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Widespread product recall upends Missouri’s cannabis industry


A widespread recall targeting tens of thousands of infused cannabis products in Missouri has led to millions of dollars in lost sales and inventory for retailers and manufacturers, according to industry sources and court documents obtained by MJBizDaily.

At the same time, scores of operators caught up in the fallout have few options to recoup those losses.

Some retailers, such as Kansas City-based multistate operator Greenlight, have locked up thousands of vape pens and other products in vaults after Missouri regulators imposed an “administrative hold” in August on the merchandise, then implemented a full-fledged recall.

Firsthand accounts from manufacturers such as Kansas City-based Clovr – the state’s largest – point to multimillion-dollar losses after the Division for Cannabis Regulation (DCR) recalled roughly 62,000 infused marijuana products with distillate manufactured and sold by Delta Extraction, a processor based in Robertsville.

On Aug. 2, regulators suspended Delta Extraction’s business license, alleging the company sourced untested “marijuana or converted hemp from outside of a Missouri licensed cultivation facility.”

In the recall notice, the DCR said the affected products “were not compliantly” logged into the statewide track-and-trace system operated by Metrc.

As a result, the agency said it was unable to verify if the products were derived from in-state marijuana growers – or whether they passed testing requirements before entering the retail market.

Delta Extraction has denied the charges.

The Aug. 14 recall included such brands as Kiva, Packwoods, Smokiez and Zen, according to the product list published by the state’s Department of Health and Senior Services (DHSS).

Affected products include vape pens, cartridges and gummies as well as countless liters of THC distillate sold by Delta Extraction and its affiliates – along with compounds processed from the distillate.

“This is really a statewide issue,” Clovr CEO Josh Mitchem told MJBizDaily.

Smaller, independent manufacturers are more likely affected by the recall, according to industry insiders.

Missouri’s limited-license structure, dominated by vertically integrated operators, likely shielded the market’s largest companies from even greater exposure because they source their own products and are less reliant on other suppliers.

Still, more than 20% of the state’s 91 licensed manufacturers have been affected, industry sources told MJBizDaily.

Many believe the ongoing inventory shortages in the market, first reported by MJBizDaily in April, fueled some distillate purchases as demand grew, resulting in wider-scale problems.

Marijuana manufacturers use THC distillate to make infused products.

Missouri’s recreational cannabis market launched in February with only 50 cultivators and 78 manufacturers.

For now, most operators are waiting for regulators to conclude their investigation before taking legal action.

“Resolution of the investigation is a high priority for the department,” DHSS spokesperson Lisa Cox said.

The recall has already triggered one lawsuit against Delta Extraction, by Dark Horse Medicinals, with others likely to follow, including potential litigation against the state and/or regulators since the recalled products and distillate were purchased legally and through licensed suppliers.

In late August, a Missouri circuit judge dismissed a motion, filed by Delta Extraction, to halt the recall.

Extensive fallout

The lawsuit filed by Dark Horse – an Arkansas-headquartered provider of vape cartridges, edibles and concentrates – as well as new insights from licensed cannabis companies underscore how widespread and financially damaging the recall could be for state operators.

According to court documents obtained by MJBizDaily, Dark Horse claimed the following damages:

  • $323,632 in purchased distillate now unusable in the state.
  • Lost profits on products containing the distillate.
  • Lost sales on infused products banned from entering the marketplace.

The processed marijuana products alone have a market value of more than $1 million, the lawsuit contends.

And it appears other businesses along the supply chain are facing deeper losses.

“There are definitely other groups that are more largely affected by this than us,” Dark Horse CEO Casey Flippo told MJBizDaily.

That list includes Clovr, which supplies nearly every dispensary in the state with infused products.

“I’m sitting on about $2 million worth of oil at my facility that I can’t use to produce any products,” said Mitchem, who estimates 20 manufacturers have products or distillate on the recall list.

Operators in Missouri, like other marijuana markets, are close-knit and often travel in the same business and social circles.

“There’s manufacturers that have 100% of their product on lockdown. They don’t have the dollars to go buy more oil,” Mitchem added.

More lawsuits?

If regulators ultimately order the recalled products and distillate destroyed – as operators fear – that would leave few options for businesses such as Clovr to recoup losses, particularly regarding products purchased from Delta Extraction using cash.

“You’re going to have to sue to get your money back or sue the state to try to get them to release the product. There’s just no other way around that,” CEO Mitchem said.

“I think you’ll probably see a class action lawsuit.”

Delta Extraction is contesting the allegations, contending it met all statutes and administrative rules of Missouri’s cannabis program.

Rich Chrismer, a Delta spokesperson, called the Dark Horse lawsuit “premature” as well as questions related to the financial stability of the company and potential liabilities.

“Delta Extraction’s products were made compliantly under state law,” he reiterated to MJBizDaily via email.

In a holding pattern

The fallout is likely affecting all of Missouri’s 200 or so adult-use retailers, sources told MJBizDaily.

Retail operators such as Greenlight and Carthage-headquartered Blue Sage Cannabis Deli are sitting on hundreds of recalled products.

Greenlight has locked up roughly 4,500 recalled products in vaults at its 15 locations throughout the state, co-founder and CEO John Mueller told MJBizDaily.

That could equate to anywhere between $100,000 and $200,000 in lost revenue based on the latest product price checks in the Missouri market, according to data provided by Seattle-based cannabis analytics provider Headset.

According to Headset data through August, the average price of a vape pen was $44.97, while a package of edibles costs $24.12.

Both price points were the highest among any market Headset covers.

Greenlight is offering in-store credit or cash refunds on recalled product purchases.

Blue Sage has set aside about 300 recalled products at its two locations, according to Chief Marketing Officer Tony Billmeyer.

The company is offering in-store credit for products of equal or lesser value, he said.

For now, retailers are stuck in a holding pattern as they await word from regulators whether they should destroy the product, return it to the manufacturer or, under the most unlikely scenario, get approval to sell the products.

“They have not given us a specific time frame yet,” Mueller said.

Metrc and statewide system under fire

While some operators have lauded Metrc’s software for its track-and-trace capabilities, particularly in the wake of the recall, others have criticized the Florida-based company.

“I think Metrc has culpability in this,” said Clovr’s Mitchem, who questioned why data entries failed to prompt immediate alerts since the yield of distillate was significantly more than the raw materials first entered into the system.

“Metrc could have put a stop to this a long time ago, but they allow that loophole for whatever reason,” he quipped.

While some irregularities can be identified, according to Metrc, regulators have the ultimate authority to take action.

“While Metrc does not automatically flag potential wrongdoing or data entry manipulation, there are several areas within the system where irregularities can be identified, including automated reports that highlight potential non-compliance based on a specific state’s rules and regulations,” the company said in a statement sent to MJBizDaily.

Under Missouri law, operators are required to use Metrc software, but the ultimate cost of the monthly service contracts are primarily covered by the state.

Chris Casacchia can be reached at chris.casacchia@mjbizdaily.com.



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