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Bubs share price rockets 17% higher on coronavirus update

The Bubs Australia Ltd (ASX: BUB) share price is rocketing higher on Wednesday morning.

At the time of writing the infant formula and baby food company’s shares up 17.5% to 56.5 cents.

Why is the Bubs share price rocketing higher?

This morning Bubs Australia provided an update on the impact that the coronavirus outbreak is having on its business.

According to the release, the A2 Milk Company Ltd (ASX: A2M) rival has implemented arrangements to underpin business continuity and the continued health and wellbeing of its employees.

These arrangements include putting in place measures to sustain continued security of its supply chain across Bubs Goat Milk formula and Bubs Organic Cow Milk formula.

This has been done in order to meet increasing demand from parents that are anxious to secure supplies of infant milk formula, as well as to build inventory to ensure the steady future supply to quickly respond to further demand surges.

Bubs Founder and CEO, Kristy Carr said: “We have greatly increased our capacity and are working to expand our inventory cover and meet the supply needs of our retail partners across both goat milk and organic grass-fed cow’s milk-based formula, moving to two shifts per day, with capacity to move to three shifts if required.”

The chief executive revealed that the company has been working closely with retail partners such as Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) to meet the increasing demand.

She said: “Bubs Domestic sales in the most recent half year accounted for about 70 percent of Bubs revenues. Over the last few weeks, we have worked with our retail partners including Coles, Woolworths, Big W and Chemist Warehouse to ensure distribution and continued supply of the newly introduced Bubs Organic 365 days Grass Fed Infant Formula range as well as our existing Bubs Australian Goat Milk infant formula range.”

Finally, the company advised that due to its vertically integrated model and existing partnerships with Australian packaging manufacturers, Bubs’ supply chain for raw materials has not been impacted to date. It intends to monitor this and will advise the market should things change.

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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 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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