Economic Development, Health Care, and Small Business & Startups

Scarcity of marijuana worries state agency

Buildout costs and other barriers to legally enter the market have contributed to statewide shortage.

August 9, 2019
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The landscape of the cannabis industry in Michigan is gradually shifting.

According to Brad Bogus, vice president of growth and marketing for Confident Cannabis, which is headquartered in California and created testing software that is used by cannabis labs in Michigan, there are more unlicensed medical marijuana retailers than licensed retailers in the state. He said there are 127 licensed retailers and roughly 150 unlicensed or illegal retailers in the state. Those retailers are being supplied by caregivers in the state.

Supply on the flower side isn’t going to be fixed anytime soon by these emergency regulations because they take the longest to get up and running. Whereas we are going to have more provisioning centers up and running before we have cultivation providing the supply that they need to be selling, Bogus said.

“This is causing a severe shortage of supply, especially in licensed flower,” Bogus said. “Prices for flower are $1,500-$3,000 per pound, roughly two to four times of what they are in Oregon. Around 14% of the product is currently coming from licensed growers. Cultivators are also acting as wholesalers — buying, testing and reselling products they didn't make.”

Shortly after the legalization of medical marijuana, registered caregivers who assist licensed medical marijuana cardholders could purchase and grow marijuana. Bogus said there are about 40,000 caregivers in Michigan.

The illegal sale of retailers is boosted by the shortage of marijuana supply, but they are at risk of facing legal consequences. According to the Associated Press, 210 marijuana retailers were forced to close in 2018 because they did not have a state license to operate.

In an effort to counteract the shortage of supply, the state’s Marijuana Regulatory Agency has increased the rate at which licenses are approved. According to Desmond Mitchell, licensing division director, his unit is reviewing its processes to increase efficiency, decrease processing times and improve customer service. 

“There have been 173 pre-qualifications and 40 state operating licenses processed since the MRA was formed on April 30, 2019,” he said in June. “This is, on average, a 122% increase in pre-qualifications and a 100% increase in state operating licenses, as compared to the previous seven months.”

Bogus said Michigan retailers are taking advantage of Confident Cannabis’ software because every cannabis product needs to be tested before it can be bought or sold. 

“We have 100% of licensed suppliers in Michigan who are already using our platform for test results,” he said. “In every regulated market, every single cannabis product needs to be tested before it can be bought or sold to ensure that everyone is getting something that is safe and at the same time making sure that they are getting the proper potency in the product. There are a lot of different types of cannabis businesses that are creating and distributing products. The most basic product in the cannabis market is the flower, the plant itself that can be smoked. If I grow a cannabis flower and I just want a retailer to sell it in their stores, I have to grow it, harvest it, send it to a cannabis laboratory. The lab has to test the sample of the product and find the chemistry of the product and then they send the cannabis results to the grower and then they can sell the harvest to different buyers. They need to get the test results to the buyers every time they buy the product.”

The caregivers are able to sell their product to licensed growers. Retailers aren’t going to caregivers directly. They would be getting their supplies through licensed growers who are buying it from the caregivers themselves, Bogus said. However, he said that market slowly will phase out in the coming years due to the stringent regulations and risk.

Later this month, Bogus said Confident Cannabis will be opening a wholesale platform in Michigan that will be opened to licensed operators across the state.

“This is a really exciting time for the Michigan market because the supply chain dynamics being what they are, those few licensed operators that are in existence are very valuable and they have the next six to nine months at least of market dynamics on their side,” he said. “It is such a sellers’ market in Michigan … because there is not a lot of licensed supply out there.”

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