VW is made and sold locally in China. As are a few other big, multi-national companies' products. Snickers, Mars bars, etc. It works when the brand is internationally recognised, is a household name in China, and a good reputation for quality. Chinese people trust that the local product will be made to the same standards because it carries the company name.
Bubs doesn't have any of this. It has a very small footprint in China. In my opinion its only chance to grow is to leverage its Australian made origins, not by producing a Chinese version of the product (yet).
There's also a risk in dealing with the local company which, under Chinese law, must be the majority shareholder in the joint venture. And good luck getting legal protection in China if things go bad. Foreign companies in China are also struggling to repatriate money earned in China since the government isn't keen on allowing dollars to leave their banking system. I feel this announcement increases the long term risk for Bubs.
However, the share price should increase nicely today which is great news for patient investors here.
BUB Price at posting:
92.5¢ Sentiment: None Disclosure: Not Held
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