Bubs Australia Limited (BUB) Earnings Call Transcript & Summary

Welcome, ladies and gentlemen, to the Annual General Meeting of Bubs Australia. My name is Dennis Lin, Executive Chairman of the company. Today's meeting is being held online by the Lumi digital platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes. Before the formal business of the meeting, I will explain the process for asking questions and voting. We will then present our resolutions for the meeting. Our Chief Executive, Mrs. Kristy Carr and I will then present an overview of our financial performance and key developments for the past year, an update on our progress in financial year 2021 and how it has been impacted by the macro environment and finally, provide some insights into our 5-year growth strategy. Before closing the meeting, we will address your questions and comments on the resolutions or general questions related to the business before closing the voting. Before I start, let me introduce your Board, who are either here with me or in other cities and joining us online. To my left is Kristy Carr, Founder and Managing Director; Kristy founded the business in 2006 and is responsible for the DNA and authenticity that makes the business so special. She leads the talented team of 50 people who make up the Bubs family, spread across our Sydney, Melbourne and Shanghai offices. Further to my left is Matthew Reynolds, who is a nonexecutive director and is a partner at Thomson Geer and has expertise on legal matters and best practice in corporate governance. Joining us via Zoom link is Steve Lin, our nonexecutive director, who is also managing partner of C2 Capital Partners, a private equity fund anchored by the Alibaba Group. Steve brings global investment, capital management and deep China expertise to our team. We also have Jay Stephenson, who is our company secretary, joining us from Perth. Jay has performed this role since our listing in January 2017. In addition, we have our executive leadership team joining us online today from our Sydney and Melbourne offices. Including Iris Ren, Chief Financial Officer; David Orton, General Manager, Commercial, Vivian Zurlo, General Manager, Marketing and Innovation; and Richard Paine, General Manager, Dairy Operations. As a business, we're extraordinarily blessed to have such a strong board and leadership team who have established a strong track record of executing and advancing our strategic ambitions. I'm particularly proud to have chaired the Board throughout what has been an extremely challenging year as we have navigated the dislocation that COVID-19 pandemic has brought on the business and society generally. Also present online today is our Deloitte audit team, including partner, Andrew Sun, who will also be available at the end of our presentation to answer any questions in relation to financial statements relevant to the auditor. We also have Kylie Lane, our partner at Ashurst, as our legal counsel representative present online. The notice of meeting was sent to shareholders on the 22nd of October 2020, and accordingly, sufficient notice of the business of this meeting has been given. Since you will have by now received the notice of meeting and accompanying materials, with your permission, I will take the notice of meeting as read. The Company Secretary has confirmed that this online meeting is properly constituted and that proxies have been inspected and all those validly lodged have been accepted. I'm advised that the necessary quorum of 2 shareholders is present. Let me now outline the process for submitting questions. Questions can be submitted at any time. To ask a question, press on the speech bubble icon. This will open a new screen. At the bottom of that screen, there is a section for you to type your question. Once you have finished typing, please hit the arrow symbol to send. Please note, only shareholders and proxy holders are entitled to submit questions. While you can submit questions any time from now, I will not address them together with the team until the end of the meeting. Please also note that your questions may be moderated or if we receive multiple questions on one particular topic, we will amalgamate them together. Finally, due to time constraints, we may run out of time to answer all of your questions. If that is the case, we will endeavor to answer them in due course via e-mail. Now it being the Annual General Meeting for the company, I'm obliged to table the financial statements, directors' report and auditor's report for the company for the year ended 30th of June 2020. So I now table those documents, which are contained in the annual report, which is available on the company investor website. In the presence of the company's auditors, if anyone would like to address any questions or comments on the financial statements, I'm happy to receive them at a relevant time for questions during our meeting. I will now explain the voting procedure following which voting will open and remain open until the conclusion of the formal business of the meeting. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. At that time, if you are eligible to vote at this meeting, a new polling icon will appear, selecting this icon will bring up a list of resolutions and present you with voting options. The proxy results for each resolution will be outlined on the screen. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting closed. I now declare voting open on all items of business. The polling icon will soon appear. Please submit your votes at any time. I will give you a warning before I move to close voting at the end of the meeting. I now turn to the resolutions for today's meeting. On the screen, you will see there are 7 resolutions before the meeting today. These are Resolution 1, the adoption of remuneration report. Resolution 2, the reelection of myself, Dennis Lin, as a director; Resolutions 3, 4, 5 and 6 deal with prior issues of shares in connection with 2 share placements, a share purchase plan and shares issued to Chemist Warehouse. And Resolution 7, to issue share options to our Executive Officer and Managing Director, Mrs. Kristy Carr. Resolution 1 is a nonbinding ordinary resolution. Resolutions 2 through 7 are ordinary resolutions and will be passed if more than 50% of the votes cast by shareholders present or by proxy are voted in favor. I confirm that all resolutions will be held by poll. I will now proceed to put forward the resolutions to shareholders. Resolution 1, the adoption of the remuneration report, which is a nonbinding resolution. The motion is that for the purpose of Section 250R, subsection 2 of the Corporations Act and for all other purposes, approval is given for the adoption of the remuneration report. As contained in the company's annual financial report for the financial year ended 30th of June 2020. The proxies are outlined on the screen. Ladies and gentlemen, as I list the company's annual general meeting, a resolution that the remuneration report be adopted must be put to shareholders. Please note that the vote on this resolution is advisory-only and does not bind the directors of the company. As the next resolution relates to myself, I will pass the chair to Matthew Reynolds. Matthew?

