Today, both China and the US are its main export markets driving revenue growth.
On its FY24 full-year results announced on August 28, Bubs Australia said that total revenue was up 33 per cent to AUD$79.7m (US$54m) , while gross margin soared 414 per cent to AUD$39m (US$26.4m).
This was different from last year when its annual revenue declined 32.7 per cent to AUD$60.1m (US$40.7m).
Its FY24 full year EBITDA remained in the red, but the losses have gone down from last year’s AUD$69.1m (US$46.8m) to AUD$19.7 (US$13.3m) this year.
Growth in revenue, tighter control of operating expenses, improved gross margins and product mix, and addressing poor performing SKUs were key factors for the improvements in EBITDA.
CEO Reg Weine said strong growth was seen in key export markets, namely the US and China.
The US was its largest export market and revenue contributor for FY24, responsible for 44 per cent of the firm’s total revenue, or AUD$35m (US$23.7m).
This was also 33 per cent higher than the year before.
Bubs only started selling its infant formula in the US in 2022 under the enforcement discretion enacted to maintain supply following temporal closure of Abbott’s Michigan plant.
China used to be the firm’s largest export market, but COVID-19 had adversely affected its revenue and since last year, it has been diversifying away from a ‘China heavy’ strategy. Previously, its China business was said to be affected by excess inventory held by its previous distributor and was cleared at heavy discount.
Revenue in China was up 27 per cent to AUD$17.3m (US$11.7m) in FY24. Gross profit also rose 47 per cent to seven million, while gross margin was 39 per cent – a five per cent increase.
The company attributes the improvements to its “China reset strategy”, which included partnerships with new distributors in the daigou and cross-border e-commerce (CBEC) channels, new products, and tighter inventory management.
China now represents 22 per cent of its total revenue and is the firm’s third largest market – behind the US and the domestic Australia market.
The company is now forecasting that revenue from China will grow by more than 50 per cent for the current financial year.
The growth is expected to come from its premium niche products, namely its goat milk, Supreme, and Caprilac brands.
These products have over 15 per cent increase in average recommended retail price (RRP), with gross profit margin of over 39 per cent, said the company.
It added that it has the upgrading of its China formulations to the new national or Guobiao / GB standards has been completed. Aside from CBEC, it also sells via over 300 O2O outlets in China.
“This first year in our turnaround strategy was a pivotal one and an important step in the right direction as we continue to build momentum in the USA and reset our China business.
“We achieved very strong growth in our two key strategic export markets, with USA revenue up 46 per cent and China revenue up 27 per cent on FY23,” Weine said, adding that FY24’s revenue was in line with guidance.
Expanding geographical footprint
Bubs Australia is planning to further expand its geographical footprint, such as Canada.
Other than US and China, the company also exports to Japan, Vietnam, Malaysia, Singapore, and New Zealand.
Japan and Vietnam, in particular, were two main markets driving its FY24 revenue growth under its “rest of world” business.
Revenue from this segment went up 20 per cent to AUD$5.9m (US$4m), with Japan contributing 51 per cent and Vietnam contributing 25 per cent.
It is now planning to enter one to two new markets each year, such as Canada in the second half of FY25.
It also believes that its new market entry model applied to Japan can be replicated in other markets.
Between FY20 and FY24, revenue from Japan has grown at a CAGR of 78 per cent to AUD$3.1m (US$2.1m).
