Missouri's Recreational Market Begins to Take Shape

Adult-use sales are slated to begin on Feb. 6.

Adult-use cannabis sales will be allowed to start on Monday in Missouri, led by medical marijuana operators that receive approval from the state by then.

Lisa Cox, the state health department’s communication director, told Green Market Report that the “vast majority” of licensed medical cannabis facilities applied to participate in the adult-use program, but the approval process is just getting under way.

Cox said that the department will begin approving or denying requests from prospective operators on Friday, giving business just a few days to convert to comprehensive facilities if they hope to launch on day one.

Any remaining applications to convert to a comprehensive license must be completed by Monday.

“There’s obviously a lot of interest from MSOs and big vertical operators from out of state, and that that’s been going on for a while,” BDSA analyst Brendan Mitchel-Chesebro said.

But, he said, many of the state’s top brands, as well as brands that are still seeing month-over-month growth, are homegrown.

“Missouri is shaping up to be a really cool market,” he said. “It’s definitely not looking like it’s just going to turn into the same sort of consolidated market we’ve seen elsewhere – at least right away.”

Questions of fairness have been raised by previously hopeful new entrants who have been told to sit on the sidelines for now, as medical permit holders will have the market to themselves for a year.

The Show-Me State also benefits from friendly state marijuana taxes (6% overall state sales tax), good product split backed by a maturing retail footprint, and a smooth compliance process. And while cities and counties have the ability to opt out, the public must vote for it rather than simply relegating the decision to the city or county council.

There are currently around 208,000 Missourians registered in the medical program, about 3% of the state’s population, though the number of cannabis consumers in the state is expected to swell to 600,000 under adult use, roughly 10% of the population.

Additionally, cross-border traffic from higher-taxed Illinois and other adjacent states that have fallen short on their own legalization efforts should beef up sales in the new market. Missouri is tied with Tennessee for having the most bordering states (eight) and both of its metropolitan areas are neatly situated at the east and west borders of the state’s stretch of I-70 – positioning it neatly for legal interstate commerce, should that era ever arrive.

Cy Scott, CEO of cannabis data firm Headset, expects Missouri’s adult-use rollout to put additional pressure on the Illinois market to accelerate license grants, given the number of already-licensed medical dispensaries converting to adult-use locations.

Christine Smith, CEO of women-led Oregon-based cannabis confections company Grön, entered the Missouri medical market last August and is bullish on state and the overall Midwest belt. Her company sold more units in December than any other edibles brand in the state market.

“If I was a retailer on the Illinois border right now, I’d be really worried about what my sales are going to be in the next month,” she said.

If the rollout is successful, BDSA predicts around $270 million-$280 million in adult-use sales in 2023. Factoring in the maturing medical market, Missouri could very well reach $730 million in total legal sales.

The program has seen enormous growth since the launch of its medical program in October 2020. Legal medical sales totaled around $210 million in 2021, the first full year of sales, and in November, BDSA predicted that legal sales will jump to nearly $365 million in 2022.

Ultimately, the firm expects the market to break $1 billion in total legal sales in 2024.

BDSA also found that Missouri saw the number of active brands skyrocket nearly two-thirds in the first nine months of 2022, and revenue growth has continued despite average retail prices plummeting 40% since September 2021.

New regulations issued in December allow for larger basket sizes in a single visit. Medical marijuana patients can now possess up to 6 ounces within a 30-day period, up from the previous 4-ounce limit. Everyone else who is 21 and older will be able to purchase up to 3 ounces of adult-use flower.

Adam Jackson

Adam Jackson writes about the cannabis industry for the Green Market Report. He previously covered the Missouri Statehouse for the Columbia Missourian and has written for the Missouri Independent. He most recently covered retail, restaurants and other consumer companies for Bloomberg Business News. You can find him on Twitter at @adam_sjackson and email him at adam.jackson@crain.com.

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