Missouri businesses look to profit from medical marijuana

February 1, 2019 GMT

KANSAS CITY, Mo. (AP) — Bennie Palmentere has been looking for warehouse space lately.

The shelves at River Market Hydro, Palmentere’s small gardening store, are already stacked high with fans, grow lights and row after carefully placed row of plant food.

The urban hipster movement toward growing more food at home has already been good for business. Now Missouri is about to add a new cash crop to the mix: legal medical marijuana.

“Growing is growing. I don’t care what you’re growing,” Palmentere said “Our business is to teach people to grow. This helps us, because it’s basically allowing people to grow plants. If it was orange trees, it would help us too.”


Missourians approved medical marijuana with 65 percent of the vote in November. And while there may be some disagreement about the wisdom of that vote and whether cannabis in its raw form should be considered medicine, there’s no argument over the business opportunity.

Missouri will be doing about $111 million in annual medical marijuana sales by 2025, according to New Frontier Data, an analytics firm that has studied some of the 30-some other states that legalized before Missouri.

That kind of money is bound to have ripple effects for businesses that may never see an actual marijuana plant — gardening suppliers like Palmentere, security experts, legal services and more.

A 2016 study by the Marijuana Policy Group, a Denver consulting company that advises government regulators and business owners, found that every dollar spent on retail marijuana in Colorado generated about $2.40 in total economic output.

That was for a state that had legalized marijuana for recreational use as well as medical use, but Miles Light, one of the study’s authors, said it’s still relevant to Missouri.

“It doesn’t really matter whether the product is medically designated or recreationally used,” Light said. “It more boils down to the level of activity. If every Missourian decides they’ve got chronic pain and they need relief and they go and get their licenses and medical cards and demand $1 billion in marijuana, that’s going to create an industry. ... A lot of different people are making money on the whole ‘green rush,’ and it all adds up.”

The Missouri Department of Health and Senior Services is still writing the state regulations, and the first medical marijuana probably won’t be sold until late this year or early next.


But Palmentere and others are already preparing for the boom, the Kansas City Star reported. He’s been looking for a warehouse close to his store.

“That’s our goal is to have it centrally located so we can buy in bulk, create our margin there,” Palmentere said.

According to the Marijuana Policy Group study, some of the biggest economic winners besides the cannabis industry itself have been in warehousing, cash-management, security, testing, legal services and climate control.

Customers will start spending on those items even before the first legal marijuana plants are grown.

He’s already working with prospective businesses in Oklahoma, where in June voters opted to legalize medical marijuana.

“We just bid out a company in Oklahoma $85,000 just in lighting, and the guy told me he had to spend $135,000 with his heating and air conditioning guy,” Palmentere said. “So you’re talking about a lot of money, just to set up the structure, the frame.”

Financial services and security are a must, because marijuana businesses often deal only in cash. The plant remains illegal at the federal level, so the large, federally backed banks are prohibited from working with them.

That opened up an opportunity for Kevin Ellison of Springfield to start his own business after 15-plus years in information technology.

Ellison started Cannabis Security and Technology Solutions to help medical marijuana businesses set up electronic security systems and computer programs to track inventory and protect customer health information.

He said he’s already hearing from people who are interested in locking down those services so they will be ready when the state starts accepting license applications in August.

“That sounds like a long time from now,” Ellison said. “But if you have to get contracts signed, systems architected, and document how everything works together, then it really isn’t much time.”

The demand for marijuana testing will depend somewhat on what rules and regulations state health officials make, but other states have required some independent testing to ensure the purity of cannabis products and the accuracy of labels.

As the state publishes regulations, business owners will need help interpreting them, which will drive demand for lawyers.

“Obviously this is one of the most highly regulated industries that there is,” said Jeff Donoho of the Kansas City law firm Kennyhertz Perry. “Not only that, but the regulations are all brand new, so there’s not a lot of precedent and there’s not a lot of experience or institutional knowledge out there where people can just kind of Google it and then go wing it.”

Kennyhertz Perry has been positioning itself to attract some of that business by posting information about marijuana regulations on its website.

Palmentere is also trying to beat the competition.

He’s hired a few more people, including a web designer, and increased his advertising budget. He’s thinking about extending the store hours to try to get as big a slice of the new market as he can before others take it.

“It’s coming,” Palmentere said. “There’s a couple stores that are trying to pop up. That’s why we’re trying to expand as quick as possible. It’s happened out west. It’s gotten so competitive that folks had to close.”


Information from: The Kansas City Star, http://www.kcstar.com