May 24, 2022

Michigan Cannabis Sales Grew by How Much in April?!

Michigan Cannabis Sales Skyrocket in April
Photo: Chris Liverani/Unsplash

Recently reported cannabis sales in Michigan show a significant increase while inventory remains plentiful and retail prices continue to slide, much to the benefit of consumers. The Michigan Cannabis Regulatory Agency (CRA) reported April 2022 data last week, detailing sales, licensing, and production in the state’s adult use and medical cannabis markets.

April combined adult use and medical market sales skyrocketed to $195 million, up 27.2% from March 2021’s sales of $153.2 million and up 26.9% from April 2021’s combined sales of $153.6 million.

Michigan cannabis prices have turned higher in May, with the spread between indoor and greenhouse flower widening over 50% in April. The increase in April sales might be put down to generally increasing demand – which may be related to significantly lower cannabis prices this year – as well as 4/20 demand. As noted in Cannabis Benchmarks’ April 29 Premium Report, Michigan 4/20 sales included 4,619 pounds of flower, a ten-fold increase from 4/20 holiday sales in 2020 and more than twice the 1,900 pounds of flower sold on 4/20/2021. Michigan cannabis prices may start to stabilize near current levels and even manage a lift going into higher seasonal demand this summer.

April 2022 Michigan Adult Use Market Summary

April 2022 adult use sales, at $168 million, were up 33.4% from March adult use sales of $121.2 million and up by 59.6% from April 2021 adult use sales of $105.2 million. The April 2022 month-on-month change in sales dwarfs any monthly change in sales previously seen in the Michigan data.

The Cannabis Benchmarks 2021 Annual Chartbook, to be published in the coming weeks, notes a 157% increase in adult use sales from 2020 to 2021, which would be an average increase of just over 13% per month. It appears Michigan demand is continuing to grow; or, perhaps more accurately, latent demand previously served by the illicit market is being increasingly captured by licensed businesses.

Adult Use Cannabis Sales

April 2022 average daily sales jumped to $5.6 million from $3.9 million in March 2022 even as prices continued to fall, again suggesting surging demand in April.

Pounds of flower sold in the adult use market in April surged 112% after falling 25% in March 2022, itself an unusual downturn given seasonal sales trends typically show a sizable uptick from February to March.

Adult Use Cannabis Flower Sales

Inventory held by growers that passed the state’s required testing was 62,278 pounds at the end of April. Combined with flower held in inventory at retailers – 52,999 pounds – the amount of immediately marketable flower in Michigan’s adult use market at the end of April was 115,277 pounds, or 2.9 months’ supply based on April sales of 39,747 pounds.

The number of plants harvested and reared in the most recent three months is shown in the table below. Vegetative and flowering plant figures are as of the month-end, while harvested plant figures encompass all those successfully harvested throughout the month. Vegetative, flowering, and harvested plant counts are rising as seasonal demand ramps up.

Adult Use Plant Count

The average retail flower ounce price fell 30.1% in April 2022, after rising over 19% in March 2022. Flower ounce prices for the most recent three months and extrapolated pound prices are listed below.

  • February 2022: $160.10 ($2,562 per pound)
  • March 2022: $190.65 ($3,050 per pound)
  • April 2022: $133.19 ($2,131 per pound)

Michigan Cannabis Sales – The Regulator’s Take

The Executive Director of Michigan’s Cannabis Regulatory Agency, Andrew Brisbo, attributed April’s skyrocketing sales to lower prices, a possible migration from the illicit to the legal market, and increased tourism. “With retail prices falling 40% over the last year, the regulated market appears to be growing by pulling consumers from other means of accessing cannabis products,” he said. Brisbo also noted, “Michigan is starting to see a return to tourism, which may be playing a factor in increased sales as well.” Adding to demand, the Ann Arbor Hash Bash, celebrating its 50th anniversary this year, likely contributed to April’s sales spike with an estimated 8,000 to 15,000 attendees, according to local reports.

While Brisbo did not address the drop in medical cannabis sales in the April data, he did say “private sector investment is continuing to favor the larger adult use market in the state.” The CRA chief also spoke to an issue raised by Cannabis Benchmarks regarding the possibility of the separate medical and adult use sectors becoming a single market: “The CRA is still considering ways in which regulatory efficiencies can be realized while ensuring continued patient access as the market continues to shift.” Brisbo continued, “the timing of any policy initiatives through the legislature has not yet been determined,” suggesting there will likely be a legislative mandate to merge the medical and adult use markets.

