DETROIT (WXYZ) — Michigan's recreational marijuana market took a significant hit in January, with new data from the state's Cannabis Regulatory Agency showing sales dropped 16% — far worse than last year's nearly 7% decline.
Industry leaders say the steep drop is the result of several factors hitting at once: a new 24% tax on recreational marijuana that took effect at the start of the year, harsh winter weather and customers who stocked up before the tax kicked in.
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December was a blockbuster month for Michigan's cannabis market, with nearly $270 million in sales as customers rushed to buy and retailers loaded up on inventory ahead of the tax increase.
Brian Yono, owner of Hyde Cannabis in Detroit, said his shop felt the impact immediately.
"January is just a slower month for retail in general," Yono said.
Yono said his sales last month dropped sharply compared to December.
"I think I declined in business at least 15%," Yono said.
He said the December surge was part of a deliberate strategy.
"That was my goal. Let me stock up for the first quarter," Yono said.
Eric Slutzky, CEO of Doghouse Farms Cannabis, said January was the worst sales month his company has ever experienced and warned the slide may not be temporary.
"For our company as well, it was the worst sales month we've ever had and that we've ever experienced," Slutzky said.
Slutzky said the convergence of factors is a warning sign for the rest of the year.
"It's a number of factors that all came together at the same time, but the taxes definitely is one of the big factors and to me, I think one of the big things to get out to everybody, especially to the state and to Legislature, is this is the sign of things to come," Slutzky said.
Cannabis law attorney John Fraser said the financial pressure could force some businesses to close.
"I think we will see more stores and wholesalers close," Fraser said.
Fraser said the new tax compounded existing vulnerabilities in the market.
"For businesses that were already on weak financial footing, having less revenue means less profit and less ability to withstand the downturn," Fraser said.
Not all consumers are pulling back, however. Detroit customer Eduardo said the tax increase has not significantly changed his buying habits.
"It don't really affect me too much if you don't buy too much of the big stuff," Eduardo said.
Eduardo acknowledged noticing the higher prices but said the added cost is manageable.
"It's a couple of dollars in change. Not too much, you know what I mean. If you can spend the money don't spend it," Eduardo said.
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