Missouri cannabis operators discuss the landscape of supply and demand
Missouri cannabis operators have been facing supply issues sparked by increased demand since the start of recreational sales in February.
The question is, how long until operators and consumers see a change that returns wholesale supply and pricing to a level seen previously?
Total sales have surpassed $1 billion dollars in Missouri and the state is on pace to exceed the $1 billion mark again in 2023 alone.
Bordering states contribute to the overwhelming success of the state’s recreational market, Missouri is bordered by eight states only one of which has legalized marijuana. Illinois is the only bordering state with recreational marijuana legalized, while Arkansas and Oklahoma have medical-only programs.
“I think [the early success] exceeded our expectations, especially on the Kansas City border,” said Show-Me-Organics Chief Marketing Officer Tony Billmeyer. Show-Me Organics is home to brands including Blue Sage, Buoyant Bob, Missouri’s Own, and Vivid. “We see demand continuing so long as there are no legal changes in our border states and especially as the industry grows to meet that demand.”
Demand for expansion
For dispensaries, the increased demand has meant enormous growth in the number of customers served each day.
Kansas City Cannabis (KCC) has seen that sales increase firsthand on the state’s border. Flower has been the hardest product to come by. For dispensaries, flower has accounted for over three-quarters of all marijuana sales. Dispensaries that do not have an in-house brand are left fighting for the cultivars that are left over.
“We’re a dispensary-only group. So we don’t have a vertically integrated company and we don’t have any equity partners that have cultivation. So we’re constantly having to kind of call in favors or we have to buy a ton of carts and a ton of dabs and a ton of gummies just to get a very small amount of flower. So it’s definitely hard,” KCC Chief Operating Officer Forest Palmer said.
When they do get flower in, it is gone in less than a week. “I can get three pounds of flower per store on a Tuesday, and it will be gone no later than Thursday. If we get a delivery on a Monday or Tuesday, that brand does not make it until the weekend,” Palmer said.
Each company has faced different challenges in trying to keep up with demand.
For manufacturers, the increased demand means higher prices on wholesale flower and biomass and an increased need for production. Biomass for THC distillate is in high demand, but the supply of distillate is limited as well. THC distillate can be used for carts, gummies and chocolates. The increased demand for product and a limited supply of whole flower has caused many manufacturers to increase the number of employees. CLOVR has nearly tripled its base, growing from a staff of 40 to over 100 people.
CLOVR CEO Josh Mitchem hopes that come October there will be more flower diversity and availability for consumers.
“Being able to find strain diversity for things like pre-rolls or faith pins has become more challenging as there’s really only a handful of cultivators that have anything available for companies outside their own,” said Mitchem. “We haven’t increased our prices at all, so we just kind of eaten that extra cost in the hopes that this does get resolved by October.”
CLOVR has also undergone changes in order to stay available in all of its normal dispensaries.
“We had to cut back production in a lot of our SKUs, especially high dose, because of the limited amount of flower availability. So we kind of ran the same SKUs for weeks on end until we got the stores where they got a healthy inventory of those products,” Mitchem explained.
That lack of strain diversity at times makes it difficult for companies to continue normal operations.
Cannabis.inc is a solventless processor, the company says that limits its ability to process some cultivars to less than 10% of strains on the market. But the company still strives to be represented throughout the state. “We had to put limitations on how many of any item a dispensary can order so that we can get it spread out throughout the state,” said Justin Callaghan, the founder of Cannabis.inc.
Cannabis.inc isn’t the only company that has had to be selective in how it approaches supplying retailers. Nearly every operator Greenway spoke with reported limiting the total number of SKUs or locations where products are currently available. Even vertically integrated operations are forced to evaluate how to best handle relationships with partners.
The aptly named Vertical, has also limited the volume of products sent to retailers. Vertical is a licensed cultivator, manufacturer, and retailer in Missouri, and while Vertical has had to be selective on how much product goes out the door the advantage of vertical integration means that the company’s St. Joseph dispensary is able to restock more quickly and offer more variety than many of its competitors.
“We grow our own, so we don’t have a difficult time with most stuff because it’s just down the street. So if we need it, we just pull it from our vault in the cultivation,” Vertical CEO Christopher McHugh said.
The overall estimate on when prices will go down as well as more products on the stores is fall of 2023. Right now is the expected peak for prices on marijuana products.
“The price increases have to stop pretty soon because people just won’t buy it. They’ll just go to the black market or they’ll go somewhere else,” McHugh said.
There will always be flower on the market, but the most sought-after cultivars and strains are limited.
“What I would say is there’s a lot of flower out there. I would say there’s a real shortage of good flower, and I think that will continue for a little bit because I just think it takes so much knowledge, skill, effort, and money to grow indoor awesome top shelf flower that you’re really proud of,” McHugh explained.
Continuing to create
While Missouri cannabis operators struggle with the constraints of a booming market, innovation and development doesn’t cease.
Despite supply limitations, many of Missouri’s leading brands are still rolling out new strains and products.
Vertical continues to release new cultivars each month as well as launching a new wax partnership with TerpX. Vivid is set to launch a new Bananaconda hash rosin. CLOVR will debut new live resin vape carts, three new CLOVR chocolate bars; a classic milk chocolate bar in 100 mg, a strawberry malt 100 mg, and a milk chocolate mocha bar as a 1:1:1 with THC, CBD and CBG; a new line of gummies – the Wana Stay Asleep and Fast Asleep; Robhots Sours gummies in 1000 mg; and Funny Bone has two 300 mg chocolate bars set to roll out – strawberry white chocoalte with fruity pebbles and a milk chocolate bar with pop rocks. While Cannabis.inc will soon bring a new granola bar to market.
What lies ahead
While the demand of Missouri’s cannabis market has created supply issues, the bulk of Missouri operators see this fall as the turning point.
With several expanded cultivation operations already increasing production over the summer and expanded flower canopies slated to begin being harvested in late summer, the price spike Missouri operators are experiencing in wholesale flower and biomass, as well as the limited supply, are expected to ease in the coming months.
Prices and supply seen this October are expected to remain relatively consistent through mid-2024. As cultivation facilities around the state complete the construction of expansions, supply will continue to grow, gradually driving wholesale prices lower. By fall of 2024 Missouri is expected to have a surplus of flower and biomass once again.