Thank you, Dennis. Resolution 2 is for the reelection of Mr. Dennis Lin as a director, and this is an ordinary resolution. The motion is that for the purposes of Clause 14.2 of the Constitution, the ASX Listing Rule 14.4, and for all other purposes, Mr. Dennis Lin, who retires as a director by rotation and being eligible, is reelected as a director. The proxies are outlined on the screen. I will now hand back to Dennis to chair the remainder of this meeting.

Thank you, Matthew. We now move on to Resolution 3, which is an ordinary resolution. The motion is that for the purpose of ASX Listing Rule 7.4 and for all other purposes, shareholders approve and ratify the issue of 31,578,947 shares to institutional, professional and sophisticated clients of the Lead Manager on the 13th of December 2019 on the terms and conditions set out in the explanatory statement. The proxies are outlined on the screen. Moving to Resolution 4, which is an ordinary resolution. The motion is that for the purpose of ASX Listing Rule 7.4 and for all other purposes, shareholders approve and ratify the issue of 35,371,844 shares to institutional, professional and sophisticated clients of the Lead Manager on the 11th of September 2020 on the terms and conditions set out in the explanatory statement. The proxies are outlined on the screen. Moving to Resolution 5, which is an ordinary resolution. The motion is that for the purpose of ASX Listing Rule 7.4 and for all other purposes, shareholders approve and ratify the issue of 4,751,775 shares to eligible shareholders pursuant to the share purchase plan on the terms and conditions set out in the explanatory statement. The proxies are outlined on the screen. Resolution 6, which is also an ordinary resolution. The motion is that for the purpose of ASX Listing Rule 7.4 and for all other purposes, shareholders approve and ratify the issue of 12,356,627 shares to CW Retail Services Pty Ltd on the terms and conditions set out in the explanatory statement. The proxies are outlined on the screen. Finally, moving to Resolution 7, being the approval of issue of options to Bubs' Founder and Chief Executive and Managing Director, Kristy Carr. It is also an ordinary resolution. The motion is that for the purpose of ASX Listing Rule 10.11 and for all other purposes, approval is given for the company to issue 4,770,810 options to Kristy Carr or her nominees on the terms and conditions set out in the explanatory statement. The proxies are outlined on the screen. That concludes the formal part of the meeting. I will now hand over to Kristy to present a business update as well as outline our strategic focus and opportunities that lie ahead. Kristy?

