Will European industry win in cannabis?
Nope unless they up their game
You may not think so, if you were a North American LP & MSO and heard the sentiments of most panelists at the recent Cannabis Europa conference.
Here are some of the notable stumbles. Entrepreneurs and investors take note:
1. Forget Canada? – Few speakers referenced any learnings from the World’s largest and oldest legal federal market. Fact is, there is no better case study right now - especially for Germany - than what a large cannabis market is from a business, industry, healthcare and regulatory perspective. Pay attention.
2. The TAM fantasy – The common feeling was Germany will be the largest cannabis market in the World based on its population of 80M+ people. Accordingly, the panelists forecasted a total addressable market (TAM) from 400 to 1000 tonnes. However, relying on the TAM (whatever the number) is an incorrect let alone reckless way of evaluating market potential.
To wit, the TAM says nothing about critical factors like the speed at which you will get to the hypothetical number (and by when), the level of competition & consumer accessibility or the likely level of industry profitability - all of which tend to shrink the real market size.
3. Important operational considerations were pooh-poohed – Little attention was paid to key issues such as the difficulty of consistently growing quality, compliant flower; the availability of unique and appealing genetics; and the ease of securing market distribution & consumer penetration. The prevailing but misplaced belief was that these things will be handled easily and in due course. Sure.
4. Blind spots with conventional wisdom – Suspect and risky assumptions swirled about. For example: there was the domino effect whereby German legalization quickly spurs the rest of the EU to legalize; that legal, inter-country transit will be quickly figured out (despite restrictive EU rules and UN conventions) and; that sufficient legal product will be available early on at a price and quality that is competitive with the illicit market. The reality is that you cannot take anything for granted.
I am not trying to be the enfant terrible. The up-and-coming European cannabis sector needs to move beyond happy talk and soberly address the risks and imminent hurdles.
For example, many basic regulatory decisions have yet to be made, some of which can radically impact go-to-market and funding strategies. The capital markets are in funk, with no recovery expected before 2023. And finally, the political, public health and economic headwinds are significantly stronger today than in the 2014- 2018 period, when Colorado, California and Canada legalized adult use cannabis.
#Germany #EU #legalization #Canada #strategy #investors #regulations