With an initial annual market cap projection of between $1.5B and $1.7B, the unprecedented revenue numbers make Michigan the most successful state market in America.
While it has been a somewhat lackluster couple of years for the legal and regulated cannabis industry in the U.S. as a whole, some state markets are performing at extraordinary levels. One of those stellar performers is Michigan, where voters approved adult-use marijuana sales in 2018.
According to data from the state’s Cannabis Regulatory Agency, Michigan cannabis retailers sold a remarkable $3.06 Billion in combined adult-use and medical marijuana products in 2023. That number equates to roughly $305 worth of cannabis items per person in the state, which is the highest per capita spending amount for marijuana in the United States (source: Crain’s Detroit Business). Retailers were able to exceed the $3 Billion threshold thanks to stellar sales in November ($260.5 million) and December ($279.9 million).
By comparison, California dispensaries sold about $5.9 Billion in cannabis products in 2023, or roughly $150 per capita. Likewise, Colorado's per capita spending was approximately $290 during the same period. In 2022, California sales equated to only $135 per resident, compared to just $229 per capita in Michigan.
Many industry experts believe much of the early and substantial success in Michigan is due, in part, to how state regulators set up the market. With much lower taxes than neighboring states, unlimited available licenses, and fewer rules and regulations that tend to keep entrepreneurial investors away, Michigan officials designed their adult-use cannabis market to start fast and grow rapidly.
"Michigan's got relatively low barriers of entry at the state level and a relatively low tax rate. We also have the advantage of bordering a couple of cannabis deserts with Wisconsin and Indiana," said attorney Lance Boldrey, chair of the Dykema Law Cannabis Practice Group.
"Michigan's got relatively low barriers of entry at the state level and a relatively low tax rate. We also have the advantage of bordering a couple of cannabis deserts with Wisconsin and Indiana.
- Lance Boldrey, Chair of the Dykema Law Cannabis Practice Group
However, those record-level sales numbers are not exactly translating into record profits for Michigan retailers and manufacturers. While market-wide sales numbers may represent all-time highs, competition is also incredibly intense, eating away at profits, creating price wars, and subsequent incredible deals for consumers.
For example, in 2020, the first active year of recreational sales, the average retail price for an ounce of marijuana flower was $402, based on the Cannabis Regulatory Agency's monthly statistical reports. Today, it is not unusual to find that same product on sale for under $100 an ounce, and in some corners, an ounce can go for as little as 50 bucks (one ounce can produce close to 60 joints).
The increased competition and plummeting prices have taken a toll on small operators, with many either shutting down or being gobbled up by larger operating companies. As a result, prices are slowly increasing as market forces adjust to the still-young and developing industry.
However, one of the better outcomes resulting from the Michigan model concerns jobs. In July, the total number of marijuana retailers in the state reached 704, an increase of 71 stores since the year began and 163 more than in July of 2022.
And, as of August, Michigan regulators reported more than 32,000 people employed by those licensed cannabis companies to go along with the 13,000-plus caregivers producing marijuana for registered medical marijuana patients.
"I haven't been in a lot of places that had unlimited open licensure like we have here in Michigan. And I'm not entirely sure that all of the limits that states have put on in other places accomplished what appears to have happened here, which is, you know, a lot of jobs," said Cassin Coleman, a Lansing-based director of production for Highway Horticulture and a cannabis industry consultant.
"I haven't been in a lot of places that had unlimited open licensure like we have here in Michigan. And I'm not entirely sure that all of the limits that states have put on in other places accomplished what appears to have happened here, which is, you know, a lot of jobs."
- Cassin Coleman, Director of Production for Highway Horticulture
The example set by Michigan could potentially impact the way other states set up their regulated adult-use cannabis markets moving forward. With neighboring Ohio and Minnesota recently approving adult-use cannabis legalization measures and others like Indiana and Wisconsin debating the end to prohibition in their respective jurisdictions, the Michigan model may prove to be the best template moving forward.
By encouraging massive participation, sales over profits, and customer retention, Michigan officials and business leaders have quickly established a solid and sustainable market for years to come.
