When John Mueller sold Acres Cannabis to Curaleaf in 2019, it was an arm’s length deal with a noncompete that forced him to break ties with what he and his partners had built out West.
As the CEO of Acres, Mueller steered a ship in Nevada that included nearly 270,000 square feet of operating cultivation facilities, a state-of-the-art production and extraction lab, and an immersive 19,000-square-foot dispensary in Las Vegas—the largest retail spot in the state until Planet 13’s SuperStore came along in late 2018.
That Acres dispensary in Las Vegas hosted a “Marijuana Farmers Market” every weekend, offered a museum steeped in cannabis culture, and it had an open-view processing kitchen where customers could look on as technicians worked with edibles and extracts.
Mueller’s Nevada vision also included another 133,000 square feet of cultivation that was under construction on 37 acres of land the company owned in the Amargosa Valley—an unincorporated area about 75 miles northwest of Las Vegas. Upon completing that undertaking, Acres expected to generate 100,000 pounds of dry flower per year at full scale.
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“The day we signed, they pretty much took over operations,” Mueller said of Acres’ $70-million deal with multistate operator Curaleaf. “Obviously, we made sure it was a smooth transaction. We still consider them friends. But there’s no tie between the companies other than we’ve both been good partners to each other on some transactions.”
With ties to the Nevada market severed upon that 2019 sale, Mueller said a new opportunity awaited in the Midwest, where Missouri voters passed a medical cannabis initiative via a 65.6% majority on Amendment 2 in the November 2018 election.
That ballot measure imposed a 4% tax on medical cannabis sales, with revenue dedicated to health care services for veterans, and required the state Department of Health and Senior Services (DHSS) to begin accepting applications for dispensaries no later than Aug. 3, 2019.
“It allowed us to come back to Missouri where my brother and I were born and raised, went to the University of Missouri in the middle of the state here,” Mueller said. “And it allowed us to come back basically home and build out a big footprint here in the Midwest.”
Greenlight, which Mueller founded with his brother, Jim, now has 15 dispensaries across the state and about 150,000 square feet of cultivation and manufacturing space with another 100,000 square feet contracted.
Through Greenlight, the Mueller brothers are also building out a cultivation operation in South Dakota along with eight retail locations on the way. The Greenlight retail footprint also extends to four active dispensaries Arkansas, five active dispensaries and one more under construction in West Virginia, and one coming in Illinois.
Despite being less than three years out from the completion of that Curaleaf transaction, the Mueller brothers are building out a young cannabis empire in the Midwest and Southeast that includes three in-house brands and 400-plus team members at Greenlight.
“I think we’re opening stores as quick as anybody else out there, including the kind of big five or six guys out there, and being efficient and focused on construction costs and cost of capital,” Mueller said. “As we say, we’re kind of cannabis 2.0, where one of the big MSOs came in and acquired us up. And we had noncompetes out there.”
In addition to more recent cannabis endeavors, Mueller and his brother are experienced entrepreneurs in food, manufacturing and construction, including in all aspects of business startup, turnaround and management.
From processing facilities to restaurants, a cattle feedlot in China and international road construction companies, their business trials are diverse and almost to a fault, Mueller said.
“We have never been scared to go into any business,” he said. “So, [we’re] serial entrepreneurs to say the least.”
With Greenlight, Mueller said he and Jim lean on wearing two hats: construction and retail. That’s allowed them to position themselves as a multistate operator that can prosper in the good times and weather the not so good, such as current downturns experienced by West Coast markets, he said.
“If you’ve been cautious with your capital and winning licenses versus buying licenses, it’s a much different equation,” he said. “And, you know, we have no debt on the company, and it’s a pretty good position to be in.”
Specifically in Missouri, the Greenlight team has attacked its success head on, from helping to increase the state’s medical cannabis patient count to strategically expanding its partnership network, and working with NORML and the NAACP to shape future reform efforts.
As of August 2022, there were 197,700 active medical cannabis patients registered in Missouri, according to DHSS data. Of those patients, roughly 40,000 became cardholders through Greenlight’s $49 sponsored medical evaluations on its website, Mueller said.
Patients also have to pay roughly $25 in state fees, but Greenlight offers $25 in loyalty rewards at its dispensaries to those who complete the evaluation and patient card process through its website.
“As a new market, we’ve outperformed any medical market that’s come on as a percentage of population,” Mueller said in regard to how fast Missouri’s patient base has grown.
“If you look at what everybody was projecting, we’re about double where we thought this state would be at this point,” he said. “A lot of those early projections are usually sandbagged a little bit, but … as far as a patient population and execution from the industry, I think we’ve outperformed.”
According to an economic analysis published by DHSS in early 2019, it was projected that Missouri would have 26,000 medical cannabis patients by 2022.
Missouri’s roughly 200,000 medical cannabis patients today represent about 3.3% of the state population, which compares to Florida’s roughly 750,000 medical cannabis patients representing about 3.5% of their state population. But Florida’s medical program passed by voters in 2016, one of the most attractive in the U.S. for larger MSOs, has a two-year head start on Missouri.
