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The Bubs share price dropped 11.5% lower today

James Mickleboro
13 May 2019




The Bubs Australia Ltd (ASX: BUB) share price has had a disappointing start to the week.
The infant formula and baby food company’s shares fell as much as 11.5% to $1.25 this afternoon.
They have since rebounded a touch but are still down 9.5% to $1.28 at the time of writing.
Why did the Bubs share price drop 11.5% lower today?


With no news out of the company or broker notes that I’m aware of, today’s decline appears to be a case of profit taking from some investors following an impressive share price rally in 2019.


Prior to today, the Bubs share price had gained a remarkable 208% since the start of the year, making it the third-best performer on the All Ordinaries index behind medical technology company Avita Medical Ltd (ASX: AVH) and payments company Zip Co Ltd (ASX: Z1P).

Why has the Bubs share price been on fire in 2019?


Bubs has caught the eye of investors this year following a series of announcements, many of which have been made in recent weeks.

One key announcement was the acquisition of Australia Deloraine Dairy for $35 million in cash and shares. Australia Deloraine Dairy is a CNCA approved infant formula manufacturing facility.

According to the company’s CEO and founder, Kristy Carr, the acquisition is expected to lead to a material reduction in production costs, as well as placing Bubs in the best possible position to achieve SAMR brand registration.

The latter will allow the company to export its infant formula products to China to be sold in physical Mother and Baby stores alongside A2 Milk Company Ltd (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL).

Another key announcement was an agreement with the Chemist Warehouse Retail Group to form a four-year strategic alliance relating to the sale and promotion of its products in Chemist Warehouse stores.
The agreement is due to commence in June and will see Bubs products sold across Chemist Warehouse retail stores throughout Australia, including its domestic and Tmall online stores.

And finally, the recent announcement of the company’s expansion into cow milk infant formula also drove its share price higher.

Bubs expanded into cow milk infant formula after entering into a supply agreement with Fonterra Australia (ASX: FSF) to produce Bubs Organic new infant formula range. This agreement will make Bubs the first company to offer Australian made certified organic grass-fed cow milk infant formula.

Management advised that the new product range is expected to be available in Chemist Warehouse pharmacies across Australia within three months. After which, the company plans to make it available for export through China’s cross-border eCommerce channel.

Kristy Carr believes this product has a lot of potential. She said: “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.”