Under the proposed plans, Bubs will supply its infant formula and organic baby food products to Beingmate's distribution network, covering 30,000 stores. The proposal, due to be completed next month, will see a JV company set up in Shanghai.
At present, Bubs is selling its organic baby food products in around 500 stores in China, while its infant formula is sold in China via cross-border e-commerce (CBEC) and other online-to-offline platforms.
It also owns the largest number of registered infant formula brands in China, including 17 sub-brands and 51 product lines that are successfully registered with the State Administration for Market Regulation and physically distributed throughout China.
“Beingmate’s extensive infrastructure, local knowledge, regulatory expertise and extensive domestic distribution footprint, coupled with Bubs unique premium international offering, will have the capacity to transform our business,” Bubs Founder and CEO Kristy Carr said in a statement to ASX.
“Beingmate is particularly strong in driving distribution via China’s lower tier cities which are benefiting from China’s new multi-child family policy, and so there are higher expectations for addressable market growth than in the tier 1 cities where the costs to entry are high,” she said.
China is a crucial engine of growth for Bubs. Last year, Bubs said its sales growth skyrocketed by 531%, which was due to a 644% increase in export sales to China.
In the past few months, it has also embarked on a number of partnerships with Chinese distributors.
For example, it signed a supply agreement with New Times Asia, a China-based supply chain and service provider, following previous supply agreements with JD.com and QianJiaWanPu, to further expand its sales channels in June last year.
Benefits for Beingmate
Beingmate said that the partnership with Bubs would serve to foster new areas of growth and elevate its market standing in the infant food industry.
“We believe there is a terrific opportunity for Bubs to capture a material share of the super-premium infant formula and organic infant food sectors, both of which are experiencing rapid growth in China,” CEO Bao Xiufei said.
“In particular, Chinese parents are attracted to ‘clean and green’ infant nutrition products for which Australia has an enviable reputation,” he added.
In its latest financial report, Beingmate said its total revenue dropped 6.92% to reach RMB$2.4bn (US$369m) while operating profit jumped 106% to reach RMB$60m (US$9m).