Michigan has a long and sometimes paradoxical relationship with legal and quasi-legal cannabis. Ann Arbor, the sixth-largest city in Michigan, decriminalized possession of small amounts of cannabis in the 1970s, and the state legalized medical cannabis in 2008.
Since then, municipalities, the state legislature, executive branch and federal government have all disagreed in various ways about the concept of cannabis. A petition in 2016 that would have sent the issue of legalization to voters failed to make the ballot.
In two weeks, Michigan voters will decide whether to approve Proposal 1, an initiative that would allow a legal recreational cannabis industry in the state.
A $1B Opportunity?
Given that Michigan is the tenth-largest state in the U.S. by population, what opportunities does a legal cannabis market here hold for investors?
The answer is that it's an "unheard of" opportunity, said Michael Elias, CEO of Michigan Pure Med, one of the largest vertically integrated producers in the state.
“Michigan is one of the most exciting states in the country [in regards to its cannabis industry],” Elias said. “If you look at it objectively, there’s a patient base of around 345,000 people. That’s unheard of. It is the largest patient registration in the entire country."
Michigan is a $700-to-$800-million market in medical marijuana alone, and a $1 to $2-billion market when recreational cannabis is taken into consideration, the CEO said.
The Tourism Market
On top of the massive installed user base, Elias points to tourism as a driver for Michigan’s cannabis industry.
Michigan’s medical cannabis laws allow for reciprocity, meaning tourists who come from other states with a legal cannabis framework can purchase it in Michigan.
“Colorado has a $1.5-billion cannabis industry, and 60 percent of that is driven by tourists,” Elias said. "So all of Michigan’s tourists on top of 10 million people already living here — that’s a huge market.”
Vertically Integrated Production
Michigan Pure Med is a vertically integrated producer, meaning the company owns every step of the seed-to-sale process. The company will grow, process and sell cannabis at its own retail locations and wholesale to other dispensaries. The company’s footprint is large in a state where securing licenses presents a numerous hurdles for entrepreneurs.
“We have seven dispensaries at various stages of development and are working on licenses for more, as well as a 1.2-million-square-foot greenhouse in Marshall, Michigan,” Elias said.
“Our goal is to dominate the market, and the only way to do that is to never lose sight of the patient experience. We want to wrap a bit of love with each visit.”
Those hurdles include the aforementioned mix of municipal and state regulation. The licensing process starts with securing real estate for cannabis facilities in line with local ordinances, which can be a tough process given that only a handful of Michigan cities have opted into allowing commercial levels of cultivation, Elias said.
Then, businesses can apply for state licensing, which requires them to meet criteria such as a $500,000 in capitalization.
“We right now have 45 licenses pending, 34 of which are Class C licenses that you can stack in one location," Elias said. “We have two processing licenses and the rest are provisioning.”
Lessons From A Neighbor To The North
As Michigan moves closer to the Proposal 1 vote, it’s important to note that the state borders the largest federally legal cannabis market in the world: Canada.
The lack of supply and licensed retail spaces during Canada’s transition period is an issue Michigan regulators should take note of as they issue licenses, Elias said.
“Operators need to be ten steps ahead in creating an inventory buffer to meet the demand."
In the ramp-up to a potential legal market, Elias said he remains focused on why he’s in the business — he’s passionate about removing the stigma around cannabis.
“Our mantra is to elevate the everyday for everyone through cannabis. Cannabis has been cultivated for thousands of years. It restores hunger for cancer patients and helps people with multiple sclerosis. We’re in this business to strip away the bias and celebrate the quality of life that cannabis can provide.”
Investors will get the first chance to be part of Michigan's potential legal cannabis industry at the Michigan Cannabis Business Roundtable Nov. 9. For more information on how investors can attend, click here.
Meet the biggest cannabis industry players and make deals that will push the industry forward.
Featuring live company presentations, insider panels, and unmatched access to networking, the Benzinga Cannabis Capital Conference is where cannabis executives and entrepreneurs meet.
Join us September 13-14, 2022 at The Palmer House in Chicago, IL.
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