Mounting debt and folding businesses are shaking the foundation of Michigan cannabis’ financial future.
Michigan’s marijuana market has two growers for every retailer, fueling a price plummet in flower and distillate, found in edibles, vapes and concentrates. Add in a stubborn black market and out-of-state products illegally seeping into the supply, and profit margins are sinking with every “buy one, get one” deal.
The multi-billion-dollar industry is reckoning with how to stabilize a supply chain leaning on credit by introducing new rules. On the heels of court filings exposing millions in debt from major names in the industry, the Cannabis Regulatory Agency has proposed denying a license or license renewal based on civil judgments or court orders resulting from unpaid debt.
The debt rule is popular among processors and growers, said Scott Roberts, a Detroit-based cannabis attorney and broker.
“For them, this is a godsend,” he said. “To go through the district court process takes a lot of time, and to have this kind of extra bite to the collections process, it’s great for them. If you’re a dispensary owner that’s robbing Peter to pay Paul. Not so great for you.”
Price volatility on flower has slowly leveled – in May the recreational price per ounce was $90.64, inching up month-over-month but far from the $221.21 price point just two years ago. Even so, it’s the growers and processors who consistently get caught in the red as they sell their product on a line of credit to retailers who are slow to fulfill their end of the deal.
Roberts has seen clients tallying up seven figures of debt as unpaid invoices ranging from $20,000 to $50,000 pile on top of each other from multiple retailers not paying within a 30-day period.
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