Michigan Leads U.S. In Cannabis: Will It Continue In 2024 Given High Sales, Low Prices & Big Scandals

Despite becoming the leading market in the U.S. in 2023, Michigan’s cannabis industry faces a complex landscape marked by declining prices, corporate struggles, and potential federal regulatory changes. 

Sales in Michigan soared to $2.8 billion through November 2023, outperforming older markets like California and Colorado. This growth is expected to push the total sales beyond $3 billion by year’s end.

Price Plunges And Obstacles To Profitability

This growth, however, unfolded amid a dramatic price collapse. The average cost of an ounce of marijuana plummeted to $80.16 in January 2023, a steep decline from over $500 in 2020. The year also witnessed the court-ordered receivership of Skymint, Michigan’s largest marijuana grower, indicating the challenges of non-traditional financing and volatile business models within the industry, noted Crain’s Detroit.

Tax Success, Corruption Scandals And Potential Regulatory Revolution in 2024

Despite these hurdles, the industry’s maturation was evident. Marijuana excise taxes surpassed combined taxes from beer, wine and alcohol sales, despite the state’s low taxation on cannabis. Yet, the year was tainted by corruption, leading to charges and jail sentences for lobbyists and former Michigan House Speaker Rick Johnson.

Looking ahead to 2024, the U.S. Department of Health and Human Services’ recommendation to the DEA to reschedule cannabis could revolutionize the industry. This change would alleviate banking restrictions, reduce tax burdens under tax code 280E, and enhance cash flow for businesses.

Approaching Market Saturation Amid Decline Of Medical Marijuana Sector

However, Michigan’s market might be nearing its zenith. With 2023 sales peaking in July and showing a subsequent decline, experts predict the market’s ceiling to be around $3.2 billion.

The medical marijuana sector, once a cornerstone of the state’s legal cannabis industry, is also diminishing. November 2023 saw medical sales drop to a mere 2.8% of total marijuana sales. The stringent regulations differentiating medical and adult-use dispensaries are pushing operators away from maintaining medical licenses.

Local Resistance And THC Testing Controversies

Local resistance also poses a challenge. Communities like Rochester and Birmingham rejected cannabis businesses, potentially capping expansion opportunities. Additionally, controversies over THC testing persist, prompting state regulators to plan their own testing labs to ensure market fairness.

Navigating Future Challenges

As Michigan’s cannabis industry moves into 2024, it stands at a crossroads of growth, regulatory change and market challenges. The upcoming year will test the resilience and adaptability of this burgeoning sector at both federal and state levels, as it seeks to build a sustainable path forward.

Read more at Crain’s Detroit.