Located at the entrance to the Emerald Triangle, NewTropic is an ambitious Northern California manufacturing facility that serves such edible and pre-roll brands as Garden Society (whose co-founder Erin Gore I interviewed last year); flower fave Henry’s Originals; and vertical NorCal Cannabis Co., among others. Opening his doors just before the pandemic closed most other businesses, NewTropic’s co-founder and CEO Alex Rowland named his business in honor of the “nootropic” classification of substances that, simply put, make you smarter. I recently caught up with Alex to learn more about how cannabis manufacturing increasingly plays a role in financing and supporting emerging brands.
Warren Bobrow=WB: Please tell me who you are? Where you are from, and where you are now? What is your favorite part of working with the plant?
Alex Rowland=AR: I was born in Norway and lived for eight years in Australia before moving to the U.S. at the age of 10. I studied studio art and economics in college and spent most of my early adulthood on the East Coast before moving to California at the age of 30. I currently live in Hillsborough, in the San Francisco Bay Area, with my partner Lisa and our three children. I’ve been starting technology companies since I was in my mid-20s, moving into cannabis in 2015. If I’m not working, I’m spending time with my family.
I’ve been a cannabis consumer for most of my adult life, so I had a natural affinity for the plant. But the reality is that cannabis has provided me with the rare opportunity to combine business acumen that I have developed over a 25-year career with a hobby that I enjoy, but also a political movement that I find incredibly compelling.
I’ve been a long-time opponent of the drug war and have believed since I was in college that all drugs should be legalized and regulated. The boundaries between legal and illegal drugs are obviously arbitrary and the law has been used as a cudgel to incarcerate and otherwise disempower minorities and the poor for decades.
For many communities, dealing drugs has been one of the only ways to earn a decent living. And the individuals that have embraced this industry are the entrepreneurs of these communities. Rather than nurturing the talents of these people and encouraging the sense of enterprise in these individuals, we have instead vilified them, incarcerated them or killed them. It’s tragic on multiple levels.
So I see the legalization of cannabis as the first step towards righting a wrong and building a framework to eliminate criminal penalties for all drugs in the future. It isn’t a perfect transition, but we are still moving in the right direction after decades of ineffective and destructive policies.
WB: How did you get into the cannabis industry? What was your path? Did you study horticulture in school? Work in a nursery? Scientist? Do you prefer organic/biodynamic outdoor to indoor?
AR: My first introduction to cannabis was through my father. After my parents divorced, he remained in Australia when my mother married an American and I was moved to Ohio. I would go back down to Australia every other summer to stay with him. The summer I was 17, my father showed me the hydro grow in the basement of his house. It was my first experience with cannabis, the growing of cannabis, processing of the flower, and the ritual of consumption. So, there was quite a bit of adolescent maturing combined with the relationship with my father and a bit of early drug discovery.
I started my first software/consulting company in 1995 with the goal of building websites for small enterprises. By 1996, that had morphed into building intranets, web-based enterprise systems to manage a company’s internal information archives and workflow. I always had enough sense to retain ownership of whatever code we built and license the code to our clients, so in 1998 we built a communications platform to automate billing transactions between a regulated utility in Massachusetts and a brand-new retail energy company. We later found out that our system processed the very first deregulated energy transaction in the country and we built a business around it.
We sold the business in 2002 and I decided to move to California to start building consumer focused platforms, which wasn’t a great idea. It wasn’t until 2008 that I settled on the creation of a software platform for video syndication that I eventually merged with another company to create Emerge Digital Group. EDG ultimately became the eighth fastest growing company in Inc. Magazine’s 2013 top 5000 rank before running into issues stemming from a security breach in our trading desk. I remained in the media business until 2015 but had decided by then that the time was right to move into another vertical.
I’ve always had an affinity for cannabis and had an intention of making it part of my career, but it wasn’t until Colorado legalized recreational consumption in 2014 and California looked ready to embrace adult-use with the passage of Prop 64 in 2016 that the opportunity to unify my business career with a hobby became possible. And it was really the passage of MAUCRSA (the Medicinal and Adult Use Cannabis Regulation and Safety Act) in 2017 that created the business environment necessary to jump into the industry.
