State of Play: Recreational Cannabis in Europe
Understanding recreational cannabis reform in Europe – where it is and where it’s going.
Whisper it, but it looks like the tide is starting to turn on Europe’s prohibitionist cannabis policies. With a steady stream of positive announcements since 2020, the odds of meaningful new legislation on recreational cannabis in the first half of this decade look increasingly strong.
At the point of writing, Europe now stands on the cusp of wider recreational access. A cultivation experiment in The Netherlands, a consumer pilot in Switzerland, home-grow in Luxembourg, and now, an inbound German government set to legalise access forms the foundations of one of the most anticipated cannabis markets on the planet.
In Part One of a new Hanway series on recreational cannabis, we analyse the themes and cultural specificities that will shape how European adult-use markets develop. In Part Two, we’ll dig into details and updates for specific countries as developments unfold.
Don’t expect change overnight
Policy time. In a sector like cannabis, business likes to move much faster than politics and policymaking is able to. Timelines are long, and the process complicated - especially when grappling with complex and controversial regulatory, economic, health and policing issues. Expect to count the legalisation timeframe in years, not months - especially if political leadership to see the process through is lacking.
Experimentation. ‘Pilot’ programmes that push the hard call on cannabis further down the road can extend reform timelines further still, and given the relatively small population that pilots serve, can cause added investment and operational challenges.
Implementation. Canada’s Liberal party made Cannabis legalization a key plank of its 2015 manifesto, winning the October election with a healthy majority. The Cannabis Act was introduced to parliament in April 2017, passed in June 2018, with legal sales commencing on 17th Oct 2018 - although sales of ‘Cannabis 2.0’ products such as edibles, vapes and concentrates were delayed for a further year. Legalisation was therefore more than three years in the making, even with medical cannabis legal in Canada since 2001, and dozens of commercial licenced producers (LPs) already operating under the medical program before adult-use legislation was submitted.
Teething problems. Expect these. Slow rollouts, licencing over-and-undersupply, botched government tenders, overwhelmed agencies and overly-punitive tax burdens have all been seen before in developing cannabis markets. It’s inevitable that European recreational markets will have their fair share of hiccups. The good news is that none of this is insurmountable, and there’s a growing handbook of mistakes to avoid and best practice to follow.
Headstart. Despite the long timeframe, now is the time to start planning. Companies should look to start building the relationships, ecosystem and infrastructure for recreational reform now, combining preparatory planning with a longer-term outlook.
Today’s regulations are a hurdle for tomorrow’s markets
Legacy. Creating a legal cannabis market against a broad backdrop of illegality is challenging. Winners of the Dutch coffee shop experiment tender have been slow to secure investment and progress their operations, thanks to demanding background checks and ownership requirements.
Realism. Overexcitement for a legal opportunity in what is still a very small addressable market (coffeeshops serving 10% of the Dutch population) has led to high valuation expectations, further complicating investment discussions. Canadian LPs already operating within a legal regulatory framework have been well-positioned to offer financial and technical support here.
Treaties. Commercial production of non-medical cannabis also remains prohibited at the international level. While both Uruguay and Canada have been prepared to bite the bullet and contravene UN treaties on this issue, European countries may be more reluctant to do so. Interestingly, Switzerland is framing its adult-use pilot as a series of ‘scientific’ trials - a move to keep the country semantically closer to international compliance, and which may also allow the import of cannabis for use during the scheme.
Neighbours. The cannabis policies of your neighbours can matter, too. Tiny, landlocked Luxembourg has already dialled back its cannabis legalisation ambitions - opting for home-grow rather than a commercial market, thanks to the trafficking risk that cannabis sales presented for bordering countries because of the EU’s passport-free Schengen zone.
A home-grown appetite for home-grow
Non-profit. While the cannabis frameworks adopted across Canada and US States have been predominantly commercial in nature, less market-driven cannabis models - such as decriminalisation, legalisation of home-grow & non-profit social clubs - are likely to see a higher rate of adoption across Europe.
Playing politics. Smaller tweaks to drug laws are cheaper, easier and less politically-charged than the root-and-branch regulatory change required to regulate and licence commercial producers, products, and retail throughout the supply chain. Keeping commerce out of cannabis is also more politically comfortable for many left-leaning parties and voters across Europe - those most likely to endorse reform.
Grey areas. Non-market models can fall short when it comes to issues such as product quality, testing and minimising underage access, however. While decriminalisation and home-grow may provide a springboard for further commercial reform, don’t overestimate institutional capacity for inertia without sufficient political & public pressure for change. Both Spain and the Netherlands have maintained their regulatory models for decades, even in the face of legal ambiguity.
Cannabis conquest from across the pond
First movers. Many ambitious North American cannabis brands are watching European developments closely, and several have already made their move. Aurora and Village Farms have taken stakes in Dutch cultivation opps, Curaleaf has cemented its European supply chain, and Cookies is circling markets touted to go rec with licencing deals in Israel and Portugal.
Track record. American multi-state-operators (MSOs) arguably have a strategic advantage for European entry - as they’re used to right-sizing operations to serve ‘closed loop’ state markets. However, many of the biggest Canadian LPs are highly-capitalised, hungry for expansion and have a greater footprint in Europe through existing medical channels.
Cultural context. Yet as we’ve seen from frothy North American markets – money and ambition don’t always equal success. To do well in Europe, companies will need to understand the cultural and political context of each market - and crucially, what drives and excites consumers at the country and consumer segment level.
The road ahead
Untapped potential. No matter the caveats, European recreational cannabis markets have huge potential - to generate value for brands and producers, yes, but also to minimise the harms of cannabis consumption, to create new jobs and raise tax revenue, to reframe policing priorities - and most importantly - lift the stigma and the threat of criminality from cannabis users and those unjustly profiled by the ‘war on drugs’.
Real consumers. We know that cannabis is already a booming, multi-billion business in Europe. We can see usage rates from drug surveys, attendance at events like Spannabis, and the tourism draw of Amsterdam - but that’s all just scratching the surface of how vibrant and complex cannabis culture is in Europe, and what could be supported, developed and represented through a properly-regulated cannabis market.
Freedom. One of the most exciting elements of cannabis legalisation is being able to see the cultures, conversations and communities that emerge once cannabis use is taken out of a criminalising and prohibitionist framework.
