Michigan may allow stand-alone adult-use cannabis licenses earlier than expected

The recreational program in Michigan is only seven months old but is growing very quickly. Sales have grown from $7 million in December 2019 to over $39 million this past May. According to the Marijuana Business Factbook, Michigan’s 2020 cannabis sales could reach as high as $475 million and could grow to as high as $2.4 billion by 2024.

The current recreational market has challenges, according to industry officials. There is a mismatch between supply and demand that could take years to clean up, but this leads to great opportunities for new cannabis businesses to move into the space. Additionally, the problem has been exacerbated by the Covid-19 pandemic.

Michigan has seen cannabis flower shortages in the recreational market, which have left prices high. When compared to the medicinal market, the recreational market still has a lot of room to develop. According to Omar Hishmeh, CEO of Exclusive Brands, a vertically integrated producer and retailer, supply chain issues are apparent. In an interview, Omar said his company’s production currently fulfills less than 5% of consumer demand for recreational products.

Michigan also helped create this opportunity for licensed cannabis businesses by suddenly phasing out the ability for caregivers to supply cannabis concentrates, cartridges, or infused products to adult-use retailers, via a decision made in April. The situation caused significant spikes in wholesale pricing and drove up adult-use retail prices as well. Caregivers are still able to supply cannabis flower to retailers through the end of September. By October, this will immediately remove large quantities of flower from the system and further impact recreational sales. The recovery could take years, which means there is a high demand for recreational producers, manufacturers, and retailers. In the meantime, the illicit market is still thriving in Michigan.

While roughly 1,400 municipalities have opted out of allowing licensed adult-use marijuana establishments, we will likely see more opt-ins in the near term as communities seek to replenish their budgets amid COVID-19. First movers in these new Michigan markets will have the advantage of the time to develop their brands, products, and customer base while prices remain high. Businesses that invest in strategic planning from the start will quickly reach efficiency levels that will increase their profit margins and solidify their stance amongst the competition. According to the records, only 60 communities have opted in to allow adult-use businesses so far. 

All the above means there is a fantastic opportunity to start a cannabis business in Michigan in select municipal markets, contact us to learn more.