I spent a year driving up and down the state talking to regulators and dispensaries and came to understand that more products were going to be processed for the consumer than just flower and pre-rolls. As I saw regulations ramp up, I realized that manufacturing could be a fulcrum. I looked at a lot of different companies and saw the cannabis space being underserved in manufacturing and processing, and not up to the level required by new laws. A manufacturing facility is very time-consuming and expensive to set up but, once you’re up, you sign long-term contracts and can plot out revenue going forward. At the end of the day, what we’re doing with NewTropic would be tough for other people to replicate.
As a rule, I prefer outdoor flower to indoor. I often find indoor-grown cannabis to be so potent that I can’t take more than a couple puffs. But in general, great cannabis comes from great artists and I’ve had amazing bud from both indoor and outdoor growers.
WB: Tell me about your company? What about the FoxConn Model? How does this translate to your business line? What are your six and twelve-month goals? What about new markets? Obstacles? How do you propose removing them?
AR: NewTropic is like AWS (Amazon Web Services) for cannabis. We’re ubiquitous and necessary but you don’t really see us. We do everything from sourcing material to processing it to extraction and infusion, to packaging and shipping. We enable brands to focus on building consumer demand for their products while we make sure shelves remain fully stocked.
I’m pleased that cannabis brands look at the quality of the facility and the quality of the team we’ve put together and come away impressed with the professionalism we exhibit. When brands first came in, they were interviewing us to see if we were good enough — but it’s actually the other way around. They have to be a good fit for us. We have to constantly invest in the size and scope of our facility to accommodate new client needs and have to ensure that those brands will be successful. We look for brands that have already exhibited traction in the marketplace locally or in other compliant markets or startups that have substantial financial backing and can go through the process of scaling public demand around their product.
NewTropic clients are typically brands that have been successful in other markets, Prop 215 brands that never managed to transition to the new regulated market, or brands that built their own licensed facilities and are now reevaluating that decision. While building your own facilities may have been rational before contract manufacturing came along, doing so now is difficult to justify. Brands either have to start small, which makes scaling very difficult, or they go big and wind up carrying an enormous amount of capital expense.
By working with an entity like NewTropic, brands are able to variablize these fixed costs and scale much more easily. We let them pay on a per-unit basis. We can carry that inventory and receivables on our balance sheets so that they can free up cash. We’ve had multiple brands come in who are looking for our kind of solution.
I have mentioned FoxConn with admiration in the past because they demonstrate the power of focusing on a specific aspect of the supply chain and executing with a relentless focus on quality and cost. Apple has enough money to build their own manufacturing facilities, but they still rely on Foxconn to build their most profitable devices. That speaks volumes to the power of the contract manufacturing model — and that interests me.
Our six-month goal is to reach profitable operations. We have quite a few clients to onboard and new facilities to stand up in that time. But the team is heads down and working hard to make it happen. Our 12-month goal is to be in process on a Southern California location and working towards launch in other markets like Massachusetts. Over the next five years, we want to have facilities in every adult use cannabis market in the US.
In terms of obstacles, we want more clients and more growth. Much of what we struggle with is onboarding clients successfully. Sometimes we hire all of the workers from a brand and bring them into our shop. But that means acquiring more facilities, getting those facilities online, doing state and local permitting, and etc. How do we project our demand out into the future and ensure we have the capacity to serve? That’s something I think about constantly.
My favorite way to overcome obstacles is by hiring great people. One great person can do the work of five mediocre employees. It’s a matter of finding that talent and promoting it within the company and rewarding the effort. If you have great people and great culture you can achieve amazing things in a very short period of time.
WB: Do you cook? Who taught you if yes? Favorite food memory of your childhood? What is your favorite comfort food? Have a recipe idea to share?
AR: To be honest, I’m not a very good cook. I know people who have a depth of knowledge and understanding of different spices and ingredients and how they come together to create something delicious. I don’t have any of that. I can follow instructions because I’m so process-oriented — but that doesn’t make me a good cook!
Most of my favorite food memories derive from going to visit family in Norway when I was a child. The spread of fresh breads and crackers, cheeses and smoked salmon, pastries and desserts! Those are great memories.
WB: What is your passion?
AR: My family is Number 1. Everything I do is to provide a better life for them. I also love building companies. I’ve done it a dozen times and there is nothing quite like the time when a company finally finds its stride and starts making money. And to know that you built it from an idea into something that people will spend considerable money to utilize is an amazing feeling of validation.