The Clovr production facility in Kansas City has felt the impact of the flower shortage in Missouri. (Photo courtesy of Clovr)
The Midwestern market, which launched recreational sales on Feb. 3, is off to a sizzling start and on pace to break $1 billion in sales in its first full year.
But strong demand from medical marijuana patients as well as local and out-of-state consumers has far exceeded operators’ expectations and resulted in the kind of product shortages and higher wholesale prices experienced in other newly launched recreational markets.
In some areas of the state, particularly near the Kansas border, Missouri retailers are seeing foot traffic increase ninefold since expanding into recreational sales.
In southeastern Missouri, Illinois consumers are crossing the Mississippi River in droves for St. Louis cannabis that’s significantly cheaper than back home.
Even illicit marijuana feeding the market from neighboring Oklahoma hasn’t quelled demand in Missouri, leading to big spikes in wholesale flower prices and inventory shortages throughout the supply chain.
“There just isn’t enough bulk flower for the sort of demand that’s come into the market,” said Ben Burstein, strategy analyst at New York-based wholesale technology platform LeafLink.
“It’s one of the only markets in the country that you can actually say that demand is exceeding supply.”
It’s a stark contrast from other markets such as Massachusetts, Michigan and Oregon, where falling prices and a supply glut are challenging business viability.
Operators in Missouri are also avoiding overleveraging production and resources, a recipe that has led to a glut of product oversupply in markets such as California and Colorado.
With dozens of retailers and manufacturers buying bulk flower from only 50 cultivators – and most of them producing at less than half-capacity – the price of wholesale flower has skyrocketed the past few months.
According to LeafLink – which tracks nearly all wholesale volume in Missouri through its online marketplace – the price of bulk flower has doubled to $3,000 per pound since the launch of adult-use sales.
Meanwhile, the number of product stock-keeping units (SKUs) has dropped by two-thirds during that time. Bulk-flower availability is down nearly 79%, according to LeafLink data.
“It’s going to be a couple more months where you have these bulk shortages,” Burstein said.
Product and inventory shortages have followed the launch of recreational sales in several markets over the years, including California, Illinois and Washington state.
Despite the early hiccups, Missouri adult-use and MMJ retailers generated $126.2 million in sales in March, up nearly 23% over February.
Total marijuana sales in the state are projected to hit $1.3 billion in the first year of recreational retail, according to the 2023 MJBiz Factbook.
Cultivation production less than half-capacity
The crux of the problem in Missouri is cultivation underproduction.
Fifty of the state’s 67 licensed cultivators are operational, and growers are utilizing a little more than 15,000 square feet of canopy, half the allowance under Missouri law, according to state regulators.
“The square footage of flowering canopy space currently in use is 37% of the capacity of all 67 licensed cultivation facilities combined,” said Lisa Cox, spokesperson for the state’s Department of Health and Senior Services.
“Any product availability issues right now are due to the industry’s transition to adult use and not due to lack of cultivation capacity in Missouri.”
Lulls in expanding capacity stem partly from the circumstances of legalizing adult-use sales in November through a ballot measure. Operators, in most cases, waited for the results before adding capacity and now are playing catch-up.
A harvest typically takes three months to reach retail shelves.
