Michigan Cannabis Sales Hit Record High, Profits Another Story

According to the Michigan Cannabis Regulatory Agency’s latest monthly report, Michigan cannabis sales hit a record $276 million in July, with adult-use cannabis accounting for the lion’s share of sales. However, local cannabis companies say they are not making huge profits.

The state is expected to surpass $3 billion in revenue for the first time in 2023. This underscores the importance of the state’s cannabis market. If this trend continues, Michigan will become the second largest market in the country after California.

However, insiders say that making a profit in this industry is a completely different scenario and near impossible for companies that play by the rules. In addition, the constant influx of new licenses is increasing competition to an unworkable level.

“It’s what they call a race to the bottom,” Beau Whitney, chief economist at the National Cannabis Industry Association, told Bridge Michigan. “Prices go down, go down and go down because there’s so much competition, but at some point prices won’t be able to go down any further.”

Some locals say the current system will not work for long under the current circumstances.

“I think the big retailers thought they could throw money at it and just keep throwing money at it and it would work, but it doesn’t work. That’s why most of your big dispensaries are … for sale,” said Jerry Millen, owner of The Greenhouse, a Walled Lake dispensary.

The influx of new licenses doesn’t seem to be helping existing businesses much. Last month, Michigan received 97 adult license applications and issued 87 new licenses. Seventeen of the licenses were for Class C growers, with a limit of up to 1,500 plants under state regulations.

After adult consumption was legalized in Michigan in 2018, retailers were levied a 10% excise tax in addition to a 6% sales tax. Due to the high cost of production and oversaturation of the market, consumers are satisfied but companies are not.

The average price of $99 for an ounce of adult cannabis is a lot cheaper than this time last year. The price of an ounce of medicinal cannabis is only slightly higher.

A boon to Michigan’s economy

While small businesses are unlikely to make much profit, local governments are ecstatic. Tens of millions of dollars in revenue are distributed to local governments throughout Michigan through the state’s adult-use cannabis industry.

According to FOX 2 Detroit, “Only 30% of total adult product sales go to local governments, while the other 70% goes to schools and streets.” When last year’s contributions are compared to 2021 and 2020 numbers, the show it’s an industry that shows no signs of slowing down.”

Michigan voters legalized adult use of cannabis in 2018 when they adopted Proposition 1, which legalized adult use of cannabis for ages 21 and older and paved the way for a regulated cannabis market that was introduced in 2019.

But despite strong sales, Michigan, like other regulated cannabis markets, has an oversupply of marijuana.

Illegal cannabis sales continue to thrive in the state and Michigan regulators are taking action. Last October, the Detroit News reported that Brian Hanna, acting director of the Michigan Cannabis Regulatory Agency, told the assembled media that “the agency is planning actions that will expose bad actors and act as a warning to other regulated companies.”