The $60 Ounce Paradox: When Growing More and Spending Less Still Means Earning Less

Burn After Reading The 30-second intel for operators and investors ⏱ 0:30

Michigan's adult-use flower price is steadying near $59.99 an ounce, about 5% below a year earlier, but flower revenue over the past twelve months fell 7.3% to about $1.28 billion, and volumes are now declining too.

• Operators: Stable prices are not restoring margins. Q3 flower volume is down 5.9%, discounted prices are slipping, and the 24% wholesale excise tax raises acquisition costs where retail prices cannot rise to match.
• Investors: Retailer flower inventories sit 43% above last year at about 212,000 pounds. Flower drove roughly $100 million of the market's $131 million revenue decline, and Grown Rogue's Michigan adjusted EBITDA margin fell to 22.7% from 26.8%.
• Do now: Compare your full-price and discounted-price sales and your per-unit margin after the wholesale tax and promotions, to see whether the market's flat price masks margin erosion in your own numbers.

Short on time? You’re done. Want the numbers?Keep reading ↓

In Michigan, slower price declines have coincided with weaker flower volumes and renewed promotional pressure.

Michigan’s reported adult-use flower price reached $59.99 an ounce in September, about 5% below a year earlier. Between September 2024 and September 2025, it had fallen almost 20%. Field interviews suggest the slowdown is substantial.

After years of adjusting to lower prices, businesses are finding that stability alone isn’t enough to restore margins.

The Cannabis Regulatory Agency’s monthly reports show how uneven that adjustment has been. Flower fell from $63.16 an ounce in September 2025 to $58.22 in December.

It recovered to $61.67 by March 2026, then slipped to $58.18 in June before returning to roughly $60 in September.

During the first nine months of this year, the monthly average remained within that relatively narrow range.

If prices have stabilized, why are cannabis businesses still struggling to restore profitability? And how can operators cut costs and gain market share while earning less on every pound sold?

Chart 1. Michigan adult-use flower prices from September 2025 through September 2026

Figure 1. Source: Michigan Cannabis Regulatory Agency, monthly statistical reports. Reported flower sales averages, expressed in dollars per ounce; these are not prices for an identical basket or a particular packaged ounce.

The state average reflects the flower actually sold, including changes in quality and product mix. It provides a useful measure of revenue per unit of weight across the market, while leaving open how individual brands and stores achieved their prices. The sales volumes behind the average offer another way to assess whether operating conditions have improved.

From October 2025 through September 2026, Michigan’s adult-use retailers sold 1.6% more flower by weight than in the previous twelve months. Flower revenue nevertheless fell 7.3%, to about $1.28 billion. Dividing revenue by the weight sold produces a volume-weighted price decline of 8.7%.

Additional pounds softened the revenue loss, but their contribution was small relative to the decline in revenue earned on each pound.

The more recent comparisons are less encouraging. In the first nine months of 2026, flower volume fell 2.8% from the same period a year earlier. By the third quarter, it was down 5.9%, while the weighted price was 4.3% lower. Together, those changes left quarterly flower revenue almost 10% below the previous year.

The annual total still contains a modest volume gain, but the deals conducted during 2026 increasingly reflect lower prices alongside fewer pounds sold.

Chart 2. Changes in Michigan flower price, volume and revenue across three overlapping comparison periods

Figure 2. Author’s calculations from CRA reports. Each window is compared with the same months a year earlier. Volume is flower weight sold; weighted price is total flower revenue divided by total flower weight.

The consequences extend beyond flower, as total adult-use revenue across the latest twelve months fell 4.1% to approximately $3.05 billion, but flower accounted for about $100 million of the market’s $131 million revenue decline, or roughly three-quarters. A relatively small change in the overall market therefore conceals a more difficult adjustment in its largest agricultural product category.

Other categories followed different paths: vape-cartridge revenue was approximately flat across those twelve months, even as reported product weight increased 14.4%; shake and trim showed a similar separation, as weight sold rose 15%, while revenue slipped slightly.

The data suggest that selling more material continued to provide limited revenue relief in parts of the market. Operators in Michigan’s market should check whether their individual consumers traded down or shifted their spending between formats, to see if the aggregate trend shows in their own spreadsheets (if you do that, hit me with an email at rolando@igniteit.com; I’m curious to know).

Moreover, the market now holds substantial inventories. Retailers held about 212,000 pounds of flower at the end of September, an astonishing 43% more than a year earlier. And that was below the unusually high December balance, but it still accompanied declining sales volumes in the latest quarter. So these figures give us little reason to infer a broad shortage of flower.

