Rick and Michelle Ringold, who run Galaxy Labs in Richton Park, planned for vertical integration from the outset.
“We thought from the beginning that vertical integration was the only way to success,” he says. “You can stock 40% of the inventory in your own store. You become your own best customer. It gives you more buying power (with bigger players) who are more receptive to placing our product if we can carry theirs.”
"If you're only in retail, you're buying from a grower for 50% of what you sell it for. I don't see enough profit on products I'm not producing to make it successful on grow if we didn't have a retail location."
The Ringolds were awarded a craft-grow license but came up short in the lotteries for dispensary licenses. They finally acquired a retail license earlier this year.
Ringold and his wife came to cannabis with capital and experience from operating their own businesses. She's a CPA. he’s in construction.
“In the early months, we used our other businesses to fund our operations," he says.
The company has 52 employees in its grow operation and 36 employees in its dispensary. Galaxy's product is sold in 162 dispensaries.
Ringold says both businesses are profitable, despite overall revenue being lower than their original projections. Cannabis was selling for nearly $4.000 a pound when they won a grow license two years ago. Now it's about $2.300. He says pricing pressure and a lack of capital are industrywide challenges that weigh on everyone.
"A store has got to sell our product before they pay their bills. We've gotten to a point where we're picking and choosing which stores we want to do business (with) based on payment and keeping their account current."
Running a grow operation is challenging because it requires far more capital for equipment and facilities than retail.
"We've invested multiple millions of dollars in building this out." Ringold says. we'll be focused the next couple years on being profitable enough to pay down debt."
Despite the unexpected challenges, “it's still worth it." he adds. "Overall, we've been successful and happy."