Bubs Australia wants to grow up to be like $8b market dynamo A2 Milk

Nick Simms said on Wednesday that Bubs was still in the very early stages, but aimed to emulate much bigger infant formula and specialist milk rival A2 Milk in building a substantial business.
«I think any player in the infant formula space would love to be able to share in a journey like what they [A2 Milk] have experienced,» Mr Simms said. «That’s obviously somewhere we aspire to be,» he said. A2 Milk has turned into an $8 billion company through strong growth from its specialist milk and A2 Platinum infant formula brand.
But he emphasised that the development of the Bubs business was in its formative stages still. «We are just at the starting blocks».
Bubs on Wednesday revealed in its first-half results that the goodwill component of the $80 million acquisition of NuLac Foods announced in early November was a hefty $72 million. Bubs took ownership of the goat’s milk business on December 20 along with a 49.9 per cent stake in goat milk processing businesses in Australia and New Zealand, and a milk processing facility in Keysborough in Victoria.
«Certainly, goat’s milk operations of that scale are not common. For us it’s a matter of securing the core ingredients,» Mr Simms said.
Internal milestones
He was speaking as Bubs unveiled its first-half results for 2017-18, which showed a net loss of $3.9 million and that sales revenue had risen by 87 per cent to $3.3 million. The NuLac acquisition substantially expands the product portfolio, which had previously been centred on the Bubs range of infant formula and organic baby food products. Bubs shares were down 10 per cent on Wednesday in early afternoon trading to 85¢, but were at 20¢ a year ago.
Mr Simms said Bubs had internal milestones set out, but he declined to say when Bubs might start trading in the black. «I wouldn’t want to put a time stamp on it,» he said.
Bubs has just struck a deal to be on the shelves of some Woolworths supermarkets where demand is strong from families with babies, and is also part way through a trial with Aldi in about 100 stores for a range of CapriLac fresh goat’s milk. Bubs products are also in 504 Coles supermarkets. Mr Simms said 13 per cent of overall sales were to China through cross-border e-commerce channels.
The NuLac acquisition gave the company exclusive access to 6.2 million litres of milk annually from 8500 goats in Australia and New Zealand, along with ownership of the CapriLac range of goat dairy products including yoghurt, milk and milk powder and the Coach House Dairy brands.
It undertook an institutional placement priced at 60¢ per share to raise $15 million as part of the funding.
Bubs undertook a backdoor listing in January, 2017 through the shell of Hillcrest Litigation Services, raising $5.2 million at an issue price of 10¢ per share.
Also on Wednesday, Wattle Health, another junior infant formula company with big ambitions but tiny revenues, reported a $13 million bottom-line loss for the first half of 2017-18 with revenues up 18 per cent to $661,261. Wattle said the bottom-line loss included a share-based payment expense resulting from the issue of loan-funded shares and options amounting to $9.6 million. Wattle shares slipped 8 per cent to $2.55 by 2pm on Wednesday. Wattle listed on the ASX after a float in March last year with an issue price of 20¢.
By: Simon Evans
Source: The Australian Financial Review
Link: http://www.afr.com/business/health/bubs-australia-wants-to-grow-up-to-be-like-8b-market-dynamo-a2-milk-20180227-h0wqie