The article has been reprinted from Crain’s Detroit Business with their permission.
Skymint has turned a fresh leaf after a highly-publicized unraveling.
Ann Arbor’s marijuana retailer, now based in Michigan, is on the verge of ending a court-ordered messy receivership. It broke even for the first year since it was founded back in 2017.
Now a company in flux – original investor and general counsel Jeff Donahue is transitioning his role from running the company day-to-day back to the legal and advisory role he previously served, eventually turning over the reins to Bryan Lloyd, a former retail executive for Dick’s Sporting Goods – Skymint seeks to rehabilitate its reputation and expand.
Donahue, from his modest office near M-14 Ann Arbor said: “If you look at our initial strategy, we didn’t really understand the client and spent a lot of money on a product that we couldn’t sell.” We paid a high price for putting in $300 to $400 per square foot. We were paying too much for our stores and we focused on revenue rather than profit margin. “Now we have refocused on the quality of our product and its mix. Right now, that’s working really well for us.”
Skymint operates 19 retail outlets and its new owners – Canadian creditors – plan to put the company in expansion mode as the industry in Michigan and beyond is rife with distressed assets and opportunity.
From the beginning, it was tarnished
Skymint is not the only vertically-integrated marijuana company in Michigan to have failed. Skymint’s management was determined to be the dominant player in the Michigan marijuana industry. It accumulated large cultivation warehouses, as well as a broad retail base.
The floor collapsed due to mismanagement, expensive lease-back agreements and falling prices.
Skymint quickly expanded after Michigan legalized adult use recreational marijuana sales at the end of 2019. The company now has more than 30 retail stores and will be operating over 180,000-square feet in cultivation by 2022.
Tropics, a Canadian investment company, provided more than $127 millions to fund its ambitious plans. It engaged San Diego based Real Estate Investment Trust Innovative Industrial Properties, which is America’s leading cannabis-focused property developer to build, leaseback and buy its entire footprint.
The prices of marijuana in Michigan plummeted as a result of the constant competition and an oversupply on the market.
In December 2020, the first month that legal marijuana sales were allowed to take place, an ounce of flower for adult use cost on average $512.05. Skymint was placed under court order in March 2023 and the average price of an ounce dropped to $86.77.
Donahue, a Crain’s reporter, said that Skymint’s operations would never be able to bring the input costs of producing one pound of cannabis below $1,000.
At the time that receivership was initiated, rivals were producing at less than $500 per kilogram. Profitable cultivators today produce indoors at around $300 per pound, which is necessary given that prices are down to $62.50 on average per ounce.
Skymint, which primarily operates under the parent company of Green Peak Innovations Inc., entered receivership in March 2023 after Tropics filed a lawsuit in Ingham County Circuit Court.
Skymint reportedly burned through $110,000,000 in revenue annually by 2022 while burning $3,000,000 per month, as stated in the lawsuit. Separate lawsuits by Merida Capital Holdings allege that Skymint was mismanaged, with Jeff Radway as the co-founder/CEO operating the business “as his personal piggybank” and making unilateral decisions without approval of the board.
This led Skymint to exit all of its growing operations last year, including shuttering its 56,000-square-foot Harvest Park facility at 10070 Harvest Park in Dimondale in March 2024. That property has since been leased to Evart-based competitor Lume Cannabis.
Tropics, under a new entity called Skymint Acquisition Co., acquired the assets of Skymint for $109.4 million in an auction under receivership last year.
Skymint’s retail stores in Michigan are now all that remain. They include Hazel Park as well as East Lansing and Ann Arbor.
Donahue is confident that the company can reach an agreement to exit receivership and will be out of receivership in the near future.
News faces with the same name
Skymint brought on Lloyd to breathe new life into the Skymint brand, a name that the company chose to retain despite past problems.
Lloyd’s retail background spans the cannabis, and non-cannabis industries. Recently, Lloyd served as Dick’s Sporting Goods’ retail region manager. Prior to that, he was the retail director for cannabis multistate operator Green Thumb Industries.
Lloyd stated, “It was my job to understand customers.” We wanted to retain quality. It meant cutting down on SKUs. Our goal was to streamline our product offerings and keep margins high, but not at any cost. We know exactly what to expect from the business every day of the week.
The company did not abandon its retail brand, but it began to depend less and less upon its Skymint-branded products.
Skymint is no longer the only brand that’s sold. About 40% products sold today are Skymint.
Without its cultivation operation, the company’s workforce has been reduced from about 750 to 250 employees today.
This company is expected to be profitable this year, despite not receiving any working capital infusions from their lenders for nearly an entire year.
Comeback Story
Lloyd stated that Skymint’s collapse story and its return resonates with suppliers, as they “build back better.”
Lloyd explained, “We realized pretty quickly that telling our story was a game changer for us.” Some companies were in financial trouble, and thought we’d gone out of the business. “We’re here to tell them we haven’t gone anywhere.” We are just different. We’re better. We f—– up, but this is what we learned.”
Lloyd says that the early mistakes have led to new plans for expansion. The Battle Creek stores were closed during receivership. However, the company plans to open one of them in the next few months.
Analyses are being used to decide when the store should be open, and how many employees it needs. Skymint Battle Creek will be only open Tuesday through Sunday from 10 am to 7 pm, as most people stock up over the weekend.
Skymint also has renegotiated a number of leases. IIP, among others, have discovered that empty storefronts don’t pay any rent.
Donahue explained that a purchase of a lease with 20 years left on it is not a sustainable option. Retail leases costing $40-150 per square foot and costing $25,000 each month are not sustainable.
Skymint’s Lansing shop rent is only $20/square foot now.
Skymint has recovered its margins, now averaging 37% in all of its outlets.
Lloyd intends to become the president of Skymint once Tropics has taken over operations in full and when receivership is closed. He said that then it will be growth mode.
Lloyd stated that Skymint would expand throughout the state of Florida under Tropics, while Lloyd will eventually transition to managing its cannabis assets located in other states such as Atlanta’s Parallel which is active in multiple states, including Florida.
Lloyd stated that “we’re still not satisfied.” Skymint still has big plans.