Thanks, Dennis. Good afternoon, everyone. Before we go into the financial performance, let's review the macro environment and how the business has responded to the COVID-19 pandemic and channel disruption with resilience and flexibility. As was evident in our results, the advent of the COVID-19 pandemic interrupted our growth momentum. Despite this, we still closed the FY '20 financial year with solid year-on-year growth. Firstly, I will address consumer behavior and channel shifting. While we experienced a sudden surge of demand related to pantry stocking at the height of the pandemic lockdowns, the underlying momentum saw domestic consumer demand for Bubs products begin to return to pre COVID levels as the financial year ended. In recent months, we have seen that the Australian consumer momentum continues with very pleasing results from the [ scanned ] sales uptake across our major Australian retail partners. At the same time, there was a sharp decline in the Daigou outbound sales demand caused by the sudden international border closures that prevented Chinese tourists and students visiting Australia, coupled with the sharp increase in air freight costs. Channel shifting from the Daigou channel to China's cross-border e-commerce platforms has been evident during this period, and consumer uptake in e-commerce sales continue to outpace our expectations. However, this incremental trend has not yet compensated for the significant shortfall in the Daigou channel sales revenue due to the short-term market disruption. Also critical this year was supply chain resilience. As a vertically integrated business, we were better placed than most to respond to a fundamental shift in the market, giving us a clearly differentiated position. We had the manufacturing capacity to respond quickly to the fluctuation in demand to help protect potential supply chain disruptions in the challenging conditions under COVID-19. Regulatory and market access was also required us to respond with resilience and flexibility as Australia's board is closed and the geopolitical relationships deteriorated. We have embarked upon our created by Bubs localization strategy, under which we plan to acquire one of Beingmate's SAMR [ slot ] application for its Beihai facility enabling us to manufacture Bubs infant formula tailored specifically for Chinese babies in China using 100% Australian goat milk. We believe this will provide a clearer path for registration of Bubs Chinese label products, in addition to also pursuing SAMR registration for Australian manufactured product out of Deloraine. Our approach to people and culture also worked to our advantage during the year. We put in place additional health and safety measures across our production floor and flexible remote working for office-based staff. We are certainly proud of our agile and responsive culture that enabled such quick redeployment of team resources to deal with the challenges of 2020. Whilst we are well placed to continue to manage the disruption of FY '21, the remainder of the financial year will continue to be challenging. Nevertheless, we are focused on protecting shareholders' interests and value in ensuring that we strengthen the core business, maintain a strong balance sheet and leverage our strategic partnerships as we build growth in China. At the same time, we will continue to drive market diversification across Asia and ensure the continued strength of our cornerstone domestic base. We are setting up the business to be ready to strike in the second half of FY '21 and beyond as the world adjusts to the new paradigm and ultimately delivers sustainable long-term profitable growth and value for our investors. Overall, we finished FY '20 with strong underlying growth across all our core products and regions. In the short term, the macro environment has forced an immediate response. And going forward, we are supported by our key foundational strengths being strong brand equity, supply chain security, a robust balance sheet and an agile culture that responds and supports flexibility and the ability to pivot towards new opportunities. Given the times in which we find ourselves, the success of our recent institutional placement signified a tremendous vote of confidence in our long-term vision and our ability to overcome short-term challenges. Let's now quickly recap on some of the key events during the calendar year 2020 since we last met in this forum, which supported our strong underlying growth and some of our post balance sheet developments. We launched Bubs goat and organic cow junior nutrition products tailored for children 3 to 12 years in both Woolworths and Chemist Warehouse. A few months later, the Chinese label product was registered for physical import into China's general trade mother and baby stores. At the annual review, we doubled our distribution footprint in Woolworths, which now ranges all 8 infant formula products. Bubs Organic Grass-Fed Infant Formula was also ranged in Coles to supplement the existing ranging of our goat products. Our adult goat dairy brand, CapriLac, was successfully relaunched in an improved pack format in partnership with Alibaba. In conjunction with A Z Global, our corporate Daigou partner, we launched a new range of functional goat dairy products, targeting China's growing seniors market. During the first quarter of FY '21, we appointed Jennifer Hawkins as Bubs category exclusive global brand ambassador, with multimedia campaigns already produced and activated in all of our key markets. Leveraging our position as an infant nutrition specialist, Vita Bubs infant and toddler vitamin and mineral supplements were successfully launched nationally across 400 Chemist Warehouse stores. We continued our strong pipeline of new products, gaining China General trade approval for Bubs organic cereals, enabling the distribution of our products across China's mother and baby stores. We also commissioned a new sachet production line at the Deloraine facility, catering for the rapidly increasing demand across China and Southeast Asia for single-serve products. You will also be aware, we