Have Cannabis Sales in Michigan Hit Their Peak?

An Opinion Piece By: Harry Barash

Cannabis did not do so well at the ballots this past election season.   Four metro Detroit cities voted “no” to cannabis retail sales.  Voters in Birmingham (One Adult-use and One Medical), Grosse Pointe Park (Two Adult-use), Rochester (Three Adult use) and Keego Harbor (One or Two Adult Use) all voted against allowing for retail sales within their municipalities. 

When Michigan allowed for Adult Use sales in December of 2019, the Cannabis Regulatory Agency projected that the industry should mature at around $3 Billion in annual sales.  Sales of cannabis in 2020 when recreational marijuana was available for the entire calendar year were just under $1 Billion in total retail sales ($510M in AU and $475M in medical). 

According to the CRA website, there was not any information on the on how many retail licenses were active (both med and AU).   At the end of 2020 there were 152 municipalities that opted-in to medical and 87 that opted-in to adult use out of a total of 1,493.  In 2021 sales reached $1.83 Billion ($1.335 Billion in AU and $496M in medical) ending the year with 458 active medical retailer licenses and 432 active adult use licenses.  In 2021, there were a total of 160 municipalities that had opted-in to medical and 114 for adult use.  In 2022, sales of cannabis reached $2.356B in overall retail sales, $2.1B in AU and $256M in medical. 

At the end of 2021, there were 391 active medical retail licenses and 609 active AU licenses.  There were a total of 129 municipalities that opted-in to AU and 169 that opted-in to medical.  Here we are approaching the end of 2023 and the state is on pace to reach their $3 Billion projection. 

Through October of 2023, total retail sales are at $2.527B, with AU being $2.45B and medical at $77M YTD.  At the end of October, there were 734 active AU retail licenses and 266 active medical retail licenses.  There are 138 municipalities that opted-in to AU and 172 that opted-in to medical, again out of a total of 1,406.   

With adult use retail sales in just about every major city across the state including Detroit, Ferndale, Hazel Park, Waterford, Lansing/East Lansing, Ann Arbor, Ypsilanti, Flint, Saginaw, Bay City,  Kalamazoo, Battle Creek, Grand Rapids, Muskegon, Monroe, Traverse City.  Most of these markets are considered to be over saturated and retailers are not only working on smaller margins, prices continue to hover at near all time lows. 

Soon there will be more retail in other major markets like Warren, Eastpointe, Pontiac, Roseville, Harper Woods, New Buffalo, Detroit now with 68 AU approvals, almost half of which are already operational and the other half that just received their approvals in November, and a host of other cities that are considering it. 

How much is enough?  In the recent elections, four metro Detroit communities, Rochester, Birmingham, Keego Harbor and Groose Pointe Park all had ballot initiatives and all lost.  At least those municipalities thought it was enough.  Besides metro Detroit, the most populated area in the state, where there are large pockets that do not have retail, there doesn’t seem to be a demand for other areas. 

These smaller markets that are near larger markets are just not performing and are capped based on population, competition, location or any combination thereof.  Some people think that the state should have a moratorium, while others say let the market sort itself out.

There are a lot of bad actors, bad operators, underfunded operators and low volume single store operators that have either not made it or will probably not make it.  I say let the market sort itself out! 

Harry Barash is Vice President at NAI Farbman (www.naifarbman.com), a full service commercial real estate company based in Southfield, MI, and specializes in the cannabis industry.  Should you wish to discuss your asset in confidence, feel free to reach out at barash@farbman.com   

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