Bubs Australia Achieving Growth from Overseas Operations; Enters into Vietnamese infant Nutritionals Market  

About Bubs Australia Limited (ASX: BUB)

Founded in the year 2006, Bubs Australia Limited (ASX: BUB) is a leading producer of goat dairy products in Australia with its products being sold in major supermarkets and pharmacies throughout Australia, as well as exported to China, South East Asia, and the Middle East.

The company offers a great range of organic baby food, goat milk infant formula products, the adult goat milk powder products and fresh dairy products. With the acquisition of Deloraine Dairy, Bubs is also involved in providing canning services of nutritional dairy products.

Last year, the company progressed its vertical integration capabilities, extended its infant nutritionals product portfolio, and deepened its channel partnerships.

Bubs four Key drivers:

  • Increased domestic market penetration
  • Brand awareness and impact
  • Innovation and product development
  • Enhanced Asian focus

During the last financial year, Bubs took a major step toward improving margins and adding manufacturing capacity by signing a manufacturing agreement with Tatura Milk Industries. As a consequence of this, Bubs sold its 49.9% interest in Uphamgo, the manufacturing assets acquired from the NuLac Foods vendors, while retaining the first call on the facilities to manage seasonal flows.

During the fourth quarter of FY19, Bubs entered into a strategic equity-linked agreement with Chemist Warehouse, securing a significant retail footprint and brand marketing support for Bubs® products in its home market. The company believes that this powerful alignment with such a strong leader in Australian retail will drive rapid sales growth and contribute widely to building the Bubs® brand in Australia as well as in China, offering substantial long-term shareholder value.

In the new financial year i.e., FY2020, the company is seeking profitable growth via leveraging its brand equity and partnerships, by developing its innovation pipeline, expanding into new markets, and through optimisation of its end-to-end supply chain and production capabilities

Bubs entry into fast growing infant nutritionals market- Vietnam

The company recently secured ranging for Bubs® product portfolio in Vietnam’s largest Mother & Baby store chain, Bibo Mart JS Company, marking its entry into fast growing Vietnamese VND 34 trillion* (A$2.2 billion) infant nutritionals market.

In order to service Bibo Mart and other Mother and Baby stores in Vietnam, Bubs Australia inked a Master Distribution Agreement (MDA) with Viet Nam TVV Service and Trading Company Limited.

As per Bubs Founder and CEO, Mrs. Kristy Carr, this new partnership with TVV and ranging in Bibo Mart demonstrates the achievement of another milestone for the Bubs’ business.

Bubs to capitalise on the growth of China $2 billion goat dairy market

Bubs Australia recently struck a deal with Alibaba CIP to capitalise on the growth of China’s $2 billion goat dairy market including the launch of new brand ‘Deloraine,’ which will be produced at the Bubs Australia manufacturing hub, Australia Deloraine Dairy in Victoria.

As per the agreement signed between both the parties, Bubs Australia and Alibaba CIP expect to ship adult goat dairy products, including CapriLac® and Deloraine® brand portfolios, worth $10 million in the first year with Alibaba CIP catering to the premium end of the segment with science based functional benefits.

Dennis Lin, Executive Chairman of Bubs commented:

It has long been a privilege to work in partnership with Alibaba across our infant nutrition products, and the opportunity to now develop the market for our adult goat dairy range through this Master Distribution Agreement is another step in the growing acceptance of the maturity of our business”

Q1FY20 Update

Bubs recently released its Q1FY20 (Quarter ended 30 September 2019) trading update wherein it reported that the quarter finished at $14.21million in gross revenues, up 58% on the prior comparable period, demonstrating the validity of the company’s continuing focus on its four-pillar growth strategy, combined with continuing investments in supply chain and manufacturing capabilities.

During the quarter, the company witnessed 34% growth in the sales figures from Australia, as compared to pcp. In China, there was a 113% growth in sales in the quarter. Notably, in the International markets, the growth in the gross sales was 973%; however, it only represented 8% of gross sales for the quarter while the sales from Australia and China represented 70% and 20% of gross sales, respectively.

Bubs Q1 FY2020 highlights:

  • Bubs Infant Nutrition products – up 66% pcp, representing 38% of gross sales for the quarter;
  • Adult milk powder – up 100% pcp, representing 53% of gross sales for the quarter;
  • Fresh milk products – down 45% pcp, representing 7% of gross sales for the quarter, following the disposal of non-core Coach House Dairy assets;
  • Deloraine Manufacturing – represents 1% of gross sales for the quarter.
  • Added to the ASX300 index as part of the S&P’s quarterly rebalance on 23 Sept 2019.

The company is committed to using its cash to continue to invest in building the Bubs® brand and its end-to-end supply chain, including the infrastructure and quality controls required to support its extremely high growth profile.

BUB stock performance

On the stock performance front, BUB’ stock increased by 124.00% in the last one year (as at 11 November 2019), however, in the last three months, the stock has declined by 7.44%.

By AEST 1:37 PM, on 12 November 2019, BUB’s stock was trading at a price of $1.100, down by 1.783% during the day’s trade, with a market cap of around $575.76 million and outstanding shares of around 514.07 million.

BUB 1-year stock Performance (Source: ASX)

Peer Analyses

Like Bubs, another consumer staple stock, Asaleo Care Limited (ASX: AHY), is down on ASX today by 1.765%, trading at a price of $1.002. (AEST 1:37 PM).

Asaleo Care Limited develops and sells everyday consumer products across the Feminine, Incontinence and Baby Care, Consumer Tissue and Professional Hygiene product categories with manufacturing and distribution facilities situated throughout Australia, New Zealand and Fiji.


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