Bubs’ China problem gets worse

afr.com:

Infant formula company Bubs’ China sales deteriorated further over the past quarter as excess stock and an ongoing dispute with its biggest daigou partner, AZ Global, dented demand.

Bubs Australia’s full-year revenue slid 29 per cent to $73.7 million.

It earned just $13.6 million in revenue from China, scraping into the lower end of its guidance for between $13.5 million and $13.8 million, and down sharply from $53.6 million in the 2022 financial year.

Last week, the Bubs board led by Katrina Rathie survived a spill motion.

Katrina Rathie hung on to her position as chairwoman of Bubs Australia after an unsuccessful board spill. 

Bubs is suing two entities associated with AZ Global, Willis Trading and Alice Trading, over alleged debts of $5.65 million. Meanwhile, its Chinese distributor is seeking to claw back more than $20 million from the troubled formula company in refunds for ageing stock sitting unsold in its warehouses.

Since Bubs outlined the dispute on June 30, it has axed its relationship with AZ Global.

“As a consequence of the excess stock-in-trade and the ongoing dispute with Willis and Alice, sales into China remain subdued. China Q4 gross revenue of $1.4 million was down 96 per cent on prior corresponding period and down 55 per cent on Q3,” Bubs said in a statement.

Bubs is seeing “some modest growth and sell-through in [cross-border e-commerce] for Caprilac and Bubs sales volumes have stabilised (in China). With new trade partners and distributors on board we expect to see our China sales and volumes build steadily in the coming year.”

But it will not be easy, with the falling birth rate in China still a problem for the infant formula sector, including much larger rival The a2 Milk Company.

Barrenjoey head