Baby food and formula producer Bubs Australia (ASX: BUB) saw its shares jump 10% this morning on the back of a lucrative supply agreement signed with Chinese distributor New Times Asia.
Bubs Australia develops Australian-made premium infant nutritional and goat dairy products which it looks to monetise in both Australia and strong markets overseas; namely China.
Last year, Bubs Australia acquired NuLac Foods giving the company a “pathway to provenance” to become Australia’s only vertically integrated producer of goat milk infant formula, and the largest producer of goat dairy products in the country.
Earlier today, Bubs Australia announced a total sales commitment that included purchase orders valued at $17 million for the 2019 financial year, increasing to $24 million in 2020 and up to $37 million in 2021, as part of the company’s “China expansion strategy” according to Ms Kristy Carr, founder and managing director of Bubs Australia.
New Times Asia is a professional service provider specialising in e-commerce sales and fulfilment in China servicing all major and second tier e-commerce platforms, and already represents many leading global brands, including numerous imported infant formula and milk powder brands.
“The agreement with New Times Asia is a major step forward in our China expansion strategy and shows the investment we have been making and continue to make in building our China presence is bearing fruit,” she said.
As part of the deal, New Times Asia is expected to deliver a range of services for Bubs in including sales, account management, operations, fulfilment, logistics, payment, cash flow management, customer service, digital content production and marketing activities.
The deal also sees New Times Asia committing to purchasing a minimum volume of products from Bubs Australia, but the ASX-listed producer did say that it “maintains flexibility should New Times Asia not meet agreed performance measures.”
“Based on our annualised run rate of Bubs and CapriLac combined trading, the committed FY19 offtake by New Times Asia will be at least double our total company net sales revenue. We will now be well positioned to reach and suitably manage many new e-commerce channels in China,” said Ms Carr.
“We are very pleased to partner with Bubs Australia. Bubs and CapriLac are very strong and trusted Australian brands. We are confident we can quickly build brand awareness and consumer demand for Bubs in China given the trend for premiumisation as reflected in the rapid growth of specialised formula, goat milk and organics,” said Mr Michael Deng, founder and CEO of New Times Asia.