In September 2021, the German people elected a new parliament. The resultant incoming government consists of a so-called traffic light coalition of the three following political parties: SPD (Social Democrats), the Greens, and the FDP (Liberals). After 16 years of Angela Merkel and the conservatives (CDU/CSU) ruling the country, the new government promises something of an awakening. For years, Germany has been lagging behind when it comes to digitalisation, its administrative apparatus is often slow and bureaucratic. In their programme for the government – which aims to define a coalition “for freedom, fairness and sustainability” – the three parties have agreed on their common agenda with an objective of no less than modernising Germany.
A key part of this modernisation process includes putting an end to the current prohibitive drug policy which has failed in their eyes. This will be realised with the legalisation of adult-use cannabis. Although all parties promise to be more progressive and liberal, there is still much uncertainty around the practical implementation of legalising cannabis sales.
It is certainly a challenge for three parties with contrasting political agendas to come together and find a compromise. The major point of agreement is fostering youth protection together with a controlled cannabis market. In recent years, the illicit market was perceived to be increasingly problematic due to increasing consumption among 12-17-year olds. While especially conservative politicians feel certain that cannabis is a gateway drug to other substances, more liberal politicians see an opportunity, where a legal market could ensure that cannabis quality is improved, and underage use is controlled.
The new government is expected to look at various markets to avoid mistakes but also follow positive examples. On the one hand, Switzerland could serve as a positive role model where some bigger cities are trialling legalisation. Such a trial could also be a useful strategy for Germany, where some cities such as Berlin, Frankfurt (Main), Cologne, Munich for instance could become a testing ground. The SPD in particular has been in favour of such a trial. On the other hand, the Dutch example is rather a deterrent where recent media coverage has shed light on the perceived dark side of the liberal policy, where particularly conservative voices summon a grim picture of a legal market.
So what do we know about the German strategy to introduce a legal cannabis market?
When can we expect a legal cannabis market?
Legalisation will take time due to the judicial process and the federal structure. At the moment, legalising cannabis is not the top priority on the government’s agenda. Germany is still coping with high COVID-19 rates and this will likely be the main political topic at least until spring 2022.
How big is the market?
In 2021, the illicit market had an estimated value of more than EUR4 billion. The illicit user population accounts for more than five million people. The trend is expected to even increase as younger consumer groups in particular show higher user rates. Assuming cannabis was fully legal and available to adults by the end of 2021, and if one would expect a slight increase in consumption to approximately 10% of the adult population to seven million consumers, the legal market value would increase to EUR5.5 billion.
Who will distribute cannabis? And where?
It is still being discussed where adult-use cannabis will eventually be distributed. On the one hand, adult-use cannabis could be sold by pharmacies either in separate rooms or through a standalone dispensary network. On the other hand, while it is not in the interest of politicians to attract new consumers, there is also the possibility of sales through private independently-run dispensaries in high-profile locations, in order to compete with the black market.
At what price will cannabis be sold?
Currently, the prices on the illicit market vary depending on the region. However, an average price per gram is approximately EUR10-11. For medical cannabis, the cannabis agency, which was created in 2017 (within the Federal Institute for Drugs and Medical Devices), purchases cannabis from German production sites for EUR4.30/g. However, the inbound production capacities are limited to 2.6 tonnes per year, which does not even cover the demand for medical cannabis. Dispensaries could charge 100% of the price on top and would still be able to compete with the black market.
At least initially, it is likely that the cannabis agency would also be responsible for recreational cannabis to ensure high quality standards.
Will Germany import or produce cannabis?
Both. One the one hand, Germany would hugely depend on imports to satisfy demand. On the other hand, medical cannabis production facilities have shown their capabilities and are more than willing to expand their business. However, it is unlikely that Germany would become a major production country. It seems to be more profitable to strengthen its global position in the pharmaceutical and biotech sector by enhancing its capabilities as a “knowledge exporter”.
Would cannabis be sold and marketed just as tobacco currently is?
On the balance of probabilities, German adult-use cannabis will be a highly regulated market. It can be expected that the “Cannabis Control Act” would regulate all aspects, from production and supply to consumption and marketing. Although Germany’s tobacco regulation has been fairly liberal under the conservative government, this is subject to change, especially as the incoming government wants to harmonise regulations within the EU-context. However, cannabis receives significant media attention and is likely to be tightly regulated, at least initially. The pressure on “getting this right” is high, especially for the Green party, given its outspoken advocacy for the change.
What about home-grown cannabis?
Home-grown could become legal first. Meanwhile, to expedite the process, it is possible that home-grown cannabis will be decriminalised.
Once it is legal, will it stay legal?
There will be a review. The incoming coalition has already announced that it will review its own legislation after four years. Consumption levels and patterns will be evaluated as much as the impact on law enforcement authorities.
If the three parties agree on legalisation, why does it take so long?
Legalisation will occur, it is only a matter of time. Even German conservatives have begun to acknowledge the appeal of reducing illicit cannabis and generating government revenue. Nevertheless, there is much to do. Not only are there many interest groups involved, but there are also still several aspects to be resolved and aligned, including supply, distribution, administration and taxation.
For further insight, please see the current edition of Cannabis in Germany, and for a global perspective of this fast-growing industry head to World Market for Cannabis, or reach out to Linda Lichtmess.