Eurozone Cannabis Market Highlights: 2018 And Beyond
This brief summarizes the findings in the fourth edition of The European Cannabis Report, published by Prohibition Partners in January 2019.
Eurozone Overview: Demographics & Consumption
The European market is vast and extremely culturally diverse, with 50 countries and 24 official languages. Over 740 million people live in Europe (twice the population of the US & Canada combined). Some 3 million Europeans now consume 255 tons of cannabis each year. The result is a rapidly growing demand for cannabis products and services throughout Europe.
Cannabis in Europe: By the Numbers
- Europe is forecast to have the world’s largest legal and medical cannabis markets by 2023
- Potential total €123 market value by 2028 (medicinal and recreational cannabis). By 2028, European recreational market will be worth an estimated €65 billion
- €2.3 trillion total spent on healthcare each year
- In the European Union (EU) and Norway, 23 million people, or nearly 7% of all 15-64 year-olds, used cannabis in the past year; of these, 3.6%, or 12 million, consumed cannabis in the past month
- Vive la France. Despite relatively strict laws, the French are the biggest consumers of cannabis in Europe. Over 700,000 French use cannabis daily; around 41% of French adults have used cannabis at least once. French teens use cannabis more than teenagers in any other country in the world.
Key Trends & Takeaways
2018 marked a turning point for European cannabis
- Industry grew more in 2018 than it did in the prior six years combined
- Visibility and public acceptance of cannabis continued to expand as new scientific discoveries increased understanding of potential social and commercial benefits
- New legislation in six countries set the stage for continued momentum of medical cannabis
- More than €500m invested in European cannabis businesses
At this pace, Europe will be world’s largest legal market by 2023 and, by 2028, have a potential total market value of €123b.
Social and economic benefits drive legal momentum. Key drivers and benefits of legalizing recreational cannabis in Europe include new job opportunities and tax income, increased research opportunities and lower crime rates.
Government and business leaders in Europe recognize cannabis as a new and exciting industry. However, leaders also acknowledge that any expansion of this new market must be grounded in definitive research. Throughout Europe, cannabis consumers and patients will demand and expect high quality, well-regulated products.
Popularity and price of cannabis. Europe’s cannabis market has significant usage rates and commands high prices. Demand, and prices, will most likely increase as legal medical cannabis expands across Europe, especially if medical professionals prescribe cannabis to treat widespread mental illnesses such as anxiety and depression.
European economists and policymakers will most likely look to cannabis-friendly countries and certain US states for direction and ideas. Guideposts include Canada, where cannabis sales are poised to overtake both its wine and liquor markets this year, and the US, where cannabis-related jobs are on track to outpace traditional manufacturing job creation by 2020.
Greenfield Opportunities Abound for Investors
Every European country will offer a multitude of cannabis-based economic and employment opportunities, as well as related products and platforms, across each stage of the cannabis supply chain.
Europe represents opportunities to those who can offer cannabis-related products and services such as:
- Professional education programs. Formal educational training for licensed health professionals on medical properties and benefits of cannabis is needed, particularly in Germany and Italy.
- Research. Reliable, replicable, and rigorous peer-reviewed research will be critical to convince legislators and governments to change laws.
- Medical markets. Over the next 5-10 years, demand for medical cannabis will make Europe a critical target market for pharmaceutical companies.
- Non-medical products. Innovations in wellness, health and beauty, and food and beverage sectors will add to high market valuations.
- Cultivation know-how. Canadian imports and joint ventures cannot keep up with demand. Market leaders (Germany, Italy, the Netherlands) are developing market tenders for domestic licensed producers.
Impact on insurance industry and coverage. European countries that have legalized medicinal cannabis have pushed many European insurance companies such as AOK, TK, Barmer, Sun Life and Cigna. While cannabis is still illegal in a number of countries, insurance companies throughout Italy, Denmark, Germany and Israel have changed their policies to cover cannabis prescriptions in their respective markets.
Insurance companies continue to expand their coverage across Europe on a country-by-country basis. Policies in cannabis-leading countries suggest that fulfilling medical cannabis prescriptions will become a standard component of public healthcare programs—and will be a major differentiator between North American and European cannabis policies.
An update of a report last issued in 2015 by the World Health Organization (WHO) and the EU on the “evidence surrounding medical cannabis” could, once it is released, set the stage for a wave of future legalization across the European continent. The report’s latest findings are also expected to increase the number of countries with legal medicinal cannabis, often the first step towards full legalization.
Challenges Lie Ahead for the Eurozone, too
EU’s cannabis frontier is increasingly segmented in terms of legislative agenda and reforms. Europe’s cultural diversity is also the cause of its equally diverse legal landscape. The EU will continue to struggle to reach consensus on commercial contracts, product standardization, and cross-border supply chains. Still, coordinated efforts are underway to increase debate and discussion among legislators and policy makers. For example, the European Parliament’s committee on Environment Public Health and Food Safety has called for a single EU policy on medical cannabis.
