Southwest Michigan Vertical Marijuana Business

New research recently published in the Monitoring the Future Panel Study Annual Report shows increased cannabis use among young Americans. The demographic includes everyone in the United States, ages 19 to 30. It does not include teenagers under 19.

Monitoring the Future started collecting data about adult substance use in 1988. The new release shows the highest cannabis use on record. The report shows that:

• 42.6% of young adults used marijuana at least once in 2021.
• 28.5% of young adults used marijuana at least once within the past 30 days.
• 10.8% of young adults say that they use marijuana daily (although daily is defined as at least 20 times within the last 30 days).

Outlets report that vaping marijuana declined at the beginning of the pandemic. The activity has now returned to its pre-pandemic level. Approximately 12% of young adults vaped cannabis in 2021.

Alcohol remains the most popular drug used by young adults in the U.S. 81.1% said they had used alcohol at least once within the last year. 66.3% said they had consumed alcohol within the last 30 days.

Where Do Young People Purchase Cannabis Products?

Unfortunately, these numbers likely mean that the U.S. still has a thriving black market that sells cannabis to underage consumers. The legal market has proven its ability to exclusively serve adults 21 and over.

In California, no legal cannabis dispensary served an underage consumer in 2021. Medical and recreational dispensaries have robust systems in place that prevent underage people from entering the premises or purchasing products. For example, most stores have a waiting room where customers can relax while employees verify their IDs. Once verified, the customers can enter the retail room, where a trained representative helps them choose products that match their needs. Customers do not reclaim their IDs until they leave the stores.

These systems ensure that all customers are of legal age. They also help prevent theft and burglary by minimizing the number of people in the retail space.

For comparison, a recent report shows that alcohol companies earned about $17.5 billion from underage drinkers in 2016. Some experts predict that underage consumers can successfully purchase alcohol 30% of the time. Several factors probably affect this, including poor security and lax standards at liquor stores. Cannabis dispensaries, however, have shown that they take the law much more seriously.

If adults under 21 are using cannabis products, they either purchase them from black market dealers or have older friends purchase them legally from a dispensary.

Is It a Problem When Young People Use Cannabis?

Some research shows that using cannabis before the brain is fully developed can lead to cognitive impairments. The same is true of other drugs, including alcohol.

Unfortunately, the human brain doesn’t finish developing until about 25 years old (although the exact age varies from person to person). Therefore, it isn’t ideal for 19-year-old consumers to use cannabis or other mind-altering substances.

The potential risks are reduced as people move closer toward full brain development. This makes it important for all retailers to follow the law and ensure that they only sell products to legal adults.

Arizona took a huge step forward in 2020 when voters decided to legalize recreational cannabis for adults 21 and over. Now, medical and recreational stores operate throughout the state. An odd thing has happened, though: even as recreational cannabis retains its earlier sales, the medical market has slipped.

Medical marijuana has been legal in Arizona since 2010 when voters passed the Arizona Medical Marijuana Act.

Medical Cannabis Sales in Arizona

Arizona’s medical cannabis sector has struggled, especially since the state let retailers start selling recreational cannabis products.

In May of 2022, medical marijuana sales dropped by $45 million. It was only the second time medical sales dropped below $50 million. Even the number of medical marijuana cardholders has fallen. In January, the Arizona Department of Health Services (ADHS) reported that the state had 256,676 medical marijuana cardholders. In July, it reported 158,154. That’s a striking drop that has confused many experts.

Perhaps even more bewilderingly, fewer people are participating in the medical cannabis cultivation program. ADHS reported approving 2,982 cultivation permits in its January report. It only reported 1,844 in July.

Granted, you would expect to see some variation from month to month. These changes seem surprisingly large, though. They also seem like an ongoing trend that might have started after recreational sales began.

Recreational Cannabis Sales Hold Strong

Unfortunately, lower medical marijuana sales mean that the state collects less tax. The good news is that the state’s recreational cannabis industry holds strong.

Although Arizona legalized recreational cannabis sales in 2020, stores couldn’t make transactions until January 2021. That was around the time that medical sales started to fall. Still, monthly recreational sales have exceeded $70 million five times. In April, dispensaries sold approximately $81.2 million of recreational cannabis products, breaking the previous record of $80.4 million.

What Does This Mean for Arizona?

Right now, it means that the state isn’t collecting as much tax from medical cannabis as expected. That could hurt a variety of essential services. The state’s program dedicates:

• 33% to community colleges
• 31% to public safety, which includes police, fire departments, and first responders
• 25% to the Arizona Highway User Revenue Fund
• 10% to the justice reinvestment fund, which seeks to promote social justice in communities damaged by the War on Drugs and similar anti-drug initiatives

Perhaps these are just short-term concerns, though. If the taxes from recreational cannabis can cover the gap, Arizona doesn’t need to worry. It’s also worth considering that recreational tax revenues are new for the state. They didn’t even exist until 2021.

