The Cannabis Operations

September 2020 • Issue 3

The Cannabis OPERATIONS

California dreaming

How NewTropic is helping usher in the age of cannabis

Dan ONeill, Director of Business Development, NewTropic

California dreaming

How NewTropic is helping usher in the age of cannabis

NewTropic co-founder and CEO Alex Rowland’s vision has always been straight forward—to lead the cannabis manufacturing segment to a whole new level. Ask Rowland and he will tell you he wants to elevate it to the same level as the food, beverage and pharmaceutical manufacturing markets.

Founded in 2016 by Rowland and Nelson Becerra, NewTropic started as a brand focused on cannabis concentrates, before turning its focus to the manufacturing side. Teaming with manufacturing and operations experts, the trio set their sights on changing the game. Operating from a state-of-the-art facility in Santa Rosa, California, NewTropic continues to charge forward with new and exciting innovations. Today, NewTropic is onboarding its initial set of customers and partners, including marquee cannabis brands as well as multi-state operators and distributors. We sat down with Director of Business Development Dan ONeill to get his thoughts on how NewTropic is leading the cannabis market to the next level of growth.

GIVE US A SNAPSHOT OF THE NEWTROPIC BRAND? NewTropic does not carry a brand of its own. Our business model depends on our ability to stay neutral and focus on our third-party brand partners and produce their consumer products. Because we do not have our own brand, there is no channel conflict with our client partners. WHAT TYPE OF CONSUMERS ARE YOU TARGETING? We are a B2B company focused on large brands in state and/or MSO (Multi State Operators) looking to jump the state lines into California without the time and capital expense to build their own facility.

HOW DOES THE OVERALL DESIGN OF YOUR SHOP CATER TO WHAT TODAY’S CONSUMERS ARE LOOKING FOR? Our operations are designed with Good Manufacturing Practices (GMP) standards as our target.

WHAT KIND OF ADJUSTMENTS HAVE YOU MADE (OR ARE YOU PLANNING) TO MAKE IN ORDER TO CATER TO HOW CUSTOMERS ARE SHOPPING IN THIS NEW LANDSCAPE? We have aligned ourselves with several of the strongest licensed distribution firms in California, but we also are tracking and developing relationships with the budding direct-to-consumer and home delivery models, which both have exploded due to COVID.

SINCE YOUR OPERATION WAS DEEMED ESSENTIAL DURING THE LOCKDOWN, HOW DID HELP YOUR STANDING IN THE MARKETPLACE? The “essential” designation was a game changer for our firm and the industry. We were able to institute best practices for operating during the various stages of lockdown throughout the state. Because we were able to operate and expand our services over the past six months, we have been able to support the local community through extensive hiring, training and onboarding of client partners.

WHAT TYPE OF AREAS DO YOU LOOK FOR WHEN SEEKING STORE LOCATIONS? We do not have stores, but we are strategically located in Santa Rosa, California for our operations. The proximity to cultivators and labor are amazing. That, coupled with a very friendly tax rate makes Santa Rosa the ideal place to operate out of.

Consumers today are looking for education on products so they can better understand the experience they can expect.

WHAT IS YOUR SHORT-TERM STRATEGY? LONG-TERM? Short-term we would like to earn the reputation as the top co-packer in California for quality and scale. Long-term, we intend to bring this same business model to other states. We are currently evaluating Illinois, Massachusetts, Michigan, and other burgeoning markets.

WALK US THROUGH HOW AND WHY YOUR OPERATION IS DESIGNED THE WAY IT IS? Our operation is designed with best practices to reflect FDA and GMP type of equipment

and SOPs. It is critical in this space to have the highest levels of certification to prepare for exporting, investment or acquisitions.

WHAT IS THE BEST PIECE OF ADVICE YOU CAN OFFER TO OTHER BRANDS ON HOW TO DEAL WITH WHAT IS HAPPENING RIGHT NOW IN THE MARKETPLACE? It seems like firms are always raising money in cannabis. It is critical to have enough dry powder to endure through these times, and navigate this heavily regulated and ever changing marketplace. I would recommend raising as much money as possible, and look to strategic funding sources in particular. Not all money is great in this space.

TAKE US THROUGH YOUR CONSTRUCTION AND DESIGN STRATEGY. We tend to work backward from the market demand by segment and align our facility design with the states consumer demand. Because each state’s in the US has different regulations, and different product offerings and consumer preferences, it is critical to build your facility to suit the current demand with an eye to the evolution of regulations and the consumer’s changing desires. It is important to use more mature regulated cannabis markets like Washington, Colorado and Oregon to anticipate the changes in product mix that will affect your construction moving forward. You have to build your facility in such a way that you can add square footage or functionality in phases.

TALK ABOUT SUSTAINABILITY. WHAT ARE YOU DOING? The cannabis space is very aware of sustainable practices and packaging choices. Because the entire business is based on farming, best practices around pest management and organic growing techniques at the grower level are widespread differentiators. Also, we spend a good amount of time working with our packaging supplier partners to identify and use sustainable materials to package the products we handle. We balance a broad market spectrum. Because we have licenses that allow for us to produce virtually any consumer product, we have a wide range of clients. But, a good snapshot includes pre-rolled joints, packaged flower, gummies, chocolates, concentrates, vape pens and beverages. Getting the mindshare and time to achieve the permits and approvals in the cannabis space is daunting. Some of the extraction technologies we apply requires C1D1 and other advanced safety rooms to operate. It is a real challenge to put together design, construction, cannabis approvals and building approvals to execute on construction.

WHAT TYPE OF OPPORTUNITIES DO YOU SEE MOVING AHEAD? Moving to new states is a primary focus. And adding more drink production capability like canning and 750ml bottling.

WHAT TRENDS ARE YOU SEEING/EXPECTING? More brands are trying to extend their offerings and expand their lines to command more retail shelf space. You will see more and more M&A activity as the large brands look to smaller firms to acquire recipes and innovation rather

The “essential” designation was a game changer for our firm and the industry. We were able to institute best practices for operating during the various stages of lockdown throughout the state.

GIVE US A RUNDOWN OF YOUR MARKET’S LAYOUT.

WHAT IS THE BIGGEST ISSUE TODAY RELATED TO THE CONSTRUCTION SIDE OF THE BUSINESS? than build it themselves. WHAT IS TODAY’S CONSUMER LOOKING FOR? Consumers today are looking for education on products so they can better understand the experience they can expect. And, in particular, they want a consistent flavor, onset time and user experience with the products.

TELL US WHAT MAKES YOUR BRAND SO UNIQUE? Our dedication to the white label model shows our commitment to our brand partners. They like that we will not have to come out with our own version of a product and compete with our partners. That relationship creates valuable and unusual transparency with our partners, particularly in cannabis, which is notoriously clandestine.