Bubs Australia, the infant formula and baby food business, has revealed it has entered a strategic partnership with Chinese peer Beingmate.
The deal will see Bubs’ full portfolio of products marketed and distributed in China via Beingmate’s network.
The announcement was made on both the Australian and Chinese stock exchanges.
New Zealand dairy giant Fonterra has an 18.8% stake in Beingmate but the relationship has become increasingly fraught, partly because Beingmate posted losses for a number of years.
Last month Fonterra revealed it had taken back full control of its Darnum site in Australia, which was part of the joint venture.
But despite Fonterra’s experience, Bubs said the deal with Beingmate provides it with a “significant opportunity to accelerate” the expansion of its operations in China. It pointed to Beingmate’s existing distribution network covering 30,000 mother-and-baby stores.
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The partnership is expected to become a formal joint venture agreement within the next month.
Bubs and Beingmate will finalise sales and marketing plans to cover the Bubs Organic baby food range, which is already sold in around 500 stores in China, and Bubs infant formula, which is sold into the country via cross-border e-commerce and online-to-offline platforms.
Beingmate has 280 infant formula and baby food products in its portfolio and owns the largest number of registered infant formula brands in China, including 17 sub-brands and 51 product lines.
China has recently introduced a new registration system to better control the sale of infant nutrition products and Beingmate was the first company to obtain certification since the new registration system was established.
Bubs founder and CEO Kristy Carr said: “Beingmate’s extensive infrastructure, local knowledge, regulatory expertise and extensive domestic distribution footprint, coupled with Bubs’ unique premium international offering, will have the capacity to transform our business.
“Beingmate is particularly strong in driving distribution via China’s lower-tier cities, which are benefiting from China’s new multi-child family policy, and so there are higher expectations for addressable market growth than in the tier 1 cities where the costs to entry are high.
“Importantly, Chinese parents want only the best when it comes to infant nutrition, and in this regard, Beingmate has an established brand position with the ‘Beingmate Successful Child Care System,’ which over the last 20 years has helped more than ten million Chinese families. This will be a great support for introducing Bubs products into the Chinese market.”
Beingmate’s chief executive officer, Bao Xiufei, said: “We believe there is a terrific opportunity for Bubs to capture a material share of the super-premium infant formula and organic infant food sectors, both of which are experiencing rapid growth in China.
“In particular, Chinese parents are attracted to ‘clean and green’ infant nutrition products for which Australia has an enviable reputation.”
He added: “We are particularly attracted to the control Bubs has over its goat milk supply chain from the farm gate to the end consumer product and the sheer size of their milk pool. As well, Bubs organic baby food products, particularly cereals, are also highly regarded.”
In an interview with The Australian, Bubs’ chief operating officer in China, Charles Li, said the link-up with Beingmate came as the company was being turned around under Bao Xiufei, who joined as chief executive in July last year.
Li said the deal with Bubs was part of a turnaround programme by Beingmate under its new chief executive, who was the chief executive of the China operations of Dutch dairy giant Friso before joining the company.