BeLeaf Medical has 10 licenses, the maximum allowed, allowing the company to open five dispensaries, three cultivation sites and two manufacturing facilities, which will be run by Dr. Stephanie Cernicek, the company’s chief science officer. Photos courtesy of BeLeaf.
In many ways, Missouri is right in the middle of medical marijuana.
Geographically, the Show-Me State is sandwiched between Illinois to the northeast and Oklahoma to the southwest — two states that represent vastly different regulatory ideologies when it came to getting their medical programs up and running.
Illinois implemented stringent regulations and a high barrier to entry when it launched its medical cannabis industry in 2015, stifling the growth that other states enjoyed. Meanwhile, Oklahoma’s minimal regulations sprouted an instant industry in 2018, leading to more than 10,000 licensed businesses and the state growing its consumer base by approximately 10,000 patients a month over the past year.
Missouri’s regulatory program also sits right in the middle, with a more streamlined version of Illinois’ operating regulations and a similar level of patient access and enthusiasm that swept Oklahoma.
“In Illinois, the regulations were about 200 pages. In Missouri, the regulations are about 33 pages,” says Kathleen Beebe, the human resources director and regional manager of Missouri Health & Wellness, a new chain of five dispensaries.
With the cannabis industry booming across North America, the potential of Missouri’s market compelled plenty of new and existing operators to throw their hats in the ring. Now, with six months of legal sales and steady growth behind them, operators sound off on the state of the industry, addressing its strengths and weaknesses and the future of one of the fast-growing markets in the Midwest.
Missouri Health & Wellness’ five dispensaries were designed with a medical feel, so patients can still buy a bong without feeling like they are in a headshop. Photos courtesy of Missouri Health & Wellness.
State of the Market
“Fast and furious” is how Tom Muzzey describes operations in Missouri.
Muzzey is the CEO of BeLeaf Medical, a vertically integrated cannabis business that has 10 licenses in Missouri, permitting the company to operate five dispensaries, three cultivation sites and two manufacturing facilities. BeLeaf’s retail brand, Swade, has two dispensaries open with three more slated to open this spring. Its three cultivation licenses make BeLeaf one of the state’s largest cannabis producers, but the company is still ramping up to its max capacity.
“Being vertically integrated is something that we thought was really important for us here in Missouri,” Muzzey says. “There has been plenty of challenges to go around.”
The hectic state of the market is partly due to a large patient base, with not enough operating licensees yet. When medical sales began on October 17, 2020, approximately 65,000 patients were already enrolled and waiting to buy products at one of the 15 dispensaries allowed to open and sell flower from five operating cultivators. By comparison, Illinois didn’t surpass 65,000 registered patients until 42 months after medical sales began in November 2015.
Missouri regulations limit the number of licenses available: 192 dispensary licenses, 60 cultivation licenses and 86 manufacturing licenses. However, as of March 5, the state had only approved 56 dispensaries, 16 cultivation facilities, six manufacturers and four testing labs. Each cultivation license is capped at 30,000 square feet.
“Cultivation is going to be the bottleneck out there for sure,” says James Christensen, co-founder of the Arizona-based company Territory, which has a dispensary and manufacturing license in Missouri. “We are waiting on biomass for our manufacturing facility to start manufacturing our edibles line.”
Leigh Anne Baker, the director of operations for Jane, a multi-state operator with a dispensary in St. Louis, says the company has 10 vendors lined up to supply the shop with product, but she’s not sure what is coming down the pipeline.
“We don’t know exactly the depth of their product line yet,” Baker says. “I think everybody is still a little ambitious in what they are expecting to have and what they are expecting to produce. It’s just hard to tell, with the lack of experience and product out there, what anyone is going to produce or sell.”
Like many newly established markets, supply is at the heart of Missouri’s problems and demand is causing wholesale and retail prices to soar.
“You always see these markets in the beginning where the cultivators are squeezing dispensaries, and once more cultivation comes online it flips, and dispensaries start squeezing cultivators,” says Nate Ruby, who owns five From The Earth dispensaries, a brand he licensed from the California-based chain of retail stores to use in Missouri. “As a dispensary, I want what’s selling and right now it’s pretty much anything people can get their hands on.”
Ruby also owns a cultivation facility in Missouri and says growers are not intentionally gouging retailers, but the sheer demand of the market has the average eighth of cannabis retailing between $50 and $65, and the wholesale price per pound ranging between $2,500 and $4,500.
While new cultivation sites are still being approved, the majority of the program’s cultivation licenses have shown very little progress, says Zach Mangelsdorf, the president of North Medical Group, which has two dispensaries in the state.
As of March 5, 93 cannabis businesses have passed commencement inspections and another 65 are “in progress.” Meanwhile, 161 have requested extensions and three were “set aside” until they are ready to pass the commencement inspection.
Missouri’s rules specifically state that “license or certification may be revoked” if the business “has not passed a commencement inspection” within one year. Due to the pandemic, that deadline was extended, allowing 277 of the state’s 370 licensed marijuana businesses until September 2021 to pass commencement inspections.
Even if the Department of Health and Senior Services, the agency that regulates medical marijuana, revokes and reissues the licenses to other operators, it will still be at least eight months to a year before the new crop of producers is up and running, Mangelsdorf says.
