On Nov. 6, Cannabis Professional hosted a conference call to discuss on cannabis opportunities in Europe with special guest Deepak Anand, the co-founder & CEO at Materia Ventures.
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Thank you to the subscribers who listened in to this lively discussion. You can read a recap of the key takeaways below. The following has been edited for length and clarity.
Audio of the call
What are important things to keep in mind when approaching the German market?
Deepak Anand: Unlike some other jurisdictions in Europe, Germany is a flower-only market, and there are different categorizations around flower. There are a number of state governments in Germany that are regulating this product, and there’s a lot of interpretation on how each state is looking at this product. In some areas, it’s considered as an active pharmaceutical ingredient, while in others it’s considered a finished pharmaceutical.
It’s a patchwork of regulation within Germany, so if you’re looking to set up as an importer or you’re looking to set up operations on the ground, you want to pay very close attention to the way that these states within Germany look at things and the legislation they have developed. If you’re looking at it strictly from an export perspective, then there isn’t that much that needs to be done. There are a number of importers that are looking for product. I’d say that’s the other takeaway: There’s a shortage in the market and there’s a lot of interest from German suppliers to be able to import products.
Are prices coming down yet in Germany?
DA: We’re still in a supply shortage situation, so there’s still plenty of opportunity. You absolutely need to have EU GMP before you can export to Germany. There’s only a handful of companies that actually have that. In addition to that, there’s still quality issues. Bedrocan products are still very much regarded as the highest quality products.
As far as Germany is concerned, I don’t think the prices are insane, but there’s certainly a significant mark up to be had
As far as Germany is concerned, I don’t think the prices are insane, but there’s certainly a significant mark up to be had there, as long as you are able to get into the market very quickly. The price will come down over time as more suppliers come into the market. Even after this next tender is completely done, and these companies are growing and selling to BfArM, it will still be an import market, and you can expect the government to put out more tenders.
Is it more cost effective for Canadian LPs to export product to Europe or set up production within Europe?
DA: We’re looking at cannabis as a commodity. We’ve seen cannabis being grown in places like Columbia and Macedonia and Lesotho, and a number of different low cost jurisdictions. And there’s no reason why a lot of these companies can’t actually comply with basic GMP standards as well as GPP and GACP standards. Eventually I think you’ll see a move away from Canada. You might see companies get it into Europe in the next little while. But it will go into to lower cost producing countries like Colombia or Jamaica. A lot of them are very sophisticated from a compliance perspective. It will be cost-prohibitive in the long-term importing cannabis from Canada into Europe and so companies that are focused on cultivation would be smart to look at not just setting up in Europe, but setting up in lower cost jurisdictions, complying with GPP and GACP standards, aiming to get GMP, and then tying up with partners in Europe to be able to extract and process product.
What are other European markets you’re excited about?
DA: Denmark is a market that currently has a significant premium on pricing. Unlike Germany, it’s an oil-only market. There’s a number of regulations that you need to keep in mind if you’re looking at the Danish market, including pesticide regulations and product registrations.
The patient numbers have dipped somewhat recently, but that can be attributed to some of the supply issues, because there have really been no oil products being sold in that market for quite some time because of the issues with CannTrust.
Several large LPs are building greenhouses in Denmark. Are they allowed to export from Denmark?
DA: Denmark allows for cultivation under its trial program, but there are limitations around what you can do in terms of exports. And when I say exports, I even mean intra-European exports. Nonetheless, you’ve seen investments from a number of companies. Export is certainly something that most people are advocating for. Denmark is a jurisdiction that’s been very open to international trade, investment and promotion and growth, so we don’t see any reason why, once the program is up and running from a quality perspective and the Danish Medicines Agency is satisfied that the regulatory compliance is in place, that they wouldn’t permit for exports out of Denmark.
I understand that CannTrust, which was the main Canadian company shipping to Denmark, did not have EU GMP certification. I thought you needed EU GMP for all shipments to Europe. Is that correct?
DA: For a long time there was a myth that you needed EU GMP before you could start to export. While that still may be true for countries like Germany or the UK, Denmark is a prime example of somewhere that CannTrust was shipping too, even though CannTrust did not have an EU GMP license or certification. That’s because the Denmark program was a trial program; you weren’t allowed to re-export product that was being brought into Denmark, so it couldn’t be a flow through system.
CannTrust had a partnership with a local company that was importing product and re-labeling and repackaging it. It wasn’t actually being converted into GMP; it was still very much just GPP or GACP, and that is something the Danish Medicines Agency was fine with.
You don’t necessarily need to have EU GMP, but you still need to be operating to GMP principles, and there’s a very strict audit process
For Denmark, you need to be very clear on what your pesticide use is. In certain cases they will allow some biological pesticide to be used, but again there’s a strict application process that you are required to go through. Just because you’re GACP or GPP certified doesn’t necessarily mean that you’d be able to ship products over tomorrow.
Let’s talk about Malta for a second. The Malta Medicines Authority allows you to bring in product as an active pharmaceutical ingredient, so you don’t necessarily need to have EU GMP. As long as you’re satisfied that you’re meeting GMP standards, you can import products, and then start to formulate them into value-added products and get into the rest of Europe.
You don’t necessarily need to have EU GMP, but you still need to be operating to GMP principles, and there’s a very strict audit process that suppliers would need to go through before they could send products into Malta.
What’s the state of CBD in Europe?
DA: There are countries like Sweden and Finland where there’s no CBD permitted whatsoever. There’s countries like Austria and Italy and others that will allow for CBD flowers to be sold at Christmas markets. You’ll find CBD shampoos in grocery stores in Germany and in the U.K. you’ll find a range of CBD products on the market. So it’s really the Wild West, and it depends on which country that you’re looking at. I would say, by and large in Europe, there isn’t a lot of enforceability on CBD, and I think that’s because they’ve been missing a lot of regulations. You will start to see enforcement come in once there are guidelines that have been issued especially around packaging and testing.
Europe has something called Novel Food Regulations. At a high level, that’s food that was not used for human consumption to a significant extent prior to 1997. It needs to be safe for consumers, it needs to be properly labeled. There’s a number of restrictions and guidelines around how you could do that… The novel food regulations only apply to things that are ingestible or that are food. And so CBD vapes would not be considered food products.
In the U.K. specifically, there aren’t any novel food regulations. We are expecting the U.K. Food Safety Authority to come up with guidelines around CBD products.
If you’re a vape maker and you wanted to enter the U.K. market, you could actually do so. Exporting a finished product obviously continues to remain illegal both from a Canadian perspective as well as from a U.K. perspective. But there are ways to actually start to manufacture CBD products in the UK and start to sell them, both on the topicals side as well as on the vape side. In my opinion, the vape side is actually a tremendous opportunity because there are not a lot of regulations.
Theoretically, all of these products need to make sure that they have got under 0.2 per cent THC. But again, because it’s such a Wild West, nobody is really doing any significant testing to make sure that these products are actually complying with those regulations.