Why Have Medical Marijuana Sales Dropped in Arizona?

No one has published information showing why medical marijuana sales are dropping in Arizona. A few possible explanations come to mind, though:

• Adults no longer see the need to seek a prescription when they can simply buy recreational products.
• Public and private health insurance plans do not cover medical marijuana, so patients might choose other prescription drugs to save money.
• High inflation has forced patients to live without the benefits of medical marijuana.
• Legal cannabis seemed novel for a while, but now people have gotten used to it and purchase products less often.

How Will Arizona Respond to These Changes?

At the moment, the state probably will not do anything to influence cannabis buyers. Instead, they will likely keep an eye on tax revenues to determine whether they need to make adjustments. The state will find itself in a challenging situation, though, if medical marijuana sales keep falling and recreational sales do not replace them.

The state could respond in several ways, such as:

• Lowering the tax rate on medical marijuana to help patients afford their medicine.
• Increase the tax rate on recreational marijuana to encourage patients to use the medical program.
• Giving marijuana companies more tax breaks so they can charge lower prices.
• Adding medical marijuana to the list of medications covered by public health insurance policies. (This might seem unrealistic, but New York is pursuing a similar plan.)

Regardless, Arizona officials need to pay close attention to how these trends evolve over the next several years.

Adults in 19 U.S. states and Washington, D.C. can legally purchase cannabis for recreational use. However, all 50 states let adults purchase alcohol. A growing number of individuals and states believe that more states should let adults possess and consume recreational cannabis. Unfortunately, headlines don’t always accurately reflect how Americans feel about cannabis and alcohol.

Two recent surveys from Gallup show what people really think about using these substances.

Americans and Alcohol

When asked about the effects of alcohol on society, 75% of Americans surveyed say that the substance has a “very negative” or “somewhat negative” effect. Only 21% say that alcohol’s effect on society is “somewhat positive.” Only 2% think alcohol has a “very positive” effect.

Not surprisingly, non-drinkers had a more dire perspective. 85% of non-drinkers say that alcohol has a “somewhat negative” or “very negative” effect on society.

Drinkers don’t have a favorable outlook on alcohol either, although it’s notably less pronounced than the attitudes of non-drinkers. 65% of drinkers say that alcohol is “very negative” or “somewhat negative.” 26% of drinkers think alcohol has a “somewhat positive” influence. Even drinkers balk at the idea that alcohol is “very positive.” Only 2% of non-drinkers and drinkers give that response.

As a side note, the percentage of American imbibers hasn’t changed much over the decades. In 1939, 58% of American adults consumed alcohol. Use peaked at 71% in the late 1970s. Currently, about 67% of people say that they drink, at least occasionally.

Americans Have a More Favorable View of Cannabis

When asked about the effects of marijuana on society, Americans are evenly split: 50% think it’s negative and 49% think it’s positive.

Interestingly, a person’s experience with cannabis has a significant influence on their perspective. 66% of Americans who have tried marijuana say it has a somewhat or very positive effect on society. Only 27% of people who have never tried marijuana say it has a positive effect.

What about those who think cannabis has a negative effect on society? Seventy-two percent of people who have never tried marijuana say that its effect is somewhat or very negative. Only 35% of people who have used marijuana think it has a negative effect on society.

Given the correlation of trying cannabis and believing in its positive effects, these numbers will likely shift even further in favor of marijuana. In 1969, only 4% of Americans said that they had tried marijuana. The percentage stayed around 34% from 1985 to 2013. In 2022, 48% of Americans said that they had tried marijuana. Sixteen percent say that they currently smoke marijuana.

If the percentage of people who have tried marijuana keeps climbing, more people will probably have a favorable view of the plant’s influence on society.

Additionally, 60% of Americans say cannabis should be legal for medical and recreational use. Thirty-one percent want legal marijuana only for medical use. Just 8% of Americans don’t believe marijuana should be legal in any form.

Laws and Media Don’t Represent American Views

When you look at these two surveys, it’s clear that the average person thinks alcohol is more harmful than cannabis. Despite that, the majority of states do not allow recreational cannabis sales, while every state allows alcohol sales. The laws are out of sync with Americans.

