This article was reprinted with permission from Crain’s Detroit Business.

After a well-documented unraveling, cannabis operator Skymint is turning a new leaf.

The now Ann Arbor-based marijuana retailer is nearing the end of a messy court-ordered receivership and broke even early this year for the first time since its founding 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.

“If you looked at our strategy at the beginning, we just didn’t understand the customer and we spent way too much money without having the volume,” Donahue said from the company’s modest headquarters near M-14 in Ann Arbor. “Putting in $300-to-$400 per square foot was a mistake and we paid dearly for it. Our stores were way too expensive and the focus was on topline revenue selling our own product and not margin. Now we’ve refocused on quality and product mix and right now that’s really working 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.

Tarnished from the start

Skymint was the first, but not the last, major vertically integrated marijuana company to fail in Michigan. Its management went big to dominate the market, accumulating massive cultivation warehouses and a wide retail base to sell all the product it was growing.

But the floor fell out thanks to expensive sale-leaseback deals, mismanagement and falling prices.

Skymint quickly scaled up its operations after adult-use recreational sales in Michigan went live in late 2019, operating more than 30 retail locations and running more than 180,000-square-feet of cultivation by 2022.

It bankrolled its ambitious plans with more than $127 million from Canadian investment firm Tropics LP. It also engaged San Diego-based real estate investment trust Innovative Industrial Properties, the nation’s largest cannabis-focused real estate developer, to buy, build out and then leaseback its footprint.

Meanwhile, marijuana prices in Michigan were cratering thanks to continuous competition coming online and oversupplying the market with product.

An ounce of adult-use of marijuana flower cost an average of $512.05 in the first full month of legal sales in December 2020. By the time Skymint entered court-ordered receivership in March 2023, that average price dropped to $86.87 an ounce.

Skymint’s grow operations could never get its input cost of producing a pound of marijuana below $1,000, Donahue told Crain’s.

Meanwhile competitors were, at the time of receivership, producing for less than $500 per pound. Today, profitable cultivators in the state produce at roughly $300 per pound for indoor operations, a necessity given prices have fallen further to an average of $62.50 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.

At the time, Skymint was burning through $3 million in cash per month; despite generating $110 million in revenue in 2022, according to the lawsuit. Separate lawsuits filed by cannabis investment firm Merida Capital Holdings alleged the company was mismanaged and that co-founder and CEO Jeff Radway “operated (Skymint) as his personal piggybank, and made unilateral decisions on behalf of the company without board approval.”

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.

Now, the Skymint that remains is just its retail stores across Michigan, in locations including Hazel Park, East Lansing, Ann Arbor and Grand Rapids.

The company is still in receivership due to the outstanding lawsuits driven by Merida Capital, but Donahue believes the company will reach an agreement and exit receivership soon.

News faces, same name

Skymint hired Lloyd last year to bring new life to the Skymint name, which the company decided to keep despite its past troubles.

Lloyd has a long history of retail experience in and out of the cannabis industry. He most recently served as a retail region manager for Dick’s Sporting Goods, but was previously the retail director of cannabis multistate operator Green Thumb Industries and vice president of retail operations for Florida-based multistate operator Jushi Holdings Inc.

“My job was to understand the customer,” Lloyd said. “We wanted quality retention. That meant a focus to lean down SKUs and fewer vendors. To simplify our offerings at the right price and not race to the bottom of margins. Now we know what we’re going to get out of the business seven days a week.”

While the company didn’t ditch its retail name, it did begin to rely less and less on its Skymint branded product.

Instead of selling nearly 95% of products with a Skymint label, it’s broadened to other brands. Today, about 40% of products on its shelves are processed under the Skymint name; the rest coming from a variety of companies including Choice Labs, Mitten Extracts, Pleasantrees and others.

The company has also “rightsized” without its cultivation operations; dropping from a peak of about 750 employees to just 250 today.

The company has gone nearly a year without an infusion of working capital from its lenders and is set to turn a profit this year.

A comeback story

Lloyd said Skymint’s story of collapse and return is resonating with its suppliers as it “builds back better.”

“We figured out pretty early on that sharing our story is game changing for us,” Lloyd said. “A lot of companies are struggling and some thought we went out of business. So we’re out telling them that we didn’t go anywhere. We’re just different. We’re better. We f—– up, but this is what we learned.”

Lloyd said those early mistakes are creating new game plans as it prepares for expansion. The company had two stores in Battle Creek that were shuttered during receivership, but it plans to reopen one store in the coming months with some operational changes.

The company is using analytics to decipher when to be open and with fewer employees. Skymint’s Battle Creek location will only be open from 10 a.m. to 7 p.m. Tuesdays through Sundays, understanding that most consumers stock up on the weekend and don’t need to purchase product on Mondays.

Skymint has also renegotiated many of its leases with various landlords. IIP and others have learned vacant store fronts pay no rent.

“Entering into a lease buyback with a 20-year lease, it’s just not sustainable,” Donahue said. “You just can’t have retail leases that cost $40- to $150-per-square-foot that cost $25,000 a month.”

The rent on Skymint’s Lansing store is down to just $20-per-square-foot now.

The moves have allowed Skymint’s margins to recover; now with an average of 37% across its retail outlets.

Lloyd plans to take over as president of Skymint when the receivership closes and Tropics can fully takeover operations. Then it’s growth mode, he said.

Lloyd said Skymint will expand across the state under Tropics while transitioning Lloyd eventually to manage its existing cannabis assets in other states, such as Atlanta-based Parallel, which operates in several states including Florida.

“We’re not satisfied,” Lloyd said. “There are still big plans for Skymint.”