Shares of Bubs Australia Ltd [ASX:BUB] have increased by almost 10% yesterday, following the news of a merchant service agreement with Alibaba, the largest e-commerce platform in China and a new manufacturer.
The baby formula producer specialises in premium goat milk baby formula and certified organic baby food pouches packed with organic superfoods.
At the time of writing, their shares are trading at 93 cents, up from 85 cents on the previous trading day, 8 June.
Why has Bubs Australia’s share price increased?
Bubs’ share price has continued to rise since the most recent market update, which revealed exciting news for investors.
Bubs has launched their own flagship store on Tmall Global, which is expected to generate $1 million in the first 12 months.
Kristy Carr — Founder and Managing Director of Bubs Australia — believes the company’s heritage brand and unique products will be a great success in the Chinese market.
‘As the only Australian vertically integrated producer of goat milk infant formula, we will be in a unique position to offer Chinese parents comfort that we have complete control over the quality and scalability of our supply chain back to the farm gate. With this solid foundation in place, and with the support of the Alibaba team, we believe we are well positioned to establish a popular Flagship Store on Tmall Global.’
Alongside the deal with Alibaba, Bubs also announced that they have entered into a binding manufacturing agreement with local company, Australia Deloraine Dairy.
This is a critical step in the process of being approved for the China Food and Drug Administration (CFDA) registration, to allow Bubs to sell in the Chinese market. Australia Deloraine Dairy is one of 15 facilities licensed to produce infant formula products eligible for importation into China, under the regulations of CFDA.
The manufacturer only has three brand slots available, one of which will be taken by Bubs.
What’s next for Bubs Australia?
Dennis Lin, Bubs Australian Chairman, has said that the partnership with Australia Deloraine Dairy is a crucial step to achieve the CFDA registration and will allow Bubs to advance their China expansion strategy.
‘There is an increasing demand for goat milk based infant formula in China, especially in Mother and Baby stores. The Manufacturing Agreement will facilitate our CFDA registration and provide a defined pathway to maximising Bubs’ access to 80,000 stores aligned with our partner QianJiaWanPu, China’s largest nationwide distributor of infant formula.’
It seems Bubs is taking all the right steps. But as to whether or not infant goat milk products will be a hit in China, we’ll just have to wait and see.
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PS: Bubs Australia has had incredible growth over the past two years, increasing over 2225%, with the potential to continue to soar. Our Money Morning editor, Sam Volkering, argues that the biggest potential gains can be found in the sector with the biggest potential risk — small-cap stocks. If you’re interested in learning more, check out his free report ‘Top Three Aussie Small-cap Stocks’ downloadable now.