The Bubs Australia Ltd (ASX: BUB) share price is under the spotlight after the business launched a range of milk powder products for the whole family.
Bubs products for the family
The infant formula and goat product business announced that it’s expanding into another growth category: a range of cow’s milk powder products for the whole family.
Bubs says that this powder market is a US$15.7 billion global opportunity. It gives the business the chance to expand its shopping basket opportunity, as a complement to the infant formula.
The infant formula will remain as the core margin driver, but this will open up new access points. Management believe this is a significantly larger and growing category with less complex regulatory compliance than infant formula.
What progress has it made?
Bubs has entered into supply agreements with new distribution and retail partners in key international markets, with opening orders due to be shipped to China, Malaysia, Singapore, Vietnam, Pacific Islands and East Africa in the second quarter of FY22.
China is a large consumer of milk powder, accounting for around a fifth of the global market demand, worth US$3.3 billion in 2021 and forecast to rise to US$3.8 billion by 2025.
Bubs believes that China is an excellent starting point because Bubs already has brand recognition there across key channels and it only meets 70% of its domestic dairy needs.
Management comments
Bubs Chief Operating Officer Fabrizio Jorge said:
“We expect Bubs Family Nutrition will broaden the footprint among young families and support market diversification, while strengthening the foundations of continued business growth. This portfolio expansion will have the consequent effect of increasing utilisation of our Deloraine manufacturing facility, thereby providing cost efficiencies across our entire business.”
Final thoughts on the Bubs share price
Bubs is a very interesting business. It has many of the building blocks that could turn it into a much bigger business – a strong product, global growth plans, control of its supply chain, it’s cashflow positive (or was in the last quarter) and has attractive margins.
The Bubs share price might be worth looking at if it can fulfil its potential, but it’s likely to be a rocky road to say the least.
