Cannabis opportunities growing in these five, international markets

Patience might prove to be a virtue when it comes to the five nations outlined here.

These countries don’t offer cannabis entrepreneurs an opportunity to cash in quickly—at least not yet. Rather, the five selected countries, which span from Europe to Latin America and Oceania, are worth keeping tabs on for their potential business opportunities down the road.

  


The Netherlands

2019 Population: 17.3 million
2019 Gross Domestic Product: $909.1 billion
2020 Projected GDP (% Change): –7.7%
Sources: World Bank and International Monetary Fund

For decades, Dutch authorities have tolerated the sale of recreational cannabis in cafes under certain conditions. But wholesale cultivation and sales were illegal.

Now, the Dutch government is rolling out a novel experiment to permit the legal production of recreational marijuana that will be sold in select coffee shops.

Despite its limited scope and duration, the experiment is important: If all goes as planned, the first legal, commercial marijuana plants will be grown and harvested in Europe in 2021.

Other European countries will be closely watching the pilot program, and its results will likely be part of any future legalization debate on the continent.

The Dutch government is expected to select up to 10 companies to participate in the pilot program before the end of 2020. The application process to become a legal grower ended July 28.

Selected growers will supply around 80 coffee shops in 10 municipalities that would, in turn, sell the products to consumers. All coffee shops in the municipalities that joined the experiment must abandon their illegal suppliers.

None of the 10 participating municipalities are among the top Dutch cities by population, such as Amsterdam and Rotterdam.

Price, THC and CBD content will largely depend on supply and demand rather than government regulations.

The government estimates a minimum production of 65,000 kilograms (143,300 pounds) per year will be needed from the growers. This assumes each of the 80 coffee shops has an average turnover of about 1 kilogram per day, 20% of which is hashish.

However, the growers won’t be obligated to each grow 6,500 kilograms during the trial, nor will they have any guarantee they will be able to sell their cannabis crop.

The experiment will last four years but can be extended for another year and a half.

A government-appointed committee will conduct an independent assessment at the end of the trial. As a result, the legalization debate will likely be on hold as evidence is compiled.

Unless current laws are changed, once the experiment is over, the country will return to the status quo in place before the test program began. That means all coffee shops would need to reconnect with their illicit sources of cannabis.

Some other European countries also are moving forward with measures that could legalize recreational marijuana. Switzerland is preparing a comparable, limited pilot project. And the government of Luxembourg has promised full legalization within the current legislative period.

 


Denmark

2019 Population: 5.8 million
2019 GDP: $348.1 billion
2020 Projected GDP (% Change): –6.5%
Sources: World Bank and International Monetary Fund

Denmark’s recently launched medical cannabis pilot program so far has generated lackluster sales. And there’s little indication the situation will improve.

The pilot began in January 2018 and is expected to finish at the end of 2021.

Unless the number of approved products and patients’ access to medicine increase, the data collected from the trial will likely be too small to justify making definitive reforms.

That could have negative implications for the experiment’s renewal or the approval of legislation providing access to medical cannabis in Denmark. Moreover, cannabis opponents in neighboring countries could use the lackluster results to lobby against major cannabis reform.

Denmark chart

Sales in the first quarter of 2020 grew slightly over the fourth quarter of 2019, but the overall market remains tiny. (See chart “Sales of Medical Cannabis Under the Danish Pilot Program.”)

During that six-month period, fewer than 350 patients per quarter received one or more prescriptions for cannabis products included in the pilot scheme.

Doctors wrote an average of 250 prescriptions per month for medical cannabis during the same time frame. That’s far fewer than were written in mid-2019, when the pilot program was at its sales peak with about 1,000 patients receiving 1,800 prescriptions per quarter.

The number of patients sharply declined in the second half of 2019 and has not shown any signs of regaining previous levels.

Only four medical cannabis products were available in Denmark as of mid-2020: Three varieties of Bedrocan flower imported from the Netherlands and one form of capsules sold by Aurora Cannabis of Alberta, Canada.

Companies have tried to register more products. But as Marijuana Business Daily recently reported, only eight of 63 applications were approved, and some of those products were removed because they could no longer be legally provided in the country of origin, Canada.

During the first quarter of 2020, 27 packages of Aurora capsules—each containing 100 units—were sold in Denmark, in addition to about 9 kilograms of flower.

The revenue generated from flower sales totaled almost $160,000, while the capsules produced $4,400.

Total cannabis sales during the first quarter of 2020 reached almost $1.4 million, but that was largely outside the pilot program. Most of that revenue was generated through sales of customized, or magistral, preparations using pure THC or CBD—and, to a lesser extent, finished pharmaceutical medicines such as Sativex.

These represent preparations or finished products that, for the most part, have been available in Denmark since before 2018 and are outside the pilot program.

More than 5,500 patients received a prescription for medical cannabis at least once from January 2018 until March 2020, mostly for  isolated cannabinoids.

About half the prescriptions were written to treat neuropathic pain. Most of the patients have been older than 40, and women represent more than 60% of patients.

Canadian producers exported roughly 89 gallons of medical cannabis oil products to Denmark in 2019.

 


Peru

2019 Population: 32.5 million
2019 GDP: $226.8 billion
2020 Projected GDP (% Change): –4.5%
Sources: World Bank and International Monetary Fund

While most South American countries have legalized medical cannabis in some form, no nation has developed a viable internal market. Except for Brazil—and, to a lesser extent, Colombia—domestic sales of medical cannabis in the region were insignificant as of mid-2020.

But a positive scenario is evolving that could make Peru the next Latin American nation to offer entrepreneurs real revenue opportunities.

