With the fourth plane load of infant formula landing in the US today as part of Operation Fly Formula, Bubs Australia is capitalising on its increased international profile and profits with a $63 million equity raise.
The funds would be used as working capital to immediately scale the business in light of the rapid market expansion, increase inventory and cover US operating expenses.
It would also be used to expand the capabilities of its Deloraine canning facility, looking to include a second high-speed canning line to triple capacity.
Bubs founder and CEO Kristy Carr said the company was working with the US government to continue supply for the long term.
“Recent events have fast tracked the US by at least 18 months, and this is now set to be a significant revenue and profit driving for the business,” Carr said.
The company expects FY22 to be the company’s first year of EBITDA profitability, with gross revenue set to exceed $100 million, saying the result was driven by optimisation of product and channel mix, more efficient trade spend, improved supply chain efficiency and disciplined OPEX.
Bubs chair Dennis Lin said the company was pleased with the results despite a challenging macro environment. Bubs had strong momentum across all key business segments with group wide gross margin improvements and the company’s first profit.
Tariff clarifications, new supply agreements
Bubs has also secured tariff concessions and new supply agreements with H-E-B Grocery Company and Meijer.
H-E-B is a supermarket chain based in Texas with 340 stores. In 2020, Texas recorded more than 365,000 births, compared to 300,000 in Australia (California recorded the highest in the US with 419,000). Texas has been a primary focus for Operation Fly Formula distribution and will receive the bulk of the latest plane load (#4).
Supercentre chain Meijer has 259 stores mainly in the Midwest, including Michigan, Illinois, Indiana, Kentucky, Ohio, and Wisconsin.
The remainder will replenish existing stockists including Walmart, Kroger, and ABSCO.
The total gross revenue generated from the latest shipment is $3 million.
At the end of June, 22 US state agencies had authorised Bubs infant formula products under the Special Supplement Nutrition Program for Women, Infants, and Children (WIC Program).
The WIC Program accounts for more than 50 per cent of formula consumption in the US, and provides a subsidy for families that need assistance to ensure children receive appropriate nutrition.
The FDA allows each state agency to decide on whether to authorise Bubs’ products for its WIC Program participants.
Since Operation Fly Formula began, there have been discussions on the most appropriate tariff classification for the formula, with a decision reached between the US and Australian government that the products receive a tariff concession under the Australia-US Free Trade Agreement (AUSFTA).
Carr said the company appreciated the guidance from the US and Australia on its tariff obligations.
“It is great to see that the strong trade relations and reciprocal recognition of food standards between the two countries have reflected in greater market access for our category, particularly during this time of crisis for American families,” Carr said.
