Yield Growth’s (BOSS.C) expansion into Europe took another positive step this week after the company announced a new agreement with Melorganics for rights to six CBD formulas.
The licensing and distribution agreement allows Melorganics to develop new CBD-infused products using Yield’s manufacturing knowhow, which can then be sold throughout the European Union.
Melorganics will have access to CBD formulas that cover foot cream, body oil, muscle relief balm, body exfoliant, relief gel and hand cream.
The Yield-Melorganics deal was approved August 25 and is worth $900,000, according to the official press release. Once the deal is finalized, Yield Growth will own approximately 18% of Melorganics.
All products developed using Yield’s CBD formulas must be approved by the company before being sold.
In addition to the six CBD formulas, Melorganics has also been granted distribution rights to Wright & Well, one of Yield’s topical brands. That deal, worth $100,000, will allow Melorganics to deliver Wright & Well products throughout its home markets of Greece and Cyprus.
Penny Green, CEO of Yield Growth, says Melorganics is helping her company build a steady pipeline through Europe – a market that is still in the very early stages of the legal marijuana boom.
“We are excited to expand our relationship with Melorganics to bring our CBD products into Europe both as a new brand to be developed and also through the Wright & Well brand. The quality of our products and the strength of our brands allow us to continue to generate revenue and build our assets to bring value to our shareholders.”
CBD formulas: Gateway to Europe’s legal cannabis market
Europe’s CBD market is estimated to be worth just USD$318 million as of 2018, but is forecast to grow over 400% through 2023, according to Brightfield Group. The United Kingdom and Austria are the largest markets for CBD goods, though Switzerland and Spain are also fast-movers in this space.
Estimates about the size and growth rate of Europe’s legal marijuana industry vary significantly. Research from New Frontier Data shows an addressable market that is valued at $68.5 billion. There has already been significant growth in the number of foods and cosmetics that are infused with CBD formulas – a trend expected to continue as EU regulation evolves.
The European Commission’s Working Group of Novel Foods recently reclassified CBD as a “novel food.” Apparently this isn’t a bad thing – it just means regulations covering these products are stricter than “regular foods.”
BOSS.C stock update
Shares of Yield Growth have resumed their downward trend in recent weeks but appear to be bottoming out after an extended period of volatility. BOSS.C continues to hold just above the CAD$0.30 mark, dipping only once below that level this year.
BOSS.C spiked near $0.45 on August 6, but has since corrected some 32%. The stock is down 62% from its 2019 high but has virtually broken even for the year. Yes, it has been that kind of year for marijuana plays.
At current values, BOSS.C has a total market cap of $27.4 million. Trade volumes are pretty thin at just 552,025 on average.
Yield Growth is making all the right moves with its global expansion efforts, but it may be a while before they are reflected in the bottom line. Still, at just 30 cents, the stock may offer considerable upside for investors with a long-term horizon. After all, the company is already selling products in North America and China. We now know that Europe is next.
— Sam Bourgi
Full disclosure: Yield Growth is an Equity.Guru marketing client.