What Youngevity International’s exclusive agreement may mean for the future of cannabis-infused beverages
Yesterday in California, Youngevity International Inc. (NASDAQ:YGYI) announced a new partnership with Icelandic Glacial, a purified bottled water company. The cross-marketing partnership involves an exclusive agreement to develop and market new products, including the potential for a new CBD-infused beverage.
According to the press release, CBD will be “at the forefront of potential collaborations” between the two companies. Youngevity already launched their own line of drinkable CBD products last October through their HEMPFX line, and both companies hope to leverage this experience through their new partnership.
“We saw Youngevity as the perfect partner for our brand,” Jon Olafsson, co-founder of Icelandic Glacial, clarified on Wednesday. “With their stellar direct selling pedigree in the lifestyle industry, and their groundbreaking approach to growing their brands, we’re extremely confident for what the future of this arrangement will hold.”
Per the agreement, both brands will use their perspective consumer markets to promote one another exclusively. New products will be available through Youngevity’s unique direct-selling sales network. This direct-sales network is a particularly niche way to market and sell these products, but it is part of Youngevity’s new business model.
Two years ago, Youngevity International updated their business model, evolving from a strictly direct-sales approach to what they call an “omni-direct lifestyle brand.” The new brand and business model incorporates Youngevity’s original brand for direct selling with new social selling and e-commerce online sales. The company’s online sales for CBD started last October, but Youngevity still saw a 12 percent drop in revenue for their third fiscal quarter.
Why should investors care about Youngevity International?
Despite the losses this past quarter, Youngevity has the potential for an optimistic turnaround in 2019. Youngevity is watching the market, and investors should be watching Youngevity.
Youngevity is one of the few companies that uses a direct sales approach to sell their products, and CBD only makes up a part of their retail portfolio. Direct sales mean that the company uses individuals rather than retail stores to sell product, usually on a person-to-person basis. Youngevity attributed their loss in revenue to “a general weakness in North America direct selling business,” but by adding CBD to the mix, Youngevity could bring about the big change they need to keep up with the competition.
According to Direct Selling News, $300 million worth of CBD products were sold through direct sales in 2018. And direct sales, not including commercial or online sales, could exceed the billion-dollar mark by next year. This, combined with the potential of the CBD-infused beverage business, could give Youngevity the leverage they need to post positive numbers in the 2019 fiscal year.
And the potential for CBD beverages is pretty hefty. According to analysts at Canaccord Genuity, the market for cannabis-infused beverages could reach $600 million over the next four years. CBD beverages will make up almost half of that market, meaning Youngevity has the opportunity for a pretty nice piece of the pie if they can maintain their current momentum.
Take a closer look at Youngevity International
Partnering with Icelandic Glacial was a well-planned move for the company. Since neither brand is focused on strictly CBD, the exclusive partnership will most likely pay off when it comes to cross marketing and trading customers. But this new agreement is also representative of the major shift happening in the cannabis industry in terms of its major players and which brands are taking on the competition.
Anheuser-Busch (NYSE:BUD), the beverage giant that inked a deal with Tilray in December, owns twenty percent of Icelandic Glacial. It is no surprise that big beverage wants a piece of soon-to-be-big cannabis, but to see a smaller, direct-sales brand like Youngevity cut a deal with a brand this big means that the California-based company might just have what it takes to compete. Because the deal includes more than just purified water. Youngevity’s exclusive product agreement will have products in CBD, pet products, and coffee.
Some analysts peg CBD-infused coffee as one of the most promising categories in the industry, and investors should note the $250 million coffee deal Youngevity signed last summer through their wholly-owned subsidiary, CLR Roasters. The first shipments of the five-year agreement kicked off this month while Youngevity simultaneously announced their coffee expansion in Nicaragua. Their new facility will be done in time for the 2020 harvest.
Although no announcement has been officially made regarding a CBD-infused line of coffee products, investors can operate under the assumption that it will happen sooner rather than later. In the meantime, investors should also keep their ears to the ground. The only thing Youngevity does not have in their portfolio yet is a deal with a hemp farm or processing facility, and there is a major emphasis on yet. For a company picking up this much speed only a year after announcing their first CBD-products, it will only be a matter of time before they catch up with the rest of the pot stocks who have already made deals with hemp and cannabis growers, cultivators, and processors.
Header Image: Sonya Yruel/Drug Policy Alliance