Top Challenges in Michigan’s Cannabis Industry (And How to Succeed Despite Them)

Despite a high demand for adult-use cannabis that has only increased since Michiganders voted “YES” to recreational marijuana in November 2018, there are some issues that hinder the success of the industry. Below, we examine the main Michigan cannabis industry challenges in depth, and explain how to succeed despite them. 

Need help navigating Michigan’s booming cannabis industry? Request a free consultation now.

1. Supply vs. Demand

The adult-use supply is relatively low compared to the medical cannabis supply, due to a variety of reasons. This shortage is reflected in prices: Adult-use cannabis is significantly more expensive than medical marijuana, according to the Michigan Marijuana Regulatory Agency (MRA). However, the adult-use industry has maintained steady growth and sales since it officially launched in December 2019.  

2. Caregiver Industry

The product shortage was only exacerbated by the sudden phase-out of caregiver supply to adult-use retailers in April of this year. In DeRuiter v. Township of Byron, the Michigan Supreme Court ruled in favor of Byron Township. The court held that it is lawful for a municipality to create and enforce an ordinance containing additional regulations for caregivers, as long as the ordinance does not conflict with the Michigan Medical Marihuana Act (MMMA).

While caregivers can continue supplying Michigan’s medical cannabis market, this decision is causing large spikes in wholesale pricing and subsequently, the retail pricing for consumers. This only drives consumers to the black market, which is still thriving. Until the supply can match the demand, the legal cannabis industry will continue competing with the black market. 

3. Few Municipal Opt-Ins

The Michigan Supreme Court favoring municipalities leads to other issues within the industry. While there are now well over 100 (and counting) recreational provisioning centers in Michigan, there are only slightly more municipalities in Michigan that allow medical marijuana businesses. There are even fewer that have opted-in to recreational marijuana businesses, as well over 1,000 Michigan communities have opted out of the MRTMA. 

There are many communities that haven’t opted-in nor opted-out, and are waiting on results of other similar communities that have opted in. With the highest concentration of adult-use provisioning centers in Southeast Michigan, this provides an obstacle for both consumers and operators alike. 

If this trend persists, the market can easily become oversaturated and make it even harder for license-holders to drive profits and healthy competition. This municipal problem is only further complicated by the COVID-19 pandemic.Michigan cannabis industry challenges Michigan cannabis industry challenges.

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4. The Need for a More Robust Social Equity Program

In January 2020, Detroit’s City Council issued a temporary ban on recreational marijuana sales. Due to the COVID-19 pandemic, the ban still remains in effect until regulators can develop a social equity program and squash the black market.

June 2021 Update: Detroit marijuana applications are on hold indefinitely. Learn why.

While Michigan’s social equity program lowers the entry barrier for recreational cannabis business applicants, many industry experts say that the state needs to do more to help keep these businesses running. So far, Barton Morris, the principal attorney for Cannabis Legal Group, is “underwhelmed” with the social equity program in Michigan.

Rick Thompson, owner of the Flint-based Michigan Cannabis Business Development Group, proposed the suggestions below to Marijuana Business Daily on how to improve the social equity program:

• A break on real estate by a land bank.
• Payroll or accounting services provided to the applicants.
• Human resources and employment services.
• Free executive leadership training through a partnership with an established business to guide these new owners

Additionally, Barton would like applicants to be offered help on operational planning, odor mitigation and management planning, to name a few. For example, many caregiver applicants were not required to submit a plan on how they manage pesticide remediation. 

5. Lack of Banking Access

As Barton stated in his appearance on Startup Nation’s “Inside Michigan Business” podcast, the biggest issue facing the cannabis industry is banking, and “financial institutions (largely) unwilling to provide financial services to the industry.” A majority of banks and financial lenders cannot offer loans and other financial incentives to businesses, due to federal law classifying marijuana as a schedule I controlled substance. 

Barton Morris on Startup Nation’s “Inside Michigan Business” Podcast with John Gallagher and Jack Lessenberry, July 9th, 2020

However, The Secure and Fair Enforcement (SAFE) Banking Act of 2019 passed the House of Representatives in September 2020 with bipartisan support. This marked the furthest advancement of access to banking and financial services for cannabis related legitimate businesses. 

Though the bill passed by a vote of 321 to 103 in the House, it stalled in the Senate. And with a majority Republican Senate and COVID-19, it’s unclear what the future of this bill is. 

How to Succeed in Michigan’s Cannabis Industry

As you can see, the five most significant challenges in Michigan’s cannabis industry both directly and indirectly relate to one another. By improving one of the mentioned issues, the rest (and much more) will also subsequently improve. 

The good news? These issues can be easily navigated with professional assistance. There are over 100 recreational provisioning centers open in Michigan, and that number continues to climb. 

Our law firm has helped hundreds of clients receive their cannabis business licenses. Because of this, we proudly hold a 95% success rate with Michigan license applications. 

Need help navigating Michigan’s booming cannabis industry? Request a free consultation now.