German Ganja Growth: Organigram (OGI) to Capitalize on German Cannabis Market Through Investment with Sanity Group

The licensed leading producer of cannabis, Organigram Holdings Inc. (OGI), announced its first significant strategic investment aimed at expanding its presence in the European cannabis market. A contributor to the PRISM Emerging Cannabis Index, the stock is up ~13% YTD.

Using proceeds from its Jupiter strategic investment pool, the Company will invest €14 million (~C$21 million), initially comprised of €11.5 million via an unsecured convertible note and €2.5 million to purchase equity interests from existing Sanity Group founders and shareholders. This investment gives Organigram a minority stake in the Berlin-based cannabis company, Sanity Group GmbH. Additionally, Organigram may advance another €3 million (~C$4.5 million) as a second tranche of the unsecured convertible note for future opportunities pursued by Sanity, subject to certain conditions.

“A meaningful presence in Germany and Europe is essential to achieving our ambitions to be a global cannabis leader. We believe that after Canada, Germany will emerge as one of the more promising markets under a nationally legal model,” said Paolo De Luca, Chief Strategy Officer of Organigram.

Sanity has quickly established itself as a leader in the German cannabis market, maintaining a robust distribution network with over 2,000 pharmacies and approximately 5,000 physicians in Germany. Sanity currently holds approximately a 10% share of the German medical cannabis market, with its medical brand, Avaay, estimated to hold the number two position.

The investment expands the previously announced supply agreement between Organigram and Sanity Group. Until Organigram receives EU-GMP certification at its Moncton production facility, Sanity Group has committed to purchasing significantly higher annual volumes of dried flower. Once Organigram receives EU-GMP certification, Sanity Group will shift its annual purchase commitment to include a percentage of its overall assortment of flower offerings for the European market.

As it relates to Sanity’s use of proceeds, it includes investments in various initiatives expected to provide access to over 100,000 patients and aid in the expansion of recreational cannabis pilot projects in applicable regions.

Notable previous investors in Sanity Group include BAT, Casa Verde Capital (Snoop Dogg), Will.i.am (Black Eyed Peas), Navy Capital, Scooter Braun, and Alyssa Milano.

The German cannabis industry is on the brink of significant expansion following the recreational cannabis legal reforms enacted on April 1, 2024. According to BDSA estimates, Germany is projected to generate approximately USD $1.5 billion in total sales in 2024, with this figure expected to grow to around USD $3.7 billion by 2027. This impressive growth is driven by a 30-50% increase in medical cannabis prescriptions since the reforms, likely accelerating the transition from the illicit market to the legal market.