Red States' Anti-Pot Laws Start to Crack? - Is Missouri the First Domino of Red States about to Approve Recreational Marijuana?

Missouri is poised to become the latest state in the U.S. to launch recreational cannabis sales. The move will likely attract the attention of marijuana businesses and voters in nearby Oklahoma, who will vote next month on whether to legalize adult use in a special election.

Medical dispensaries are awaiting approval from the Missouri Department of Health and Senior Services (DHSS) to start selling recreational marijuana as soon as Friday.

With the GOP controlling the state's governorship and legislature, Missouri is projected to generate over half a billion dollars in sales in its first year and draw customers from neighboring states. Nearly all of Missouri's 212 licensed medical cannabis dispensaries, 95% of them, have applied for the expanded license, and if approved, they can begin selling to those 21 and over.

Missouri's recreational marijuana sales are estimated to reach $550 million in the first year and potentially increase from $800 million to $900 million in four years.

Key Attributes

The recent enactment of Amendment 3 in Missouri, with 53% of voters approving it in November, has changed the Missouri Constitution, establishing various regulations for the legal cannabis industry. Here are the key takeaways for state operators and consumers:

A low 6% retail tax on recreational cannabis purchases is one of the lowest in the country. Jurisdictions can add a maximum 3% tax, but only through local ballot initiatives.
Recreational cannabis advertisements will be treated in the same manner as advertisements for alcohol.
Local cities and towns can only ban retail operations via a ballot measure with a minimum of 60% approval.
The DHSS was required to process, deny or approve comprehensive retail license applications by February 6, establishing a recreational cannabis program in a mere three months, one of the shortest transitions of any recreational market launch (Arizona's recreational market launch in January 2021 was even quicker).

Missouri's tight timeline meant regulators needed to start granting licenses by Friday. Despite the possibility of launching the adult-use program with nearly 200 retailers, Missouri's limited-license and vertically integrated market are effectively established for the time being.

Amendment 3 did not significantly increase the number of licenses, which drew criticism from prominent figures such as the Missouri NAACP and St. Louis Mayor Tishaura Jones. The Missouri Democratic Party declined to endorse Amendment 3 because it worries that it "could have adverse effects on minorities, low-income Missourians, and people of color." However, the amendment does establish a process to approve an additional 144 licenses for "microbusinesses eventually.

A third of the licenses must be distributed through a lottery by October 3, 2024, but the final third can only be granted 548 days after the initial licenses are issued. This means the completion of the microbusiness licensing process is likely to take place in 2026.

According to Cox, while Missouri has no limits on licenses, regulators have decided to keep the number of cultivators (50), manufacturers (78), and licensed stores (195) close to the minimum set by the state constitution. This, combined with Amendment 3, has created few opportunities for new entrants and reduced competition for existing operators.

Revving up

Given the unpredictable timeline of license approvals, the first day of sales in Missouri could be more of a gradual launch rather than a grand celebration with festivities and industry recognition.

Despite the quiet launch, operators are optimistic about high demand. Some dispensary owners have informed MJBizDaily that they anticipate doubling their sales with the addition of recreational offerings.

BeLeaf Medical, with five stores serving approximately 310 medical marijuana patients daily, can handle two to three times the traffic, according to CEO Jason Nelson. To ensure a smooth transition for medical marijuana patients, the retailer encourages them to make online orders for seamless pick-ups so their shopping experience remains unchanged.

To streamline transactions, BeLeaf staff will use laptops and iPads to introduce products and take orders from customers waiting in line inside and outside the stores. To add a local flavor, BeLeaf's Sinse Cannabis brand has teamed up with renowned St. Louis chef Bob Brazell to launch a new line of gummies made with THC distillate, CBD, and full-extract cannabis oil.

Good Day Farms has hired 200 new employees, expanded their hours, and increased their inventory of popular products like flowers, vapes, and gummies. They offer a range of prices, starting at $25 for an eighth, to cater to all customers.

C3 Industries, a multistate operator, has added 75 new workers and upgraded their technology and displays in preparation for the launch. They anticipate a two-fold increase in sales velocity with the shift to adult use.

Wana Brands, based in Colorado and a leading provider of edibles, is partnering with Clovr, a Missouri-based manufacturer, to double its production capacity. The goal is to ensure that they have ample inventory to meet the varying demands of new customers.

Overall, retailers are well-prepared for the launch of adult-use sales, focusing on attracting consumers and providing them with accessible, high-quality products.

Regulatory Concerns For Cannabis Businesses

As product categories remain the same between medical and recreational programs, companies anticipate a seamless transition in production. However, some companies have been operating in a legal gray area due to the recent release of proposed rules on January 20.

With the new 111-page document outlining requirements for manufacturing, labeling, and packaging set to take effect on February 3, brands are hoping for a grace period to comply fully.

Key regulations include:

No human, animal, or fruit shapes designs
A limit of two colors (including logos)
Disclosure of THC, CBD, and delta-8 concentration
Submission of all product and packaging designs for approval by the DHSS.

This last requirement may cause a delay in getting products to market and is a concern for Wana Brands, as proper staffing of the approval process is crucial. Grön, an edibles maker, has been ramping up production in anticipation of peak consumer demand in the first 6-8 weeks of recreational sales.

The CEO, Christine Smith, stated that the brand and design team were able to swiftly adjust to the proposed regulations and ensure the successful launch of products.

Conclusion

As Missouri opens its doors to recreational marijuana sales, companies are poised and ready to meet the expected surge in demand. With a blend of technology, local flair, and strategic inventory management, retailers are confident in providing consumers with a seamless shopping experience. From THC-infused gummies to extended operating hours, companies are leaving no stone unturned in their quest to capture a slice of the rapidly growing cannabis market. While regulatory hurdles may present some challenges, brands are confident in navigating the rules and bringing their products to market, setting the stage for a new era of marijuana policy and industry legitimacy.