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Why the Bubs Australia Ltd share price has rocketed 27% today

The Bubs Australia Ltd (ASX: BUB) share price has been one of the biggest movers on the Australian share market today.

In morning trade the infant formula and baby food company’s shares are up a whopping 27% to 16.5 cents.

Why has Bubs rocketed?

As well as announcing a new CEO this morning, Bubs announced a significant agreement with Brilite Nutritionals to be an exclusive partner and authorised distributor in China.

Founder and executive director Kristy Carr believes it is a ground-breaking agreement which will ultimately lead to its products being sold in over 2,000 mother and baby stores across China.

Furthermore, the company believes the deal with Brilite provides Bubs with a distribution capability vastly superior to traditional models that its rivals have typically used in China.

According to the release, in the short term Brilite will help finalise regulatory approvals for all its products. In the long-term it will assist Bubs with the development of new products for the China market.

Should you invest?

This is undoubtedly promising news for the fledgling company and I’m not surprised to see its shares rally today.

As we have seen with a2 Milk Company Ltd (Australia) (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL), there is an insatiable demand from Chinese consumers for Australian infant formula.

If Bubs can capture some of this demand through this partnership then it stands to benefit greatly.

But it is a fiercely competitive market and wide distribution does not necessarily mean guaranteed success.

For this reason I would suggest investors keep Bubs on their watchlist for now and wait for sales data when it becomes available.

So for the time being I would consider an investment in rival a2 Milk or one of these explosive growth shares instead.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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