This story was republished with permission from Crain’s Detroit and written by Dustin Walsh.
The launch of northwest Ohio’s legal recreational marijuana market appeared sluggish Tuesday near the Michigan border.
Legal sales to all adults over 21 began in the Buckeye State on Tuesday after the state issued licenses to at least 98 previously medical-only dispensaries. But between 9:15 a.m. and noon, Crain’s counted just 49 customers entering Toledo’s only store, Rise Cannabis, which is licensed for recreational sales on Tuesday.
Conversely, on December 1, 2019, the first day of adult recreational drug sales in Michigan, more than 500 people lined up outside the Exclusive Brands store in Ann Arbor shortly after it opened.
Ben Kovler, chairman and CEO of Rise Cannabis’ parent company, Chicago-based multi-state operator Green Thumb Industries Inc. (OTC: GTBIF), called the opening a success, citing the short notice Ohio gave operators and prospective customers about beginning legal recreational cannabis sales.
“The state didn’t really tell everyone when it (the first day of legal sales) would start,” Kovler said. “But it makes the first day easier. We weren’t overwhelmed and didn’t have any software issues. We expected a slow rollout.”
The state of Ohio began quietly telling operators late last week that their recreational licenses had been approved, but did not officially announce it until Monday. The state issued strict rules for the first day of sales, including a ban on music, food trucks and any “grand opening” promotional material outside of outlets.
The start of sales in Ohio apparently did not stop Ohioans from purchasing cannabis north of the border.
The parking lots of the eight pharmacies clustered across the state line on Laplaisance Road off I-75 in Monroe Township are dominated by Ohio license plates. Of the approximately 139 cars in the pharmacy parking lots, 98 had Ohio license plates. Another 16 cars came from other states, including Kentucky, North Carolina, Pennsylvania and Iowa.
Quality Roots near downtown Monroe sold products to 208 customers between opening at 9 a.m. and 2 p.m., CEO Aric Klar told Crain’s. Of those, 29 were from out of state.
Tuesday is typically the industry’s slowest day for sales, Klar said, and 25% of Quality Roots’ sales in Monroe come from out-of-state buyers.
Klar said the Ohio market will likely hurt Quality Roots’ sales for the first 30 days, but after that, price pressure will drive Ohio customers back to Michigan.
“When the market understands how limited Ohio’s adult-use market is, people will come back to Michigan,” Klar said. “From price to variety to brand identity, Ohio State has years to catch up to what we’ve built in Michigan.”
One Ohio customer leaving Urb Cannabis in Monroe, who wished to remain anonymous, said he lives about the same distance from there and Rise Cannabis in Toledo, but chose to shop where he normally shops, thus avoiding the long lines he would have expected in Ohio. There were no lines at Rise in Toledo.
Another customer at King of Budz, who also did not want to reveal his identity, said the low prices in Michigan will keep him crossing the border for some time.
Michigan is cheaper
A half-ounce of Afternoon Delight, a marijuana strain grown by Green Thumb Industries in Toledo, costs $170 at Rise’s five Ohio stores. A half-ounce of Quality Roots brand marijuana flower costs between $45 and $55 at Michigan stores, a discount from typical Michigan prices, which averaged $85.88 per ounce as of June 30.
And it will likely take some time for prices in Ohio to come down as the market ramps up.
The Ohio Department of Cannabis Control received 230 applications for a dual medical-recreational license and issued 226 provisional licenses to operators in the state. The majority of these provisional licenses were issued to existing medical cannabis dispensaries.
By comparison, nearly 1,100 marijuana licenses were issued in Michigan. Ohio has nearly 1.8 million more residents.
In June alone, Michigan operators sold more than $278.84 million worth of recreational and medical marijuana, according to data from the Michigan Cannabis Regulatory Agency. Sales through June 30 totaled nearly $1.63 billion, for annual sales of more than $3.2 billion.
According to data from market analysis firm Headset, sales in Ohio (excluding medical marijuana) totaled $38.06 million in July.
Ohio’s recreational market is also hampered by the lack of recreational regulations. Until those rules are finalized, operators must maintain their medical marijuana rules. Those rules include a ban on combustibles, meaning operators cannot sell pre-rolled marijuana cigarettes, a popular category among customers, and marketing is more restricted.
Nevertheless, Kovler is optimistic about the market in Ohio.
“We know people go to Michigan to buy cannabis, but we also know Ohioans love Ohio marijuana,” Kovler said. “Our marijuana is grown in Ohio by Ohioans. It supports jobs in Ohio. The state will continue to open up and grow significantly, and that’s why we’re here.”
Kovler said Green Thumb Industries, which trades on the OTC Market, a small New York securities exchange with a market capitalization of $2.3 billion, is not yet considering entering Michigan’s highly competitive market. The company has no plans to expand its presence in Toledo, as it believes its single dispensary is sufficient to serve the city of more than 266,000 residents.
