The Bubs Australia Ltd (ASX: BUB) share price will be on watch on Monday after the goat milk infant formula company released another positive announcement.
What was announced?
This morning Bubs announced that it has entered into a supply agreement with Fonterra Australia (ASX: FSF) to produce Bubs Organic new infant formula range. This will make Bubs the first company to offer Australian made certified organic grass-fed infant formula.
According to the release, Fonterra will supply Bubs with organic milk powder, sourced from its organic milk pool in New Zealand, which will be manufactured at its facility in Darnum, Victoria. The conditional supply agreement runs for an initial term until July 31 2021.
Furthermore, the company advised that the product range will be available in Chemist Warehouse pharmacies across Australia within 3 months. After which, the company plans to make it available for export through China's cross-border eCommerce channel.
Another positive is that the company's recent acquisition of CNCA approved infant formula manufacturing facility, Australia Deloraine Dairy, means management can transfer an existing technical application for an organic cow milk formula submitted to SAMR in April 2018 to its new Bubs Organic brand. Once the product is approved by SAMR, it will be able to be sold in China's Mother and Baby stores.
Bubs founder and CEO, Kristy Carr, believes this product has significant potential.
She said: "Super premium product offerings are the fastest growing segment of the infant formula category, and we are now able to offer two nutritional options – organic and goat, to suit individual dietary needs – tapping into the global consumer trend towards natural, sustainable and organic food production."
Carr added: "Cow milk formula accounts for close to 95 percent of the Australian formula market and represents a significant opportunity for Bubs, which already has both a premium Australian infant nutrition brand positioning and strong organic credentials established over 13 years producing Bubs Organic baby food portfolio."
Should you invest?
I think this is a great move by the company and gives it a greater chance of competing with the likes of A2 Milk Company Ltd (ASX: A2M) and Bellamy's Australia Ltd (ASX: BAL) in China.
Whilst I'm still not a buyer of its shares on valuation grounds, I do think it could have a very bright future if its products resonate well with Chinese consumers.
