Organic baby food maker Bubs Australia (ASX: BUB) has set its sights on the Vietnamese market after securing a deal with the country’s largest mother and baby store chain, Bibo Mart JS.
The chain currently operates more than 135 stores across Vietnam and focuses on providing products for mothers through pregnancy and for children aged zero-to-six years old.
Its stores are predominantly located in metropolitan areas which are expected to place Bubs’ product range at the forefront of most heightened demand and consumers with the highest disposable incomes.
In the lead-up to today’s announcement, Bubs signed a master distribution agreement with Viet Nam TVV Service, one of the largest Vietnamese-owned distributors within Vietnam’s infant nutrition industry earlier this month.
Viet Nam TVV has agreed to distribute and promote Bubs goat milk infant formula and organic baby food products to its distribution network throughout Vietnam and has confirmed that Bubs products will be made available to consumers at Bibo Mart and other Vietnamese store shelves as of next month.
The deal paved the way for Bubs to secure distribution access to an extensive network of around 20,000 retail outlets in Asia and placed Bubs on a direct route to courting an Asian market that is particularly enamoured with high-quality Australian-made consumable products.
In Vietnam, specifically, the market for infant nutrition is estimated to be worth around 33.6 trillion Vietnamese dong (A$2.2 billion) annually and has been growing at a compound growth rate of 7.7% per year for the past five years.
Moreover, within the country’s infant nutrition sector, the infant milk formula category is valued at 28 trillion Vietnamese dong (A$1.8 billion) – a huge market in which Bubs Australia wants to make inroads.
“This new partnership with TVV and ranging in Bibo Mart marks the achievement of another milestone for the Bubs’ business, expanding our Asian footprint in one of the region’s fastest growth markets in the infant category,” said Bubs founder Kristy Carr.
Growing infant formula empire
Mrs Carr founded the company in 2006 from her very own kitchen on Sydney’s northern beaches when she was a mum-of-three.
In the 13 years since, the market for premium organic baby food has undergone consistent expansion with the Asian export market showing most bountiful growth.
At the same time, Bubs has grown from being a small start-up to Australia’s largest producer of goat milk products and wielding exclusive milk supply agreement from the largest milking goat herds in the country.
As validation of the company’s quality products and effective growth strategy, Bubs was recently awarded the 2019 Premier’s NSW Exporter to Asia Award.
Bubs’ products have so far been well received across multiple markets worldwide including China where the Australian company a strategic channel partnership with China’s premier baby retailer Kidswant. Furthermore, its products are also sold across South East Asia and the Middle East.
“We are honoured to be partnering with TVV’s team and draw on their experience within Vietnam’s infant nutrition category, as well as being selected for ranging across the Bibo Mart store network, which is well known as the country’s flagship baby retailer,” said Mrs Carr.
Bubs declared that its conservative revenue projection foresees its Vietnamese sales to reach A$1.5 million in the first year and then grow to “at least A$2 million” by the second year.
The company also said that the two-year contract term may be terminated if minimum sales targets are not met.
However, TVV’s founder and chief executive officer Ms Van Ngo hinted that hitting sales target is unlikely to be a problem.
“We particularly see enormous potential in Bubs goat milk infant formula for the Vietnam market,” she said.
“Our long-standing business relationships with baby retailers in Vietnam, including Bibo Mart, Kids Plaza and Tuticare, will certainly benefit Bubs as we work together to expand its portfolio representation across Vietnam,” she added.
This morning’s news helped Bubs shares to record a 2.8% gain to $1.10 after market open.