It didn’t take lengthy for Missouri’s newly established adult-use hashish market to really feel rising pains.
The Midwestern market, which launched leisure gross sales on Feb. 3, is off to a scorching begin and on tempo to interrupt $1 billion in gross sales in its first full yr.
However sturdy demand from medical marijuana sufferers in addition to native and out-of-state customers has far exceeded operators’ expectations and resulted within the sort of product shortages and better wholesale costs skilled in different newly launched leisure markets.
In some areas of the state, significantly close to the Kansas border, Missouri retailers are seeing foot visitors improve ninefold since increasing into leisure gross sales.
In southeastern Missouri, Illinois customers are crossing the Mississippi River in droves for St. Louis hashish that’s considerably cheaper than again house.
Even illicit marijuana feeding the market from neighboring Oklahoma hasn’t quelled demand in Missouri, resulting in large spikes in wholesale flower costs and stock shortages all through the availability chain.
“There simply isn’t sufficient bulk flower for the type of demand that’s come into the market,” stated Ben Burstein, technique analyst at New York-based wholesale know-how platform LeafLink.
“It’s one of many solely markets within the nation you could truly say that demand is exceeding provide.”
It’s a stark distinction from different markets corresponding to Massachusetts, Michigan and Oregon, the place falling costs and a provide glut are difficult enterprise viability.
Operators in Missouri are additionally avoiding overleveraging manufacturing and assets, a recipe that has led to a glut of product oversupply in markets corresponding to California and Colorado.
With dozens of outlets and producers shopping for bulk flower from solely 50 cultivators – and most of them producing at lower than half-capacity – the worth of wholesale flower has skyrocketed the previous few months.
In response to LeafLink – which tracks almost all wholesale quantity in Missouri by way of its on-line market – the worth of bulk flower has doubled to $3,000 per pound for the reason that launch of adult-use gross sales.
In the meantime, the variety of product stock-keeping items (SKUs) has dropped by two-thirds throughout that point. Bulk-flower availability is down almost 79%, in line with LeafLink information.
“It’s going to be a pair extra months the place you may have these bulk shortages,” Burstein stated.
Product and stock shortages have adopted the launch of leisure gross sales in a number of markets through the years, together with California, Illinois and Washington state.
Regardless of the early hiccups, Missouri adult-use and MMJ retailers generated $126.2 million in gross sales in March, up almost 23% over February.
Whole marijuana gross sales within the state are projected to hit $1.3 billion within the first yr of leisure retail, in line with the 2023 MJBiz Factbook.
Cultivation manufacturing lower than half-capacity
The crux of the issue in Missouri is cultivation underproduction.
Fifty of the state’s 67 licensed cultivators are operational, and growers are using a bit of greater than 15,000 sq. ft of cover, half the allowance beneath Missouri legislation, in line with state regulators.
“The sq. footage of flowering cover area at the moment in use is 37% of the capability of all 67 licensed cultivation services mixed,” stated Lisa Cox, spokesperson for the state’s Division of Well being and Senior Providers.
“Any product availability points proper now are because of the trade’s transition to grownup use and never as a consequence of lack of cultivation capability in Missouri.”
Lulls in increasing capability stem partly from the circumstances of legalizing adult-use gross sales in November by way of a poll measure. Operators, normally, waited for the outcomes earlier than including capability and now are enjoying catch-up.
A harvest sometimes takes three months to achieve retail cabinets.
Greenlight Dispensary, one of many state’s few vertically built-in retailers, is using the overwhelming majority of its cultivation product inside its personal retail community.
The corporate began building on a develop adjoining to its Kansas Metropolis operation that’s anticipated to conclude in mid-July, in line with CEO John Mueller.
BeLeaf Medical, a vertically built-in retailer based mostly in Earth Metropolis, is awaiting approvals to develop its cultivation to about 50% capability.
“We’re going to have that product come to market round late Q2,” CEO Jason Nelson stated.
Manufacturing woes
The flower scarcity has led to a distillate scarcity for producers corresponding to Clovr, the state’s largest producer with almost 100% protection throughout 196 shops available in the market.
Earlier than leisure gross sales, the Kansas Metropolis-based firm had three months of product stock in its vault. After the launch, Clovr was working at web zero stock week-to-week, primarily protecting little or no materials in inventory.
“I in all probability missed out on about an extra 25% of gross sales,” stated CEO Josh Mitchem, who’s beefed up workers, added a second shift and ordered specialty tools to develop extraction capabilities.
“In order that bottleneck will likely be resolved. I’m guessing that I’ll be capable to begin constructing some type of back-stock stock right here throughout the subsequent three weeks.”
The flower scarcity has helped edibles model Zen Hashish entice new clients, however filling manufacturing positions has proved tough at its facility outdoors Springfield.
“The largest problem has been employment and having sufficient personnel to maintain up with the demand and additional shifts,” founder Jeremy Zachary stated.
The corporate, which employs about 20 employees in two shifts, is prioritizing fashionable merchandise corresponding to gummies on its manufacturing line.
“We had been capable of stack some stock or some uncooked supplies as a result of we knew there was a tidal wave coming,” Zachary stated.
“We did as greatest we might. However I’d be mendacity to say that we didn’t have our personal shortages.”
Border patrons
Retail product shortages fluctuate throughout Missouri, however issues are extra acute close to the Kansas border, in line with trade insiders.
“They’re nonetheless seeing 9 occasions the quantity of visitors they noticed when it was medical,” Mitchem stated.
“There are vertical teams that don’t even have sufficient flower for their very own shops.”
A Greenlight outlet within the Kansas Metropolis space is drawing 80% of its guests from Kansas, the place marijuana stays unlawful.
“It’s an enormous quantity, and a bunch of those border (retailers) are seeing related conditions,” Mueller stated.
Missouri holds the uncommon distinction of bordering eight states, and solely Illinois has leisure marijuana gross sales.
BeLeaf, which operates 5 Swade dispensaries within the St. Louis space, has been promoting its Sinse Hashish model to retailers in western Missouri to fulfill demand.
“That volatility just isn’t being persistently skilled throughout all operators,” Nelson stated.
Turning the nook
Whereas stock shortages have pushed up wholesale costs, retail product costs have gone up solely about 10%, in line with gross sales information and operators.
“I simply don’t see way more than that,” Mueller stated.
Value consistency is partly a mirrored image of the state’s low retail tax fee of 6%, which can improve one other 3% in dozens of jurisdictions later this yr after voters overwhelmingly authorized hashish tax hikes in an April 4 poll measure.
The jury is out on when stock shortages will dissipate.
Producers will begin turning the nook on the finish of the month, Clovr’s Mitchem predicts.
“I believe we’re nonetheless going to see some ache factors by way of the start of summer time,” Zen’s Zachary suggests.
And with April 20 just a few days away, the market will seemingly get one other demand surge.
“April will likely be an enormous inform month,” Nelson stated.
“It’s a hashish vacation clearly, and these large occasions can tax stock ranges.”
Chris Casacchia might be reached at chris.casacchia@mjbizdaily.com.
