Portugal's cannabis challenge: how to evolve from a supply hub to an innovation leader

Portugal’s medical cannabis industry has gained global prominence, with over 20 tonnes of cannabis exported in 2024. The country has established itself as a key supplier to key European markets, including Germany, the UK and Poland. However, as Portugal consolidates its position as a leading producer, it faces the critical challenge of avoiding the commodity trap, fully developing a domestic demand market and driving innovation alongside patient-centred care.

This article, originally published in Cannamonitor explores Portugal’s strategic advantages, draws lessons from other case studies, and outlines potential steps to ensure long-term growth in an increasingly competitive global market. Could Portugal’s approach set a new benchmark for cannabis-producing nations? Read on to find out.

Portugal’s rise in the global cannabis industry reads like a success story. From modest beginnings following the legalisation of medicinal cannabis in 2018, with just 709 kilograms exported in 2019, the country has evolved into a powerhouse. Exports are projected to surpass 25 tonnes by 2024, reflecting a compound annual growth rate of over 80% over this period. This remarkable growth has firmly positioned Portugal as the world’s second-largest exporter of cannabis, behind only Canada, leveraging its strategic position within the European Union (EU) to dominate export markets.

However, beneath this impressive surface lies a challenge that will shape the country’s long-term potential in the global cannabis industry: moving beyond a singular focus on exports and developing a comprehensive domestic demand market. Developing the necessary access infrastructure will enable Portugal to generate synergies with downstream industries and explore high-value added activities. By positioning itself as a leader in innovation and patient-centred care, Portugal can secure sustainable growth while simultaneously improving its export performance.

Steering Clear of the Commodity Trap: Keys to Success in the Ever-Evolving International Cannabis Market

Portugal’s position as a leading exporter is firmly rooted on a solid foundation. The country benefits from a supportive regulatory framework overseen by Infarmed, harmonised standards and continued access to integrated European markets. Combined with its favourable natural resources and skilled workforce, these factors have established Portugal as a thriving centre for medicinal cannabis production. With 37 cultivation, 23 manufacturing and 47 export licences already granted, and many more in the pipeline, Portugal has emerged as the preferred European supplier to key European markets including Germany, the UK and Poland.

Germany stands out as an importer of half of Portugal’s medicinal cannabis, driven by its partial legalization reforms in 2024, which have significantly increased medical demand, with 40 tonnes imported until Q4 of 2024. Portugal has become Germany’s second largest supplier, increasing its contribution to over 16 tonnes in QXNUMX of XNUMX. The UK remains a key market, driven by its growing medical cannabis programme led by private clinics and compliant regulations. Meanwhile, in recent quarters, Poland has emerged as another vital partner, accounting for XNUMX% of exports in the last period, supported by successful registrations of products produced in Portugal by Tilray or Cannprisma.

However, the allure of export-driven success warrants a cautionary note, drawn from the challenges faced by global producers such as Colombia and Canada in the past. Canadian LP’s initial focus on capacity metrics resulted in a significant oversupply crisis, culminating in asset destruction and the misallocation of capital that could have been more effectively directed toward R&D or product development. Several Canadian companies built massive facilities without investing in proprietary technology or establishing the distribution networks needed to absorb the surplus. As a result, they became commodity producers trapped in a downward spiral of price competition that saw local wholesale prices fall below C$1 per gram, a dynamic that only began to reverse last year.

In the case of Colombia, the emphasis on positioning cannabis as a low-cost export crop has led to the rapid emergence of large-scale production processes, often at the expense of rigorous quality standards and a market-driven production strategy. The complexities of the Colombian regulatory environment to meet domestic demand, as well as restrictions on flower exports until 2021, have further compounded these challenges for producers, resulting in many companies closing or downsizing to shift their focus to producing higher-quality products.

While businesses in Portugal have not been immune to shifts in the supply-demand balance and evolving price trends, the country has managed to avoid these common pitfalls. Regulations that accommodate diverse business models and flexibility in export standards have enabled operators to adapt effectively to the dynamic international market. In recent years, Portuguese companies have adopted strategic changes to improve their supply chain positioning and production capabilities.

Initial specialization has often led to diversification, with some companies adding service lines such as nurseries, growers or external processors. The acquisition of Clever Leaves’ processing facility by Curaleaf and RPK Biopharma by SOMAÍ Pharmaceuticals illustrate this trend, while other players have developed in-house capabilities. On the other hand, other producers have shifted from a diversified model to more focused approaches, restricting extensive growth plans to a single, streamlined product range or postponing investments in extraction or additional cultivation space.

However, with 94 cultivation projects in the pre-licensing process, investment continues to be heavily focused on expanding core production capacity. Operators will face the challenge of carving out a unique niche within increasingly crowded international supply chains, competing with established competitors. Identifying opportunities to capture additional value through proprietary genetics, advanced extraction methods, innovative production techniques, research and development or clinical research initiatives will be critical success factors for new entrants.

For next-generation Portuguese companies to thrive, they must prioritise differentiation and innovation, enabling them to occupy unique niches within competitive global supply chains, while avoiding falling directly into the mass production trap. Focusing on value-added manufacturing and advanced market entry strategies will ensure that Portugal is recognised as more than just Europe’s “weed basket”, strengthening the international prospects of both established players and emerging producers. Portugal can cement its role not only as a supply hub, but as a leader in the wider medicinal cannabis industry, creating a self-sustaining virtuous cycle.

