October was a banner month for Missouri cannabis companies, as the state met the one year mark since the first licenses became operational, it passed $200 million in total legal sales, and 174 cannabis dispensaries became operational. Although sales have not grown as fast as the state’s more than 100,000 approved registered patients would suggest, existing operators tell Grown In that the current environment works well for them.
“Hopefully we’ll continue to see more growth there. In our mind it’s consistent with the medical market and there are a lot of businesses there relative to the market. Although, revenue per retail door and those metrics are not as high as people were hoping for,” said Ankur Rungta, CEO of Michigan-based C3 Industries, which just opened it’s fifth High Profile dispensary in the state.
Until recently, only a couple dozen cultivator licenses had been operational, and most of it was far from full capacity. As a result, operators report flower prices per pound have consistently stayed around $3,500 for the last year.
“From a business perspective, it’s been good, because the price is high. From a patient access perspective, it’s unfortunate,” said Tom Muzzey, CEO of Beleaf Medical. “I know of at at least eight to ten that are in the hopper that are close to operational, that are waiting to be inspected. That number will jump in the next 45 days.”
As of Friday, 39 of 60 cultivation licenses had been approved for operation.
Getting new locations operational has been a challenge in Missouri, as supply chain problems and delays have tied up license owners, says Muzzey.
“The COVID pandemic did not help people. People had internal fighting with their partner groups. Their initial pro formas were wrong. When you got into construction, you thought it was going to be two million dollars, but not nine to fifteen million dollars.”
Although a federal judge recently struck down state rules requiring licenses to have majority ownership by Missouri residents, local operators seem to be taking the change in stride.
“It hasn’t changed anything for us. It affects us in Missouri as a whole, said Brandon Green, Vice President at cultivator C4 in Carrollton. “You’ll see more MSOs in the market. Those guys are folks that have been in other markets, they understand how the industry works, so that’s a threat or additional competition. We just take it as it comes.”
“The challenges were with permitting, constructions,” said C3’s Rungta. “In my mind it was more a function of the challenges of construction and an unrealistic timeline. If you’re in a ground up site, starting from scratch, it’s almost impossible to get a design to construction up in 18 months.”
Because supply has been so constrained, it is difficult to acquire oil on the market in Missouri, say operators.
“From what I’ve seen, having a manufacturing license without a cultivation license seems like a difficult journey,” said C4’s Greene “Even if you have the know-how, with the price of flower and raw material now, you have to know what you’re doing to be successful. If you buy a couple hundred pounds of material to run, and it doesn’t come out on the other side, you’re just out. It’s a complicated venture for sure.”
“There’s a strong demand on vape cards, so we have not had any surplus,” said Beleaf’s Muzzey. “We have a couple national partners we’re working with, asking, ‘When can we set up shop in Missouri?’, but right now the price per gram [for oil] is too high to make it work.”
Operators also seem anxious to get an adult-use referendum passed in 2022, petitions for which are being passed right now. But it’s not just that legalizing adult-use would open up a new customer base, it’s that many Missourians are reluctant to get a medical license.
“If you get a medical card, you can’t purchase new firearms,” said Muzzey, acknowledging the broad interest in gun ownership in his state. “People are concerned that someone would know they have a medical card, [they] talk about that as a compliance issue.”