Yes we Cannabis! Missouri-made medical marijuana moves metro
So you want to sell weed? Legally? In Missouri? The good news is in November of 2018, Missouri voters overwhelmingly passed a constitutional amendment legalizing the sale of medical marijuana in the state. The bad news is the state legislature limited the number of licenses granted to dispensaries and cultivation operations statewide. Now all those licenses are gone. Until one of these currently licensed operations goes out of business, decides to sell, or state regulations change… you are out of luck. But Overland Park native Nate Ruby and his mother, Carolyn Richmond, weren’t.
Ruby is the 26-year-old head of OXG, LLC or Onyx 7, an umbrella company that includes five medical marijuana dispensaries under From The Earth. This cultivation operation grows and distributes “boutique-craft cannabis” products under the name Illicit, and plans for skincare products and edibles under the name Just Be.
His journey into the world of the cannabis industry started at the early age of 13 when his mom Carolyn Richards “busted” him. Richards received, by accident, a text from one of Ruby’s friends asking Ruby if he had any “skateboards” to sell—suspicious, considering Ruby didn’t skate. So she grounded him for a month, which led Ruby to spend his time in the library researching the then-fledgling medical marijuana industry.
Years later—after a law degree from UMKC and years planning a marijuana business—Ruby and his mother teamed up to sell weed. Richards brought her experience of owning and managing retail shops to Ruby’s dispensaries.
“They call me Marijuana Mama,” Richards says during a recent interview in their Independence dispensary.
Building a successful medical cannabis company in Missouri is a difficult task. Unlike most startup businesses, there are very few resources available in the maze of cannabis regulations. The cost to start a business is high. The application fee for a business license is $6,000 per dispensary and $10,000 per cultivation facility—and that’s only to apply. If you are approved for a business, you’re expected to pay an annual license fee. Then, costs associated with construction and renovation of facilities aren’t tax-deductible. Because marijuana is still a federally illegal drug, you can’t receive a business loan from a bank. While many businesses lean on investors from out-of-state, all cannabis operations in Missouri must show at least 51 percent ownership from Missouri residents.
Missouri began accepting license applications in July of 2019. Nearly 600 separate applications were filed with the state and licenses were awarded six months later to less than half the applicants.
While voters approved a constitutional amendment to legalize the sale of medical cannabis in the state, Missouri legislators set the rules by which the legalization was administered. Only 24 dispensary licenses per congressional voting district were granted for a total of 192 dispensaries in the state. There were also 62 cultivation licenses, 86 manufacturing facility licenses, and 10 testing lab permits granted. Some 853 appeals to rejected licenses have been filed at a cost of $2.6 million in legal fees incurred by the state of Missouri. These limitations on the number of licenses granted have been explained as necessary to keep the U.S. Department of Justice from enforcing federal law if Missouri did not cap licenses to avoid oversupply. The DOJ does not want more marijuana produced than is being legally consumed by medical marijuana patients. Oklahoma, which has few restrictions on the number of grow facilities or dispensaries, has seen no federal involvement.
However, license restrictions keep prices up, resulting in higher state taxes. In Missouri, the medical marijuana tax is 13.35 percent, four percent of which funds veterans programs. The state expects to generate $1.5 million per year in annual licensing fees, and with estimated sales of $200 million for 2021, the industry could raise over $25 million in tax revenues for the state. By 2024, those sales are expected to climb to $650 million with estimated sales tax revenues of $86 million dollars.
Adam Diltz, head grower and COO of OXG, LLC, explains day-to-day expenses for a cannabis operation can easily run-up to a quarter of a million dollars per month in costs. If an operation is not “buttoned up,” any small mistake can result in a product that does not pass state testing—and ultimately hundreds of thousands of dollars in the hole.
Ruby compares the state’s infant cannabis industry to the Gold Rush. A few of the miners got very rich, most lost everything, but the real winners of any gold rush are the people who do business with the miners. The guy who sells the shovels and the woman who owns the nearest restaurant made a living off of the aspirations of the miners. The same is true for the cannabis industry. Local Missourians benefited greatly from the construction of dispensaries and the tax revenue already raised. Unfortunately, some of those people who were granted initial licenses will simply not be prepared for the huge capital outlay required to stay in business.
“With Illicit [brand cannabis] it’s about quality,” Ruby says. “I hire a lot of really smart people who know how to grow really, really well. I told them, I’m not looking for the cheap product. A lot of people say you can’t be a commercial grower and a craft grower at the same time. We’re trying to take on that challenge. We’re trying to put out a quality product that people love and commercialize it.”
