European countries are fighting to become the next hub of cannabis cultivation, as medical cannabis companies accidentally over saturate the European cannabis market.
A new Prohibition Partners report was released earlier this week, shedding some light on the woes of the European medical cannabis market. As investors eye the pot pie, large-scale cannabis operations have now launched in Denmark, Portugal, Spain, Macedonia, Greece and Malta.
Across Italy, the Czech Republic and Switzerland, smaller-scale cannabis operations are also making waves. The Czech Republic recently launched their own cannabis vending machines, while Sicily announced free medical cannabis.
In the next few years, Europe will be producing over 300 tonnes of cannabis annually – but there’s a catch.
This rapid expansion has provided more cannabis can Europe can actually use.
While Europe faced many years of cannabis shortages and under supply, the continent is now overgrown with unsellable cannabis crop.
In August 2020, Prohibition Partners estimate that Europe’s fully licensed suppliers can collectively produce 34 tonnes of cannabis flower annually. Whether this is sold in flower form or in medicinal products, Europe produces three times its estimated demand for cannabis.
In response to this, investors are rescaling their projects and aiming to export cannabis overseas. Canadian cannabis producer Canopy Growth entered the European market under subsidiary Spectrum Therapeutics, investing approximately $76 million in facilities in Denmark.
In the last quarter of 2019, Canopy Growth produced over 40 tonnes of cannabis, but only managed to sell 27.5% of their stock. Towards the end of the 2019/2020 financial year, Canopy Growth logged a quarterly loss of just over $1 billion.
Medical cannabis company Aurora Nordic Cannabis faced similar European sales. Despite producing 15 tonnes of cannabis annually, the company had a deficit of roughly $8 million in the 2018/2019 financial year. In 2020, they have reduced their operating costs by $87 million by replacing their staff with robots and machines. Earlier this year, CEO Mads Pedersen told the Finans:
The European market for medical cannabis is getting tough. There are far too many producers, so it will be a tough elimination race.
Although exporting oversupplied cannabis flower to Australia and Israel would reduce Europe’s cannabis saturation, the demand for foreign cannabis is decreasing both here and in Israel. As our cannabis exporting laws changed in June, companies like BOD Australia are expanding into the European market. If a new bill legalising cannabis passes in Israel’s Knesset, their local supply of cannabis will fill their demand within five years.
According to the Prohibition Partners report, the success of Europe’s cannabis companies now depends on the market for medical cannabis increasing in Germany, Poland and the UK.
To read about the UK’s turbulent medical cannabis market, click here.