Despite some highs, trouble continued to emerge in cannabis industry this year

Michigan’s cannabis industry experienced another tumultuous year in 2024. While consumers enjoyed cheaper weed than ever and the state solidified its position as a sales powerhouse, the industry faced significant challenges stemming from oversupply, intense competition and an ever-evolving regulatory landscape.

A double-edged sword: record sales and shrinking profits

This year saw a surge in retail cannabis sales, driven by increased consumer demand and expanding market accessibility. Border stores propelled much of the success, according to industry insiders, who believe dispensaries along the southern border and in the western Upper Peninsula may account for up to half of all retail cannabis sales in the state. But growing sales numbers don’t tell the whole story. A glut of supply, coupled with aggressive pricing strategies, led to a sharp decline in profit margins, and many producers found themselves struggling to maintain profitability in the highly competitive market.

Courtesy At a public Cannabis Regulatory Agency meeting in September, Executive Director Bian Hanna said the agency has proposed rules …

Conversion oil controversy

One of the most pressing issues in 2024 was the rise of CBD conversion oil, which is created by isolating THC, the primary psychoactive compound in cannabis, from hemp. The lack of oversight due to hemp’s federal legality means hemp-derived THC products don’t have to be tested at a state-licensed facility for potency or contaminants like fungus, heavy metals and pesticides. The process of isolating THC from hemp is also complex, and there’s a lack of research on the potential long-term health effects for consumers if unpredicted chemical reactions take place.

The finding through third-party testing that numerous vape cartridges and edibles pulled off dispensary shelves contained conversion oil and banned pesticides raised concerns from industry members, advocates and even the state Cannabis Regulatory Agency about product safety and quality. The CRA has proposed rule changes that would “prohibit the conversion of a cannabinoid into a different cannabinoid using a chemical reaction” and would ban Michigan licensees from selling products containing conversion oil. The proposed rules would take effect immediately if approved, rather than the typical 90-day period.

Corporate drama and market consolidation

The year was marked by a series of corporate mergers, acquisitions and closures. Larger companies consolidated their positions, while smaller operators faced increasing pressure to compete. High-profile bankruptcies and legal disputes ensued, such as a Robin Hood-style scenario where the general manager of cash-strapped 305 Farms, based in Lawrence, sold $269,000 worth of company weed and used the profits to pay employees’ back wages, according to the Detroit Metro Times. Lansing-based Skymint’s assets were auctioned off, while early industry entrants Fluresh and LivWell shuttered their flagship mega grows, pointing to increased competition and low wholesale prices as the reason.

Local battles and voter initiatives

The battle for local cannabis legalization continued to play out in municipalities across the state. Local governments and cannabis entrepreneurs clashed over ballot initiatives in Howell, Mason and many cities in eastern Michigan. While some communities embraced cannabis as an economic opportunity, others remained hesitant to allow retail sales. As the industry gets more desperate for new market share, we can expect to see more and more legal conflicts between cannabis operators and municipalities.

Looking ahead to 2025

As we enter the new year, the state’s industry faces a complex and uncertain future. The market remains dynamic and full of potential, though challenges such as oversupply, price competition, the use of illicit substances like conversion oil and regulatory hurdles will continue to shape its trajectory. Cannabis producers will need to embrace innovation and prioritize consumer trust to navigate these challenges and establish long-term success.