Michigan’s licensed cannabis industry wants bigger piece of $3.2B market
Michigan’s legal cannabis market nearly reached $1 billion in sales last year, but the industry says that most marijuana customers in the state still don’t buy through legal channels.
About $3.2 billion in cannabis was sold in Michigan in 2020, according to a new report done by the Anderson Economic Group for the Michigan Cannabis Manufacturer’s Association, an industry trade group.
That leaves 70 percent of buyers still turning to illegal or “off the books” transactions, according to the report that offered a first glimpse into the state’s cannabis market 18 months after recreational marijuana has been available to purchase in the state.
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The report also showed that an estimated one in five Michiganders, or 2 million people, used marijuana in 2020, a 75 percent increase from 2010.
The MCMA said Michigan can consider cannabis an untapped source of revenue for the state and its local communities. At the same time, the group’s webpage notes that it has a goal of “reining in” sales that don’t go through its members and other licensed providers.
Shelly Edgerton, chair of the MCMA board, said during a Monday press conference that the marijuana marketplace “has unlimited economic potential for Michigan.”
“The bottom line is Michigan loves cannabis, and that’s indicated in this study,” said Edgerton.
Cannabis dispensary sales of almost $1 billion in 2020 produced nearly $130 million in taxes and fees, according to the report. Both medical and recreational marijuana are subject to a 6 percent sales tax, and a 10 percent excise tax is also applied to recreational cannabis purchases.
Using marijuana for medical purposes has been legal in Michigan since 2008. Recreational cannabis was legalized in the state in 2018 via a direct ballot proposal and first became available to purchase for adults 21 and up in December 2019. Eighteen states have legalized marijuana, and 11 have dispensaries selling cannabis for adult use.
The unregulated market includes marijuana that is provided by caregivers, grown in a home, or purchased illicitly. These sources of cannabis are not subject to the same taxes and fees that residents have to pay in a dispensary, and they also do not have the same testing and safety checks applied to them.
While growing limited quantities of marijuana in a home is permissible under Michigan law, distributing marijuana without a license is considered a felony and can lead to fines and criminal charges.
The study did not provide a breakdown of the exact percentages for each unregulated source of cannabis in Michigan.
While the MCMA said it did not have any policy recommendations to provide based on the findings of the report, Steve Linder, executive director of the MCMA, has been pushing for all marijuana distribution in the state to happen through the regulated market so it can be tested and taxed.
However, caregivers have expressed concerns about the potential for increased regulations — at the urging of corporate growers and distributors — limiting their right to grow cannabis for medical distribution.
Paul Armentano, deputy director of the National Organization for the Reform of Marijuana Laws (NORML), told Bridge Michigan there are several different reasons why consumers purchase cannabis from illicit sources, noting that it may involve price, access or someone under the legal age. States can also allow local communities to ban sales of marijuana and can make taxes and fees more expensive, potentially making it easier to purchase marijuana from an illicit source.
For Michigan, having recently legalized marijuana for adult use, the huge market size of illicit cannabis remains unsurprising, said Armentano. He said demand for cannabis usually starts out high once it is legalized in a state, driving up prices for the product. As supply of the product increases and the official markets develop, prices can decline, which can incentivize consumers to pursue legal avenues for cannabis.
In December 2019, when sales first started, the price per ounce of recreational marijuana was $516.21 and the price per ounce of medical marijuana was $267.30 per ounce, according to the Marijuana Regulatory Agency. In May 2021, recreational cannabis was sold at an average retail price of $221.21 per ounce, and medical cannabis was sold at $197.68 per ounce.
“The illicit market is disrupted by the legal market, and the legal market begins to overtake the illicit market over time,” Armentano said. “As the legal market becomes more mature and more evolved, people begin to gravitate toward it more...This isn't going to happen overnight.”
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