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Will cannabis legalisation in Germany lead to a boom in sales?

It’s official: the Bundestag has officially decided to legalise the possession of cannabis in Germany. But it's unclear how big of an impact this will have on the sales and possession of the substance.

Published: 26 February 2024 16:48 CET

sidewalk sign in front of a cannabis shop

While possession of cannabis in Germany is to be legalised, the sale of cannabis products in specialty shops will not be immediately allowed. Industry experts express concern for businesses involved. Photo: SPENCER PLATT / Getty Images via AFP

Expectations for legalisation were huge: one of the largest markets for recreational use in the world could be emerging, cannabis companies raved.

Prohibition policies were to be replaced with specialist shops in German pedestrian zones, shady dealers were to be replaced by legal sales.

Legalisation seemed to be the next big thing and Germany as a large market was also promising from a foreign point of view. Providers from Switzerland, Canada and the USA have been warming up for a long time.

But with the decision of the German Bundestag on Friday, what has been looming for months is finally clear: The partial legalisation of cannabis for recreational use does not go nearly as far as envisaged in the coalition agreement of the traffic light government.

Under the new legislation, cannabis is to be removed from the Narcotics Act, where it has so far been listed as a prohibited substance alongside other drugs and subject to criminal provisions. Possession and home cultivation of limited quantities are to be allowed for adults from April 1st. And in so-called “cannabis clubs,” members will be allowed to grow marijuana plants together and distribute the flowers to each other.

However, the original plan to sell cannabis to adults in specialty stores has been postponed. This is to be tested in Germany in pilot projects.

Cannabis in Dresden

Martin Reuter, head of the Sanaleo shop for CBD products in Dresden’s Neustadt, holds a cannabis flower for sale in his hands. Photo: picture alliance/dpa | Robert Michael

The realities of a partial legalisation dampens euphoria

Some cannabis companies that were counting on setting up stores in the near-term are now in trouble, industry experts observed. The GoldRush-mood has long since given way to disillusionment in the competitive market.

One thing is clear: For the time being, there will not be a recreational market with cannabis shops like in the Netherlands and some US states in Germany.

“The fact that home cultivation is now allowed to a limited extent does not help the industry,” said Alessandro Rossoni, founder of the medical cannabis company Nimbus Health. The same applies to cannabis clubs. Some cannabis companies have run into trouble, others have disappeared or been bought out.

Nevertheless, the cannabis industry association sees an upwind for the companies. “Self-cultivation and cultivation clubs as opportunities for self-sufficiency are not commercial in themselves, but they do require infrastructure, equipment and services,” says Lisa Haag from the Department of Technology, Trade & Services.

In view of the hype surrounding the release, a colourful market has also emerged for all kinds of (legal) cannabis products – from hemp shower gels to hemp tea and creams.

Recently, a “hemp megastore” opened in Munich, offering around 1,000 cannabis-related products on 800 square metres.

Tailwind for medical cannabis on prescription

Cannabis as medicine has already experienced a boom since liberalisation in 2017. Patients can have the substance prescribed by a doctor, for example for spasticity in multiple sclerosis or chronic pain, as well as for nausea and vomiting after cancer chemotherapy.

According to market researcher Insight Health, around 77,000 cannabis patients in Germany received at least one prescription in 2023 – and that’s not including private, self-payers.

However, the documentation obligations for doctors have so far been high. In medicine, the legalisation of the industry will help, Rossoni of Nimbus Health expects. “Acceptance among doctors is likely to increase.”

New restrictions in place

Since the release of cannabis on prescription in 2017, there has been speculation about its release for recreational use. However, there are great doubts about the planned implementation.

Smoking pot in public spaces, for example, is to be prohibited in schools, sports facilities and within sight of them – specifically within 100 metres of the entrance area as the crow flies.

According to the plans, the cannabis clubs are to be organised as non-commercial associations and will require permits that are valid for a limited time. Additionally, the annex building must not be an apartment and must not have any conspicuous signs. Advertising is taboo, as is cannabis consumption directly on site. Documentation obligations are also regulated.

