In European cannabis, the EU’s top economies are also the top players. But when investors look beyond the Western Bloc, there exists a bounty of unforeseen opportunities. Be it attractive legal frameworks, low overhead costs or a rich agricultural history, the continent is full of unexpected potential. North Macedonia, in particular, seems to be the perfect place for cannabis companies looking to get started in Europe.

Related: The 9 Best Countries to Grow Cannabis at Home in Europe

Expect red markets in 2020

The cannabis sector in Europe is expected to boom within the next three to five years, according to various reports.

Much of this anticipation surrounds the recent swath of positive cannabis regulation from European countries such as the UK, Italy, Portugal and Poland. Like dominoes in formation, the entire continent appears to be ceding space for the cannabis industry.

This has excited large corporate outfits in Canada, too. Due to the recent slump and downward trend afflicting companies like Aurora, Canopy, Aphria and so on, these companies are eager to enter new markets. Naturally, Europe is a prime target.

Their entrance has appeared via various acquisitions, the winning of tender processes and helping regulators in different countries develop productive cannabis regulation.

From a very broad perspective, everything is going according to plan. Capital-rich companies are adequately capturing opportunities as they arise. Investment is funneling into critical infrastructure to help build out a cannabis market in Europe.

(Source: Cannabis Europa)

But not all of this positive press is improving sentiment among top cannabis stocks, unfortunately.

Quartz reported a collective loss of $25 billion for the entire cannabis market in 2019. The massive run-up following legalisation in Canada has now been thoroughly corrected. With ‘Cannabis 2.0’ rolling out in Q1 of 2020, some are still hopeful that the derivatives market will boost dismal returns as consumers discover new products.

Related: ‘Cannabis 2.0’ Underway, What Will This Mean For Europe?

Still, supply issues and the slow deployment of drinks, vapes and edibles have kept bag holders skeptical.

Even cannabis-related media companies like High Times, Civilized and MassRoots are all reporting financial difficulties. Indeed, 2019 was a very difficult year for those attempting to ride the green wave of cannabis. This year looks to be no different either.

As many large firms bleed capital, some have taken drastic measures to generate cash. The CEO of Canopy Growth Corp.’s venture capital branch, Narbe Alexandrian, told the Financial Post that ‘there’s just no money coming in, so if you have a low cash balance, you might be in trouble.’

In Europe, the pace of cannabis businesses is far slower and likely won’t yield a windfall-like event such as those in certain American states and Canada. That doesn’t mean that profitable businesses won’t spring up on the continent. In fact, just the opposite.

If one looks closely, past the press releases, and focuses on how each country is approaching cannabis, then opportunities abound.

The single market is complicated

Every country in Europe is different. It binds distinct histories, cultures and languages. Some jurisdictions aren’t interested in participating in Europe, while others are fighting hard to join the EU. As a North American business person, the number of variables is dazzling. And this is long before one begins exploring the differences in cannabis regulations.

Overcoming the complexity of European laws can, however, offer diligent investors a hefty bounty for their efforts. Consider, for instance, North Macedonia.

A member of the former Yugoslavia, the country has been a hotbed for ethnic infighting, political uncertainty and, most recently, an open and ambitious economy. Although it reports one of the lowest per capita GDPs in Europe, administrators are looking to change this by restructuring their rich agricultural sector.

But, for all intents and purposes, the country certainly isn’t the number one destination for cannabis investors.

That being said, the country has been making an incredibly strong push over the past four years to become one of the top suppliers of Europe’s cannabis market.

In 2016, North Macedonia amended its existing statutes, specifically those that allow the cultivation of opium, and legalised medical cannabis. Only four conditions are eligible for treatment via cannabis, namely epilepsy, cancer, HIV and multiple sclerosis. Cannabis oils containing more than 0.2 percent of tetrahydrocannabinol (THC) must be prescribed by a doctor, while products that fall below this dose are widely available in pharmacies.

To get started, companies need to first obtain a licence from the state and special permission from the Ministry of Agriculture before seeding the crop. This is no small task, however.

At the time of press, there are more than 24 licensed growers in the country with another 20 applicants currently being processed according to Business Day. The move has all the backing from government officials too. The healthcare minister Venko Filipche was quoted as saying, ‘if we want to raise the economy in North Macedonia, cannabis is the way to boost it.’ Even the former prime minister, Zoran Zaev, has cousins who have restructured their tomato plantation to grow cannabis.

Although the country has announced a free market rather than a state monopoly akin to Bedrocan in Holland, the realities on the ground are slightly different.

Anyone can indeed participate in the next motor of economic prosperity, but growers need anywhere from €500,000 to €1 million, plus the coveted license. This is a difficult task for citizens whose average income per month is €465 per month.

It is primarily for this reason that foreign investment is eagerly being invited to deploy capital in the country. Cannabis Europe indicated in their Europe Is Open report that:

‘Medical cannabis is an attractive proposition for European governments as countries such as Macedonia, Greece, Romania, Portugal, and Jersey open up for investment. European states have observed the commercial and social benefits of a legal framework that can drive jobs, market growth and tax revenue. However, markets/allocation of licences saturate quickly with many competitors, propounding the importance of acting quickly.’

But, as much as cannabis companies based in the Baltic state are hoping to turn their economy around with cannabis, there remain two major obstacles. First off, growers are only allowed to export the extracted oil, not the whole, dried flower.

With only one business authorised to do so, American-owned NYSK Holdings, the competition appears more saturated rather than actually competitive. Not only do many of these businesses not have the required licence, but they’re also missing critical extraction facilities.

(Source: Wikipedia)

The second obstacle facing the country is the thriving black markets surrounding North Macedonia. Long before cannabis went mainstream in Europe, Albania had earned the title of Europe’s cannabis capital. Due to a struggling economy, many young Albanians have had difficulty finding work outside of the illicit industry.

One member of the Albanian community told the BBC in 2016 that, ‘there are no jobs, no work here. There’s no money in growing anything else.’

Thus, many officials in North Macedonia worry that building out a robust cannabis industry in the country will simply be absorbed by neighbours like Albania. Often the quality is higher and the price much lower. Indeed, the paradox is reminiscent of the Canadian market.

North Macedonian Cannabis

What does all this mean then for investors looking to expand into Europe? Well, it’s complicated.

For starters, North Macedonia isn’t even a member state. And with the Prime Minister having resigned on the 3rd of January, 2020, due to stalls in EU talks, this fact might not change in the near term. What’s more, the EU doesn’t recognize the Macedonian GMP certification. These all appear like immediate red flags.

The small upside, of course, is that no one is looking in this region for these exact reasons. For the contrarian investor, places like North Macedonia are hidden gems. Where else in Europe do you have the leading political body attempting to restructure the economy around cannabis?

Not only that but, with low prices for electricity, rent and other substantial public services, the barrier to entry is much lower than in much larger countries. The Minister of Foreign Investment in the Government of the Republic of Macedonia, Bardhyl Dauti, confirmed that:

‘What further makes North Macedonia an attractive investment venture for the cannabis market are the low tax rates as well as the low cost of land rental.’

Though shelved, for now, a draft bill exists which would see the creation of an independent cannabis regulatory agency and the exportation of the dried flower. The passing of this law would place nearly all the local cannabis companies in the country in a unique position to supply the entire continent of Europe.

Indeed, it appears a long shot, but it’s one rarely discussed in cannabis headlines. More critically, it’s just one small example of how misunderstood European cannabis is.