Michigan beat California in cannabis sales, but there’s still work to be done

There are few places in our country that are more synonymous with cannabis than California. The state has been a cultural powerhouse for decades, and cannabis has been wafting through the halls of its cultural kingmakers’ homes and businesses for just as long.

California boasts one of the earliest and most lax medical cannabis programs in the country. Although beaten to legalization by some states, it’s home to many of the cultural and economic movements growing the cannabis industry nationwide.

However, in March, Michigan sold more cannabis products than California for the first time ever — 22 million versus 21.3 million — ushering in the reign of a new king in the cannabis economy.

California still outperforms Michigan as far as revenue, but this is easily chalked up to California’s higher pricing. Legal operators from the state that has created many of the most sought-after strains and acted as a springboard for legalization and mainstream acceptance have struggled to find sustainability and profitability, apart from a highly specialized and savvy few.

Cannabis flower grows at a state-licensed facility in Battle Creek.

There are several factors at play, many of which our state’s operators have also experienced. In addition to the similar impact of black- and gray-market products, legal dope dealers in California are facing a race to the bottom on pricing and a relentless battle for market share. In addition, in this ultra-competitive environment with some of the highest costs of living in the country, California hits its operators with some of the highest state and local taxes in all of legal cannabis.

Michigan is being heralded as an example of how a market can have competition and not be regulated out of existence. There’s a lot to be said for that, but I also think California has been more proactive in trying to make its industry sustainable for all operators, something Michigan could improve upon in a few ways.

Creating more accountability and transparency via state-run testing labs has gone a long way in bringing more credibility and fairness to California’s industry. I hope Michigan can also work to make our industry more transparent, so consumers know they’re getting exactly what they’re paying for.

We also need to address our problem with overcapacity, which other states like California are also experiencing. There are simply too many cultivators in the legal game and not enough stores or consumer demand. Making this issue hit even harder is the reality that the fight for market share has forced many operators to take it on the chin and sell their wholesale flower for close to a loss. While larger operators can dig into their cash reserves, smaller operators are struggling to stay afloat.

Furthermore, other states look to Michigan to see how it reins in the gray market through Metrc, the state-monitored tracking system that all THC products must be sold through. We need to take this opportunity to lead the pack and crack down on the illicit distillate coming into the market, taking money away from state-licensed processors, big and small.

If we want Michigan’s market to stay on top, we’ll need to think about ways the Cannabis Regulatory Agency and industry members can work together to bring down overall production capacity, stabilize pricing and increase the amount of retail locations in a way that spreads them out geographically. We could also make a lot of headway by reforming microbusiness licenses to ease those operators’ compliance testing burden and allow them to grow more plants and buy more third-party products.

More and more people keep bringing up the idea of state minimum pricing for cannabis retailers and perhaps a moratorium on new cultivation licenses. Our state’s industry is full of talented and creative folks, and we’ll need creative solutions if we want to tackle these issues and ensure our market continues to perform as well as it has.