Our home state of Michigan is turning into a hotbed of marijuana business and investment. As the industry grows, what will the cannabis industry look like next?
It’s a tremendous opportunity, and investment is finally coming to an industry that has already proven itself more thoroughly than most up-and-coming sectors ever have. Here, the proof is in the numbers; February 2021 saw $105 million on retail sales, a 160% increase year-on-year. Investors have noticed, with more businesses and money pouring into supporting the 400+ individual retailers now licensed in the Mitten state.
What’s interesting now is wherein the chain of supply to processing to distribution many of these companies are headed. While production facilities, largely indoor in a state that sees more than its fair share of cold weather, are still popping up from the Upper Peninsula to metro centers like Lansing, Grand Rapids, and Detroit, some of the biggest companies are focused on processing finished dried flower into extraction and other finalized cannabis products. These are often called “Cannabis 2.0” outputs and include products like CBD oils, butters, and extracts, as well as concentrates and vaping accessories.
First, production is still a smart move, and companies like Pure Extraction Technologies are creating facilities, including a 2,600 square foot facility in the middle of the start, which isn’t a coincidence. The central lower peninsula allows for distribution channels that are less than two hours away from population centers like Grand Rapids, Lansing, and Detroit. But even that facility is focused on creating extracts, concentrates, and CBD-specific products, which have eclipsed dried flower sales in the past year.
Pure Extraction, in many ways, is a blueprint for Michigan cannabis companies looking to tap into a market that experts have estimated reaching a total value of $3 billion in the next few years. They’re partnering with current production facilities, creating their own, and focusing production on final products that require efficient and complex extraction and concentration processes. It’s easy to see that their facilities may ultimately set them apart from competitors, especially those leaving money on the table along the intricate growth cycle.
This level of investment is a sign that the competitive outlook of cannabis in Michigan and, to be sure, the country is getting more professional and more demanding. As companies either jump on this kind of integrated operation or get left behind, the market will dictate ever more demanding in terms of input costs. Energy expenses, which we’ve elaborated on in a number of blogs over the past year, will play a critical role in developing a competitive edge. When much more strict environmental and carbon restrictions catch up with energy-hungry cannabis facilities, those with a strong foundation now will be better suited to carry on while others bear the financial burden of efficiency upgrades.
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