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2020 was a challenging year for the global economy and countries are looking to find new taxable revenue streams to bounce back from the COVID pandemic.
During the early months of the pandemic, the European Union (EU) was considered to be a hot spot for the pandemic and countries adopted lockdown measures to slow down the spreading of the virus.
We expect the cannabis industry to continue to be a beneficiary of the COVID pandemic and believe that additional countries in the EU will pass cannabis legislation in an effort to bring in additional taxable revenue.
The last few years have been significant for the cannabis industry in the EU and this is a trend that we expect to continue. We believe the EU cannabis industry is barely in the first inning of a major growth cycle and are of the opinion that the COVID pandemic will serve as a catalyst for growth for the entire market.
Today, we have highlighted 3 EU cannabis markets that are expected to report strong growth in 2021, as well as some of the companies that are levered to these opportunities. We believe these markets are strategic in nature as they provide businesses with a launch pad into additional markets in the EU.
Is 2021 the Year for Recreational Cannabis in Germany?
Germany is the largest cannabis market is the EU and we are favorable on the long-term growth prospects that are associated with it. Although we have been bullish on the German cannabis opportunity, the market has been slow to advance and this negatively impacted the Canadian Licensed Producers (LPs) that were early movers on it.
From Canopy Growth Corporation (WEED.TO) (CGC) to Aurora Cannabis Inc. (ACB.TO) (ACB), several of the largest Canadian LPs were early movers on the German cannabis market. For operators of this size, the slow advancement of the market was not as significant. For smaller operators, most of their respective resources were invested in Germany and the lack of advancement served as a huge headwind for growth.
This year, we expect to see companies report increasing revenue from the German medical cannabis market. The biggest potential catalyst for the German cannabis market would be the passing of recreational cannabis legislation. We believe the COVID pandemic has made legal recreational cannabis in German more of a possibility and will continue to closely monitor this emerging market.
United Kingdom’s Cannabis Market is Just Getting Started
The United Kingdom (UK) is an emerging cannabis market and was home base for GW Pharmaceuticals plc (GWPH) for more than a decade. While GW is a biotech company that is focused on developing and commercializing cannabis-based treatments, the UK cannabis industry has evolved over the last few years.
The Medical Cannabis Clinics (TMCC) is considered to be an emerging leader in the UK’s cannabis industry. The company is led by 25 doctors that specialize in prescribing medical cannabis to patients
TMCC recently announced a major milestone and reported to be prescribing medical cannabis for more than 1,500 patients. These patients are having their orders fulfilled by Dispensary Green, which is owned by LYPHE Group and we find this to be significant.
According to a press release, there are approx. 2,500 cannabis patients in the UK (in 2020). Based on this statistic TMCC has a 60% market share of the UK’s cannabis market and this is a metric that we find to be significant. With approx. 40% of patients coming from London, the city has turned into a hotspot for the cannabis industry and we will monitor how it evolves this year.
According to New Frontier Data, the two biggest CBD markets in the EU are Germany and the United Kingdom (UK). These two markets account for approx. $2.17 billion (USD) and $2.03 billion (USD), respectively, in annual spending for 2020. We will monitor how these number translate over to tetrahydrocannabinol (THC) over the long term.
Poland: A Market to be Aware of
Poland is an emerging cannabis market in the EU and is one of the continents largest CBD market. A few months ago, Hemp Industry Daily published data on the Polish CBD market and we were impressed with how the industry has advanced in such a short period of time.
When compared to 2019, Polish farmers have almost doubled the amount of acreage that is being used to cultivate hemp so far this year. During the last year, Poland developed a reputation as a primary hub in the EU for processing CBD. The reputation was formed due to the growth of small extraction operations and this is a market that we are bullish on.
According to official data, Polish hemp farmers cultivated at least 7,480 acres in 2019 which represents an increase of 79% when compared to 2018. The figure is based on the area that was declared by farmers who received an EU subsidy.
We believe that the Polish CBD industry is expected to continue to record strong growth. The size of the market has steadily increased since 2015 (based on the number of hectares of hemp that is being cultivated) and this is trend that caught our attention. Like the UK, we are interested in seeing how the CBD market translates over to the THC market over the long-term.
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