Published in Economic Development

Study: Economic impact of Michigan recreational marijuana could reach $7.8B

BY Thursday, April 09, 2020 12:35pm

Michigan’s recreational marijuana industry could spur a total economic impact of more than $7.8 billion and result in 13,500 direct jobs, according to a Michigan State University study.

Once more widely available, retail sales could reach $3 billion and generate $495.7 million in tax revenue for the state, according to researchers at MSU’s Center for Economic Analysis. The findings were extrapolated from Colorado’s experience and adjusted to Michigan’s population.

“While based on survey data, consumption patterns in Michigan appear to be similar to those in Colorado,” according to the report.

The estimates are based on the assumption that Michigan’s recreational market will continue to grow. The two main obstacles to that growth, however, are the lack of acceptance in local communities and the lack of testing facilities and capacity.

According to the report: “Marijuana needs to pass testing before it can be sold, and currently, it takes several weeks before growers and processors receive their results. The slow rate of local approval and the backlog of testing has created a bottleneck in the supply chain and are factors that partially explain why marijuana prices in Michigan remain quite high.”

Meanwhile, Michigan’s adult-use marijuana supply chain is “maturing rapidly, with several well-funded vertically integrated firms already operating,” the report adds.

The cannabis industry starts with “input suppliers,” an “often overlooked” component of the system that involves seeds, clones, property, lighting and labor. It’s followed by the producers, initial processing to dry and cure product, secondary processing that includes making edibles and concentrates, wholesaling and then retail sales.

“It should be noted that while all of these activities need to take place, one firm can act on multiple levels along the supply chain,” according to the report. “This is sometimes referred to as vertical integration.”

The report also expects prices to decline as Michigan’s market matures, as it did in Colorado, particularly from 2016-2018, and in Oregon.

However, the effects of the coronavirus pandemic remain to be seen. Medical and recreational marijuana has been deemed an essential service, but sales declined sharply since stay-at-home executive orders were issued last month, following an initial uptick.

The Lansing City Pulse reported sales declined 20 percent statewide in the last week of March after a record-high weekly revenue of nearly $5.8 million the week before.

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