China-owned Bellamy’s gets US formula supply nod; Bubs bags Target order

The US formula shortage crisis has delivered a win for China Mengniu Dairy Company, which can now supply its Aussie-made Bellamy’s products in the market.

China Mengniu Dairy Company’s Bellamy’s products are still made in Australia. Picture: Peter Hemphill

Aussie-made Bellamy’s infant formula products are the latest to gain approval from US President Joe Biden’s administration to be sold locally to meet a national shortage, making China Mengniu Dairy Company the first partially state-owned Chinese entity to gain direct shelf spot due to the current crisis.

The Aussie organic infant formula brand Bellamy’s was sold to the China Mengniu Dairy Company in 2019 for $1.5bn.

Following approval from the USA Food and Drug Administration under the Infant Formula Discretion Policy, China Mengniu will deliver a minimum volume of 696,000 tins of Bellamy’s Step 1 and Step 2 Organic Infant Formula products into the country.

The group, which remains headquartered in Australia and makes its formula here, said it has 300,000 tins available for immediate delivery.

“Bellamy’s is also in discussion with several global and specialty retailers to expand the product availability to reach as many American families as possible which will offer relief for parents struggling to find formula to meet the babies’ daily nutritional needs,” a statement from the group said.

The approval “is the outcome of a rigorous process that Bellamy’s has undertaken with the FDA to demonstrate that Bellamy’s Infant Formula meets provisions of safety and adequate nutrition for American families”.

Chinese state-owned Cofco, the country’s largest food processor, manufacturer and trader, is a major shareholder in China Mengniu.

Separately, listed infant milk formula company Bubs quick-thinking move to capitalise on the supply shortage in the US is continuing to deliver with a new agreement with overseas retail giant Target.

The 30,000-tin infant formula deal with Target will see its product retail at initially 280 stores, but is potentially a foot in the door to the retailer’s 1934-strong store network across the US.

With Target coming on board, Bubs Australia products will now be available in the four largest retailers of infant formula in the US across 5000 stores in 34 states.

The Target order will be delivered from the 90,000 tins already flown to US with the remaining shipment to replenish Walmart and banner stores in the Kroger group as part of Bubs’ deals with the groups.

The total gross revenue generated from this third plane is about $3.2m.

“It’s an extraordinary outcome,” says Bubs founder and chief executive Kristy Carr of the new partnership and forecast delivery of 360,000 tins to US stores by mid-July.

“Since receiving the Enforcement Discretion from FDA to import six Bubs Infant Formula products on 27 May, or less than a month ago, our products will be ranged in all four top retailers for infant formula in the USA,” she says.

“This is an extraordinary outcome, thanks to our American sales team who have built a relationship with retailers over the last 12 months.”

The ASX-listed business has seen demand soar since signing an agreement with US President Joe Biden’s administration to ship 1.25 million cans of infant formula to the US, which is suffering from a crippling national shortage following issues at a local manufacturing plant.

Earlier this month, Bubs upgraded gross revenue forecasts to be above $100m for 2022, subject to scheduled operations occurring without disruption, with at least a 100 per cent increase on the $1.2m underlying earnings reported at the half year.

This compares to its results in February, when Bubs reported gross revenue of $38.5m, up 73 per cent.