California is no longer the top seller of legal cannabis in the nation. This is according to data recently shared by BDSA, showing that in March, Michigan sold 22 million cannabis products, which surpassed the 21.3 million products sold in California during the same time. This disrupts conventional narratives that place California as the hub of legal cannabis in the nation and sets a new challenge for California’s industry.
A Gradual Change, Surprising Some
In 2023, Michigan’s cannabis industry was the second-largest market in the US, closely following California. Many experts saw challenges in Michigan’s market during the year, during which at least one prominent state vendor fell under court-appointed receivership as the decline in marijuana prices narrowed profit margins throughout the state.
It was only the fourth year of recreational marijuana sales in the state, and going into 2024, many experts predicted that struggles with product, prices, and legislation could lead to further struggles and failures.
Lance Boldrey, a cannabis industry attorney in Michigan, made such predictions near the end of 2023, saying, “I really think that’s the leading edge of what’s going to be a much bigger trend of business failures, followed by business disputes, litigation between investors and companies.”
However, the market continued to mature, with new products being created both inside of Michigan and being brought in by national brands, such as Kiva’s individually wrapped marijuana chews.
Can California Learn From Michigan?
“Michigan is unquestionably better at running the legal cannabis market than California,” Hirsh Jain, a Cannabis Consultant and Advocate, told SFGate on Wednesday. “Michigan illustrates the ways that California has squandered the opportunity.”
However, Michigan has some opportunities that California does not have and may have yet to cash in on every chance. Michigan’s legal cannabis market has the advantage of marijuana tourism from surrounding states, as its closest neighbors do not have legal cannabis markets. This is not true for California. The nearest neighbors to California, Oregon, Nevada, and Arizona all have their legal cannabis markets that compete with California in many ways.
Michigan has also missed its opportunities, as shown in its overall revenue. While Michigan moved more cannabis products overall, its revenue didn’t measure up. California created $1 billion in cannabis revenue, while Michigan only made $786 million in revenue, a significant difference considering the slight difference in the amount of product moved.
What Causes These Trends?
Michigan moved more products for less revenue, in part because cannabis products are much more affordable there. “In Michigan, blue-collar people can afford cannabis products at a price that is affordable to them,” says Jain, “And they don’t have to drive hours to do so.” This is due to the low tax rate on cannabis and vigorous enforcement against illegal sales.
In California, however, legal vendors compete with a robust illegal market. Higher prices for legal products in California, driven partly by a higher tax rate, push consumers toward the enduring illegal market where they can find much cheaper products. Some narratives claim that, with lax enforcement against unlawful growing and selling, the illicit marijuana market in California is booming while the legal market is struggling to grow. If California wanted to reverse this trend and keep the cannabis crown, this may be an arena worth attention.
