During the last year, there has been a significant increase in the number of publicly traded cannabis companys, and this is a trend that we expect to continue.
When looking at these new opportunities, there are several traits that we look for and these include: 1) the management team, 2) the focus of the business and the assets in place to execute, 3) the recent announcements, 4) the performance of the company from a revenue and profit standpoint, and 5) the valuation of the business.
Earlier this summer, we started covering The Yield Growth Corp. (BOSS.CN) (BOSQF) (YG3.F) and believe that this opportunity meets the criteria that was listed above. The last month has been very busy for the emerging cannabis firm and we are bullish on the growth prospects on a going-forward basis. Today, we have provided a breakdown of the company and will continue to monitor this opportunity.
A Multi-Faceted Growth Story with an Attractive Structure
One of the reasons we are excited about Yield Growth is related to the structure of the operation. The company is comprised of 6 subsidiaries that provide the overall business with a number of revenue streams. The subsidiaries include the following:
- Urban Juve Provisions Inc. – Sells direct-to-consumers in North America through its website and has retail distribution agreements with more than 110 brick and mortar stores across North America since the beginning of 2019
- Wright & Well Essentials inc. – Has a licensing agreement to manufacture and distribute to 400 Oregon stores via partnership with NovaPaths
- Wright & Well Manufacturing Inc. – Serves as the US retail and e-commerce distribution channel for beauty, health and wellness brands with legal hemp and CBD products for distribution
- UJ Beverages Inc. – Has a line of eight wellness beverage formulas to be infused with CBD and THC and one capsule product intended to treat hangovers.
- Yield Botanicals Inc. – Has proprietary patent pending extraction technology that combines Ayurveda therapeutic extraction methods with modern science and commercial hemp root oil production.
- Thrive Activations Inc. – This asset provides management personnel and expertise to small and growing companies
A Differentiated High-Tech Cannabis Business
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.
Through a proprietary hemp root oil extraction process, Yield Growth produces top-quality skincare and wellness products. Last week, the company reported that the research being conducted on this process has found higher concentrations of therapeutic compounds. To satisfy the increasing consumer demand for high-quality hemp-based products, Yield Growth has developed a scalable and a cost-effective production model that incorporates this proprietary process in hemp root oil manufacturing.
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.
When it comes to creating awareness, we believe that Yield Growth has selected some of the best partners. Key relationships include multiple Smart Health Solutions locations in North and West Vancouver, People’s Pharmacy in Vancouver, multiple Vitasave locations in BC and Ontario, Smith’s Pharmacy in Ontario, Brow Down in Saskatoon, Lily Bar Sugaring in Langley, BC, Breathe Vape Lounge in Detroit and Inspired Boutique on Salt Spring Island, BC. Over the next year, we expect to see Uban Juve penetrate new markets and are bullish on the growth prospects associated with the expansion opportunity.
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.
Led by a Management Team with a Proven Track Record
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 operation. The combination of the pharmaceutical and the cosmetics expertise that comes from these two leaders provides Yield Growth with a strategic advantage in the rapidly growing hemp and cannabis topicals industries and we find this to be of importance.
Another significant development that was recently reported by Yield Growth relates to the appointment of Tamara Melck as Chief Operating Officer. Prior to joining Yield Growth, she played a key role in the growth of Canadian fashion retailer Aritzia (ATZ.TO) as its Vice President, Corporate Operations and Executive Vice President, People & Culture. When she joined in 2001, Aritzia had 10 stores and 30 head office employees and Melck helped scale operations. When she left it 2017, Aritza was generating $743M in annual revenue and had a market capitalization that was greater than $1 billion.
We are favorable on this addition due to Melck’s proven track record of success as it relates to scaling businesses. With Yield Growth being highly focused on expanding its reach and penetrating new markets, this is the perfect time to make an addition of this caliber. Going forward, Melck will play an instrumental role in the company’s expansion process and we will monitor how she is able to help advance the business.
When looking at the Yield Growth opportunity, the strength of the management team is one of the first things to stand out. The management team is comprised of proven executives with diverse skills sets and we find this to be significant. Over the next year, we expect to see Yield Growth leverage the strength of the management team to commercialize additional products and enter new markets.
