A binding agreement between Bubs Australia and Chinese manufacturer Heilongjiang Ubeite Dairy Group (HUG) will produce a premium Bubs China label formula range as well as renew an existing goat formula slot in China.
Bubs founder and CEO Kristy Carr said the agreement confirms the brand trust and loyalty Chinese parents have developed over the last six years.
“Bubs English label infant formula products in the cross-border ecommerce channel (CBEC), accounts for around 20 per cent of total infant formula sales in China.
“In FY22, Bubs English label infant formula sales to China grew 179 per cent, delivering $42 million in gross revenue,” Carr said.
If the new registration with HUG is approved by China’s State Administration for Market Regulation (SAMR), Bubs China label products can be marketed and sold to the remaining 80 per cent of China’s market, including Mother and Baby brick and mortar stores, and the general trade eCommerce channel such as Tmall Supermarket, a market worth $40 billion.
In 2019, seven Chinese Government ministries released a joint action plan to strengthen the domestic infant formula market. Its goal was to increase domestic supplies to more than 60 per cent of the market.
Australia’s biggest infant formula exporters at the time, A2 Milk, Bellamy’s and Bubs were hit hard, with almost $1 billion wiped from A2 Milk’s value, alone.
Carr said the new ultra-premium Bubs China goat formula has been developed exclusively for Chinese infants and formulated in line with China’s new Guojiabiaozhun (national standards, or GB).
The products are made without corn syrup and maltodextrin, and are free from GMOs, artificial flavours, or preservatives. It is based on an easy-digest A2 goal milk protein with supplements including sn2 palmitate (OPO), prebiotics, lactoferrin, and nucleotides.
She said the decision to partner with HUG was driven by its longstanding reputation in dairy ingredient procurement of goat milk and A2 protein cow milk from the alpine dairy region of north-eastern China.
“Its wholly owned infant nutrition spray drying production facility and canning line is located less than 90 minutes from its dairy farms, allowing for a one step process in conversion of fresh milk into formulated dried powder,” Carr said.
Subject to SAMR approval, Bubs expects to commence production in 2H FY23.
Bubs has also secured first right of refusal to a SAMR registered ultra-premium A2 protein cow milk slot with OPO, prebiotics, lactoferrin, and nucleotides with HUG.
Distribution partner also secured
The company has also signed a 75:25 joint venture with Zhitong (Hangzhou) Health Technology Co. (Zhi Tong). Bubs will have decision-making power and will oversee financial management of the JV.
Bubs chair Dennis Lin said China’s supply chain was “coming of age” and being reflected in Chinese consumers gravitating towards a ‘China pride’ sentiment and choosing Chinese made products.
“We anticipate unrestricted access into the largest infant formula market in the world would result in a material shift in our China revenue momentum, commencing in the second half of FY23 and beyond,” Lin said.
