As demand grows Michigan falls short on recreational cannabis supply

Published Aug 12, 2020 09:00 a.m. ET
iStock / gguy44

Sales are up, and so is demand. Michigan’s seven-month-old recreational cannabis market is growing quicker than the industry can handle.  The first month of recreational cannabis sales went up by around the 7 million dollar mark, and that number increased to an unbelievable amount of 39 million dollars in May. The marijuana market is green and ready to go.

Are you one of the many people who are contributing to the 400-475 million dollars worth of sales that this state has produced? Do you believe that the marijuana market will rise to 1.9 billion dollars by 2024 and overcome the challenges that have confronted the recreational cannabis market?

What challenges?

There is an apparent mismatch between the demand for the cannabis flower and the supply chain.  Let's take into consideration COVID-19 and how this deadly virus has impacted the recreational cannabis market in Michigan. Clearly, today the demand for adult-use recreational cannabis has outweighed the supply, and this could affect the high prices of the cannabis flower in the Michigan area.

The recreational cannabis user is not in the same situation as medical marijuana patients are. Strains available in the medical marijuana market outweigh the availability of different strains in the recreational cannabis market. The pharmaceutical market may have 20 to 25 available strains compared to the recreational cannabis market that have the availability of a meager four strains of cannabis flower.

Medical or recreational cannabis

The shortage in supply is reflected in the average price on the marijuana market. The average cost for an ounce of cannabis flower at the retail level was about $410 in May of this year. Michigan’s Marijuana Regulatory Agency (MRA) has supplied the monthly available information. The comparison to the medical marijuana market is shameful at $251, revealing some troubling discrepancies.

A vertically integrated cannabis producer and retailer of Exclusive Brands, CEO, Omar Hishmeh discusses how his company is fulfilling less than 5% of clients' recreational marijuana product demands. Sadly, he states that nobody is getting the amount of product  that they truly need due to the lack of supply. The reason given is that it is simply not available.

Prices

Robin Schneider of the Michigan Cannabis Industry Association comments on the cannabis flower's wholesale prices, which run between $2500 and $3500 per pound, and this is dependent on the quality available. If the state can get companies up and producing the herb, then the price per pound will significantly decrease, and the cannabis consumer will be more likely to frequent the legal marijuana market establishments.

Supply

The caregiver supply is drying up due to the decision issued in April, which was brought down by the MRA. The spikes in wholesale pricing were attributed to this decision and caused recreational marijuana pricing to increase for the consumer. The caregiver supply chain for medical cannabis users can continue until October only.

The process of changing medical cannabis to recreational cannabis impacts the recreational marijuana side of the market. The change being implemented by the MRA will see a bunch of cannabis flower removed from the market. Industry chiefs believe it will be years before the recreational cannabis market will be able to keep pace with the demand.

The market for cannabis products in this state is in high demand, and the market is growing fast. The black market in the state is not slowing down, and experts believe that the only way to abolish this market is to lower the prices for legal cannabis flower.

Closing thoughts

Michigan’s medical cannabis market in Detroit is enormous as some of the inner ring suburbs are expanding adult cannabis use. However, some have chosen to go the direction of the recreational market instead. Those markets are seeing incredible revenue. Hishmeh from Exclusive Brands  is concerned that new municipalities in the state that opt-in may be disappointed due to the lack of supply.

How COVID19 is altering recreational drug demand

Author

Related posts