Andrew Livingston | Vicente Sederberg

1. +
Estimating Michigan’s
Cannabis Market
ANDREW LIVINGSTON | VICENTE SEDERBERG
Planning for Growth

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Analysis for Proposal 1

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Why Does This Matter?
•Business Plans and Pro Forma
• You must accurately estimate revenue based upon demand
• Michigan will be competitive in the long run
• State and local pricing dynamics are important
•Understanding Competition
• You must understand both total regulated market capture and your
share of the legal industry
• The illicit market is your biggest competitor

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Full legalization and Medical Cannabis: 9 + DC
Comprehensive Medical Only: 21 states
CBD/Ineffective Medical Only: 19
• DC & VT – No regulated system for full legalization
No progress: 1
States With Regulated Cannabis Laws

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Michigan’s Cannabis Market
How to determine consumer and market size
• Demand-side consumer model which assessed the number and growth rate of
Michigan cannabis consumers, patients, and likely marijuana-consuming tourists from
outside the state
• Used data from: the U.S. Census, National Survey on Drug Use and Health, Longwoods
International, RAND Corporation, University of Michigan, and Colorado Department of
Revenue
• There are two major steps to the analysis: (1) Estimating the consumer population
and (2) Estimating legal market capture
• Consumer Population: (A) Total Consumers (B) Patients (C) Adult-use Consumers (D) Tourists
• Legal Market Capture: This will depend on the number of businesses, legal market prices,
taxes, and the existing black market

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Michigan Past Month Consumers
• Michigan currently has about 995 thousand adult
past month cannabis consumers
• In 2017, about 27% of all past month consumers
registered as patients
• Based on self-reporting, about 31% of Michigan’s
adult past month consumers are 18-25
• About 36.5% of Michigan 21+ past month
consumers used cannabis 20 or more days in the
last month

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Michigan Cannabis Consumers
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
Less than once per month 1-10 days 11-20 days 21-30 days
Michigan Cannabis Consumers and Demand
Number of Consumers Pounds of Demand
• Millions of Michigan
residents consume cannabis
but only a small portion use
frequently
• Those that use more than 20
days a month make up 6.5%
of consumers more than
75% of demand
• Bringing these consumers
into the legal market is most
important

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Michigan Medical Cannabis Patients
How high will the rate go?
0
100,000
200,000
300,000
400,000
500,000
600,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Michigan Medical Cannabis Patient Projection
Patients - Model 1 Patients - Model 2 Patients - Model 3 Patients - Model 4
• Michigan has the highest
patient to population rate in
the county (over 2.7%)
• Even if adult-use passes in
2018, stores will not likely
open until 2020
• Once adult-use stores open
patient registration will
decline

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• There were over 66 million visitor days to
Michigan in 2016 from those 21+
• But the percentage of visitors that consume
cannabis is far less representing only about 4.2
million visitor days
• Based on estimates from other states this
equates to just 9 thousand pounds of demand
in 2016 and about 11 thousand pounds by 2024
• There are over 2.1 million residents within a 45
minute drive of the Michigan border
Michigan Tourists
Those who come to visit but also consume cannabis

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Local Control
• Adult-use and medical market
capture requires local
communities to opt in
• If purchasing cannabis is
inconvenient then consumers
will stay in the black and grey
market
• Local lobbying is essential

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Regulated Market Capture
2017 2018 2019 2020
2021 2022 2023 2024

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Projected Market Growth
• By 2023, this Model estimates legal medical and adult-use marijuana
combined sales to exceed $1.47 billion
• Michigan’s regulated marketplace is projected to sell over $6.71 billion in
medical and adult-use marijuana from 2020 through 2024
• Over the first five years of adult-use sales, from 2020 through 2024, Michigan
will raise more than $520 million in taxes from adult-use marijuana sales
• Michigan cannabis market growth will depend on the pace of licensure at the
state and local level

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Projected Market Growth

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Find Your Piece in the Puzzle
•Where will your business reside and how will you market?
• Does the group you are marketing to actually exist?
• Are they as large as you expected?
• Are you priced competitively for your area?
•Michigan has a lot of consumers and niches will grow
• Most legal states do not show a large number of new consumers
• Instead, existing consumers will increase use and their tastes and
preferences will become more nuanced

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Questions?
Andrew Livingston | Vicente Sederberg