July 4, 2021
The Director of Michigan’s Marijuana Regulatory Agency (MRA), Andrew Brisbo, made a guest appearance on the hit podcast Four20Post July 1, 2021. He had a far-reaching conversation with hosts Mike Brennan, Rick Thompson, Jamie Cooper and Dan Sparrow. The Director took questions on topics including the push to eliminate caregivers by the Michigan Cannabis Manufacturer’s Association, the upcoming legislative cycle and sales figures from the state cannabis industry.
“The data I’m looking at has 1.437 billion (estimated sales dollars) for this year but that’s not taking into account the steep increases month over month over the past several months.” By the end of the fiscal year, the figure could be larger. “If this growth rate continues, who knows?” Director Brisbo offered. “We’re all just kind of along for the ride, at this point.”
A fiscal year runs from October through September; the 2021 calendar year would include lucrative November and December, which were big sales months in 2020. For the calendar year, Director Brisbo is looking at more than $1.4 billion in sales. “I think it’s entirely possible that we could get closer to $2 billion total between the medical and adult-use markets this calendar year.”
Michigan’s adult-use cannabis sales figures have leveled off. “We had $105 million in adult-use sales in April and $104 ( million) in May. It’s hard to tell where this can go.” Medical cannabis sales in Michigan are bucking that trend, however, in recent months. “Medical had started to trend downward and now has started to come back up over the last couple of months as well.. It’s been between 44-48 (millions of dollars sold) in medical. I think that balance will probably continue.”
There are 17 licensed safety compliance centers, or cannabis testing labs, in Michigan, the Director confirmed.
“There has been a proposal to ask caregivers to test their cannabis. There are 30,000 caregivers in Michigan,” asked Thompson. The 30,000 caregivers service 72,000 patients by cultivating cannabis in their behalf, at 12 plants per patient. “The testing industry is clearly not capable of handling 30,000 additional users, isn’t that correct?”
“I haven’t seen that proposal. I’ve also heard rumors of that,” the Director confirmed. “Mandated testing, if that were to come to fruition, I think certainly would be a significant increase in what the expectation of the bandwidth would be for the state’s regulated labs.” Bandwidth is the capacity of labs to process tests; mandated, or required, testing of caregiver cannabis would require a significant increase in testing lab capacity- meaning, significantly more testing labs than are currently licensed would be needed.
A companion proposal to the mandatory testing of caregiver cannabis is the mandatory tracking of all caregiver-grown cannabis plants through the same seed-to-sale tracking program used for commercial entities. It’s called METRC, and it currently tracks more than one million live plants in the Michigan regulated cultivation system, and all the harvested plants, and the cannabis being transported or processed, and every single packaged cannabis product in retail stores everywhere.
“The METRC system seems to be pretty much at capacity. We regularly get notices that the METRC system goes down,” Thompson established. “How would that (METRC system) fare if we added plants to accommodate 72,000 patients into it immediately?”
“The platform can handle load, and we can always expand the amount of servers that we use,” Director Brisbo replied. “The concern I would have with expecting caregivers to utilize that system, or patients, or any home grow operation is the complexity of trying to get a decentralized group of people to use a singular system.”
The Director’s words suggest training caregivers and patients to use METRC would be a nightmare. METRC is a complex computer system. Even today, providing human support for the METRC system to the commercial market is labor-intensive and challenging. “We have a lot of energy that goes into supporting the use of the system by commercial operations, large scale commercial operators with compliance people who spend their time utilizing the system, and becoming experts in the system, and going through training,” the Director explained. “They certainly have their share of struggles of getting the right data into the system… we spend a lot of time in cleanup.”
In terms of buying more servers, having more outages and the sheer number of customer MRA employees needed to train 30,000 new people and provide computer support for them, the cost of having METRC track caregiver gardens would be prohibitive. “If you add a home grower, a non-commercial user who is required to use that system… the educational lift and the amount of resources we would have to devote to ensuring the data is accurate would be, certainly a consideration for us.”
The recently-released Michigan Cannabis Manufacturer’s Association (MCMA) report asserts Michigan’s regulated and unregulated markets combined were $3.2 billion in 2020. The report was created by the Anderson Economic Group, which has released only a two-page summary and not the entire report. The summary looks more like a press release with graphics than a scientific study, as the researcher’s methodology and sources are not revealed. The text is dominated by the politics of the MCMA’s mission to change the Michigan caregiver market.
The Director was asked to comment on the ratio of market sizes offered within the summary, a $3.2 billion overall market size with approx. $1 billion in regulated sales in 2020. “I was present for a presentation,” he began, “they were nice enough to include me when they presented that information to legislators.” The Director stopped short at drawing conclusions based on the data provided by the MCMA’s two-page summary. “I’d like to see the full report, I haven’t been privy to that, to see some of the methodology that went behind that.” Later, he added: “I’d like to see the numbers behind that.”
