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The Chinese demand for Australian manufactured dairy products is high. This means product authenticity is paramount in the buying decision.

However, difficulty in determining the legitimacy of some dairy products is now more prevalent than ever as counterfeit products flood the market.

YPB Group Limited (ASX:YPB) is an Australia-based product authentication and consumer engagement solutions provider looking to combat this problem.

YPB’s proprietary smartphone enabled technology suite allows consumers to confirm product authenticity and brands to trigger consumer engagement.

The combination of YPB’s smartphone authentication solutions and its SaaS Connect platform, creates smart’ product packaging, opening cost-effective, digital and direct marketing channels between brands and their consumers.

YPB is currently focused on the rapidly growing Australian, South East Asian, and Chinese markets. Its focus is dairy, cannabis, alcohol and cosmetics where the viral growth of fake products, particularly in Asia, affects brand value and endangers consumers.

Drinking yogurt in the hands of a buyer in a store.

With regard to dairy, last year YPB Group announced it had 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.

The idea was to ensure product authenticity and bring peace of mind to consumers.

NATURE ONE DAIRY® (NOD) 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 China.

This week, YPB announced that follow-up business from Nature One Dairy in Australia has been extremely positive.

The relationship with NOD® has, in fact, been strengthened with YPB announcing that the group had confirmed the expanded usage of YPB’s CONNECT codes in its regional expansion through South-East Asia.

NOD® was YPB’s first dairy sector customer and it is a producer of nutritionally enhanced milk powders, as well as being a contract manufactures for a number of Australian and international retailers.

The group has confirmed that it intends to increase the utilisation of YPB’s CONNECT beyond the initial applications in China and domestically to its new markets of Myanmar, Singapore, Vietnam, Indonesia and Cambodia.

NOD has initially ordered an additional 10 million codes to be implemented over the initial Master Service Agreement (MSA) period.

The group’s South-East Asian expansion takes its product lines into more markets and additional product types such as senior and student nutrition targeted at the Vietnam market.

YPB’s chief executive John Houston highlighted the positive revenue impact from this development in saying, “NATURE ONE DAIRY® is a cornerstone client of YPB’s innovative CONNECT platform and we are delighted to extend our MSA to support its SE Asian expansion. We believe that not only will this add to revenue recognition, but also the awareness of this technology which is easily implemented on production lines to confirm product authenticity and encourage consumer engagement.”

This news comes on the back of improved financial performance for the half year ended 30 June 2020.

YPB’s financial performance improved significantly in the first six months.

The net operating loss of $1.7 million was a 52% or $1.9 million improvement on the first half of 2019, and this could be attributed to timely cost actions that have set the company up with a lean effective cost base.

In terms of managing cash flow and gearing the group’s balance sheet to cope with the challenging conditions, the company was provided with $1.2 million of loans from an entity associated with chief executive John Houston, of which $600,000 was subsequently converted to equity following shareholder approval.

New equity totalling $800,000 was also raised post period end.

As at 30 June 2020, the company held $532,000 in cash and cash equivalents.