recently signed a memorandum of understanding with our joint venture partner Beingmate, with the aim of manufacturing our goat milk formula in China made from 100% Australian goat milk. And finally, this month, we launched Bubs portfolio of products in Malaysia as a further step in our strategy to accelerate international expansion. Our solid FY '20 performance was fueled principally by strong infant formula growth and direct sales to China. Gross revenue at $62 million was up 32% for the full year against the previous comparable period. Cash reserves at the end of the financial year stood at $26 million. Our revenue has grown strongly over the past 3 years since listing on the ASX. And FY '20 saw Bubs deliver strong growth accompanied by increased regional diversification with 30% of revenues now generated from export markets compared to just 16% 3 years ago. China remains our lead export market at 21% of gross revenue; however, the fivefold increase in Southeast Asia, predominantly from Vietnam, demonstrates the viability of our international expansion strategy. Infant formula was the key driver of this growth in all markets with its contribution increasing to 55% of gross group revenue compared to 30% in FY '18. Infant formula represents the highest and best use of our goat milk pool and delivered gross sales revenue of $29.8 million, which was an uplift of 58% on prior year. As mentioned, we implemented new distribution agreements in February and May of this year with our 2 biggest customers in Australian retail. Woolworths now ranges our entire portfolio of infant formula products across a targeted selection of 700 stores. And additional ranging was achieved in Coles across 482 stores for Bubs Organic cows milk infant formula as well as 130 BIG W stores. The full Bubs portfolio is also now ranged in 52 Baby Bunting stores around Australia. In addition to infant formula, China remains the catalyst for global growth. Reflecting the value of our strategic partnerships with Alibaba and Beingmate. Our China direct exports grew up and were up 37% to $13.2 million, driven primarily by cross-border e-commerce demand for Bubs Goat Infant Formula demonstrating the underlying China consumer demand trend remains strongly positive. As we continue our journey through FY '21, we have already seen our first quarter group revenue being impacted by the macro volatility brought on by COVID-19. However, notwithstanding the short-term disruption to the Daigou channel, consumer offtake demand from all other channels remain strong. In the first quarter of FY '21, Bubs Infant Goat Formula direct China exports continued to be -- remained strong and were up 76% on prior year. And across all sales channels, our total Bubs Infant Formula portfolio grew 9% in the quarter compared to the prior year. Our regional channel and product portfolio were also strengthened. The introduction of vitamin supplements last month provided additional product diversification to our portfolio mix. The quarter also saw continued strengthening of our infant formula sales outside of China. With other international markets, gross revenue up 6% on prior year and representing 8% of group gross revenue for the quarter. It is important that we recognize the continuing strength of consumer demand in China. We are extremely proud of our China team and the success of our Double 11 campaign, which ended last week. Based on the latest official Tmall Global and Tmall market data, Bubs Goat formula is now ranked the #3 brand across all imported got infant formula products on Tmall Global and the #1 Australian goat milk brand on both Tmall Global and Tmall during the recent Double 11 official event. Our sales for Double 11 increased 174% compared to last year's event. In fact, our Tmall flagship sales in the first hour of this year's campaign exceeded the total sales for Double 11 last year. We also enjoyed significant growth on jd.com, vip.com and [ Koala. ] Bubs Goat Milk Infant Formula is now the third imported goat infant formula brand on [ Koala ] ahead of our 2 largest international competitors. Bubs Goat official Double 11 event ranking on JD also increased by 200% on prior year. Meanwhile, our CapriLac Tmall flagship store achieved 45% increase over last year's Double 11 event. We see this as a positive reflection of our recent brand refresh strategy, demonstrating demand for our adult products in China that continues to strengthen. CapriLac is now ranked the #1 adult go dairy product on the Tmall platform, including domestic and all international brands. Despite the Daigou channel being greatly impacted by the COVID-19 disruption, we have continued to work alongside our corporate Daigou partners to actively support their social marketing to their end customers via live streaming and new Daigou social e-commerce platforms to help rebuild sales momentum. As a result, we are seeing initial positive sales momentum across both our product ranges return to the Daigou channel. Whilst we have seen channel shifting from the Daigou channel to the cross-border e-commerce platforms, there is an underlying structural difference in the lead time for inventory to move through to end consumers between the conventional Daigou channel, which is consumer-to-consumer and the commercial scale evident in the cross-border e-commerce channel being business-to-consumer. The transition time from uptake of sales in the cross-border channel compared with the rebound in Daigou channel is difficult to predict. But we remain cautiously optimistic that this will translate to sales growth over the second half of FY '21. These positive signs of the strengthening consumer sentiment towards Bubs products continues in our domestic retail channels. Bubs is now the fastest-growing infant formula brand in the domestic retail category in Australia at 40% increase to prior year. Despite the decline in the Daigou retail channel purchasing, achieving challenger positions to the long-standing market leaders across our 3 major retail customers, namely #2 goat infant formula brand across Coles, Woolworths and Chemist Warehouse combined. And