In the Weed Part 2: Building Business

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In the Weed

The leadership at Flora Farms LLC say they came close to revenue projections for 2021, the first full calendar year of the company. However, they also admitted having no solid idea what to expect for the medical marijuana industry and the company’s performance in it.

“Way back when we were projecting, we didn’t really know,” said Flora Farms CEO Daryl Deel, noting it hit $32 million in revenue for 2021. “Dispensaries didn’t know how much flower to sign up to order per month. Nobody really knew what the market was going to do. We didn’t exactly know how many medical patients there would be. We also didn’t know about how much competition would get open on the cultivation side.”

The Humansville-based company runs a cultivation facility, three dispensaries and is on the cusp of launching a manufacturing operation. It was one of the early entrants in the new industry, which is overseen by the Missouri Department of Health and Senior Services. The agency has given approval to operate for 186 dispensaries, 66 manufacturing facilities and 46 cultivators as of Feb. 25.

Mark Hendren, Flora Farms president, said sales from its three dispensaries in Neosho, Humansville and Springfield comprised 20% of the company’s revenue last year. The bulk of sales, $25.6 million, came from its cultivation facility, which fills 115,000 square feet between two buildings in the Polk County town.

Industry firsts
Much like all state dispensaries in early 2021, Hendren said sales were slow to start at Flora Farms, as patient demand outpaced product supply. Neosho was the first of the company’s dispensaries to open.

“When we first started out in Neosho, all we had to sell were manufactured products,” he said, adding most were marijuana-infused gummies. “When we had our first crop of flower, our sales went up a lot.”

Hendren said the first harvest of marijuana flower from Flora Farms was available in April 2021. The company’s three dispensaries had combined revenue in that month of around $500,000. By December, its dispensary sales reached $772,000 – an increase of over 54%.

“It grew quite a bit and was tied maybe to some of our own marketing efforts – but was mostly just patient count growth,” he said.

According to DHSS data, the statewide patient count surpassed 153,000 in December and exceeded 171,000 through February. Legal medical marijuana cumulative sales at dispensaries surpassed $200 million during December. The total grew to over $241.6 million through January, the most recent month reported.

Flora Farms has flower in roughly 85% of the state’s dispensaries – a total the leadership desires to exceed. Hendren said the company just added salespeople to meet that goal, noting there’s a need to be more competitive in the young industry.

“It’s getting more difficult as more and more cultivators come in,” Deel said. “The market is only so big.”

The company sold 9,000 pounds of flower to dispensaries over the nine months last year it produced a harvest.

“I’ll be happy if we do 1,000 pounds a month,” Deel said.

Changing lineup
While giving a recent tour of the Humansville cultivation facility, Hendren said 90% of the flower in its dispensaries are produced in-house. Flower represents about 70% of the dispensaries’ total business with infused products making up the other 30%. He said Springfield’s dispensary is the company’s top performer.

“For now,” Chelsea Rollins, general manager of the Humansville dispensary, responded to Hendren.

She and Hendren said the company regularly rolls out new products with a daily changing lineup. That includes roughly 30-40 products, such as pre-rolls, infused edibles, concentrates and tinctures.

One of its new pre-roll offerings, introduced in January, is called Cheers! Here’s to Your Health. The product’s material, harvested from Flora Farms’ strains, is made from trim, which Hendren said is what they primarily supply to manufacturers. Trim is a mix of sugar leaves, bits of cut off buds and trichomes that fall off during processing, Rollins said.

“It is great, high-quality stuff for edibles, home baking, blunts and all sorts of purposes,” Rollins said. “It’s a new offering for us and we’ve been really pleased with it. The trim is kind of like the final stage of the plant, if you will. The buds are kind of the beginning stage.”

The three dispensaries also carry dozens of products from other Missouri companies, such as Buffalo-based Heartland Labs and Garden City-based Show-Me Organics, which sells Vivid brand items.

“We try to purchase from our customers,” Hendren said. “So, if you have our flower in your base product, that gives you an advantage of getting into our stores. It’s not the only reason. The quality of the product, the pricing and things like that are built into it.”

New experience
Like Hendren, Deel didn’t come to the medical marijuana industry with any experience. Aside from serving as its CEO, Deel said he’s also the chief financial officer, capitalizing on his 15 years of experience he accrued with BKD LLP. He started with the Springfield-based company as a certified public accountant in 1976 and left to work in the trucking industry in 1991. For about 10 years, he owned Joplin-based R&R Trucking Inc., which hauled arms, ammunition and explosives for the U.S. Department of Defense. He sold the venture in 2007 to a private equity firm, which has since combined with Tri-State Motor Transit Co.

After working three years as vice chair for another Joplin business, EBV Explosives Environmental Co., Deel said he was mostly retired until 2019, when he became one of the investors with Hendren in BD Health Ventures and ERBA Holdings LLC, dba Flora Farms.

“Nobody recruited us. We just became investors and decided if we’re going to start this company, we have to do it right,” he said.

Deel said embarking on a new company in a new industry has been “very interesting.”

“Starting a company totally from scratch, as Mark knows, is very hard. I’ve been in companies that I’ve built up, but I had never started a company from ground zero,” he said. “Cannabis is just another type of business. There are a lot of unique features to it.”

As Flora Farms prepares to ramp up its manufacturing production later this month after getting state approval in mid-February, Deel and Hendren expect this year’s revenue to stay on pace with 2021, despite the added competition.

Both believe they’ve come a long way with the venture in a short span of time.

“You’d think growing a weed would be easy. Mark and I found out how hard it is to do it right,” Deel said with a laugh. “A year and a half ago, Mark and I knew very little. We know a whole lot about this industry now. There’s still more for us to learn, but we’re just businessmen learning something new.”