Widespread Product Recall Shakes Up Missouri's Cannabis Industry

Industry in Crisis

A massive recall affecting tens of thousands of cannabis products in Missouri has left a trail of financial turmoil for retailers and manufacturers. According to industry insiders and court documents, this crisis has resulted in millions of dollars in lost sales and inventory.

Lockdowns and Losses

Some retailers, like the Kansas City-based multistate operator Greenlight, have taken drastic measures to safeguard their merchandise. After Missouri regulators initiated an "administrative hold" in August, Greenlight locked up thousands of vape pens and other products, eventually leading to a full-fledged recall.

Manufacturer's Nightmare

Leading manufacturers, such as Clovr based in Kansas City, the state's largest, reported multimillion-dollar losses due to the recall. The Division for Cannabis Regulation (DCR) recalled approximately 62,000 infused marijuana products with distillate that was manufactured and sold by Delta Extraction, a processor located in Robertsville.

Regulatory Clampdown

Delta Extraction faced suspension of its business license on August 2nd, with allegations of sourcing untested cannabis from outside of a licensed Missouri cultivation facility. The DCR indicated that the affected products were not correctly logged into the statewide track-and-trace system, operated by Metrc, making it impossible to verify their origin and compliance with testing requirements.

Denial of Charges

Delta Extraction vehemently denied these charges, setting the stage for a contentious legal battle.

Impacted Brands and Products

The recall, which occurred on August 14th, included well-known brands like Kiva, Packwoods, Smokiez, and Zen. The product list was published by the state's Department of Health and Senior Services (DHSS). Vape pens, cartridges, gummies, and liters of THC distillate sold by Delta Extraction and its affiliates, as well as compounds processed from the distillate, were all part of the recall.

Statewide Fallout

"This is really a statewide issue," remarked Clovr CEO Josh Mitchem, underscoring the far-reaching consequences of the recall. Smaller, independent manufacturers appear to be bearing the brunt of the fallout, as Missouri's limited-license structure, dominated by vertically integrated operators, offers some insulation to larger companies.

Legal Limbo

While more than 20% of the state's 91 licensed manufacturers have been affected, most industry players are awaiting the conclusion of regulatory investigations before pursuing legal action. DHSS spokesperson Lisa Cox emphasized that the resolution of the investigation is a top priority.

Lawsuits Emerge

The recall has already triggered one lawsuit by Dark Horse Medicinals, an Arkansas-headquartered provider of vape cartridges, edibles, and concentrates. Other lawsuits against Delta Extraction, the state, and regulators are likely to follow, as the recalled products were purchased legally through licensed suppliers.

Extensive Fallout

Dark Horse claimed damages totaling $323,632 in purchased distillate that is now unusable in the state, lost profits on products containing the distillate, and lost sales on infused products banned from the marketplace. The lawsuit highlights the substantial market value of the processed marijuana products, exceeding $1 million.

Industry in Crisis

Other businesses along the supply chain, such as Clovr, are grappling with deep losses, with CEO Josh Mitchem estimating that around 20 manufacturers have products or distillate on the recall list. A sense of solidarity exists among operators in Missouri's cannabis market, with some manufacturers unable to purchase more oil due to financial constraints.

Possible Class Action

If regulators ultimately order the destruction of recalled products and distillate, it may leave businesses with limited options for recovering losses, possibly leading to a class-action lawsuit. Delta Extraction, however, maintains its compliance with state law.

Stuck in Limbo

Meanwhile, Missouri's adult-use retailers, like Greenlight and Blue Sage Cannabis Deli, are grappling with the aftermath. Greenlight has secured around 4,500 recalled products in vaults at its 15 locations throughout the state, potentially resulting in significant revenue losses. Retailers are anxiously awaiting guidance from regulators on whether to destroy, return, or potentially resell the recalled products.

Metrc Under Scrutiny

The fallout has raised questions about the performance of Metrc's track-and-trace software. While some operators praise its capabilities, others criticize it for not immediately flagging irregularities. Clovr's Josh Mitchem pointed out potential loopholes, questioning why the system failed to detect discrepancies in distillate quantities entered into the system.

Regulatory Concerns

Under Missouri law, operators are required to use Metrc software, with the state primarily covering the monthly service costs. The ongoing crisis has illuminated regulatory vulnerabilities that demand attention.

Disclaimer: The quotes used in this article are exact and have been attributed accurately to their respective sources.