West Michigan’s few cannabis microbusinesses are taking a page out of the craft brewery handbook with a clear focus on customer experience and an emphasis on locally produced products.
While the license type has failed to take off at rates comparable to traditional dispensaries or grow operations in the state, newly opened companies in the Muskegon area say the microbusiness model is helping them to carve out a niche in what’s become an oversaturated market.
Karen and Steven Kekelik started pursuing a microbusiness license in 2019 to fill what they saw as a quality gap in the cannabis industry, and because they did not want to involve out-of-state investors. The couple opened the retail side of Indigrow LLC in November 2022 in downtown Muskegon, where they also grow and process flower, pre-rolls, edibles and concentrates sourced from the 150 plants allowed by their microbusiness license.
“A lot of people told us that 150 plants wouldn’t be enough to be profitable, but we haven’t found that to be the case,” Karen Kekelik said. “As plant counts get higher, how much care are those plants really getting? It’s nice with a small batch, they are getting the high quality care they need.”
The amount of investment it takes to open a cannabis business and the level of expertise required in local zoning restrictions shuts out a lot of local people from operating a cannabis business. Muskegon Planning Director Mike Franzak hopes that microbusinesses like Indigrow, the first in the city of Muskegon, will catch on to help smaller operations from local residents get off the ground.
“A couple years ago, we noticed the overlay district (where cannabis businesses are permitted) was pricing out all of the local people and smaller people because all of the property was going for so much money,” Franzak said.
To get more local operators into the cannabis industry, Muskegon then changed its zoning ordinance to allow microbusiness, Class B grow operations (for up to 500 plants) and cannabis consumption lounges to operate with a special land use permit in most of the city’s commercial and industrial districts.
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Microbusinesses must pay $8,300 in licensing fees, a little more than half of the $15,000 required for a cannabis retailer. A cannabis microbusiness license also allows for processing, growing and selling. However, microbusinesses are limited to growing up to 150 plants and cannot sell outside cannabis products.
Licenses for consumption lounges and Class B grows are priced at $1,000 and $6,000, respectively, which is lower than most other types of licenses. Statewide as of Nov. 30, 2022, only 12 microbusiness licenses were active, compared to 591 active cannabis retail licenses, according to the latest monthly report from the Michigan Cannabis Regulatory Agency.
Focus on quality
Many grow operations are so large that they choose the strains that are easiest to grow, and they all produce similar effects for the user, Steven Kekelik said. By contrast, Indigrow produces more heirloom plants, which are pure cannabis strains that have not been crossbred.
The Kekeliks enlisted a caregiver to lead Indigrow’s small batch grow operation.
“We interviewed hundreds of growers that were stuck on following deadlines,” Karen Kekelik said. “Our grower gives so much care to every plant and is not sticking to a production schedule, which is sometimes tricky, but he is just really able to ensure that the plants are getting exactly what they need. Any hoops we’ve had to jump through with weird production timelines have been well worth it with the quality we get.”
Indigrow is serving a “largely undervalued” subset of cannabis consumers that are not necessarily looking for the cheapest possible product, but want more variety in strains and a place where they can go in and talk to people and ask questions about the product, according to the owners.
“For a microbusiness to be successful, you also have to follow the microbrewery model and let people come in and see the plant and touch it and give people an experience,” Steven Kekelik said. “Most places you can’t go into the grow rooms, but we’re rolling out the tours and the excitement is there. People are looking for that canna tourism, which we’re offering especially being located in the heart of downtown.”
The Kekeliks also plan to open a nearby cannabis consumption lounge so customers can try out products right after touring and shopping at Indigrow.
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“Anyone who wants to own a dispensary or grow operation now will find it very hard,” Steven Kekelik said. “There is no room in the market. The only way is in the boutique way, but you have to do it in a way that really separates yourself from a dispensary.”
The model Aric Keyser and James Dewald used in MI Canna Connection, a microbusiness that opened in November in nearby Muskegon Heights, shares parallels to what they had been doing as longtime caregiver growers.
Similar to the owners of IndiGrow, Keyser and Dewald eschewed tapping into large non-local investors in pursuing a microbusiness license. Each partner has a 50-percent ownership stake in MI Canna Connection.
“We didn’t really want to be the guys pushing product for big out-of-state companies,” Keyser said. “We wanted to grow our own products and educate our consumers on what we were doing. We felt like this was the best model to get our product out there and deal with people we already know.”
Running a smaller operation competing with large dispensaries comes with its share of hurdles, said Keyser, who also noted customers say the company’s cannabis is better and gives them a better high.
“It’s hard for us to match the price point because there are places right now basically losing money just trying to clear out their inventory, and some of them are probably about to shut down,” Keyser said. “But it’s hard for those other places to match the freshness and quality of our products because we’re doing everything onsite. As soon as it’s ready to smoke, it’s on the shelf.”
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Staff Writer, covers real estate and development and small businesses
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