By Eric Peterson | Feb 16, 2021
Earth City, Missouri
Medical cannabis and cannabis-infused products
BeLeaf initially launched its brand as a nonprofit in Missouri's emerging CBD space in 2015. "We received one of two licenses in the state to cultivate hemp and create CBD products," says Cernicek. "That company is still operating. We no longer grow hemp plants, but we are still making CBD products."
At the time, Missouri law was notably narrow: Medical CBD was reserved for patients with epilepsy and neurologist's note. When the 2018 Farm Bill rewrote federal rules, the company launched BeLeaf Life's Oils line under the broader policy.
Also in 2018, Amendment 2 legalized medical cannabis in Missouri. Instead of the narrow approach the state first took with CBD, a medical cannabis card is easier to obtain. "If you have any type of pain, you qualify for a card," says Cernicek. "Just about anybody who wants a medical card can get it in the state of Missouri as long as they can pay for the doctor's visit and $25 for the medical card."
She continues, "When that passed, obviously we wanted to jump on medical marijuana. We applied for as many licenses as we could. We thought maybe if we were lucky, we would get one cultivation license, one dispensary, and one manufacturing [license]. We ended up being awarded the most licenses in the state."
That includes three cultivation facilities, five dispensaries, and two manufacturing operations. Both the cultivation and dispensary licenses are the maximum allowed for one company in Missouri.
The state awarded the licenses in early 2020. "Since then, it's just been building those facilities out, and getting operational as soon as we can," says Cernicek. "Right now we have two cultivation facilities that are up and running. One of our manufacturing facilities is operational -- our second manufacturing facility is going through our state commencement process. We've got three of our dispensaries commenced to operate."
Under the Phytos brand, the operational manufacturing facility in Earth City handles extraction, and the soon-to-open facility near downtown St. Louis will produce cannabis-infused chocolates and beverages.
"We have hydrocarbon extraction and CO2 extraction," says Cernicek. "We have the capability of doing ethanol extraction, it's just not our primary method. We'll do all the extractions and distillations in that facility. We'll make gummies, tablets, and tinctures at that facility."
Cernicek says she expects the St. Louis facility to open in spring 2021. The company now employs 63, but she notes, "By the end of the year, I expect that to jump to about 150 employees."
Each cultivation license encompasses 30,000 square feet of flowering canopies, and the manufacturing volume will be about 300 to 600 pounds a month to start. Beyond BeLeaf's in-house brands (Zoet edibles, Sinse pre-rolls and extracts, and Amend medical products), the company is pursuing licensing deals with out-of-state brands looking to break into the Show-Me State's market.
"We're taking a phased approach to make sure we're doing everything right from the get-go," says Cernicek. "It's all going to be dependent on demand."
The BeLeaf manufacturing model is designed to scale as needed. "Our Earth City facility is right around 8,000 square feet we're using for our manufacturing operation," says Cernicek. "That facility was very much designed with GMP [Good Manufacturing Practices] in mind. Everything is separated. Our extraction rooms are individual extraction rooms. Our distillation room is its own room. We do flower processing and packaging in its own space. Our main lab where we're making products was designed to meet food grade and food quality in every way that we can."
Third-party GMP certification is ongoing and should be complete by mid-2021, says Cernicek, and all extraction employees are certified by the state. The extraction operation uses equipment from Isolate Extraction Systems, ExtractionTek Solutions, and other suppliers.
"Everything is set up along one hallway, and all the rooms have windows looking into them. Everyone wants to take tours and see the facilities, but I can't have everyone in my facility. This way people can look and see but not go in and potentially contaminate products."
Before she entered the cannabis industry, Cernicek earned a Ph.D. in chemistry at the University of Missouri - St. Louis. "While I was in graduate school, BeLeaf had actually reached out to my school looking for someone to operate all the equipment they had bought to make CBD products," she says. "From there, it's been a learning experience. I've been doing this since 2016 with the company."
The advent of medical cannabis led to consulting work before BeLeaf Medical received its licenses in 2020. Ever since, it's been about building a vertically integrated cannabis company from the ground up, but Cernicek says she wouldn't have it any other way.
"It's really great to be part of the industry from the get-go in the state and really be able to build up our brands and build out exactly how we want to," she says. "Missouri's been fun. Everything's new, everyone's just getting started. We have a really great trade organization [MoCann Trade]. I'm on their advisory board. It's been really, really great for the industry as a whole."
Challenges: Launching all of its licensed operations during a stormy pandemic winter. "It's not easy to open up 10 facilities all at once," says Cernicek. "It takes a lot of capital . . . and a lot of teams to make sure the construction is going on."
She adds, "All of the regulatory compliance that has to be done, there's just a lot to it. Luckily, we've built out a great team so we've been able to handle all of it."
Opportunities: Demand for medical cannabis is far outpacing supply in Missouri right now. "It's more than 70,000 patients with very limited product," says Cernicek. "Right now, there's not very many people operating in the state. There's a lot of dispensaries, but there are not very many cultivators or manufacturers who are up and running in the space, so obviously the potential for growth is huge here. Being first to market helps a lot."
Execution is also key, she continues. "Every dispensary right now is looking and trying to get products wherever they can. It's a really big opportunity to get as much out there as we can as quickly as we can. . . . It's flower from about four different cultivators. There are edibles out there, but not much. Once more products hit the shelf, we'll see a huge influx of people applying for medical cards. I think it's going to go crazy by midsummer."
Beyond first-mover status, BeLeaf has "an exceptional branding and marketing team," she adds. "One of the founders, Mitch Meyers, her background is in branding and marketing. She brought Bud Light to market and was with Anheuser-Busch for years."
Contract manufacturing for out-of-state brands is another big opportunity for the Phytos operations. "Obviously, everybody wants to bring big names to the state," says Cernicek. "We've been talking with national brands to try to bring them to the state in our facilities."
Needs: Talent. "We are growing," says Cernicek. "We will be adding on more and more employees every single month. We're in a really great position -- we're in St. Louis and St. Louis University has a cannabis science program certificate they're offering, and it is really a top-notch certification."