By Cody Yarbrough, Contributing Writer
The cannabis industry is booming across the country, and Ohio is the newest state to legalize the buying and selling of the herb for recreational use. After a split 53%-47% vote last year’s election and months-long delays caused by petty politics in the state’s legislature, as of August 2024, the Buckeye State is now the 24th state to pass the measure.
The benefits of the measure were felt almost immediately throughout the state. Dozens of dispensaries saw blockbuster profits on day one as lines of customers wrapped around the block, and cannabis fuel parties and events encouraged people to buy more products. The profit generated during the first week has exceeded market expectations and has filled the pockets of both business owners and the state coffers. However, while Ohio enjoys the success of its already booming new industry, here in Michigan, many experts and dispensary owners are expecting the worst.
This wouldn’t be the first time that Ohio has ruined something for Michigan, but it surely would be one of the more expensive cases. In 2023, Michigan came out No. 1 in the nation in the number of cannabis products sold with 24.2 million units purchased and over $3 billion generated in sales. However, a large number of Michigan’s marijuana sales aren’t made by Michiganders. Up until Ohio’s legalization of the herb, Michigan shared a border with three states where only medical use was legal. As a result, Michigan dispensaries have garnered a strong support base of out-of-state buyers over the past five years. In fact, some people in Monroe Township say that Ohioans alone make up half of their cannabis sales.
To have multiple residents of other states flocking to spend money in your economy sounds like a dream. But once you start looking at the numbers, that dream starts to melt into a harsh reality. Despite moving more cannabis than any place else in the country, Michigan only generated $3 billion in sales last year. Coming in second to California which generated $5.1 billion off of only 17.3 million units. The reason? Well, besides California’s higher taxes, there’s simply just too much weed and too much competition in Michigan.
“Every state has a different set of structures and rules.” Jason Erkes of Cresco Labs said in a recent interview, “Michigan is not a limited [cannabis] license state, which means that the state is really saturated with stores and they’re competing against each other driving the prices down and a lot of businesses are failing.”
Cresco Labs is a Chicago-based company that owns dispensaries across the country, including one in Ohio. With around 750 licensed dispensaries in its borders, the cannabis market in Michigan is highly competitive and oversaturated. On top of overproducing product, undercutting prices of rival dispensaries has become a widespread practice throughout the state as a result. The low prices might be great for the consumer, but for cannabis distributors, they make it a struggle to make decent profits. Smaller dispensaries are particularly affected, as abiding by completive pricing can make it hard to keep up with expenses, and raising prices might result in fewer customers coming through their doors.
To put it plainly, the Michigan cannabis industry is growing, but it’s unstable. And when you factor in Ohio’s exit from Michigan’s market, it’s more than enough to make those invested in it quite nervous. Dispensaries that are strategically placed in border towns can count on a decrease in sales and might soon find that the rural area that they’ve set up shop in a community that’s incapable of sustaining their business without out-of-state buyers. Even worse, because of the massive impact that the cannabis industry has had on the Michigan economy, its decline will be felt throughout the state as a whole.
The drop in sales will also result in Michigan communities receiving less from the state’s government. Tax from cannabis sales in Michigan are reinvested into schools, transportation, roads, and other public projects. The state also provides small-town governments a piece of the pie in the form of grants that they can use as they see fit. Removing Ohio from the picture directly affects these programs and communities the communities that benefit from them. However, there is one saving grace that might soften the economic blow enough to keep the market stable.
Ironically, Michigan’s low prices might be the one thing that saves its industry from an immediate crash. Despite now being legal, Ohio’s market is nowhere near as oversupplied as Michigan’s, with only around 100 dispensaries in the entire state that sell recreational cannabis. Meaning that prices over there are much higher in comparison, and for many Ohioans, it’ll still be cheaper to travel to Michigan for the products they enjoy. This of course will change over time as investors rush to open their own dispensaries and capitalize on this fresh opportunity. However, the slow change will mean that Michigan will have a chance to adapt more healthily than if Ohio had appeared as a major competitor right away.
Still, Ohio’s market is growing rapidly, and in a year’s time, their industry might even rival that of their big brother’s up north. In fact, Ohio’s cannabis journey is already mirroring Michigan’s in one big way. The recent legalization of the herb has not only excited Ohioan consumers, but also cannabis enjoyers from neighboring states like Kentucky, Indiana, and Pennsylvania. With the state nearly surrounded by non-recreational states, there’s little mystery as to how previous projections have been so easily surpassed.
“Any way you look at it, Ohio had incredible performance in the first week of sales.” Erkes stated, “We’re seeing numbers at dispensaries that rival numbers in established markets like Illinois that have been running for years. We’re seeing that in the first week in Ohio. We’re seeing a lot of out-of-state licenses when people are checking in. A lot of out-of-state license plates in the parking lot. We know that people want access to regulated lab-tested products, and they don’t have access to that in those states.”
As Ohio enjoys the same success that Michigan has enjoyed in the cannabis industry, they should also look at where Michigan is now and take notes. Relying on an out-of-state customer base has put the state in a precarious situation that will take millions out of local communities’ pockets. Every year more states vote to legalize recreational cannabis and in the very near future the states that haven’t will be in the minority, and the market for traveling buyers will be almost non-existent.
For one reason or another Michigan distributors didn’t see this coming, and now many are wrestling with some tough decisions regarding their business. This blow to the industry won’t mean the end of the cannabis business in Michigan, but with some foresight and regulation, it’s a blow that could’ve easily been avoided.
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