With Ohio set to begin legal sales in the coming weeks, we thought it would be a good idea to take a look at how the Great Lakes area’s cannabis markets are performing now, and maybe make some wild guesses as to what they could look like in the future.
We compared recent sales data (April 2024), for adult-use cannabis for Michigan and Illinois, the only Great Lakes states undertaking adult-use sales prior to June 2024.
We compared three different slices of the addressable market to actual sales volume in these states,
We first divided overall adult-use sales by the number of citizens over 21 using the latest census.gov, USAFacts, and World Population Review Data for each state.
Then we did it again, factoring for the 59% approval rating of adult-use cannabis nationwide, to [very] roughly reflect each state’s maximum potential customer base.
Finally, to visualize a more down-to-earth, addressable market, we factored for each state’s prior year cannabis use data from the 2021-2022 National Surveys on Drug Use and Health; with 25.60% and 22.34% of Michigan and Illinois residents reporting using cannabis in the past year, respectively.
We also added in the per-gram price of dry flower, just to give a rough hint as to how much actual cannabis is produced and consumed in each market.
Keep in mind that there are a variety of other demographic factors such as age and socio-economic standing that also inform market performance, and all of these are heavily influenced by the specific regulations in any given state. Before we dive into some of the possible insights from this small data capture, let’s peek at the revenue data:
A pretty small chart, thanks to lagging legalization efforts and outright criminalization of cannabis in many of the states in the Great Lakes region. Digging in deeper, let’s compare per capita sales for persons over 21:
This shows unequivocally that Michigan’s market is outperforming Illinois’. A typical point of comparison we like to check at Fire is how many dry flower grams are represented in the adjusted per capita sales rate:
We see that Michigan, at about 20.0 grams per approval-adjusted capita and 42.5 grams per annual-use-adjusted capita, far outstrips Illinois’ 2.9 grams and 6.8 grams per capita in the same categories.
It’s no surprise then, much like in the Northeast, the math and consumer sentiment are closely aligned. Notably, Reddit posts in communities dedicated to Illinois cannabis are overwhelmingly critical of the state’s industry. The two pinned posts at the top of r/ILtrees are an Axios study regarding Illinois’ high cannabis prices and an Illinois House rep calling for relaxed homegrow regulations, pointing out that the Illinois industry is largely monopolized and stagnating while still charging or fining adults growing cannabis for personal use.
But as anyone who has shopped in Michigan knows, that’s not the whole story, is it?
Almost every inch of Michigan’s borders and coastline to the west, south, and east is made up of borders with states where cannabis is illegal. While it’s not something many of our peers or the local governments like having to acknowledge, the permeability of state borders in the US almost always leads to small-scale trafficking by everyday people looking for accessible, affordable cannabis products. That’s something that goes back to 1996, when California legalized medical marijuana and began to set standards for quality and price that had ramifications across the US, Canada, and Mexico, if not the world, and held water through the wave of adult-use legalization in the decade since Colorado, Oregon, and Washington led that charge. Analyses of these dynamics provide valuable predictive insights about potential market size and other dynamics as we move closer and closer to national-level legalization.
So, what happens when, this week, Ohio’s adult-use sales begin? What happens if Indiana and Wisconsin follow suit?
Market Normalization
Now we make some very rough but very educated guesses as to the Great Lakes cannabis market in, say, 2025 or 2026, since some pretty major changes will be necessary for Indiana, especially, to legalize adult-use. So, that in mind, we first wanted to see what happens if just Ohio and Indiana manage to mooch from Michigan’s pot-based picnic:
Assuming that Michigan is currently feeding a regional market that consists only of Indiana and Ohio in addition to itself, The Great Lake State could lose up to half of its cannabis market to robust cannabis programs in its neighbor states. Rough for Michigan, to say the least, whose potential monthly revenue would drop by about $170 million. But how about if we introduce Wisconsin and Illinois back into the mix?
Okay, we’ll pump the brakes for a few disclaimers here. Despite the almost 20% lower overall monthly sales in the Prairie State, this dynamic is heavily contingent on marked improvements to affordability and accessibility in Illinois if any amount of their current revenue is from out-of-state purchasers. And that’s before the fantasy that is Wisconsin or Indiana making any major moves in the next couple years.
However, this hypothetical dynamic does highlight Michigan’s absolute nightmare scenario–even worse than the already clear-and-present threat that is Ohio’s transition to adult-use in late July or early August. However, it also highlights that Ohio’s program has a strong chance to be remarkably stable; at its full potential there is only a 9% difference between eating Michigan’s lunch in the next couple of years and a completely legalized, potentially more population-balanced regional market.
This type of market normalization in response to regional legalization has seen states like Colorado deal with massive market swings, as a growing-but-plateauing market there around 2019 grew around 50% during the COVID-19 pandemic lockdown period before again normalizing in 2023, decimating businesses as the market gained and lost around $700m in value over less than 36 months. Parallel timing of legalization efforts in New Mexico, Arizona, Missouri, and states farther afield was only just beginning to influence the Colorado cannabis landscape when the COVID bump hit, leading to a form of market whiplash the Midwest and Great Lakes can hopefully avoid. As more states legalize, it’s only natural that the cannabis tourism market should fade from Green Wave levels to a more seasonally moderated and normalized pattern parallel to any other local industries and events.
Summing Up This Extremely Basic and Shallow Market Analysis
Notably, this analysis completely excludes any illicit or black-market cannabis sales that may be ongoing, and the overall cannabis market does continue to grow year-over-year. That means our ‘balanced market’ is potentially—if not probably—off by over 10% for any given state, as illustrated by the fact that per capita sales would drop drastically–below even Illinois’ current dismal numbers–dropping to a measly but incredibly reasonable $21.35 per capita per month for the region (remember we include our least frequent fliers in that measurement, though). We also ignore cultural and regulatory differences that exist now or may come to pass. Even beyond that, a healthy market with broad selection and low prices in Michigan could mean out-of-staters will still head there to make their purchases indefinitely, local markets be damned.
It’s also notable that the demographics of 21–65-year-olds and median income statistics are remarkably consistent over the states we compared here, averaging around 55% in that age group and with an average median income across all states of $70,666.00 +/- $4,360.50, meaning we shouldn’t see major differences in individual buying power across the region, either.
Overall, the regional volatility in the Great Lakes and greater Midwest is intense, and if trends continue it’ll only get more competitive. We expect lots of opportunity for revenue generation in Ohio, but the states that are lagging may never see markets that develop like Michigan, and Illinois is a case study in what not to do (did we mention they put up these weak numbers despite having 22% more adults than Michigan, too? You’d at least think Illinois could win one metric, but maybe the ’95-’96 Bulls were bottled lightning, who knows?).
At Fire Business Strategies, we tend to nerd out a little; we whip up these types of back-of-the-napkin market analyses on the fly to satisfy our own curiosity. For more in depth looks at regional markets, and to learn how Fire’s services can enhance outcomes for your cannabis business, head on over to our Contact page to set up a free initial consultation.
