Missouri Cannabis regulators suspend operations of three cannabis facilities

Missouri Cannabis regulators suspend operations of three cannabis facilities

Missouri cannabis regulators earlier this month suspended the operations of three cannabis facilities due to potential product safety concerns.

The state’s Department of Health and Senior Services declined to comment which facilities’ operations were suspended: “Investigations are ongoing, so we cannot comment further at this time,” it said in a statement issued Aug. 10.

On Monday, the state's Division of Cannabis Regulation on Monday issued a product recall for products sold to dispensaries and manufacturers by Delta Extraction LLC, a St. Louis-based infused product manufacturer. DHSS on Tuesday confirmed that the recall is linked to its ongoing investigation into the three cannabis facilities. Delta Extractions LLC, registered to Joshua Corson, could not immediately be reached for comment.

As a result of the earlier suspensions, dispensary operators across the state have seen “hundreds” of their products placed on hold, Greenway Magazine first reported.

Jason Nelson, CEO of BeLeaf Medical, a St. Louis-based, vertically integrated cannabis company that operates five dispensaries under the Swade brand, said that he has “approximately $100,000 worth of total inventory sitting on administrative hold that (he) can’t do anything with." This inventory was purchased by BeLeaf from the three affected producers, not produced by BeLeaf, he said.

But the holds, he said, aren't so severe to be noticed by consumers, whose shopping experience wouldn’t be noticeably different.

The holds come as Missouri’s recreational cannabis market, which launched in February, experienced higher-than-expected demand and sales in the past six months leading to a supply crunch and causing wholesale prices to skyrocket and retailers’ profit margins to shrink.

All the products that have been placed on hold are distillate based, according to people familiar with the matter. Distillate is a type of cannabis oil that can be consumed by vaporizing it in a vape pen or distillate cartridge, and it is also found in edibles and topicals.

The Business Journal received a notice sent from DCR to all the state’s licensed cannabis facilities on Aug. 3, requiring all licensees to “immediately place all product that is on administrative hold in quarantine.”

“No marijuana product on administrative hold shall be moved or altered in any way once it has been secured in quarantine, including wasted,” the notice read.

BeLeaf has removed the affected, third-party produced distillate-based products from its shelves and replaced them with unaffected similar products produced by BeLeaf, Nelson said. Cannabis flower — which is sometimes referred to as “bud” and makes up most of his dispensaries’ sales — hasn’t been placed on hold.

In its recall release, the Division of Cannabis Regulation said there were no reports of adverse reactions to the products subject to recall. The recalled products were not compliantly tracked in the statewide track and trace system, METRC, to allow the agency to verify they came from marijuana grown in Missouri or that they passed required testing prior to being sold at dispensaries.  

Missouri as of late July had 67 licensed cultivators, 89 manufacturers and 215 dispensaries, state records show.

The state’s ongoing investigation comes only a few months into a recreational market that has so far outperformed other recently launched adult-use markets.

Missouri, which had an oversupply of cannabis at the beginning of the year, saw its supply shrink after the state’s recreational market came online, the result of higher-than-expected demand and sales.

Now, many cannabis companies throughout the state are expanding operations. Proper Brands, a St. Louis-based, vertically integrated cannabis firm, earlier this month announced its acquisition of another local cannabis business and said it’s currently in the process of expanding its growing facility to more than 30,000 square feet from about 18,000 square feet. And Kansas City-based Show-Me Organics is building out an additional 15,000-square-foot cultivation facility, set to finish construction this fall, to help keep up with demand.

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Region: Missouri