As the first cracks appear in the pan-European prohibitionary edifice, Germany is about to embark on a legalisation journey of seismic proportions and far-reaching ripple effects. Could this be the catalyst that will ultimately shift the green limelight onto European markets? What form will such a de facto radical initiative take? And, perhaps most importantly, what are the cautionary tales, downside risks and lessons to be gleaned from the Californian and Canadian pioneers?
After dethroning Angela Merkel’s conservative ruling party in late 2021, the new government, a rainbow coalition consisting of the Social Democrats, Greens and Liberals, is pushing ahead with its legalisation agenda, and the momentum is growing faster than most had anticipated. Following a consultation process consisting of five public hearings with health experts, economists and cannabis players, which concluded in late June, the regulation is now heading towards the final stages, which should culminate in a draft law reaching parliament by the end of this year.
Contrary to the conservatively cautious approaches recently adopted in other key markets, the German agenda is clearly ambitious, holistic and expansive, not merely touching upon medical access and CBD, but embracing full recreational legalisation, practically making Germany the biggest legal cannabis market on the planet.
The size of the prize, even in its early and inevitably volatile evolutionary stages, will be very impressive indeed. Euromonitor International forecasts overall cannabis sales in Germany (including medical, recreational and CBD) to reach EUR2.5 billion by 2026, with the actual sales timeline for adult use projected to be rolled out around mid-2024.
And that is where projections get hazier than the atmosphere in a Californian cannabis lounge. According to the coalition agreement, cannabis should be distributed in “licensed shops”. But what qualifies as a licensed shop is yet to be determined. While some industry figures suggest that pharmacies could, at least initially, adopt that role, specialist dispensaries would allow for wider accessibility, building brand equity and, ultimately, achieving the government’s stated aim of draining the thriving illicit market.
International treaties – and the complications that would arise in securing essential imports – will be another obstacle to overcome. The 1961 UN Single Convention on Narcotic Drugs prohibits Germany from legalising recreational cannabis, as it bans states from cultivating and trafficking outside of medical or scientific purposes. Withdrawing from the convention or choosing to ignore it – much like Canada did, and is yet to be sanctioned – would be possible options, although a technical withdrawal and subsequent rejoining appears to be the most likely and least confrontational approach.
Nevertheless, beyond political and legislative hurdles, the time has finally come to begin discussing the industry in fmcg terms. Demographic breakdowns, branding exercises, insights on need states and consumption occasions, promotional and outreach activities and product formulation have all been glaringly missing in the ongoing debates. Attempts to wholesale superimpose North American positioning, celebrity endorsements and strategies onto an entirely different market will be doomed to unceremonious failure. Value propositions will need to be reassessed, and regional cultural heritage and local artistic, countercultural, and legacy market forces will need to be taken into account. Berlin is far more infamous for its underground techno scene than its urban and hip-hop associations, for example.
But Berlin has also been where the tides of history have collided and shifted in the past. This July, at the International Cannabis Business Conference, history will be in the making once more, with the Commissioner on Narcotic Drugs at the Federal Ministry of Health, Mr Burkhard Blienert, providing the keynote speech. The prohibitionary wall is crumbling, at last.