As of late July, the Peruvian health authority’s public database showed 24 applications seeking approval for cannabis products. As of July 26:

  • Four were withdrawn by the applicants.
  • Three product registrations were approved in recent months as a “cannabis-derived natural health product,” a category created by Peruvian regulators. The first to be approved belongs to Canopy Growth in Canada. The other two, registered by Peruvian CannFarma, are for products to be exported from Uruguay by Toronto-based Ramm Pharma. They contain CBD as the active ingredient.
  • The remaining 17 product registrations, submitted by six companies, were pending approval.

Any product approvals would be in addition to Sativex, manufactured by GW Pharmaceuticals in the United Kingdom and approved as a cannabis-derived pharmaceutical, although it has not yet been commercialized, according to local sources.

Moreover, Peru allows magistral preparations that are customized to meet individual patients’ needs. The pharmacist is expected to prepare the prescription for each patient and is free to choose the supplier of the necessary ingredients.

As of July 2020, the only company to announce it had the necessary permits to start selling approved cannabis products was Toronto-based Khiron Life Sciences, a company with its main operations in Colombia.

Khiron made an agreement with Peruvian Farmacia Universal for distribution, but as of mid-July, no patients had access to the products.

Rather, the only cannabis product available to patients in Peru was a CBD medicine sold in just one pharmacy. That product was bought by the country’s health authority through two different supply tenders from Anden Naturals, an Oregon-based supplier. The 10-mililliter bottles with 5% CBD sell at retail for about $14.

Peruvian patients also have the option to import nonregistered products on a per-case basis. This option of exceptional authorizations is often called “compassionate use.”

So far, Peru has depended entirely on imports, but its legislation allows for domestic production. Many expect that the country’s regulators will begin licensing production activities in the second half of 2020.

 


 Uruguay

2019 Population: 3.5 million
2019 GDP: $56 billion
2020 Projected GDP (% Change): –3.0%
Sources: World Bank and International Monetary Fund

Uruguay fully legalized cannabis at the end of 2013, but the first meaningful exports didn’t occur until the end of 2019. They ramped up in 2020.

In August, the government approved rules to promote additional overseas cannabis sales, allowing companies to export plant material that is not registered as medicine in Uruguay. This comes after Uruguay’s medical cannabis export business was dormant for several years—until last year.

Marijuana Business Daily reported that in late 2019, Uruguay-based Fotmer Life Sciences shipped 1,000 kilograms of high-THC cannabis flower to Portugal. It was probably the largest single shipment of psychoactive cannabis flower to date. But in 2020, Fotmer made a second, even larger shipment of almost 1,500 kilograms, also to Portugal.

Fotmer also shipped roughly 500 kilograms to Israel, for a total of about 3,000 kilograms exported as of mid-2020.

No other company has exported high-THC cannabis from Uruguay as of July 2020.

The two huge shipments to Portugal, meanwhile, are unusual for their secretive nature—at least from the importer’s standpoint. So far, no company has publicly taken responsibility for the flower.

Infarmed, the Portuguese regulatory agency responsible for approving imports and exports of narcotics, also would not identify the buyer: “The specific information sought is not public, falling within the scope of the activities of the licensed companies,” the agency told MJBizDaily.

Portugal has a regulatory framework that allows domestic sales of medical cannabis. But no Portuguese company has been able to get the necessary approval to begin selling to domestic patients. For that reason, it seems even more unusual that the high-THC flower was shipped to the European nation late last year—unless it was used for research or the shipments were destined for another country.

The declared customs value of the latest Fotmer shipment to Portugal was about $2 per gram, lower than the first shipment, which registered a value of $3.20 per gram.

Uruguay also began exporting hemp flower recently, with two companies shipping a total of 2,834 kilograms for an average price declared in customs of 16 cents per gram to Switzerland as of Aug. 5.

Flower has slightly more than 10% CBD and in Switzerland is typically used as a tobacco substitute, not as medical cannabis.

 


New Zealand

2019 Population: 4.9 million
2019 GDP: $206.9 billion
2020 Projected GDP (% Change): –7.2%
Sources: World Bank and International Monetary Fund

New Zealand could become the third country in the world—after Uruguay and Canada—to legalize adult-use marijuana production and sales.

The “Cannabis Legalization and Control Bill” is set for a Sept. 19 vote in a nationwide referendum that coincides with the nation’s general election.

The proposed legislation would:

  • Reserve market share for micro-cultivators.
  • Prioritize indigenous-run businesses.
  • Allow consumption lounges.

However, the measure would also ask the Cannabis Regulatory Authority to establish a yearly cap on the amount of marijuana available for sale in the licensed market. It also would set potency limits through controls on the amount of THC permitted in cannabis products.

If the referendum wins approval from voters, the incoming government would be able to introduce legislation to Parliament. That means the outcome of the general election could be as important as the cannabis referendum itself.

The bill states that its purpose is to “authorize, regulate and control the cultivation, processing, use and sale of cannabis in New Zealand, with the intent of reducing harms from cannabis use.”

The bill proposes to tightly regulate all aspects of the cannabis supply chain, from seed and growing to retail sales.

It would effectively ban vertical integration by limiting to one the type of license a person may hold, meaning businesses allowed to grow cannabis could not operate a retail outlet or consumption lounge.

When setting the annual limit, the cannabis authority would determine the share of the cap to be awarded among holders of cultivation licenses, including micro-cultivation license holders.

The bill also contains a provision to limit the market share one company could control: The authority would not be allowed to authorize a license holder to supply or sell more than 20% of the annual cultivation cap allocated.

 

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