Cannabis is the one commodity that is defying the trend of rising gas prices, food prices, property prices, and other costs of living.
At $153, the average retail cost of an ounce of marijuana for recreational use dropped sharply in January. According to statistics from Michigan's Cannabis Regulatory Agency, prices have since slightly increased to $191 in March, but even at that price, there has been a 25% decline from $255 in March 2021.
In March of 2020, the common price for an ounce was $471.
This is excellent news for customers. However, smaller cannabis businesses claim they cannot compete with the cheap costs being offered by bigger vertically integrated businesses.
Eric Parkhurst, owner and producer of Ann Arbor's Winewood Organics, a small firm that cultivates, manufactures, and distributes recreational marijuana, claimed that he has seen rivals advertise an ounce of flower for as little as $70. He charges $250 for an ounce.
Parkhurst didn’t believe small businesses can compete with the bigger player. So in order to stand apart, he concentrated more on cultivating organic cannabis and what he thought was more artisan, high-end cannabis rather than competing on pricing.
According to Andrew Brisbo, director of the organization (formerly known as the Marijuana Regulatory Agency), this is a textbook example of supply and demand.
There wasn't much flower available when the state's recreational marijuana sales began at the end of 2019. But during the past several years, a growing number of cannabis grow operations have developed throughout the state, increasing the supply.
And when the outdoor farms harvested their crops in October, Brisbo added, the number of plants collected increased by nearly three times compared to the preceding months. He said that the end of the year normally sees a little decline in consumer demand, which results in an excess supply and reduced pricing.
Around that time, Lume Cannabis Co., one of the biggest cannabis businesses in the state, reached a turning point where its size (it has a 5% market share), the fact that 80% of what it sells in its stores is its own product, and falling flower prices prompted it to take a stand and really just go for it, according to John Gregory, Lume's chief marketing officer.
Lume chose to offer an eighth for $25 as opposed to the original $45. The price of some of its premium strains has decreased from $65 to $35.
While such strategies may be effective over the long run for vertically integrated businesses, producers, distributors, and retailers that must purchase the flower from farmers are placed in a dangerous position since they are unable to recoup their costs.
Pete Truby, VP of Marketing for Glorious Cannabis, a cannabis grower and distributor located in Rochester Hills, said the business is concentrating more on developing value-added goods, like an infused pre-roll, which is a pre-rolled joint with hash added to it, to enhance profitability.
However, industry insiders are concerned about the outcome, particularly for small growers, like Parkhurst at Winewood Organics. By being able to sell cannabis directly to customers and have some control over pricing, as opposed to, say, producing cannabis and selling it to other producers or retailers, he claimed that having a micro business license was crucial for him.
Medical Marijuana in Michigan
The Cannabis Regulatory Agency is in charge of managing Michigan's Medical Marijuana Program (MMMP), which is a state registry program. In accordance with the 2008 voter-approved Michigan Medicinal Marihuana Act, the program gives citizens of Michigan access to medical marijuana.
The MMP in Michigan is in charge of distributing medical marijuana cards to patients and caregivers as well as keeping track of registered users in a database. Dispensaries, growers, processors, and testing facilities are all subject to regulation and licensing under the scheme.
A patient who has been approved by a qualified doctor will be given a card that allows them to buy medical cannabis from dispensaries in the state after receiving the necessary approval. There are several certified dispensaries spread out over Michigan.