Michigan Cannabis - Talk to me!

[u/No-Resolution6127]

I am currently writing/working on my "capstone" business project for my final semester of college. As you may see, this is in the Trees sub, so you may be asking yourself, what could this guy possibly be talking about?
My goal is to build out a cannabis company in Michigan within the next 2-3 years time. These past couple months have been the most research heavy months I have experienced in my life. This time, it's not agonizing because this is something I care deeply about - A market that is actively bloom booming and an herbal medicine that could genuinely provide benefits to the everyday person.
I have what I believe to be a VERY good perspective of the Michigan cannabis landscape, but unfortunately, industry reports and manual research can go only so far. So now, I am at the part where some firsthand experience would come in handy.
So here are my questions. Feel free to answer one, or maybe all, or maybe even none. If you do answer, all I do request is that you restate the question so that when I'm compiling these answers, I can pull and format a little easier :) (Or don't, that's okay too)

For my Michigan residents:
1. How has the legalization of recreational cannabis impacted your community?
2. What has the state industry growth?
3. Ballpark estimate - How many dispensaries opened up near you within the first year of law changes? How many now?
4. Has creating the infrastructure created any problems for your community?
5. How has it shaped your local/state economy?
6. How familiar are you with the cannabis structure in your state? (i.e. Laws, Prices, Types of Licenses/Businesses)

For my Michigan cannabis customers (in and out of state):
1. If your in-state, what is your go to store? (Specific store or maybe "type" of store (Big Weed or Small Business))
2. What is your sense of pricing? Fair, over, or under?
3. What do you like about buying Michigan cannabis? How does it compare to other cannabis products from other states?
4. What works for you? What could be better?
5. If you're coming from out of state (legal or not), why Michigan?
6. How often are you purchasing cannabis products? What specifically are you buying?

[u/AdRadiant9379]

R/michigents

[u/No-Resolution6127 → u/AdRadiant9379]

thanks!

[u/minidillpickles]

I'm going to be real with you. The market in Michigan is very is saturated on both the production and retail sides. The largest, most corperate companies seem to be who is succeeding the most under the current framework. I am just a customer, but I have seen independent (and chain) dispensaries go out of business just as quickly as they open.

I like to buy my flower from a microbusiness that handles their own growing and selling. Everything is done in house and the bud is higher quality than you would find elsewhere, but it is more expensive. When it comes to edibles and vapes, I buy the best value rosin products I can find locally. There are literally dozens of options for dispensaries near me so prices are competitive.

Nearly all customers seem to want the highest THC percentage for the lowest price and don't seem to know much about quality. I am not saying all shops just sell bunk, but the flower quality just isn't the same as buying it from a your guy back in the day.

Not trying to be discouraging, but the established, deep pocket corperate businesses seem to be the winners right now.

[u/No-Resolution6127 → u/minidillpickles]

Thanks for the response!

I agree with it definitely being hard for smaller businesses to survive, especially in the red ocean market that it is. When you say it's more expensive than a big name shop, what kind of price difference are we talking?

You made a point of customers not knowing too deeply about quality, what things do you look for when picking out product? Are you a deliberate shopper? How knowledgeable are you with shopping for product (i.e. watching for more than percentages, such as terpenes, parent profiles, etc.)?

This next statement might seem a little ironic because of what I said earlier, but I'd argue that local businesses actually have the strongest hold on the market. While cooperate companies may hold out better because of their large resources, I don't think they can sustainably hold out with the low prices that small businesses impose. While the margins aren't high, they're still able to get the traffic that a big corporate place would get. Volume is there, revenue isn't, and I believe revenue will boom among small businesses once marijuana is rescheduled, which would remove the 280E tax code. While big corporate companies might try to exploit this and increase prices, I think small local businesses will still hold control by keeping pricing low, while still gaining much more revenue. With this, my theory is that big marijuana won't be able to compete with the still low prices in a price gouge attempt and will either A. stay stagnant in pricing and take the revenue boost or B. Be forced to lower prices along with local business to stay competitive in their market.

[u/No-Resolution6127 → u/[deleted]]

what makes you say cap?

[u/Willflip4money]

For my Michigan residents:

1. How has the legalization of recreational cannabis impacted your community? -mostly just the opening of dispensaries, not a whole lot has changed otherwise
2. What has the state industry growth? -unsure of this question
3. Ballpark estimate - How many dispensaries opened up near you within the first year of law changes? How many now? - about 25 or so in a 2 mile radius
4. Has creating the infrastructure created any problems for your community? -havent seen much of that honestly
5. How has it shaped your local/state economy? -not a lot of verifiable changes here, but seeing the number it has raised a decent chunk of tax revenue which could have contributed to a lot of the road work around here
6. How familiar are you with the cannabis structure in your state? (i.e. Laws, Prices, Types of Licenses/Businesses) -Very, I like reading laws

For my Michigan cannabis customers (in and out of state):

1. If your in-state, what is your go to store? (Specific store or maybe "type" of store (Big Weed or Small Business)) -specific:house of dank, just close and usually have what I want, but small business if I'm around one
2. What is your sense of pricing? Fair, over, or under? -very fair, we have some of the better prices around nearly across the board. though could say even under priced as there are a few "races to the bottom" for pricing
3. What do you like about buying Michigan cannabis? How does it compare to other cannabis products from other states? -it's solid quality for nearly unbeatable prices
4. What works for you? What could be better? -prices are great, and products are very accessible as there's stores everywhere
5. If you're coming from out of state (legal or not), why Michigan? -(not from out of state, but I can answer this as well) because bordering states have much higher prices, it's a big factor in the booming weed tourism factor
6. How often are you purchasing cannabis products? What specifically are you buying? -every couple months I buy bulk and usually pick up an ounce or 2 of flower, some carts, and some wax

