Entering Europe Means Building a Second Company

Every few weeks, a North American cannabis operator announces its "entry" into Europe. The press releases read alike: Germany's medical market is booming, UK prescriptions are rising, Portugal is a friendly export base, and company X is well-positioned to capture all of it.

The top-line numbers are real. Germany's medical cannabis market is projected to exceed €1 billion in 2025, with the legal patient population moving from roughly 250,000 in April 2024 to close to 900,000 by mid-2025. UK private prescriptions reached around 660,000 in 2024, serving an estimated 80,000 patients. The demand side of the equation is not the problem and hasn’t been for years.

The problem is that most operators who wrote confident European press releases between 2019 and 2022 have since revised, restructured, or written off the thesis behind them.

In 2023 Canopy Growth took a $1.72 billion non-cash impairment substantially tied to European ambitions. Clever Leaves wound down Portuguese cultivation and manufacturing in early 2023 at $19–21 million in exit charges. Khiron Life Sciences sold its entire European subsidiary stack (Germany, UK, Spain) for $3 million in late 2023. But those outcomes say more about the challenges of extending a North American model into Europe than about a fundamentally bad market

Medical cannabis in Europe moves through a pharmaceutical supply chain led by EU-GMP (Good Manufacturing Practice). This certification reshapes facility design, staffing, documentation, batch release, and the working capital cycle. So it’s basically a business model, not just a certification.

Building a compliant EU-GMP operation runs between €3 million and €15 million depending on scope, with application timelines of six to 24 months and ongoing compliance spend of €200,000 to €500,000 per year. For instance, Tilray has disclosed roughly €20 million invested in its campus in Cantanhede (Portugal) alone.

Distribution changes too. In Germany, products move through regulated pharmaceutical wholesalers into licensed pharmacies. In the UK, unlicensed cannabis-based products for medicinal use can only be imported by MHRA (Medicines and Healthcare products Regulatory Agency ) -authorized Specialist Importers against specific private prescriptions, with the Home Office overseeing Schedule 2 movements. In the UK, Schedule 1 is the default for cannabis with no recognized medical use —such as the raw cannabis plant and cannabis resins— that are deemed to have little to no recognized medicinal or therapeutic value, and Schedule 2 is where medicinal cannabis sits after the 2018 reclassification —meaning every import consignment requires a separate per-shipment licence from the Home Office, not a blanket authorization.

Curaleaf Laboratories alone handled roughly 54% of matched UK flower volume in 2024.

SOMAÍ founder Michael Sassano put the stakes bluntly in a 2026 interview with Cannabis Industry Journal: "EU-GMP is the gold standard", he said. "Without it, you simply can't access the bulk of the world's regulated medical markets."

Cultivation, Manufacturing, and Distribution Require Separate Entities

EU-GMP Annex 7 —a specific chapter within EudraLex Volume 4, which is the European Commission's guideline document governing Good Manufacturing Practice for medicinal products, in which cannabis falls— and the regulatory architecture around it push operators toward legal separation of cultivation (GACP-certified), manufacturing (EU-GMP), and distribution (licensed in each destination country). Each activity sits under a different regulator, a different risk profile, and often a different jurisdiction. The separation matters for operations, financing, tax, and audit.

On the one hand, significant ring-fencing —meaning setting up a separate holding entity so that the European business has its own capital structure, its own governance, and its own books— work lies ahead, as section 280E of the Internal Revenue Code can push effective federal tax rates above 70% for US adult-use cannabis entities. A properly structured European holding company prevents European profit from being pulled into that posture, keeps operations financeable by institutional capital that will not touch US federal illegality, and preserves a clean vehicle for future monetization.

On the other hand, recently the DEA moved state-licensed medical marijuana from Schedule I to Schedule III — eliminating the 280E tax disallowance for qualifying medical operators and opening a clearer path toward a federally recognized US medical market. If that medical channel develops along pharmaceutical lines, the supply chain it requires will probably look something like the EU-GMP, and operators who have already built to that standard for Europe will have a head start.

Portugal adds another layer. Operators licensed under Madeira's International Business Centre (Portugal’s tax-free zone) can access a 5% corporate income tax rate through 2033, subject to some requirements: local employment, real activity, resident directors. The tax benefit is meaningful if the structure holds up to scrutiny, which usually requires locally hired Qualified Persons for EU-GMP sites, statutory auditors, and IFRS books that consolidate cleanly at the parent.

Europe Runs on a Longer Clock

Every operator with a credible European track record has signaled that returns materialize on a three-to-five-year horizon. Local companies like Drapaline in Bavaria, Germany, stood by for seven years before accessing the first and temporarily only license to sell in pharmacies after medical cannabis went online in 2024.

Village Farms began sales at Leli Holland, its Dutch subsidiary and one of ten licensed producers in the Netherlands' closed recreational supply-chain program, in February 2025. CEO Michael DeGiglio described the moment in the launch announcement as "the culmination of nearly five years of work by our team to commercialize Leli's operations." The option was signed in 2021; revenue began in 2025.

Again, SOMAÍ offers a similar case. Construction on its Lisbon facility began in November 2021; full EU-GMP Part I and Part II authorization from INFARMED followed in August 2023. Even that relatively efficient build took two years before meaningful revenue was possible.

Returns are healthy. Curaleaf crossed $100 million in international revenue in 2024, up 73% year-over-year. CEO Matt Darin framed the shift in the company's Q2 2024 earnings release: "Curaleaf is leaning into its evolution from an MSO to an MCO, a multi-country operator, a term which represents our global vision and business that spans 15 countries." Aurora Cannabis reported international medical cannabis net revenue of $64.8 million in Q1 FY2026, with international markets contributing 91% of cannabis-segment adjusted gross profit before fair value adjustments. Neither result would have been possible on a one-year budget.

The Finance Function Must Also be Rebuilt

European entry rewrites most of what a finance organization owns: European subsidiaries report under IFRS, and those results must roll into US GAAP or Canadian IFRS at the parent with defensible eliminations and transfer pricing documentation. Treasury policy needs to cover EUR, GBP, CAD, and USD exposure rather than be improvised quarter to quarter. Germany, the UK, and Portugal each impose statutory audits, local auditor appointments, and filing calendars that run independently of the group audit. Permanent establishment, withholding tax on intercompany flows, and Madeira substance tests need documented answers, not assumed ones. And for US parents, the 280E ring-fence between European and domestic operations has to be a defensible structural reality.

So, aside from planning ahead for the expansion, building the appropriate team will prevent countless problems and save lots of capital.

The European opportunity is real. A likely €1 billion German medical market in 2025, a UK market growing at triple-digit prescription rates, and developing programs across the Netherlands, Portugal, the Czech Republic, Switzerland, Malta, and Luxembourg add real volume and optionality.

The operators now producing returns in those markets have done a few things consistently. They separated the European business legally and financially from the North American parent before meaningful capital was deployed. They capitalized on a European timeline, usually with patient money raised at the holding level and milestone-linked tranches. The finance function was built from day one to handle multi-currency, multi-jurisdiction, multi-standard reporting. And EU-GMP was treated as the operating model.

That’s why entering Europe looks more like the construction of a second company than just an expansion of the existing one.

The operators who survive the next five years in these markets will be the ones whose teams understand that from the first board meeting. Verdant Strategies works with cannabis operators on entity structuring, international tax, multi-jurisdiction compliance, and CFO-level capital planning, with offices in Nice, France, Los Angeles, and New York.

If you are considering expanding to Europe, let’s start a conversation about getting the structure right before the capital is deployed.