Marijuana: High Market Potential but Blunted Profits
Marijuana emits the aroma of potential, but trouble lies ahead for Michigan producers.
While the legal distribution of the drug remains popular in social and political landscapes, its macroeconomic fortunes are worsening. It’s oversupplied, facing tax increases, and has seen a dramatic dip in prices.
The political and social landscape over the past decade has dramatically shifted to support marijuana use. A 2024 Gallup poll found that 57% of U.S. adults think marijuana should be legal for recreational purposes, and an additional 32% thought it should be legal for only medical use, a dramatic increase from a decade ago.
The reclassification of marijuana from a Schedule I drug, which includes heroin, LSD, and ecstasy, to a Schedule III has had bipartisan backing, with then-President Biden openly supporting it and President Trump hinting at the idea this year. Even in Florida, where Trump won by double digits in 2024, 56% of voters voted in favor of a 2024 amendment to legalize marijuana recreationally, though the amendment did not meet the 60% threshold to pass.
People are also consuming more marijuana. Michigan, the second-largest U.S. marijuana market based on sales as of July 2025, proves this point best. Between 2020 and 2024, revenue from marijuana sales in Michigan more than doubled. Even among older people from Michigan, marijuana consumption has increased. According to the Michigan Poll on Healthy Aging, over one-fourth of people from Michigan 50 and older have used cannabis in the past year.
Globally, marijuana has massive potential. Sales in Europe, for example, are forecasted to grow with a compound annual growth rate of 45% and reach €2.1 billion by 2027. The legalization of medical-only cannabis in Canada and the U.S. prompted other countries to legalize medical-only cannabis. Legalizing recreational use in Canada and 50% of U.S. states has triggered laws internationally to increase access to marijuana products.
Despite the positive direction of the industry, marijuana businesses are struggling to stay afloat. The marijuana sector seems to be suffering from its own success.
Put simply, the market is oversupplied. In Michigan, the 2020 recreational marijuana retail price was an average of $419. By 2024, the price dropped by 80%, down to an average of $83. The number of active growers in Michigan has nearly doubled, and the retail inventory of flowers has more than tripled. Other states have also seen a significant decrease in retail prices. However, other markets, especially more mature markets, such as Colorado and Oregon, have seen a less significant drop.
For producers, this is bad news. This year, Michigan is experiencing a net decrease in marijuana employees for the first time in years. Last year, 18 leading public marijuana businesses lost $2 billion collectively despite taking in $8.5 billion in revenue. For consumers, on the other hand, this is good news. This means marijuana, at least for now, is significantly cheaper than it was previously and is staying cheap despite consumption increasing.
However, it’s unlikely that marijuana will continue to be deflationary. The Michigan House just passed a bill that would implement a 24% wholesale tax on marijuana. This tax, passed with bipartisan support, aims to raise $420 million for state infrastructure projects.
This could be disastrous for the industry. Not only will this tax be partially passed onto producers via higher prices, but it will also cause the illegal cannabis market to begin crowding out the legal market. After all, black market products can not be taxed. In California—which had a similarly high marijuana tax until only a few days ago—the illegal market flourished. As a result, only 40% of cannabis consumed in California originates from a regulated marketplace.
Despite these challenges, producers can look forward to several silver linings. The rates of exiting businesses, emerging marijuana markets, and Michigan’s taxes will all likely increase—or at least stabilize—marijuana prices in the coming years.
As the market matures and businesses increasingly distinguish themselves, producers could see real profits return. But for consumers, marijuana’s cheapness is likely to be blunted in the near future.
About the Author
Isaac Gardner is a writer for the Economics Section. He focuses on the intersection between business and politics. His experience includes interning in the U.S. Senate Committee on Homeland Security, U.S. House of Representatives, U.S. Secretary of Senate, Michigan House of Representatives, and various Michigan political campaigns. He is also a finance committee member of Michigan Business group and an undergraduate studying at the Ross School of Business
