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Over the past five years, the U.S. has emerged as the most coveted and valuable cannabis market in the world, but brands and investors are now seizing on opportunities that are exclusively European.
The region’s cannabis market is predominately medical and in its early innings. Still, business interest escalated this year after two consequential transactions: Dublin-based Jazz Pharmaceuticals’ acquisition of G.W. Pharmaceuticals, the manufacturer behind the only FDA-approved CBD treatment for seizures, and Curaleaf’s acquisition of EMMAC Life Sciences, the largest vertically-integrated independent cannabis operator in Europe, Both transactions have prompted industry executives to reconsider Europe as a serious expansion target.
In emerging cannabis markets, the conventional approach is first to pursue plant-touching opportunities. But Europe’s unique consumer habits and cannabis regulations have created an especially favorable environment for American vaporizer companies to flourish. Here’s what makes the vape market so appealing.
Related: 5 Vape Tricks for Beginners
Europeans are well-acquainted with vapes
Europeans are more familiar with vaporizers, which makes this an ideal market for cannabis hardware and vape brands to enter. Unlike the U.S., tobacco is still a prevalent part of European culture. A 2019 global medical study found that countries with the highest cigarette consumption rates were mainly in Europe. In recent years, consumers have transitioned to modern offerings like e-cigarettes, generating over $9 billion in sales in 2021. At the same time, European consumers have a propensity for discreet design-forward devices, illustrated by the significant demand for IQOS heat-not-burn tobacco products. The brand’s parent company, Philip Morris International, reportedly shipped over 69 billion product units to the E.U. in 2021 –a 45 percent increase compared to last year.
Cannabis vaporizers fit seamlessly into European consumers’ lifestyles, especially considering how smokable hemp and medical flower products dominate the regulated space. European smokers will likely not embrace joints as much as American consumers due to existing stigmas, which explains their preference for more discreet devices. Consequently, brands that introduce innovative whole flower vaporizers or heat-not-burn devices to this receptive audience will strategically position themselves as market leaders in this nascent industry.
Vapes have established e-commerce distribution channels
European cannabis retail looks very different from America’s adult-use model; patients here cannot simply obtain a medical card and stroll into their favorite dispensary. Currently, medical cannabis is legal in some capacity in 28 countries, but prescriptions are highly regulated and products treated like conventional pharmaceuticals. In Germany, the largest and most developed European market, only seriously ill patients can use medical cannabis as a drug of last resort through the country’s public health system.
While constrained supply and stringent regulations continue to hamper growth for plant-touching companies, vaporizer devices can be legally purchased on dozens of e-commerce sites, including Amazon. This is one of the key differences between the American and European cannabis industries and presents a lucrative opportunity for hardware companies to build brand awareness and customer relationships proactively.
Adopting this strategy can be particularly advantageous in countries that allow personal cultivation, including Italy and Spain, or have robust CBD industries like Switzerland, which permits cannabis products containing less than 1% THC and boasts one of the largest hemp and CBD markets in the world. Under these conditions, non-plant-touching companies can make significant inroads into new customer acquisitions if e-commerce takes off before brick-and-mortar operations.
Vape companies have a first-mover advantage
Europe’s regulated industry is nascent, but consumer demand is profound. Approximately one in ten Europeans smoke cannabis, and illicit sales hover around $12.4 billion annually. Nevertheless, there is still plenty of room for growth considering how the legal market is projected to reach $906 million by 2025 –which amounts to less than 1.5 percent of the United States’ established $61 billion industry.
At this stage, vaporizer companies that invest in European distribution channels are entering the industry at the beginning of the bell curve. By contrast, most American vape brands came online in the middle of the bell curve when customers were already accustomed to smoking flower products without specific devices.
European countries that are either accelerating adult-use legalization timelines or scaling cultivation capabilities (such as Germany and Switzerland) are optimal targets for American vape companies aiming to capture additional market share. Entering such a green market could be seen as a considerable business risk, but the region’s untapped potential makes it a tremendous windfall for the entire hardware sector.