Lack of reliable cannabis research is further slowing efforts to change laws and enact meaningful reforms. European governments and legislators are more open than ever before to changing the laws, and in general, are becoming more pro-cannabis. The benefits of medical cannabis will increasingly be recognized as scientifically legitimate and will be the biggest driver of legalization efforts.
Legalization status and progress. Other than Luxembourg and Spain’s region of Catalonia, most European countries are focused on legalizing medical cannabis and CBD-based products. As the economic and social benefits of a regulated cannabis market become apparent, governments are debating whether or not to legalize recreational cannabis.
In 2018, legislators and policy makers in Malta, Greece, Italy, Germany and Denmark discussed creating fully regulated cannabis markets. Luxembourg has promised to introduce its adult cannabis market by 2023.
Tier 1. Leaders: Germany, Italy, Portugal, Spain, Luxembourg, The Netherlands, Czech Republic
Tier 2. Followers: UK, France
Tier 3: Laggards: Austria, Hungary, Romania, Turkey, Serbia, Slovenia
…honorable mentions in the Laggards category go to the Netherlands and France (regarding legality and accessibility of medical cannabis)
Insights: Looking Ahead
Medical professionals continue to discover and accept the benefits of medical cannabis. Germany and Italy lack adequate formal educational programs for physicians, even though medical cannabis demand is rising quickly.
Cannabis, especially CBD, continues to enter conventional market spaces. Wellness or health and beauty products containing CBD were early entrants, but following closely are beverages, food, and financial services. BlackRock, Constellation Brands and AB InBev show that cannabis stocks are gaining traction.
Cultivation considerations. In Southern Europe, cannabis (including hemp) cultivation offer a lifeline to revive agricultural industries still recovering from the 2008 recession. Countries such as Italy, Macedonia and Greece will offer a low-cost alternative to imports on intra-EU trade networks.
Italy’s reviving hemp industry will continue to see remarkable growth after 40 years of prohibition. Italy’s hemp-cultivated land increased by 80% in 2018, thanks to reforms enacted in 2017.
Meanwhile, France is experiencing a cultivation brain drain as experienced growers leave for opportunities in cannabis-friendly countries.
CBD Market Trends: Opportunities & Challenges
The big picture. Europe’s health and wellness market was worth an estimated €180 billion in 2018. This represents a €29 billion increase from 2013 and reflects Europeans’ growing interest in healthy lifestyles and supplements.
Opportunities. Cannabidiol (CBD) is one of the cannabis plant’s many non-psychotropic cannabinoids and has no reported side-effects even at high doses. CBD products are enjoying an explosive growth worldwide. CBD’s versatility makes it an increasingly popular option in health and beauty as well as food and beverage products, including oils, tinctures, teas, capsules and balms, as an ingredient in cosmetics, and in food supplements. CBD-infused beverages will help increase sales in the food and beverage category even further. Some analysts also point to potential future CBD use in household products.
WHO estimates roughly 25% of the European population suffers from depression or anxiety, creating opportunities for products that contain CBD’s mood-enhancing effects. Additional opportunities exist for consumer and even household products containing CBD. Innovative products created by large consumer brands will introduce CBD products to mass markets.
Challenges. In Europe, lack of access to even medicinal cannabis means that demand will only grow for the therapeutic benefits offered by non- or low-psychotropic CBD products. This trend is borne out by legal markets in the US, which show high demand for products containing high CBD and low THC levels.
CBD falls under a rather uncertain status in terms of legalization and classification, depending on its use for health and wellness versus products with purported medicinal properties. CBD in any form is illegal in Slovakia.
Europe’s cannabis cultivators have the capacity and processing infrastructure to quickly ramp up production and compete with North American producers of hemp-based CBD products. But the competition to classify and control cannabis and CBD-only products will rapidly intensify as Big Pharma enters the market.
Focus on: Italy
Italian creativity and penchant for entrepreneurship will continue to create exciting opportunities for investors in the cannabis space.
“Cannabis light” takes the market by storm. Relaxed restrictions have seen Italian innovation in cannabis light products such as Easy Joint, a high-CBD, low-THC product containing less than 0.2% of THC, an amount that can be sold legally in Italy. Since launching Easy Joint in 2017, the company has sold more than 17,000 kilograms of cannabis light product. Easy Joint’s immense popularity caused the company’s website to crash, and retailers have had to employ crowd-control measures. Other examples of new Italian cannabis companies include CROP, which has produced over 600,000 cannabis light plants so far in its 25-acre cultivation facility, and startup Weedentity’s line of CBD-based medicinal products for cats and dogs.