Germany Intends to Grow Its Own Recreational Cannabis; Leaked Policy Document Says Firm No to Imports
BusinessCann reports that four key points of how Germany’s upcoming adult-use cannabis legalisation will look were leaked on 19 October 2022 by the German press. In summary the key points cover:
Supply: all production to be sourced within Germany;
Distribution: through pharmacies and dispensaries and ‘specialist shops with consumption options’; no clarity on where online sales may fit in;
Tax: Special cannabis tax on top of 19% VAT and the possibility of a tax on THC potency;
Consumer Protection: a cap on THC% at 15%, with 18 – 21 year olds only allowed to consume products with 10% THC; 20 grams allowed to be possessed for personal use and a home grow limit of two plants per person.
As BusinessCann reported last month, the German Ministry of Health had promised to publish ‘Eckpunktepapier’ sometime in October, providing a simplified summary of what the country’s draft law would look like and addressing a number of key issues.
While this paper has not been officially released, RedaktionsNetzwerk Deutschland (RND) says it has had exclusive access to the document, and has now published a story detailing these key points.
Though it’s important to note that these proposals are still subject to change, Cannovum’s CEO, Pia Marten, says there is a ‘high degree of certainty’ that the leak is close to what the internal documents are showing.
These key points cover four main areas: supply, distribution, taxation, and consumer protection.
According to RND, EU and international legal restrictions mean that importing cannabis for recreational purposes is not an option the government is considering.
Instead, according to their ‘preliminary assessment, national demand would have to be covered by German production’.
With German domestic production currently producing just 2.6 tonnes per year for what is the largest medical market in Europe, production will need to be ramped up significantly and rapidly to meet the demand of the upcoming recreational market, and is expected to be around at least 400 tonnes a year to begin with.
Prohibition Partners’ Industry and Data Analyst Conor O’Brien says that in his opinion the fact that imports of adult-use cannabis will not be allowed is the ‘most important point’ of the leak.
“The question of how supply will meet demand then arises. Allowing people to grow their own cannabis at home would plug some of the gap in supply,” he added.
RND reports that the Health Ministry will propose that the self-cultivation of up to two cannabis plants should also be allowed.
“Then the government would have to increase the amount of cannabis being grown domestically by orders of magnitude, meaning more licences and more growers, which would take years to implement.”
Mr O’Brien suggests that a possible solution to this issue would be by rolling out legalisation in ‘pilot trials’, limiting the number of people allowed to access adult-use cannabis ‘under the auspices of a scientific study on the effects of legalisation’.
“This would serve purposes other than balancing supply and demand in that it means Germany would more likely remain compliant with international drug control treaties, and could test out the viability of legalisation before a full roll-out when issues of international law are ironed out amongst a wider group of countries.”
Currently, only three tenders for the production of cannabis have been released in Germany, granted to Aurora, Tilray and Demecan.
AlephSana’s Co-Founder and Managing Director Boris Moshkovits says that the production of these three companies ‘cannot cover the needs of the recreational market’ and will empower ‘the illicit market or force customers to use the medical market as a pre-rec market to have full access to legal products of their choice’.
However, Ms Marten, who took part in the expert hearings this summer, says that ‘this was definitely a scenario we anticipated and prepared for’.
She says that while it ‘would have been better’ to allow imports to satisfy demand, she expects a significant supply of product to be available soon as the considerable restrictions on growing practices endured by the medical cannabis market would also be lifted, making adult-use cultivation much easier.
The RND reports that under the government proposals, in principle cannabis would no longer be legally classified as a narcotic.
According to Ms Marten, this is ‘a very important key factor’, and will mean cannabis growth will no longer be restricted to tightly secured concrete bunkers.
She explained: “For me, it is a very interesting fact that it won’t be regarded as a narcotic anymore, which releases a lot of the standards that are in place now regarding cultivation and also warehousing.
Right now, you need 40cm concrete walls for cultivation, because this is set forth in the narcotics law here in Germany. If this does not apply, cultivation standards will be a little bit more relaxed. That’s what we interpret from what we’ve read.”
Another key point revealed in the leak is that the government will propose enabling the sale of cannabis in both licensed shops and in pharmacies, while ‘specialist shops with consumption options’ are also being examined.
Ms Marten suggested that this was ‘the first time’ the point of sale had been defined, adding that she believed this would be a ‘huge’ part in tackling the black market.
“If you cannot guarantee even distribution in smaller cities, you won’t eradicate the black market. So I think it’s very important that they won’t just work with pharmacies, but also with licensed stores.”
Contrary to suggestions made by two SPD party members in a recent Instagram Live session, the Government will also look to enable online sales.
It suggested that ‘the suppression of the black market would probably be greater if recreational cannabis could also be purchased online, which is convenient and increasingly important’.
The report also suggested that a new ‘cannabis tax’ could be brought in on top of a sales tax, which is applied automatically.
Furthermore, the amount of tax could ‘be based on the THC content’, which is designed to produce a ‘pronounced steering effect’.
While no suggestion has been made on concrete figures, the Government says that the highest possible tax tariff, including sales tax, must ‘come close to the black-market price’.
Mr Moshkovits says that despite the political goal of being competitive with the black market, he believes the prices of medical cannabis and adult-use cannabis will end up being ‘minimal, as there is no additional tax’ on medical products.
“The reality will be that in a dispensary you pay a cannabis tax and on top the full VAT of 19%. As a result, the prices of medical cannabis might end up being very competitive and attractive to patients and consumers.”
Should the Government’s proposals be passed into law, the purchase and possession of up to 20 grams of cannabis would ‘in principle’ be exempt from punishment for anyone over the age of 18, regardless of its origin or THC content.
While self-cultivation of two plants will be allowed, THC limits will be imposed on adult-use cannabis sold in shops in a bid to prevent ‘cannabis-related brain damage’.
THC should not exceed 15%, while consumers aged 18–21 will not be allowed to purchase any products with a THC content greater than 10%.
Mr O’Brien believes there ‘is a question about whether the limit of 15% on the THC concentration in products would be so low as to encourage the persistence of the illicit market, as many consumers prefer products with these concentrations’, adding ‘this is a real concern’.
Mr Moshkovits mirrored this, suggesting that this will ‘leave a good portion of the business in the illicit market’.
However, he suggested that this could also present a significant opportunity for the medical market, and could ‘increase the numbers of patients seeking prescriptions of high-THC flowers and extracts’.
Ben Stevens, BusinessCann