Bottlenecks, roadblocks, and the black market: An overview of Michigan’s adult use cannabis market in 2020

Michigan’s adult-use cannabis market is on pace to eclipse $500 million in sales in 2020, a relatively average first year performance that’s been held back by licensing bottlenecks at the local level and a dearth of retail stores throughout the state. 

But the market has significant room for growth, which will come as regulators approve more applications and access to the legal market improves. 

Over the prior three months – from July to September – adult-use cannabis sales in the Great Lakes State averaged nearly $59 million, up approximately 60% from an average of $37 million in the three-month period from April to June. 

The rise in sales corresponded with an increase in the number of retail cannabis stores throughout the state, up fourfold from January to September. However, Michigan’s adult-use market continues to be constrained at the local level, as over 1,400 municipalities do not allow retail stores. This includes Detroit – the largest city in the state – where regulators are still in the process of setting up an equity-centric licensing framework. 

This delay has kept the illicit market alive and led to long lines and high prices at licensed retail stores.  

As of September, the average pre-tax price for an eighth ounce of flower hovered around $50, down from a high of $64 at the beginning of the year but well above both the illicit market and prices for legal cannabis in other states. According to the website Price of Weed, an eighth of flower in Michigan’s illicit market goes for approximately $35, or roughly 40% less than a legally purchased eighth of flower after tax. 

Flower prices remain elevated, but are actually slowly declining. Prices for vape cartridges, however, have increased over time. That’s likely driving the move away from vape cartridges and towards flower.  

Though many adult-use markets have seen an uptick in flower sales following last year’s vape crisis and – more recently – the coronavirus pandemic, the move from vape cartridges to flower has been especially pronounced in Michigan. 

Rising vape cartridge prices may stem from the slow phaseout of medical marijuana caregivers from the legal cannabis supply chain. Previously, medical marijuana caregivers in Michigan could sell excess supply to the regulated market. Oftentimes this included cannabis extracts and distillates used to produce edibles, concentrates and vape cartridges. That has now come to a complete stop, and all retail cannabis sold in the state must now be produced by licensed adult-use businesses. 

Looking forward, Michigan’s adult-use market is expected to expand as more municipalities allow retail cannabis stores–improving access to legal channels and lowering prices. It’s a pattern seen in nearly every adult-use market that’s come before and will likely play out in Michigan as well.