Bubs Australia reports strong US sales and rebounding Chinese market

Organic infant formula manufacturer Bubs Australia (ASX: BUB) has reported continued strong performance of its product range in the US market.

The company’s weekly scan revenue has exceeded US$1 million with over 24,000 tins sold, compared to US$750,000 in revenue for the previous quarter.

It retained the position of the best-selling infant formula product on Amazon USA for May, representing a lift in status from sixth place in February.

Sustained demand

Managing director Reg Weine said the company had experienced rapid growth since entering the US market in 2021.

“Pleasingly, we are seeing sustained demand from more than 5,800 bricks-and-mortar retail stores stocking our products,” he said.

“In addition to the rapid growth in physical stores, we are now the best-selling infant formula on Amazon US, a testament to our range of premium, high-quality, clean-label nutritional options that continue to resonate with US parents and healthcare professionals.”

Bubs recently increased its target inventory levels in the US to meet rising demand following last year’s stock shortages.

The demand is expected to provide a strong tailwind for Bubs’ growth in the new financial year.

Chinese rebound

Bubs’ performance in China has rebounded since last year’s distributor fiasco forced it to write off a $25m stockpile of unsold products.

That situation was brought on by deals between the company’s previous executive team and a host of exclusive Chinese business partners, underpinned by a weak go-to-market strategy and a pricing architecture heavily reliant on rebates and discounts.

Bubs said at the time that the ex-factory sales were “below expectations and continue to disappoint”.

The Chinese partners were eventually pursued for payment of $5.65m worth of finished goods delivered in accordance with sales and purchase agreements.

New management team

Since then, the company has installed a new management team, and its online-to-offline (O2O) sales have materialised to the point where it is likely to finish June on a sales high.

Across April and May, 143 new outlets committed to stocking the range of Bubs products via the O2O channel.

Sales of Caprilac adult goat nutrition on Bubs’ T-Mall flagship store have also been strong.

“We are confident that we have now built the ‘go-to-market’ and brand foundations for sustainable growth in the 2025 financial year and beyond and a clear pathway to positive trading EBIT,” Mr Weine said.