Demand for products that contain cannabidiol (CBD) continues to increase and we have seen a variety of industries start to incorporate the cannabinoid into everyday types of products. We recently came across a story that featured a butcher who started adding CBD to sausages and ended up selling out of product that day. Over time, we believe that CBD will be treated as a supplement and will be included in tens of thousands of products.
Going forward, we expect to see increasing demand for CBD products and this is a trend to be excited about. For several years, we have been laser focused on the CBD industry and have been working to identify companies that are positioned to capitalize on this burgeoning market. Europe is one of the markets that we have been especially excited about due to attractive economics associated with the sale of CBD products and the size of the population.
When compared to North America, Europe has twice the population and a much less mature industry. Due to this, the price of CBD is much higher in Europe when compared to North America and we find this to be significant. The Yield Growth Corp. (BOSS.CN) (BOSQF) has been laser focused on the European CBD market and this is an opportunity that we have been closely following.
Yield Growth: An Emerging European CBD Opportunity
Last week, Yield Growth recorded a significant development as it relates to the European market and announced a distribution and licensing agreement with Melorganics Hellas for European rights to six product formulas for CBD infusion for a fee of $900,000. Under the agreement, Yield has agreed to license to Melorganics (in perpetuity) the non-exclusive rights to formulas and know-how to manufacture and distribute CBD foot cream, CBD body oil, CBD muscle relief balm, CBD body exfoliant, CBD relief gel and CBD hand cream.
The formulas may be developed by Melorganics into products infused with CBD and other cannabinoids and distributed throughout the European Union under one brand to be developed by Melorganics. According to the agreement, Yield Growth will have approval on the brand and packaging of the products, and we will be monitoring how the companies are able to execute on this opportunity.
Under the agreement, Melorganics will issue units to cover the $900,000 fee that is owed to Yield Growth, which represents approx. 18% of Melorganics. Yield Growth also has the right to appoint a Director to Melorganics’ Board of Directors and we find these terms to be favorable for the company.
Once this agreement is completed, Yield Growth has also agreed to grant Melorganics exclusive distribution rights to the Wright & Well brand of CBD products in Greece and Cyprus for a term of two years and for a fee of $100,000. The fee will be payable after a definitive distribution agreement is signed and after at least 3 Wright & Well products have been registered for sale within the European Union.
Over the next year, we expect to see the companies expand on this relationship and are bullish on the potential value associated with this agreement. Since Yield Growth has a considerable ownership interest in Melorganics, we expect this to be a major focal point for the business and will monitor how the team are able to drive this partnership forward. As previously announced, Melorganics was appointed as the exclusive retail distributor and non-exclusive e-commerce distributor for Yield Growth’s Urban Juve products in Greece and Cyprus.
If Melorganics wants to maintain its exclusivity in Greece and Cyprus, it must purchase at least $300,000 of Urban Juve products of in Year 1 and $500,000 in each subsequent year. Yield Growth is currently in the process of registering all of its Urban Juve products for sale in the European Union with 2 products already approved and 9 more that are expected to complete registration in the fall. We are favorable on the structure of this agreement as it requires Melorganics to execute to maintain its exclusivity on in Greece and Cyprus.
Issued a Compliance Certificate to Sell Lip Balm in the EU
A few weeks ago, Yield Growth reported a major milestone after Urban Juve Lip Balm with Hemp Oil was approved to be sold in the European market. Urban Juve’s Responsible Person in Europe, Biorius, has issued a compliance certificate for the product in accordance with EU regulations and we find this to be significant.
Urban Juve’s Lip Balm with Hemp Oil is one of the brand’s top-selling products. The lip balm will be featured in Vogue Beauty Highlights in October, introducing the product to an audience of 4.1 million readers. Urban Juve is manufacturing 250,000 units of its lip balm, which will be ready in September and we are favorable on the marketing strategy in place to generate awareness for the brand. We are excited about this aspect of the story and believe that this approval represents a major development for the business.
Pursuant to EU regulations, Yield Growth retained Biorius to act as its Responsible Person for Urban Juve. After a rigorous review of each ingredient in the lip balm, Biorius issued a certificate of compliance, confirming that Urban Juve Ultra Hydrating Lip Balm is now registered with the EU. Urban Juve now has two products registered with the EU and expects to have nine more products registered by early fall. The launching of new products represents an attractive growth opportunity for Yield Growth and we will be monitoring how the market responds to the launch.
