Tips on how to method the European hashish market

With the American cannabis industry In full-scale growth mode, many businesses are at an insane pace to gain a foothold from coast to coast. The largest are also observing the emerging opportunities in the international landscape. The big price there is, of course, Europe – a cannabis market that Insight Partners expect to be valued at $ 37 billion by 2027 and growing at an average annual growth rate of 30 percent from 2020.

That’s the good news. The bad news is that Europe is on the slow path to legalizing weeds and the continent will almost certainly be almost entirely a medical market – and a highly regulated one – in the near future. Of course, this is nothing new to cannabis companies in the United States. They’re used to exorbitant taxes and regulations no matter what state they’re in (aside from those outsiders in Oklahoma).

Signpost in the European cannabis market These are sideline businesses that don’t touch plants and sell everything from trimming machines to harvesting and extraction equipment, growing lights in hopes of building brand awareness and sales channels before the floodgates open over the next five to ten years. Aside from complex regulations, import restrictions, and other issues, the most painful part of the process is paying high tariffs, tariffs, and value-added taxes (VAT), which can cut margins to a few meager percentage points. While fees vary depending on the location of import, it’s not uncommon for them to add up to 20 percent or more.

One of the companies that make the leap across the pond is based in Las Vegas GreenBrozwho has designed and manufactured some of the most advanced harvesting and trimming machines on the market. Lance Lambert, Vice President Marketing at GreenBroz, has worked for the past several years to export the company’s products to Europe, learning a few nuances and workarounds in the process.

“Their market is only twice the size of North America by population, so there’s a lot of potential out there,” he said. “But you almost have to bring in an expert who really knows where you want to import it to say, ‘Okay, these people work very well with their neighbors and have a lower import tax here that allows us to trade here , and they have good relationships on the VAT side with everyone else [European Union] Countries.’ It just comes up with these little things that people just don’t realize and they believe they are just going to ship [their product] Overseas like everything else. But there is much more to it than that. “

When Bruce LintonThe then Chief Executive Officer of Canopy Growth Corporation spoke at SXSW in 2019. He said he was solely focused on international markets and developing intellectual property and patents that could be duplicated if more cannabis-friendly policies were passed around the world. “If I were in the US I would think about what [intellectual property] I could submit in all niche areas and what brands I can lock up, ”he said. “The globalization of this thing … I think in three years it will almost be over.”

The challenges of doing business in European countries are a barrier to expansion for many ancillary cannabis businesses, and absorbing the high import fees can be a deal breaker. Still, many device manufacturers know that cannabis startups overseas want the latest, most efficient machines to streamline their operations. Even with low profit margins, it pays to establish sales channels and a customer base as the industry takes shape.

Navigating the ports of entry in Luxembourg and the Netherlands is a relatively easy and business-friendly process, Lambert said, but getting the same goods on the market in Germany is a different story. Rotterdam, the main EU port of entry for goods, is notoriously difficult to tackle, and the Czech Republic is also a challenge. However, as any cannabis business owner knows, there are always workarounds and creative solutions to hurdles and roadblocks.

In order to navigate European markets successfully, “you need to work with certain departments within the government to find out what your options are,” said Lambert. “Fortunately [for GreenBroz]The subject of tariffs wasn’t as problematic as duties and VAT because you bring in finished goods. In some countries there is a requirement that you fall into a different tax bracket if it is a completely finished good. This is a challenge for international expansion when it comes to material goods. “

Translation: Don’t bake the cake and send it to a German grocery store for sale. Submit the ingredients for the cake, train some German bakers to follow your recipe, then set up your distribution channel and retail customers to sell the cakes. “It can save you an exponential amount in business expenses if you just get the money [cost of goods sold] to bring something to Europe there and bring it to the local dealers, ”said Lambert. “That’s exactly what we’re looking at right now.”

Bottom line for US cannabis companies: Entering European and other international markets must not be done on a whim. Most European countries pay attention not only to their workforce, but also to which companies they allow to import goods.

To overcome local skepticism in the EU, companies that choose to jump over the pond should consider developing socially responsible, sustainable businesses that will bring new jobs and tax revenues to their new communities.

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