Challenges for US Companies Entering the EU

by Michael Sassano

It is very clear to most cannabis industry analysts that the United States is the undisputed heavyweight in terms of cannabis, ringing in around $13 billion in annual sales pre-federal legalization. The opportunities are very strong in almost every individual state market, however, there is still a whole global cannabis industry developing – from South America to Europe.

I can’t speak to South America, but if you are a U.S. company and want to get in on the ground floor of the cannabis market in the European Union, your best strategy is to go build a facility on the continent. Keep in mind, there is a long road ahead before we see any sort of American legislation regarding exporting cannabis. We haven’t even gotten to legalizing it federally yet. So, if you cannot sell to them, join them.

In 2019, that’s exactly what I did when I joined the Board of Directors — and subsequently, become the CEO — of Somai Pharmaceuticals, an Ireland-based company focused on the cultivation, extraction, and distribution of cannabinoid-containing pharmaceutical products throughout the European Union. Before this position, I built one of the largest cultivation companies in the U.S. State of Nevada, called Solaris Farms. I still have a hand in Solaris, but could see that waiting around to export the cannabis I was growing in Las Vegas was a waste of time. With Somai, I am trying to leverage the experience I’ve gained in the American West Coast market – which I consider to be the best in the world in terms of cannabis growing and product development.  

Following, I identify, based on my own experience, some of the major challenges that face an American with intentions of setting up shop in the burgeoning EU market. My hope is that, in outlining this information, I can help serve as a source of advice for entrepreneurs considering their own entry.

Learn the Structure 

As things stand, the EU has a similar structure to the US Federal versus State rules. Individual countries are making their own rules on how cannabis can be administered. Germany has a 250M dollar medical marijuana program with strict import restrictions on consistency as well as being EU-GMP certification. Denmark has started its own recreational program with local growers. Italy does its sales through the government. And Portugal has some of the stronger pro-export rules of the EU and a potential recreational program

Most importantly, Europe is following the traditional pharmaceutical market. On the EU level, like the U.S. Federal rules, adoption of an over-reaching program is slow-going and to some extent being controlled by the WHO of the UN; the WHO recently just recommended that CBD be treated as a pharmaceutical product. Clearly, a U.S. manufacturer would have an uphill battle trying to bring a regulated narcotic from a source where federal law prohibits such action.

Pay Attention to Good Manufacturing Processes  

Europe is very serious when it comes to enforcing strict EU-GMP processes and designs for its consumers. Currently, there are no GMP-certified THC-rich cannabis farms or processors in the U.S. State rules follow more of an agricultural and food processing standard but due to no federal oversight, there are no strict requirements like the EU in the manufacturing processes. Even if a US company wanted to get GMP-certified like many of the new CBD hemp-based facilities, it would be costly and possibly not achievable without serious operational and structural redesigns that would far outweigh the benefits of trying to export to the EU if it were even possible.

Transporation is Tricky

The transportation inter-state is hard enough for the legal cannabis industry, but the transportation of a regulated narcotic across borders is both expensive and requires special approvals by regulators. Even if transportation could be worked out, which currently cannot due to illegality, the EU would then have to accept the product which is currently prohibited under UN resolution. And then distributing inside the EU would require a licensed distributor who could receive the product. A logistics and approval ladened process that currently is unknown to the US producer.

Canada has been dreaming of selling to Europe for years and is a perfect case study of how hard and costly the process of setting up shop in the EU really is. Re-doing building designs cost them money and time, some never receiving their certification for years. Sales have also been meager and many have received complaints on an initial product that was available in early stages.

So for the foreseeable future, U.S. manufacturers will be enjoying the massive growth in the US. Others, like me and my company, will venture out and start from the beginning again developing new GMP pharmaceutical approved manufacturing facilities in Europe and working within the existing framework, while exportation from the US remains an elusive reality.

 

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