Cannabis Benchmarks research for our soon to be published 2021 Chartbook shows a 157% surge in Michigan’s adult use cannabis sales from 2020 to 2021 and an 80% surge in combined medical and adult use sales in the same period. In fact, Michigan cannabis sales revenues were the third highest in the nation in 2021, behind the two legacy states of California and Colorado.

Of note, just three of the 10 most populous states – California, Illinois, and Michigan – have fully functioning legal medical and recreational cannabis markets, with Michigan being the tenth most populous state currently. Illinois, the sixth most populous state, saw its 2021 sales tally settle only about $10 million below Michigan’s.

May 17, 2022

Connecticut Adult Use Cannabis Sales to Start in Late 2022

Connecticut Adult Use Cannabis Sales to Start in Late 2022
Photo: Christiann Koepke/Unsplash

Kaitlyn Krasselt, Communications Director for the Connecticut Department of Consumer Protection (DCP) – the agency overseeing adult use cannabis licensing in the state – confirmed to Cannabis Benchmarks that the state is likely to commence adult use cannabis sales late this year. Connecticut’s medical cannabis program has four licensed producers, which are all Multi-State Operators (MSOs). The licensed producers supply 18 dispensaries across the state, which are owned by the same companies that hold the producer licenses and are sure to apply for adult use licenses in the state’s cannabis license lottery. MSOs can convert their medical cannabis licenses into a “hybrid license” and, in addition, are allowed to partner with social equity applicants.

Thus far, Connecticut has collected over 8,200 social equity retailer applications for participation in the cannabis license lottery. The general lottery, for non-social equity applicants, has over 7,200 applications. Krasselt said there is no limit on the number of applications that can be entered into the lottery, providing each application is accompanied by the $500 application fee. As yet, no retailer licenses have been issued, but it is expected that 12 retailer licenses will be awarded out of the first lottery; six to social equity applicants and six to general applicants.

Krasselt said her agency “has not determined how many licenses will be available in the next lottery.” When asked if Connecticut was capping licenses, she responded “licenses are capped … and uncapped,” in that the DCP can decide to add more lotteries once two rounds of lotteries for each license type are completed. Krasselt noted that while medical cannabis operations are vertically integrated with MSOs owning the entire medical supply chain, new adult use licensees will be allowed to hold two license types but cannot be fully vertically integrated.

Connecticut spot prices have been rising steadily since fall 2021, climbing about $300 per pound to just over the $3,300 level this year. Prices are expected to begin to move sharply higher several months before the start of adult use sales at the end of this year. Given the proximity of several states committed to adult use legalization, it is likely prices across the Northeast will rapidly converge once each state is up and running. Below is a chart of Connecticut’s Spot Index and that of the adjacent state of Massachusetts, where the adult use market has been open for roughly three and a half years.

Connecticut and Massachusetts Wholesale Cannabis Prices

May 10, 2022

Illinois Cannabis Market Continues to Benefit from Customers Across State Lines

Lake Michigan
Photo: Stephan Cassara/Unsplash

The Illinois Department of Financial and Professional Regulation (IDFPR) issued adult use sales data for April 2022 this week. Combined sales to in-state and out-of-state residents at $131.8 million were up by just 0.6% month-on-month versus combined sales in March 2022 of $130.9 million. Year-on-year, April 2022 sales were up 14.6% from April 2021’s combined sales of $115 million.

April 2022 adult use sales to in-state residents were also up just 0.6% to $90.9 million versus March 2022 sales of $90.4 million but were up 13.8% from April 2021 in-state sales of $79.9 million. In-state sales were 69% of total sales in April 2022 versus 68.6% of sales in March 2022; in-state residents accounted for 69.5% of sales in April 2021.

April 2022 adult use sales to out-of-state customers inched up 0.7% to $40.9 million versus $40.6 million in March 2022 but were up 16.6% from sales of $35 million in April 2021. Out-of-state sales were 31% of total sales in April 2022 versus 30.5% in April 2021.

IDFPR supplies monthly data on the number of items sold; April items sold increased to 3.1 million, up 3.1% from March items sold of 3 million. The average price of each item sold was $42.48 in April 2022, down from $43.54 per item in March 2022 and down from $46.67 in April 2021. With spot wholesale prices down 13.3% in 2022, average retail item prices are down just 4.2% this year.

