Article: International: Is Germany Already Facing Oversupply Issues Similar to Canada and U.S.?

Whitney Economics recently presented an analysis of the supply and demand of cannabis in Germany. The amount of supply in Germany relative to the level of legal participation is significant and, if not controlled, could quickly result in oversupply and a rapid decline in prices.

It has been a little over a year since Germany opened up the country’s market to allow for individual possession, home grows and cultivation associations. The cultivation associations seemed to be a compromise from full-on adult-use legalization. Germany in essence was dipping their toe into the adult-use waters. The associations are limited in many ways, including not allowing full time employees, limiting membership to 500 members per entity, capping the supply for each member to 50 grams per month. So far there are roughly 200 associations that have been approved. This represents a supply capacity of 300 kilos per entity or 60,000 kilos of supply capacity per year. This is a lot just by itself. It represents nearly twice as much supply capacity than all of the imports into Germany in 2023.

Source: Whitney Economics

Speaking of imports, this is where things could get very interesting for Germany in the next year or two. Germany imported over 72,000 kilos of flower in 2024. In fact, in Q4’24 alone, there was about the same amount imported in the quarter than there was imported into Germany in all of 2023. If the trend in imports continues, the amount of supply could overwhelm the demand. It will not take that much to do so. Countries have long coveted the German market as an export destination. Canada, Denmark, Portugal, Isreal and North Macedonia are the top exporters of flower to Germany. More countries are focusing on the German market as South America, Africa and other European countries ramp up production intended for the European (German) market.

A note on German demand. The German market has traditionally had a strong medical program. Supply was dispensed by a pharmacist, and medical patients could choose to self-pay or be reimbursed by insurance companies. Once the market opened up, innovation kicked in, there was a surge of home growers, a slow roll on the cultivation associations, but a significant spike of self-paying consumers utilizing a variety of telemedicine options. These telemedicine companies would legally support medical patients by offering quick turn prescriptions and home delivery. It is very reminiscent of the early days of medical cannabis in the U.S.

There has been a consistent number of between 200k – 300k medical patients. As a result of this new innovation, there is now an additional 500k – 600k self-paying consumers participating in the legal market. When combined with 100k cultivation association members, there is approximately 800k legal consumers in the German market right now. For perspective, 800k consumers represents between 10% and 20% of the total market, while the supply and capacity at the end of 2024 represented nearly 15% of all of the supply that the market needs.

The question then becomes how can Germany get more legal participation, and will supply become saturated in the process? The cultivation associations are not a sustainable model, and there is potential reform being discussed that will make it more difficult to conduct cannabis related telemedicine in Germany. W.E. is forecasting that by limiting access and clamping down on telemedicine providers, growth will slow in the German market. In other words, legal participation may have already peaked without additional reform. If supply trends on the importation continue and the imports double or triple, Germany could be faced with an increase in supply that is greater than the amount that the legal consumers can consume. With modest growth in cultivation associations and a tripling of imports, supply capacity could cover over 60% of the total market (illicit and legal) within the next two to three years. This will result in a decline in prices as well as increased challenges to profitability in the German market. Sound familiar? If you are an investor or operator interested in the German market, be very careful, do your due diligence and track the data closely. We can help.