On October 26, German Health Minister Karl Lauterbach unveiled plans to decriminalize the possession of up to 30 grams (1 ounce) of cannabis (any current proceedings would stop) and allow the sale of the substance to adults for recreational purposes in Germany.
It is important to note that this is just a key issue paper. The German government will align this with the EU Commission and other international institutions to ensure it is realizable. If yes, they will draft a bill and put it in front of parliament Q1 2023.
There is still a long way to go to solve the puzzle but the next gating item will be the EU consultation process, following which we will know where this is headed. According to Health Minister Lauterbach, he expects that if everything goes very smoothly then in 2024 we would see the first legal adult-use cannabis sales occur in Germany.
Here are the key updates from this proposal:
Cultivation:
Individuals would be allowed to grow up to three plants, and to buy or possess 20 to 30 grams of marijuana.
- Lauterbach confirmed that the objective is that adult-use cannabis will need to be grown in Germany, acknowledging that greenhouse grown cannabis has high energy use and would “ideally” be powered from renewable energy. He expressed comfort that sufficient German grown supply would be available by the time adult use goes live.
- A license for cultivation of cannabis for recreational purposes would be required.
Products:
- In terms of permitted product offerings, Lauterbach specifically mentioned that “cannabis for smoking (flowers), capsules and sprays” will be permitted but “edibles like cannabis cookies” are excluded from the current scope but “under evaluation.”
Distribution:
- Distribution through specialist shops including pharmacies is contemplated.
General Population vs. 18-21 Age Group
- Since mid-Octboer, the reference to placing a maximum THC limit has been abandoned with the caveat that a limit could be put in place for 18-21 year olds; this is something that is still being evaluated.
- The media was quite challenging in their questions about how adult-use legalization could be consistent with improved protection of German youth and general public health. Lauterbach took the position that the proposed legalization could actually lead to a reduction in current cannabis use amongst the vulnerable population.
Next Steps Towards Legalization:
- The paper will now be submitted to the EU for an informal consultation in relation to open legal aspects, and it is expected that this consultation will be concluded by Q1 2023 with a potential start date for adult use in 2024.
- The position paper will only be turned into draft law if the EU Commission sides with the German government on their interpretation of conformity with international treaties; if not, everything could go back to the drawing board.
Link to (German language) position paper of the government coalition
GPS Hot Takes:
Deepak Anand, GPS Head of International Consulting
I would disagree with Lauterbach that “sufficient German grown supply would be available by the time adult use goes live.” We saw an insufficient supply in Canada when the recreational market kicked off, and there were far more licensed cultivators in Canada then than Germany has today. It also has taken Germany far longer than Canada to approve cultivation licences based on licensing data to date, which would only exacerbate the problem.
The edibles issue is another interesting one because, if the goal is to protect health and safety, then surely moving consumers from legacy to legal is a critical step and as we’ve seen in the US & Canada, legal markets need to give these consumers what they want. In many cases that is edible products.
Finally, I believe the EU approval piece is the big elephant in the room as I do not see them collectively agreeing with Germany’s approach. Just look at how they’ve failed to align on CBD to date! THC is a whole other story. I see countries such as a few EU member states opposing this.
Tim Gordon, GPS Chief Science Officer:
The German market will be a difficult one to enter and will have a very tight compliance process. The reality is that when Germany does finally adopt a regulatory process, most of the infrastructure needed to supply the small market in Germany with flower or other products will be completed within the region. There already is a lot of movement in the region around scaled cultivation and processing. So if you’re looking to compete seriously, I’d stop waiting and start planning.
Rosa Puentes, LATAM Business Development:
As the German government addresses the EU about their plans to legalize recreational cannabis, how do these decisions affect the Latin American cannabis industry? The reality is that the current draft set out by German authorities leaves no room for imports. This means any company that might have set up their business model to export recreational products to this market now needs to rethink and pivot. Recreational markets will take a lot more time to develop, and since United Nations treaties only allow international cannabis trade for medicinal or scientific purposes, this is going to take even longer. This is exactly the kind of challenge that businesses which opt to engage a management consulting firm like GPS will find profitable solutions faster and with less wasted time and expense.
Gateway Proven Strategies has the combined experience of working on over 600 licenses nationwide. Our strategic expertise has taken clients from the license procurement phase to business maturity to exit. We pride ourselves on our team of best-in-class consultants serving best-in-class clientele. We are not only stakeholders in this thriving industry, but also responsible, ethical advocates.