YPB countering fake cannabis consumables

It’s hard to find an industry that’s set to deliver such rapid and consistent growth as legal cannabis and even more so, cannabis consumables.

Consumables, or “edibles”, include obvious yummies, brownies, and cookies, as well as things like cannabis-butters, oils, and cannabis-infused beverages, plus a wide range of tinctures, sprays and inhalers.

And that’s just the tip of the iceberg — as CBD and THC rapidly make their way into all kinds of consumables.

While the sector is still figuring out what products will be its future growth drivers, a crop of new cannabis edibles, extracts and concentrates are set to hit the market.

And a significant market it is. According to Deloitte, the Canadian market for edibles and alternative cannabis products is worth C$2.7 billion annually with growth set to accelerate when Canada brings in “Legislation 2.0” in October in.

Health Canada recently released details around this legalisation specifying that edibles and topicals (lotions, balms, creams, etc.), concentrates and extracts are all set to become legal in Canada in just a few months.

YPB safeguarding consumers

ASX junior, YPB Group Ltd (ASX:YPB), has its eye on this market, providing much needed consumer protections against fake and counterfeit cannabis products and the proliferation of synthetic cannabinoids.

Synthetic cannabinoids — suspected to have been contaminated with rat poison — was responsible for the deaths of three people in Illinois last year and caused severe bleeding in more than 100 people across US states.

To counter dangers like these from illegal drug labs YPB provides product authentication. Its product markers are designed to both protect consumers from the health, safety and quality risks associated with counterfeit products. It also provides consumer engagement solutions and greater market intelligence.

The company today announced that it has signed on its first client in the high volume, fast-growing cannabis consumables space.

The deal involves a Master Supply Agreement signed with cannabis extraction specialist Halo Labs Inc.

Headquartered in Canada, Halo is a cannabis grower and processor that’s listed on several exchanges — its primary listing being on Canada’s NEO exchange, while it has significant operations in the USA.

The company, an expert in oils and concentrates, is launching innovative cannabis products and delivery systems. It’s a white label manufacturer for a number of prominent cannabis brands and is also developing its own brands in a number of markets.

Within consumables, Halo’s areas of expertise, cannabis oils and concentrates, are the fastest-growing segments.

YPB will provide Halo with its authentication solutions and its YPB Connect consumer engagement platform.

YPB’s revenue under the agreement with Halo will be two-pronged:

- Authentication tracer and labels will be charged on a per unit volume basis; and

- Connect consumer engagement technology will be provided on a SaaS basis and charged monthly over the life of the contract.

The volume pricing component will allow YPB to participate in Halo’s growth.

Halo will deploy YPB’s technology on both its delivery systems and consumables products, from late Q3 2019 and is expected to become an important client to YPB over time.

YPB’s original cannabis clients signed in 2018 were all vendors of delivery systems i.e. hardware. Halo is the first client in the much higher volume, much faster-growing cannabis consumables space.

YPB Executive Chairman, John Houston, commented on the deal:

“I’m delighted YPB will be assisting Halo in ensuring its investment in brand building is not damaged by fakes and in developing the value and loyalty of its consumer base through personalised engagement direct to its consumers’ smartphones.

“After an initial flurry in H2 2018, our momentum in cannabis had slowed for a number of reasons but cannabis remains a key vertical and major opportunity for YPB. This new relationship with Halo is the first evidence of our rekindled momentum in the sector”.

While this is the first cannabis consumables agreement signed by YPB, the group already has a number of sales agreements to provide its product markers for cannabis products such as vaporisers and other accessories.

Like questionable cannabis, black market products including vapes and cartridge concentrates are also an issue for in industry. Almost all major vaporiser brands have counterfeit versions in the market.

For this market, YBP provide an industry-wide authentication and consumer engagement solution called “Cannabis Confirmed”.

The Cannabis Confirmed initiative seeks to stamp out fakes by enabling cannabis brand customers to confirm the authenticity of their product after purchasing online by scanning a unique serialised QR code — a ProtectCode — on the product packaging.

Earlier this year YPB and its partner Namaste Technologies (TSXV:N) — a global leader in cannabis e-commerce — agreed to broaden the use of YPB’s product markers to all products on Namaste’s e-commerce platforms.

There are currently four Namaste companies engaged in YPB’s initiative, including Shatterizer Inc. — an established Canadian vaporiser brand leading in hardware for cannabis concentrates. YPB has a three-year deal exclusive agreement with Shatterizer, whereby YPB’s ProtectCode will be applied to all of its cannabis concentrates vaporisers and accessories.