Cannabis Distribution Profits in Ohio vs. U.S. Benchmarks

Ohio legalized adult-use cannabis in late 2023, with licensed sales starting in August 2024. As markets evolve, operators are asking: Are Ohio’s profit margins on cannabis distribution better, worse, or similar to other U.S. states?

Ohio’s Early Revenue Trajectory

In its first two months, Ohio dispensaries collectively earned $98 million—averaging about $8 million in annualized sales per store. This is double Michigan’s ~$4 million figure and compares favorably to other young adult-use markets. Strong per-store revenue often translates into healthy gross margins, assuming wholesale costs remain comparable.

Supply Constraints & Price Support

Ohio imposed canopy limits and phased cultivation rollout, which have temporarily kept wholesale supply moderate and prices supportive. With genuine supply limitations, distributors can maintain stronger markup percentages—at least until cultivation scales up.

Tax Burden & Net Margin Impact

Ohio applies a 10% excise tax, plus standard state and local sales taxes. That places Ohio’s total tax burden around 16‑17%, similar to Michigan (excise 10% + 6%)—higher than states like New York or Illinois, but lower than high-tax jurisdictions such as California or Washington.

High taxes compress net margins, so while distributors in Oregon or Washington might enjoy gross margins on cheaper wholesale costs, their after-tax profits may be compressed more heavily.

National Margin Averages

Industry-wide reports estimate retail cannabis profit margins typically fall in the 15–20% range. Distribution margins fluctuate more but often align around similar figures—some wholesale players in mature markets report even higher cash operating profits owing to lower cost structures.

Operational Overhead & Scale Effects

Ohio’s emerging market offers low initial overhead but lacks the established logistics and economies of scale seen in places like Colorado or California. Distribution firms in Ohio must build infrastructure, regulatory compliance systems, and social equity programming—costs that compress margins initially. Still, established operators expect “consistent profit margins, comparable to those in other states” once momentum builds.

Comparison to Established Markets

  • Colorado (2012+, mature):
    • Moderate tax burden
    • Large supply, significant price pressure
    • Thinner gross margins, moderate net margins
  • Washington (2014+, mature):
    • High tax burden (~37%)
    • Large supply
    • High taxes compress net margins
  • Michigan (2018+, growing):
    • Moderate tax burden
    • Growing supply
    • Similar gross margins to Ohio
  • Ohio (2024+, nascent):
    • Moderate tax burden
    • Controlled, limited supply
    • Strong early gross margins with net margins roughly matching the U.S. average

Looking Ahead: What Would Move the Needle?

Increased cultivation capacity could expand supply and push wholesale prices down. New taxes or regulatory fees could squeeze margins further. Scaling distribution infrastructure would improve efficiency and help preserve margins. Consumer cross-border shopping (e.g., to Michigan) could introduce competitive price pressure.

In Summary

Ohio’s cannabis distribution margins currently perform well, likely on par with or slightly above newer markets like Michigan. Supply constraints and moderate taxation support competitive gross profits. Net margins are in line with the national average (~15–20%), though overhead and evolving regulations may tighten them temporarily. As Ohio’s cultivation base grows and systems mature, distributions can expect margins to stabilize alongside long-standing markets—unless taxes ratchet up significantly or interstate competition intensifies.