Michigan Cannabis Prices Plummet Amid Oversupply of Cultivation Licenses

Since the launch of adult-use cannabis sales in December 2019, marijuana flower prices in Michigan have dropped dramatically, with the average retail price for an ounce of flower plunging more than 80%. Industry experts attribute the sharp decline to an oversupply of cultivation licenses, leading to a highly competitive market and a glut of cannabis products.

Price Drop and Market Growth

As of August 2024, the average retail price for an ounce of marijuana flower in Michigan was $80.14, down a staggering 84.5% from $516.21 per ounce in December 2019, according to data from Michigan’s Cannabis Regulatory Agency (CRA). Despite the price drop, Michigan’s cannabis market has experienced explosive growth, with monthly sales increasing from 450 pounds sold for $1.7 million in December 2019 to 100,894 pounds sold for $129.4 million in August 2024—a remarkable 22,321% increase.

Oversupply of Cultivation Licenses

A key factor driving the price compression is the massive increase in cultivation licenses. Between May 2020 and August 2024, the number of cultivation licenses in Michigan rose by 964%, jumping from 273 licenses to 2,904. This oversupply has flooded the market with cannabis products, far outpacing demand.

Industry insiders note that Michigan’s unlimited-license structure has contributed to this freefall in prices. As more cultivators entered the market, many were forced to lower prices to remain competitive. Companies have been eager to move inventory, and price reductions have been their primary solution.

Bulk Sales and Outdoor Growing

Another factor influencing Michigan’s cannabis market is the state’s allowance for retailers to buy and sell flower in bulk. Outdoor growers, in particular, are selling marijuana flower for as little as $12 to $15 per ounce, as they struggle to sell massive quantities of product.

Outdoor growers with large-scale operations face significant challenges in moving their inventory. Some farms grow tens of thousands of pounds of cannabis, but the oversupply means they often can’t sell it fast enough, leading to steep price cuts.

Impact of Croptober Harvest

As Michigan’s Croptober harvest season approaches, outdoor growers are still working to sell off last year’s flower. The CRA’s data only captures bulk flower sales, but many cannabis products are pre-packaged before being sold to retailers, which skews the overall numbers. Despite these challenges, brands with strong identities have managed to maintain price stability amid the price compression and oversupply.

Competing with California’s Market

Michigan’s low cannabis prices have created a retail environment that now rivals California, the largest regulated cannabis market in the world. Michigan’s combination of low prices and high sales volume has helped it emerge as a major player in the national cannabis industry. However, the intense price competition is forcing cannabis companies to adapt or face significant financial challenges.

Market Adaptation and Consumer Benefits

Cannabis brands in Michigan are adjusting to the low prices by focusing on efficiency and offering value to consumers. Dragonfly, a top-selling pre-roll brand in the state, sells non-infused pre-rolls for just $1 each, a pricing strategy that reflects the market’s competitive landscape. As the market matures, efficiency in production and cost savings are becoming increasingly important, with companies passing those savings on to consumers.

Price Compression Across the U.S.

Michigan isn’t alone in facing price compression due to an oversupply of cannabis licenses. Other states, such as New Mexico, are also grappling with an excess of retail licenses, which has forced some businesses to close or downsize. Industry experts predict that as more cultivation licenses are issued and supply increases, prices will continue to stabilize across the country.

The cannabis industry is adjusting to these market dynamics, with companies finding ways to stay competitive despite shrinking profit margins. As the market matures, operators are learning to navigate these challenges while offering consumers more affordable cannabis products.

Michigan’s cannabis market has seen significant growth since the launch of adult-use sales, but the rapid expansion of cultivation licenses has led to a sharp decline in marijuana flower prices. While this has created a highly competitive market with some of the lowest prices in the country, it has also posed challenges for cannabis businesses that are struggling to maintain profitability. As Michigan’s cannabis industry continues to evolve, companies will need to adapt to the changing market conditions, ensuring that they remain competitive while delivering value to consumers.