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3 reasons why the Bubs (ASX:BUB) share price could be a buy

Bubs could be a good pick for a few different reasons.
The post 3 reasons why the Bubs (ASX:BUB) share price could be a buy appeared first on The Motley Fool Australia. –

The Bubs Australia Ltd (ASX: BUB) share price might be a good business to think about for a few different reasons. It’s up 5% today.

Bubs sells a number of different products including goat milk formula, cow milk formula, vitamins, cereal and other food for young children. It also sells goat milk products through the Caprilac brand.

Here are three reasons why the Bubs share price could be one to think about:

Growth in Australian retailers

Bubs is seeing increasing brand share in Australia. It remains the fastest growing infant formula manufacturer across Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL) and Chemist Warehouse. In the third quarter of FY21, it saw brand retail scan sales growth of 37%.

It was the number one goat formula brand in Chemist Warehouse during the quarter. Bubs total scan sales in Woolworths were up 436%.

Bubs’ distribution in supermarkets and pharmacies in Australia continues to increase. For example, it recently increased its distribution to Coles stores to more than 700.

China child policy changes and growth

China – one of the world’s biggest markets for infant formula – recently changed its child policy to allow people to have three children rather than two. This may (or may not) lead to an overall increase in demand for infant formula.

Bubs said that it’s seeing accelerated growth in China. Bubs’ third quarter cross-border e-commerce (CBEC) offtake sales increased 60% year on year across the top-tier platforms in China. CapriLac CBEC third quarter offtake sales increased 175%.

Caprilac remains the number one top selling brand with nearly 80% market share on Tmall Global.

Total China export sales were up 28% quarter on quarter. Bubs infant formula CBEC sales were up 47% quarter on quarter.

International growth

Bubs is pursuing international growth in a number of countries.

The company said that it continues to build its presence in Malaysia and Vietnam. Bubs also said that it is progressed with registration in South Korea and Redmart in Singapore, with first shipments for both markets expected to be delivered in the fourth quarter of FY21.

Bubs also just announced that it’s launching into the USA formula market, it’s going to sell on Walmart.com. It will include a bi-lingual English and Hispanic label product. It will also launch on Amazon.com in the USA.

In the US, its supply chain infrastructure is in place. It’s aiming to commence its expansion of retail distribution with a US broker appoint, including a national network of sales agent companies selected as exclusive sales representatives across the US.

Bubs believes that the US market for infant milk formula is worth over US$5 billion annually. Selling through the websites of Walmart and Amazon gives it immediate scale access to the market, according to management.

The post 3 reasons why the Bubs (ASX:BUB) share price could be a buy appeared first on The Motley Fool Australia.

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More reading

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Bubs (ASX:BUB) share price explodes 17% on US launch
The Bubs (ASX:BUB) share price is down 35% in 2021
US on brink of passing massive anti-China law

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BUBS AUST FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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