The Bubs Australia Ltd (ASX: BUB) share price is going bananas, jumping over 19% after it announced a new partnership with Fonterra Shareholders’ Fund (ASX: FSF) to produce a new formula product line.
Bubs was founded in 2006 by Kristy Carr and was listed on the ASX in January 2017. Its infant formula is based on goat milk and it also sells organic baby food. Bubs recently acquired NuLac Foods, Australia’s largest producer of goat milk products, it also guarantees exclusive supply of local goat milk from Australia’s largest herd of milking goats.
New Bubs Product And Partnership
Bubs has entered into a supply agreement with Fonterra to produce a new Bubs Organic infant formula range. Bubs says it will be the first company to offer Australian made certified organic grass-fed infant formula.
Fonterra will supply organic milk powder from its New Zealand organic milk pool, which will be manufactured at its facility in Darnum, Victoria. The initial agreement will run until 31 July 2021.
The new Bubs Organic range will be available at Chemist Warehouse within 3 months. Bubs entered into a strategic equity-linked alliance with Chemist Warehouse 3 weeks ago. Bubs also aims to export to China through online channels soon.
Bubs reminded investors of the recent acquisition of the Australia Deloraine Dairy manufacturing facility which is approved by the Certification and Accreditation Administration of the People’s Republic of China (CNCA).
With the CNCA-approved facility Bubs hopes to physically distribute the new range into Mother and Baby stores in China.
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 in roads into China, and is now in a position to be the first to offer an Australian made certified organic grass-fed infant formula,”
“Cow milk formula accounts for close to 95 percent of the Australian formula market and represents a significant opportunity for Bubs, which already has both a premium Australian infant nutrition brand positioning and strong organic credentials established over 13 years producing Bubs Organic baby food portfolio.”
Is Bubs A Buy?
Bubs is strategically acquiring and putting foundations in place with multiple big announcements recently. I can see why investors are getting excited and I am certainly keeping watch. However there is a lot of competition in the infant formula space, even more than a few years ago.
Investors may be getting too excited and reminiscing about past formula company success stories, like A2 Milk Company Ltd (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL), there’s no guarantee that Bubs can replicate that success and take the top players’ market share.
There are promising early signs for Bubs’ growth, but at this stage the two rapid ASX growth shares mentioned in the free report below are much further along with their international expansion and could be better picks.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.