Michigan’s cannabis market has matured into one of the nation’s largest. Now businesses are battling shrinking margins, relentless discounts and higher taxes in the fight for survival.
LANSING – Michigan’s legal cannabis industry has become one of the state’s biggest economic success stories.
Adult-use marijuana sales reached approximately $3.17 billion in 2025, making Michigan one of the nation’s largest legal cannabis markets. The industry supports thousands of jobs, generates hundreds of millions of dollars in tax revenue and has transformed vacant buildings into cultivation facilities, processing centers and retail dispensaries.
Border communities such as Monroe and New Buffalo have become cannabis shopping destinations for customers from neighboring states where prices remain higher.
But less than seven years after Michigan launched adult-use marijuana sales in December 2019, the industry’s biggest challenge is no longer attracting customers.
It’s making money.
Falling wholesale prices, aggressive retail discounting, intense competition and Michigan’s new 24% wholesale cannabis tax have combined to squeeze profit margins across much of the industry. While consumers have benefited from some of the nation’s lowest cannabis prices, many operators say sustaining those bargains has become increasingly difficult.
The result is an industry entering a new phase—one where success depends less on rapid expansion and more on operating efficiently in a mature marketplace.
Demand Has Limits
Patrick Anderson, principal and CEO of Anderson Economic Group, said today’s market reflects basic economics rather than a collapse in consumer interest.
“Consumer demand for cannabis is no different than demand for other products,” Anderson said. “Back in 2018, when Michigan legalized marijuana for adult use, we warned against exaggerating demand. At the time, some people argued the state would collect so much marijuana tax revenue it could fix the roads.”
“The state made a similar mistake in 2025 when it sharply increased taxes and expected even more revenue. Well, pot didn’t fix the potholes back then, and it isn’t going to float the state budget now.”
According to Anderson, the industry’s challenge is simple: the number of cannabis consumers—and how much they are willing to spend—is not unlimited.
“The market for flower and edibles is limited by both the number of consumers and the amount they are willing to spend,” he said. “Like we warned in 2018, both are limited. As a result, sales, discounts and promotions are proliferating at the dispensaries, and we can expect that to continue well into the future.”
Anderson Economic Group has tracked legal cannabis markets for more than a decade, analyzing sales trends in Michigan and other states alongside industries such as automobiles and alcoholic beverages.
From Growth To Competition
When Michigan’s recreational market opened, demand far exceeded supply. New cultivation facilities and dispensaries appeared across the state as investors anticipated years of rapid growth.
Today, the market looks much different.
Dispensaries compete with loyalty programs, flash sales, buy-one-get-one promotions, discounted ounces and value-priced prerolls to attract customers.
Some retailers advertise 15 prerolls for $25, often using products made from shake or lower-grade flower to create low-cost promotional bundles.
The strategy has helped keep Michigan’s cannabis prices among the nation’s lowest—but it has also reshaped consumer expectations.
Consumers Expect A Sale
Joshua Covert, CEO of MedsCafe, said promotions remain an important business tool—but only when they generate new business.
“Michigan consumers have benefited from some of the lowest cannabis prices in the country, and that’s a good thing,” Covert said. “But retailers have to be careful. A promotion should bring in new customers, increase the size of a purchase or help move specific inventory. If you’re simply discounting a sale that was already going to happen, you’re not creating new business—you are just giving away margin.”
Covert believes years of discounting have changed customer behavior.
“Michigan consumers have been exposed to so many daily deals and rotating promotions that many have learned there’s usually another discount coming,” he said. “That makes the advertised regular price less meaningful because customers increasingly judge value based on the price they expect to actually pay.”
Some operators are responding by emphasizing premium flower, craft cultivation, customer education and product quality rather than competing solely on price.
CRA Emphasizes Business Resources
The Michigan Cannabis Regulatory Agency recently highlighted existing programs designed to help cannabis businesses strengthen long-term operations through education, compliance assistance, workforce development and networking opportunities.
David Harns, public relations manager for the CRA, said the quarterly update does not represent a change in agency policy.
“Supporting the long-term success and sustainability of Michigan’s cannabis businesses has always been part of our work, including through our social equity initiatives,” Harns said. “The purpose of the quarterly newsletter is to provide a more comprehensive update on the work we are already doing and ensure stakeholders are aware of the programs, resources and opportunities available to them.”
A Mature Industry Faces Its Next Test
Michigan’s cannabis industry has moved beyond its startup years.
Like grocery stores, auto dealers and other mature retail sectors, cannabis businesses are increasingly competing for existing customers instead of relying on rapid market expansion.
Consumers have been the biggest winners, enjoying record-low prices and abundant choices.
The question now is whether enough businesses can remain profitable to keep delivering those bargains.
