Cannabis: German growers celebrate as hemp is legalized
March 22, 2024
Dirk Rehahn has every reason to pop the champagne corks: Traffic to his two websites has increased massively since February 23.
That was the day the German parliament passed the government's draft law "on the controlled distribution of cannabis to adults for consumption purposes." It stipulates that all adults will be allowed to grow three cannabis plants at home and keep up to 50 grams (1.75 ounces) of cannabis there, and may also carry up to 25 grams on their person.
On Friday, the legislation — a prominent reform project of Chancellor Olaf Scholz's government — was approved by parliament's upper house, the Bundesrat, which represents Germany's 16 federal states. The Bundesrat could have delayed the bill, but opponents of the plan failed to muster a majority.
Now, as the law has finally passed, Rebhan will be one of the winners. He sells all kinds of goods related to cannabis cultivation. They could be described as greenhouse technology and gardening supplies. His best seller is a DIY "grow set": a tent the size of a refrigerator, with lamps, ventilation systems and measuring technology.
The cheapest costs more than €500 ($541), the most expensive almost €1,500. Right now, though, they are all sold out. "People are overcoming their reservations about growing their own cannabis," Rehahn told DW.
Cannabis cultivation market is booming
Rehahn has, in the past, spent two years in jail for assisting the cultivation of cannabis. It was after this, in 2011, that he started his wholesale business. Since then, when advising customers, he speaks of growing chilies, tomatoes, and broccoli.
He's looking forward to being "allowed to give advice perfectly normally." Rehahn has four permanent employees at his two stores, Drehandel and Dirks Growshop, which together had a turnover of two million euros last year. He anticipates that this year it will increase to three or four million.
Morale is also very good among other suppliers in the so-called growing industry. Seeds 24, an Austrian company that sells hemp seeds, the Hamburg-based supplier Growmark, and others are warning that there are long waits for delivery. The online shop Grow Guru comments: "All our shops and suppliers are currently overwhelmed with customers."
No big business with recreational cannabis
But not everyone in the industry has reason to celebrate. Those who were betting on comprehensive legalization have come away empty-handed. There will be no specialist shops selling cannabis. Importers, distributors, and shop owners will all have to seek new business models.
The law says that recreational cannabis will either be cultivated by users at home or consumed in so-called "non-commercial cultivation associations," also known as "cannabis social clubs."
"Our business model was never predicated on legislation, fortunately," says Philip Schetter, the CEO of Cantourage, a company that specializes in importing and processing cannabis for medicinal use, and also runs a specialist cannabis clinic in London. Based in Berlin, the company says it has 50 employees in Germany and 25 in Britain.
Cantourage was floated on the stock market at the end of 2022. Since then, its share price has more than halved. As for many others in the industry, Cantourage's problem is that there hasn't been a really big breakthrough.
"Unlike other companies in our field, though, we're showing strong growth, and at least we're not losing money," Schetter told DW. He said that in the first nine months of 2023 the company had a turnover of €17 million.
Schetter noted that because Cantourage doesn't have expensive production facilities of its own, the running costs are manageable. "We're prepared for whatever comes," he added confidently. The greatest potential, in his view, is in cannabis reclassification.
Medical cannabis: From poor relation to profit driver
The change in the law will also mean that cannabis for medicinal use is no longer classified as a narcotic. This will make it much easier to prescribe. "Companies already in the medical cannabis business will benefit disproportionately," says Finn Hänsel, founder and CEO of the Sanity Group.
His company has already turned its back on some areas of activity and laid off employees because the process of legislation is taking so long. However, Hänsel remains committed to the medical market. "We had hoped for more overall, but there's still a lot of potential in the pharmaceutical market," Hänsel told DW.
There are currently just under 200,000 cannabis patients in Germany, and this market could grow further. The industry has a total turnover of €200 million across a number of companies.
Taking a long-term approach
But there is still a small window of opportunity for the companies to do business with recreational cannabis. In the medium term, the state is planning to allow "commercial supply chains" in selected towns and districts.
If these pilot projects go ahead, in Berlin, Cologne and other places, they could bring in additional millions via the cash registers of specialist shops. Details of these pilot projects will be revealed in the summer. People who want to stay in the market need to have patience and a long-term approach.
Not, however, in the case of online retailer Dirk Rehahn. As was the case during the gold rush, it's the one who sells the sieves and spades who has the best chance of making good money.
Rehahn doesn't want to tie himself down too firmly, though. The cannabis industry is very dynamic, he says. Other business models may be more successful in the medium term. "Almost all the small, pioneering health food shops in the town centers have been displaced by big chains. The same thing could happen to us."
This article was originally written in German and published on March 3, 2024. It has been updated for latest developments on March 22, 2024.