We were delighted to visit Michigan a couple of weeks ago and then again this past weekend at Cannacon, where we met with fellow industry members to learn more about the dynamics of the state’s emerging market. The transition from medical caregiver model to adult consumption is super exciting and we’re thrilled to join in the work being done at this very early stage.
As we create solutions to the problems this industry faces in the supply chain, we are strengthened by the lessons learned in Oregon to help us hit the ground running in Michigan and serve your unique needs.
That being said, we collected a few key takeaways during our work so far that we think you might benefit from knowing…
- There’s Not Enough Product
Michigan’s medical retail sales today are roughly the same as Oregon’s adult use sales at around $700 million in 2019. However, Michigan’s recreational market is expected to surpass $1 Billion just like California did in 2017.
The Michigan market is rapidly changing from a caregiver model (similar to California’s from 1996 to 2017) to a licensed, for-profit business framework like most recreational states have today.
Due to buildout costs and other barriers to entry, there are fewer cultivation and manufacturing businesses seeking to license than retailers. This is causing a severe shortage of supply, especially in licensed flower. Prices for flower are $1,500-3,000/lb (roughly 2-4x what they are in Oregon). Around 14% of the product is currently coming from licensed growers. Cultivators are also acting as wholesalers—buying, testing, and reselling products they didn’t make. This hasn’t been seen in any other market to date.
- The Caregiver / Retail Relationship is Changing
There are 77 licensed retailers in the state, and roughly 150 unlicensed/illegal retailers all of which are supplied by the caregivers in the market). Unregulated caregivers are temporarily afforded an avenue to sell into the regulated market, which has opened the possibility for illicit market inventory (even from out of state) to enter the regulated market.
While the caregiver allowance is still in play, the lower-cost supply hurts the economic viability of fledgling licensed producers and processors, further disincentivizing new operators from seeking to license on the supply side.
Legal experts in the state expect this caregiver allowance to continue for the next 6 to 18 months.
- An Abundance of Extracts
There are 40,000 caregivers in MI operating right now. A lot of caregiver product is considered to be low quality and therefore processed into distillate. It’s then sold to licensed cultivators for resale to regulated retailers. This means that there is an abundance of oil in the market—with cartridges and edibles available on the cheap—but a shortage of retail-ready flower. Furthermore, the large number of unlicensed/illegal retailers continues to boost the caregiver supply side.
However, circumstances are rapidly changing. In the pipeline right now, there are roughly 500 license applications past the first stage of review, with a relatively healthy mix of cultivators, processors, transporters, and retailers.
Licensed medical operators will be given priority to receive their recreational license, which is contributing to the rush to seek medical licensing now.
Are you seeing anything special in the market worth mentioning? Let us know by writing to firstname.lastname@example.org and giving us the scoop!
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