After booming first year, recreational cannabis market shows no signs of slowing down
While COVID-19 has put many folks out of business, one industry is booming: cannabis. It’s been nearly one year since Michigan dispensaries were allowed to start selling marijuana for recreational purposes. And for many Michiganders, it came just in time. As people look for a way to take the edge off 2020, recreational cannabis sales are closing in on half a billion dollars.
Dustin Walsh, senior reporter at Crains Detroit Business, has been reporting on the industry's impressive growth. He said that while many industries are looking at substantial losses during the pandemic, cannabis sales have increased every month since last December. Walsh said this was possible, in part, because the government categorized the marijuana industry as an essential industry all the way back in March.
But the pandemic has brought changes to how dispensaries interact with their customers. Marie King is with Bloom City Club, a dispensary with locations in Battle Creek, Burton, and Ann Arbor. Usually, she says, people like coming into the dispensary to talk to the staff about their options, but curbside pickup has altered that relationship.
“The level of care that we were used to, it was still there, but we had to be more creative about how we were able to help people that way,” King said.
Bloom City Club was a medical marijuana dispensary before recreational cannabis was legalized. The shift to a recreational market has meant adjusting to new regulations throughout the distribution chain. For example, the state enacted a tracking system which follows cannabis from seed to sale. That’s increased oversight, and subsequently, prices.
“Cannabis is one of those interesting products that it kind of just sells itself, and people are willing to pay for it what they feel it’s worth,” King said. “Definitely, the taxation has been a little bit of a sticker price shock for a lot of people. Because you know, nobody’s really expecting to be pay for an excise tax of 10% on top of a 6% sales tax.”
The extensive oversight and expensive licensing process has made storefront openings in Michigan slow— slower than states like California or Oregon. Walsh said this helped stop a overflow of product onto the market when legalization occurred.
“A slow rollout makes everyone antsy, but because the licensure was slow and because the capital requirements were sort of high, it made everything move a little slower and it didn’t flood the market. I think there is going to be a point probably in the next year or two, probably close to two years, where you are going to see the saturation of the market. And that’s when you’ll see consolidation,” Walsh explained.
Access to capital for people of color looking to start a cannabis business has been a focus for many in the marijuana industry. Though opening a shop still requires a significant amount of capital, Walsh said there are banks that are looking to fund Black-owned dispensaries.
As more municipalities in Michigan allow dispensaries to set up shop, King expects that sales will continue to rise. Detroit’s city council just voted to allow businesses to apply for licenses and set up within city limits. But while Michigan has been carrying the weight for cannabis distribution in the Midwest, she says, that isn’t going to last forever. Eventually, those extraordinary sale reports will plateau, but probably not until neighboring states also legalize medical and recreational use.
This post was written by Stateside production assistant Catherine Nouhan.