Michigan’s cannabis market reached an all-time high in July, with adult recreational and medical cannabis sales hitting $276 million, as announced by the Michigan Cannabis Regulatory Agency. On the back of these figures, Michigan is poised to surpass $3 billion in annual revenue for the first time. With this momentum, the state is projected to emerge as the nation’s second largest cannabis market, right after California.
Yet, this robust growth doesn’t translate to universal profitability. Many retailers grapple with thin margins, chiefly because of persistent low marijuana prices, although there’s been a modest uptick recently.
In the midst of these dynamics, 87 new licenses were approved from 96 applications in July. Notably, 17 of these were for class c growers, sanctioned to have up to 1,500 plants. Of the 2,080 active licenses in Michigan, over half are held by class c growers or retailers.
According to Bridge Michigan, Jerry Millen, owner of The Greenhouse in Walled Lake, points out the predicament of larger franchises. He noted, “I think that big corporate stores thought they could throw money at this and just keep throwing money at it, and it would work and it’s not working. That’s why most of your major dispensaries … are for sale.”
The influx of big franchises offering aggressive deals and low prices puts pressure on smaller, local businesses. Following marijuana’s legalization in Michigan in 2018, retailers were levied with a 16% tax, combining a 10% excise tax and a 6% sales tax. This scenario, with high production costs and an oversaturated market, may be challenging for retailers, but it translates to more affordable products for consumers.
“Retailers need to get out of the fight with each other on pricing, and work on customer service and education and helping marijuana become mainstream,” Millen said, Bridge Michigan reports. “This race to the bottom has made $1 and put your competition out of business is not what the culture of marijuana really was.”
Presently, recreational marijuana averages $99 per ounce—a $23 drop from last year’s figures. In contrast, medical marijuana, contributing over $6 million in revenues since January, averages at $102 per ounce. Although prices have declined over the past year, they’re slightly higher than in February when sales reached over $200 million.
Interestingly, Michigan’s cannabis industry typically witnesses a seasonality effect. Summer often brings about a price increase, primarily due to the elevated costs of indoor cultivation. This year, however, the anticipated summer price rise was subdued.
As the state transitions to its harvest season, when prices usually dip, retailers, shouldering the majority of the cannabis tax, are strategizing with suppliers to devise innovative profitability avenues.
In the broader scheme, these market shifts have a profound influence on Black Detroiters eager to venture into the cannabis industry. Historically, Detroit, with a predominantly Black population, has faced socio-economic disparities. The burgeoning cannabis industry offers an avenue to address some of these imbalances.
The Detroit City Council is actively addressing these disparities. Efforts are underway to create zoning guidelines tailored to benefit local communities and streamline the licensing application process. The overarching aim is to foster inclusivity and ensure fair representation in this expanding sector.
In Detroit, marijuana has become an integral part of discussions around economic revitalization. The city recognizes the potential of the cannabis sector, not just as a revenue stream but as a means to create jobs, stimulate local economies, and provide opportunities for entrepreneurs, especially from Black communities. However, the journey isn’t without challenges. As Detroit strives to establish itself as a cannabis hub, ensuring equitable access and representation remains a top priority.
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