Recreational marijuana purchases are expected to overtake medical marijuana receipts this year as Michigan’s budding marijuana industry is expected to top a record $1.3 billion in sales.
But some industry experts believe that growth could have been higher if not for challenges of the pandemic.
Michigan legalized recreational pot in a November 2018 ballot initiative and the state began allowing sales in December 2019. Michigan reported $776 million in total marijuana sales last year, about $434 million in medical marijuana and $342 million in recreational marijuana.
Michigan Marijuana Regulatory Agency Executive Director Andrew Brisbo said the state is on pace to see some growth in medical marijuana sales — 2021 annual sales are forecast at about $490 million — but recreational purchases are expected to more than double to $816 million despite retail marijuana prices in February being down 46% from the same time a year ago.
Total marijuana sales were more than $105 million in both January and February of this year, and recreational sales accounted for about 65% of sales, or $68 million, each month, according to data from the marijuana regulatory agency. Flowers, edibles and vape cartridges make up the majority of sales.
“Considering the increase in total sales and prices coming down by almost half, that’s really indicative of just how quickly things are growing,” Brisbo said.
Michigan State University researchers studied the potential economic impact of the recreational marijuana industry in the state by using Colorado’s experience and adjusting for Michigan’s population.
Their report released in March 2020 estimated that once marijuana becomes widely available retail sales will reach approximately $3 billion, with an economic impact in excess of $7.8 billion. Researchers predict the marijuana supply chain is estimated to bring 13,500 to 23,000 jobs and $300 million in excise taxes to Michigan.
“We’re jumping from $776 million to $1.3 billion, and I think it’s possible we could surpass that based on monthly sales and those are trending upward more recently,” Brisbo said. “Our growth rate is quick, but it’s hard to draw an apples-to-apples comparison to other states. Michigan’s market is somewhat unique.”
Recreational marijuana sales surpassed monthly medical-use sales in July and the gap continues to grow.
Brisbo said Michigan created a robust medical market that operated for eight years before recreational sales began.
“The consumer demand was there, it was just waiting to be met through regulated sites,” he said.
Michigan is one of 17 states, plus the District of Columbia, to legalize recreational marijuana, although it’s still against federal law. There are 36 states that allow medical use. Canada has also legalized marijuana for recreational use.
“As a result, at least in the short run, most of the marijuana consumed in Michigan will be produced in Michigan,” the MSU researchers noted, as it is illegal to carry marijuana across state lines.
More municipalities are opting into the Michigan Regulation and Taxation of Marijuana Act to allow marijuana businesses. The state now has 95 jurisdictions participating but 1,403 other communities have opted out and prohibit recreational sales. Detroit has opted-in for recreational marijuana but does not have its licensing certifications sorted out.
The state has about 411 medical marijuana retailers and 265 recreational stores, although recreational businesses are expected to grow as cities like Detroit establish rules and businesses obtain state and local approval. Detroit will eventually license up to 75 dispensaries as well as other types of recreational marijuana businesses.
In February, 187 new applications were filed with the state — up from 115 in January — and 94 were approved. None were denied, according to the marijuana regulatory agency. The new applications included 139 for pre-qualification by the state to be eligible for a license, and the rest included various types of businesses including retail stores, growers and secure transporters.
Cities that license marijuana retail businesses receive about $28,000 in tax revenue for each business or micro business, and communities are starting to see the economic benefits, Brisbo said.
“That’s just direct excise tax revenue distribution. That doesn’t include revenue from sales tax generated, job creation or potentially property taxes,” he said.
Pandemic hinders cannabis growth
“I’m certain we would have already reached over $1 billion in sales last year,” had the pandemic not occurred, said Robin Schneider, executive director of Michigan Cannabis Industry Association, who added the pandemic hasn’t allowed new business owners to move as quickly.
“Michigan has proven to be a safe place for consumers to safely access cannabis products, even during the pandemic, the state did a phenomenal job of putting safety measures in place including contactless delivery, curbside service, pre-ordering so there isn’t a lot of traffic inside these retail facilities.”
Schneider believes Michigan is on its way to becoming a hub for marijuana use in the Midwest as residents in surrounding states cross borders to consume products.
Illinois has legalized recreational marijuana, while Indiana and Ohio, which does allow medical marijuana, haven’t. Indiana is one of 14 states that has no medical marijuana laws. Possession of a single joint there is punishable by up to one year in jail and/or a $5,000 fine.
“It is illegal to take the cannabis back across the border, but there are designated areas like parks along the Indiana border where people can actually consume while they’re in Michigan,” Schneider said. “We expect to see more travelers with the opening of social consumption lounges after the pandemic settles down and we’re able to get back to some sort of normalcy.
“Over time, as communities embrace and understand that cannabis consumers are not any different than alcohol consumers, more municipalities will opt in and really social consumption lounges won’t be any different than a bar,” she said.
Quality Roots opened its first dispensary in Battle Creek in April 2020. By January, it opened a second location in Hamtramck and aims to serve residents in Berkley and Westland by the end of the year, said owner Aric Klar.
The recreational shop off Interstate 75 in Hamtramck sees about 500 people each day and shoppers only need a driver’s license to enter. The shop is similarly designed to an Apple Store, and shoppers can learn about products, their side effects and smell different flower strains.
“We’ve definitely seen an increase in sales during the pandemic that’s allowed us to grow despite the setbacks,” said Klar, 32, adding weekly sales have grown more than 20% per week since the store opened Jan. 8. “We focus on making the experience a very approachable place to come to learn. With so many things out there that people can try, we are curating those goods that are the best and highest quality hence the name Quality Roots.”
While the stores are climbing in sales every month, Klar said there’s a strong fear of oversaturation as more than eight dispensaries have opened on East Eight Mile.
“There are two avenues to this business, the operating out of it and getting stores open end of it,” he said. “Getting stores open is tough because you either have the property zoned properly, you have to win licenses and identify communities where we can have a positive impact.”
Research growing in Michigan
Dr. Ziva Cooper, director of the UCLA Cannabis Research Initiative, said while there’s strong evidence marijuana helps with addiction, anxiety, post-traumatic stress disorder and schizophrenia, few studies are done with dispensary products. “So we have very little knowledge about the whole cannabis plant and what people are using nationally,” she said.
“We have changing policy and public perception, emerging cannabis trends shifting patterns of use in demographics, and there’s clearly an urgent need to know the positive and negative health effects,” Cooper said.
Brisbo said the Michigan Marijuana Regulatory Agency is on the cusp of disbursing $20 million in research funding that was required under the recreational marijuana ballot initiative. A majority of the funds will be spent researching the efficacy of using marijuana to treat veterans and preventing veteran suicide.
The state is working with Northern Michigan University and Superior State University, which have four-year cannabis degree programs in chemistry and business, to create a leading research specialty space in the state.
It’s unknown when or if there could be a federal shift in policy, but if it does occur, Brisbo is on the executive committee of the Cannabis Regulators Association, a national board comprised of state officials from 19 jurisdictions working on cannabis policy, and says Michigan will have a seat at the table for an “easy transition” into the future.
“As we see a transition of consumers into the regulated market I think ultimately that’s good for public health and safety, and obviously good for the economy of the state as well,” he said.
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