October 20, 2020
We back Bubs to thrive because of its differentiated brand, strong position in Australian market, and multichannel partners into China and SE Asia. Some other key investment highlights of Bubs include:
• BUB was the original Australian organic baby food producer 15 year ago, and has built its authentic “Bubs” brand around being the best nutrition for the first 1,000 days of life.
• BUB is #1 in vertically integrated Australian goat infant formula with 70% Australian content (vs peers <30%). BUB controls the core of Australia’s goat milk pool and has access to some of the NZ goat milk pool. Together representing 7% of the global market.
• BUB is part of Fonterra’s Australian and New Zealand organic grass-fed milk pools with Australian manufacturing.
• During 2019 and 2020 BUB widened the audience to children and adults with goat nutrition powders and vitamins.
• Many off-shore infant formula suppliers pulled out of Australia in 2020. They had been Australia as a proxy for suppling up to 10m tin/annum into China during 2017 to 2020.
• BUB consistent prioritised Australian channels through this change, and this is now recognised by partners such as Chemist Warehouse, Coles, Woolworth and others.
• From October 2021 BUB is the clear #2 goat infant formula and #2 organic cow milk infant formula brand in Australian supermarkets and Chemist Warehouse behind Danone’s “Karicare” and Mengniu’s “Bellamy’s” respectively.
• The pay back for wider range of distribution options with differentiated products is lower risk growth and higher margin sales from FY’22F.
• BUB has access to ~12m tins/annum of goat infant formula and only sells ~1.3m tins/annum at the 40% gross margin vs the ~0.5m tin equivalent of 10-20% gross margin products to adults.