Michigan’s legal cannabis market, once a booming industry, is facing a reality check. September 2024 saw a sharp decline in sales, with total revenue reaching $266.9 million, a nearly 10% drop from August’s record-breaking $295.4 million. This downturn reflects not only the end of summer but also the growing issue of oversupply within the state’s cannabis industry.
The drop in prices is a significant factor contributing to the decline. The average price of an ounce of recreational flower hit an all-time low of $78.68 in September, a 15.6% decrease since January. In some regions, like the Upper Peninsula, retailers offered steep discounts to maintain sales, but even with these efforts, overall sales still fell by 16.9%.
The surge in Ohio’s recreational cannabis market is another factor impacting Michigan’s sales, particularly in the eastern and southeastern regions. Ohio’s market sold over 5,200 pounds of marijuana in September, generating $87.1 million in revenue. This influx of competition is likely contributing to Michigan’s 23% sales decline in those areas.
On the supply side, overproduction is the primary driver of the market’s struggles. With 3.77 million active cannabis plants being grown, a 45% increase from the previous year, the market is saturated, further pushing down prices. Growers are now utilizing 82% of their licensed grow capacity, a significant increase from 56% in April, highlighting the intensified production and its impact on market dynamics.
The state has also witnessed a surge in cultivation licenses this year, further contributing to the oversupply situation. Adding to the challenges, the presence of unlicensed cannabis in the market remains a concern. Though a court ruling in 2023 allowing its integration into the licensed market was reversed, concerns about organized crime and the impact of these illegal products persist.
Despite the current challenges, Michigan’s cannabis market has achieved remarkable growth in recent years. In 2023, the state reached a record $3.06 billion in sales, reflecting one of the largest growth spurts in the US cannabis market. The market’s success was fueled by increased consumer demand, expansion of dispensaries, and cross-border trading. However, the current oversupply and price drops suggest a market that has matured and is reaching its peak.
The future of Michigan’s cannabis market remains uncertain. Whether it can adapt to the new challenges, address the oversupply issue, and find ways to attract new customers will determine its long-term success.