Organic baby food and infant formula company Bubs Australia has started to repay the faith of its big name backers, shaking off the shadow of stricken rival Bellamy's Australia to make a solid debut on the ASX.
The company, whose backers include Wattle Hill, the private equity fund run by Jessica Rudd's husband Albert Tse, Ellerston Capital's Ashok Jacob and the Kerry Stokes family investment vehicle, saw its shares rise to 13.5¢ on Tuesday after a $5.2 million capital raising conducted at 10¢.
It was a solid result given market concerns about Bellamy's, whose shares plummeted in December before being placed in voluntary suspension until January 13. The company said in late December it was negotiating "with key suppliers and manufacturers in order to determine the impact of those negotiations on the company's expected financial results".
Bubs Australia managing director Kristy Carr said that the last few years had seen e-commerce links into China open up "which really allows quick link to a lot of Australian brands to enter the market which could not have so easily done so in the past".
China represented 18 per cent of revenue last year, but the company is also targeting other south-east Asian countries such as Malaysia, the Philippines and Indonesia.
Calming concerns
The freshly listed Murray River Organics has also moved to calm market concerns about sales into China on Tuesday, stressing Chinese sales account for less than 2 per cent of its total revenue.
Managing director and co-founder Erling Sorensen told The Australian Financial Review that Murray River Organics had fielded a number of investor questions about the state of the Chinese market following revelations late last year that Bellamy's Chinese sales had fallen sharply.
But Mr Sorensen said Murray River Organics is in a very different position.
It does not sell directly to Chinese customers and is not involved in the Daigou trade – where Chinese entrepreneurs buy product in Australia and resell it on Chinese websites – that helped Bellamy's and vitamins maker Blackmores grow their sales so quickly.
"We think we are very different," Mr Sorensen said.
"I've always been very clear that we are not a China story. It's an interesting market, but it's not a market we are in any way reliant on.
"Our focus is on mature markets where the consumer is accustomed to organic foods and we see tremendous growth opportunities."
Such markets include the US and Asian markets such as Japan, Taiwan and South Korea, where Mr Sorenson said consumers are "better educated" about the benefits of organic goods.
"We'll just never be reliant on any one market," Mr Sorensen said.
Supply control
He also said that, unlike Bellamy's, which uses contract manufacturing and buys in organic ingredients to make product, Murray River Organics "control our supply chain from A to Z, so we have full traceability from A to Z".
Murray River Organic shares, which were issued at $1.30, have fallen to $1.18 since its listing on December 16.
Mr Sorensen said the company had also fielded inquiries about adverse weather in Western Australia, Victoria, South Australia and parts of Queensland over the last few months, including a large storm that hit the Sunraysia district in early November.
While Murray River Organics manages weather risk through geographic diversification, Mr Sorensen says the company was lucky to escape what he says was a once-in-60-year storm in Sunraysia without any damage.
"We were just incredibly blessed. There's just no other way of putting it."