Adult cannabis in Europe: the final countdown begins

By Barbara Pastori, Director Strategy & Data – Prohibition Partners

In this insightful article, international cannabis expert Barbara Pastori examines the potential impact of legalizing adult use in Europe.

The legalization of adult cannabis use is picking up speed in America. On Wednesday, July 14th, Senate Majority Leader Chuck Schumer released a bill that would make cannabis federally legal in the United States. Earlier this year, New York joined the ever-growing collection of US states where adult cannabis is already completely legal. Last June, the Mexican Supreme Court ruled that the government should legalize recreational cannabis use, bringing the country one step closer to the world’s largest legal adult cannabis market.

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And Europe? It’s still lagging behind. There is currently no country in the EU that allows the legal production, marketing and consumption of cannabis for adults. But things are just beginning to move on the old continent as well.

There are some governments that are taking the first tentative steps towards legislation that will allow adult cannabis use (at least on an experimental basis). In June, two political parties in Portugal – Left Bloc and Liberal Initiative – each presented proposals to legalize adult cannabis. As a result of the debate, it was agreed that both bills would be sent to the Health Committee for a period of 60 days, where public hearings, amendments and negotiations could take place before the decisive vote in Parliament.

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Luxembourg, Switzerland and the Netherlands have all put in place to get the legalization process rolling. In Switzerland and the Netherlands, new laws allow the initiation of pilot projects in which cannabis can be legally manufactured, imported and distributed to registered users. It is likely that these pilots of products on the shelves will be underway within 1-2 years. This will make the two countries the first to enable a de facto fully legal supply chain for adult cannabis.

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If the legalization process continues as expected, Portugal – along with other European countries such as Spain, the Netherlands, Luxembourg, Germany, Switzerland and Malta – could be on the way to introducing legal access to adult cannabis in the next few years.

What are the effects of legalization?

The potential impact of cannabis legalization in Europe is far-reaching and significant. From an economic, social, political, and medical perspective, the opportunities created by legalization could be transformative. Let’s look at some now.

A commercial boom

First, let’s examine the potential commercial impact of cannabis legalization in Europe. Simply put, the potential adult cannabis market is huge. One in ten Europeans smokes cannabis every year, while a quarter of people admit to having used cannabis at least once in their life. Annual sales of illegally marketed cannabis are estimated at around 11 billion euros.

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It is likely that many countries will focus on developing infrastructure for domestic adult cannabis production. This is the course Switzerland and the Netherlands are taking to allow closer monitoring of all stages of the supply chain and to maximize the level of tax revenue.

While fragmented legislation could prevent the market from quickly realizing its full potential, the gradual legalization of adult cannabis will mark a major turning point for the industry and create opportunities. As highlighted in the European Cannabis Report: 6th Edition, we expect adult cannabis sales to reach 200 million euros by 2023 and close to 800 million euros in 2025.

To put these numbers in context; When cannabis was legalized in Canada, the illegal market for cannabis was 800 million euros. It took only two years for the legal adult cannabis industry to take half of its market share away.

Product differentiation will be a natural result, as we’ve seen in the US and Canada. There are a number of ways cannabis can be used for recreational purposes, many of which are currently impossible due to a ban.

This diversification could lead to a wider spike in cannabis use – after all, many people are put off by the illegality of the business and the lack of alternatives to smoking flowers. The quest to meet the diverse needs of consumers will affect a wide variety of sectors. Consumer goods, food and healthcare are most likely to play a role. Profitable investment opportunities will be available to essentially create a functioning value chain from scratch.

A wide variety of medical uses

Legalizing cannabis across Europe will not only create a new market, it will also have a significant impact on the medical side of the industry. Indeed, the relationship between these two segments has always been controversial.

In the United States, medicinal cannabis has been used on occasion as the basis for broader arguments about legalizing adult cannabis. We all know the photos of doctor’s offices in areas like Venice Beach offering quick cannabis prescriptions for a few dollars. This practice has helped normalize cannabis use while damaging the image of cannabis as a medicinal product.

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The situation is very different in Europe, where medical cannabis and cannabis for adults have remained largely separate topics. Cannabis is legal for medicinal purposes in many countries, while recreational use still carries a stigma and is largely left to the illicit market.

However, the legalization of adult cannabis is expected to have an impact on the medical cannabis market in Europe. One likely effect is the increasing medicalization of these cannabis markets. Patients and doctors will increasingly move away from the bloom – which is still prevalent in Europe – and towards products such as extracts, edibles and the more sophisticated pharmaceutical products that align medicinal cannabis with more traditional medical practice.

This is a natural process, but also one that will be necessary for the further development of the pharmaceutical cannabis industry. As more and more patients can meet their consumption needs elsewhere, medical cannabis must differentiate its offerings. A similar trend can already be seen in a more mature market like Canada, where the opening of adult cannabis stores has seen the total number of registered patients on a downward trend.

Socially and politically transformative

Finally, legalizing cannabis for recreational use will almost certainly bring further normalization and social acceptance of cannabis across Europe and spark the flames of a market that is set to grow exponentially over the next few years (we expect it to will be worth more) more than 3 billion euros by 2025). As with everything, the social stigmas associated with cannabis are largely due to its illegality and are gradually being removed as countries legalize it.

It is also entirely possible that countries will begin to see the political and legal benefits of legalization and encourage other governments to follow suit. Countries that embark on the legalization path are likely to experience the immense benefits of direct revenue from taxes and a significant reduction in pressure on the judicial system. Colorado, a state with an economy the size of Norway, sold $ 1.6 billion in cannabis in 2020 and is an industry that is helping create thousands of jobs and revitalizing many communities.

Legalization is unlikely to completely change the market in one clean swing. It is much more likely that countries will gradually adopt a hybrid solution or gradually implement new laws. However, this is a story we’ve seen over and over again. When we reach a legislative tipping point, change will happen quickly.

We may not see a European country legalizing recreational cannabis this calendar year, but the process is ongoing and it’s hard to predict how fast things will move if they do. For anyone hoping to ride this wave, now may be a good time to start preparing.

Photo by Kyle Glenn via Unsplash

Barbara is a leading expert in the international cannabis industry. She has done extensive work in emerging cannabis markets such as Europe, Latin America and Africa. Barbara leads Research & Consulting at Prohibition Partners, the premier source of market intelligence, data and strategies on the global cannabis industry.

Barbara has extensive experience leading and executing strategic consulting projects in a variety of highly regulated sectors, from oil & gas to transportation to FMCG. Before joining Prohibition Partners, she held various positions at General Electric, Wood Mackenzie and the KLB Group. Barbara holds a degree in Political Science and International Relations from LUISS University and an MSc in Petroleum and Energy Economics and Finance from the University of Aberdeen.

To get in touch with Barbara, you can email her directly: barbara@prohibitionpartners.com

This article originally appeared on Benzinga and was republished with permission.