From suburban kitchen to $35m empire

Bubs Australia founder Kristy Carr with chief executive Nicholas Simms. Photo / News.com

It all started in a suburban kitchen on Sydney's northern beaches.

At home on maternity leave from her role as a high-flying marketing executive, local mum Kristy Carr became obsessed with the nutritional value of what she was feeding her young daughter, who is now the eldest of three daughters.

Along with her sister Liesa Dailly, Carr started experimenting with home-cooked baby foods made from organic ingredients. Soon, she decided to turn her passion into a business.

Twelve years later, the venture has grown into a A$35 million (NZ$36m) empire with Bubs Australia's trademark baby food pouches and goat milk infant formula ranges sold at supermarkets across the nation - and into the lucrative Chinese market, thanks to a new partnership with e-commerce platform Kaola.com.

"I felt there was a gap in the Australian marketplace for a quality, nutritious but convenient product," Carr told news.com.au at Kaola's recent Partner Day.

In the early days, she said, there was "a lot of preparation and trialling different recipes, trying them on my own daughter".

"It was very hands-on in the beginning, we went down to the organic markets at six o'clock every morning."

Seeing the potential to tap into a growing appetite for premium baby food, Carr partnered with Shakespeares Pies founder Anthony Gualdi to launch what was then known as Organic Bubs, with each tipping in A$100,000 to set up a commercial kitchen and hire a team of chefs led by early childhood nutrition expert Tony Sharpe.

The meals were prepared using fresh produce cooked by home-style methods such as steaming, baking and slow-cooking, then snap frozen to avoid over-processing.

After perfecting their secret formula, Bubs started delivering the products to families across the nation.

A handful of health food stores, independent grocers and selected David Jones food halls began to stock Bubs, which evolved from a tub into Australia's first certified organic baby food pouch.

The company grew organically "for a long time", she said, with profits ploughed back into the business as it gradually scaled up and branched out into infant formula.

Then, in January this year, Bubs hit the big time.

China's own Milk Tea Sister got behind the brand.

After listing on the ASX in January, backed by investors including billionaires James Packer, Kerry Stokes and Kevin Rudd's son-in-law Albert Tse, Bubs raised A$5.15m to bankroll its local and Chinese expansion plans.

Newly appointed chief executive Nicholas Simms quickly signed deals with Coles, Costco and Chemist Warehouse, and then came the Kaola deal that would give it access to 15 million Chinese consumers who shop on the Amazon-like platform.

Mass market distribution meant the business had to evolve, preparing everything in their own commercial kitchen was no longer going to cut it.

"We had to upscale our production facility and outsource the products to be produced for us, in order for them to be shelf stable," Carr said.

Bubs now has a market capitalisation of $35m, with its share price surging by 10 per cent on Monday after news broke of the Kaola partnership.

Maternal and baby products make up Kaola's second-largest product category, only just behind beauty and cosmetics, with 42 per cent of its customers having purchased baby-related products.

NetEase Kaola chief executive Zhang Lei said Bubs products would be in high demand in the high-end and diversified Chinese market.

Another major backer of Bubs' sharemarket listing was Zhang "Nancy" Zetian, the Chinese social media influencer dubbed "milk tea sister" after a picture of sipping a milk tea drink as a schoolgirl went viral.

Zetian owns a 17 per cent stake in the venture through her investment company, and will be tasked with helping to promote the brand in China.

While she could never have predicted the heights to which her kitchen-table brainwave would soar, Carr always had big ambitions for her business.

"I had spent nearly a decade overseas in Hong Kong and travelling around in Asia, so I always had the globe, particularly Asia and China, as a focus for where I wanted the brand to go," she told news.com.au.

"So it's really nice to be positioned to have those doors opened for us."

There are winners and losers in China's "white gold" infant formula market, with Bellamy's suffering a disastrous $770 million sharemarket rout after over-estimating its overseas venture. Its founder, former accountant Laura McBain, stepped down as chief executive in January.

Simms said Asia was just one part of Bubs' expansion strategy, with China representing 17 per cent of sales last year.

The company was seeing "significant month-on-month growth", he said, although it was "too early to put a number on it".

"I don't think anyone truly understands what the size of the opportunity is, being so large and fragmented," he said.

"What we do know is that the opportunity in front of us is quite significantly greater from where we are today."