The Illinois Department of Public Health (IDPH), which oversees the state’s medical cannabis program, issued an update on patient numbers and sales figures for March 2022, in which retail medical sales were $32 million, up 13.4% from February 2022 sales of $28.2 million, but down 10.4% from March 2021 sales of $35.7 million.

IDPH reported 206,389 qualifying patients in March 2022, a 2.8% increase over February’s patient count of 200,709 and up 33.2% from March 2021’s patient count of 154,965.

Flower sales within the medical market were $14.6 million in March 2022, up 10.7% from February medical flower sales of $13.2 million, but down 12.5% from sales of $16.7 million in March 2021. Patients in the medical cannabis program purchased an average of 17.3 grams of flower in March 2022 versus 16.6 grams in February 2022. Patients paid an average of $12.52 per gram, up $0.17 from the February gram price of $12.35 per gram. Flower sales made up 45.7% of total medical sales in March 2022, down from 46.8% of sales in February 2022 and down from March 2021’s flower market share of 46.7%.

May 3, 2022

Will the Oregon Moratorium on Cannabis Business Licenses Really Work?

Photo: Zan/Unsplash

The Oregon Liquor & Cannabis Commission (OLCC) announced last week that it is formally implementing a moratorium on issuing new cannabis business licenses “to applicants who submitted an application after January 1, 2022.” The moratorium was enabled by legislation passed last year, which we covered at the time; it applies to all license types and will remain in effect for two years.

The OLCC statement says that the state’s market has “experienced exponential growth, which has led to a crowded marketplace.” By some measures, however, growth has been slowing in Oregon’s legal cannabis market as of late, with 2021’s sales of $1.18 billion up just 6% over 2020’s tally of $1.11 billion, the smallest year-on-year increase in legal sales since they began in 2016. On the other hand, production and supply increased at impressive rates in 2021, with the state’s outdoor harvest volume wet weight ballooning by 55% year-on-year and indoor harvest volume jumping by about 30%.

Oversupply and a saturated market have led to wholesale prices falling to extremely low levels in Oregon, with competition in the retail sector also leading to reports of rock-bottom prices and shrinking margins, where they still exist. Whether the new moratorium will work to ameliorate the state’s current cutthroat market conditions remains to be seen.

If history is any guide, it is unlikely that the moratorium will have a prompt and direct impact on the existing market landscape. Oregon officials previously limited the issuance of new producer licenses in 2018, with a formal moratorium on that license type put in place in June 2019 by the passage of legislation. However, since previously submitted applications could still be processed under the terms of the moratorium, as is the case with the new moratorium, the number of producer licenses continued to expand. Information from OLCC shows 1,136 active producer licenses as of the end of June 2019. The most recent information available from the Commission lists 1,395 active producer licenses as of mid-March 2022. As noted above, harvest volumes increased substantially in 2021 – and in 2020 as well – despite the previous moratorium remaining in effect.

April 26, 2022

Arizona Recreational Marijuana Sales Chipping Away at Medical Market

Cathedral Rock, Arizona
Photo: Kaileen Fitzpatrick/Unsplash

The Arizona Department of Revenue (ADOR) published cannabis tax collections and estimated sales information for February 2022, when combined adult use and medical sales were $121.2 million, down 2% from an upwardly revised $123.7 million in January 2022. Year-on-year, the first full year of adult use sales shows an increase of 27.8% in total sales, an increase in adult use sales of 72.8%, and a decrease of 4.7% in medical sales. The adult use market share has climbed in the majority of months over the first year of sales and recently jumped over the 50% mark. As with other states with well-established medical markets in which an adult use market is introduced, the adult use market slowly bleeds away medical use market share.

Arizona Marijuana Sales
Arizona Medical vs Recreational Marijuana Sales

The lower January and February 2022 sales figures are likely a function of sharply lower cannabis prices in part, as well as perhaps indicating Arizona, like other states, may be seeing a seasonal demand trend, in which sales dip slightly after the holiday season.

Arizona February medical sales were $52.5 million, down 6.5% from a downwardly revised $56.1 million in January 2022 and down 4.7% from an upwardly revised $55 million in February 2021. Medical sales were 43.3% of total sales in February 2022, down from 45.4% in January 2022 and down from February 2021’s medical market share of 58.1%.

These data provide some evidence of medical consumers migrating to the adult use market, despite the 16% excise tax imposed on adult use consumers. Depending on their purchasing frequency and how much they spend, former medical consumers find the adult use market less expensive than maintaining registered patient status.