Bubs plans produce infant formula in China amid Australian boycott fears

Bubs is set to manufacture goat’s milk infant formula in China, amid Beijing’s growing hostility towards Australian products.

Bubs Australia's goat milk infant formula. Picture: PETER HEMPHILL

Growing Chinese nationalism has spilled into infant formula, with goat milk-focused producer Bubs planning to start manufacturing in China to combat increased regulatory tightening from Beijing and growing hostility towards Australian products.

Bubs announced on Monday it had signed a memorandum of understanding with Chinese infant formula giant Beingmate to start manufacturing in mainland China of infant formula from Australian sourced goats milk.

The move is contrary to a decade-old trend of Chinese parents looking to buy foreign infant formula brands, particularly from Australia and New Zealand, following a contamination scandal in 2008.

Chinese parents distrusted their locally produced product after it was contaminated with melamine, killing six babies and putting another 54,000 in hospital, 12 years ago.

But Bubs chief executive Kristy Carr said the tide was turning, with more parents swooped up in President Xi Jinping’s tide of renewed nationalism and looking to buy products made in China.

“We are seeing a shift in consumer sentiment and a bit of a resurgence in Chinese infant formula brands,” she said.

“We have seen them over time start to win back market share and trust in Chinese consumers. And since March, really, we have seen a shift to a higher level change of consumer behaviour to not only where they purchase but what brands they are purchasing.

“That’s a reflection of what we are seeing around the world, and in our home market here. There is a sense of pride and eagerness to buy products, particularly highly sensitive products that you can’t be without, that are manufactured in your own country that are also tailored specifically for Chinese babies.”

Bubs’ shares jumped 4.7 per cent to 97c compared with a 0.3 per cent gain across the broader share market.

Ms Carr said China had tightened regulation around the sale of infant formula, which involved limiting the number of brands available via accreditation from the State Administration for Market Regulation (SAMR).

“Since April 2019, 92 product applications have been successful in obtaining SAMR registration. Of these, 77 are manufactured in China. Of the 15 products that are manufactured outside of China, nine are Chinese owned brands manufactured in France,” Ms Carr said.

“The only international brand to achieve certification during this period was Wyeth for six products manufactured in Singapore.”

Bubs’ strategy also aims to combat China increasingly targeting Australian brands following Prime Minister Scott Morrison pushing for an inquiry into the origins of COVID-19 earlier this year. Already Beijing has imposed a punitive 80 per cent tariff on Australian barley, suspended imports from Queenslands abattoirs and last week began an anti-dumping investigation into Australian wine.

Speculation is mounting that the communist regime will soon target milk powder, which has delivered many Australian infant nutrition brands riches in the 12 year’s since the melamine scandal.

“Given the current geo-political landscape and regulatory risks, this breakthrough localisation strategy for a ‘Created by Bubs’ product to be packed in China exclusively from our own Australian premium goat milk mitigates key risks and provides a secure pathway to gaining full access to the world’s largest and fastest growing Infant Formula market, valued at $55bn,” Ms Carr said.

“Under our proposed manufacturing arrangement, Bubs China label Goat Milk Infant Formula will be produced in Beingmate’s Certification Accreditation Administration of the People‘s Republic of China certified Infant Formula production facility in Beihai and be positioned as a premium product targeting China’s lower-tier cities.

“Beingmate has already had great success for many years driving distribution of their 51 registered infant formula products across their 30,000 strong Mother and Baby store network.”

Ms said under the MoU with Beingmate, Bubs would also acquire an ownership interest in Beingmate’s Infant Formula factory at Beihai in China, and obtain Beingmate‘s crucial support in securing SAMR registration.

“We are confident this collaboration gives us the best opportunity to secure SAMR brand registration and accelerate our prospects of full market access in the shortest possible timeframe,” Mrs Carr said.

“Importantly this new localisation strategy would provide Bubs with exclusive use of a China domestic SAMR brand slot and partial ownership in a registered facility in China, whilst fully retaining IP ownership of the Bubs brand and of eventual product proprietary formulations, which will be based on 100 per cent Bubs Australian goat milk.”