Michigan: A Lucrative Cannabis Market with Tight Regulations
Ryan Allway
February 27th, 2019
Exclusive, News, Top News
Several states have legalized recreational cannabis over the past few years, but almost all of these states have been progressive coastal states. Last November, Michigan became the first midwestern state to legalize recreational cannabis.
The Marijuana Business Factbook 2018 projects that Michigan could become one of the country’s largest recreational markets, generating $1.4 billion to $1.7 billion in annual sales over the coming years, citing the state’s large existing medical cannabis population. The state’s residents are already widespread marijuana usage at around 15.6 percent of the population, compared to 14.9 percent for California.
Let’s take a look at Michigan’s evolving regulatory framework and why Grown Rogue Inc. (CSE: GRIN) (OTC: NVSIF) has focused on building a strong presence in the state.
Michigan’s Complex Tiered System
Michigan’s cannabis regulations are set to become among the most complicated in the country. After briefly closing more than 60 unlicensed medical dispensaries earlier this year, legal and supply challenges forced the state to reopen them until March 31. Many of these existing businesses have experienced issues securing new permanent licenses from the state under the new regulations—a testament to how complex the process has become.
Cannabis businesses must obtain three separate licenses in order to operate in the state:
- State License: The state will not restrict the number of recreational licenses, but the process is still up-in-the-air. The state has issued licenses for medical cannabis businesses, but regulations on the recreational market are not finalized.
- Municipal License: Municipalities may prohibit or limit the number of cannabis businesses in their jurisdiction. The licensing process is completely independent of the state licensing process and many municipalities have caps in place.
- Real Estate: Real estate used for cannabis cultivation or retail must be approved by both the state and municipal authorities, introducing another hurdle to the cannabis business licensing process in Michigan.
Legal challenges have led to an effective moratorium on the state level, as well as in several municipalities. For example, the Detroit City Council recently approved a 180-day moratorium citing ongoing legal challenges and concerns about voter-approved initiatives. The council members indicated that they would use the time to develop new ordinances to regulate the licensing and zoning of marijuana facilities and caregiver centers.
Grown Rogue’s Advantage
Grown Rogue recently announced a binding agreement to expand into Michigan through a strategic partnership with Blue Zebra Community LLC. Under the terms of the deal, the partnership will include two retail dispensaries, a 19,000 sq. ft. indoor cultivation processing center in Detroit, and an interest in a 28-acre parcel located in the northern portion of the lower peninsula that could be used for cultivation.
“With the second highest total number of medical cannabis card holders in the United States Michigan’s legalization of cannabis for adult-use presents a very large cannabis market opportunity,” said Obie Strickler, CEO of Grown Rogue, in a recent press release announcing the deal. “Significant barriers to entry at the local level add meaningful value to the limited number of municipal licenses approved.”
The company’s partnership approach helps sidestep many of these licensing issues by acquiring assets that already have municipal licenses. In addition, these assets are strategically located in areas conducive for rapid growth.
- Dispensaries: Grown Rogue’s Detroit dispensary is located in midtown near popular sports stadiums, art centers, and affluent housing. The Hazel Park location is within a quarter mile of the busiest freeway system in the state, as well as population centers.
- Cultivation: Grown Rogue’s Detroit cultivation center is a converted warehouse that’s expected to house two Class C growing licenses for up to 3,000 plants, yielding an annual production capacity of 2,500 kilograms.
Once fully licensed, the retail locations will offer multiple Michigan cannabis brands as well as locally produced Grown Rogue branded products for the Michigan cannabis market—which will launch the Grown Rogue brand into the midwest region.
Grown Rogue will leverage is strong expertise developed in Oregon to build out its presence in Michigan. With a vertically-integrated model and unique brands, the company is well positioned to continue executing its multi-state strategy in Michigan.
Looking Ahead
Grown Rogue Inc. (CSE: GRIN) (OTC: NVSIF) is uniquely positioned to capitalize on Michigan’s attractive market. With a complex regulatory framework in place, the state could see significant barriers to entry for new businesses in what could become a $1.7 billion per year market. Investors also have access to existing operations in Oregon, unique product lines, and expansions into other states, including California.
For more information, visit the company’s website at www.grownrogue.com.
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The above article is sponsored content. Emerging Growth LLC, which owns CannabisFN.com and CFN Media, has been hired to create awareness. Please follow the link below to view our full disclosure outlining our compensation: https://cannabisfn.com/legal-disclaimer
This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.
About Ryan Allway
Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.
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