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High expectations for Germany as global cannabis markets light up

Over the past few decades, the world has grown savvy to the benefits of cannabis with the industry reporting in October 2021 that at least 30 countries had legalised its medicinal use creating a market estimated to be worth $80 billion in 2024.
Over the past few decades, the world has grown savvy to the benefits of cannabis with the industry reporting in October 2021 that at least 30 countries had legalised its medicinal use creating a market estimated to be worth $80 billion in 2024. Germany has been a willing customer with the country importing a record amount of cannabis (10,487 kgs) for medical sales and scientific use in the first half of 2022 – 6.1% higher (9,840 kgs) than in H1 2021 and considerably higher than its 2019 total (8,057 kgs). Market intelligence firm Prohibition Partners estimates that more than 128,000 patients in Germany receive medical cannabis annually and ~60% of medical cannabis prescriptions were reimbursed by insurance companies in 2019. Despite there being contrary arguments and opposition, Germany’s Health Minister Karl Lauterbach announced plans to legalise the possession and sale of cannabis to adults, subject to compatibility with European Union law. The move is expected to create up to 27,000 new jobs and bring in annual tax revenues and cost savings of about 4.7 billion euros. The country is expected to become the world’s second largest importer of cannabis. With numbers and potential tailwinds like these, Germany is touted to lead the European cannabis market in terms of growth with revenues projected to reach US$1,111.00 million in 2023 and US$1,877 million demonstrating a compounded annual growth rate of 14% between the years.

Here’s where Australia comes in

It would be fair to assume that the Australian medicinal cannabis industry has firmly taken root. According to the Office of Drug Control and Use, Australia has 44 cannabis manufacturers and as at October 2022 there were 35 cannabis companies listed on the ASX. Australia’s medicinal cannabis production capability has been described by former Minister for Health Greg Hunt as having ‘gold-standard regulation’ backed by ‘a premium agricultural and manufacturing industry’ – one that duly complements and is meeting the high demand for quality in European markets. Australia legalised medicinal cannabis exports in February 2018. Little Green Pharma (ASX: LGP) was the first Australian producer to successfully export the product to Germany (2019) and the first to export cannabis oil to the UK (2020). Ensuring momentum would be kept, the federal government granted ‘major project status’ for the development of new medicinal cannabis facilities in Queensland and Victoria in 2019. As at 2021, Australia was the fifth biggest exporter of medicinal cannabis to Germany behind Canada, Denmark, Netherlands and Portugal, possibly owing to a decade-long $92 million export agreement headlined by local growers Australian Natural Therapeutics Group. More recently, Australian producer ECS Botanics (ASX: ECS) secured a $9.9 million agreement to exclusively supply four medicinal cannabis strains to the German market over the next three years. Health and wellness business Wellnex Life (ASX: WNX) has also caught a whiff of the budding sector and aims to become one of the first companies to offer an over-the-counter, prescription-free medicinal cannabis product in Australian pharmacies. The company has also secured a joint venture partnership with OneLife Botanicals to produce multiple medicinal cannabis products for the growing Special Access Market (SAS) – estimated to be worth over $400 million in 2022. Cann Group (ASX: CAN), one of Australia’s biggest cannabis growers, also seeks to build itself into the Aussie over-the-counter and European markets. Through a share purchase plan, the company successfully raised $8.18 million from 1,254 shareholders to support its ambitions.

Cannabis in the limelight

Once stigmatised with pseudonyms such as the ‘devil’s lettuce’, cannabis and its many benefits has played its part in persuading governments, authorities and businesses to turn over a new leaf and realise its commercial potential.  Naturally, some celebrities have been advocates of cannabis for its medicinal benefits and are not lost on the notion themselves. Popstar Lady Gaga, the first woman to win an Oscar, Grammy, BAFTA and Golden Globe in the same year, has been known to use medicinal cannabis to help manage chronic pain caused by fibromyalgia. Cordozar Calvin Broadus, Jr., more famously known by his artist name Snoop Dogg, is part-owner of Canopy Growth Corporation, one of the largest cannabis growing operations in the world.  Considering cannabis’ marketability and further regulatory easing, it’s safe to say that the concept is growing into a global opportunity as its circle of consumers and producers continues to expand. To stay up to date on the medicinal cannabis industry news and announcements, register your details here. Past performance is not a reliable indicator of future performance.  Reach Corporate provides Corporate Advisory Services, including managing investor communications on behalf of Wellnex Life Limited and may receive fees for its services.
Sources:  

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