The media also misrepresents the truth frequently. Even the Gallup titles make alcohol and cannabis sound equally negative. One is titled, “Most in U.S. Say Alcohol Adversely Affects Drinkers, Society.” The other is titled “Americans Not Convinced Marijuana Benefits Society.” These statements aren’t lies, but they also lack the surveys’ nuances.

Someone glancing at the headline would think that most Americans suspect that cannabis harms society. In reality, about half think cannabis is positive and the vast majority think it should be legal.

The legal cannabis industry promises to generate significant returns for investors and owners. However, anyone looking for short-term returns will find themselves disappointed. The industry still has a lot of work to do. In the meantime, companies must dedicate massive amounts of money to developing products, opening stores, starting efficient grow operations, and swaying political opinions.

Creating a new industry requires a lot of money, and that cuts into profits. If you just glance at cannabis stocks, you might wonder why anyone buys them. Many of them have tons of debt!

In reality, most companies across industries take on lots of debt. They have just enough revenue to cover the payments and still profit a little. That’s not nearly as easy to accomplish when you operate a small business in a new industry.

However, Agrify is committed to showing that it’s possible to grow an industry while repaying debt.

Agrify Commits To Repaying Debt

Inflation and other barriers have made it difficult for Agrify to meet many of its financial goals. The company managed to increase its year-over-year second-quarter revenue by 63.5% in 2022. Unfortunately, it earned 26% less than during the year’s first quarter.

This small stumble didn’t distract Agrify from an earlier commitment to repaying its debts, so it could focus on turning revenues into profits.

The company restructured its finances so it could move closer to this goal. The new agreement:

• Repays a significant portion of the current, outstanding loan.
• Exchanges the remaining debt to a new note with a lower principal balance.
• Does not require amortization payments on the principal for three years.
• Gives the company an opportunity to repay the loan early with minor financial consequences.

According to Raymond Chang, Chairman and CEO of Agrify, “Modifying our credit facility has been a top priority for us, and we are pleased to be able to move forward with additional flexibility to manage our business, conserve cash, and pursue a variety of compelling growth opportunities with fewer restrictions.

Can Other Cannabis Companies Follow Agrify’s Lead?

Agrify’s leaders and major investors believe that the new strategy will help them build a more dynamic company capable of making decisions based on opportunity instead of financial necessity. It’s much easier to develop a new product when you don’t need to worry about repaying high-interest loans. Agrify believes this is the way forward for them.

But can other cannabis companies follow its lead?

Agrify’s Role in the Cannabis Industry

Ideally, they can do similar things. Then again, Agrify’s section of the cannabis industry faces fewer pressures from regulations and consumer opinion than other companies.

Agrify develops and manufactures equipment that helps other companies succeed. Some of Agrify’s biggest sellers include cultivation and extraction equipment. It also provides professional facility design and engineering services. If you need someone to train your grow op’s employees or sell you distillation equipment, you go to Agrify.

This unique role as a manufacturer, designer, and trainer means Agrify spends money differently than growers and storefronts. It absolutely needs to invest massive amounts of cash into researching and developing reliable vertical grow solutions that work better than those built by competitors. However, it doesn’t need to think about purchasing other businesses to grow its brand authority and reach. If you own a large cannabis company that grows or buys products for consumers, you probably dedicate a lot of money to acquiring other businesses.

This significant difference could convince other cannabis companies that they cannot follow Agrify’s lead.

The Future of Financial Success in Cannabis

Companies certainly have unique concerns in the cannabis industry. What works for Agrify might not necessarily work for a retailer or grower. However, all companies need to start thinking about how they can spend less money without damaging long-term growth. That might mean restructuring current debts, seeking more investors, or entering partnerships instead of acquiring smaller businesses. If corporations do acquire smaller businesses, they might need to keep immediate and future financials in mind.

Massachusetts started letting retail stores sell recreational cannabis products to adults in 2018. Over the last few years, the state has built a successful industry that recently celebrated more than $3 billion in sales.

Cannabis Sales in Massachusetts

The Cannabis Control Commission (CCC) uses a seed-to-sale system to track all transactions. It even has an Open Data Platform that lets anyone browse or download datasets. The approach makes it relatively easy for Massachusetts to calculate the financial benefits of cannabis legalization.

CCC announced the achievement on May 18, 2022, via its official Twitter account.

Records show that retailers in the state sold over $5.9 million of cannabis and cannabis products on April 20, an official holiday for marijuana enthusiasts.

In 2021, Massachusetts cannabis stores sold more than $1 billion within a single year, a first for the state.

More States Celebrate Milestones

Massachusetts isn’t the only state celebrating financial milestones since legalizing recreational cannabis sales.

