There is a new wave of cannabis investment looming on the horizon and this is just the prologue to a much bigger story.
The untapped versatility of CBD and THC extracts means that it can be merged with practically any product, be it edible or applied to the body, such as a facial cream or deodorant.
In early December 2018, AltriaGroup Inc. (NYSE: MO), owner of Marlboro cigarettes, made a transformative $2.4 billion (USD) investmentinto Canadian medical and recreational marijuana company Cronos Group(TSE: CRON). This followed a major investment made earlier by multinational beverage giant Constellation Brands Inc. (NYSE: STZ) (maker of Corona Beer) with $245 million (CAD)into cannabis industry heavyweight, Canopy Growth Corp. (TSX: WEED).As it relates to this story, Estée Lauder’s (NYSE:EL) topical arm Origins recently made headlines when it launched a face mask that contained cannabis sativa oil from hemp.
What does this mean? Major corporations are starting to look at the next play in cannabis, which is to infuse products people already use and these deals are closing fast.
Investors looking for an entrance closer to the ground-floor should consider the Yield Growth Corp. and the opportunity it offers to the cosmetics sector. The Company already has $2.5 million in revenue to date (as of 2018 Q3) and on December 13, 2018 announced the successful close of its IPO of approximately $2.2 million for units at $0.50 per share. Each unit contained one share and one warrant to purchase a second unit at $1.10. The second unit consists of a share and a warrant to purchase another share at $2. All warrants expire December 14, 2020.
The Market for Wellness Products
Based in Vancouver, B.C., the Company is in the business of developing and acquiring cannabis wellness topical products and intends to be the world’s largest topical Company. As it establishes its foundation and grows its international reach, Yield Growth wants to become a leader in the infused topical space.
For those that need to get up to speed; topicals are skin care and beauty wellness products that can easily be infused with CBD or THC and applied topically, but not usually used to treat medical conditions. A report by the Brightfield Groupthat studied infused topical products found that this sector has a lot of room for innovation, with topical and beauty products expected to explode with legalization and the entry of major consumer packaged goods (CPG) companies. The global wellness economy is already well established, collecting an estimated $3.7 trillion in 2015.
The biggest asset under Yield Growth is its Urban Juve topical brand. The first line of products now launching, with 2 products for sale and 10 more being manufactured and launching in e-commerce and retail within the next 2 months. Urban Juve has more than 50 formulas complete and has finalized product testing for over 20 products, and has 26 products registered with Health Canada.. This first line of products contain hemp root oil, which recently became legal in October under the Cannabis Act.
The next stage in wellness products
These products have a proprietary formulation and were crafted through a proprietary extraction technique for hemp root oil. The Company has filed 11 patents so far and expects to file more.
Products under phase one include:
Lip balm, Anti-aging serum, Vitalize Daily Ritual, Oil Balance Daily Ritual, Oil Align Daily Ritual, Oil Deodorant, Vitalize Moisturizer, Balance Moisturizer, Align Moisturizer, Vitalize Facial Mist,Balance Facial Mist, Align Facial Mist.
Urban Juve’s introductory product line include: an anti-aging serum and a lip balm. The Anti-Aging Serum ($85 CDN) incorporates the soothing qualities of hemp root and hemp seed oil with a proprietary blend of essential oils. This tailored combination absorbs into and hydrates skin cells.
The Urban Juve Lip Balm ($10 CDN) creates a soothing protective layer with coconut oil and beeswax, which provides a healthy, hydrating environment for the critical hemp root and seed oils to moisturize and freshen. A hint of peppermint tops off the formula for a fresh feeling, flavour and aroma.
What makes an infused product better than a regular version of the same thing? Yield Growth’s formula is based on ancient ayurvedic principles. This five-thousand-year-old philosophy is a traditional science that was designed to bring the body back into balance in order to heal itself from ailment. It customizes treatment to a person’s specific body type. Incorporating modernized principles, the products under Yield Growth’s wing are of higher quality than what is typically found on the market, with superior ingredients, such as essential oils and hemp root oil. These oils can import plant ingredients into the body at a faster rate. These blended products are all-natural, provide a distinct experience and are not tested on animals.
