Bubs partners with Fonterra to make Australia’s first organic grass-fed infant formula

Quick on the heels of announcing growth revenue figures in excess of $11 million, Bubs Australia (ASX: BUB) has confirmed the company will be the first to produce Australian-made organic grass-fed infant formula.

The infant formula producer said that it has entered into a long-term supply and manufacturing agreement with Fonterra Australia to produce its news formula range called Bubs Organic.

The deal represents a significant coup of Bubs given that Fonterra Australia is a multinational dairy co-operative owned by around 10,500 New Zealand farmers and is currently New Zealand’s largest company by revenue.

The company is responsible for approximately 30% of the world’s dairy exports and generated annual revenues in the region of NZ$17 billion (A$16 billion) per year.

The supply agreement is conditional and will initially run until 31 July 2021. According to the terms of the deal, Fonterra will supply Bubs with organic milk powder, sourced from its organic milk pool in New Zealand, which will be manufactured at its facility in Darnum, Victoria.

In recent months, Bubs has established itself as a key player in the goat dairy infant formula sector in Australia and made significant inroads into China.

The gradual expansion of its product range, as well as geographic operations, means that the company is now in a position to be the first to offer a certified organic grass-fed infant formula with both prebiotics and probiotics, in addition to Omega-3 DHA and Omega-6 ARA.

As an indicator of its growing market presence and incremental success within its market niche, Bubs Australia published figures that would have pleased its shareholders as part of the company’s quarterly financial results.

Bubs generated $11.4 million in gross revenue for the March quarter 2019 and had set a company record for quarterly gross revenue. So far in this financial year, Bubs reported it had generated a revenue figure of $32.9 million.

“Continued strong sales momentum provides a foundation for the Deloraine acquisition and new strategic alliances with Beingmate, C2 Capital Partners and Chemist Warehouse,” the company said.

Fonterra partnership

In terms of distribution, Bubs said it will make Bubs Organic available via Chemist Warehouse pharmacies throughout Australia in the coming three months, thereby expanding on an existing four-year strategic alliance.

The distribution agreement will see Bubs products sold across Chemist Warehouse retail stores throughout Australia from 1 June 2019, including its domestic and Tmall online stores.

Chemist Warehouse is currently Australia’s largest pharmacy chain network by total sales, with over 450 franchised stores throughout Australia and New Zealand.

Bubs products are also sold in major supermarkets and other pharmacy chains throughout Australia, as well as exported to New Zealand, China, South East Asia, and the Middle East.

Furthermore, the new infant formula will soon be made available for export to China’s cross-border eCommerce channel.

In parallel with its partnership with Fonterra, Bubs also intends to transfer an existing technical application for an organic cow milk formula submitted to SAMR earlier this year.

Bubs recently acquired Australia Deloraine Dairy, an infant formula manufacturing facility, with impending approval likely to mean that Bubs will commence production at the plant.

In effect, this could mean that the new range of infant formula may be physically distributed to China’s Mother and Baby stores in the near term.

“Super-premium product offerings are the fastest growing segment of the infant formula category, and we are now able to offer two nutritional options – organic and goat, to suit individual dietary needs – tapping into the global consumer trend towards natural, sustainable and organic food production,” said Mrs Kristy Carr, Bubs Australia founder and chief executive officer.

Mrs Carr added that “cow milk formula accounts for close to 95% of the Australian formula market and represents a significant opportunity for Bubs, which already has both a premium Australian infant nutrition brand positioning and strong organic credentials established over 13 years producing Bubs Organic baby food portfolio.”