Federal legalisation of cannabis in Canada has made overnight experts of a handful of commentators from the country. Now, as many feel the latest market pinch, these same experts are looking to bring discussions to Europe. Unfortunately, the EU speaks a much different language.
Apples and Oranges
Analysts have waxed poetic for the past year about the rich bounties of cannabis in Europe.
Couple this with diminishing returns for heavy-weight Canadian firms and the continent appears like fertile soil for budding ideas. There’s just one problem: the European market is forming much slower than North American pundits would like.
‘There’s no point in talking about finance because there is no market yet,’ said Laurène Tran, the Executive Director of ACTIVE Europe, in an interview with Strain Insider. ACTIVE Europe is a pan-European CBD trade association looking to stimulate native discussions around cannabis. The group brings together brands, companies, investors, and regulators from all around the European Union.
Who are we?
"At @ACTIVEurope, we are building a platform to showcase the best experts and entrepreneurs who contribute to build a safe and strong ecosystem" claims @LaureneTran12, our Executive Director 🍀#CannabisRenaissanceEU
— ACTIVE 🇪🇺 (@ACTIVEurope) December 12, 2019
The idea, according to Tran, is to improve the quality of cannabis discourse. ‘Instead of fancy conferences and investments, we should be spending money on advocacy,’ she said. Even if these high-level discussions don’t necessarily equate to profits, being a good advocate for your industry is still very good business. This doesn’t appear to be the go-to strategy for some Canadian firms, however.
Some reports have indicated that they often fumble critical conversations with legislators, or haphazardly deploy capital before understanding the nuances of a country. The problem is as much cultural as it is strategic too.
These critics often forget that bureaucratically, most European countries tend to move slower than their North American counterparts. In the United States, for instance, the cannabis trend appears unstoppable as state after state acquiesces to legalisation. This type of momentum, albeit already palpable in the EU, is difficult to comprehend on the continent.
In Europe, there are a few legislative frontrunners, specifically Germany and Holland, who have laid out prosperous frameworks for portions of the cannabis sector. France also has a medical pilot in the works that will offer the region even more data on how best to regulate what is still considered a taboo substance. Other member countries are following these developments and reacting accordingly.
Luxembourg officials announced full legalisation of cannabis by 2021. If successful, one could expect similar initiatives in neighboring countries.
Still, the hype surrounding an anticipated windfall far outpaces these legislative experiments. Tran explained that the sector is still missing the critical ‘regulatory nerds’ to help make sense of the cannabis craze.
‘The cannabis movement needs lawyers to help make clear how the market should be regulated and confirm their position. Unfortunately, most large law firms are adding their commentary so as to lead all the [mergers & acquisitions].’
For many, it is unclear that within the world of cannabis, multiple conversations still need to happen before the real profiteering can begin. These discussions revolve specifically around the differences between CBD, medical cannabis, and recreational cannabis.
Pick Your Poison
The largest obstacle facing cannabis in countries trying to regulate all of its distinct features is negative popular opinion. Although this is changing on a daily basis, it remains a barrier to more nuanced conversations. Consider the two most relevant cannabis subsections in Europe: CBD and medical cannabis.
The CBD market in Europe is booming, albeit fraught with irregularities. The notorious novel foods regulation has yet to claim its first victim, but that’s mostly because there are too many shoddy products on the market. Authorities simply can’t keep up with all of them. The landscape will likely remain this way until the EU approves the first applications.
It is in this arena that ACTIVE Europe is participating the most too. Laurène Tran explained that before forming the association she had been introduced to the idea of CBD in 2017 via Antonin Cohen, now the CEO of Harmony CBD.
The two met while participating in The Family, an incubator for startups and entrepreneurs. At that time, partners of the organisation found it difficult to work with Harmony due to the taboo around cannabis. Skip ahead to 2019, and Harmony is one of the top CBD brands in Europe.
This has been no small feat, however.
‘[Five] years ago, nobody [knew] about CBD,’ said Cohen in a report from ACTIVE Europe. ‘We had to do a lot of education [for] users and to authorities to explain the potential of CBD as an ingredient.’
In this, one also gleans the first step in the long journey of starting a business in a sector with poor public support.
Education and advocacy are key elements that have helped propel cannabis from niche counterculture to mainstream financial news. For some reason, this step-by-step process has been forgotten in current times. Europe is likely halfway through this process and is currently being pulled in two different directions.
On the one hand, there are more and more champagne-glass conferences with investors, law firms, and venture capitalists springing up every day. They are a critical demographic for any industry, but their timing may be too early. Such an early arrival means that the tone of cannabis discourse is primarily finance-oriented. This makes advocacy much more challenging too.
It should not be forgotten, especially considering the hype around cannabis, that patients in much of Europe are still going to prison for treating themselves with cannabis.
But this strategy can work for CBD firms, according to Tran. The swath of CBD products that vendors are presenting is closer to consumer goods than medicine. People don’t need CBD, but they might use it from time to time if they heard it can soothe sore muscles, for instance. This is the primary distinction between how people should be thinking of CBD and medicinal cannabis.
Tran said that many entrepreneurs are ‘blurring these lines’ and stating that their CBD-products are like ‘foods with effects.’ These effects may exist but without clear regulations, the quality between products will be highly-variant. In a separate interview with cannabis legal expert Kathleen Denoodt, she told Strain Insider:
‘Unfortunately what we have on the market is a bit of everything, some high quality, some pure scams and some outright dangerous.’
That’s why taking the time to create a strong, reliable product and, of course, earn a stamp of regulatory approval will come with a major bounty. Larger firms in the wellness space have yet to move in either. The high-level of risk associated with a gray market-product is far too high for, say, a Johnson & Johnson’s to enter. For Tran and ACTIVE Europe, this small hypothetical CBD company has a few distinct characteristics.
“The best chance for a small CBD firm to have success is the one that is already doing food supplements,’ said Tran. ‘They might have a background in science and extraction, but they have a very strong base and are not in a hurry. Slow and steady business practice is ideal.’
In the medical cannabis space, however, there are no ‘investments of a lifetime,’ said Tran. ‘It’s for patients, it’s serious medicine for people who really need it. It should be boring.’ The opportunities in this branch of cannabis come with a different language and are populated by a much different crowd. It involves medical professionals and individuals forming health policies.
Ultimately, trying to sell something to a desperate patient or policymakers is akin to everything the world hates about the American healthcare system. Such a dynamic should be nipped in the bud immediately.
Put this all together and what emerges is the fact that the European cannabis space is still missing clear information. Regulators are being pitched CBD before they understand that it isn’t hallucinogenic. Entrepreneurs have little idea about where the solvable, legal problems exist in the value chain. And, especially in Europe, every country is approaching cannabis laws much differently.
Tack on a multi-billion Euro jackpot and the entire operation, like rocket fuel in a lawnmower, is absolute chaos. For Tran and others, however, this isn’t a problem. ‘If you can thrive in chaos,’ she said, ‘you can thrive in cannabis.’