Michigan recreational marijuana business owners who gathered for a quarterly public meeting of the state's Cannabis Regulatory Agency on Wednesday said unfair fines, falling prices and the illicit products showing up in the market are threatening their economic survival.
The business owners and other industry stakeholders who spoke during the 1½-hour-long meeting, held both in-person in Lansing and virtually, called for more effective enforcement and regulatory reform to stabilize the industry.
Their comments come as the price of marijuana flower continues to decline — dropping to its lowest level of $65.21 for an ounce of recreational marijuana flower in February — making it hard for businesses to make a profit. Cannabis companies that use undisclosed substances in their products to save money can undercut the prices of other sellers, making it tougher for businesses to compete, industry stakeholders said.
At the same time, a new tax on marijuana products, recently proposed by Gov. Gretchen Whitmer to fund Michigan roads, adds to obstacles for business owners. A cannabis attorney called that proposal a "very serious and existential threat" at the meeting.
Some of the concerns raised at the meeting on Wednesday include:
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 fact that the average retail price for an ounce of recreational marijuana flower has dropped to $65.21 is a bad thing for everyone in the industry, including transporters.
"We are all losing," Feehan said. "I don't know who you could tell me is winning on that."
Recreational marijuana prices drop again in Michigan: What it means for the industry
Fines that threaten profitablity
A caller who identified himself as Eric Colandrea and an attorney for LaHaze Cannabis Co., a grower and processor in Cheboygan, said fines resulting from enforcement actions taken by the CRA are based on rules that are poorly written and 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 said. "Right now, there's millions of dollars invested in our facility and given the pricing that we're getting for the product, we're not making money. We're losing money. So if we don't have some actions by the agency that make sense when it comes to fines, you're just going to drive these businesses like us out ... and blow up a lot of investments and put a lot of people out of work.
Illicit products still an issue
A caller who identified as David Bye with the Michigan for Safe Cannabis Coalition said conversion oil (oil that's synthetically converted into THC, which is 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," Bye said. "Obviously, we know that's very unsettling, and we're looking for ways to resolve that."
The CRA has said that it intends to make clear in a new rule set proposed by the CRA in 2023 that CBD to THC conversion is prohibited in Michigan.
A few industry stakeholders brought up Whitmer’s plan to raise $470 million per year for roads by imposing a 32% wholesale tax on marijuana, which they said would result in business closures because consumers wouldn't be willing to pay higher prices for cannabis products and would turn to the illicit market.
Matt Imig, who spoke in person representing Lansing-based M&M Agriculture, described the proposed tax as dropping "a bombshell" on the industry.
"What are people going to do," Imig asked at the meeting. "Where is it going to go? Are we starting to look at what the possible loopholes are for people? ... Maybe small growers are going to get stuck and then you could just kiss the small businesses goodbye. Maybe that's the goal: to just have 10 or 15 huge players and the rest of the small mom-and-pop shops just go away."