Jane Dispensary was fortunate enough to find a location for its boutique dispensary in Delmar Loop, a well-known hub of nightlife in St. Louis. Photo courtesy of Jane Dispensary.
Striking Retail
By Patrick Wagner
Although the shops are facing a shortage of product, Missouri’s medical dispensaries look as beautiful and polished as any retail chain in recreational states.
Jane Dispensary in St. Louis combined elements from high-end retailers like Chanel and upscale lounges in its design.
“It’s dark but it has gold accents,” says Leigh Ann Baker, Jane’s director of operations. “It’s definitely not a headshop or a sports bar. It’s beautiful and warm.”
In Hillsboro and Pevely, North Medical Group built its two dispensaries from the ground up. The North stores have vaulted ceilings with towering windows to allow lots of natural light and incorporate a high-tech-yet-approachable design for the store.
“The culture is important, but we are making our store welcoming to a wider range of people,” company president Zach Mangelsdorf says. “For new cannabis patients, we didn’t want to make them feel like they were in a store that was heavily based on a culture that they were unfamiliar with and intimidated by.”
BeLeaf worked with a local architectural firm in St. Louis for the design of its dispensary brand, Swade. The stores have a sleek, minimalist and modern design akin to well-known cannabis retailers in San Francisco.
On the other end of the spectrum, Missouri Health & Wellness’ five locations were designed in part to help remove the stigma associated with cannabis.
“We want people to take it seriously,” general manager Kathleen Beebe says. “Yes, we have glass cases that have bongs, but when you walk in, it doesn’t feel like a headshop.”
The serious design inside Missouri Health & Wellness locations, not unlike those found in other strictly medical markets, aims to ease apprehension surrounding the industry’s sudden presence in the state. Beebe says the bulk of the stores’ customers are 60 and older.
Out-of-state chains like From The Earth and Territory were already poised with their own proven retail designs.
One of the reasons Nate Ruby wanted to partner with From The Earth was how the company’s California stores work well with medical patients.
“They know how to market and bridge the gap between medical and recreational,” Ruby says.
Territory co-founder James Christensen says the Arizona-based company’s active-lifestyle branding is perfectly at home at the company’s new Lake of the Ozarks location in Missouri. The company is refurbishing an old restaurant to match its aesthetic and repurposed the building’s bar to become the dispensary’s waiting room.
“I think cultivators are going to rake it in for the first few years in Missouri,” he adds. “I think we will continue see higher-than-national-average wholesale market prices in Missouri for at least the next couple years.”
Patients First
While many states launch medical marijuana programs with exorbitant licensing fees, limited products and overly stringent qualifying conditions, Missouri has taken a more progressive approach, making patient access a focal point of the program.
Since medical sales began, patients in Missouri have had access to the same types of cannabis products available in recreational states like California, Colorado and Washington, including tinctures, topicals, edibles, vape cartridges, concentrates, beverages and flower — if they can find it. The enrollment fee for a medical card is $25 through the state, and a wide array of qualifying conditions, ranging from psychiatric disorders to terminal illnesses, are accepted. Program participants are free to shop wherever they choose, or not at all since they can opt to grow up to six plants at separate stages of growth (flowering, veg, seedlings) at home for $125 annually.
“I love that we allow home-growing,” Ruby says. “A lot of other states cross it out. They don’t like it because the state wants the tax money and businesses want people to buy from them.”
Patients also pay 4% retail sales tax, one of the lowest sales taxes in the country for cannabis. All tax revenue goes to the Missouri Veterans Commission to fund services for those who have served in the military.
From The Earth has a licensing deal with Nate Ruby, a Missouri operator who won five retail licenses and imported the brand from California. Photos courtesy of From The Earth.
Principled Progress in Missouri
Christensen says expanding Territory from Arizona to Missouri was relatively straightforward in terms of design, but the most compelling part is working in a completely new market.
“It’s really interesting working in a new market for us because, well, it’s new, but also because it’s a market where the regulators are new and because of the perceptions that they have of cannabis,” Christensen says.
Baker says one stark difference between California and Missouri is that the cannabis community in Missouri is considerably more open to sharing information and helping one another out.
“It’s not as competitive,” Baker says. “If I get on the phone with another dispensary, I can ask them all kinds of operational questions and get answers quickly. There is a fervor to move this industry forward.”
As somebody in charge of hiring, Beebe says onboarding has been particularly interesting in Missouri. One applicant called to cancel her interview because she consulted her priest and decided it wasn’t the best fit for her.
“I completely respect that opinion, but that is what we are trying to overcome,” Beebe says. “In the Midwest people are a bit more conservative than the West Coast or on the East Coast.”
To help the community acclimate, Missouri Health & Wellness is launching “It’s my medicine,” a campaign using real-life stories from people who were helped by cannabis to establish a human and medical connection to the plant.
Overall, the majority of operators interviewed say their operations were welcomed wholly by their surrounding communities.
“I think everybody is very excited about it,” Baker says. “The operators are excited to get going and provide to patients. I think once we all start getting those sales, and seeing what the market can do, then it gets more competitive. It’s a really exciting time, and to be around other people who are so excited about it just pumps everybody up.”