Missouri weed businesses cash in as small shops wait for licenses

When Missouri allowed the first dispensaries to begin selling marijuana earlier this month, Andrew McDowell was frustrated.

Although he was happy for his community to finally have access to recreational weed, his Black-owned smoke shop in Raytown still can’t sell it. And he won’t know for months whether he’ll eventually be allowed.

“We would have liked to be a part of that first push,” said McDowell, who co-owns Funky Skunk with his longtime business partner Roderick Pearson Jr. “Whenever we do get our opportunity, we’re going to definitely make a lot of noise and we’re going to shake some stuff up.”

As the established marijuana industry cashes in on full legalization in Missouri, small-time players who want to break into the market are left in limbo. Black-owned mom-and-pop shops like McDowell’s Funky Skunk have to wait until later this year before they can apply to compete in a pool for smaller micro-licenses in order to sell or grow recreational marijuana.

The Missouri Department of Health and Senior Services, which oversees the state’s marijuana program, doesn’t plan to make applications available until June and won’t start accepting them until September. The state will then review whether businesses are eligible in December.

After Missouri voters legalized recreational marijuana last November, existing medical marijuana companies were able to easily convert their businesses to sell recreational weed this month. The state health department even bumped that date up a few days earlier than expected.

Critics say the state’s slow launch of the micro-license program gives established players even greater control of the marijuana market. Even if a business is awarded a micro-license — which is more restrictive than a full recreational license — those businesses will be months behind the current industry, they say.

Among other criteria, the micro-license program is geared towards lower income individuals and those who have been previously arrested for nonviolent marijuana offenses. It was intended to give small businesses a chance to join the lucrative market.

But some say it creates a separate and unequal category of marijuana businesses since micro-license holders can’t sell or buy products from larger players.

Lisa Cox, the spokesperson for DHSS, told The Star that it takes time to roll out a program like the micro-license system.

Recreational marijuana “was only passed three months ago, and we’re working to add necessary staffing and build an entirely new application and set of criteria,” she said.

“We are also required to provide technical assistance and education to these applicants. All of this takes time to develop while also continuing to provide guidance and required regulatory oversight to the newly converted comprehensive licensees.”

Brennan England is president of the Missouri chapter of Minorities for Medical Marijuana. He also founded the St. Louis Cannabis Club, a social and business club centered around marijuana.

England told The Star he’s less concerned with businesses having to wait to apply for micro-licenses. The bigger problem with the program is the small number of businesses that will actually be awarded these smaller licenses, he said.

Missouri is required to issue at least 144 micro-licenses divided among the state’s eight congressional districts. The state will use a lottery system to award licenses in three rounds to qualified micro-license applicants.

“We’re stuck in a waiting period for a line that’s going to be sold out before we get there,” he said.

To give himself a better shot, England plans to apply for a micro-license with a pool of roughly 10 other people who are funded by an outside backer. That way, even if he doesn’t win a license, he still would have a written agreement that guarantees he gets a share of another person’s business.

“If I were to apply as just an individual and only be depending on my one application — chances are slim to none,” he said. “The more people that apply, the less chance I have.”

For Josh Mitchem, the CEO of Clovr, a Kansas City manufacturer of marijuana-infused products, business is booming. His company was able to convert its license from medical to recreational marijuana this month.

“We are drinking from a fire hydrant right now,” he said. His business is seeing four to five times the amount of sales it got from medical marijuana patients.

Mitchem acknowledged that established industry players like himself have an advantage over smaller businesses looking to break into the market.

“The reality is that we had a leg up to begin with,” he said, referring to businesses who have been already selling medical marijuana for years. “Having a two-year head start certainly is a big advantage.”

However, Mitchem said the micro-license facilities may be able to specialize in unique marijuana strains that are difficult for bigger facilities to mass produce. Similar to how craft breweries experiment with brewing techniques, smaller marijuana companies could attract customers for their unique products.

“The micro-licenses that decide to do more craft products I think will do well,” he said. “The ones that try to make more standard cannabis products that compete with the macro-licenses are probably going to suffer.”

McDowell, the Funky Skunk co-owner, said he’s heard customers grumble about the quality of products from some of the already-established businesses. If he’s able to get a micro-license, his “boutique-style” operation will offer a more local product than some of his competitors, he said.

Before he gets there, however, the Raytown businessman still has to win a license. He said he expects thousands of people to join the mad dash to scoop up micro-license applications.

“You’re going to be fighting through a bunch of riff raff, a bunch of fluff, a bunch of people that don’t really need to have licenses,” he said.

McDowell said he and his business partner plan to submit to the state multiple micro-license applications in an effort to skew the lottery in their favor.

“It’s a lottery system,” he said. “If we were trying to win the Mega Millions, how many tickets would you buy?”

Star reporter Maia Bond contributed to this story.

A reporter for The Kansas City Star covering Missouri government and politics, Kacen Bayless is a native of St. Louis, Missouri. He graduated from the University of Missouri with an emphasis in investigative reporting. He previously covered projects and investigations in coastal South Carolina. In 2020, he was awarded South Carolina’s top honor for assertive journalism.

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