Rossoni is sceptical. “It remains to be seen whether all of this will prove to be practical.”

Member comments

Anonymous - 27 February 2024 at 19:55 CET

One topic that is quite blurry is the connection between cannabis consumption and the driving license.
Will cannabis consumers be automatically marked as unfit to drive? Or will it be like with alcohol consumption, i.e. one is not allowed to drive only if under the effect of the substance?
Could you guys please clarify this topic?

Become a Member to leave a comment.

Output is expected to expand 0.3 percent this year, the economy ministry said, up from a prediction of 0.2 percent in February.

The slightly rosier picture comes after improvements in key indicators — from factory output to business activity — boosted hopes a recovery may be getting under way.

The German economy shrank slightly last year, hit by soaring inflation, a manufacturing slowdown and weakness in trading partners, and has acted as a major drag on the 20-nation eurozone.

But releasing its latest projections, the economy ministry said in a statement there were growing indications of a “turning point”.

“Signs of an economic upturn have increased significantly, especially in recent weeks,” Economy Minister Robert Habeck said at a press conference.

The ministry also cut its forecast for inflation this year to 2.4 percent, from a previous prediction of 2.8 percent, and sees the figure falling below two percent next year.

“The fall in inflation will lead to consumer demand — people have more money in their wallets again, and will spend this money,” said Habeck.

“So purchasing power is increasing, real wages are rising and this will contribute to a domestic economic recovery.”

Energy prices — which surged after Russia’s 2022 invasion of Ukraine — had also fallen and supply chain woes had eased, he added.

Several months ago there had been expectations of a strong rebound in 2024, with forecasts of growth above one percent, but these were dialled back at the start of the year as the economy continued to languish.

‘Germany has fallen behind’

But improving signs have fuelled hopes the lumbering economy — while not about to break into a sprint — may at least be getting back on its feet.

On Wednesday a closely-watched survey from the Ifo institute showed business sentiment rising for a third consecutive month in April, and more strongly than expected.

A key purchasing managers’ index survey this week showed that business activity in Germany had picked up.

And last week the central bank, the Bundesbank, forecast the economy would expand slightly in the first quarter, dodging a recession, after earlier predicting a contraction.

German Economics Minister Robert Habeck

Economics Minister Robert Habeck (Greens) presents the latest economic forecasts at a press conference in Berlin on Wednesday, April 24th. Photo: picture alliance/dpa | Michael Kappeler

Despite the economy’s improving prospects, growth of 0.3 percent is still slower than other developed economies and below past rates, and officials fret it is unlikely to pick up fast in the years ahead.

Habeck has repeatedly stressed solutions are needed for deep-rooted problems facing Germany, from an ageing population to labour shortages and a transition towards greener industries that is moving too slowly.

“Germany has fallen behind other countries in terms of competitiveness,” he said. “We still have a lot to do — we have to roll up our sleeves.”

Already facing turbulence from pandemic-related supply chain woes, the German economy’s problems deepened dramatically when Russia invaded Ukraine and slashed supplies of gas, hitting the country’s crucial manufacturers hard.

While the energy shock has faded, continued weakness in trading partners such as China, widespread strikes in recent months and higher eurozone interest rates have all prolonged the pain.

The European Central Bank has signalled it could start cutting borrowing costs in June, which would boost the eurozone.

But Habeck stressed that care was still needed as, despite the expectations of imminent easing, “tight monetary policy has not yet been lifted.”

In addition, disagreements in Chancellor Olaf Scholz’s three-party ruling coalition are hindering efforts to reignite growth, critics say.

This week the pro-business FDP party, a coalition partner, faced an angry backlash from Scholz’s SPD when it presented a 12-point plan for an “economic turnaround”, including deep cuts to state benefits.

Christian Lindner, the fiscally hawkish FDP finance minister, welcomed signs of “stabilisation” in the economic forecasts but stressed that projected medium-term growth was “too low to sustainably finance our state”.

“There are no arguments for postponing the economic turnaround,” he added.