Missouri Recreational Marijuana Sales And Their Impact On Illinois' Market, An Expert's View

Once Missouri rolled out recreational cannabis sales "all 200 medical dispensaries have converted or will soon convert to recreational," said Cantor Fitzgerald's Pablo Zuanic.

Zuanic contends the state could reach $1.6 billion in sales in 2-3 years. 

The Analyst

"Missouri will have lower prices (and lower taxes) and more stores than Illinois," said Zuanic in a report that analyzes both markets by following affordability, access, assortment and shoppers in both states.

• Affordability: Missouri has the "cheapest legal weed" in the Midwest, per the report. There, "the median flower price is $36 for 1/8 ounce," he said. "That is lower than neighboring IL where median retail prices in 4Q22 were still $15 per gram or >$50 per 1/8 oz." 

• Access: According to the analyst, there are 200 stores in Missouri, with 71 in the St Louis area and 44 in the Kansas City area. In contrast, "while MO was medical, there were only four stores on the IL side near St Louis."

• Assortment: "A scan of menus shows most formats available with various brands," per the report. However, Cantor's analyst said they do not have wholesale price data for Missouri.

• Out-of-state shoppers: Missouri is close to those states where adult-use cannabis is not legal yet (AR, OK, KS, NB, IA, and TN). "True, shoppers from IA and TN may have been going to IL, but MO prices (plus access and assortment) may entice them. We wonder too if people from IL, not too far from the border, will make the trek," noted Zuanic. 

Potential Impact on Illinois: Zuanic says 30% of sales in Illinois come from out-of-state shoppers. "We assume that will decline rather meaningfully." He added that this may not be just about inbound traffic, as IL-based consumers could drive to MO now. "Stores in the greater Chicago area may be more insulated but those near the borders will be impacted."

Jushi Holdings, Inc, JUSH JUSHF and Ascend Wellness Holdings, Inc. AAWH AAWH each own two of four stores near the St Louis area. Green Thumb Industries GTBIF has a Rise store in Quincy near the MO border, but its other nine stores are further out from the border. Cresco’s Sunnyside (CL CRLBF) stores seem more insulated, with its border stores near WI; Verano Holdings Corp. VRNO VRNOF Zen Leaf stores are mostly in the greater Chicago area. Also, Planet 13 Holdings Inc. PLTH PLNHF plans to open a store near the Wisconsin border.

"MO could quickly become an attractive market and one where MSOs begin to acquire local operators. All this assuming licensing remains limited," Zuanic concluded.

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