the #2 organic cow milk infant formula brand across the same 3 retailers combined. This consumer uptake growth was driven by our continued marketing and trade investment accelerating ahead of the sales curve to support our significantly increasing domestic distribution footprint, which will have a negative impact on net revenue in the short term. Our major innovation for 2020 with Vita Bubs, which saw the Bubs brand expand into another high-margin adjacent category within the infant and children's vitamin and mineral supplements market. All 8 products are now on shelf in 400 Chemist Warehouse stores and new production runs are scheduled to satisfy export interest from China, Vietnam, Malaysia and Hong Kong, with delivery scheduled by calendar year-end. I will now discuss how we see the business developing over the medium-term in light of recent developments and indeed the unique experience of our journey to this point. Our value proposition has been acquired over the long term. Creating a successful infant formula brand can only be achieved with time. Together with my co-founders, we spent the first decade as a private company, building on the DNA inherent in the Bubs brand. Bubs is now established as an enviable and authentic Australian infant nutrition brand, which has earned the trust of young families here and abroad. Since listing on the ASX in 2017, we have acquired core competencies to establish a scalable, vertically integrated business model, gained deep, technical and manufacturing know-how and secured strategic collaborative partnerships with global retail giants. During this time, we have delivered a revenue compound annual growth rate of 150%. We are now poised to enter the third phase of our journey. Whilst there is uncertainty around the short-term outlook, given the current environment, in Phase 3, we are focused on the long-term global expansion in our 5-year growth plan. In this phase, we will look to replicate our unique value proposition across existing and emerging markets, where we can display competitive advantage as well as enter high-margin adjacent space with innovative infant nutrition and well-being products. We know the opportunity over the next 5 years beyond Australia is substantial in the market segments we excel in. Whilst we acknowledge the uncertainty of the business outlook of FY '21 and the potential impact in the short term, we remain confident about our medium- to long-term strategy. And in this light, we can realistically aspire to a 46% revenue compound annual growth target, which would take us to circa $400 million in gross sales by the end of 2025. Our unique value proposition lies in our 360-degree business model, combining their expertise as a dairy specialist with a vertically integrated supply chain at its call coupled with being a brand-led business with infant nutrition as our crown jewel. This end-to-end offering is underpinned by valuable assets with the ownership of a China certified infant grade dairy production facility. Many of our industry peers are manufacturing driven or alternatively, they are predominantly brand-driven but lack vertical integration in a manufacturing base and secure supply chain. Bubs, however, is uniquely positioned in Australia, operating in a virtuous circle of high margin product, R&D expertise for innovation and specialty supply chain, security and know-how. To provide you with some insight into this know how, we will now play a short video taken at our Deloraine facility in Melbourne, presented by our General Manager of Dairy operations, Richard Paine. [Presentation]

The Bubs brand caters for all feeding occasions throughout a child's development. Our comprehensive portfolio provides a unique advantage to extend our consumer life cycle and increase their basket size with a single customer base and 1 overriding brand message. In the present and post COVID era, there will continue to be intense competition to become front of mind with Chinese parents. In November, we launched a China consumer brand campaign, leveraging our influencers and social media content producers to drive awareness of the unique product proposition of our Bubs Goat formula. It is this investing to drive demand ahead of the sales curve, which is particularly important given our position is still one of an emerging brand in China. The road to China is complex and multilayered with relative market advantage being the end objective as we navigate the evolving ecosystem across China's distribution landscape. When we think of the China market, we must think beyond any one route. We need to ensure the balance between the outbound push from Australia and the inbound pull from within China reflects the current consumer purchasing behavior. And we will continue to leverage our strategic relationships with our channel partners as we continuously manage our position within each of the channels to create relative market advantage for Bubs. As we have already seen, the strength of our strategic partnership with the Alibaba Group was instrumental in the success of our Double 11 sales performance this year. It is clear Chinese consumer offtake demand for our premium products remains strong across the quarter. Cross-border e-commerce offtake increased 937% compared to the prior year across the top-tier cross-border platforms in China. Bubs is now ranked #3 infant goat formula brand on Tmall Global, with 12% share, doubling the share of this -- on the platform compared to the same time in the prior year. Bubs is ranked #1 goat infant formula brand on JD.com. CapriLac is also ranked the #1 adult goat milk powder brand on Tmall Global. That brings us up-to-date with our business overview and how we are positioning ourselves throughout this turbulent period. We will now discuss the company's strategic focus as we continue to navigate towards our 5-year plan for sustainable, long-term profitable growth. There is no doubt it is our foundation building blocks, which sets us apart. They remain as valid now as they have throughout our history, and they're unique in the Australian marketplace. We are an authentic