Inside Bubs’ US formula mission and the call with POTUS

Australian Financial Review | June 3, 2022

When Bubs Australia executive chairman Dennis Lin and founder CEO Kristy Carr wrote to both sides of the aisle on Capitol Hill in May about lending a hand in the United States’ growing baby formula crisis, they never imagined that a couple of weeks later Ms Carr would be presenting to US President Joe Biden.

It has been a whirlwind few weeks for the ASX minnow that makes infant formula and baby snacks. The flurry culminated in the wee hours of Thursday when Ms Carr gave a virtual speech to the most powerful man on the planet from Bubs’ warehouse in Dandenong South in Melbourne’s south-east.

Bubs was thrust onto the global stage this week after responding to the crisis that had erupted in the US as families experienced chronic shortages of formula following the February closure of a Michigan plant because of a contamination scare. Supply was already tight due to supply chain disruptions.

The company offered to supply much-needed tins of “white gold” after President Biden called the baby formula crisis a national priority and launched Operation Fly Formula.

Abbott Laboratories accounts for about 40 per cent of the formula market in the US, and the affected factory was one of its biggest. It was due to reopen on Saturday.

The US shortage is so acute that Mr Biden invoked decades-old wartime powers that require US suppliers to provide needed resources to manufacturers before any other customers.

Bubs is helping to alleviate the supply issues after this week securing a deal to send more than 1 million tins to the US, a deal Mr Biden endorsed on Twitter.

Ms Carr took part in the roundtable with other heads of big infant formula players overnight on Wednesday. She was the only woman in the group speaking to the president.

Mr Lin said when Ms Carr gave her speech, he had tears in his eyes.

“It was a genuinely proud moment, not just for Kristy but for all the Bubs team behind the company. All the way down here in Australia, for the founder and CEO to be invited to a roundtable by the most powerful office – it’s incredible. It just shows that we are doing something that you know is actually truly helping,” he told AFR Weekend.

In a statement, Mr Biden said the Department of Agriculture and the Department of Health and Human Services were authorised to use Department of Defence-contracted commercial aircraft to pick up overseas infant formula that met US health and safety standards.

“I thank the guys from Down Under,” the president told reporters.

The market valuation of Bubs rocketed $115 million higher on Monday after news of the deal.

But it has been anything but easy to get to this moment.

Weeks earlier, Bubs was one of the first companies to submit an application after the US Food and Drug Administration allowed new brands into the US – a $US4.3 billion ($6.1 billion) formula market that has been dominated by four local players. Bubs toddler formulation gained FDA approval last year, giving it a head start over larger rivals.

A war room was set up and the project codename, Maverick, was inspired by the new Top Gun movie. Blue inflatable camping mats have been set up at the Deloraine facility as teams work around the clock.

Ms Carr, who started Bubs 17 years ago, called this week’s formula deal a “game changer” for the small company, which is facing one of its biggest logistical challenges.

While it had promised it could deliver 1.25 million tins of formula, the question was how it would transport them to the US.

As Bubs was scrambling to find a plane big enough, the first 500,000 tins were packaged and ready to go.

Mr Lin had just returned from six months in the US and seen first-hand the empty shelves and the size of the problem.

“Just for the first 500,000 tins we are talking about five fully loaded 747 cargo planes that are needed, which is very challenging with the current supply chain issues,” Mr Lin said.

Forget commercial flights or even a US military transport Hercules Aircraft, which could carry up to 173 pallets – about 54,430 tins.

One Boeing 747-400 F cargo plane can carry just shy of 300 pallets. This aircraft will be provided by the White House to carry stock from Melbourne to Pennsylvania and California, beginning next week, in an attempt to speed up the replenishment.

After the tins arrive at Tullamarine Airport, staff from Bubs and Kiwi logistics player Mainfreight will have to load them onto the plane, a process that will take two days. Bubs has to organise distribution centres on the other end that have capacity to hold this amount of stock.

Once the plane lands in the US, Bubs must unload and repack the stock onto American pallets. Mr Lin said the distribution had to be linked with Bubs and with retailers such as Walmart and Target, which will put the product on their shelves. The bar codes for each product will need to be added to the systems of each retailer.

Bubs is shipping over six formulations across its goat, organic grass-fed cow and its A2 beta-casein protein formula ranges.

This flight will bring 4.6 million bottles of formula and pave the way for up to 27.5 million total bottles of Bubs formula to be supplied to American families in the weeks ahead.

After the invitation to the White House roundtable, hair and make-up artists arrived at the Bubs factory in the middle of the night on Wednesday. There was a technical rehearsal at 2.45am on a secure Zoom line.

Mr Biden had a late start, but Ms Carr was on standby from 4.10am. She was sitting in the Bubs warehouse surrounded by millions of tins as the temperature sank to 5 degrees. She could not give the presentation from inside the factory because of the noise. The session started at 4.45am.

Bondi Partners co-founder and former US ambassador Joe Hockey was watching from Washington DC. He had been advising Bubs, with support from US ambassador Arthur Sinodinos.

Mr Lin said this fast-moving situation was different to the past 2½ years of the pandemic and supply chain issues, which led to huge volatility and unpredictability.

“With all the challenges which have been thrown, we learnt from all that. Now it’s about problem-solving every day,” he said.

Bubs has to continue to serve its other markets, including Australian customers such as Woolworths and Chemist Warehouse, during the day, then turn to the US market at night.

“It’s like Mission Impossible every single night,” Mr Lin said.

Published by the Australian Financial Review.

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