Analyzing the impact on Missouri marijuana operators in wake of administrative holds

As Missouri’s cannabis industry enters the first full week of an expansive administrative hold on product that has left thousands of products in quarantine, operators around the state are working to satisfy customers and fill shelves while looking for answers from Missouri cannabis regulators.

Division of Cannabis Regulation staff has stated only that product is on hold and that the investigation is ongoing, not providing additional detail as to a timeline or the cause for the hold at press time.

What that means to a cannabis industry already stretched by booming consumer demand and a supply chain anxiously anticipating expansion is an increased workload and struggle to balance the demand of administrative hold with the need to turn existing product into sales in order to cover operational expenses.

For dispensary operators, who have potentially have hundreds of thousands of dollars or more tied up in product that cannot currently be released or sold and who have no timeline expectancy on when that product will be released or when it will be able to be returned to manufacturers, uncertainty looms large over head. One of the most common refrains among industry participants was a sense of dissatisfaction with the lack of communication from Missouri regulators.

While many operators were complimentary of the Division’s efforts to fulfill its mission of ensuring public safety, there was much lament about the investigative process employed by DCR with some calling the process intrusive and damaging.

While retailers look to maintain shelves and keep up with demand, additional logistical complications including allocated space for quarantined product and staffing demands of monitoring and removing product from shelves stretch dispensary resources in the interim.

For manufacturers without a vertical structure that rely on other operators to provide biomass, flower, and distillate for production, an already strained supply chain is worsened by the hold. Concern over potential price gouging and the ability to maintain supply was the biggest concern among independent manufacturers Greenway spoke to, while those with access to their own cultivated product remain largely insulated.

   

Additionally, multiple operators said that they are already facing issues with receiving payment for delivered goods due to the large amount of product on hold.

As the increased demand of adult use continues, it is possible that wholesale prices will see inflation in the coming weeks. As with any industry, price impacts are not seen in real-time as supplies limit, but are instead felt in the following weeks and exacerbated by length.

While none of the operators Greenway spoke with have raised current prices, on the wholesale or retail side, several admitted that the prospect becomes more realistic as the the timeline for resolution exaggerates.

For cannabis retailers on the eastern side of the state, this comes at a less than opportune time as Illinois is rife with oversupply and retail prices, specifically in Southwestern Illinois have fallen substantially in recent months.

While the western side of the state has little to no competition, a rise in prices or increasing limitations on supply could result in driving consumers and patients back toward the traditional market, a move that causes concerns among industry operators and is counreintuitive to the DCR mission of ensuring public safety.

While Missouri operators await clarification on how to move forward, the industry braces for change and prepares for what lies ahead.