Bubs shareholder Jack Gance ‘distressed’ by CEO Kristy Carr’s ousting

Bub’s second-biggest shareholder says he has faith in Kristy Carr and Dennis Lin, as he declares his support for a spill the board following their resignations.

Chemist Warehouse chairman and co-founder Jack Gance says he is “deeply distressed” and “saddened” at the ousting of Kristy Carr from Bubs and the demotion of Dennis Lin, as he declares his support for a spill of the goat milk-focused infant formula’s board.

Mr Gance, Bubs’s second-biggest shareholder and major customer, said on Wednesday that he has faith in Ms Carr and Mr Lin.

Ms Carr was sacked from her executive role earlier this month, with the directors accusing her of failing to follow “reasonable board directives” while she was on leave.

She remained on the company’s board, but she and Mr Lin both resigned from Bubs’s board on Tuesday night.

Ms Carr has now called for a spill of Bubs’s board and for former A2 Milk Asia Pacific boss Peter Nathan to be appointed as the company’s chief executive.

“I have faith in Kristy and Dennis and feel saddened by what happened to them. Kristy built up a great business and Kristy and Dennis were incredibly successful in getting Bubs into the USA ahead of many larger Australian and overseas players,” Mr Gance said.

“Sure, the company does have challenges and issues, but do not think that the current arrangements will help resolve them and propel the company forward. The USA market is a tough one and needs a lot of work to make it profitable and successful.

“I have personally met Peter Nathan, the proposed new CEO, and am impressed with his experience and enthusiasm and think he will make a great CEO and hopefully lead the company to great success.”

Mr Gance said he had spoken with Bubs’ current board members, led by chair Katrina Rathie, but he said there is “no clear path to improvement and no succession plan.”

“I feel disappointed at the events that arose. I was only told of the changes after they were implemented by the new board.”

Mr Gance was speaking after Ms Carr broke her silence about her ousting from the company she founded.

Kristy Carr joins a video call with US President Joe Biden last year.

In a 270-word post on LinkedIn published late on Tuesday, Ms Carr mentioned bullies but did not specify who they were nor did she mention former fellow Bubs directors including chair Katrina Rathie and Steven Lin, who represents C2 Capital – an Alibaba-backed private equity firm – on the company’s board.

“Even if they (bullies) win, they do not define who you are and cannot take away what you have achieved,” Ms Carr wrote.

She also said that female entrepreneurs and c-suite leaders should “never need to apologise” for their “passion, emotion or undying grit to succeed”.

“They are your best qualities that will deliver your heartfelt mission. The corporate paradigm needs you. Dare to dream, disrupt and make positive change in the world and the workplace,” Ms Carr wrote.

“Female founder CEOs of ASX listed companies are a rare breed, so I feel both proud and privileged to have founded and led Bubs Australia through what I can only describe as an extraordinary 18-year journey.

“Creating a brand and growing a business from zero to $100m turnover that peaked at $800m market capitalisation when it hit the ASX300, takes a certain amount of zealous tenacity.”

Ms Carr said it was a feat that she did not achieve on her own. “Along the way, I surrounded myself with incredibly talented and passionate people who shared my vision to grow happy, healthy families through clean nutrition. I have always believed a positive people-first culture creates (a) high-performance culture”.

Mr Nathan said he believed Bubs could “prosper”.

“Although the Bubs business has faced recent challenges in China, I believe with the new team who have an independent and very commercial approach, proven track records and deep industry experience, can ensure that Bubs reaches its full potential and create significant value for shareholders,” Mr Nathan said.

“Kristy Carr, together with Dennis Lin, have done a remarkable job in building an Australian brand that is gaining traction in the two largest consumer goods markets in the world, China and the USA, which is a rare accomplishment for a company of its size. This journey demonstrates the growth potential of the Bubs brand and story.

Kristy Carr's LinkedIn post.

“I am confident that with a disciplined, commercially focused approach to running the business, coupled with a deep knowledge of infant formula brand and channel dynamics that the business can prosper.”

Ms Carr says she will remain a supporter of Bubs but is not seeking to serve as an executive or director again. In a statement, a group of “concerned shareholders” titling themselves ‘Save our Bubs’ has also put forward former Elders deputy chair James Jackson to replace Ms Rathie has Bubs’ chair, as well as Rupert Soar as a potential non-executive director.

Mr Jackson said: “Fast-growing young companies like Bubs are vulnerable to revenue and profit volatility. This is when an experienced leadership team and experienced independent board with a ‘hands on’ commercial understanding of the value drivers of the business can be instrumental in responding quickly, cohesively and with resolve to preserve and create value for all shareholders”.

“I look forward to the challenge of a truly independent board with the full complement of skills around the table leading the Bubs business into the next chapter of growth.”

Among the group of concerned investors was Bubs’s 12th biggest shareholder and co-founder of the company’s factory in Deloraine, Stable Charter.

Dennis Lin also supports the proposed board shake-up. “Together with Kristy, I have put my blood, sweat and tears into this business over the last six years. I strongly believe in the proposed board and management, and their ability to continue the Bubs journey for us in delivering and creating extraordinary shareholder value.”

Ms Carr’s sacking has triggered a reshuffling of Bubs’s executive and boardroom ranks.

Last week, Bubs chief financial officer Iris Ren resigned, citing “domestic reasons”. Robin Johnston has replaced Ms Ren as interim CFO. Mr Johnston has previously worked at Forty Winks, Dindas and Metcash.

It comes as Jackie Lin has been seconded from Alibaba-backed private equity firm C2 Capital, which also owns more than 10 per cent of Bubs.

Jack Gance says he has faith in Kristy Carr and Dennis Lin. Picture: Arsineh Houspian.

Some shareholders say his appointment is a clear conflict of interest and at worst represents the start of a potential takeover by stealth from C2 Capital and Alibaba, without Bubs paying shareholders a premium – an accusation Bubs has rejected. Bubs says Mr Lin has been appointed because of his knowledge of the Chinese market.

The Australian revealed earlier this month that three senior employees at Bubs’s China office had been sacked as a result of Jackie Lin’s review.

Under Ms Carr and Dennis Lin’s leadership, Bubs was pursuing an omnichannel approach, including producing infant formula in China to gain access to bricks and mortar outlets — such as mother and baby stores — which represent about 80 per cent of the country’s $40bn infant formula market, and compete with online retailers such as Alibaba.

But Bubs’s latest quarterly earnings were awash with red ink. Revenue was down 10 per cent to $15.8m — and its China sales plunged 56 per cent, with “significant amounts of finished goods inventory held in trade”.

Group expenses meanwhile leapt 74 per cent in the three months to March 31, compared with the same quarter in 2022, but had fallen 10 per cent from the December quarter.

It represents a stunning turnaround for Bubs, which 12 months ago was the toast of Australia after it became one of the first companies to receive approval from the US Food and Drug Administration to import infant formula to help alleviate America’s nationwide baby food shortage.

Ms Carr even joined a video call with US President Joe Biden, who heaped praise on the company.