Report: Michigan recreational pot market to rival Colorado's
Michigan’s recreational marijuana market is expected to rival that of Colorado and Nevada by 2023, according to a recent report.
The West Coast, where the legal marijuana business got its start, will be surpassed by by large states in the Midwest and along the East Coast as they expand medical and recreational access, according to an industry analysis by the Chicago-based Brightfield Group, a CBD and cannabis market research and consulting firm.
“We’re seeing a shift from the West Coast to the East Coast,” said Kay Tamillow, Brightfield’s research director. “Cannabis is not just for West Coast hippies anymore. It’s a growing industry, and it’s everywhere.”
Michigan joined nine other states and the District of Columbia to legalize recreational marijuana last year after 56% of voters supported the change, though the Michigan Marijuana Regulatory Agency has until Dec. 6 before it must begin accepting applications for recreational business licenses
With approximately 3% of Michigan residents holding a medical marijuana card, a higher rate than many other medical markets, Brightfield predicts between 2020 and 2023 the state's recreational market could triple in size and grow its share of the U.S. market by more than 3% to $650 million.
That is approximately the size of the recreational markets in Nevada and Oregon right now, Tamillow said. But with the sizes of their populations, those states likely won’t see much more growth by 2023, while Michigan's industry will be in its nascent stages.
“There is a lot of opportunity in Michigan,” Tamillow said. “It has a strong medical market, which is an indication that Michigan is a good state to get into for recreational. There’s certainly a lot of opportunity there. I’d expect to see some of these bigger players with headquarters in the Midwest looking to enter.”
Michigan’s medical market already has attracted interest from heavy hitters. New York’s Acreage Holdings, a cannabis company publicly traded in Canada whose board includes former U.S. House Speaker John Boehner, acquired Michigan-based Blue Tire Holdings LLC in November with the intent to open cultivating, processing and retail operations here.
Colorado edibles business Wana Brands also has partnered with Michigan cultivator VB Chesaning LLC to produce its products in the state.
Major cannabis companies such as Cresco Labs and Green Thumb Industries have their headquarters in Chicago.
Brightfield predicted the U.S. cannabis market will grow at a compound annual growth rate of 20% between 2019 and 2023 to $22.7 billion in sales. Recreational is expected to comprise $16.8 billion of the total.
None of the current top five markets are east of the Mississippi. Although California is expected to maintain its lead in the years to come with two-fifths of the U.S. market by 2023, eastern states such as Michigan, Illinois, Massachusetts, New Jersey and New York will grow their market share from 11% to 34%, Brightfield forecasted. Western originators together could drop to 20% of the U.S. market. The region, however, still remains a leader in product innovation because of the intense competition.
East Coast and Midwest states are instituting stricter rules and license caps as they move toward legalization, while the West’s regulatory environment included fewer limits on the number of licenses issued, which favors smaller operators, according to the report. This has led to about two dozen vertically integrated multi-state medical operators in the newer markets, Tamillow said.
Michigan doesn’t have a license cap, though some municipalities cap the number of businesses that can operate in their communities. The state also has strict criminal and financial disclosure requirements for cannabis license applicants.
Federal lawmakers also have introduced a number of federal bills to help support the cannabis industry, including confusion over state legalization versus federal law and protecting business banking practices.
“We’re keeping a close eye on the regulatory changes,” Tamillow said. “These could create more momentum in the market.”