On Wednesday, Michigan recreational marijuana business owners gathered for the state’s Cannabis Regulatory Agency’s quarterly public meeting, claiming that unfair fines, falling prices, and the emergence of illicit products in the market are threatening their economic survival.
The 1½-hour meeting, held both in-person in Lansing and virtually, heard from business owners and other industry stakeholders who advocated for stronger enforcement and regulatory reform to stabilize the industry.
Their comments come as the price of marijuana flower continues to fall, reaching its lowest point of $65.21 for an ounce of recreational marijuana flower in February, making it difficult for businesses to turn a profit.
Cannabis companies that use undisclosed substances in their products to save money may undercut competitors’ prices, making it more difficult for businesses to compete, according to industry stakeholders.
At the same time, a new tax on marijuana products, recently proposed by Gov. Gretchen Whitmer to fund Michigan roads, complicates matters for business owners. At the meeting, a cannabis attorney described the proposal as a “very serious and existential threat”.
Some of the concerns raised at the meeting on Wednesday were:
The cratering price of marijuana flower
Lindsay Feehan, who spoke in person and identified herself as one of the owners of Lansing-based Emerald Transport, said the drop in the average retail price for an ounce of recreational marijuana flower to $65.21 is bad news for everyone in the industry, including transporters.
“We are all losing,” Feehan stated. “I don’t know who you could tell me is winning on that.”
Fines that threaten profitablity
A caller identified himself as Eric Colandrea, an attorney for LaHaze Cannabis Co., a grower and processor in Cheboygan, and claimed that fines resulting from CRA enforcement actions are based on poorly written rules that are “arbitrary.”
“When you layer on the various licensing fees that we pay annually in the high $75,000 range, adding on an extra $9,000 in fines for something that really could have been a warning or could have been a $500 fine, it hurts,” Colandrea told me.
“Right now, we have millions of dollars invested in our facility, and given the product pricing, we are not profitable. We are losing money. So, if the agency does not take some reasonable actions in terms of fines, you will simply drive these businesses like us out, destroying a lot of investments and putting a lot of people out of work.”
Illicit products still an issue
According to a caller identified as David Bye from the Michigan for Safe Cannabis Coalition, conversion oil (oil that is synthetically converted into THC, the psychoactive component of the marijuana plant), unregulated hemp-derived products, and illegal cannabis “still undermine the integrity of our regulated market” in which companies are required to follow state rules.
“Despite clear violations, a significant number of license holders caught with large quantities of illegal products still retain their licenses and are still doing business today,” says Bye. “Obviously, we know that’s very unsettling, and we’re looking for ways to resolve that.”
The CRA has stated that it intends to make it clear in a new rule set proposed for 2023 that CBD to THC conversion is prohibited in Michigan.
What Whitmer’s proposed tax on marijuana could do
A few industry stakeholders mentioned Whitmer’s plan to raise $470 million per year for roads by imposing a 32% wholesale tax on marijuana, which they said would lead to business closures because consumers would not be willing to pay higher prices for cannabis products and would instead turn to the illicit market.
Matt Imig, who spoke in person for Lansing-based M&M Agriculture, described the proposed tax as “a bombshell” for the industry.
“What are people going to do,” Imig inquired at the meeting. “Where will it go?” Are we starting to look into the potential loopholes for people?
Maybe small growers will get stuck, and you can just say goodbye to small businesses. Maybe that’s the goal: to have 10 or 15 major players while the rest of the small mom-and-pop shops disappear.”