In April, Illinois stores sold $132 million in legal, adult-use cannabis products, setting a new record for monthly sales in the state. Arizona achieved a similar record in March. In April, Michigan had its highest per-month gross sales (almost $200 million).

States legalize recreational cannabis for various reasons. Not surprisingly, many governments point to the benefits of collecting cannabis sales taxes. According to the Marijuana Policy Project, states with legal, adult-use cannabis generated more than $3.7 billion in taxes, a 34% increase from 2020. States have collected about $11.2 billion in taxes since Colorado and Washington started allowing adult-use sales in 2014.

Concern about minors having easier access to cannabis has been one of the tallest barriers to its legalization. A new study adds to the ample evidence suggesting that states with legal cannabis do not have higher use rates among minors. Some evidence even shows that recreational cannabis laws might curb underage use.

California’s Cannabis Stores Take Regulations Seriously

The latest study shows that 100% of cannabis retailers comply with state ID policies designed to prevent underage consumers from buying products. The study’s authors express some surprise regarding the perfect consistency throughout the state. However, they acknowledge that research shows dispensaries in Washington and Colorado also comply.

Preventing Underage Patrons From Purchasing Cannabis Products

At least two factors likely influence the success of ID policies. First, retailers face hefty fines and possible jail time for failing to follow strict laws about who can buy cannabis products. In California, a first violation can result in a $500 fine and up to 30 days in jail. The state uses decoys to test the system, and any store that doesn’t comply can lose its license.

Second, companies have designed retail stores to make it nearly impossible for underage shoppers to enter. Typically, the stores have waiting rooms where patrons can sit while employees check their IDs. Once cleared, they can enter the retail area of the store. This approach makes it easier for cannabis retailers to control who enters their stores and limits the number of people within the retail space, which likely prevents theft.

States With Recreational Cannabis Have Lower Underage Use

Somewhat surprisingly, legalizing recreational cannabis seems to reduce the amount of underage use within a state. States with recreational cannabis laws show a 9% decrease in frequent use by teenagers.

Researchers speculate that legalizing recreational cannabis could actually make it harder for underage users to access marijuana products. It’s possible that law-abiding stores make it harder for drug dealers to earn money. More local product goes to the licensed distributor instead of someone selling illegally. Also, more adults who consume cannabis will choose retail stores that provide a wider range of products that have been tested for safety.

States that have not adopted recreational marijuana laws should consider whether prohibition truly benefits public health. The evidence suggests otherwise.

New York has taken a significant step toward treating medical cannabis as a legitimate medication. Senate Bill S8837 passed a floor vote with 54 Ayes and nine Nays.

SB S8837 has attracted national attention because it would force public insurance plans to treat medical cannabis like other prescription drugs. However, private insurers would not need to follow the regulation. The law would also make it possible for private insurers to cover medical marijuana if they choose to do so.

Making Medical Cannabis More Affordable for Patients

The bill’s justification states that “cost is the primary barrier to patient access in New York’s medical marijuana program.” Currently, no health insurance plans in the state help patients pay for medical cannabis. Some patients in New York start treatment but soon quit using their medications because they can’t afford to pay out of pocket.

If passed into law, SB S8837 would impact New York’s publicly funded programs, including Medicaid, workers’ compensation, Child Health Plus, and EPIC (Elderly Pharmaceutical Insurance Coverage).

The Next Steps Toward Adding Cannabis to Health Insurance

The bill still has two hurdles to clear before it becomes law. It awaits a vote from the State Assembly, but they will likely approve the bill. In the Senate, every Democrat and more than half of Republicans voted to mandate cannabis coverage. Democrats have an overwhelming majority in the Assembly.

If the Assembly votes in favor of the bill, it will go to Governor Hochul, who can veto or sign it into law. Although the governor has shown support for expanding cannabis access, she has not made it clear whether she plans to approve the bill.

If Gov. Hochul vetoes the bill, it will go back to the state legislature, where members could override the decision and force it into law.

Connecticut legislators recently passed a bill that removes an earlier restriction on how many cannabis stores and micro-grows can be in the state’s towns and cities. The new law also clarifies some industry regulations.

Connecticut Prepares for Recreational Cannabis Sales

Connecticut legalized recreational cannabis in 2021. Currently, adults 21 and older can possess up to 1.5 ounces of cannabis for medical or recreational use. Over the last year, the state has been working on rules that would regulate the new industry. So far, Connecticut hasn’t issued licenses for recreational cannabis sales. The state expects to finish setting guidelines by the end of 2022.

An early version of proposed regulations mandated that municipalities could only have one cannabis retail location per 25,000 residents. According to that rule, a town like New London, which has a population of about 28,000 people, could only have one retail cannabis store. New Haven, which has about 130,000 residents, could have up to five stores.

