Organic baby food maker Bubs Australia (ASX: BUB) has struck a new supply agreement with Woolworths (ASX: WOW), Australia’s largest supermarket retailer, which is expected to “materially” boost the company’s domestic revenues.
In a statement to the market this morning, Bubs said that it had updated its existing agreement with Woolworths that’s seen its product stocked at 120 stores across Australia.
The updated agreement effectively validates Bubs’ products because Woolworths will now offer the entire range of eight infant formula products across a targeted selection of its 700-strong national store network.
Under the new agreement, all three stages of Bubs’ goat milk infant formula store representation will increase more than threefold to 400 stores.
The “substantial expansion” of the Bubs portfolio will also be supported by a strong campaign in Woolworths media, as well as a multi-media consumer brand campaign launching in March, including TV, outdoor, digital and social media.
Bubs’ founder and chief executive officer Kristy Carr declared that the deal will have the effect of more than doubling the company’s shelf space exposure and retail points of distribution across the Australian grocery retail sector and is expected to create a significant uplift in domestic sales volume.
Bigger and better
Ms Carr said a key element of the Bubs’ growth strategy is to extend its relationship with families beyond the infant formula segment through to toddler and junior nutrition products.
The company has extended its addressable market beyond goat milk into the “much larger” cow’s milk market, with the most recent product launched being Bubs Organic 365 days grass-fed infant formula range, which it says was developed with a super-premium formulation, including both prebiotics and probiotics.
In-store implementation of Bubs Organic grass-fed infant formula will commence in March this year with full distribution to be completed by the end of May.
Furthermore, the agreement announced today also secures ranging for Bubs new junior nutrition range to be sold in 100 premium Woolworths stores.
The Australian launch coincides with the launch of a registered China label equivalent Goat Junior Nutrition product with Lactoferrin, to be sold in Mother and Baby stores in China.
The Junior Nutrition category in China is worth an estimated $1 billion and has experienced double digit growth since 2017.
“This is a major vote of confidence in Bubs based on strong performance in stores where we have been represented for the last two years, and an increasing demand for premium infant formula products across the Woolworths network generally, particularly in the super-premium goat and organic milk segments,” Ms Carr said.
“This significant expansion of our all-Australian manufactured product lines is now validated with our increased presence in Woolworths and is a significant step-change for our business,” she added.