Ruby continues, “The key to this is the right team. You can’t skimp on payroll by having team members wear too many hats because it catches up with you on the compliance side of the state rules. You need specific individuals taxed with specific areas to oversee. Dispensaries have general managers, lead budtenders, budtenders, security personnel. We have all the right people in place to ensure state compliance, to make us successful and to allow us to bring the best product possible to our patients.”
Ruby learned a lot of what he knows today from the California-based cannabis company From The Earth. Ruby’s Onyx 7 entered into an agreement with From The Earth that lets him use their brand, intellectual property, and educational resources in his retail dispensaries. The partnership gave Onyx 7 a head start on other applicants—with quality, product knowledge, and training standards already set.
In 2019, Onyx 7 approached Pedro Zamora, Executive Director of the Kansas City Hispanic Economic Development Corporation (HEDC) about partnering with their team as they applied for a license for a Southwest Boulevard dispensary location on the West Side.
“The very first day we met, we started talking about, how can we incorporate—not only economic redevelopment in some of these distressed communities, communities that have been overly enforced by rules and regulations and laws that punish and persecute a lot of folks for minor infractions of marijuana possession—but we also started talking about how can we create programs that are sustainable, that will help folks shift their lives,” says Zamora. “And that’s what I got out of our first conversation is that this young man is talking about problems that have been plaguing immigrant, refugee, minority communities. And knowing that [cannabis] is going to come into these communities one way or another, that became more of a motivator for our organization to try to help him win those applications.”
Selling the idea of supporting dispensaries was not an easy thing for Zamora.
“After I cleared this with my wife and mom and sons, then it became a conversation with the [HEDC] board and it got a little cold in the room when we had this conversation,” Zamora says.
Eventually, he was able to convince the board the benefits from working with Ruby’s group outweighed any perceived dangers from the association. “We looked at communities that have had several funding pushes for drug enforcement, youth programs, DARE, COMBAT. I had to look and think, sure those were programs that put a round peg in a round hole but sometimes those are just round pegs in round holes,” Zamora says. “We had to look at the challenges the local communities had and a lot of it was that they do have drug dependencies and they have ailments that can be treated with medical marijuana. We took that into consideration and we researched all the risk factors that come into play when medical marijuana comes into a community.”
For Ruby, the hardest part of the process was the time spent filling out separate applications for all five dispensaries and the cultivation facility. “You don’t really sleep. You do a lot of research,” he says.
The cannabis industry is one of the most heavily regulated industries in the state. After being granted a license, you have one year to finish construction on your facility and have it inspected and approved for opening. Once you receive the official go-ahead, you need product ready for harvest. But in order to harvest product, cultivation needs to receive approval from a testing site in order to be sold.
While Missouri has many dispensaries open, only 15 of the 60 cultivation facilities been given permission to begin operations as of March 1, and only six of those facilities are selling product. This becomes an enormous supply issue for dispensaries and the reason for the current high prices in Missouri.
Matching demand needs while maintaining the quality of the product is only one of the many issues that Onyx 7 has tried to address through their team. Cultivating quality cannabis is much more complicated than merely sticking a seed in some dirt and trying not to forget to water it. It’s science.
As Onyx 7 COO, Diltz manages the massive grow facility near Independence, Mo., a sprawling property that sits off the road with no signage to identify it. A razor-wire fence surrounds the property with cameras prominently displayed on all corners. Inside, a team of 35 employees grow approximately 300 pounds of marijuana per month for sale. Soon, the new, larger building will open and they will employ up to 200 employees while growing 3,000 pounds per month.
Surprisingly, very few plants are grown from seed and those plants never become sold product. Growers purchase seed only to start new “mother plants.” Feminized seeds are purchased at high prices because these genetically engineered seeds are predetermined to grow female plants; male plants produce hemp and are useless for medical cannabis. Even the most common strains of cannabis cost $10 or more for a single seed. Extremely rare seeds can cost hundreds of dollars per seed. The plants grown from these seeds live in the “Mother Room,” a large tented area between the main buildings that allows for natural light. From these original “mother” plants, clippings are removed, tagged for identification, and put into an earth-like root enhancer designed to encourage root growth. When the original “mom” plants in the Mother Room grow too big, they are discarded and replaced by younger plants.
The newly planted clippings become the plants that are allowed to bloom and are eventually sold. When the roots are fully established, the clippings are re-planted and put into one of the grow rooms. Creating a “boutique craft” cannabis product requires complete control of the environment. These large rooms are lined with two-tiered shelves and are lit by artificial light designed to replicate the best light spectrum for growth. Nothing is left to chance in their growth cycle. Each plant is individually cared for by workers who follow a strict schedule of feeding, watering, and adjusting the plants for light.
