Michigan’s cannabis market could face significant challenges due to the rapid growth of the marijuana industry in neighboring Ohio. Since recreational sales began on August 6, Ohio has seen a surge in demand, and stores are reporting record-breaking sales, fueled by enthusiastic locals and visitors from neighboring states. This booming success could pose a threat to Michigan’s cannabis economy, which has long relied on buyers from other states, particularly Ohio, according to the Michigan Chronicle.
Sales increase in Ohio
On the first day, Ohio dispensaries saw huge sales and profits that exceeded market expectations, reaching an impressive $38.5 million in the first two weeks of launching online recreational sales alone. While Ohio basks in the success of its newly legalized market, Michigan’s cannabis industry faces an uncertain future.
Michigan’s cannabis market in danger
In the second quarter of 2024, legal cannabis sales in Michigan reached a record $837 million, making the state one of the fastest-growing cannabis markets in the U.S. However, some of this growth is due to demand from customers in other states, particularly Ohio, where cannabis was previously only available for medical purposes.
For example, dispensaries in Monroe Township reported that Ohio residents made up to half of their sales last year. Now that Ohio residents can buy cannabis at home, Michigan dispensaries, especially those near the state border, are bracing for a significant drop in sales.
Impact on an oversaturated market
This situation is particularly worrying given Michigan’s already oversaturated market.
Since there are around 750 licensed dispensaries, intense competition has driven prices down as businesses vie for customers. For smaller dispensaries, this means a fight for survival, as low prices cut into profits and make it difficult to cover operating costs. Losing out-of-state customers could further destabilize the market, hurting not only businesses but also state-funded public projects that rely on cannabis tax revenue.
“Every state has different structures and rules,” said Jason Erkes from Cresco Labs CRLBFa Chicago-based company with dispensaries in Ohio. “Michigan is not a state with limited (cannabis) licenses, which means the state is really saturated with stores, and they’re competing with each other, driving prices down, and a lot of businesses are going out of business.”
What’s in store for Michigan’s cannabis market?
Michigan’s lower prices may still temporarily attract some buyers from Ohio, as the Ohio market is still in its infancy and has fewer dispensaries and higher prices. However, as the Ohio market grows and more dispensaries open, Michigan’s advantage could quickly disappear.
The coming months will show how much Ohio’s cannabis success will impact Michigan’s once-thriving industry and potentially reshape the economic landscape of both states.
Pharmacies on the Michigan border are not worried
While sales in Ohio are significant, the new competition from the South has gone largely unnoticed in the Michigan market – even by stores near the border that depend on sales to Ohioans.
“We’re not too worried about it right now,” says Camden Miller, manager of the Pinnacle Emporium in Morenci, Lenawee County, on the Ohio border. “Supply and demand are not yet in line in Ohio, and just like in Michigan … prices aren’t going to go down until there’s oversaturation.”
“I am sure it will have a bigger impact in the coming years.”
The Ohio State Budget Office projects that marijuana sales will reach $1.5 billion in the first year and result in new excise taxes of nearly $150.
There are only a few stores open in Ohio within a half-hour drive of the Michigan border—two in Toledo, Ohio, and one in Bowling Green, Ohio. However, the state’s Department of Cannabis Control plans to approve more stores to open in the future.
In the meantime, Miller said, Ohioans appear willing to travel further for the offerings and choices in Michigan.
A large portion of Pinnacle Emporium’s sales come from outside Michigan, including Ohio, where customers often “stock up,” placing orders averaging over $100, sometimes nearly $1,000.
Miller said shops in Ohio are selling 1/10 ounce (1.6 grams) of flower for nearly $50.
