Bubs plans to start manufacturing its goat's milk infant formula in China and acquire a stake in a Chinese factory to counter Beijing’s increased regulatory tightening and growing hostility towards Australian products.
Bubs announced on Monday it had signed a memorandum of understanding with Chinese infant formula giant Beingmate to start the Chinese manufacturing of infant formula used from Australian sourced goats milk.
The strategy is at odds with the seemingly insatiable appetite from Chinese parents for foreign infant formula, particularly from Australia and New Zealand, which has a clean and green image. Memories are still fresh from a 2008 scandal, in which a Chinese-produced infant formula was contaminated with melamine, killing six babies and putting another 54,000 in hospital.
But Bubs chief executive Kristy Carr said China had tightened regulations around the sale of infant formula, which involved limiting the number of brands available via accreditation from the State Administration for Market Regulation (SAMR).
“Since April 2019, 92 product applications have been successful in obtaining SAMR registration. Of these, 77 are manufactured in China. Of the 15 products that are manufactured outside of China, nine are Chinese-owned brands manufactured in France,” Ms Carr said.
“The only international brand to achieve certification during this period was Wyeth for six products manufactured in Singapore.”
READ MORE:Bubs recruits Hawkins as China sales soar|No sign of Chinese boycott: Bubs|Bubs surge after record revenueMs Carr said the strategy also aimed to combat China’s increased targeting of Australian brands, following Prime Minister Scott Morrison’s push for an inquiry into the origins of COVID-19.
Already Beijing has imposed a punitive 80 per cent tariff on Australian barley, suspended imports from Queensland abattoirs and last week began an anti-dumping investigation into Australian wine.
Speculation is mounting that China will soon target milk powder, which has delivered many Australian infant nutrition brands riches in the 12 year’s since the melamine scandal.
“Given the current geopolitical 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 $55bn,” Ms Carr said.
“Under our proposed manufacturing arrangement, Bubs China label goat milk infant formula will be produced in Beingmate’s certification accreditation administration of the People‘s Republic of China certified infant formula production facility in Beihai and be positioned as a premium product targeting China’s lower-tier cities.
“Beingmate has already had great success for many years driving distribution of their 51 registered infant formula products across their 30,000 strong mother and baby store network.”
Ms Carr said under the MoU with Beingmate, Bubs would also acquire an ownership interest in Beingmate’s infant formula factory at Beihai in China, and obtain Beingmate‘s crucial support in securing SAMR registration.
“We are confident this collaboration gives us the best opportunity to secure SAMR brand registration and accelerate our prospects of full market access in the shortest possible time frame,” Ms Carr said.
“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 per cent Bubs Australian goat milk.”
Bubs Australia's goat milk infant formula. Picture: PETER HEMPHILL
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