During the last year, we have been following a number of high-growth trends that are expected to continue in 2020 and at the same time have been working to identify companies that are levered to such trends.
From cannabis to edible mushrooms, we have seen a significant increase in the amount of interest in these highly controversial markets. One of the major reasons for the increased interest in these verticals is on account of the types of legislation focused on advancing these markets.
When we are analyzing companies, we take a deep dive into the types of verticals that the companies are capitalizing on. We are primarily focused on businesses that can withstand headwinds and can execute at a high level. One company that seems to meet this criterion is The Yield Growth Corp. (CSE: BOSS) (OTCQB: BOSQF) (FSE: YG3) which is highly focused on the cannabis and the edible mushroom market.
It is no secret that the cannabis sector has been under pressure for the last several months and this is a trend that we continue to follow. While many companies have looked for cover during these tumultuous times, Yield Growth has been able to expand its position in burgeoning cannabis markets and has been able to enhance its leverage to the edible mushroom market.
We are impressed with how the Yield Growth story continues to advance and believe that its success begins with the management team. The company is led by a management team that has a proven track record in a number of high-growth verticals and we are impressed with how the team has been able to use its prior expertise to advance the operation.
2019 has been a transformational year for the edible mushroom market in the US and we will monitor this trend in 2020 and beyond. Earlier this year, Denver and Oakland approved legislation that decriminalized mushrooms and we expect to see additional cities pass similar laws in 2020. We have seen positive coverage of the mushroom market from leading broker-dealers in the US and we are favorable on the way this opportunity is gain traction.
A few months ago, Yield Growth became highly levered to the edible mushroom market and reported a major acquisition in the space. Through its recently acquired subsidiary Flourish Mushroom Labs, the company owns more than 130 mushroom recipes for a variety of consumer goods, including teas, soups and coffees.
A Multi-Billion-Dollar Growth Vertical to be Aware of
Although the edible mushroom space is highly controversial, it is more advanced than most would expect. According to a report by Research and Markets, the global edible mushrooms market is expected to grow at a CAGR of 7.95% to US$62 billion by 2023, increasing from US$42 billion in 2018. According to the market intelligence firm Mordor Intelligence, the functional mushroom market is expected to grow from $5.8 million in 2018 by 6.4% per year through 2024.
Demand for functional mushrooms is stronger than expected and there are only a few firms that are focused on this burgeoning market. Four Sigmatic launched as a functional mushroom product company in 2012 and is reported to be generating more than $60 million of revenue per year. These are significant numbers and the edible mushroom market is just getting started. We believe that the vertical is not even in the first innings of a multi-decade growth cycle and are favorable on the leverage that Yield Growth has to this market.
Going forward, we are favorable on the growth prospects associated with the mushroom side of Yield Growth’s business and will monitor how this aspect of the story continues to advance. Flourish plans to explore the psychedelic mushroom opportunity as it focuses on increasing market share in the functional mushroom space and we are bullish on its growth prospects.
Although most people initially think of magic mushrooms when it comes to the edible mushroom market, the opportunity is far more significant than that. Mushrooms are known be very healthy and contain important nutrients. We have seen a significant increase in the amount of demand for functional mushrooms over the last decade.
Last month, Yield Growth reported a major milestone as it relates to Flourish and reported to sign a $3 million agreement with the company. Under the agreement, Yield Growth will license 126 product formulas to Flourish and we find this development to be significant. The agreement is comprised of cash and stock and Flourish has already made the first payment of $1,800,000 to Yield Growth through the issuance of 90,000,000 common shares.
When looking at the growth prospects associated with the arrangement, there is a lot to be excited about. Under the agreement, the formulas that Yield Growth issued to Flourish may be used in foods and beverages as well as personal care, skin care, cosmetic and other wellness products that are infused with functional mushrooms or psilocin or psilocybin (magic mushrooms) or any combination thereof.
A Company with Catalysts for Growth
During the last quarter, Yield Growth has been under pressure with the rest of the cannabis sector and we are favorable on the move to expand the business into the edible mushroom market. When it comes to the cannabidiol (CBD) market, we are favorable on how the Yield Growth story has evolved so far this year.
Yield Growth has attractive leverage to the European Union (EU) as it relates to the CBD market and this is an opportunity that we have been excited about. The market in the EU is massive, with a population more than twice the size of North America. From a company saturation standpoint, we find the EU CBD market to be an attractive long-term opportunity and believe that Yield Growth has had its finger on the pulse of this market.
We believe that Yield Growth is in the early stages of a major growth cycle and this is an opportunity to be watching. To stay up to date with the opportunity, please reach out to firstname.lastname@example.org and we will add you to our distribution list.
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