Adding to the volatile mix in Michigan’s cannabis economy are wide variations in year-to-date cannabis prices in the adult-use market. “We have $104 million dollars in adult-use sales in May of this year; there were $39 million in May of last year. In that twelve month period the retail price also went down 46%.”
In terms of measuring the entire market, volume of cannabis sales is an underutilized tool, the Director observed. $100 buys a lot more adult-use retail cannabis in 2021 than it did in 2020. “The volume of the product being sold is actually much greater than” the $65 million increase in sales might suggest, the Director pointed out. “I’m not sure… the grey market has that level of volatility with the pricing.”
“The pounds of flower sold through the regulated market, between January and May, went up 137%; 182% in the adult-use market. In January, almost 6700 pounds was sold; almost 18900 pounds in the adult-use market in May. That percentage increase is much greater than the dollar value that was sold. And you take into consideration… a declining price. I think that’s good news,” he opined.
The declining price seems to have been really declining. “If I look at the average retail price in Michigan for an eight, we’re at $27 now where it was well over $50 when the market first came to fruition,” the Director read from a spreadsheet. “We are getting closer to a place where… the price point within the regulated market is close to that street value, to what it would be sold on the illicit market.” Later the Director expanded his comments. “I think we’re at a place where the prices will stabilize a bit. I don’t know if they are going to go much lower right now, unless the supply increases tremendously.”
He reported the average retail price of a pound of cannabis is $3163 in the medical and $3539 in the adult-use markets. “I don’t think many people buy pounds at retail,” he quipped, adding, “They better not be. They’re not allowed to.”
Not increasing at the same rate is the number of cities allowing cannabis businesses to open. “As of the end of last month, our unofficial tally was 106,” communities authorizing cannabis businesses, the director revealed. “Which is up five from the previous month. I don’t recall the last month where we had that many jump in all at once.” The state has 1773 registered municipalities, 1396 of them have “prohibitive ordinances,” the Director said.
One of the incentives leading cities, villages and townships to invite cannabis businesses in is their share of the tax revenue. Cities hosting cannabis retailers qualify to receive a share of one-third of the 10% excise tax collected on adult-use cannabis sales. In fiscal 2020, that payment was $28,600. That carrot gets slightly smaller in 2021, the Director predicted. “I think that in fiscal 2021 that share might go down a little bit.” He cited more licensees and municipalities in the market as reasons the local tax revenue may go down.
In response to a question from Dan Sparrow about increasing the microbusinesses plant allocation up from 150, the Director said he was unaware of any stakeholder group or lawmaker currently pursuing that issue. He did reveal a new license type being adopted by the Marijuana Regulatory Agency- one which would function similarly to the microbusiness model.
“We did have a recommendation from a workgroup I put together called the Racial Equity Advisory Workgroup that suggested we create a new license type by rule,” Director Brisbo said. “Our rules are in draft form now; we expect those to be published within about a month or so. There will be a different license type, but somewhat similar in scope to the microbusiness, that will be proposed there.”
Watch for a crackdown on outrageous containers and wacko ads, too. “I had a mentioned in some of my previous discussions, particularly with stakeholders, that there was going to be an increased Agency focus on issues of packaging and labeling that would appeal to minors.” Packaging for cannabis products can not simulate child-friendly products- including using cartoon characters and eye-catching, kid-friendly design elements. “I think during the pandemic, with less of a field presence by the MRA… we saw things moving a little bit in a direction were not comfortable with. We’re going to be having some conversations with processors in particular who manufacture and package those products.” The Director added, “I think it’s one of those things that’s good for everyone.”
Designated consumption lounges are seemingly under attack from a bill introduced in the Michigan legislature to disallow cannabis consumption in places where food is served. Consumption lounges are places where cannabis is allowed to be consumed by smoking, vaporization or any other method. None have been licensed in Michigan yet, the Director informed the panel, but one has been applied for. Offering food or non-alcoholic beverages for sale would make this license type more attractive- and indeed, the MRA recently granted microbusinesses the ability to do just that. “In the last round of rulemaking we did open the door to say you can serve food and beverage in those establishments as long as you have the appropriate licensure from the local Department of Public Health.”
The bill, HB 5129, would seemingly block this new foodservice opportunity, and that has not escapes the MRA’s notice, the Director told Four20Post. “We need to have some conversations with the legislature about how that might impact this specific license type that was intended to be used for that purpose.”
The Director was asked what changes is the MRA is asking the legislature to do regarding Michigan’s caregiver program. The subject is controversial and has received media coverage recently.
“We haven’t made any recommendation in that regard,” Director Brisbo stated. “The only legislative proposals we were pursuing were the delta 8 concern and tribal relationships.”
“Not pursuing any changes at this time?”
“Not at this time, no.”
Earlier in the broadcast co-host Dan Sparrow said: “We really have been watching… the attack on caregivers. These groups that are after caregivers are after our individual rights to have 12 plants at home as well.”
The full video can be seen at https://www.facebook.com/M2Podcast