Youngevity (YGYI) investors got a bit of a nice treat to start off 2019. While many watchers of the stock have been eagerly awaiting the company to get into the hemp growing business by purchasing a farm and processing operation, the company has been busy expanding its deal structure on consumer products. This past week Youngevity announced that it has entered an exclusive deal with Icelandic Water Holdings.
At first blush this may not seem very compelling, but if you take the time to scratch the surface, you will notice something. Icelandic Glacial Water is distributed in the United States by Anheuser-Busch InBev (BUD). In fact, Anheuser-Busch InBev owns 20% of Icelandic Water Holdings. Let that sink in a moment. If you have been following the CBD space for any length of time, you will note that beer companies have been pretty keen on getting involved in some way. This deal shows that Youngevity has what it takes to cut a deal with some pretty impressive players.
The deal includes not only CBD products but also supplement infused water as well. Youngevity will be exclusive to Icelandic and not promote any other water products, whilst Icelandic will be exclusive and promote no other supplement products. This is very big. No company cuts off its ability to promote something else unless it is very sure that the product it is being exclusive to is very good.
Over the next three years, the companies will jointly develop products in four key areas:
- Dietary supplements including CBD products
- Children’s drinks
- Pet products
- Coffee products.
Earlier in the article, I mentioned that you had to look beyond the headline and think a bit more deeply. The fourth category of development relates to coffee products. As long time readers know, Youngevity has a well established field-to-finish coffee business established. In fact, the company is already fulfilling a massive $250 million green coffee contract. The other segment where integration of CBD is hot is CBD infused coffee products. Youngevity, which entered the CBD space only last year, is already making very big moves.
Connecting more dots brings us to a very compelling thought. Management of Youngevity has been out pounding the pavement with the folks on Wall Street for several months. It seems clear that some pretty compelling players are keen on the opportunity Youngevity presents. A deal like this may actually help Youngevity in its mission to acquire a hemp operation. Any seller worth his salt is likely looking to take advantage of the run that will happen in the CBD space in the year ahead rather than to simply cash out. That means sellers will be looking to the ability of the buyer to actually be able to produce and market CBD products on a scale that can differentiate itself from others. Youngevity has a built-in buyer network through its direct selling model. It has a built-in retail channel through its coffee franchise. The company now has a built-in distribution channel to all things beer. On top of that, the company is already established with Amazon (AMZN) selling coffee products, and can likely be on a fast track to add to its Amazon distribution footprint.
This is the part I find even more compelling. The company has not yet inked a deal for a hemp farm and processing operation. It would seem to me that the next natural step is to get these types of deals done. When that happens, Youngevity will have a very compelling CBD story that differentiates itself from the johnny-come-lately stories that we will all see hitting the headlines. The bottom line is that I remain bullish on this stock. Youngevity is making bold and smart moves within its sector and is quickly integrating hemp and CBD into its already compelling product line-up. Stay tuned, and watch the news wire!
Disclosure: I am/we are long YGYI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.