The high cost of the race to the bottom

Michigan’s record-breaking year of growing for less

Lansing just wrapped up a 2025 that would make even the most seasoned dealer’s head spin. We’re smoking more and growing more, but the industry is somehow making less.

According to the year-end wrap-up from the Cannabis Regulatory Agency, Michigan dispensaries moved nearly 260,000 more pounds of flower than they did in 2024. But in a brutal reality check, total revenue actually dropped by $113 million, landing at $3.17 billion.

We are officially in the era of “record volume, shrinking value,” and it’s a buzzkill of epic proportions. It turns out you can indeed have too much of a good thing, especially when the “good thing” is an oversaturated market that’s cannibalizing its own profits.

 

The race to the floor

If you’ve been to the counter lately at places like Pure Options or Jars, you’ve seen the “deals” that look more like a fire sale than a business plan. By December 2025, the average price for an ounce of flower hit an all-time historic low of $58.22 — a 16% drop in a single year. Vape products fared even worse, with prices cratering by nearly 20%.

For the budget-conscious smoker, it’s a dream. You can walk into a shop on Michigan Avenue and walk out with a month’s supply for less than the cost of a tank of gas. But for the businesses, it’s a nightmare. Michigan’s “unlimited license” model has created a glut so massive that the state is effectively tripping over its own stash. We’re producing nearly twice as much as we can actually consume, and when the market is this flooded, the value of that “fire” eighth starts to look more like the price of a mid-tier olive burger at Kewpee’s.

 

The retail cull: Survival of the best-funded

We’re starting to see the first real casualties of this price compression. At the end of 2024, there were 848 licensed retailers in the state. By the time the ball dropped on 2026, that number fell to 838. While a loss of 10 stores might seem like a rounding error, it marks the first year-over-year decline since the recreational market opened in 2019.

The “mom and pop” shops, the social equity pioneers and the independent growers are the ones feeling the squeeze. Without the massive capital of multi-state operators like TerrAscend — which recently made headlines by exiting the Michigan market entirely, closing 20 dispensaries and laying off over 200 workers — survival in a $58-an-ounce world is a game of inches.

When you’re moving 260,000 more pounds but losing $113 million in revenue, someone is paying the price. Usually, that’s the local entrepreneur who can’t afford to burn cash while waiting for the market to stabilize.

 

The road tax trap

The irony is that just as the industry hits this revenue wall, the state has decided to reach deeper into the jar. The new 24% wholesale excise tax, it went live on Jan. 1, is hitting an already bruised industry. This tax isn’t just a line item; it’s a structural shift that forces cash-on-delivery which can hurt smaller businesses.

Under the new rules, growers and processors are liable for that 24% tax the moment a transfer happens. They can’t extend credit to retailers.

This means small shops that used to rely on 30-day terms to keep their shelves stocked now have to come up with tens of thousands of dollars in cash just to get a delivery. For many social equity businesses in Lansing, this could be the final blow. If you don’t have the cash up front, you don’t have the product. If you don’t have the product, you don’t have a business.

 

Paving over the progress

The state estimates this tax will generate $420 million annually to “Fix the Damn Roads.” But at what cost? We are essentially trading off the health of a brand-new industry for asphalt. By the time the potholes on Saginaw Street are filled, the diverse, locally-owned cannabis landscape we were promised might be replaced by a handful of corporate giants who were the only ones big enough to survive the squeeze.

Even the CRA seems to recognize the tension. While they’ve recently updated disciplinary guidelines to reduce fines for minor “human error” violations, they’ve also ramped up penalties for selling “illicit” products. It’s a clear signal: The state wants its tax money, and it wants it from the regulated system. But by making the regulated system so expensive to operate in, they are inadvertently rolling out the red carpet for the “legacy” market to make a massive comeback.

 

The bottom line

Michigan remains the second-largest cannabis market in the country, but being a “heavyweight” doesn’t mean much if you’re losing blood. The record volume of 2025 proves the demand is there — Michiganders love their weed. But the revenue drop proves that the “golden age” of easy profits is over.

As we move into 2026, the question for Lansing’s shops isn’t how much they can sell, but how much they can afford to lose while the state paves the way to a corporate-dominated future. The harvest is bigger than ever, but for the local shop owner, the crop has never felt so thin.