Michigan Cannabis Market Hits Record Sales Amid Low Weed Prices And Rise In Cultivation Licenses

Michigan's cannabis market is experiencing a major transformation, with retail sales surging while flower prices continue to drop. As MJBizDaily reported, since the start of adult-use sales in December 2019, the average retail price for an ounce of marijuana flower has plummeted by more than 80%, creating an ultra-competitive environment.

In August 2024, an ounce of flower cost $80.14, a staggering 84.5% drop from the $516.21 price tag in December 2019, according to Michigan's Cannabis Regulatory Agency (CRA). Despite the sharp price decline, the market has witnessed exponential growth. Monthly sales have skyrocketed, rising from 450 pounds sold for $1.7 million in December 2019 to 100,894 pounds for $129.4 million in August 2024.

Market Overrun With Licenses

This surge in sales comes amid a significant increase in cultivation licenses, which could account for driving prices down. Since May 2020, cultivation licenses in Michigan have increased by 964%, from 273 to 2,904. By comparison, Illinois saw a more measured rise, with licenses increasing by only 176% in the same period.

Ron Gibori, CEO of Michigan-based Six Labs, attributed the price compression to the state’s decision not to limit licenses. “Michigan is an unlimited-license state,” he said. “It's economics: Supply will outpace demand.”

Nate Reid, senior vice president of commercial strategy at Cresco Labs CRLBF, echoed this sentiment. “Everyone is so cash-focused and wants to move through their inventory; the only solution is to move prices down,” he told MJBizDaily.

Bulk Sales Drive Retail Competition

Adding to the competitive environment, Michigan allows retailers to buy and sell flower in bulk, further driving prices lower. Aric Klar, CEO of Quality Roots, noted that distressed outdoor growers are offloading bulk flower at rock-bottom prices, as low as $12 to $15 per ounce. "Outdoor growers are so distressed that retailers are buying pounds for $200-$300," Klar said, explaining that some outdoor farms are producing 20,000 to 30,000 pounds of marijuana annually. “I don't know anybody — even Pablo Escobar — who can sell that much product in a year.”

Klar also highlighted that pre-packaged flower, which accounts for half of Michigan's sales, is not recorded in the CRA's monthly reports, per the outlet. "Those brands that have identity … those products are staying pretty stable," Klar added, pointing out that established brands are weathering the price drops better than lesser-known competitors.

Effect On Brands

Some cannabis brands, like Dragonfly, are finding ways to thrive in this low-price environment. Dragonfly's non-infused pre-rolls, for example, sell for just $1 each. Founder Ching Ho noted that efficiency is becoming more important as the market matures. “As the market matures, efficiency will matter more and more, and consumers will discover there's no quality difference between a pre-roll you're paying 3X for versus ours,” Ho said.

This shift toward affordability, combined with Michigan's favorable market conditions, is helping Michigan’s cannabis industry rival even California's, the world's largest regulated market.

A National Trend?

Michigan is not the only state experiencing price compression. Cannabis operators in New Mexico and other states have faced similar challenges due to an oversupply of licenses. "We have seen this happen across four or five markets," said Matt Hutchinson, chief product officer for LeafLink. "As more cultivation comes on, it starts to level out to where it should be."

Cover image made with AI