Why the Bubs share price has surged 177% higher in 2019

The Bubs Australia Ltd (ASX:BUB) share price has been an impressive performer in 2019. Here's why its shares are up 177%…

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Although the Bubs Australia Ltd (ASX: BUB) share price has drifted around 1% lower on Wednesday, it is still one of the best performers on the All Ordinaries index in 2019.

Since the start of the year the infant formula and baby food company's shares have surged a staggering 177% higher.

This compares favourably to a 43% gain by the A2 Milk Company Ltd (ASX: A2M) share price and a 25% gain by the Bellamy's Australia Ltd (ASX: BAL) share price.

Why is the Bubs share price up 177% in 2019?

Investors have been fighting to get hold of the company's shares following a series of positive developments over the last few months.

Arguably the three most important developments were the acquisition of Australia Deloraine Dairy, its agreement with Chemist Warehouse, and its expansion into organic cow milk infant formula.

The acquisition of Australia Deloraine Dairy, which is a CNCA approved infant formula manufacturing facility, is being seen as a big positive as it is expected to result in a material reduction in production costs and widen its margins significantly.

The second major development, its agreement with Chemist Warehouse, is due to commence on June 1 and will see Bubs products sold across Chemist Warehouse retail stores throughout Australia, including its domestic and China-focused Tmall online stores.

And finally, the decision to move into the cow milk formula market has gone down well with investors due to the sizeable market opportunity. Whilst goat milk infant formula has the potential to be lucrative, cow milk formula represents 95% of the Australian formula market.

Bubs is targeting the premium side of the market and will offer an organic grass-fed range thanks to its supply agreement with Fonterra (ASX: FSF). This is expected to be on sale in Chemist Warehouse pharmacies throughout Australia within the next three months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Bellamy's Australia and BUBS AUST FPO. 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 Scott Phillips.

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