Prices for marijuana flower in Michigan have nosedived since the start of adult-use sales in December 2019, and many in the industry attribute the falling prices to a glut of cultivation licenses.
At the same time, low prices in Michigan have created a marijuana retail market that rivals the one in California, the largest regulated cannabis market in the world.
The average retail price for an ounce of flower in Michigan has plunged more than 80% since adult-use sales started.
The average price for an ounce of flower was $80.14 in August 2024, according to data from Michigan’s Cannabis Regulatory Agency (CRA), down 84.5% from $516.21 per ounce in December 2019.
Meanwhile, monthly sales increased from 450 pounds sold for $1.7 million in December 2019 to 100,894 pounds sold for $129.4 million in August 2024, a change of 22,321%.
“The licensing structure has led to a freefall over time,” Nate Reid, senior vice president of commercial strategy at Chicago-based multistate operator Cresco Labs, told MJBizDaily.
“Everyone is so cash-focused and wants to move through their inventory; the only solution is to move prices down,” he said.
Cannabis cultivation licenses up 964%
Although price compression is to be expected as a regulated marijuana market matures, the situation is compounded when the state doesn’t limit licenses, said Ron Gibori, CEO of Michigan-based cultivator Six Labs, which holds 12 licenses in the state.
The number of cultivation licenses issued in Michigan has increased 964% since May 2020, when there were only 273 licenses compared to 2,904 in August 2024, according to Cannabiz Media.
The increase in cultivation licenses issued in Illinois has been more measured, rising from 21 active cultivation licenses to 58 during the same period, an increase of 176%.
Additionally, licenses are not always comparable; for example, some cultivators have more square footage or facilities operating under the same license than others.
“Michigan is an unlimited-license state,” Gibori said.
“It’s economics: Supply will outpace demand.”
Bulk cannabis sales
Number of licenses is not the only issue affecting Michigan cannabis prices, said Aric Klar, CEO of Quality Roots, which operates eight cannabis stores in the state.
Michigan also allows retailers to buy and sell flower in bulk.
“Outdoor growers are so distressed that retailers are buying pounds for $200-$300, or $12-$15 an ounce,” Klar said.
“Say an outdoor farm has 20 acres; they grow the product, and the amount they sell and keep in flower format is 20,000 to 30,000 pounds of marijuana.
“I don’t know anybody - even Pablo Escobar - who can sell that much product in a year," Klar added, referencing the late Colombian drug lord.
Growing cannabis supply
The Croptober harvest season is imminent, but many of Michigan’s outdoor growers still haven’t sold through their flower from last year.
Additionally, the CRA records only bulk flower in its monthly reports, but half of Michigan’s flower is pre-packaged before it’s sold to retailers, which skews the numbers, Klar said.
“Those brands that have identity … those products are staying pretty stable,” he said, adding that price compression and oversupply of regulated products are pushing illicit operators out of the market.
“Price compression has happened: We have the best prices in the country.”
Marijuana brands adapt to low prices
Ching Ho, founder of Michigan’s top-selling pre-roll brand Dragonfly, said the same market dynamics also are affecting brands, which are seeing sales volume make up for lower prices.
Dragonfly’s non-infused pre-rolls sell for $1 each.
“As the market matures, efficiency will matter more and more, and consumers will discover there’s no quality difference between a pre-roll you’re paying 3X for versus ours,” Ho said.
“This is because we integrate sun-grown cultivation with manufacturing and pass the savings on to the consumer.”
Cannabis prices falling in other markets
Michigan isn’t the only state where cannabis businesses are seeing price compression attributed to excess licenses.
Cannabis operators in New Mexico say an oversupply of retail licenses is forcing many marijuana businesses to close or downsize.
Price compression creates problems for many marijuana companies that build their business plans around high price points and high demand, said Matt Hutchinson, chief product officer for New York-based LeafLink, a software platform that connects cannabis retailers with brands.
“We have seen this happen across four or five markets,” Hutchinson said.
“You see a market start with low supply, and you have price points that are excessively high.
“As more cultivation comes on, it starts to level out to where it should be."
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‘Mini green rush’
Isaiah Dawid, founder and president of multistate cannabis genetics producer Clout King, said when he moved to Michigan from Santa Cruz, California, in April 2020, the prices of trim, flower and distillate were through the roof.
“Seeing wholesale flower prices at $4,000 a pound made operating in Michigan very attractive, which led to a mini green rush,” Dawid told MJBizDaily.
Because Detroit is a hub for automobile manufacturing, the power grid is robust, and inexpensive warehouse space is available, he added.
“Indoor cultivation boomed, and the post-COVID stimulus correction left all of the stores with an abundance of overpriced inventory,” Dawid said.
“The correction was severe, leaving growers with no choice but to race for the bottom.”
Margaret Jackson can be reached at margaret.jackson@mjbizdaily.com.