In the heat of a bitter battle with founder Kristy Carr and...

In the heat of a bitter battle with founder Kristy Carr and facing a shareholder revolt infant formula play Bubs had little choice but to attempt a reset.

However the release of a five-point plan to become cashflow positive and profitable by 2025 relies on a lot going right.

It also a leap of faith for shareholders, given the company needs a new chief executive, a full-time chief financial officer, a stable board and supportive investor base.

The broader environment is too working against Bubs where costs are rising and US economy where it has pinned much of its hope is verging on a recession.Bubs Co-founder and former chief executive Kristy Carr is part of efforts to secure a boardroom coup.

Bubs Co-founder and former chief executive Kristy Carr is part of efforts to secure a boardroom coup.

Carr and former executive chairman Dennis Lin were ejected from the company in recent months under claims by the current board of governance issues and a collapse in revenue from its much heralded China push.The part are now orchestrating a boardroom spill of the infant formula company’s board and have secured enough support for an extraordinary general meeting set down for later this month. Part of their plan is to install former A2 milk boss Peter Nathan as Bubs CEO.

New Bubs boss axes ‘made in China’ dealBubs search for a new CEO has been paused ahead of this month’s EGM with the process to resume after the vote.Bubs early Thursday released the results of a two-month strategic review that following the exit of Lim, but this has conveniently become electoral pitch to support of Bub’s current board under new chair Katrina Rathie. That review had been led by independent director Reg Weine win input from advisers Kidder Williams.The key pitch is under the previous regime Bubs has accumulated losses of $240m and has been a serial capital raises going back to the market at least seven times. For those tipping more funds in this has seen the value of their investment imploded by as much as 80 per cent.

Key to the way forward is a bigger pivot to US premium market with Bub’s now hitting $1m in monthly sales over the Amazon platform. There is also interest from retailers in what Bub’s estimates to be a $US600m opportunity in the premium end of the infant formula market.Of course entry into the US all hinges on getting permanent access to the market with an approval process underway with the Food & Drug Administration. The outcome of this may not be known until later 2025.Other areas slated for change include a reset in the troubled China market where Bubs plans to pivot back to its core of goat infant formula from the A2 milk strain.

Elsewhere it needs to leverage the Alibaba e-commerce platform but Weine was clear that Alibaba (also a shareholder in Bubs) was but one a many channels to grow in China.At the same time Bubs is exploring private label manufacturing with its high tech canning plant outside Melbourne is running at just a third of capacity.Other areas include cutting cash burn and lowering annual operating expenses by around $10m. The plan is to hit cashflow positive by the June quarter of 2025.
On the current outlook Weine says Bubs has 12 months of funding in place to support is growth plans. This suggests if Bubs’ plans fall short it will have to return to market at some point.All this could be a moot point with the direction of the company hinging on the fate of a vote. Until then shareholders are not closer to finding their way through the mess.

[email protected] JOHNSTON ASSOCIATE EDITOREric Johnston is an associate editor of The Australian. He has more than 25 years experience as a finance journalist, including a former business editor of The Australian. He has been business editor of The Sydney ... Read more