Michigan Marijuana sales surpass $3 billion in 2023, but face possible slowdown
The Michigan marijuana industry reached a new milestone in 2023: $3 billion in total sales.
That’s $300 per man, woman and child.
Despite 30% growth over the the $2.3 billion sold in 2022, insiders believe the market is increasingly saturated and headed for a slowdown in the upcoming year.
“I believe we’ll probably do better in 2024, but I don’t think there is going to be a significant amount of growth, but enough to be noticeable,” said Harry Barash, Founder of MiCannaPros, a 9,000-member marijuana industry Facebook page, and Meet. Connect. Puff., a networking business. “I just feel like the market is getting pretty close to being capped out.”
Last year experienced significant growth, not only in total sales but the number of retailers, which increased by 120 statewide. As of December, there were 750 marijuana stores in the state.
“As we head into 2024, the (Cannabis Regulatory Agency) continues to focus on transparency and communication, working with stakeholders as the industry continues to grow,” said CRA Director Brian Hanna. “We’re committed to supporting Michigan’s cannabis licensees who currently employ over 35,000 employees, a 23% increase from December 2022.”
The year in cannabis was marked by increased enforcement, intended to keep black-market marijuana from infiltrating the licensed and tested market; the long-awaited and litigated addition of the state’s largest single-city market, Detroit; border battles in places like the western Upper Peninsula’s Menominee, where marijuana companies are vying for out-of-state business; price stabilization and plans to create a state-run reference lab to hold private labs accountable.
Enforcement
Cannabis Regulatory Agency Director Brian Hanna, who has a law enforcement background, vowed to take a harsher stance on enforcing rules when he was appointed to replace predecessor Andrew Brisbo in September 2022.
Hanna has often focused his enforcement on people sneaking unregulated, and therefore cheaper and more profitable unlicensed marijuana product into the market. Insiders believe it’s helped reduce the amount of illicit activity.
The enforcement played out in a plethora of fines, often targeting businesses that failed to comply with required annual financial but increasingly for other violations related to improper product tracking or handling. The CRA also issued more serious suspensions against at least eight licenses and revoked or declared it would not renew a dozen others.
“They’re certainly making a lot of examples, and if you’re doing things that you shouldn’t be doing it’s only a matter of time before the CRA figures it out,” Barash said. “It certainly seems like they have more bodies and more enforcement now. The CRA has sent a strong message.”
Enforcing the black market infiltration of the commercial market is “an iceberg situation,” and the CRA has only reached the tip, said Eric Jacovetti, who’s worked for a licensed grow, a marijuana staffing company and now an equipment rental business that services the cannabis industry.
“Just the way the current system is set up, you’d have to go to facilities and be auditing sticker by sticker, batch by batch, and I just don’t see that happening,” Jacovetti said. “I don’t even know how they could do it, en masse. A lot of this is still self-policing and thankfully there’s not a lot of folks that don’t want to break the rules.”
When Jacovetti worked in the licensed market brokering his grow’s marijuana, he remembers being asked if the product was entered in the statewide marijuana tracking system. The fact that anyone would even ask that, “opens up the realm of possibility” that people are dealing unlicensed, untracked marijuana in the commercial market, he said.
Price stabilization
Long-term businesses and consumers like stability, something that has evaded marijuana pricing since the first stores opened in December 2019. A mere three years ago, the average cost for an ounce of marijuana flower was $323. As of December, it was only $95.
Prices bounced back from the all-time January 2023 low near $80 an ounce and have remained level since July.
The previous price dips may have scared off quick-money investors and caused others to slow expansion and production, said Jamie Lowell, the operations manager for the Meds Cafe cannabis retail chain and a board member with Michigan NORML, a marijuana legalization advocacy group.
“We could be looking at a scenario in the future where there’s not as much inventory in the pipeline,” he said. “A lot of people just backed off because of market saturation.”
The lower inventory, combined with the “reality of how much everything costs,” could result in prices increasing for consumers, Lowell said.
Border battle
Deep-pocketed marijuana businesses have filed lawsuits at a rapid pace since the Michigan marijuana industry opened, often a tactic to force local governments into letting them open.
One of the most prominent examples occurred in the 8,300-resident town of Menominee, located along the Wisconsin border in the western Upper Peninsula.
Menominee leaders attempted to issue two licenses in 2021, but that was quickly challenged and stalled by other marijuana businesses who filed lawsuits, claiming the selection process was flawed.
As the rest of the state fills in with retail stores competing for local shoppers, cannabis businesses recognized the enormous potential for out-of-state marijuana shopper revenue. The vast majority of marijuana sales along the border come from Wisconsin shoppers, but also as far away as Illinois and Minnesota.
The legal battles in state and federal court, as well as political infighting, continue to play out in Menominee as up to eight marijuana retailers now hope to open in the border town.
Since 2021, similar legal battles slowed the opening of Detroit’s market, which opened in 2023 and quickly became the state’s largest market, currently with 44 licenses for retail stores.
‘It’s all based on THC’
Michigan and other states have traditionally relied on private labs to test marijuana products. The labs are tasked with ensuring product safety from contamination but also with providing information about THC potency and other data that’s important to consumers, producers and retailers.
If a product is contaminated, it’s costly for growers and processors to remedy. If the THC content is low, it directly correlates with the price customers will pay.
Since labs are paid by marijuana producers, it creates an inherent conflict of interest, which has resulted in allegations that labs are altering results to the benefit of their customers, not the end consumers.
To remedy this and hold labs accountable for the data they produce, the CRA is in the process of creating its own $2.8 million lab, to double check results and audit private labs. The state lab is slated to open by the end of 2024.
“I think it could definitely have an impact on the safety compliance portion of the business, which definitely needs some correction,” said Barash. “If that gets corrected, it could definitely impact pricing.
“Because if these results are artificial and we now see the true colors of these results, it will probably have a negative impact on prices, because it’s all based on THC.”.
