Michigan's recreational pot sales dampened by pandemic but projected to set records
Recreational marijuana purchases are expected to overtake medical marijuana receipts this year as Michigan’s budding marijuana industry is expected to top a record $1.3 billion in sales.
But some industry experts believe that growth could have been higher if not for challenges of the pandemic.
Michigan legalized recreational pot in a November 2018 ballot initiative and the state began allowing sales in December 2019.Michigan reported $776 million in total marijuana sales last year, about $434 million in medical marijuana and $342 million in recreational marijuana.
Michigan's Marijuana Regulatory Agency Executive Director Andrew Brisbo said the state is on pace to see some growth in medical marijuana sales — 2021 annual sales are forecast at about $490 million — but recreational purchases are expected to more than double to $816 million despite retail marijuana prices in February being down 46% from the same time a year ago.
Total marijuana sales were more than$105 million in both January and February of this year, and recreational sales accounted for about 65% of sales, or $68 million, each month,according to data from the Marijuana Regulatory Agency. Flowers, edibles and vape cartridges make up the majority of sales.
"Considering the increase in total sales and prices coming down by almost half, that's really indicative of just how quickly things are growing," Brisbo said.
Michigan State University researchers studied the potential economic impact of the recreational marijuana industry in the state by using Colorado's experience and adjusting for Michigan’s population.
Their report released in March 2020 estimated that once marijuana becomes widely available retail sales will reach approximately $3 billion, with an economic impact in excess of $7.8 billion. Researchers predict the marijuana supply chain is estimated to bring 13,500 to 23,000 jobs and $300 million in excise taxes to Michigan.
"We're jumping from $776 million to $1.3 billion, and I think it's possible we could surpass that based on monthly sales and those are trending upward more recently," Brisbo said. "Our growth rate is quick, but it's hard to draw an apples-to-apples comparison to other states. Michigan's market is somewhat unique."
Recreational marijuana sales surpassed monthly medical-use sales in July and the gap continues to grow.
Brisbo said Michigan created a robust medical market that operated for eight years before recreational sales began.
"The consumer demand was there, it was just waiting to be met through regulated sites," he said.
Michigan is one of 17 states, plus the District of Columbia, to legalize recreational marijuana, although it's still against federal law. There are 36 states that allow medical use. Canada has also legalized marijuana for recreational use.
"As a result, at least in the short run, most of the marijuana consumed in Michigan will be produced in Michigan," the MSU researchers noted,as it is illegal to carry marijuana across state lines.
More municipalities are opting into the Michigan Regulation and Taxation of Marijuana Act to allow marijuana businesses. The state now has 95 jurisdictions participating but 1,403 other communities have opted out and prohibit recreational sales. Detroit has opted-in for recreational marijuana but does not have its licensing certifications sorted out.
The state has about 411 medical marijuana retailers and 265 recreationalstores, although recreational businesses are expected to grow as cities like Detroit establish rules and businesses obtain state and local approval. Detroit will eventually license up to75 dispensaries as well as other types of recreational marijuana businesses.
► RELATED REPORT: Will Detroit be allowed to give legacy residents priority for recreational marijuana businesses?
In February, 187 new applications were filed with the state — up from 115 in January — and 94 were approved. None were denied, according to the Marijuana Regulatory Agency. The new applications included 139 for pre-qualification by the state to be eligible for a license, and the rest included various types of businesses including retail stores, growers and secure transporters.
Cities that license marijuana retail businesses receive about $28,000 in tax revenue for each business or micro business, and communities are starting to see the economic benefits, Brisbo said.
"That's just direct excise tax revenue distribution. That doesn't include revenue from sales tax generated, job creation or potentially property taxes," he said.
Pandemic hinders cannabis growth
"I'm certain we would have already reached over $1 billion in sales last year," had the pandemic not occurred, said Robin Schneider, executive director of Michigan Cannabis Industry Association, who added the pandemic hasn't allowed new business owners to move as quickly.
"Michigan has proven to be a safe place for consumers to safely access cannabis products, even during the pandemic, the state did a phenomenal job of putting safety measures in place including contactless delivery, curbside service, pre-ordering so there isn't a lot of traffic inside these retail facilities."
Schneider believes Michigan is on its way to becoming a hub for marijuana use in the Midwest as residents in surrounding states cross borders to consume products.
Illinois has legalized recreational marijuana, while Indiana and Ohio, which does allow medical marijuana, haven't. Indiana is one of 14 states that has no medical marijuana laws. Possession of a single joint there is punishable by up to one year in jail and/or a $5,000 fine.
"It is illegal to take the cannabis back across the border, but there are going to be designated areas like parks along the Indiana border where people can actually consume while they're in Michigan," Schneider said. "We expect to see more travelers with the opening of social consumption lounges after the pandemic settles down and we're able to get back to some sort of normalcy.
