From daigou to in-market distribution: Formula firm Bubs seals another major China supply deal
This follows its international supply agreement with JD.com and distribution agreement with Chinese distributor QianJiaWanPu Co. Ltd earlier this year. QianJiaWanPu supplies 80,000 (about 90% of all) Mother & Baby stores China.
With these deals, Bubs will serve the China market through cross-border e-commerce sales and via daigou shoppers, who buy in Australia and ship back to China to sell.
However, as we recently reported, daigou demand has been leading to product shortages in Australia, fuelling consumer unrest.
Through this latest deal, Bubs Australia will supply Bubs and CapriLac goat milk infant products to 20 Chinese e-commerce platforms.
It aims to achieve AU$17 million sales next year, at least a 100% increase from its current business sales revenue. It also hopes to achieve a minimum sales commitment of AU$37 million sales in 2021.
The new deal opens up cooperation with more Chinese e-commerce platforms, including Suning, Jumei, Mia, BeiBei, Baby Tree and MamaGo, adding to its existing partnerships with JD.com, Kaola.com, VIP.com and RED.
According to its annual report, Bubs Australia's revenue has been rising steadily over the past few years. Revenue increased from AU$1.13 million in 2014 to $3.65 million in 2016, and AU$3.94 million last year.
To hit the supply and production target, it is looking to increase its number of herds by cooperating with other farms.
"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," said Kristy Carr, founder and managing director of Bubs Australia.
While New Times Asia has committed to purchasing minimum volumes of products, Carr said Bubs Australia will maintain flexibility if New Times Asia is unable to meet its performance targets.
This new arrangement is an extension of Bubs Australia's business strategy in China.
Commenting on the partnership, Michael Deng, founder and CEO of New Times Asia, said the company is "very pleased" and that "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."
Last year, Bubs Australia purchased NuLac Foods for $39 million to further its plans for the infant and adult goat milk product markets in Australia and China.
The deal gave Bubs exclusive access to 6.2 million litres of milk yearly from 8,500 goats in Australia and New Zealand.