Marijuana prices likely to keep falling in Niles, Buchanan and other Michigan towns

While consumers have become accustomed to paying more for everything from gasoline to groceries over the past year, the cost for most cannabis-related products in Michigan has been steadily declining.

And it’s not like demand for cannabis is declining. In fact, sales have been steadily increasing as new consumers are drawn to the state’s dispensaries, which have been adding a wider assortment of products.

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“Prices have been dropping since day one and they continue to drop,” said Rick Paniagua, founder and CEO of Cannavista Wellness in Buchanan. “Major manufacturers are coming into the market and bringing a production scale that supports lower prices.”

Since recreational marijuana became legal in the state at the end of 2018, growers and processors have become more consistent and efficient at producing cannabis products and even distribution channels have become more streamlined, Paniagua explained.

According to the Michigan Marijuana Regulatory Agency, the price for an ounce of marijuana has dropped about 40% from $252 an ounce in January 2021 to $152 an ounce in January this year.

And barring any unforeseen problems, there’s little chance that prices will reverse course anytime soon as more grow facilities, processors and dispensaries are opening each month across the state.

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“When we opened about two years ago, there were probably 100 or 120 growers in Michigan,” said George Lynch, CEO of Green Stem Provisioning in Niles. “Today, we’re approaching 1,000 growers.”

That’s a lot of volume for the market to absorb and could result in near-term mergers and acquisitions within the state’s cannabis industry as those who are solely focused on growing and processing look for guaranteed shelf space inside dispensaries.

That might have been what prompted Common Citizen, which operates a 70-acre greenhouse in Marshall, Mich., to recently enter into a partnership with Cannavista in Buchanan. And such deals are likely to become common as businesses look ahead at the competitive environment.

Lynch said Green Stem routinely gets calls from business brokers who are looking for opportunities to buy, sell or form strategic partnerships. That’s one way to deal with the competitive environment.

But Lynch believes vertical integration also will be key to surviving the highly competitive environment, so the family-run business plans to open its own grow and processing facility in Niles in the next several weeks.

That’s the same strategy being employed by NoBo, which operates a grow and processing plant in Benton Harbor as well as retail outlets in Benton Harbor, Edwardsburg, Muskegon and Battle Creek.

“With this much competition, vertical integration is key,” said Ingo Ausland, vice president of operations for NoBo Michigan. “And quality is the only way to win the game.”

A grower that develops a reputation for high-quality cannabis builds brand loyalty and having dispensaries guarantees shelf space — and some necessary margins — where the public can find those products.

On the retail side of the business, it’s also critical to provide an environment and friendly, knowledgeable staff to help customers sort through the wide array of cannabis-related products that are available.

“We have 10-times the number of products compared to when we opened,” said Paniagua from Cannivista, pointing out the vapes, tinctures, edibles, bath bombs and other items that are available.

To some degree, the market for cannabis products might still be in its infancy, with researchers studying the possible benefits from the 80-plus cannabinoids contained in the marijuana plant.

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But it’s questionable whether demand will ever be able to catch up with the ever-expanding number of dispensaries and facilities that grow and process marijuana. Beyond mergers and acquisitions, some believe there also will be a lot of business failures.

Observers speculate that growers who are investing tens of millions of dollars might be banking on a change in federal law that would allow marijuana to be transported to other states, such as Indiana.

If that happened, Michigan growers would have an opportunity to instantly expand their market reach into states that haven’t developed the infrastructure necessary to produce cannabis-related products.

Federal prohibitions regarding cannabis might very well be relaxed or eliminated in the future, as recreational marijuana is now legal for about 40% of the nation’s population, said Beau Kilmer, chairman of the Rand Drug Policy Research Center in California.

Without limits on the amount of cannabis that’s produced, there’s no surprise that prices in Michigan have been coming down and will likely continue to fall, Kilmer said.

But it’s also unlikely that the oversupply issue will be solved even if the federal government eventually decriminalizes marijuana, allowing it to potentially be shipped to adjoining states.

“People complain about the federal prohibition, but it’s what’s keeping them in business,” Kilmer said.

Legalization on a national level would allow “big liquor, tobacco and even Amazon” to get into the business, Kilmer said. “Large companies will be the ones driving the market.”

And they’d be looking to improve efficiency.

“All of the nation’s marijuana could be grown at a couple of dozen industrial farms across the country,” Kilmer said. And that doesn’t include the possibility of imports from other countries where marijuana could be grown and processed more cheaply.

In the end, the businesses that survive might be operators who have built a strong following in much the same way microbreweries have proliferated with multinational companies controlling most of the beer sold in the country.

With the number of growers, processors and dispensaries in Michigan, it’s doubtful there will be anything but downward price pressure for the foreseeable future, Kilmer said.

“When it comes to prices," he said, "it could be a race to the bottom.”

This article originally appeared on South Bend Tribune: Legal pot, marijuana, cannabis prices fall in Michigan, Niles Buchanan