To look more closely at the commercial adjustment, I reviewed pricing data from a cannabis business-intelligence platform covering several standard flower package sizes. I haven’t had time to ask about reproducing their figures, so I won’t be publishing those, but I do want to get into some aggregate trends. First of all, the gap between full-price and discounted-price averages narrowed in the opening months of 2026, then widened through spring and summer. I find this evidence consistent with continued pricing pressure, although the two sources do not follow an identical path.

By the third quarter, full-price averages were higher than in the first quarter, while discounted-price averages were lower across the package sizes examined, a hint that the race to the bottom is still alive. The separation grew more strongly in larger standard packs than in eighths.

Secondly, the timing is also revealing. The opening months offered some evidence of firmer discounted prices. As the year progressed, that improvement gave way to a wider separation between the two price series, consistent with renewed promotional pressure. Looking only at full prices would have suggested a stronger commercial recovery than the discounted series supported.

Taken together, the recovery in full prices could reflect a marketing operation or an attempt to recover margins that met resistance from buyers. These averages alone cannot establish either explanation.

Who paid for the gap?

The pressure could have travelled through the whole chain, but these data do not establish whether dispensaries and other businesses at the end of the line took the biggest hit. Vertically integrated operators face the pressure across their own businesses. And there’s an extra something that we need to discuss. For a retailer, the relevant margin depends on the selling price retained after a discount and the cost of acquiring the stock. A higher full price offers little protection when sales require larger reductions from it. Whether a promotion compresses the retailer’s margin also depends on supplier support and purchasing terms, which these price series do not disclose. That relationship became more consequential when Michigan added a tax at the wholesale stage.

The Comprehensive Road Funding Tax Act, signed on October 7, 2025, introduced a 24% wholesale excise tax effective January 1, 2026. It formed part of the state’s road-funding package, with proceeds directed to the Neighborhood Roads Fund. The levy generally applies at the first sale or transfer of adult-use cannabis to a retailer, with provisions also covering retailers that produce their own stock. It sits alongside the existing 10% retail excise tax and 6% sales tax. Those rates apply to different values at different stages (so adding them together would misstate the effective tax on a purchase).

Under Treasury’s guidance, wholesalers are legally responsible for remitting the new levy and may collect it from retailers. Where that raises a retailer’s acquisition cost, and competition prevents a corresponding increase in the selling price, gross profit per sale falls unless other purchasing costs decline.

Suppliers can also bear part of the burden through lower underlying prices. For instance, Grown Rogue reported that its Michigan bulk-flower selling price fell from $734 to $615 per pound between Q2 2025 and Q2 2026, a 16.2% decline, excluding the wholesale tax. That might be a case of a wholesaler taking part of the hit, although falling prices can also reflect other factors, including stock accumulation, changes in the product mix, and fierce competition. The figures do not isolate the tax’s contribution.

What is clear is that the tax increase was not followed by a sustained rise in the statewide flower price.

That is consistent with pressure on operators, although prices alone cannot establish how much of the tax they absorbed. One open question is whether the tax rise affected the split between legal and illicit cannabis. Steadier consumer prices can coexist with pressure on margins within the supply chain.

Still, Grown Rogue’s second-quarter results look sound in Michigan. Its production cost fell from $323 to $277 (−14.2%) per pound between the second quarters of 2025 and 2026. As mentioned, its bulk selling price, excluding the wholesale tax, fell by 16%. In this context, the company disclosed a Michigan-adjusted EBITDA margin of 22.7% after excluding wholesale-tax amounts from revenue, down from 26.8% a year earlier. Adjusted EBITDA dollars still increased as the business expanded, but the company earned a smaller margin on its revenue.

Overall, Michigan has moved into a period of slower price erosion with little evidence yet of broad commercial relief. Flower volume weakened during the year, retail inventories remained elevated, and the commercial price series showed renewed separation between full and discounted prices. For operators, a sustainable improvement would require the revenue retained on sales to recover relative to acquisition and operating costs.

Until that relationship improves, a flower price holding near $60 an ounce offers limited evidence that profitability is recovering with it. The pressures facing Michigan operators also reflect broader questions about taxation, competition and the economics of regulated cannabis markets. These issues will be part of the conversation at IgniteIt’s Cannabis Capital & Policy Summit in Washington, D.C., on November 18, where industry executives, investors and policymakers will discuss the policies and market conditions shaping the industry’s future.