Missouri is set to become the latest red state to launch recreational cannabis sales, with developments no doubt drawing the attention of marijuana operators and voters in neighboring Oklahoma, which will hold a special election next month on whether to legalize adult use.

Recreational marijuana sales could start as early as Friday in Missouri, with medical dispensaries awaiting the green light from state regulators to expand into adult-use retail.

The newly minted Midwestern market is expected to generate more than half-a-billion dollars in sales in its first year.

Its rollout comes a year after Montana began adult-use marijuana sales.

Missouri, like Montana and Oklahoma, has a Republican trifecta where the GOP controls the governorship and both chambers of the legislature.

Missouri adult-use operators expect to draw customers from across the heartland and into the South.

That’s because Missouri holds the rare distinction of bordering eight states, some with only medical marijuana markets and others where possession remains illegal.

Missouri’s Department of Health and Senior Services (DHSS) must approve or deny all retail applications for a “comprehensive license” no later than Monday, Feb. 6.

That deadline was imposed through an industry-led, voter-approved November ballot measure that legalized possession and a regulatory framework for recreational sales.

Nearly all of Missouri’s medical cannabis dispensaries – 212 are licensed, with 195 operational – applied for the expanded license, which requires a nominal $2,000 fee.

The widespread participation is one of several notable differences in this rollout compared to recently launched adult-use markets in Connecticut, New York and Rhode Island.

“Ninety-seven percent of the state’s medical marijuana dispensaries have requested to convert their medical license to a comprehensive license,” DHSS spokesperson Lisa Cox said.

“Once a facility is approved, they can begin sales for those 21 and up.”

Recreational marijuana sales in Missouri could reach $550 million in the first year, according to MJBizDaily estimates, and potentially increase to $800 million-$900 million in four years.

Some unique characteristics

Amendment 3, approved by 53% of voters in November, altered the Missouri Constitution, locking in several rules regulating the legal industry.

Among the notable takeaways for state operators and consumers:

• A 6% retail tax on recreational marijuana purchases, among the lowest in the nation. A maximum 3% tax could be added by jurisdictions, but only through local ballot initiatives.
• Recreational marijuana advertisements are treated the same as alcohol advertisements.
• Local municipalities can ban retail operations only through a ballot measure, which must gain 60% approval.
• DHSS had to process, approve or deny comprehensive retail license applications by Feb. 6, effectively creating an adult-use program in less than three months. It’s among the shortest transitions of any recreational market launch. (Arizona’s adult-use launch, in January 2021, occurred on an even quicker timetable.)

Missouri’s short window required regulators to start approving licenses by Friday.

While the adult-use program could open with nearly 200 retailers, Missouri’s limited-license, vertically integrated market is practically set for the time being.

Amendment 3 didn’t significantly expand the total number of licenses, conditions that drew vocal opposition to the ballot measure from the likes of St. Louis Mayor Tishaura Jones and the Missouri NAACP.

The Missouri Democratic Party also refused to endorse Amendment 3 over concerns it “may negatively impact minorities, people of color, and low-income earning Missourians.”

The amendment does create a system to ultimately approve an additional 144 licenses for “microbusinesses.”

A third of these licenses must be issued via lottery by Oct. 3, 2024, but the final third can’t be issued until 548 days after regulators begin issuing the first ones.

That timetable would kick the completion of microbusiness licensure well into 2026.

Though Missouri doesn’t have license caps, regulators have chosen to keep the number of licensed stores (195), cultivators (50) and manufacturers (78) near the minimal allowance under its state constitution, Cox said.

That system, along with Amendment 3, has presented few opportunities for new entrants and less competition for existing operators.

Ramping up

Given the uncertain timing of license approvals, Day One sales in Missouri might end up being more of a soft opening – versus the daylong celebrations, ribbon-cutting ceremonies and political grandstanding that typically accompany a new era of marijuana policy and industry legitimacy.

Nevertheless, operators expect strong demand. Several dispensary operators told MJBizDaily they expect to double their revenue with the expansion into recreational sales.

BeLeaf Medical serves about 310 medical marijuana patients per day across its five-store network, which can handle two to three times that traffic, according to CEO Jason Nelson.

The retailer is encouraging MMJ patients to place online orders for seamless pickups so their shopping experience doesn’t change.

For consumers waiting in line, particularly outside, BeLeaf staffers will be introducing products and taking orders via laptops and iPads to expedite transactions.