"Over time, as communities embrace and understand that cannabis consumers are not any different than alcohol consumers, more municipalities will opt in and really social consumption lounges won't be any different than a bar," she said.
Quality Roots opened its first dispensary in Battle Creek in April 2020. By January, it opened a second location in Hamtramck and aims to serve residents in Berkley and Westland by the end of the year, said owner Aric Klar.
The recreational shop off Interstate 75 in Hamtramck sees about 500 people each day and shoppers only need a driver's license to enter. The shop is similarly designed to an Apple Store, and shoppers can learn about products, their side effects and smell different flower strains.
"We've definitely seen an increase in sales during the pandemic that's allowed us to grow despite the setbacks," said Klar, 32, adding weekly sales have grown more than 20% per week since the store opened Jan. 8. "We focus on making the experience a very approachable place to come to learn. With so many things out there that people can try, we are curating those goods that are the best and highest quality hence the name Quality Roots."
While the stores are climbing in sales every month, Klar said there's a strong fear of oversaturation as more than eight dispensaries have opened on East Eight Mile.
"There are two avenues to this business, the operating out of it and getting stores open end of it," he said. "Getting stores open is tough because you either have the property zoned properly, you have to win licenses and identify communities where we can have a positive impact."
Research growing in Michigan
Dr. Ziva Cooper, director of the UCLA Cannabis Research Initiative, said while there's strong evidence marijuana helps with addiction, anxiety, post-traumatic stress disorder and schizophrenia, few studies are done with dispensary products. "So we have very little knowledge about the whole cannabis plant and what people are using nationally," she said.
"We have changing policy and public perception, emerging cannabis trends shifting patterns of use in demographics, and there's clearly an urgent need to know the positive and negative health effects," Cooper said.
Brisbo said the Michigan Marijuana Regulatory Agency is on the cusp of disbursing $20 million in research funding that was required under the recreational marijuana ballot initiative. A majority of the funds will be spent researching the efficacy of using marijuana to treat veterans and preventing veteran suicide.
The state is working with Northern Michigan University and Superior State University, which have four-year cannabis degree programs in chemistry and business, to create a leading research specialty space in the state.
It's unknown when or if there could be a federal shift in policy, but if it does occur, Brisbo is on the executive committee of the Cannabis Regulators Association,a national board comprised of state officials from 19 jurisdictions working on cannabis policy,and says Michigan will have a seat at the table for an "easy transition" into the future.
"As we see a transition of consumers into the regulated market I think ultimately that's good for public health and safety, and obviously good for the economy of the state as well," he said.
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Here is a roundup of the latest news concerning the COVID-19 pandemic in addition to announcements from local, state, and federal governments, as well as international channels. To share a business or nonprofit story, please send us a message.
Ford and Mahindra End Joint Venture Discussions
Ford Motor Co. in Dearborn and India’s Mahindra & Mahindra, which has its North American headquarters in Auburn Hills, have decided they will not complete a previously announced automotive joint venture.
The decision follows the passing of the Dec. 31 “longstop,” or expiration date of a definitive agreement the organizations entered into in October 2019.
According to the companies, the outcome was driven by changes in global economic and business conditions – caused, in part, by the global pandemic – over the past 15 months. Those changes influenced separate decisions by Ford and Mahindra to reassess their respective capital allocation priorities.
Ford said its independent operations in India will continue as is. The company is actively evaluating its businesses around the world, including in India, making choices and allocating capital in ways that advance Ford’s plan to achieve an 8 percent company adjusted EBIT margin and generate consistently strong adjusted free cash flow.
Ford’s plan calls for developing and delivering high-quality, high-value, connected vehicles – increasingly electric vehicles – and services that are affordable to an even broader range of customers and profitable for Ford. The company says it is moving quickly to:
- Turn around its automotive business – competing like a challenger while simplifying and modernizing all aspects of the company.
- Grow by capitalizing on existing strengths, disrupting the conventional automotive business, and partnering with others to gain expertise and efficiency.
Quality Roots Opens its Second Michigan Dispensary
Michigan-based Quality Roots has opened its first cannabis dispensary in southeast Michigan and its second in the state overall.
The new dispensary is located in Hamtramck. The company’s first outlet is in Battle Creek. Stores in Berkley, Royal Oak, Westland, and Pontiac, as well as growing facilities are planned.
Quality Roots is run by CEO Aric Klar. He is joined on the leadership team by his brothers Jonathan and Michael, and their father, Mark. The Schostak family is an operational partner in Quality Roots.
Klar’s parents owned one of the largest, independent pharmacy operations in Michigan. Aric Klar says he learned about patient management, team management, and supply chain while helping to grow the business in a regulated industry. In 2014, he helped his parents exit the pharmacy portfolio through a deal with Walgreens.
