Falling Prices Create Financial Struggles for Cannabis Businesses
Michigan’s recreational marijuana industry is facing mounting challenges as cannabis prices hit record lows, raising concerns among business owners about their long-term survival. During a quarterly public meeting of the state’s Cannabis Regulatory Agency (CRA), industry stakeholders voiced their frustrations, citing regulatory issues, illicit market competition, and proposed tax hikes as major obstacles.
One of the biggest concerns for cannabis businesses is the sharp decline in marijuana flower prices, which dropped to an all-time low of $65.21 per ounce in February. With prices continuing to fall, many businesses are struggling to remain profitable. Industry insiders say that some cannabis companies are using undisclosed substances in their products to cut costs, allowing them to undercut legitimate businesses that follow state regulations. This practice makes it increasingly difficult for compliant businesses to compete in the market.
Lindsay Feehan, co-owner of Lansing-based Emerald Transport, expressed her concerns about the declining prices, emphasizing that the entire industry is suffering. “We are all losing. I don’t know who you could tell me is winning on that,” she said. The downward pricing trend has created a crisis for many cannabis entrepreneurs, who are now looking for regulatory solutions to stabilize the market.
Regulatory Fines and Illicit Products Add to Industry Woes
Amid declining cannabis prices, business owners are facing additional challenges, including what they perceive as unfair fines imposed by the CRA. Eric Colandrea, an attorney representing LaHaze Cannabis Co., criticized the regulatory agency for issuing steep fines based on ambiguous rules. He argued that the fines, combined with high licensing fees—sometimes exceeding $75,000 annually—are pushing businesses to the brink of closure.
Colandrea highlighted a recent case where his client was fined $9,000 for what he considered a minor violation. “Given the pricing that we’re getting for the product, we’re not making money—we’re losing money,” he said. “If the CRA continues enforcing excessive fines without reasonable discretion, businesses like ours will be driven out, putting many workers at risk of unemployment.”
Additionally, concerns were raised over the persistence of illicit products in the cannabis market. David Bye, representing the Michigan for Safe Cannabis Coalition, pointed out that unregulated hemp-derived products and illegally converted THC oil continue to undermine the integrity of the state’s legal market. Despite repeated violations, some businesses caught with illegal products still retain their licenses and operate without serious consequences.
To address these concerns, the CRA proposed a rule change in 2023 that would explicitly prohibit the conversion of CBD to THC in Michigan. However, industry stakeholders argue that stricter enforcement is needed to eliminate unfair competition from unregulated products.
Proposed Tax Hike Sparks Fears of Business Closures
Adding to industry anxieties is Governor Gretchen Whitmer’s recent proposal to impose a 32% wholesale tax on marijuana products to generate $470 million annually for state road repairs. Many cannabis entrepreneurs fear that such a tax would push consumers toward the illicit market, making legal businesses unsustainable.
Matt Imig of Lansing-based M&M Agriculture strongly opposed the tax, describing it as a “bombshell” for the industry. He warned that smaller businesses would be the first to suffer, leaving only a few dominant players in the market. “Maybe small growers are going to get stuck, and then you could just kiss the small businesses goodbye,” he said.
Stakeholders have urged state regulators to evaluate the potential impact of the tax, highlighting how declining cannabis prices combined with financial pressures on legal businesses could negatively affect Michigan’s economy and workforce. As the industry struggles to stay afloat amid these challenges, business owners are calling for urgent regulatory reforms and fairer policies to ensure their survival in the competitive market.
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