As the burgeoning cannabis market in Europe begins to expand, one Canadian marijuana firm is aiming to fill in the “supply gap” for Germany.
Through the Ontario-based licensed producer (LP) Quality Green, High Street Cannabis plans to export medical dried cannabis to its German subsidiary ahead of the first cannabis harvests in the country.
In an email, a company spokesperson told the Investing News Network (INN) there is a lack of domestic medical cannabis cultivation in Germany, which will lead to imports continuing to make up the bulk of supply over the next several quarters, making the country a prime location for export opportunities.
Adrian Robinson, CEO of High Street — an affiliate of Quality Green — said the company is in the process of applying for permits to export product to Germany and expects to start shipping its dried flower, tinctures and capsules by the first quarter of 2020.
Robinson said that, domestically, Canada already has a number of established firms and LPs that can help supply demand in the country, which is why High Street considers the German cannabis market to be an attractive space for its operations.
“They have a population of close to 90 million people, they have 24,000 pharmacies, they’re leveraging the pharmacy distribution network to roll out all of the cannabis. (That’s compared to) Canada, where you’re having dispensaries roll out recreational cannabis; they have their pharmacies retailing all the cannabis in Germany,” said Robinson.
After a lengthy application process, three companies were chosen in April to cultivate cannabis domestically in Germany: the German company Demecan and German subsidiaries for Canada’s Aurora Cannabis (NYSE:ACB,TSX:ACB) and Aphria (NYSE:APHA,TSX:APHA).
A report from Marijuana Business Daily indicated after the winners were announced that they were given a maximum of 18 months to deliver the first harvest of product. This time period is when High Street believes Germany will be in need of imported marijuana product.
Quality Green has plans to make a public debut later this year. The company has enlisted the services of Canaccord Genuity Group (TSX:CF,OTC Pink:CCORF) for its reverse takeover transaction and, with approval, shares will be traded on the TSX Venture Exchange.
Though High Street is currently an affiliate of Quality Green, once the public listing is finalized, High Street will become the issuer and Quality Green will act as a subsidiary.
German cannabis market could reach 7.7 billion euros
Medical cannabis was first legalized to treat conditions such as multiple sclerosis and chronic pain in Germany in 2017, and since then the country’s medical marijuana sector has become the biggest outside of North America.
According to cannabis industry research firm Prohibition Partners, Germany’s medical cannabis market could grow to 7.7 billion euros by 2028, and by 2024 the country could have over 1 million patients with access to the drug.
Robinson is also interested in Germany due to the strength of its insurance coverage, which can offset up to 90 percent of the cost of a product, further incentivizing patients to seek medical cannabis as a treatment option.
In 2018, health insurers covered 73.7 million euros worth of medical marijuana products, according to data from German health insurance agency GKV-Spitzenverband.
The broad coverage for cannabis also allows for higher margins — current medical marijuana prices in German pharmacies range between 16 and 26 euros per gram of dried flower, according to Quality Green’s spokesperson.
During the first half of 2019, Germany imported almost 2,500 kilograms of medical cannabis flower.
The Canadian producer said it is focused on serving other countries in the European Union besides Germany in the long run.
High Street plans to use Denmark as a “trampoline” into the larger European market by using distribution channels to ship product across the continent and by working within the country’s pharmacy network. According to the firm, these plans are still in the early stages.
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Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.