Two years in, retail cannabis growth explodes

Adult-use licensing still trails medical provisioning, but gap is closing.
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(Watch for this story Monday morning on WZZM 13) On Dec. 1, 2019, Michigan’s first adult-use cannabis retailer opened up shop in Ann Arbor. As the two-year anniversary of adult-use cannabis licensing in Michigan approaches, a closer look shows a growing and shifting industry.

Exclusive Ann Arbor was the first in Michigan to acquire adult-use licensing and the first store to offer recreational cannabis to Michigan consumers 21 and older. According to a report pulled from the Michigan Licensing and Regulatory Affairs (LARA) website on Nov. 4, Michigan’s market now has grown to 395 adult-use retailers.

Like many other dispensaries in Michigan, Exclusive has acquired multiple licenses for indoor and outdoor grow facilities, as well as additional adult-use retailer and medical provisioning center licensing. The company’s footprint has grown from Ann Arbor to additional locations in Grand Rapids, Kalamazoo and Muskegon. Apart from its physical growth, the company also has experienced a 1,200% increase in year-over-year sales from 2020 to 2021, and an employment increase of 900% within the same time frame.

Similarly, the Michigan cannabis market as a whole also experienced staggering growth. According to Headset.io, a cannabis data and marketing intelligence site that receives its data from participating retail stores, Michigan’s sales reached $970.4 million from January to July 2021, a figure exceeding other more established cannabis markets such as Washington and Oregon.

Narmin Jarrous said much of the success of the Michigan cannabis market is due to the decreasing stigma surrounding cannabis use. Courtesy CMW Media and Exclusive

“I think people being at home was a big contribution,” said Narmin Jarrous, chief development officer for Exclusive. “I think it’s been a very hard year and people are wary of going to doctors’ offices and being in those kinds of situations where you could possibly expose yourself to different illnesses. And so, if you can get this plant-based medicine instead of having to go to a doctor’s office and get a prescription for whatever you need, I think it’s a much easier process.”

Jarrous said she also believes much of the success of the Michigan cannabis market is due to the decreasing stigma surrounding cannabis use and hopes to see that trend continue.

“I think that also contributes to people using more cannabis and buying more cannabis as they’re feeling more comfortable about it. They see their neighbor using it or their mother or grandmother, and they see that it’s OK to use,” Jarrous said. “And so, I think that is a big contribution to the sales increases we’re seeing, is just people are feeling more comfortable around it, and that’s really wonderful.”

The modalities in which people are using cannabis also seems to be trending away from traditional consumption methods.

“We saw edible sales going up for a while,” Jarrous said. “I wanna say … when we were deep in the trenches of COVID, I think a lot of people kind of leaned toward it because they were maybe worried about smoking or, you know, something along those lines, because that one kind of threw us off guard … but we saw more and more people demanding those sorts of products.”

Jarrous said Exclusive saw many consumers leaning toward non-smoking items in general, including topicals and transdermal patches.

“(It) was kind of surprising. Usually that’s a really niche section of the market. And we saw a lot of people leaning toward those as well, which is really interesting to see and really great and bodes really well for companies like Exclusive that really pride ourselves on creating new products and different products for a lot of different people.”

According to a Michigan Marijuana Regulatory Agency (MRA) monthly report, Michigan saw more than $161 million in combined adult use and medical sales in September 2021 alone, with adult-use sales representing approximately $125 million and medical sales representing approximately $36 million.

By contrast, there still are more medical licenses in Michigan than there are those for adult use. According to LARA’s website, as of Nov. 4, Michigan has 490 active medical provisioning center licenses compared to 395 adult-use retailers.

Jamie Cooper, director of industry and community development for Sensi Magazine and founder of Sensi Connects, formerly Cannabiz Connection, said this balance may change as municipalities that once prevented adult-use retailers begin to see financial benefits from those retailers being present in their cities.

“We’ve seen a lot of changes around accessibility,” Cooper said. “Two years ago, there weren’t a whole lot of businesses operational. A lot of municipalities were very hesitant to be one of the first to opt in for adult use. We have seen a lot of municipalities witness some of their neighboring communities thrive from cannabis, and that made them willing to opt in to allow it in their community so they can start generating some of the tax revenue as opposed to losing it to their neighboring communities.”

For example, one of the state’s largest markets, Detroit, so far has allowed only medical provisioning centers and opted out of allowing adult-use establishments. City officials are considering an ordinance to allow adult-use marijuana establishments, beginning with what they call “legacy applicants,” or longtime Detroit residents, who would receive first priority for licensing.

“So, we’re … seeing sales numbers increase and continue to increase year on year, but we’re also seeing the price come down to the end consumer and that’s because more businesses are getting operational,” Cooper said. “The MRA is also lowering some of the costs, the barrier costs. When it comes to being in business operating, you know, licensing costs are a lot lower than they were two years ago, and that might be more applied to the medical program.”

Cooper said due to changes surrounding the medical program, significantly fewer people are applying for or renewing their medical marijuana cards because adult use continues to be more accessible.

“Because of the cost of medical licensing, there are even a lot of companies just dropping medical … because they have to pay the cost to supply to the medical market, but they also have to pay the cost to supply to the adult use, so it’s more money. Sometimes they (then) drop the medical, which is not fair to those that are using cannabis as medicine.”

In terms of overall growth, Michigan cannabis industry professionals are optimistic for what lies ahead. According to the same study from headset.io, Michigan remains one of the newer cannabis markets and is currently ranked third in terms of overall sales in the United States, trailing only behind California and Colorado.

“I believe that Michigan has been one of the smoothest rollouts for a legalized adult-use industry,” Jarrous said. “As much as we’ve had to kind of adapt and adjust (to) rule changes and packaging regulation changes and all these things, all these kinds of obstacles, I still think if you look at it compared to other states, we went fairly smoothly.”

Jarrous said Michigan was able to learn from the problems other states experienced and make corrections, contributing to a smoother rollout of the industry here.

“I think we have been doing very well as an industry,” Jarrous said. “I think Michigan has a really intelligent and sophisticated cannabis community in terms of both consumers and operators alike, and I think that made a big difference in the success of the Michigan industry.”

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