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How YPB Group is leading the fight against counterfeit goods

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iPhones, Rolex watches and Louis Vuitton handbags are just some of the big name brands that have fallen foul of counterfeiters. However, what you may not know is one of the world’s most counterfeited items is actually the humble cotton shirt.

It begs the question how do you combat counterfeit cotton? YPB Group (ASX:YPB) may have the answer. The company is developing much needed technologies, most notably the MotifMicro authentication technology and ProtectCode, to counter the $1.82 trillion worth of counterfeiting incidences anticipated by 2020.

Particular areas of focus are dairy, cannabis, alcohol and cosmetics where the viral growth of fake products, especially in Asia, affects brand value and endangers consumers. Many industries are interested in preventing counterfeiting of a wide range of materials. For example, one of YPB’s China clients currently marks glue used in global brand consumer goods with YPB technology to prevent substitution.

YPB has recently completed several deals with a variety of clients to not only combat counterfeit, but also deliver a full suite of proven data driven, customer engagement retail solutions derived from the anti-counterfeit technology.

From cotton to cannabis to dairy

Esquel Group, the world’s largest cotton garment maker, has engaged YPB to provide anti-counterfeit fibres embedded with invisible tracer technology. In essence, clothing brands are able to use YPB’s scanner to detect whether or not the AC fibres are present in each shirt label.

This provides the brand with the ability to identify counterfeit products and confirm authenticity throughout the supply chain through either stocktake processes or simple spot checks.

Esquel Group, produces about 100 million garments per year and is incorporating YPB’s Anti-Counterfeit (AC) tracer thread into their clothing labels for two of their major brand clients. However, clothing is just a small sample of YPB’s reach.

This year YPB signed its first client in the cannabis consumables space, establishing a foothold in a high volume, fast growing industry where companies are increasingly alert to counterfeit products.

YPB inked a Master Supply Agreement with US-based cannabis extraction specialist Halo Labs Inc. (NEO:HALO). The deal gives Halo access to YPB’s authentication solutions and the YPB Connect consumer engagement platform for its delivery systems and consumable products such as food, oils and concentrates.

The contract contributes revenue through both the sale of authentication tracers and labels, charged on a per unit volume basis and Software as a Service (SaaS) monthly fees.

The Halo deal was the second major partnership this year in the legal cannabis industry, which the Barclays European Consumer Staples Report from September 2018 estimated to be worth US$150 billion (A$213.8B), potentially doubling to US$272 billion by 2028.

Barclays analysts estimate that if fully legalised today, the US cannabis market alone could be worth US$41 billion by 2028. The third major market YPB has entered is the powdered milk market.

YPB’s strategy is to focus on high need, mass market verticals such as dairy, wine, pharmaceuticals, health and beauty. In relation to dairy, YPB signed a 2+2 year sales contract with Nature One Dairy for the integration of its consumer engagement and serialised authentication solution, Connect, into its milk powder tins.

Importantly, Nature One Dairy is one of Australia’s milk formula manufacturers accredited by the Certification and Accreditation Administration of the People’s Republic of China (CNCA) for export to

Nature One Dairy sells across 1800 Chinese outlets, so this is an important contract for YPB with the company set to embed its consumer engagement and serialised authentication solution, Connect into Nature One’s manufactured milk powder tins.

FDA certified?

MotifMicro is a multi-patented, high security, invisible-to-the-human-eye, smartphone-readable anti-counterfeit technology. Recently, MotifMicro1 (MM1) was certified as safe to FDA standards for food contact by the world leading certification company SGS. SGS is a multinational company headquartered in Geneva Switzerland and is recognised as the world’s leading inspection and certification group.

Highlighting the significance of this development in terms of de-risking a possible barrier to commercial success, YPB chief executive John Houston said, “So far we have serious commercial interest in MotifMicro1 from Australia, Thailand, USA and China where we have the largest security
printer as the first adopter of our MM1 technology.

“Commercial print trials are underway and this SGS certification of the safety of our now core authentication technology eliminates a possible barrier to its commercial success. Brands can confidently employ our authentication solutions in food packaging with this certification as to its safety.”

In mid-September, YPB negotiated the first supply agreement for its MM1 smartphone authentication technology with China’s leading security label supplier PanPass Inc. being the first commercial adoption of the solution.

PanPass is reputedly China’s largest security label supplier with annual volumes of 15 billion labels. This is a critical milestone as it confirms the path to revenue generation for this novel technology.

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