Costs for marijuana flower in Michigan have nosedived for the reason that begin of adult-use gross sales in December 2019, and plenty of within the trade attribute the falling costs to a glut of cultivation licenses.
On the similar time, low costs in Michigan have created a marijuana retail market that rivals the one in California, the biggest regulated hashish market on this planet.
The typical retail value for an oz of flower in Michigan has plunged greater than 80% since adult-use gross sales began.
The typical value for an oz of flower was $80.14 in August 2024, in accordance with information from Michigan’s Hashish Regulatory Company (CRA), down 84.5% from $516.21 per ounce in December 2019.
In the meantime, month-to-month gross sales elevated from 450 kilos offered for $1.7 million in December 2019 to 100,894 kilos offered for $129.4 million in August 2024, a change of twenty-two,321%.
“The licensing construction has led to a freefall over time,” Nate Reid, senior vp of business technique at Chicago-based multistate operator Cresco Labs, advised MJBizDaily.
“Everyone seems to be so cash-focused and desires to maneuver by means of their stock; the one answer is to maneuver costs down,” he stated.
Hashish cultivation licenses up 964%
Though value compression is to be anticipated as a regulated marijuana market matures, the scenario is compounded when the state doesn’t restrict licenses, stated Ron Gibori, CEO of Michigan-based cultivator Six Labs, which holds 12 licenses within the state.
The variety of cultivation licenses issued in Michigan has elevated 964% since Could 2020, when there have been solely 273 licenses in comparison with 2,904 in August 2024, in accordance with Cannabiz Media.
The rise in cultivation licenses issued in Illinois has been extra measured, rising from 21 energetic cultivation licenses to 58 throughout the identical interval, a rise of 176%.
Moreover, licenses usually are not all the time comparable; for instance, some cultivators have extra sq. footage or amenities working underneath the identical license than others.
“Michigan is an unlimited-license state,” Gibori stated.
“It’s economics: Provide will outpace demand.”
Bulk hashish gross sales
Variety of licenses isn’t the one challenge affecting Michigan hashish costs, stated Aric Klar, CEO of High quality Roots, which operates eight hashish shops within the state.
Michigan additionally permits retailers to purchase and promote flower in bulk.
“Outside growers are so distressed that retailers are shopping for kilos for $200-$300, or $12-$15 an oz,” Klar stated.
“Say an outside farm has 20 acres; they develop the product, and the quantity they promote and hold in flower format is 20,000 to 30,000 kilos of marijuana.
“I don’t know anyone – even Pablo Escobar – who can promote that a lot product in a yr,” Klar added, referencing the late Colombian drug lord.
Rising hashish provide
The Croptober harvest season is imminent, however lots of Michigan’s outside growers nonetheless haven’t offered by means of their flower from final yr.
Moreover, the CRA data solely bulk flower in its month-to-month stories, however half of Michigan’s flower is pre-packaged earlier than it’s offered to retailers, which skews the numbers, Klar stated.
“These manufacturers which have id … these merchandise are staying fairly steady,” he stated, including that value compression and oversupply of regulated merchandise are pushing illicit operators out of the market.
“Value compression has occurred: Now we have the most effective costs within the nation.”
Marijuana manufacturers adapt to low costs
Ching Ho, founding father of Michigan’s top-selling pre-roll model Dragonfly, stated the identical market dynamics are also affecting manufacturers, that are seeing gross sales quantity make up for decrease costs.
Dragonfly’s non-infused pre-rolls promote for $1 every.
“Because the market matures, effectivity will matter an increasing number of, and shoppers will uncover there’s no high quality distinction between a pre-roll you’re paying 3X for versus ours,” Ho stated.
“It’s because we combine sun-grown cultivation with manufacturing and cross the financial savings on to the buyer.”
Hashish costs falling in different markets
Michigan isn’t the one state the place hashish companies are seeing value compression attributed to extra licenses.
Hashish operators in New Mexico say an oversupply of retail licenses is forcing many marijuana companies to shut or downsize.
Value compression creates issues for a lot of marijuana firms that construct their enterprise plans round excessive value factors and excessive demand, stated Matt Hutchinson, chief product officer for New York-based LeafLink, a software program platform that connects hashish retailers with manufacturers.
“Now we have seen this occur throughout 4 or 5 markets,” Hutchinson stated.
“You see a market begin with low provide, and you’ve got value factors which might be excessively excessive.
“As extra cultivation comes on, it begins to degree out to the place it needs to be.”
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‘Mini inexperienced rush’
Isaiah Dawid, founder and president of multistate hashish genetics producer Clout King, stated when he moved to Michigan from Santa Cruz, California, in April 2020, the costs of trim, flower and distillate have been by means of the roof.
“Seeing wholesale flower costs at $4,000 a pound made working in Michigan very enticing, which led to a mini inexperienced rush,” Dawid advised MJBizDaily.
As a result of Detroit is a hub for vehicle manufacturing, the ability grid is powerful, and cheap warehouse area is offered, he added.
“Indoor cultivation boomed, and the post-COVID stimulus correction left the entire shops with an abundance of overpriced stock,” Dawid stated.
“The correction was extreme, leaving growers with no alternative however to race for the underside.”
Margaret Jackson will be reached at margaret.jackson@mjbizdaily.com.