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Spotlight: Niklas Kouparanis, CEO of Bloomwell Group, on cannabis legalization in Germany
"Legalization will never happen overnight. We all know that, and it's important that it doesn't happen overnight because legalization is a huge step for a country. We saw that, for example, in Canada, where a lot of mistakes were made."
Frankfurt-based Bloomwell Group, one of the largest cannabis companies in Europe, was co-founded in 2020 by brother and sister, Anna-Sophia and Niklas Kouparanis.
A holding company for medical cannabis businesses, Bloomwell is also positioned to work with recreational companies once Germany legalizes the plant, a change that would make the country of more than 83 million the world’s largest cannabis market.
The timeline for legalization remains speculative but Niklas, Bloomwell’s CEO, predicts that full legalization will happen in Germany by the beginning of 2024. In May, German Finance Minister Christian Lindner tweeted that it will happen “soon.”
Regardless of the timeline, cannabis companies are increasingly looking to access the German market. A year after launching, Bloomwell closed a seed funding round of over $10 million and now employs more than 250 people across all channels.
As cannabis reform begins to unfold across Europe — Malta has legalized cannabis, though there are limits; Luxembourg has decriminalized the plant, allowing residents to grow up to four plants at home; and countries like the Netherlands and Switzerland are running commercial cannabis cultivation pilots — social acceptance of cannabis is at an all-time high. A recent report by Hanway, a London-based consultancy agency, found that 55 per cent of Europeans now support legalizing recreational cannabis.
The GrowthOp recently spoke with Kouparanis about the work the company is doing in Germany, the country’s prospects for legalization and the impacts cannabis reform could have across Europe and into Canada.
What does Bloomwell Group do?
Bloomwell is the parent company for various cannabis platforms and cannabis brands. On the one side, we have a pharmaceutical cannabis wholesaler, which does product development and importing and distributes pharmaceutical cannabis to pharmacies in Germany. Then we have Europe’s biggest telemedicine platform for treatment with cannabis, which is called Algea Care. We are treating more than 10,000 patients in Germany right now and have over 80 doctors on the platform. Our third company is an e-commerce platform for the future recreational market but also an online pharmacy that completes the customer journey.
What’s the status of cannabis in Germany currently and what does the path toward legalization look like?
Germany legalized medical cannabis five years ago. Now, five years later, in November, we had an election in Germany, and a new coalition government was formed, which included the Greens, the Free Democratic Party (FDP) and the Social Democratic Party of Germany (SPD). The coalition agreement is written that cannabis will be legalized through licensed shops for adult use in Germany.
Of course, legalization will never happen overnight. We all know that, and it’s important that it doesn’t happen overnight. Because legalization is a huge step for a country. We saw that, for example, in Canada, where a lot of mistakes were made. We see it in the U.S. still today, where there is a fragmented market, but no government legalization. These are mistakes Germany should not make and that’s why it’s good that it will take some time.
International law is also something that we need to consider when it comes to the timeline. Germany is part of The Single Convention on Narcotic Drugs with the UN and that actually prohibits cannabis from being cultivated, distributed and sold as a consumer product in member states. That’s why Germany needs to actually withdraw and step out of the UN Single Convention on Narcotic Drugs first, legalize and then step back in. That’s the only real formal way to do it.
The blueprint for this is Bolivia with the legalization of coca leaves. We also have the examples of Uruguay and Canada, which are basically the only legal domestic markets for cannabis right now globally, which just ignored the convention. That’s not something Germany and Germans, in general, are famous for. I think Germany will follow how Bolivia did it and actually step out and step back in again, with the permission that cannabis is legalized.
For this process, there is a timeline. A country needs to file stepping out of the convention a year ahead of time. For example, if Germany wants to step out in January 2023, Germany needs to file this at the UN in July 2022.
I don’t think that it’s realistic that we will have a law drafted and passed through the two houses in Germany in July this year. So when it comes to legalization, January 2023, is not possible, in my opinion. My bet is that everything will be delayed one year later, and we will have legalization in Germany in Q1 of 2024.
What are some of the mistakes Germany hopes to avoid with legalization?
We have the opportunity to be the benchmark for legalization globally, and how to do it correctly. In the U.S., I think that the fragmented market is a huge challenge. We also have different states within Germany and it is very important that we have a national regulation and that there is no route for different states. For example, Bavaria is always a little bit more conservative than other states in Germany. We have to make sure they cannot take a different route when it comes to cannabis, that this is on a federal level and that it is a national law. That is important so we avoid a fragmented market like the U.S., which also has problems with the banking system.
Banking is not an issue for us in the medical space at all. When we legalize it on a federal level, I don’t think it will be an issue in Germany, but it’s a huge mistake and a huge issue for the industry in the U.S.
When we look at Canada and also Uruguay, and some of the U.S., I think imports are very important. Germany would be the first country that legalizes cannabis and imports it and is not relying on domestic cultivation. Quite frankly, we don’t have domestic cultivation in Germany now, only medical cultivation and very little.
I think mistakes were also made in Canada when it comes to distribution channels. It’s always about supply and demand. In Canada, there was too much bureaucracy and no actual access points for high-quality, attractive pricing. We need to allow eCommerce to also legalize cannabis on a broader scale, not only in the cities but also in the countryside, so we can drain the black market.
How do you think legalization in Germany could affect other European countries and Canadian operators?
Legalizing in Germany is just the beginning. Germany will be the benchmark for other European countries that will follow and we will see a lot of countries in Europe legalizing within the next year. And that’s a pity, actually, for the companies in the U.S. which cannot participate. Of course, they can invest, they can buy subsidiaries and so on, but in terms of shipping over products and exporting products — because they have great products in the U.S. — that will not happen.
When it comes to the supply side, Canada is definitely a country that should allow export not only for medical purposes. Right now, in Germany, we have a lot of products coming in for medical use from Canada. A lot of subsidiaries from Canadian companies are in Germany already. So I think in terms of product, Canada is interesting because of federal legalization and I think exports will be allowed. I think also Germany will allow exports because Germany will be legalized on the federal level. So that could be a nice run rate or a nice supply channel for Canadian companies.
I think what’s even more interesting is that when it comes to publicly listed companies, I think cannabis companies will need to explain in the future why they don’t have a footprint in Germany, the biggest cannabis market in the world. So I think we will see a lot of consolidation in Germany in the next 12 to 16 months. On the medical side, I think that publicly listed cannabis companies will go to Germany, and will look to also have partners or even subsidiaries in Germany because otherwise, they cannot explain their valuations anymore to the market.
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