German start-ups lay the groundwork for marijuana windfall

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FRANKFURT – The first sign that something is different in the ancient, century-old winery located in a sleepy German village on the hillside surrounded by vineyards is the gate to the estate. It is brand new and reinforced with a steel grid. Behind that, a startup has built a multi-million dollar testing and processing facility and is preparing to cash in on Germany’s next big wave: the possible legalization of marijuana.

Germany is traditionally conservative and has always been politically very cautious,” said Finn Hänsel, founder of Sanity Group, the start-up that built the high-tech facility, where a dozen well-paid technicians in white coats use chromatography to test the composition of imported cannabis plants. The company has requested that the exact location of the farm be kept secret for security reasons.

The idea that marijuana could become legal “is still kind of unbelievable to me,” Hänsel said.

Germany’s new government has announced that it will legalize recreational cannabis for adults in its coalition contract presented in October. Although there is no draft law or official timetable for a law yet, experts believe a draft law will be passed within the next two years.

Medical marijuana is legal in Germany, and small amounts of the drug for personal use were decriminalized years ago, but companies like Sanity are scrambling to make sure they’re ready to supply a recreational market.

“The legalization of cannabis is a paradigm shift,” Kirsten Kappert-Gonther, doctor and Green MP, said in an email. “Anyone who would rather consume a hashish cookie instead of a beer after work in the future should be able to make that decision and remain on legal grounds. “

Recreational marijuana is legal in a number of states in the United States and in a few countries, including Canada and Malta.

As the arrival of legal marijuana is anticipated by companies across Germany, Jakob Manthey, a scientist at the Center for Interdisciplinary Addiction Research at the University of Hamburg, warns against rash decisions.

“A huge market is being created here and this could ultimately also be a reason – or an important factor – that will ultimately lead to the voices of scientists being taken into account with less care than the voices of commercial interests.” , he said in a recent interview.

Despite endorsing the legalization of marijuana, Dr Manthey says Germany’s legal market – in Europe’s largest economy – will have a signal effect on the rest of the European Union, where several nations are slowly approaching legalization (the tiny Malta being the first). Lawmakers need to be aware of this greater responsibility, he said.

Mr Hänsel co-founded his cannabis business in 2018 after successfully launching several conventional businesses. He said he sees a great business opportunity in legal cannabis.

Right now, work on the converted farm is focused on the medical and wellness sectors, but it is expected to ramp up as soon as the leisure market comes online. Sanity Group claims to have received to date more than € 65 million, or approximately $ 73 million, in funding from international and domestic investors, including Casa Verde, Snoop Dogg’s investment fund; the musician will.i.am; actress Alyssa Milano; a German football star; as well as more conventional investment funds.

No one knows exactly how much can be done once the weed becomes fully legitimate. But a recent study estimated that legalized cannabis could generate nearly € 5 billion per year in tax revenue and police savings. The study, led by Justus Haucap, an economist at the Düsseldorf Institute for Competition Economics, also estimates that legalization could create 27,000 new jobs. According to Professor Haucap’s research, the legal market could generate a demand of 400 tonnes per year.

Some lawmakers, however, insist that the primary goal of legalization is not the bottom line of the state, but the societal danger of drugs if left unregulated.

“We have to get cannabis out of the dirty corner,” said Andrew Ullmann, doctor and US member of the German parliament.

Dr Ullmann, who is a business-friendly Free Democrat, will likely help shape the law as a member of the health committee. One of the most important aspects is to ensure that marijuana is not sold to people under the age of 18. “Our intention is to eliminate the black market,” he said.

The plan is to sell cannabis through licensed distribution sites, where quality can be assured, sales taxes can be collected, and it can be kept out of the reach of minors. The most likely path, many say, is for pharmacies – which now distribute medical marijuana – to continue selling the drug.

This would solve the problems of having to create and regulate a new commercial distribution system, as has been the case in many US states, or of not having enough government-licensed distributors, as was evident in the deployment in Canada.

For Germany, known for its cumbersome bureaucracy, legalization within two years would be a relatively quick change.

But German start-ups say they will be ready and waiting.

Stefan Langer, who uses medicinal marijuana to treat his ADHD, founded Bavaria Weed. He bought one of the last Cold War bunkers built in Bavaria and installed a production line capable of conditioning 20,000 individual doses per day. Keeping his business above the board, which includes filing with both a medical authority and a substance control authority, each with their own rules, is more than a full-time job, said Mr. Langer.

Neither Sanity nor Bavaria Weed grow their own plants, although some German companies do, so they import the product from distant countries like Portugal or Canada, all of which must be licensed and documented for German authorities.

In a laboratory in the former wine estate dedicated to extraction and production, maintained under positive air pressure and accessible only via a clean room, a team is developing methods to more efficiently extract and better restore THC, cannabinoid responsible for the classic buzz and CBD, the substance believed to help relieve stress. In its current configuration, the processing plant can process 21 tonnes of cannabis per year, according to the company.

Sanity Group also built an 800 square foot controlled substance storage vault on the winemaker’s property. To meet historical preservation laws, the structure had to be clad in timber, but its security cameras and alarm system are linked directly to the local police station, its walls are armored and are nearly a foot thick. , and its heavy metal door would put a bank to shame.

The Germans seem to be coming to the idea of ​​legalizing marijuana. A recent Infratest Dimap survey revealed for the first time more respondents in favor of legalization (49%) than against (46%). In 2014, only 30% said they were in favor of legalization.

Kevin Roth, a biopharmaceutical engineer who has studied cannabis and oversees the construction of the lab on the wine property, said there had been a shift in the stigma surrounding marijuana after it was cleared for medical purposes.

During a recent open house, the laboratory invited neighbors to come and see what was being done in their village. Employees were worried at first, but said they were greeted with far more acceptance than they expected from the rural conservative community.

“It turns out that there are a lot of similarities between wine growers and cannabis professionals,” Mr. Roth said.


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