From Trulieve, which has 120 dispensaries in Florida, to Verano (59 dispensaries), Curaleaf (51), Ayr Wellness (51), Cresco Labs (19), Columbia Care (14) and Green Thumb Industries (7), the cannabis giants of the U.S. are highly invested in the Sunshine State. But, with the exception of one Columbia Care dispensary in Hermann, Mo., none of those companies are competing with the likes of Greenlight in Missouri—yet.
That’s because under Missouri’s medical cannabis law, the DHHS requires every license applicant to submit an attestation that no owner, in whole or in part (including shareholders), has a disqualifying felony offense. In other words, that’s made it nearly impossible for publicly traded companies to enter the market.
As such, Missouri’s medical cannabis market has been “flyover country” for many big MSOs, Mueller said.
“The way the rules and regs are written today, it basically blocks out a publicly traded company from operating here as we have to get 100% of the fingerprints,” which includes shareholder backgrounds, Mueller said. “So, it’s kind of kept them at bay a little bit from operating a big operation in the state.”
But adult-use legalization could change all that.
With Amendment 3 on the statewide ballot this November, Missourians will vote on a proposed constitutional amendment that, if passed, will allow adults 21 and older to possess, consume, purchase and cultivate cannabis. The proposal would also allow individuals convicted of nonviolent cannabis-related offenses to petition to be released from incarceration and/or have their records automatically expunged.
“If the adult-use passes in November, which we’re optimistic about, it would allow those publicly traded companies to come operate in our sandbox here,” Mueller said of the measure, which aims to establish a lottery to award new licenses, including a new category of 144 licenses reserved for small businesses. Forty-eight of those would be retail licenses equally distributed among eight congressional districts in the state.
While opponents of the measure, including Democratic state Rep. Ashley Bland-Manlove and Christina Thompson of advocacy group ShowMe Canna-Freedom, argue it will create a monopoly for existing medical operators who will be the beneficiaries of the majority of new licenses, the ballot proposal is supported by the ACLU, NORML, the NAACP and the Missouri Medical Cannabis Trade Association.
“[When] you get NORML and NAACP, and basically everybody that owns and operates a license today, all on the same page, you’ve really accomplished something,” Mueller said.
Aside from the ballot language, Mueller said Greenlight has a “homefield advantage” ahead of a possible adult-use program rollout in Missouri because of previous business experiences running vertical operations in Nevada and because of his and Jim’s native roots in the state.
“I think that the key for us is, one, getting strategic partners across the state so we [span] the whole state [with our] 15 stores, and then being able to be the second cultivator up and operating,” he said.
“And once you retain those patients and you treat them like they’re part of the Greenlight family, they tend not to move to other dispensaries after that,” he said. “So, I think getting up and operating is really where the homefield advantage is, and then also knowing where the strategically located [opportunities are]. Something may look good on a real estate brochure, but there’s reasons why some of the locations that people pick are maybe not ideal for the cannabis industry.”
Mueller added that gaining local approvals is pivotal in executing Greenlight’s strategic footprint across the state, and that comes from relationships and having the right people on the ground. And those relationships are key factors that come into play right now, he said.
The anticipated ripple effects of adult-use legalization will have far-reaching impacts throughout the state, from tens of millions of dollars in additional tax revenue, to thousands of new jobs and increased revenues for industry retailers, according to advocates behind the 2022 ballot measure.
“I think we’re going to get a billion-plus-dollar market,” Mueller said, a prediction he bases off other states that have transitioned to adult use and one that would mean roughly $100,000 in annual revenue from a 6% state excise tax and a 3% local tax at retail. That’s on top of Missouri’s standard sales taxes.
“Obviously if sales go up to 2.5 times [from medical]—the general rule of thumb—you’re going see about almost the doubling in the number of workers,” he said. “So, you’re going to add 4,000 or 5,000 additional Missouri workers into the industry that don’t exist today.”
And Missouri’s cultivation capacity for its medical cannabis program should be well-positioned to transition to an expanded adult-use market, Mueller said.
“A lot of people built out a significant amount of canopy here because when we did our application process, we had to tell the state that we were going to do, you know, ‘60,000 square feet’ or whatever the magic number was, and the state basically held you accountable to what you said in your application process,” he said. “And most of those [canopies] were built out to make sure you won your application. And now those are matching up to what it looks like in an adult-use market.”
And based on current polls, adult-use legalization appears inevitable in Missouri: 62% of likely voters are “certain to vote yes” on Amendment 3, according to a SurveyUSA poll released Sept. 19.
If that polling aligns with actuality in November, Missouri will become the third state in the Midwest to legalize adult-use cannabis, joining the likes of Illinois and Michigan. Those two states combined for $2.7 billion in adult-use sales in 2021 and are on pace to smash that mark this year.
So, how’s a state like Missouri, with just a fraction of the population, going to compete?
“Obviously the population dictates some of that,” Mueller said. “But I think the strategic [move] is looking at Illinois and how many people are heading east across the Mississippi River and look at what stores [there] are going to be doing versus now staying here at home [in Missouri]. I think our tax rate is going be significantly less. So, I don’t see people crossing the [state] border ever again, not that they should be to begin with, technically.”
But with adult-use ballot measures also playing out in Arkansas and South Dakota this November, Greenlight’s Midwest mission in Missouri is just the tip of the iceberg for the emerging MSO.