In addition to his work with that family business, Klar started an independent toy store, Toyology Toys, that has retail locations in Michigan and a distribution platform that serves thousands of other stores across the country. The company focuses on trends-based products, which Klar says translates well to the rapidly changing cannabis industry.
“(Quality Roots) is focused on building a branded experience for consumers, this allows us to be a cannabis education platform that happens to sell both medicinal and recreational cannabis products,” Klar says. “Quality Roots is providing quality assurance in growing and selling cannabis that meets only the same high standards of safety, efficacy, and potency that the customers have come to expect on the dispensary shelves.”
For More Information, visit here.
U-MSurvey: Consumers See Economic Gains on Distant Horizon
Despite the ongoing surge in COVID-19 infections and deaths, consumer sentiment improved according to the results of a December survey conducted by the University of Michigan in Ann Arbor.
The Consumer Sentiment Index was 80.7 in December, up from 76.9 in November, but well below last December’s 99.3. The gains reflect improvements in the Expectations Index (74.6, up from last month’s 70.5 but below last year’s 88.9). The Current Conditions Index rose to 90.0 in December, between last month’s 87.0 and last year’s 115.5.
The improvement, according to analysts, was due to Democrats becoming much more positive and Republicans much more negative about long-term prospects for the national economy.
Twice as many Democrats as three months ago expected a continuous expansion over the next five years (54 percent up from 27 percent), while that same favorable expectation was nearly cut in half among Republicans (32 percent down from 60 percent). The near-term outlook for the national economy remained unfavorable due to an expected rise in stay-at-home orders and business shutdowns due to the surging COVID-19 virus.
“Although the rollout of the COVID vaccine has been greeted as the beginning of the end, the end of the pandemic is still on the distant horizon in terms of a return of normalcy for consumer behavior,” says Richard Curtin, a U-M economist who directs the surveys. “Precautionary motives will continue to shape most economic and personal behavior.
“While the recent passage of more relief payments and boosted jobless benefits are welcome, they will hardly offset the economic impact of renewed regulations due to the resurgence in COVID inflections and deaths. It would compound past mistakes to think that future actions could wait until the short duration of the current financial aid package runs its course.”
The typical pattern over the past half century, according to Curtin, has been that consumers’ assessments of their personal finances and the national economy followed similar trends. Current assessments of the economy have fallen more than twice as much as consumers’ overall judgments about their current finances.
The much smaller falloff in personal finances reflects a growing offset: Some households that have been devastated by job and income losses due to the pandemic were largely offset in the overall figures by other households who have benefited from continued employment by working at home throughout the pandemic. Along with rising home and stock prices, this has caused a significant increase in income and wealth inequality since the start of the pandemic, Curtin says.
Six-in-10 consumers participating in the survey made spontaneous references to the pandemic’s negative impact on jobs. When directly asked about how they expected the national unemployment rate to change in the year ahead, there was a good deal of uncertainty as increases, decreases or an unchanged unemployment rate were nearly equally common. Six months ago, consumers more frequently expected declines in joblessness, but those positive views have been reduced as they have reluctantly concluded that the virus will persist longer than they had initially anticipated, Curtin says.
To review the full survey report, visit here.
Building on roots in retail, marijuana business Quality Roots branches out in metro Detroit
By Jason Davis
Crain's Detroit Business
If you don't believe a cannabis business can be run similar to a toy store, don't tell Aric Klar. Klar co-owns Quality Roots with his father, Mark, and brothers, John and Michael. They opened their first store in Battle Creek in the spring, just as the coronavirus was taking hold in Michigan. Now they are set to open their second location, in Hamtramck, on Monday and hope to open a third shop this spring in Berkley.www.crainsdetroit.com
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IN THIS ARTICLE
#Retail Business#Metro Detroit#Recreational Marijuana#Retail Sales#Klar Co#Quality Roots#Toyology Toys#Sav Mor#Schostak Brothers Co#Applebee#Mod Pizza#Schostak Development#Klars
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Roots detroit quality
The Path From Toys To Cannabis - QUALITY ROOTS is the New Standard of Cannabis in Michigan
DETROIT, MI, January 26, 2021 /24-7PressRelease/ -- Growing up working with his parents in their independent pharmacy business, to creating his own independent toy store it's no surprise CEO of Quality Roots, Aric Klar and his family are poised to be the Michigan family to lead the Michigan Cannabis industry in 2021. The first of January will bring the second recreational dispensary and in SE Michigan in Hamtramck. "While (Quality Roots) is a recreational marijuana retailer, we're still taking a medical approach focused on patient protection and service," Aric Klar said. "I grew up in the world of regulation and compliance. Tying that family history into this business will make a big difference."
