Opportunities are thriving in Michigan’s growing adult-use cannabis market

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Bethan Rose Jenkins, Cannabis News Writer/Editorial

Since December 2019, when licensed sales of recreational cannabis in Michigan began, the state’s medical cannabis program has gone from strength-to-strength. 

Monthly adult-use sales have surpassed $100 million since April and are anticipated to reach $1.2 billion for the entirety of this year. Should this happen, sales revenue would be more than double that of last year.

If projections outlined in the 2021 MJBizFactbook a trusted downloadable resource for investors, business owners and industry followers are anything to go by, the market will see sales revenue quadruple over the next five years.

Based on the latest edition of the MJBizFactbook, recreational cannabis sales in Michigan are forecast to jump from approximately $500 million in 2020 to somewhere in the range of $2 billion-$2.5 billion in 2025.

Some of the market’s main appeals include rapid and consistent sales growth, enticing acquisition deals, broad licensing options and the state’s large population.

Numerous factors are influencing the growth of Michigan’s recreational cannabis market

In a separate research report that was published by New York-based Cowen Group last week, Michigan is gaining prominence as one of the country’s largest cannabis markets. 

Activity in Michigan’s adult-use cannabis market appears to be heating up due to the fact that the market currently has minimal penetration and a lack of big-name players. However, despite the appeal of Michigan’s recreational cannabis market, large multistate operators (MSOs) are backing off because of the state’s unlimited licensing structure.

Experts believe that numerous factors are contributing to the market’s success. For example, the state is taking no breaks in reviewing license applications, but various municipality opt-outs have caused restrictions for much of the market. As time progresses, more municipalities many of which are expected to impose license caps are likely to opt in over time.

Unlimited statewide licensing means that acquisition prices are less costly in places like Illinois. This means that existing cannabis businesses in Michigan and newcomers can enter the market without worrying about excessive costs. What’s more, as of October 1, license fees will be majorly reduced by the state; new cannabis retail store licenses will sink to $7,500 from $25,000.

Social equity issues pose a problem for Michigan’s adult-use cannabis market

In spite of the success that Michigan’s adult-use cannabis market is experiencing, social equity issues are slightly stunting the industry’s growth. A temporary halt was recently issued for 75 retail licenses, 35 cannabis consumption lounge licenses and 35 microbusiness permits in Detroit. One of the primary causes for concern pertains to “legacy” residents a city ordinance stipulates that 50 percent of the licenses are set aside for residents in this category. 

Something else that is causing a problem for Michigan’s adult use cannabis industry is the building tension between businesses and caregivers. A number of adult-use cannabis store operators require caregivers to abide by a stricter set of regulations. Currently, caregivers can cultivate a maximum of 72 plants and are not required to pay license fees, nor are they required to trace or test products.

A June-published study carried out by East Lansing-based Anderson Economic Group and commissioned by the Michigan Cannabis Manufacturers Association (MCMA) found that Michigan’s adult-use market is still being inundated by large amounts of illicit cannabis. Factually, Anderson stated that 70 percent of cannabis sales are still occurring outside of the legal, regulated market.

Notwithstanding these findings, industry experts rejected the report, describing it as “corporate protectionism.”