The Yield Growth team is also developing a substantial distribution network. Company President and CEO Penny Green sat down with Stockhouse Editorial to further discuss the strategy behind taking Urban Juve global into key territories. Whether those territories are hemp-based, or CBD and THC-based, depending on legality, the intent is to cover all topical markets, starting with cosmetic products, like facials, eye cream and lip balm, then move to therapeutic products like analgesic balm and sunscreen. The plan is to cover a full-range or face and body therapeutic products and establish a trusted international brand.
As CEO Green explained, the Company sees the world territory-by-territory. In some regions, it would be beneficial to partner with a cannabis company, or sell its licensing. The Company is looking to enter all emerging markets around the world for topical and have already sold exclusive rights in Italy to Crop Infrastructure (CSE: CROP), while also selling non-exclusive distribution rights in the U.S. while it continues negotiations elsewhere. Yield Growth began its relationship with Crop back in July 2018 and the two have been working to develop the infused wellness market in Italy, where Crop has a grow operation. The Company is working to determine the regulatory requirements to get Urban Juve to market in Italy through Crop and has been in the midst of negotiations to determine how the products will roll out there and in the United States.
Uncharted Regulatory Landscape
The legal framework around infused products, while challenging, is actually where Yield Growth found its competitive advantage. We are still in the prohibition era where this is concerned, as it isn’t quite fully-legal anywhere in the world, yet. In Canada, topicals that contain CBD and THC are not legal, whereas in the U.S., the laws vary from state-to-state. Every country around the world is different, so many companies have avoided this market for that very reason. While that is a challenge, Yield Growth sees an opportunity. There isn’t much in the way of competition from international brands in this space because the regulatory landscape is too difficult to navigate through efficiently.
What sets this Company apart is its leadership’s strong legal expertise. CEO Green has 20 years of experience as a lawyer in capital markets with the Bacchus Law Corp. and the cannabis space. She has a thorough understanding of what cannabis companies face. She was also the co-founder of Merus Labs International which was bought for $342 million in July 2017 and was the President of Glance Technologies when it achieved a market capitalization of more than $480 million.
The Company’s Vice President of Licensing, Amy Frankel, serves as general counsel and was previously general counsel for shoe retailer Skechers when they completed their IPO through to a multibillion-dollar valuation, then repeated that story with clothing retailer Aritzia. She also worked in house for Best Buy and Future Shop.
Yield Growth recently announced the addition of cosmetics executive Sandi Lesueur as President of Urban Juve. Highlights of her professional experience include the design and launch of several product lines for physicians and celebrities such as dermatologist and Vice President of the Dermatology Association of Canada Dr. Jason Rivers and Oprah Winfrey’s makeup artist, Derrick Rutledge at OOH Lifestyle. Over her eight-year tenure, she played part in the meteoric rise of MAC Cosmetics where she developed expertise to recognize and situate innovative brands as future dominant players in the cosmetics business. Her health and wellness knowledge — combined with experience in global production, distribution and brand cohesion — will position the newly launched Urban Juve as a unique force in a lucrative, growing sector in full-spectrum health.”
These track records speak for themselves and the management team at Yield Growth has experience in all of the crucial areas of success, from the wellness side, to cannabis as a business, to taking profitable companies and turning them into businesses with exceptional valuations.
Looking into the next few years, CEO Green stated that she wants the Company to be vertically-integrated into every major market in the world. All countries that are currently adopting to allow medical or recreational cannabis is exactly where they want to be, either by partnering with a cannabis company like Crop, or by acquiring licenses in every major territory to extract the distillate and produce and manufacture their products. There is also a plan to partner with a medical team to conduct clinical trials on their therapeutic-based products that are coming down the pipeline.
There are high expectations for the wellness product market and few have higher expectations than the leadership at Yield Growth Corp. There is a potential $3.7 trillion value there internationally and when coupled with the very fast-growing CBD industry, especially in the U.S., there is tremendous upside, likely growing at 50% a year. With the impending adoption of the Farm Bill, CBD derived from cannabis will be legal and that industry will eventually have a massive impact on the wellness industry, starting in the U.S. and growing internationally once it is a proven cash crop. Investors looking to get in before the crowd on this market should do their due diligence and take a deeper look into the Yield Growth Corporation.
Source: Stockhouse
