Canadian cannabis companies look overseas as domestic market saturates

Facing a saturated market and intense competition domestically, Canadian cannabis companies are exporting more of their products overseas.

The cannabis export market is an opportunity for marijuana businesses to tap into new revenue streams and mitigate the impact of Canada’s domestic excise taxes.

The growth of medical cannabis markets, particularly in Europe, is a key driver of the export trend.

Canada’s volume of cannabis exports to Germany, for example, doubled from 16,895 kilograms (roughly 37,247 pounds)  in 2023 to 33,155 kilograms in 2024, according to Germany’s Federal Institute for Drugs and Medical Devices (BfArM).

“There’s a lot of excitement around the export market,” said Deepak Anand, principal at ASDA Consultancy Services in British Columbia.

“But people are assuming that it’s much easier than it actually is. It’s not for everybody. There are barriers that you need to get around.”

Strict licensing standards

One of those challenges is having European Union Good Manufacturing Practice (GMP) certifications.

Of Canada’s 900 licenses, only 19 have the certification, Anand said.

One license holder with EU-GMP certification is Village Farms International, which has offices in Lake Mary, Florida, and Vancouver, British Columbia.

The company exports medical cannabis from its EU-GMP-certified facility in Canada to international markets, including Germany, Australia, Israel and the United Kingdom.

The company is expanding its international presence with more export contracts in new countries in the Asia-Pacific region and Europe.

Village Farms, whose exports totaled $8.4 million last year, expects to at least triple its international sales in 2025, said Sam Gibbons, the company’s senior vice president of corporate affairs.

“The European markets are taking a much more pragmatic approach to the regulatory environment and see real potential for cannabis as a medicine,” Gibbons said.

“There’s not as much dysfunction as there is in the U.S., where there’s all sorts of red tape and regulatory frustrations. They’re letting these markets behave in a way that’s rational.”

Companies that don’t have EU-GMP certification can run their products through a facility that does.

“They’ve created hubs that are EU-GMP-certified. (Cannabis) gets transformed in these hubs and gets shipped to Germany,” said Niklas Kouparanis, co-founder and CEO of Frankfurt-based Bloomwell Group.

Kouparanis said 30%-35% of Germany’s imported cannabis comes from Canada.

“Prices were falling, and you had overproduction in Canada for a long time,” Kouparanis said.

“Germany is ramping up in terms of patient numbers, and the amount needed here is a blessing to the industry.”

Although Canada has a head start in Germany, Portugal is scaling up, increasing its exports into Germany by 318% to 17,230 kilograms between 2023 and 2024, according to the BfArM.

Germany also is importing cannabis from Denmark, Spain, North Macedonia and the United Kingdom.

The cannabis excise tax

Another factor Canadian cultivators consider is the $1 per-gram excise tax or 10% of a producer’s selling price (whichever is higher), which they don’t have to pay on exports.

“It depends on the quality of the product and how you price it, but you generally get more on a per-gram basis than you would in Canada,” said Adam Coates, chief revenue officer of the Calgary, Alberta-based Decibel Cannabis Co.

“Your gross revenue becomes your net revenue because you’re not paying the excise tax.”

Decibel Cannabis’s domestic business still accounts for the biggest portion of sales, but that’s starting to change, Coates said.

“Our outside-of-Canada business will be bigger than in Canada in the not-so-distant future,” Coates said.

In its early days, the domestic business experienced double-digit, year-over-year growth, but those times are over, and Decibel is now seeing mid- to high-single-digit growth in Canada.

In October, Decibel purchased AgMedica Bioscience, which expanded the company’s international footprint with the addition of an EU-GMP-certified facility and enables it to export cannabis products to Australia, Denmark, Germany, Israel, Norway, Spain and the United Kingdom.

Although it’s uncertain if or when marijuana legalization will occur in the United States, along with the country’s ability to export cannabis products, Canada has an advantage by being in overseas markets first.

“Canadian companies would do well to establish themselves in the supply chain before the U.S. gets into it,” Coates said.

Margaret Jackson can be reached at margaret.jackson@mjbizdaily.com.