ASX listed Bubs Australia has signed an equity share deal with its largest corporate daigou distributor, giving Hong Kong company Willis Trading a 4.82 per cent stake in the business.
Willis Trading is a wholly owned subsidiary of Hong Kong-listed Alpha Professional Holdings was Bubs’ largest customer throughout FY21 and the first half of FY22. It is the lead distributor for Bubsâ and CapriLacâ brands in the corporate daigou channel.
The deal is conditional on Alpha Group meeting product purchase milestones of at least $50 million in FY22 and at least $80 to $120 million in FY23.
Bubs founder and CEO Kristy Carr said the company and Willis Trading had worked closely for several years.
“Together we have successfully returned Bubsâ Daigou sales to high growth, delivering record revenues in the first half of FY22, increasing 276 per cent on the prior year, now exceeding pre-Covid levels,” Carr said.
For Carr, the deal deepens Bubs’ daigou channel engagement and ultimately its consumers in China.
“[Willis Trading’s] deep understanding of Chinese consumers provides more direct identification of our target consumers and their product needs in real time.
“Word of mouth and peer endorsement is critical in our category, and we view the Daigou Channel as expert community builders. Through one person, we can reach hundreds of consumers,” Carr said.
Bubs chairman Dennis Lin said the daigou channel had evolved from a fragmented network to a genuine corporatised channel, and the alliance between Bubs and Willis Trading was evidence of what can be achieved when a channel and brand work as partners.
“Daigous play an integral role in assisting Australian brands in understanding and reaching Chinese consumers, while simultaneously enhancing brand equity.
“We have the upmost respect for what this entrepreneurial community have built and the contribution they have made in creating value in many leading Australian brands, including Bubs,” Lin said.
Record first half results
Snapshot:
- group revenue $33.6m, up 84% pcp, up 60% on 2H21;
- group gross margin increased to 38%;
- corporate daigou gross revenue record high, up 276% pcp;
- corporate daigou gross revenue exceeding pre-Covid levels;
- China CBEC gross revenue up 53% pcp; and
- $30.6 million in cash reserves as at 31 Dec 2021
Carr said the results spoke to, “our corporate DNA and our ability to navigate ways forward in a volatile environment”.
The turnaround was driven by strong revenue performance across all business segments, with particularly strong growth in Bubs infant formula. Its gross revenue doubled across all channels during the first and is a key margin driver in the company’s portfolio.
“Reformed channel strategies put in place in the wake of the Covid-19 have driven record group gross revenue of $38.5 million for the half-year, resulting in a 73 per cent uplift on the prior corresponding period and up 57 per cent on the second half of FY21,” Carr said.
The groupwide gross margin of 38 per cent was ahead of expectations. Proactive optimisation of product and channel mix, more effective trade spend execution, reengineering supply chain operations for greater efficiency, disciplined OPEX management, and inventory provision reversal all played a part, Carr said.