A North American Growth Story to be Watching
Although we are very excited about the European market for Yield Growth, the North American market represents an attractive CBD market and we are favorable on the recent developments. Currently, Yield Growth has more than 35 products registered with Health Canada and 12 US patents pending. The company’s proprietary formula library includes more than 200 personal and skin care formulas, health supplements, and therapeutic formulas, plus eight beverage formulas.
In early July, Yield Growth announced that 130 retail locations across North America have agreed to sell Urban Juve products. The locations are diverse geographically, and will bring luxury, hemp-powered skincare products to new markets. These locations were strategically selected to help boost brand awareness in this key demographic and will monitor how the team continues to execute.
Urban Juve appeals to a savvy, health-conscious target market and we are excited to see the company gain market share across this demographic. In addition to the 130 retail locations, Yield Growth also secured events and locations for a series pop up shops that will sell Urban Juve products. By the end of the year, Urban Juve plans to have distribution in more than 500 stores and we are bullish on the amount of revenue that can be generated through this network.
A High-Growth Story that is Flying Under the Radar
According to Jefferies, the CBD beauty industry is expected to reach US $25 billion within 10 years and that it could account for 10 – 15% of global skincare sales. Jefferies said, the Global Beauty & Personal Care market neared $465 billion in 2017 and is ripe for disruption from Cannabis-based products. We are favorable on the potential that Yield Growth has to capture market share and will monitor how the team continues to execute across the board.
One of the reasons we are confident in Yield Growth’s ability to execute is due to the management team in place. The company is led by executives that have diverse backgrounds and proven track records of success. Yield Growth recently appointed Tamara Melck as Chief Operating Officer who played a key role in the growth of Canadian fashion retailer Aritzia (ATZ.TO), serving as the Vice President, Corporate Operations and Executive Vice President, People & Culture.
When looking at any cannabis company, the most important aspect of the business is the management team, and this is an area where Yield Growth excels. We believe that the strength of the leadership team has played an important role in the success of Urban Juve and believe that Tom Bond (former COO of MAC Cosmetics) and Jeff Smith (former Chairman of Johnson & Johnson) will continue to play an instrumental role in the long-term success of the operation.
A Company with Catalysts for Growth
Another reason we are excited about Yield Growth is due to the potential catalysts for growth. The company has a visible growth strategy and going forward, the name of the game is execution. In the coming months, Yield Growth plans to launch several CBD product lines and will target the US and Europe. The Brightfield Group recently announced market intelligence stating that the European CBD market will boom with 400% growth through 2023.
From a distribution standpoint, Yield Growth has been nothing short of a major success and we are bullish on this aspect of the business. In regard to Urban Juve, the company has an online platform and the products are sold in brick and mortar stores in North America. Yield Growth is targeting strategic markets (LA, San Fran, NY, Toronto and Vancouver) and we are bullish on the growth prospects associated with these markets.
An exciting aspect of the existing distribution strategy is related to the signed marketing and sales alliance that Yield Growth has with ipsy, the world’s largest beauty community of 3 million+ monthly members, to include Urban Juve’s line of hemp-based beauty products in its Glam Bag. The products are already available for purchase on Shopper, ipsy’s exclusive ecommerce marketplace, and we are favorable on this relationship.
Earlier this month, Yield Growth announced plans to launch its Urban Juve in at the upcoming ipsy Live event in Manhattan, New York, in mid-October. Urban Juve is anticipating a high level of social media engagement and will be included on multi-branded posts, which have the potential to reach ipsy’s 2.3 million Instagram followers and 5.4 million Facebook followers. We expect the event to generate significant awareness for the hemp skin care line and will monitor how this serves as a potential catalyst for sales.
Urban Juve is teaming up with a New York based agency to create an interactive experience at its booth at ipsy Live to educate attendees by giving Ayurvedic-based skin assessments. The timing of this event coincides with the launch of Urban Juve’s Ultra-Hydrating Lip Balm which will be included in gift bags for the 4,000 event attendees. The interactive booth and influencer experience will be replicated throughout North America as Urban Juve unveils its Pop Up and Retail strategy.
Through a multi-faceted marketing strategy and through strategic partners, Yield Growth is well positioned to record strong growth and penetrate major markets across North America and Europe. We are excited about the relationships in place and believe that this aspect of the story is underappreciated by the street.
To stay up to date with Yield Growth, please reach out to email@example.com and we will add you to our distribution list.
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Published at Wed, 25 Sep 2019 11:24:31 +0000