China not trying to ‘manipulate markets’, says Bubs chairman Dennis Lin

Bubs’ executive chairman Dennis Lin doesn’t believe China is making any attempts to manipulate the market to undermine the value of Australian companies.

Dennis Lin is the executive chairman of Bubs Australia. Picture: Aaron Francis/The Australian

Bubs’ executive chairman Dennis Lin doesn’t believe China is making any attempts to manipulate the market to undermine the value of Australian companies, saying all countries — including Australia — present “hurdles”.

A Bubs shareholder asked Mr Lin at the company’s annual meeting on Monday if management had mitigation strategies to counter attempts of market manipulation from China. The shareholder cited Beijing withholding access to China to Bellamy’s Organic in 2018, which resulted in shares of the Launceston-headquartered company more than halving before it was eventually taken over by China Mengniu Dairy.

“I certainly wouldn’t go to the extent of stating there is market manipulation by China,” Mr Lin said.

“It’s fair to say that no matter which market we operate in, and that’s both Australia, New Zealand, China and other parts of the world, we are always working with the in-country hurdles, whether they be market driven or regulatory driven.

“We have both the management and mitigation strategies in relation to the risks that are being posed, not necessarily by China, but by the market forces that may present themselves at any particular point in time.”

China is Bubs’ lead market, representing 21 per cent of its total revenue, with sales continuing to climb despite the escalating trade tensions between Beijing and Canberra, which has seen China’s communist regime target a range of Australian soft commodities from barley and beef to wine and lobster.

In the three months to September 30, Bubs’s exports to China soared 76 per cent compared with the same period in the prior year. “It is important we recognise the continuing strength of consumer demand in China,” chief executive Kristy Carr said.

Ms Carr said COVID-19 enforced travel bans had hit the company’s lucrative daigou trade — which involves “trusted shoppers”, who are mostly students and tourists, buying products from Australian stores and sending them back to China.

Ms Carr said while there had been a spike in sales via China’s cross border e-commerce platforms, it hadn’t offset the collapse of the daigou trade.

“Channel shifting from the daigou channel to China’s cross border e-commerce platforms has been evident during this period and consumer uptake in e-commerce sales continue to outpace our expectations. However, this incremental trade has not yet compensated for the significant shortfall in daigou channel sales due to the short-term market disruption.”

The collapse of the daigou trade as hit several Australian companies from A2 Milk to Bega Cheese. The market involves two segments, trusted shoppers and corporate, the latter of which companies deal with directly. But Melbourne’s near four month lockdown also hindered the operations of corporate daigous, given many are based in the city.

Ms Carr said the transition from an uptick in sales in cross border e-commerce channels versus a recovery in the daigou market was “difficult to predict”.

“We remain cautiously optimistic that this will translate to sales growth over the second half of the 2021 financial year.

“In the present and post-COVID-19 era there will continue to be intense competition to become front of mind with Chinese parents.

“In November, we launched a China consumer brand campaign leveraging our influences and social media content producers to drive awareness of the unique product proposition for our Bubs Goat Formula. It is this investing to drive demand ahead of the sales curve, which is particularly important given our position is still one of an emerging brand in China.”

Mr Lin reiterated Bubs’ lofty ambition of a near eight-fold revenue increase by 2025. “We have the capability and confidence to realistically aspire to a 46 per cent revenue compound annual growth target, which would take us to circa $400m in gross sales by the end of 2025,” he said.

“(It is) a vision shared by our institutional investors who oversubscribed to the recent share placement.”