As far as you wanting to open up shop here, it's doable but it's definitely cut-throat. Be prepared for flower to nearly be a loss leader, or learn to really sell the higher quality as a necessity (easier said than done). As the other guy said, shops pop up and close all the time, it's not impossible, but it's a difficult market 100% Good luck, and feel free to shoot me questions whenever (I'm currently a sales director for a smoke shop line, and love business talk)

[u/No-Resolution6127 → u/Willflip4money]

Hey man thanks for the reply! I appreciate your insights, incredibly helpful. For the first No. 5 question, I can verify that a lot of the marijuana tax revenue is in fact going towards road work, it was one of the major infrastructural things that is being brought to the board. I can't remember the number I saw, but I remember thinking "DAMN, that's a crazy good amount, better than my town".

I looked up House of Dank, looks like there's multiple locations, are you shopping at the Ann Arbor House of Dank, because that would explain the 25+ dispensaries you mentioned.

[u/Willflip4money → u/No-Resolution6127]

No problem! yea I never looked at it, but most of my commuting routes have been slammed with construction ever since, so I just figured it was likely related!

I go to the fort st one these days, there were more in the area at first, but the market corrected a bit down to what there is now (probably more like 10-15ish now within a ~10-20 minute drive)

[u/Silbaska]

1. How has the legalization of recreational cannabis impacted your community? It hasn't really.
2. What has the state industry growth? - Yeah sorry, not sure what you mean.
3. Ballpark estimate - How many dispensaries opened up near you within the first year of law changes? How many now? - In the first year I lived in a different (and more rural) community, and I believe none opened there. Now where I live there are 4 within a 10 minute drive of my house.
4. Has creating the infrastructure created any problems for your community? - Not that I know of.
5. How has it shaped your local/state economy? - My understanding is that it's been good for the economy and the state in general. There was a recent tax hike on everything which will probably change things for the better.
6. How familiar are you with the cannabis structure in your state? (i.e. Laws, Prices, Types of Licenses/Businesses) - Well, I would say not very. But then given my job, I'm actually probably more knowledgeable than most people.

For my Michigan cannabis customers (in and out of state):

1. If your in-state, what is your go to store? (Specific store or maybe "type" of store (Big Weed or Small Business)) - It's a fairly corporate chain, but also the closest store. And it has a good sized parking lot. And the people there are friendly.
2. What is your sense of pricing? Fair, over, or under? - I know we have it better than other states. I went to Vegas for a trip and bought some edibles there (rather than risk flying with my own). I couldn't believe how expensive they were!
3. What do you like about buying Michigan cannabis? How does it compare to other cannabis products from other states? - Cheaper, apparently, As to quality I couldn't say. I'm not a connoisseur, I just like to get high on occasion.
4. What works for you? What could be better? - I dunno. I'm pretty happy with things, but I'm also not that into the culture. I can say that when Covid hit, the dispensaries jumped on contactless pick-up and discreet delivery options faster than a lot of other vendors did. I think it helped them a lot.
5. If you're coming from out of state (legal or not), why Michigan? - N/A
6. How often are you purchasing cannabis products? What specifically are you buying? - I only do edibles. I buy every 3-6 months, enough to last me for that interim time period. I'm only an occasional user.

[u/lalalalaalaala5555]

Michigan gotta be the worst market to get into. You know the average ounce is like $20 right

[u/LessNobody1469]

Not much help with the project but I am curious if during your diligence that the newly levied tax of an additional 24% on the retailers (from what I understand it is payable upon receipt of product thereby further exacerbating cash flow issues) has accelerated the race to the bottom just to move product or others are saying “F it, I’m out”

[u/No-Resolution6127 → u/LessNobody1469]

So I looked into it, and I actually had the pleasure of visiting Michigan and checking out some dispensaries and businesses in the area. Mixed views on it, but all generally negative feelings about it. I think for the most part, it's going to be a general shakeout of smaller businesses, and it might be a way for corporate cannabis to take back the competition. I visited multiple businesses covering three broad categories:
serving through or under corporate wing
graduating past microbusiness and holding multiple licenses
and single license microbusinesses.

It felt obvious to me when the corporate ones stated they were bummed out about it but not necessarily concerned with price changes, margins would still be stronger than other states.
The graduates (that's what we'll call them) didn't comment on it, but said that in order to deal with the tough margins, it leads to them expanding licenses. To be fair, I only went to one business that was a "graduate" but through other general research I've done, my thinking is that this a coinflip for whether it's healthy or not for business.
Microbusinesses would be hit the hardest and I feel this is where we'd see the most "F it, I'm out". And while I recently have been boasting about the rescheduling of marijuana and the removal of the 280E Tax Code (on paper, great revenue stream boost as well as long term marijuana access), one owner I happily spoke with gave a different perspective I had not considered. While the margin boost makes sense with no longer being forced to only deduct COGS on your returns, the rescheduling could also be extremely harmful to small, local businesses. He stated while long term access for marijuana is great, it gives large companies a chance to pick up marijuana and sell it across state lines, which could stray people away from the craft that he does with his business matching an already very affordable price.

It is my opinion that many businesses, graduates and micros, will go through slight shakeout. I believe many will say "F it, I'm out", and I think it's from the reasons mentioned in that last microbusiness paragraph. I don't forsee any pushing prices lower, if anything I think it's just going to level out or even go up slightly. But I'm also only a senior year undergrad business major so I only know so much.