Quality Roots has its first operational recreational and medical dispensary located in Battle Creek, Michigan. At Quality Roots, Aric Klar is joined on the leadership team including his brothers Jonathan and Michael and father Mark. The Schostak family, which has years of operational experience, is an operational partner in Quality Roots. Assisting with the venture is Schostak Brothers & Co., one of the largest real estate development groups in metro Detroit that manages and leases a variety of properties. Its TEAM Schostak Family Restaurants' portfolio includes more than 150 fast-casual restaurants including Applebee's, Del Taco, MOD Pizza, Olga's Kitchen and Wendy's brands.
Schostak Development President Jeffrey Schostak said his group is excited about the partnership, touting the Klars' operational and regulatory retail business experience.
Klar's parents owned one of the largest, independent pharmacy operations in Michigan while he was growing up. He learned about patient management, team management and supply chain while helping to grow the business in a regulated industry. In 2014, he helped his parents exit the pharmacy portfolio through a deal with Walgreens.
In addition to his work with that family business, Aric Klar started an independent toy store, Toyology Toys, that has retail locations in Michigan and a distribution platform that serves thousands of other stores across the country. The company focuses on trends-based products, which translates well to the rapidly changing cannabis industry.
Quality Roots takes a family approach with its entire team. The company prides itself on giving its team members the tools they need to be successful. Having a trusted team is essential to success, including, Nicole Essa, Director of Operations, who has strong experience in restaurant management and supply chain.
Klar's past experience in understanding supply chain and shelf space by working so successfully with the pharmacie and Toyology has helped Quality Roots build strong vendor relationships to offer its consumers a wide variety of products. Quality Roots has one of the largest cannabis menus in Michigan, with numerous varieties of marijuana, pre-rolls, vape cartridges, edibles, concentrates, and CBDs. The focus is on high-quality marijuana.
The company has a number of other licenses for recreational dispensaries in the state; ready to open are Hamtramck the first of January 2021, followed by a store in Berkley, Royal Oak, Westland and Pontiac with growing facilities and more.
The Klar family business history has allowed Quality Roots to create a cannabis brand that is built on service, patient and customer experience along with a strong emphasis on embedding into the communities in which Quality Roots will operate.
The company is focused on building a branded experience for consumers, this allows Quality Roots to be a cannabis education platform that happens to sell both medicinal and recreational cannabis products.
Aric Klar is confident in his team's ability to provide a strong educational platform and experience that keeps consumers coming back. Quality Roots is providing quality assurance in growing and selling cannabis that meets only the same high standards of safety, efficacy, and potency that the customers have come to expect on the dispensary shelves.
For More Information: https://getqualityroots.com
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Despite opposition from some in the community, Hamtramck is getting a second marijuana dispensary this week.
It's also the second dispensary for Quality Roots, which opened its first dispensary in Battle Creeklast year. Quality Roots is expected to open its Hamtramck location on Thursday at 2024 Caniff St. for recreational adult-use customers.
Quality Roots is led by Aric Klar, whose family owned a large local pharmacy and the Toyology toy store in Royal Oak — experience the company says will translate to the cannabis industry. According to a press release, Quality Roots has one of the largest cannabis menus in the state, with numerous varieties of flower, pre-rolls, vape cartridges, edibles, concentrates, and CBD products.
The cannabis industry had a rough start in the multicultural enclave of Hamtramck, where the opening of the Pleasantrees dispensary in November was met with opposition from some of the city's Muslim leaders, who moved to prohibit future dispensariesin the two-square-mile city.
Those opposed to marijuana shops claimed Pleasantrees snuck in under the radar. In fact, Hamtramck City Council failed to formally opt outof allowing marijuana businesses, as Michigan Marijuana Regulatory Agency Director Andrew Brisbo advised communities to do, creating a window for Pleasantrees and Quality Roots to set up shop.
Hamtramck Mayor Karen Majewski has supported cannabis business in the city.
Quality Roots is also planning to open more medicinal and recreational dispensaries in 2021, including potential locations in Berkley, Royal Oak, Westland, and Pontiac.
Klar tells Metro Timesthat he's looking forward to opening the Berkley location as soon as possible, as it's a community where he has laid down his own roots. He says he bought his first home in the city.
The Berkley location will be at 3916 W. 11 Mile Road.
"We're very eager to hopefully see an uptick in future development on that road, and hope to [turn] that 11 Mile district to a new retail corridor for the city of Berkley," he says.
"We're just super excited and eager to get this site operational as fast as possible, so people can see how embedded we are in the cannabis community, how educated we are, and just show everybody the experience that they deserve," he says.
"We'll be rocking and rolling as fast as possible."
More information is available at getqualityroots.com.
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