When the plants reach the proper maturity, they are pulled whole from the soil and hung upside down in the drying room. Here is the real test of a good grower. The quality of the product is determined by proper drying. The length of time that they hang, the humidity, and the temperature of the room are all considered proprietary information and kept as closely guarded trade secrets. The idea is that if you treat each plant the same with the same attention and individual care, it doesn’t matter if it is 10 plants or 10,000 plants. You still get the boutique craft quality cannabis that Ruby wants the Illicit brand to be known for.
Once the drying process is complete, the plants are then trimmed by a team of workers who carefully cut the dried buds from the stem of the original plant. While doing this, they are also providing a quality check on the product. Some buds don’t have “jar appeal,” a reference to the small, glass jars that cannabis is packaged in for sale. These small or misshapen buds (known as “popcorn” buds) are separated and sent to a manufacturing facility managed by the Illicit team to be ground into pre-rolled joints. Buds considered too “light and airy” to appeal to patients who smoke are called “larf” and are also sent to manufacturing to create the extractions needed for edibles and vapes. The key philosophy taught to these “trimmers” is that if you wouldn’t be happy buying this 1/8th of weed, don’t package it and don’t sell it. Only the best buds qualify as “boutique-craft” product.
This attention to quality and consistency of product is the main attraction of legalized marijuana for both medical patients and recreational users. A black market purchase is an easy purchase; if you don’t believe me, give your eighth-grader $10 and ask them to get you a “dime bag.” The odds are they know someone like 13-year-old Ruby who has “skateboards” for sale. The difference is that 26-year-old Ruby knows what he is selling because he has tracked it from seed to sale. Adult Ruby’s product has been subjected to rigorous testing to ensure that no illegal pesticides were used and that there is no mold, heavy metals, or other contaminants present in the product. Black market purchase information is based on what the guy you bought it from was told it was by his guy. Educating the general public about this difference is a major educational goal of the Onyx 7 team.
As “Marijuana Mama” Richards puts it, “There will always be a black market. But you are choosing to put something in your body, so you had better know what you are putting in your body. You pay a little higher price at a dispensary because the taxes are so high and things are more expensive to run; but if that product is going inside you, you know that product is what it says it is on the package.”
There is still a lot to learn about the effects of medical cannabis. Due to it still being illegal at a federal level, research isn’t easy to conduct. But ultimately Americans hold cannabis to a higher standard of safety than other products.
We demand that cannabis be safe when other products also can be harmful when overindulged in. Alcohol can ruin your liver, computer screens can damage your eyes, and bike seats can cause testicular cancer. Every commercial for prescription drugs carries a laundry list of potentially harmful side effects, but we are okay with those products as long as they help us sleep, reduce our anxiety, and cure our impotence.
But as we argue these opposing views, we lose sight of one important group: the patients who feel that cannabis helps their medical conditions.
“When you start talking to people who use cannabis for medical purposes, you can’t deny that it has helped them in some kind of way,” says Ruby. “In the beginning, I smoked cannabis recreationally. I thought, ‘Medical is just a way to get it legal for recreational use.’ Then I started meeting these patients and completely flipped my philosophy after meeting the first one.”
For those people who work in the medical cannabis industry, it is always about that “first one”—the one person they personally know who benefited from medical cannabis at a time of great need in their lives. For Zamora, it was his brother’s cancer diagnosis. A military vet who worked for years on a job that required drug testing, he had no adult experience with marijuana until he contracted an especially painful form of cancer. The only thing that helped was the marijuana suggested by his doctor. It changed Zamora’s thinking on the drug.
Stories like Zamora are a common theme among the Onyx 7 team. They each have stories of a friend, family member, or acquaintance that changed their view on the medical benefits of cannabis. Diltz tells of a childhood friend who went from a high school football star to a homeless opioid addict. After multiple failures in rehab, he ended up in a facility that used cannabis as a “crutch” to combat the urges of his addiction. He’s been clean ever since and now manages multiple grow facilities across several states. As Ruby’s mother Richmond points out, “Unless you’re in that person’s situation, you don’t know what they go through on a day-to-day basis just to get up out of bed. So for them to legally get medical cannabis is the best thing we can do for someone.”
Some 30 years ago during the worst of the AIDS epidemic, I watched a good friend slowly deteriorate from the disease. Nausea and lack of appetite made eating very difficult during the last month of his life. He asked me to find him marijuana, and we made a hot tea from it so that he could have a cup before every meal. Whether it was from a scientific reason or a placebo effect, it helped. That illegal drug made his last month of life easier. It was not fair or right that he was forced to break the law to get a small bit of comfort. It was not fair or right that I risked criminal charges to help a dying friend find peace. That’s the real reason that the work Ruby and his team do is important. Their services help others survive and thrive. That’s what the community deserves.