An Inside Look into the Michigan Cannabis Market Image: Brad Switzer/Unsplash
November 21, 2023

To get an on-the-ground perspective on Michigan’s wholesale cannabis market, Cannabis Benchmarks spoke recently with Charlie McKenzie. McKenzie is Senior Director of Cultivation Operations for Left Coast Holdings, a vertically integrated business based in Manistee, Michigan, in the northwestern portion of the state’s Lower Peninsula.

Mr. McKenzie describes Michigan’s wholesale cannabis market conditions as fairly stable at the moment, with strong demand and some hiccups on the production side helping firm up wholesale flower prices. Still, McKenzie and his team are focused on meeting consumer demand while bringing down production costs in a maturing market that could see some consolidation in the near future.

The Rapid Expansion of Michigan’s Legal Cannabis Market

Michigan’s adult use market opened for business in December 2019. Just over two dozen retailers sold 450 pounds of flower that month, along with other products, and generated almost $7 million in revenue. Fast forward almost four years later, Michigan’s legal cannabis market has ballooned into the second largest in the country after California’s, with nearly 750 licensed retailers generating monthly sales that have topped $250 million for five consecutive months as of October. Michigan adult use retailers have also sold over 75,000 pounds of flower to consumers each month from March through October this year, with over 1,000 cultivation licenses producing that supply.

McKenzie began his career managing greenhouse operations in the ornamental plant industry before moving to Colorado and working for a hemp cultivation operation. After a stint as a crop protection specialist with a Florida company, followed by founding and eventually selling his own firm providing Integrated Pest Management (IPM) services for high-value crops, McKenzie decided to focus more on growing and less on traveling. In late 2021, he took a position with Left Coast managing what was then a 10-acre outdoor cannabis farm.

In a reflection of the Michigan cannabis market’s rapid expansion, Left Coast’s cultivation operation today consists of 50 acres of outdoor canopy on which almost 50,000 plants were grown this past season, along with a 150-light indoor grow facility and a 60-light greenhouse. Extraction and packaging operations are co-located with the farm and are used to produce the company’s in-house brands – Caddy and Heritage Farm Company. Left Coast also has three licensed storefronts in addition to wholesaling its products to other processors and retailers.

McKenzie stated that the size of the company’s indoor operation will roughly double in the next 12 months, along with the addition of another greenhouse. Still, “There’s appetite for [more] expansion if the market … can allow for it,” he said.

Supply and Demand in Michigan’s Wholesale Cannabis Market

As the previous statement indicates, McKenzie and Left Coast aren’t just going big for the sake of it. According to McKenzie, demand in Michigan’s wholesale cannabis market is brisk. “As of last year’s harvest and this year’s harvest, it’s definitely … getting unloaded onto the market as quickly as we can get it there,” he stated, “I’m consistently being asked when is out of testing and when can I transfer it. From a smokable flower standpoint and the finished goods – like live resin and distillate – we’re just constantly trying to get what … we’ve produced into bags and sold.”

McKenzie continued, “We haven’t had a lot of trouble moving inventory especially on the outdoor and the past couple indoor harvests.” He noted that flower is typically more readily available in the final two months of any given year, as well as in the early months of the following year. However, as of mid-November he had not yet seen a flood of product pushing down wholesale prices. In fact, McKenzie said he has been seeing outdoor flower being put up for sale for $550 – $650 per pound in the wake of this year’s harvest.

“I don’t see much [price] decline going on,” he observed. “I … don’t think [price] is going to go any lower than it went last year in October, November, December,” McKenzie predicted, “if anything, it might be a little bit higher.”

While McKenzie said he’s aware of some bumper crops produced this year by other cultivators, he also saw a lot of other farms that “didn’t produce what they expected to produce; some farms didn’t even have a crop. There was a lot of hope, a lot of people putting a lot of money into trying to upgrade or get a farm online – so first-timers that didn’t get anything.” 

“All in all,” McKenzie summed up, “I feel like we’re even keel.”

What Cannabis Products are Most In-Demand in Michigan?

While extracted and manufactured products are gaining popularity and market share in many legal cannabis markets across the country, northern Michigan appears to be a different story. When asked whether market forces had resulted in Left Coast allocating more of their crop to extraction in recent years, McKenzie replied, “It’s actually the opposite.” He continued, “We’ve gone from trying to produce as much distillate as possible and then last year trying to get a lot of live resin produced to trying to produce as much smokable flower as physically possible from the outdoor farm.”

In characterizing the relative ease or difficulty of moving different wholesale products, McKenzie stated, “We can sell through smokable flower every day of the week. We have a really easy time selling our distillate when it tests in the parameters that buyers are looking for – from the 90s [percent THC] … .” On the other hand, “Live resin … can be difficult on the bulk sales side. I think it’s harder for us to sell bulk live resin than it is to sell bulk fresh frozen [flower] … because a lot of processors like to do [the extraction] themselves.”

McKenzie also highlighted the importance of keeping in touch with consumer demand and avoiding the temptation to “produce for ourselves.” “The average consumer is looking for value,” he pointed out, “if they can get something that tastes good and smells good that is within their price range, they are elated.”

“As long as all the smokable flower we produce this year sells, we’re going to consistently focus on how do we produce smokable flower for as little as possible and have the quality that the consumer demands,” McKenzie concluded.

Lowering Production Costs is “the Name of the Game” in Maturing Market

Although McKenzie doesn’t anticipate any more short-term wholesale price pressure than Michigan’s market has already experienced, the team at Left Coast is not getting complacent. “I look at it like a game. … I have to figure out how little can I put into this and how great of a price can I sell it for, that’s the name of the game.”

“Every year we’re digging in harder into what it would take to lower the price of production,” McKenzie explained. “Whether that’s equipment, whether that’s new processes, whether that’s not doing stuff that we did before because we thought we had to but then we realized once we took it away nothing changed … there’s a lot of constant reevaluation.” He also noted, “We’ve gotten stronger as a team because we have a director of finance that’s really helping … dial in the true cost of what we’re doing and then be able to model it.” This allows McKenzie and his team to make more concrete connections between changes made in cultivation processes and how they impact the cost of production.

McKenzie pointed out that he’s been hearing talk about consolidation that could bring changes to Michigan’s market landscape. “There’s people looking to do deals,” he said, “can we merge this cultivation and this processor and this retail together? Or can we buy five of your stores? I would say there’s more consolidation than there is first-timers [looking to enter the market] – if it is a first-timer it might be [someone] that’s trying to round people up, into a roll-up of [existing] companies.”

Overall, McKenzie and the team at Left Coast plan to continue to optimize their operation to be prepared for whatever the market throws at them: “We want to act like [price is] going to go down so that we produce it for that much less next year, knowing that there’s a chance it could.”