Michigan has a weed problem — and consumers are loving it.
More than three years after legal recreational marijuana sales began in the state, the market is saturated with cannabis at bargain-basement prices.
The average price of an ounce of adult-use flower dropped from $512 in January 2020 to $80 today, according to the Michigan Cannabis Regulator Agency.
Not even the black market can compete with those prices.
But the plummeting prices have an enormous downside for cannabis businesses, many of which are struggling to survive. Growers, processors, and dispensaries are often selling their products at or near cost, hoping that prices rebound in the near future.
Not even the largest dispensary chains are immune. In July 2022, Lume Cannabis closed four dispensaries across the state. Skymint, which operates 24 dispensaries and three indoor grow operations, entered receivership earlier this year following a lawsuit from a Canadian investment firm that alleges the company owes it more than $217 million. Growers are also struggling. In early 2021, they were selling flower to dispensaries for nearly $4,000 a pound. Now, they're fetching under $1,000 a pound.
One of the most significant contributors to the plummeting prices is the over-saturation of cannabis. In January 2021, there were fewer than 350 active grower licenses in Michigan for recreational marijuana. Today, that number has grown to more than 825.
Those businesses were growing about 261,500 plants in January 2021. By contrast, more than 1.2 million plants were growing in February 2023, and it's far more cannabis than the market can sell.
A 130-acre marijuana industrial park in Windsor Township named Harvest Peak was ordered into receivership this month after one of its lenders sued the developers over unpaid loan payments. At least four other marijuana companies in Michigan are under the direction of a court-ordered receiver.
That's even as the number of recreational dispensaries continues to grow, with 75 new licenses issued just last month. Today, there are roughly 740 recreational dispensaries in the state, compared to 440 in January 2021.
That number should only increase as recreational dispensaries continue to open in Detroit. The city only began issuing its first licenses for adult-use cannabis businesses last December.
Michigan is far from alone. Other states where recreational marijuana was legalized are experiencing record-low prices, and they're struggling to find solutions. Over the last two years, the price of flower dropped by more than 50% in Colorado and 36% in Massachusetts.
In Michigan, the prices plummeted by nearly 85% since January 2020.
Weed, weed everywhere
Michigan’s cannabis industry has exploded since voters approved Proposal 1 in 2018, with more than $1.8 billion in sales reported in 2022. But it turns out there can be too much of a good thing: in this issue, we look at some of the problems caused by the state’s glut of ganja.
• Cannabis growers and regulators confront Michigan’s oversaturated market
• Michigan cannabis industry employees say they’re being left behind
• Is there room for Detroit-grown organic biodynamic cannabis in Michigan's saturated market?
Stop issuing licenses?
To combat the plummeting prices, some in the industry are calling for a moratorium on licenses for new growers and dispensaries. Doing so would address the over-saturation of cannabis, which in turn would make the prices more fair, they say.
"I don't think the state realized that the market was going to mature so fast and become oversaturated with product," Nick Hannawa, chief legal counsel for Puff Cannabis Co., which has multiple dispensaries in the state, tells Metro Times. "If there was a moratorium on licenses across all license categories, you wouldn't have this problem. There are more than enough dispensaries and product to go around."
Hannawa says people invested in the cannabis industry early on because they expected a more stable market.
"People invested millions of dollars thinking they would be selling marijuana for $3,000 a pound, but today can't sell it for $1,000 a pound," Hannawa says. "There are a lot of businesses that are really struggling, and that's sad."
Trouble is, a moratorium would not be easy to impose. The 2018 ballot initiative that legalized recreational marijuana in Michigan called for unlimited licenses. To override the initiative, a moratorium would need the approval of three-quarters of lawmakers in the state House and Senate.
“There are a lot of businesses that are really struggling, and that’s sad.”
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In Oregon, where prices also have plummeted, lawmakers imposed a moratorium last year on new cannabis licenses to address oversupply issues. Despite the moratorium, prices continued to fall to record levels this year.
Lawmakers in Oklahoma and Montana also passed moratoriums on new commercial licenses last year because too many cannabis businesses were opening for state regulators to oversee.
Other states, including Massachusetts and Colorado, are considering moratoriums to address the plummeting prices.
Unlike Michigan, those states only need a simple majority to impose a moratorium.
Industry leaders in Michigan are split on the issue. The Michigan Cannabis Industry Association (MCIA), which represents marijuana businesses, has not taken an official position because no legislation has been introduced.
Cracking down on scofflaws
MCIA executive director Robin Schneider says the most effective way to address plummeting prices is to crack down on illicit activity in the legal market. That activity includes importing cannabis from other states like California or using marijuana from the unregulated market.
