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Why the Bubs Australia Ltd share price is up 10% today

The Bubs Australia Ltd (ASX: BUB) share price has certainly had a strong start to the week.

In early trade the infant formula and baby food company’s shares are up 10% to 16.5 cents.

What happened?

This morning the company announced that it has expanded its access to Chinese consumers with the signing of a strategic partnership with NetEase Kaola.com.

According to the release the company’s infant formula and organic baby food products are now available on Kaola’s cross-border e-commerce platform.

This means that its products will be accessible to approximately 15 million targeted customers that seek quality international brands through the Kaola platform.

Rather promisingly, Kaola’s CEO Ms Zhang Lei believes that Bubs’ products will be in great demand at the high-end of the Chinese market.

Approximately 1.3 million of Kaola’s consumers are estimated to have viewed a livestream event showcasing the Bubs product range.

Which is no real surprise considering that 42% of Kaola’s customers have at some stage purchased baby products.

Should you invest?

I believe the sheer number of its target market that use the platform makes this a potentially lucrative step forward for Bubs. As a result I can’t say I’m surprised to see its shares price rally higher today.

As we saw last week with a2 Milk Company Ltd (Australia) (ASX: A2M), demand for Australian infant formula is growing very strongly in China.

If Bubs can win a decent share of the market then the sky really is the limit, but for now I think the prudent thing to do would be to wait for its next sales update to see how business is tracking.

Until then I would suggest investors consider a2 Milk or one of these fast-growing blue-chips.

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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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