Michigan's 'Unrestricted But Limited' Cannabis Market Surges, Say Experts

In an exclusive interview with Benzinga, BDSA's analysts Michael Arrington and Brendan Mitchel-Chesebro talked about the exceptional growth of Michigan's "unrestricted but limited" cannabis market. They looked closely at the market's distinctiveness, including its competitiveness, pricing dynamics and the impact of cross-border trading.

Michigan's Unique Factors

Despite launching its adult-use market in late 2019, Michigan has continued to see strong growth in consumer penetration and individual spending.

The competition is fierce in Michigan, driving prices down rapidly, yet consumer growth and spending remain robust.

Is Michigan's success attributed to a lack of control by major multistate operators (MSOs) that dominate markets like Massachusetts and Illinois?

"Michigan falls into the 'unrestricted but limited' category, offering a lot of competition and robust consumer growth, despite rapidly declining prices,” Arrington noted on Michigan's unique market dynamics.

Mitchel-Chesebro highlighted the importance of retail availability in cannabis markets, stating, "Limited retailer options can significantly impact sales growth, as consumers tend to favor convenience and affordability when choosing where to buy cannabis products."

Crossing State Lines

Visitors from other states play a significant role in the success of Michigan as in other markets.

For instance, Missouri's adult-use market achieved a billion dollars in total market sales during its first year, primarily due to trading with neighboring states.

The proximity of states with different cannabis regulations significantly impacts market dynamics.

"Cross-border trading plays a significant role in some markets' success, with Missouri's billion-dollar sales in its first year primarily driven by neighboring state interactions and their varying regulations," Arrington said.

Market Complexity

Success in the cannabis market depends on a multitude of variables, making it challenging to accurately predict outcomes.

Factors such as market maturity, licensing restrictions, pricing, and neighboring states' regulations all contribute to the unique growth trajectories of individual markets.

Product Availability And Retail Diversity

Product availability, assortment and retail accessibility significantly influence consumer choices. Limited retailer options can hinder sales growth, as consumers tend to favor convenience and affordability.

"It's not just about product variety; it's also about the number of retail locations. Limited retailer options can lead consumers to drive longer distances for cost savings,” Mitchel-Chesebro said.

“A half-hour drive can translate into significant savings, which is a considerable incentive for consumers. Understanding the dynamics of retail accessibility is vital for businesses looking to thrive in the evolving cannabis industry." 

Michigan's thriving market exemplifies how a combination of factors, including licensing, competition, pricing and cross-border trading, can lead to exceptional growth in the cannabis industry.

"Product availability and assortment and just plain retail availability are two of the biggest factors when it comes to things in a limited market that can hamper sales growth. We know that retail availability is a really big driver of consumer retailer choice. So you're going to go to whichever retailer is closest,” Mitchel-Chesebro added.

“We know that low prices are another big driver of retailer choice. If you have to drive, half an hour or longer and you can save $80 on the cannabis you're purchasing for two or three weeks, I think a lot of consumers are going to do that," concluded the analyst.

Photo by Tim Mossholder on Unsplash.