Bubs and Bega buddy up for new baby formula

Bubs and Bega buddy up for new baby formula

Infant formula and baby food producer Bubs (ASX: BUB) has entered into a partnership with dairy giant Bega (ASX: BGA) to produce a new goat milk formula for infants.

Bubs and Bega subsidiary Tatura will work together to convert fresh goat milk into formula in one step, without intermediate spray dry to whole milk powder.

The new formula will be produced in Tatura's facility in Victoria and canned at Bubs' manufacturing partner Australian Deloraine Dairy.

Bubs says the resulting infant formula quall qualify for Country of Origin labelling as it is composed of around 70 per cent Australian ingredients.

The company says it anticipates the product will be 90 per cent Australian ingredients within 12 months.

Bubs Australia founder and chief executive Kristy Carr says the company is excited for what is an Australian first.

"Now we have reached scale, we are delighted to partner with Tatura, one of Australia's largest and most reputable infant formula manufacturers," says Carr.

"Being able to product our goat infant milk formula in a single step directly from farm gate is an 'Australian first' for goat dairy, that is only made possible because we have exclusive ownership of fresh goat milk from the largest milking goat herds in Australia."

"Importantly, the one-step conversion generates a number of critical efficiencies for Bubs: the production and ingredient cost are significantly reduced, making the new production method margin accretive. As well, production lead times are cut, and so inventory is better managed and cashflow is improved."

Production of this new formula is set to commence next month after successful trials were completed.

Carr says this new product is tapping into what Australian parents are calling for right now.

"Parents in Australia and abroad are looking for authentic provenance and traceability when it comes to infant nutritionals," she says.

"With the goat milk supply chain under our control, and using only Australian fresh goat milk, we will be able to label the product with 'Made in Australia from average 70 per cent Australian ingredients,' which will be unrivalled in this market.

Shares in Bubs are up 4.42 per cent to $0.59 at 11.37am AEDT.

Today's news comes as Bega announces its 1H19 results as well as the closure of its mozzarella cheese manufacturing facility in Coburg.

The Coburg facility was closed following a review into the company's network, concluding that the site's capacity and location cannot support Bega's expected future growth.

Bega reported revenue up 6 per cent to $649 million for 1H19, whilst profit was down 76 per cent to $5 million.

Shares in Bega are up 1.04 per cent to $4.87 per share at 11.41am AEDT.

BELLAMY'S STRUGGLES WITH CHINESE REGULATION

Major Bubs competitor Bellamy's Organic saw its results dip in 1H19 thanks to delays in Chinese regulation for its infant formula exports.

Revenue was down 25.9 per cent to $130 million and NPAT was down 63.7 per cent to $8.1 million.

The company says its revenue suffered from prolonged delays in SAMR registration (a Chinese regulatory process) which impacted Chinese-label sales.

Shares in Bellamy's are down 3.22 per cent to $7.81 per share at 11.41am AEDT.

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