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Bubs share price charges higher after announcing Vietnam launch

In morning trade the Bubs Australia Ltd (ASX: BUB) share price has stormed higher.

At the time of writing the baby food and infant formula company’s shares are up 3.5% to $1.11.

Why is the Bubs share price charging higher today?

This morning the company announced that it has secured ranging for the Bubs product portfolio in Vietnam’s largest Mother & Baby store chain, Bibo Mart. This gives Bubs access to over 135 stores, predominantly located in major metropolitan areas.

According to the release, in order to service Bibo Mart and other Mother and Baby stores in the country, Bubs has entered into a master distribution agreement with Viet Nam TVV Service and Trading Company Limited (TVV).

TVV is one of the largest Vietnamese owned distributors in Vietnam’s infant nutrition industry. It distributes to an extensive network of around 20,000 retail outlets.

It will distribute and promote Bubs products to its distribution network throughout Vietnam. Product is expected to be on the shelves of Bibo Mart and other Vietnamese stores from December.

Why Vietnam?

Management believes Vietnam is an import market for the company to target. It notes that infant nutritionals market is estimated to be worth VDN 33.6 trillion (A$2.2 billion). This is after growing at a compound average growth rate of 7.7% annually over the past five years.

Bubs founder and CEO, Kristy Carr, said: “This new partnership with TVV and ranging in Bibo Mart marks the achievement of another milestone for the Bubs’ business, expanding our Asian footprint in one of the region’s fastest growth markets in the infant category.”

“We are honoured to be partnering with TVV’s team and draw on their experience within Vietnam’s infant nutrition category, as well as being selected for ranging across the Bibo Mart store network, which is well-known as the country’s flagship baby retailer,” added Mrs Carr.

The company expects the revenue from the initial distribution agreement in Vietnam to be A$1.5 million in the first year. After which, it expects it to grow to at least A$2 million by the second year. The contractual term is two years and may be terminated if these minimum sales targets are not met.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 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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