With trade tensions between Australia and China bubbling, dairy products company Bubs Australia (ASX: BUB) has mitigated their potential risk exposure through an agreement with China-based Beingmate which will package and mass distribute their 100% Australian goats milk formula.
In particular, the collaboration will seek a State Administration for Market Regulation (SAMR) brand slot which would enable faster and fuller access to China’s General Trade Channel including the 30,000 Mother and Baby stores in Beingmate’s distribution network.
Under the agreement, Bubs would supply raw products to Beingmate’s certified manufacturing facilities where the Chinese company would then manufacture the 100% Australian goat milk products in line with Chinese regulatory standards, enabling greater access to local markets than if end products are imported directly from Australia.
“Given the current geo-political landscape and regulatory risks, this breakthrough localisation strategy for a ‘Created by Bubs’ product to be packed in China exclusively from our own Australian premium goat milk mitigates key risks and provides a secure pathway to gaining full access to the world’s largest and fastest growing Infant Formula market, valued at A$55 billion,” said Bubs Founder and CEO, Kristy Carr.
“Importantly this new localisation strategy would provide Bubs with exclusive use of a China domestic SAMR brand slot and partial ownership in a registered facility in China, whilst fully retaining IP ownership of the Bubs brand and of eventual product proprietary formulations, which will be based on 100% Bubs Australian goat milk.”
“Now, more than ever, Chinese consumers are seeking premium quality health and nutrition products, especially for their children, with food safety integrity at the forefront of their purchase decisions.”
“As we have witnessed in our home-market, there is also growing consumer sentiment in China towards pride in purchasing domestically produced products with local relevance.”
As part of their localisation strategy to continue mitigating business risks associated with international trade, Bubs intends to acquire an ownership interest in Beingmate’s facility located in Beihai, China.
The partnership has been further flagged by Bubs as the cornerstone of their market localisation strategy which will provide insight into the new supply chain process where similar agreements may be sought in other countries down the track. Although products will be manufactured in China by Beingmate, which has 51 other infant formula products under 17 brands registered by SAMR, Bubs will retain full ownership and IP of Bubs China formulations.
Confirmation of the new agreement with Beingmate comes a month after Bubs appointed former Miss Universe, Jennifer Hawkins as the Company’s global brand ambassador across all international markets.
Founded in 1992 and listed on the Shenzhen Stock Exchange in 2011, Beingmate has a market capitalisation of approximately AUD$ 1.1 billion with five manufacturing facilities throughout China.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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