In an unprecedented surge, Michigan’s cannabis industry hit a new milestone in 2023, with licensed dispensaries recording a staggering $3.06 billion in sales.
This 25% increase from the previous year has not only boosted the local economy but also created substantial tax revenue for state and local governments. Cannabis sales in Michigan in 2023, averaged $385 per adult, concluding with December witnessing the highest monthly sales ever at $279.9 million.
Most of these sales were from recreational cannabis, totaling $2.74 billion. The resulting tax windfall is significant, especially for cash-strapped local governments.
A Metro Times analysis reveals that more than $274 million in taxes from recreational cannabis sales will benefit local governments, schools and roads.
Additionally, a 6% sales tax on all recreational and medical sales brought in another $183.6 million, cumulatively generating $457.6 million in new taxes.
The industry’s growth is further evidenced by the opening of 120 new dispensaries in 2023, bringing the total statewide to approximately 750.
Detroit’s recent entry into the recreational cannabis sector has notably contributed to this expansion, with 70 recreational cannabis licenses already awarded out of a potential 160.
Despite the booming sales, the industry faced challenges with pricing. The average price of an ounce of adult-use flower plummeted from $512 in January 2020 to $80 in January 2023, before slightly recovering to $90.08 in December 2023.
This price drop, while beneficial for consumers, posed difficulties for dispensaries and growers.
Michigan’s Market Dynamics
In an exclusive interview with Benzinga Cannabis, BDSA’s expert Brendan Mitchel-Chesebro noted Michigan’s unique “unrestricted but limited” cannabis market.
- Robust Growth in Consumer Spending and Penetration: Despite launching its adult-use market in late 2019, Michigan continues to experience strong growth in consumer penetration and individual spending.
- Fierce Competition and Price Dynamics: The competition in Michigan’s cannabis market is intense, leading to rapidly decreasing prices, yet consumer growth and spending remain strong.
- Unique Market Category: Michigan’s cannabis market falls into an “unrestricted but limited” category, characterized by significant competition and robust consumer growth amidst declining prices.
- Importance of Retail Availability: Mitchel-Chesebro emphasizes that limited retail options can substantially impact sales growth, as consumers prefer convenience and affordability in their purchasing decisions.
- Impact of Cross-Border Trading: The success of Michigan’s market is partly attributed to cross-border trading, similar to Missouri’s market, which achieved significant sales through interactions with customers coming from neighboring states.
- Market Complexity and Variables: The success of the cannabis market is influenced by various factors, including market maturity, licensing restrictions, pricing and regulations in neighboring states.
- Retail Accessibility And Consumer Choices: Product availability, assortment and the number of retail locations play a crucial role in consumer choices. Limited retail options can lead to longer consumer travel for cost savings.
- Significance of Pricing And Convenience: Low prices and retail proximity are major drivers of consumer retailer choice. Consumers are inclined to travel further if it results in significant cost savings on cannabis purchases.
- Combination Of Factors Driving Market Growth: Michigan’s market growth is attributed to a mix of licensing, competition, pricing and cross-border trading, showcasing how these elements can collectively contribute to the success of the cannabis industry.
This story was published by Benzinga