The recent launch of adult-use sales in Michigan and Illinois provide case studies of how new recreational markets can impact existing medical cannabis programs. Both states saw reductions in medical cannabis revenue and flower sales volume in their first month of adult-use sales due to tight supply and rising prices.

Michigan

Michigan’s adult-use sales began on Dec. 1, 2019. By that point, 180 medical dispensaries were licensed, but significant portions of the state’s supply were still coming from individual caregivers rather than licensed growers. The “Michigan Medical Market” table shows data from the state’s medical market in the months around the start of adult-use sales.

The state’s adult-use market (sales figures are in the "Michigan Recreational Market" table) started small, with only a handful of storefronts open to general consumers on the initial days of sales. By the end of December, 26 retailers had been licensed, but not all were open due to tight supply. The number of licensed recreational retailers in Michigan increased to 42 in January.

Combining each month's medical and recreational flower sales volume shows a decrease from December to January, emphasizing the tight supply in the state as licensed growers continue to ramp up production. Wholesale flower prices climbed on strong demand and limited inventory, from an average of $2,261 per pound in December to $2,535 per pound in January, a 12% jump. Weekly average prices peaked at $2,623 per pound in late January, compared to about $2,250 per pound in early December.

Illinois

Illinois began adult-use sales on Jan. 1, when about three dozen of the state’s 55 existing medical cannabis dispensaries opened to the general public. Prior to that, Illinois’ medical cannabis program boomed in 2019, with sales increasing by 84% from 2018. The opening of the adult-use market resulted in some significant changes in medical cannabis sales figures from December 2019 to January 2020.

Unfortunately, flower sales volume and pricing details were not available at press time for January adult-use sales in Illinois. However, gross revenues of recreational retailers reached more than $39.2 million in January. Unlike in Michigan, adult-use sales in Illinois surpassed those in the state’s medical market out of the gate because more retailers were open.

Tight supply was also reported in Illinois in January, with recreational retailers closing their doors for periods when they were unable to keep shelves stocked. December’s medical sales in Illinois represent a record high, suggesting patients may have stocked up in anticipation of short supply and higher prices once the recreational market opened. Limited inventory persisted in February, when Illinois reported that adult-use sales were $34.8 million, down 11% from January.

Wholesale flower prices rose in Illinois in January, when they averaged $2,980 per pound, up 5% from December’s monthly average of $2,836 per pound. Weekly average flower prices rose as high as $3,364 per pound in the first week of February. As alluded to above, rapidly growing demand in the state’s medical market in 2019 had already put upward pressure on wholesale flower rates.

Adam Koh is editorial director for Cannabis Benchmarks and Hemp Benchmarks.

Sources: Michigan Marijuana Regulatory Agency, Illinois Department of Public Health, Illinois Department of Financial and Professional Regulation, Cannabis Benchmarks