Cannabis businesses that get marijuana from the black market aren't buying it from licensed growers and processors, depriving them of business.
The state has stepped up enforcement actions under the leadership of the Michigan Cannabis Regulator Agency (CRA) executive director Brian Hanna, a former law enforcement officer who took the helm in September 2022.
Before his appointment, the CRA took an average of 5.3 disciplinary actions a month. Since his appointment, disciplinary actions have risen exponentially, peaking at 80 in October 2022.
Between January and March, the agency issued 60 fines for non-compliance.
In February, state regulators suspended the licenses of several marijuana businesses for using illicit cannabis extracts to manufacture some of their products.
Green Culture, a dispensary in Flint, was hit with an indefinite license suspension for allegedly selling unlicensed products in September.
In October, CRA temporarily suspended and fined the House of Mary Jane, a Detroit dispensary that was accused of having duffel bags full of untagged and potentially black-market marijuana for sale.
"Enforcement has been one of Brian Hanna's top priorities since he became executive director last fall," CRA spokesman David Harns tells Metro Times. "The CRA is focused on making sure that illicit product doesn't find its way into the regulated market."
The actions taken over the past few months are already having an impact on prices, according to multiple people interviewed for this story. For example, the price of distillate, the base ingredient for many edibles and dab rigs, has nearly tripled after businesses were busted illegally importing the product.
"We are seeing a rebound in pricing right now, and it's happening quickly," Schneider says. "I would attribute that entirely to the Cannabis Regulatory Agency and their crackdown on the regulated market. They've done a very good job regulating our markets and increased their enforcement on businesses ten-fold."
Schneider adds, "It's the most important thing that our industry needed, which is to make sure everyone is playing by the same rules, so we are grateful for their work."
For the first time since recreational marijuana sales began, the average price of an ounce of flower rose slightly in February and March, providing some hope that the market will rebound. But the price is still far below what growers and dispensaries say is profitable — $86 an ounce.
Discouraging the black market
Another potential solution for growers is to encourage more communities to permit dispensaries to open. About 1,400 of the roughly 1,700 cities, townships, and villages in Michigan still do not allow recreational sales.
Although some in the industry believe there are too many dispensaries, they note the stores are clumped together in communities that allow recreational sales. That means people in communities where recreational sales are banned either have to drive out of their way or rely on the black market.
It's unclear how strong the black market is in Michigan, but a 2021 study by the now-defunct Michigan Cannabis Manufacturers Association estimated that about 70% of residents still buy marijuana illegally.
In February, state police busted an illegal, large-scale cannabis growing operation in Ogemaw County, seizing more than 5,400 plants and more than 100 pounds of processed cannabis.
But reigniting the war on drugs to help the legal market does not have a lot of support among cannabis advocates. Plus, they say, the regulated market is far too large and robust for the black market to keep pace.
"As the quality of the product is better, and the price goes down to a level consumers can afford, then the regulated market wins over the customers, and the illicit market reduces itself," Schneider says. "You can get the same or superior product in the regulated market, and it's easier and more convenient, and you have a better selection. That's naturally happening over time."
Standing out in a sea of green
Not everyone in the regulated market is worried. Ryan Jundt, managing partner of STIIIZY, a popular cannabis brand with dispensaries in Ferndale, Kalamazoo, and Battle Creek, says his company is thriving because it was built on producing original, quality products with a recognizable brand.
The company produces its popular line of vape pods and infused blunts and pre-rolls in Orion Township and soon will launch prepackaged flower. The products are sold at dispensaries across the state.
What's the secret? Jundt says STIIIZY is not just a company trying to make money. Behind the operation are passionate cannabis advocates who know what consumers want.
"We're very blessed to have a viral brand," he says. "At STIIIZY, I feel like we truly represent the cannabis industry to its core. We never sacrifice our standards. We understand cannabis culture because we live it. We give a lot back to the communities that we work in. It's a lot of commitment, hard work, and not waverings from the brand."
All too often, some in the industry say, growers and dispensaries are solely focused on mass-producing inexpensive marijuana with high THC. They say the result is a predictable, humdrum product that can be purchased anywhere.
At HighHello, a Michigan business that launched a weed subscription club, cannabis aficionados deliver a curated box of marijuana products. Part of the goal is to introduce cannabis users to a variety of products that go beyond cheap and potent, says Vadim Shiglik, HighHello's co-founder. "You have consumers who are coming in and looking for $80 ounces with high THC," Shiglik tells Metro Times. "That's the kind of stuff that is killing quality growers who are putting out high quality products. It's not sustainable. You're just rewarding people who are growing a narrow amount of strains that are high in THC. It limits the results people get from cannabis. The best way to serve the customers is to have a broad variety of genetics on the market."
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