As the legalization of adult-use cannabis sweeps Europe, stakeholders and emerging investors on both sides of the Atlantic are attempting to read the tea leaves to discern what the future holds. One emerging theme is the use of social clubs as a means for distribution. 

Social clubs are nothing new to Europe, as coffee shops in the Netherlands function as the primary distribution channel in that market. Similar establishments operate all over Barcelona, as well. Legal social clubs seem to be a popular proposition for adult-use markets by new European governments. 

So, will U.S.-style dispensaries emerge supreme, or will social clubs be the dominant adult-use retail model?

North American Dispensary Models Can Crush Diverse Market Activity

If you have been watching U.S. and Canadian markets, the somewhat oligopolistic dispensary system is the currently accepted framework for retail business development. 

In the U.S., some state licensing systems have faced allegations of underhanded dealings and nepotistic hiring practices, with lawsuits in Illinois and Massachusetts bringing infamy to the same state markets with some of the most progressive social equity licensing programs in the country. U.S. social clubs (often referred to as on-site consumption lounge in some early-adopting states) have yet to take off, and rules currently in development in states like Nevada will need to be carefully crafted so as not to exclusively benefit only a few currently licensed dispensary owners. 

The Canadian market is mostly dominated by the largest corporations. Compare this to Europe, wherein the Netherlands owners of mom-and-pop coffee shops make a modest living creating a warm and safe consumption environment. Barcelona follows a similar path with local club members having a safe environment to consume cannabis, albeit in the regulatorily ambiguous environment of Spain. 

European Social Clubs Prioritize Safety and Preserve Culture

Malta has made it clear that they will allow recreational cannabis sales through social clubs, which must grow their product for a limit of 500 members, a simple step that could be adopted by the United States to increase safety for businesses. Currently, there is no limitation to the number of licenses Malta will award, but even the availability of data regarding who is visiting these establishments is helpful. 

But the most significant safety standards that set European cannabis operations apart is the presence of banking access. Cannabis banking legislation has not gained traction in the U.S., which has continued to make dispensaries targets for armed robberies. 

The U.S. should follow this lead and, like one European country that we’ll discuss in a moment, institute test programs that ensure states and the larger country have adequate data and tangible evidence to make sure specific options are viable. One determining factor to overall success will be the pace of the rollout. With numerous pieces of legislative items being introduced into a single bill, legislation can’t even get off the ground. If we take each piece of legislation step-by-step and progressively build up banking, retail and licensing rules, the U.S. will be in a much better position than what we currently have.

A specific example that was alluded to earlier is Zurich, Switzerland, which has started a test program through the University of Switzerland to license 10 social clubs with a limit of 100 members each. The idea is to study the social impact of cannabis use. Germany will likely aim toward social clubs as the prime venue for recreational distribution, as a few already exist in Berlin. 

Likewise, the Netherlands is embarking on an experiment to legitimize and supply nearly 80 of the current 570 coffee shops in the country. Coffee shops offer all the benefits of a dispensary, plus the social and cultural benefits of traditional European shared spaces like pubs or cafes. Some growth-minded detractors will note coffee shops in the Netherlands decreased from 729 to 570 between 2005 and 2019, but it is expected that maturing markets experience such contractions, and we are currently far from that point in developing European adult-use markets. 

Pre-Existing Social Club Models Like Pubs Make Conversion a Cinch

The North American dispensary model offers a clear point-of-sale that can easily be taxed and monitored via governmental licensing and provides easy access for those of legal consumption age. An enormous drawback to establishing dispensaries is the incredible amount of infrastructure-building and capital needed to get off the ground, combat illicit markets and satisfy impatient consumers. Dispensaries are as yet unable to embrace the need to be social while consuming cannabis, akin to the cultural consumption of alcohol in a bar setting. The social club and coffee shop models are able to simultaneously satisfy cannabis consumption and the enforcement of safe sale standards. 

Regardless of global location, every market could benefit from adding on to existing infrastructure rather than beginning anew. There are existing infrastructures in Europe and North America alike for the sale of controlled substances, such as in liquor stores, bars, and pharmacies. Incorporating such prior models would prove to be a clear win for producers and small-time startups that would benefit from increased outreach and distribution immediately. Social clubs and coffee shops are still integral in this model, as they act as a less-institutionalized and possibly more user-friendly opportunity for citizens to experience the normalization of cannabis consumption. 

Both Lounge and Dispensary Models Have a Place in Future Markets

The European-crafted environment of social lounges and coffee shops is both cultural and driven by a desire to usher in the acceptance of cannabis use. U.S. and Canadian dispensaries were born of the buy-and-go-home acceptance era, but look to soon begin a patchwork transformation into also incorporating lounges. 

In all markets, legal frameworks are guided by politicians trying as hard as they can to envision which framework will suit their constituencies best. Regardless of methodology, these world leaders are seeking to relocate decades’ worth of overspending on cannabis prohibition and enforcement, and both types of markets look forward to a future of cultural and personal healing.