Germany’s nascent cannabis industry hits new highs as legalisation looms

Lars Müller wants to create the Starbucks of cannabis: a chain of dispensaries offering the full array of marijuana-related products, from tinctures to flowers and edible gummies.

“We want to build up a chain with an identical level of quality across Germany, something that exudes the professionalism of an Apple Store,” he said. “This is not going to be an opium den.”

Müller is chief executive of Synbiotic, a leading player in Germany’s burgeoning cannabinoid sector that invests in everything from growers to researchers and distributors. It is an industry experiencing a high of epic proportions.

The trigger was an announcement late last month from the three parties in Germany’s new coalition government that they planned to legalise cannabis. Synbiotic’s share price doubled on the news.

So far, the government’s exact intentions remain hazy: it says only that it would allow the “controlled sale of cannabis to adults for recreational purposes in licensed shops”. There have been no more details, and no timetable for legislative action.

But the plan could still turn out to be a game-changing precedent for the global business of growing and selling marijuana, one that will be closely watched by other countries toying with liberalising their drug laws.

“In terms of population, Germany would become the largest country in the world to allow the sale of cannabis,” said Constantin von der Groeben, managing director of Demecan, a local grower. “It’s a huge opportunity for us.”

If the plan goes through, Germany would join a highly select group of countries that permit the commercial sale of recreational cannabis — the only others are Canada and Uruguay, along with a handful of US states. For most big nations it is still uncharted territory.

Uruguay is one of the few countries to allow the sale of recreational cannabis © Pablo Porciuncula Brune/AFP/Getty

But for the German coalition partners — the left-of-centre SPD, the libertarian FDP and the unconventional Greens — legalisation was a no-brainer, one of the few causes they could easily agree on.

Fiscal arguments also played a role. Decriminalisation could deliver a net benefit to the state of €4.7bn a year, including €2.8bn in tax revenues and €1.36bn in savings on police and legal costs, according to a recent study by Heinrich Heine University Düsseldorf.

Unsurprisingly, the coalition’s announcement triggered a wave of interest in the sector. Stefan Langer, founder of Bavaria Weed, a small producer, was featured in Bild Zeitung this month sporting a crown of hemp leaves and bulging bags of buds, under the headline: “I want to be Germany’s cannabis king”. 

Yet sceptics urge caution and point to Canada, where the wave of excitement unleashed by legalisation in 2018 quickly ebbed. Although 73 cannabis companies went public there from 2016-2019, the early enthusiasm faded when growth underperformed expectations.

“There was just this financial hype and . . . too much material came on to the market,” said Müller. “Most companies are still not earning any money.”

The situation in the US also played a role. “There were big expectations that [President Joe] Biden would legalise cannabis on the federal level and the fact that he hasn’t disappointed a lot of people,” said Kyle Detwiler, chief executive of Clever Leaves Holding, a Colombia-based producer. “It had a huge impact.”

A Canada-style boom and bust is unlikely in Germany, however, where barriers to entry remain prohibitively high. Companies have this year been able to grow medical cannabis in Germany, where doctors have been free to prescribe it in various forms since 2017. So far, though, only three companies have a licence to cultivate: Demecan, and the German subsidiaries of Aphria and Aurora, both of Canada.

All three must adhere to “good manufacturing practice”, an internationally agreed standard for pharmaceutical products. Some think it is inappropriate for recreational weed.

“The GMP standard is completely excessive,” Müller said. “We need a wholly new standard that’s somewhere between food and pharma quality.” He suggested it could be modelled on Germany’s 500-year-old purity law that dictates which ingredients can be used to make beer.

Demecan’s von der Groeben, in contrast, views GMP as an essential badge of quality. “We have to earn people’s trust, and we can’t gamble away that by lowering standards,” he said. “The fact cannabis makes you high means you have to make sure it’s of the highest possible quality, with no contaminants.” 

On the other hand, he added, some of the rules contained in Germany’s ultra-strict “narcotics handling guidelines” may have to be relaxed post-legalisation.

The rules, for instance, mean that cannabis facilities in Germany tend to resemble Fort Knox, with product stored in the equivalent of high-security bank vaults. Demecan’s 5,000 square-meter facility, housed in a former abattoir near Dresden, is encased in reinforced concrete walls and ceilings and surrounded by CCTV cameras and state of the art alarm systems.

“Video surveillance and burglar alarms are important, but the kinds of bunker-like systems we currently have may not be necessary,” said von der Groeben.

Yet experts think caution will be the Germans’ watchword, certainly in the industry’s early phase. Berlin will be at pains to avoid incidents such as the outbreak of “vaping-associated pulmonary injury” in the US in 2019 that was associated with the use of black market vaping products.

“What would happen if a gummy that’s supposed to contain 5mg of THC actually turned out to have 100mg?” said Detwiler, referring to the component of cannabis that makes users high. “What would happen to the kids who took them?”

“If I were the German government I would start slow,” he continued. “I think they’re going to be very careful about this.”

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