The new law removes that restriction, giving more control to local governments. Kaitlyn Krasselt, the Connecticut Department of Consumer Protection’s communications director, tells The Norwich Bulletin, “it’s up to towns to decide how many businesses are appropriate for their town.”

The state could reverse the decision in 2024, but that seems unlikely.

New Law Establishes Regulations for the Upcoming Cannabis Industry

The bill, which Governor Lamont signed into law on May 24, also clarifies some regulations ahead of the state sending licenses to recreational cannabis stores and cultivators.

A summary of the law states that it will:

• Ban billboard advertisements.
• Impose additional penalties for those who sell or trade cannabis outside of the legal limits.
• Define the financial and licensing responsibilities of dispensary and cultivation facilities.

Other changes will make it easier for certain applicants to take advantage of social equity programs. Accordingly, the state’s Social Equity Council (SEC) has grown its staff and started planning an accelerator program that teaches applicants how to operate successful businesses. The SEC also has access to a $10 million fund it can use to help qualified applicants start cannabis businesses.

Ohio cannabis advocates have been working hard to convince state legislators to vote on a law that would make the plant and related products legal. Currently, Ohio allows patients with prescriptions to purchase cannabis to treat medical conditions. While recreational possession and use is illegal, it has largely been decriminalized for personal use, defined as less than 3.5 ounces.

The Coalition to Regulate Marijuana Like Alcohol has now reached an agreement with lawmakers after suing the state for ignoring its petition.

Cannabis Advocates Collected More Than 140,000 Signatures

The advocacy group needed to collect 132,887 signatures to get the Ohio legislature to vote on its proposal. It turned in more than 200,000 signatures. Earlier this year, the Secretary of State Frank LaRose announced that only 120,000 of the signatures came from registered voters, putting the petition below the required number. The group responded by collecting 30,000 more signatures. After combining the two reams of signatures, the secretary of state said that the group had met the requirement.

Despite meeting the requirement, state legislators did not take action. State law says the legislature has four months to act, putting them beyond the deadline. Now, an agreement has been reached that the signatures will remain valid and the vote will move to 2023.

What Could the Initiative Accomplish?

The current version of the initiative establishes several goals, including:

• Legalization for up to 2.5 ounces of recreational cannabis for adults over 21.
• Legalization for up to 15 grams of cannabis concentrates for adults over 21.
• Allowing adults 21 and over to grow up to 12 plants per household.
• Creating a 10 percent sales tax that would benefit cities that choose to host dispensaries.
• Creating an additional tax to fund substance abuse programs.

The advocacy group says that a clear path has been established to legalize recreational cannabis in Ohio. If passed, it will put cannabis products on the same legal footing as alcohol.

In a blowout victory, Pennsylvania Democrats have chosen John Fetterman as their nominee for a seat in the U.S. Senate. Winning the seat could take the federal government closer to cannabis decriminalization or even legalization.

John Fetterman’s Political History

Fetterman has had an interesting career in politics. He’s unabashedly progressive, but he knows how to find common ground with many of Pennsylvania’s conservatives. He entered politics as the mayor of Braddock. He won the election by one vote. The former steel town had once thrived. Fetterman revitalized it by encouraging the community to invest in arts and youth programs.

In 2019, Fetterman became Pennsylvania’s Lieutenant Governor. He won the position by traveling the state and speaking to anyone who would listen. He was upfront about his positions, which include the legalization of cannabis, advocating for Medicare for All, and implementing a wealth tax.

The Republican nominee has not been decided yet. The current Republican holding the seat will not participate in the upcoming election. Fetterman says that his opponent will not influence his approach to campaigning because he always focuses on the concerns of working people.

Fetterman’s Positions on Cannabis Legalization

Pennsylvania has medical cannabis, but Fetterman has encouraged legislators to change that. By moving to Congress, he will have opportunities to change laws at the federal level.

The odds don’t look great for Democrats in the Senate. Fetterman’s win would flip one seat from Republican to Democratic. Unfortunately, most Republican members of the Senate have been reluctant to support cannabis legalization. This puts them in conflict with their constituents. About 62 percent of registered Republicans say they support cannabis legalization.

Fetterman’s Path Forward

Fetterman’s career shows that he can appeal to conservatives and liberals. While he holds progressive social views, he also understands the economic issues that concern many conservatives. His position on cannabis could make it easier for Republican members of Congress to break away from their national leaders and support legalization. After all, it’s not just something that Democrats want. It’s something most of the country wants. If Fetterman wins, he may provide a path forward.