Legal Risks

May 5th, 2019, Cannabis Law, International

In a previous article, we talked about the status of cannabis in Spain and the types of businesses/services that were represented at Spannabis, the largest cannabis industry event in Europe. A number of those businesses sell seeds, plants and/or marijuana products, but others have found ways to make money in this industry without ever touching the cannabis plant directly. While there are many legal risks associated with interstate and transnational cannabis businesses that handle the plant, these risks are largely avoided when the company sells ancillary products such as lighting systems, humidity control systems, software, packaging, and extraction equipment. For companies looking to expand into the global market, selling such products could provide an opportunity for early market share in the economy that minimizes risks associated with the quasi-legal status of cannabis that differs so significantly across state and country lines.

The top markets for consumer spending in Europe in the near-term are predicted to be Germany, the UK, Switzerland, Italy, and Spain. However, out of this list, domestic marijuana cultivation is only currently legal in Italy, Spain, and Switzerland, with Germany and the UK relying exclusively on imports from other countries (primarily Canada and the Netherlands). Where marijuana cultivation and manufacturing remains illegal, there are fewer opportunities for selling ancillary products and services for the time being. Accordingly, this post focuses on the legal status of cannabis in some of the top projected global markets where cultivation is lawful or where changes to laws are imminent.

Canada

It is lawful to grow cannabis for sale in Canada with authorization from Health Canada, and the complete list of licensed cultivators, processors, and sellers of cannabis under the country’s Cannabis Act can be found here. As of the date of this article’s publication there are 232 licensed entities, and the number is increasing every week. Legal spending on cannabis in Canada is projected to reach $5.5 billion by 2022, and Canadian licensed producers are already exporting cannabis to Europe and Australia. Each of Canada’s ten diverse provinces has its own detailed set of regulations that need to be monitored and understood by businesses entering into this space.

Germany

Germany liberalized its medical marijuana program in 2017, causing the country to jump to the top of the European market, but did not elect to legalize marijuana cultivation. It was recently announced that Germany has awarded contracts to supply domestically grown cannabis to two Canadian companies and seeks to develop a broader domestic cultivation program to reduce reliance on exports. The first home-grown harvest is slated for late 2020, creating even more opportunities in this market.

Israel

Israel legalized marijuana back in 1994 and has long been a trailblazer in the cannabis industry. Although adult-use legalization is not yet on the horizon, medical cannabis sales are projected to rise steadily to $44 million in 2022. Israel is known as a leader in cannabis research, a position that was earned and built upon after Israeli chemist Raphael Mechoulam isolated THC and discovered the endocannabinoid system in the early 1960s. Many countries and private companies currently export their cannabis research to Israel, including the United States through the U.S. National Institutes of Health. Israel also allows for the cultivation of medical cannabis, and in 2017 the Agriculture Ministry classified medical-grade cannabis as an official farming sector that allowed it to be exported. As of 2017, there were 12 government approved cannabis farms and 277 individual licensed farmers and cannabis entrepreneurs in the country.

Italy

When medical cannabis became legal in 2013, Italian pharmacies initially only sold cannabis that was imported from the Netherlands. Three years later, the government began to regulate domestic cannabis cultivation but the sole cultivator was the Military Pharmaceutical Plant in Florence, managed by the Italian army. The government has recently signaled an intent to liberalize this policy to allow for broader cultivation of cannabis by individuals and businesses.

While marijuana cultivation is still limited in Italy for the time being, individuals may lawfully cultivate hemp, which the Italian government (and most European governments except Switzerland) defines as cannabis with less than 0.2% THC content.

Spain

Spain has legalized the cultivation of marijuana for personal use, but the market is currently limited by the fact that selling marijuana is illegal. Cannabis clubs, which provide opportunities to acquire marijuana through payment of a membership fee, have been relegated to the gray market and entering into business relationships with such clubs would consequently pose risks at this time.

Switzerland

Any cannabis cultivated in Switzerland must have less than 1.0% THC, but below that threshold cannabis may be grown and sold freely across the country. As a result, there is already a large market for cannabis in the country that will expand as the government expands its medical program and considers adult use marijuana legalization.

Conclusion

While large-scale legal cultivation of marijuana is limited across Europe, the European Union does allow for citizens in all member states to grow hemp, which is derived from the same plant. France is the leader for hemp cultivation in Europe, although Canada tops the market globally. Providing products and services to hemp growers in Europe could be another viable way to establish business relationships in this burgeoning industry. We will examine this topic in a future article that will also touch on the legality of shipping hemp and CBD products to Europe from the United States.