The start-up, founded in Berlin in 2017, is one of three companies that are already allowed to grow cannabis in Germany – but so far only for medical use. If cannabis is released for consumption, Demecan could quickly ramp up its production for further cannabis – the facility in a former slaughterhouse in Ebersbach near Dresden is designed for expansion.
“If the legislature changes the framework, we would of course also grow cannabis for consumption,” says Maurer. This is “a huge opportunity” for the company. Demecan could expand its current production capacity in Saxony from around one and a half tons per year to four tons within six to nine months, according to Maurer.
Demecan currently only uses 5000 square meters of the former slaughterhouse, one sixth of the total area. According to Maurer, the company could expand further flowering rooms with comparatively little investment of time and capital in order to harvest ten tons of cannabis per year.
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According to estimates by the Düsseldorf competition economist Justus Haucap, the total demand for cannabis in Germany this year is around 400 tons. The medical cannabis market is around twelve to 15 tons, according to current industry estimates. One of the hopes associated with legalization is that the black market could be dried up.
Legal hurdles
There are still many unanswered questions about the topic. A major hurdle is that Germany would violate international law by importing cannabis for consumption. For Germany, the 1961 uniform agreement of the UN states on narcotics is binding. This prohibits the trade, including the import and export of cannabis for pleasure purposes. And Germany is no longer likely to be supplied with medical cannabis from these states. If the new government does not want to break with the international treaties, it must either renegotiate or fall back on cannabis grown in Germany.
Demecan grows cannabis flowers in a former slaughterhouse in Ebersbach near Dresden.
(Photo: Demecan)
This fact also makes Demecan interesting for investors. Because Demecan is the only independent German company that is allowed to grow cannabis for medical purposes. The other two companies are subsidiaries of Canadian publicly traded companies Aphria (now Tilray) and Aurora.
Behind Demecan are the venture capital company BTOV Partners and private investors such as Bernhard Schadeberg, boss and co-owner of the Krombacher brewery, and Paul Kraut, former boss and family owner of the toy manufacturer Schleich. At the beginning of the year, the Futury Fund was added to another financing round in the upper single-digit million range.
Further capital needed for expansion
Demecan would definitely need additional capital to expand the facilities for growing cannabis for pleasure purposes. Existing investors could go along with it: “We have a strong investor base who, like us in the management, see the opportunities that legalization of cannabis would offer Demecan, and would like to move forward with us,” says Maurer, adding: “In the present In the market environment, an IPO also appears to be an option. “
Much now depends on how the legalization is shaped by the government. The coalition agreement provides for the levy via licensed businesses. Here, too, Demecan wants to become active as a provider: “Opening specialty stores would make a lot of sense for us. We already cover almost the entire value chain and have experience as a grower, processor, importer and wholesaler. It would be the next logical step for us to also approach consumers. “
Demecan itself advocates that not only specialist shops but also pharmacies could sell cannabis for consumption. “There are already around 2,000 pharmacies in Germany that regularly dispense medical cannabis to a large number of patients and have been trained accordingly,” says Maurer. This guarantees the important specialist advice, the control of product quality and the protection of young people. The legal market could also be opened more quickly and the black market restricted more quickly than only through licensed specialist shops.
It is also important to Demecan that the liberalization does not affect the medical care of patients, regardless of the framework the government has set for the liberalization. “This supply must continue to be secured,” says Maurer, also with a view to the UN state agreement.
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