Has Attractive Distribution Through Strategic Partnerships
From a distribution standpoint, Yield Growth has been able to expand its reach and has secured strategic relationships to enhance 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 the US and Canada. Yield Growth is targeting residents in LA, San Fran, NY, Toronto and Vancouver with digital media and this represents strategic market penetration in North America. And finally, Wright & Well sells its THC products in Oregon and plans to launch CBD products across the US.
Another 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.
A few weeks ago, Yield Growth was able to improve its overall distribution through the formation of a strategic partnership with ParcelPal Technology Inc. (PKG.CN) (PTNYF). Under the relationship, ParcelPal will support Yield Growth’s subsidiary Urban Juve by providing same day delivery and on demand delivery of hemp-based cosmetics in Canada. We are favorable on the synergies that can be found between the businesses and will monitor how this relationship creates value for both companies.
This initiative will commence in Vancouver and the company plans to rapidly expand across Canada. We are most excited about the potential impact this relationship will have on Urban Juve and will monitor how this aspect of the story. Urban Juve hemp products are currently sold in over 90 locations across North America and this number is expected to increase sharply over the next year. Through this relationship, Urban Juve’s customers will be able to purchase products on the website and track their purchase in real time.
This alliance will lay the groundwork for Yield Growth to eventually offer same-day delivery service for cannabis topicals and other cannabis products and we are favorable on this opportunity. Once Health Canada approves the sale of cannabis concentrates and cannabis infused products, we expect to see this relationship to become more significant and will monitor how the partnership is able to execute and expand across Canada.
Highly Focused on the Burgeoning International Opportunity
One of the exciting aspects of the Yield Growth story is related to the work that is being done on the international side of the business. Earlier this month, the company announced a definitive agreement with Melorganics Hellas for the distribution of Urban Juve products in Greece and Cyprus.
Pursuant to the agreement, Melorganics Hellas will act as the exclusive retail distributor and non-exclusive e-commerce distributor for Urban Juve products in Greece and Cyprus. To maintain exclusivity in the territory, Melorganics must purchase at least $300,000 of Urban Juve products in the first year and at least $500,000 worth of products in each subsequent year. The agreement has an initial term of three years from the date of first delivery, subject to one year renewal terms if the distributor meets its minimum purchase requirements.
Greece represents an emerging cannabis market and we are monitoring how the market evolves after the country legalized medical cannabis in 2018. This agreement represented the first of many territory-specific distribution agreements that Yield Growth expects to enter into and will monitor this aspect of the story. The company plans to align itself with leading distributors that have large networks and is currently in negotiations with distributors for France, Poland, the United Kingdom and Turkey.
Urban Juve’s first product recently received a Compliance Certificate and is approved for sale in the European Union (EU). Yield Growth plans to register ten more products for sale in the EU in the coming months and we are monitoring this process. The first approval represents a major milestone and we are bullish on the growth prospects associated with the EU opportunity. In the fall, the company will start its European marketing effort and we expect the international market to become a much more significant aspect of the business.
In the fall, Yield Growth plans to launch several CBD product lines and will target the US and the EU. The European CBD market is already a multi-billion-dollar market and is in the early innings of a major growth cycle. The Brightfield Group recently announced market intelligence stating that the European CBD market will boom with 400% growth through 2023. We are favorable on Yield Growth’s leverage to this market and will monitor how the team executes on this.
An Execution Story that is Flying Under the Radar
Although Yield Growth has reported several significant developments over the last month, the shares have been under pressure and have been trading lower with the cannabis sector. We are impressed with the recent developments as it relates to the management team, the distribution in place, and international side of the business.
Over the next year, we expect to see Yield Growth record strong revenue growth and build on the success from 2018. The last few months have been significant and we are favorable on how this has the company positioned on a going-forward basis. We believe that Yield Growth has several potential catalysts for growth and believe that the market under appreciates this aspect of the story.
During the last month, Yield Growth has come off its highs and this is an opportunity that we have put on our radar. To stay up to date with Yield Growth, please reach out to firstname.lastname@example.org and we will add you to our distribution list.
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