Michigan Marijuana Market ‘Maturing Rapidly’ But Faces Barriers To Growth, State Report Finds
Michigan’s marijuana market is “maturing rapidly” and stands to become a major component of the state’s economy, according to a new report commissioned by the state cannabis regulators.
However, there are two main barriers to growth that researchers identified: 1) too many local jurisdictions have opted out of allowing marijuana businesses to operate, and 2) the process of getting cannabis products tested is excessively long.
The analysis, which conducted by Michigan State University on behalf of the state Marijuana Regulatory Agency, looked at the potential economic benefits of the state’s adult-use cannabis program. Researchers found that as the market evolves over the next few years, marijuana sales will reach around $3 billion per year and the industry will create about 13,500 jobs. Tax revenue from legal sales is estimated to hit about $495.7 million on an annual basis.
The researchers also took into account all of the ancillary businesses that will be impacted as the cannabis market grows and found that the “total economic impact is estimated to be $7.85 billion with a total impact on employment of 23,700.”
“It is very important to note that these figures are based on the assumption that the industry will grow over the next several years,” the report states. “If barriers to expansion persist, these estimates will overstate the expected economic impact and the tax revenue resulting from the legalization of recreational marijuana.”
A major challenge for the state is the fact that cities can elect not to allow marijuana businesses to operate within their jurisdictions, and many have done so. About 1,400 cities have opted out so far and others have been slow to implement retail sales.
“Over time it is assumed that more local governments will allow marijuana sales as marijuana consumption becomes more acceptable, and local communities obtain a more complete picture of the marijuana industry,” the researchers said.
Another problem concerns testing. The report said that there’s an insufficient number of facilities that can test cannabis products, which is required in order to put them on the market. Some stakeholders have reported that it takes up to a month to complete the necessary analysis.
“The slow rate of local approval and the backlog of testing has created a bottleneck in the supply chain and are factors that partially explain why marijuana prices in Michigan remain quite high,” they said.
The report, which was compiled based on data extrapolated from Colorado’s marijuana market, does indicate that Michigan is on better footing than some other recreational cannabis states. The supply chain is “maturing rapidly,” and that seems to primarily be the result of early vertical integration in the industry, the researchers concluded. Large marijuana companies that own the cultivation and distribution are able to “sell directly to retailers” in many cases.
The researchers also noted that cannabis tourism could represent a boon to the state’s economy.
“Recreational marijuana tourism can be a significant draw, especially along borders with states without recreational marijuana.”
“Tourism is a major industry in Michigan, and some believe that Michigan could become a destination for marijuana tourism,” the report states, adding that Illinois is the only other state in the region with legal adult-use sales.
That said, Illinois is surrounded by more states, and it’s market has proved significantly popular, bringing in about $36 million in sales in March—with nearly $9 million of those sales came from out-of-state visitors.
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