COVID-19 disruption: Bubs’ gross revenue in China down 66% in Q2, new sales channel delayed
The shrinking revenue from China was, however, offset by the firm’s expansion in the domestic market and the US.
The company reported its Q2 quarterly activities for FY23 with the Australian Securities Exchange (ASX) on January 31.
Group gross revenue was down 28 per cent to AUD$14.3m (US$10m).
In contrast to the decline seen in China, the domestic market Australian market grew 28 per cent in gross revenue and has become the largest engine of revenue for Bubs, contributing 42 per cent of its quarterly sales.
The international markets, including the US, saw gross revenue rise by 26 per cent.
These markets have also formed the second largest revenue stream for Bubs, contributing 30 per cent of the firm’s quarterly sales.
China, on the other hand, reported a 66 per cent drop in gross revenue and accounted for 28 per cent of the firm’s quarterly sales.
The country’s now abandoned COVID-zero policy had adversely affected channel dynamics and consumers’ purchasing activities, said Bubs.
“China’s prolonged lockdowns during the quarter delayed our transition to Bubs’ new ‘Manufacturer to Consumer’ model in partnership with AZ Global, as we continue to sell through initial pipe-fill orders from previous quarters, leading to a 66 per cent fall in gross revenues as compared to the prior corresponding period,” Kristy Carr, founder and CEO said.
The M2C model taps on a re-engineered Daigou channel, where Bubs Infant Formula is delivered tax-cleared from bonded warehouses in China. The embedded sales and inventory system is also said to provide channel movement visibility.
Following China’s border reopening and easing of COVID-19 policies, the company expects to expand its M2C distribution across online-to-offline (O2O) stores in China.
Permanent access to the US market
Elsewhere in the US, Bubs said that six of its infant formulas existing in the country would be available for the long term.
Bubs made several headlines last year for becoming the first Australia infant formula manufacturer to enter the US market amid country-wide infant formula shortage.
The six products consist of organic, A2 beta-casein protein, and goat milk-based stage 1 and 2 infant formulas.
“In what was in effect a closed market controlled by a few multinational corporations, our expedited permanent regulatory pathway into the United States has been confirmed by the Food and Drugs Administration (FDA) in a ‘Letter of Acknowledgement’ received on 20 December 2022.
“The Letter of Acknowledgement recognises Bubs’ commitment to, and capability to comply with, the FDA’s requisites for permanent access for all six Bubs Infant Formula products by October 2025.”
The firm has so far shipped over one million tins to the US and the products are sold in over 6,500 stores, including supermarket chains Walmart, Target, pharmacies, baby and health food chains. The products are also sold online in Amazon.