‘Very distressed’: Bubs founder says investor concern prompted serious action

The founder and ousted chief executive of infant formula maker Bubs Australia says mum and dad investors share the same concerns about the direction of the company as the major shareholders backing her attempt to spill the board.

Kristy Carr and a group of the ASX-listed company’s largest holders including Chemist Warehouse founder Jack Gance have not held back as a stoush with the company’s current management reaches boiling point.

Ousted Bubs CEO Kristy Carr and then-chair Dennis Lin in 2021.Credit: Dominic Lorrimer

Badging themselves the “Save Our Bubs” group, the concerned investors accuse Bubs’ current board of trying to take over the company “by stealth” and say the current directors lack the relevant experience in the infant formula industry.

Carr told this masthead that investors of all kinds were blindsided by the board’s decision to terminate her as chief executive earlier this month. 

“There is a big retail investor base on our register - many mums that love Bubs and retirees that have supported me in creating an Australian brand,” she said.

“There are also over 15,000 Australian Chinese shareholders, many involved in the daigou market. They see potential in Bubs’ future - a lot of them also reached out to us, very distressed about the current board’s actions.”

The concerned shareholders say the board’s decision to oust Carr and former executive chairman Dennis Lin has left the company without a coherent strategy, particularly in the critical and challenging China market.

But in a trading update on Friday the current management, which has the support of the group’s largest shareholder, Alibaba-backed C2 Capital, defended itself, saying it was working hard to improve distribution and sell-through of the company’s products in China.

The company said product sales into China remained below expectations in April and May, but that C2 Capital’s Jackie Lin had the right qualifications to lead a strategic review into Bubs’ China operations.

“The Company has already made significant progress on right sizing the cost base supporting the China business and resetting the China strategy with a view to creating a truly diversified multichannel approach,” the company said.

Kristy Carr speaks to US President Joe Biden in 2022.Credit: Bloomberg

Central to the tensions at Bubs is the performance of an exclusive distribution deal that Bubs inked for sales into China with AZ Global for a product called “Bubs Supreme”. AZ Global hasn’t sold all of the $50 million worth of product assigned to it, and the excess inventory in the market is creating a challenge for Bubs’ China sales targets.

But the Carr camp has high hopes they will be successful at persuading these investors to vote in favour of a spill and a switch to new management at Bubs, including installing former boss of A2 Milk in Asia, Peter Nathan, as the company’s new chief executive.

“I wouldn’t press the green light if I wasn’t confident,” Carr said of her campaign to overhaul the business she founded 18 years ago from the outside. Carr is the company’s fourth-largest shareholder.

The first hints of relationships souring at Bubs emerged in April, when then-chair Dennis Lin was demoted from his executive chairman role to non-executive director. In a sign of support for Lin, Carr took to LinkedIn to call him the “smartest, most strategic person” she ever met. She then started a period of personal leave.

On May 10, the Bubs board told investors it had terminated Carr’s position as chief executive, due to “failure to comply with reasonable board directions”.

The tensions haven’t helped the company’s share price, which closed at 18 cents on Thursday, at its lowest point so far this year. The stock has declined by close to 70 per cent over the past 12 months.

In a statement to the ASX on Friday, Bubs Australia confirmed it had received a request for the directors to hold a general meeting, from shareholders who hold around 5.04 per cent of the company.

“Under the terms of the Corporations Act, the company must call a meeting within 21 days of receiving the request, and hold the meeting within two months.”

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