The Bellamy’s Australia Limited (ASX: BAL) share price fell 7% today following an announcement from Bubs Australia Limited (ASX: BUB) and Trump’s new tariffs.
About Bellamy’s
Bellamy’s is an ASX-listed organic infant formula and organic food company that was founded in 2004 in Launceston, Tasmania. It was the first company to offer an organic infant milk formula range to Australian mothers. It is now becoming a growing presence in the large Chinese market.
Why Is The Share Price Falling?
While Bellamy’s hasn’t announced any news today, Bubs Australia has. Bubs is a competitor to Bellamy’s, making organic baby food and infant formula based on goat milk.
This morning, Bubs announced a new partnership with Fonterra Shareholders’ Fund (ASX: FSF) to produce a new formula product line, sending the Bubs share price around 15% higher.
According to the announcement, Bubs has plans to export to China through online channels, which could pose a threat to Bellamy’s market share.
Mrs Kristy Carr, Bubs Australia Founder and CEO said, “Bubs has already established itself as a key player in the goat dairy infant formula sector in Australia and made significant inroads into China, and is now in a position to be the first to offer an Australian made certified organic grass-fed infant formula,”
The a2 Milk Company Ltd (ASX: A2M) share price has also fallen in response to the news, although it’s down just 2%.
Bubs’ announcement also coincided with news that US President Donald Trump is threatening to increase tariffs on China once again.
If this goes ahead there is a chance that China could retaliate with tariffs that could end up hurting Australian businesses, like Bellamy’s.
While none of this is positive news for Bellamy’s, the share price drop may be an overreaction. Bellamy’s Organic is still Australia’s largest organic infant formula producer and has the advantage of entering China before Bubs.
However, today’s price movements do highlight the risks of paying a premium for a business because of an exciting opportunity that could be thrown off-track by political risks or regulation.
A safer investment might be in one of the companies mentioned in the free report below.
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Disclaimer: At the time of writing, Max does not own shares in any of the companies mentioned.
