Chinese buyers come flooding back for Bubs baby formula

Chinese buyers come flooding back for Bubs baby formula

Australian barley and wine may be on the outer in the Chinese market, but the latest trading update from Bubs Australia (ASX: BUB) shows consumers have renewed their enthusiasm for the company's baby formula products.

Bubs has reported a sharp rebound in trading over the December quarter with gross revenue up 36 per cent to $12.8 million compared to the previous three months.

While year-on-year sales are still 12 per cent lower, the infant formula producer has revealed a surge in domestic volumes have been met with a rebound in the corporate daigou trade which channels the company's products into China.

Bubs' corporate daigou volumes surged 122 per cent in the second quarter of FY21, although they still remain softer than pre-COVID levels.

There has also been a spike in demand for Bubs' adult goat dairy products, with that segment delivering 45 per cent growth in the quarter and a 25 per cent lift in sales year on year.

"While a degree of uncertainty exists considering the continuing COVID-19 disruption, we take the significant quarter-on-quarter turnaround in sales momentum as a positive indicator for the long term," says Bubs chairman Dennis Lin.

"As Australia's largest producer of goat dairy products built on our unique vertically integrated business model and deep understanding of the specialty goat dairy supply chain, we enjoy a portfolio of highly regarded products showcasing Australian provenance.

"We are well placed to take advantage of a continued domestic market recovery in which Bubs Australia is now the fastest growing manufacturer in the category.

"Importantly, we expect our total China cross-border e-commerce and corporate daigou channel sales momentum to continue to reflect the ongoing Chinese consumer demand for our premium quality infant nutrition and adult goat dairy products."

Bubs CEO and founder Kristy Carr points to disruptions in Daigou channel for the company's overall sales lagging the previous year by 12 per cent.

"We are particularly pleased by the strong rebound in domestic sales which are up 31 per cent quarter on quarter," she says.

"Total export sales revenue was also up 45 per cent on previous quarter and up 55 per cent on prior year, validating our global expansion strategy is taking hold." 

According to the official Alibaba Tmall market data, Bubs Goat Infant Formula was ranked the third-highest-selling imported goat formula brand on Tmall Global and the top-selling Australian goat formula brand during the Double 11 campaign on 11 November, 2020.

"CapriLac is now ranked No.1 adult goat dairy brand on the Tmall Global platform, including domestic and international brands, demonstrating continued strengthening of demand for our adult goat dairy products in China," says Carr.

CapriLac sales are up 156 per cent on the previous period.

"Whilst we remain confident in the long-term viability of the (corporate daigou) channel, the challenging COVID-19 environment and the near absence of Chinese visitors and students in Australia is likely to continue to constrain the domestic daigou channel growth in the short term," says Carr.

Investors cheered the latest figures from Bubs, sending the company's shares more than 10 per cent higher in early trade.

Bub shares, which hit a high of $1.17 early last year, were trading around 66c this morning.

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