The Innovation Model: Unleashing the Potential of the Domestic Market as a Critical Launch Pad

Portugal’s domestic market remains surprisingly underdeveloped, despite its export success and the relatively early establishment of a medical cannabis access scheme, with the first product approved in 2021 and a further 9 approvals in 2023 and 2024. In the first 9 months of 2024, only 757 packages of prescription-only medicines were distributed domestically, compared to over 18,5 tonnes exported.

The lack of strong domestic demand limits the operator's ability to diversify revenue sources, restricts opportunities for vertical integration and stifles the development of expertise that could be applied to conquer other markets. Furthermore, the disconnect between domestic and foreign markets highlights a critical gap in the innovation chain. Without a robust local market, Portuguese companies miss out on fast feedback loops and insights essentials needed to drive product innovation.

However, lack of supply is no longer the main obstacle to greater acceptance of medicinal cannabis in the healthcare system. The number of approved products has increased significantly in recent quarters. There are now 4 flower products, 5 oils and 1 sublingual solution available, from companies such as Tilray, Portocanna and Ferraz Lynce. A few more registrations from companies such as Cannprisma and SOMAÍ are in progress, but have not yet been approved.

The lack of public funding for medicines remains a significant barrier in Portugal, where health spending is a persistent challenge relative to income levels. Integrating medicinal cannabis into the publicly funded health system would be a crucial step, although it would require substantial and uncertain political capital to achieve, involving significant advocacy and lobbying efforts. lobbying. However, private financing should enable much further market development, particularly as product affordability improves for patients. Meanwhile, private access programmes that offer affordable options to vulnerable populations could help to bridge some of the access gap, building on the experiences of other countries that have successfully implemented similar models.

Recent research reveals that 80% of Portuguese healthcare professionals, particularly in areas such as anaesthesiology and nursing, support the use of cannabinoid treatments. However, the majority agree that current legislation does not guarantee patients adequate access to this form of therapy.

The limited nature of domestic access contrasts with other smaller, more innovative markets such as Israel, with a long-standing domestic market of around 40 tonnes consumed by patients in 2023, despite its smaller population, thanks to its diverse and innovative cannabis ecosystem across its entire supply chain. New Zealand offers another valuable example of balanced market development, supported by both imports and domestic producers. Its growing domestic market and strong producer identity, moving towards “designation of origin” status, have been reinforced by the reform of export regulations in 2024. Despite the importance of agricultural commodity exports to the Kiwi economy, New Zealand has prioritized providing access to patients.

In markets with strong domestic consumption, the infrastructure that connects producers, doctors, distributors, pharmacies and patients is naturally more developed, improving access for patients, but also generating insights to inform product innovation, clinical research and improved market access.

In Portugal’s underdeveloped domestic market, companies need to look abroad to tap into this critical source of innovation. By creating an environment where companies can test and refine their products before expanding them for export, Portugal can foster innovations in delivery methods, formulations and clinical practices, driven by direct feedback from patients and healthcare professionals.

Growing the domestic market is not only crucial to strengthening the local business environment, but is also a responsible strategy for promoting exports. Canada’s advantage of having the largest federally legal cannabis market in the world has allowed its proven products to be exported globally, capitalizing on premium margins as one of the highest quality offerings that comply with international standards and regulations. The Portuguese producer should remain focused on exports. While local demand will never rival the potential of larger international markets such as Germany and Australia, it will still fill a critical gap, contributing to a more complete and integrated industry. This, in turn, will support Portugal’s long-term success on the global stage.

Charting the Course: From European ‘Weedbasket’ to Leader in Innovation and Patient-Centric Care

Moving up the value chain beyond raw material exports is a critical turning point for any exporter of agricultural commodities. This process is underway in Portugal, with advanced processing and manufacturing taking place in the country.
However, a greater focus on key areas of innovation could further increase value-added production, driving further growth for Portuguese cannabis companies. The development of proprietary genetics featuring new cannabinoid, terpenoid and aroma profiles is one such trend, which could continue to grow as Portugal and Spain attract local and international geneticists looking to supply European growers.

Mastering optimized cultivation methodologies and achieving production efficiencies, while improving quality standards, is another key factor that can help sustain a long-term competitive advantage over less cost-effective jurisdictions. New extraction technologies, advanced manufacturing and innovations in delivery systems present another opportunity – rather than focusing on producing commoditized bulk cannabis flower or basic extracts, Portuguese companies could take the lead in patented formulations and innovative delivery mechanisms, improving clinical outcomes and the patient experience.

The integration of clinical research and patient engagement platforms must become central to expanding access in Portugal’s domestic market. This requires strengthening connections between producers, research institutions and healthcare providers to facilitate evidence-based product development, clinical validation of cannabis therapies and educational programmes for physicians and other healthcare professionals. Ultimately, the number of prescribers of medicinal cannabis needs to be increased.

To achieve these goals, Portugal needs a comprehensive strategic roadmap to seize the unique opportunity to transition to innovation leadership. The country’s success in farming and exports provides the perfect springboard for a natural progression towards value-added research, development and manufacturing. As global competition intensifies and global commodity prices firm up, it is time to act. Portugal’s vision as a manufacturing and innovation leader is achievable, but it requires decisive action by the stakeholders from industry, regulatory bodies and policy makers.

Through thoughtful collaboration and innovation built on its agricultural excellence, Portugal is poised to write the next chapter in global medical cannabis – not only as Europe’s trusted supplier, but as a pioneer in advancing patient care.

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Arnau Valdovinos

Contributor |  More postsBiography

As founder and principal consultant at Cannamonitor, Arnau connects the dots of the global cannabis supply chain through an independent view of the international market. An advocate for evidence-based drug policy reform, Arnau has since 2018 provided intelligence and practical advice to medicinal, recreational and CBD companies across 5 continents and 19 countries.

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