Infusing some local flavor, the company’s Sinse Cannabis brand partnered with accomplished St. Louis chef Bob Brazell to introduce a new line of gummies with THC distillate, full-extract cannabis oil and CBD.

“It was a chance for us to do what we know sells well and what we do well without trying to go in and move heaven and earth to try to take over a big chunk of the market,” Nelson said.

Good Day Farms, which operates 19 dispensaries in the state, plans to introduce King Cake gummies this month for Mardi Gras, a celebratory event held annually in New Orleans that’s been welcomed in St. Louis.

“St. Louis is very big on Mardi Gras, and with our Southern states, we love to really dive into the local flavor,” Chief Marketing Officer Laurie Gregory said.

In preparation for adult-use sales, Good Day Farms hired 200 employees, extended operating hours and increased inventory, particularly flower, vapes and gummies.

Eighths cost about $25 on the low end and $50 on the high end.

“In key markets, we potentially might have four times the patient count,” Gregory said. “We just want to make sure that we have accessible products in our stores at all levels of price points.”

Multistate operator C3 Industries, which planned to convert two of its five High Profile medical dispensaries into adult-use retail on Feb. 6, added 75 workers, stress-tested technology and display upgrades and bulked up inventory across brands and categories in the lead up to the launch.

“We anticipate approximately a 2X lift in sales velocity with the flip to adult use,” said Jason Berkenstock, vice president of retail for the Michigan-based company.

“We’ve been strategic in adding the appropriate technology, line queueing and other in-store marketing elements to support the increase in customer traffic.”

Colorado-based Wana Brands, which sells edibles to nearly every dispensary in the state, is doubling production capacity through its local partnership with Clovr, a Kansas City, Missouri-based cannabis-infused product manufacturer that operates a single dispensary in nearby Benton.

“Attracting consumers, when you launch into rec for a new market, isn’t the issue,” Wana Chief Marketing Officer Joe Hodas said.

“The issue is ensuring that you have the appropriate inventory to support a varying level of consumers coming in.”

Regulatory concerns for brands

With product categories the same in the medical and adult-use program, brands expect a smooth ramp up in production.

But many companies have been operating in a legal gray area for weeks since regulators issued the last batch of proposed rules Jan. 20.

Stipulations in the 111-page document, which outlines a litany of requirements regarding manufacturing, packaging and labeling products, is set to go into effect Feb. 3, though brands expect some grace period to fully comply.

Some notable product and packaging rules include:

• No designs or shapes of humans, animals or fruit.
• The use of more than one color is prohibited, except for logos (two maximum).
• The exact level of THC 9, CBD and delta-8 per serving/dose must be disclosed.

Additionally, all marijuana product and packaging designs must be submitted to the DHSS, which will then provide an approval number that must be displayed on all packaging, likely slowing a product’s time to market.

That last stipulation is a particular concern for Wana, according to Hodas.

“That’s a heavy lift, and my experience in other markets is that they won’t staff it properly and thus there will be a bottleneck for quite some time,” he said.

Edibles maker Grön has been ramping up production over the last two months, expecting consumer demand to peak in the first six to eight weeks of recreational sales.

“We closely monitored how the regulations would affect our current production as we ramped up,” said Christine Smith, CEO of the Portland, Oregon-based company.

“Our brand and design team were able to quickly pivot and put together several iterations as the proposed regulations were coming out so we would be able to successfully bring products to market.”

Border business

Since Missouri borders eight other states, including some with no licensed marijuana retailers, store such as Greenlight Dispensary expect a rush of out-of-staters.

The company operates 15 dispensaries across Missouri, including four in St. Louis near the Illinois state line and four in Kansas City, which borders Kansas, where marijuana possession is illegal.

Greenlight CEO John Mueller expects to compete on price and less taxation.

“For people coming across the border, I think we’re going to have less expensive products,” he said.

Farther south, he expects to pick up business from Tennessee, where possession is also illegal, and Arkansas, which has an established medical market.

In November, Arkansas voters rejected a ballot measure to legalize possession and recreational sales.

Greenlight also operates dispensaries in Arkansas.

“With them not going to adult use, there’s a lot of chatter in Arkansas about coming up to Missouri to try the Missouri products,” Mueller added.

Source: https://mjbizdaily.com/missouri-recreational-cannabis-sales-launch-impact-on-other-red-states/