and trusted brand with a unique value proposition in a high growth, high-margin market. That value proposition comes from a 13-year heritage, built on premium providence and a history of product innovation that has delivered the most comprehensive children's nutrition portfolio in Australia and the markets in which we compete. We have our own canning facility with China certification, unparalleled vertical supply chain know-how in the sector, key strategic partnerships with Alibaba, Tmall and all critical China in market platform through our own joint venture with Beingmate and unparalleled domestic distribution through the major retailers, Woolworths, Coles and Chemist Warehouse. As we see it, there are a number of clear strategic priorities, and we are confident we have the assets and the capabilities to deliver on these. Our future strategic focus lies in 5 key areas aligned with and a building on our key foundation attributes: one, maximizing brand equity growth as an authentic brand with a unique value proposition; two, optimizing the goat dairy leadership to improve margins and ensure supply chain security; three, driving innovation in emerging and adjacent categories like the vitamin and mineral supplement sector; four, leveraging the strategic partnerships to access China; and five, accelerating global growth into markets where our skill set can be applied. We are the clear leader in goat dairy production with -- in Australia with capacity for significant expansion. Our strategy is to go deep in the goat dairy supply chain and go broad in our infant nutrition brand portfolio. With our leadership and exclusive access to the Australian goat milk pool, our first priority is to use that leverage in our own goat dairy branded products across infant formula, adult milk powder and liquid fresh. At the same time, this leadership in Australian goat dairy supply chain enables our current capability to enter new goat dairy adjacent categories such as Vita Bubs, formulated goat milk chewable vitamins, become a goat dairy ingredient supplier to other manufacturers and deliver contract manufacturing goat dairy products for other brands. I will now hand back to Dennis to outline our 3 growth horizons towards achievement of our long-term sustainable growth aspirations.

Thank you, Kristy, for that very comprehensive summary of the year that was and the year to go in the future. As Kristy mentioned, we have the capability and confidence to realistically aspire to a 46% revenue compound annual growth target, which would take us to circa $400 million in gross sales by the end of 2025. We see the next phase of our journey in terms of 3 horizons, effectively, 3 overlapping themes, which when fully developed will have a multiplier effect on driving long-term sustainable growth. The first horizon is maintaining and defending our core business, making the investment to accelerate growth of our existing portfolio and continuing to improve supply chain efficiency from both business process improvement and scale benefits. Horizon 2, built on our core competencies to develop emerging businesses, including entering adjacent markets and with our eyes on the significant China market, rolling out SAMR approved products for sale in China general trade. Under Horizon 3, we sit in [indiscernible] toward expanding our portfolio into adjacent categories, including dairy based functional wellness products. We're expanding our Asian footprint and establishing our business in the Americas. By the time we reach the end of Horizon 3, all the steps we will have taken should realistically take us to being a $400 million per year business. It is clear from our financial results that infant formula is the underpinning and key driver of our business. Our key priority is to, therefore, maximize our return through both scale and supply and manufacturing chain efficiencies as we invest in driving sales growth from Bubs infant formula. Over the next 5 years, we aim to more than double our infant formula sales with brand extension, along with market expansion in domestic, including Daigou as well as China. With a vertically integrated supply chain, we are uniquely placed to generate efficiencies via scale as well as leverage improved input and conversion costs from farm gate through to all aspects of the supply chain and production. We will continue to strengthen and build our domestic market share as we continue to invest in marketing and trade spend, including building our emerging Bubs Organic cow formula and Vita Bubs product lines ahead of the eventual market share gains. Meanwhile, we are continuing to work with our joint venture partner, Beingmate, to acquire an ownership interest in Beingmate's Beihai facility to secure exclusive use of their SAMR approved brand slot to manufacture Bubs Goat formula China label product registered locally in China made with 100% Bubs Australian goat milk. This will secure a faster, more certain route to market, providing full access to China's general trade channel. It also reflects our willingness to partner within country manufacturers in delivering quality products from Bubs. At the same time, our growth into Southeast Asia is set to continue, building on our entry into Vietnam and more recently, Malaysia as well as leveraging the recently signed regional comprehensive economic partnership, otherwise known as RCEP agreement where possible. There are many opportunities for growth through innovative extensions to our specialty goat dairy portfolio in adjacent categories, which represent opportunities to leverage our core competencies and tap into additional consumer locations. We see the rising global demand for sports nutrition and functional specialty dairy as an opportunity for CapriLac brand extension into super premium adult science-based protein products to appeal to millennials. A recent CSIRO study reported the fortified and functional full category is expected to provide Australian food exporters with a $5.5 billion annual domestic manufacturing opportunity by 2030 and a $4.2 billion export opportunity by that time. The recent launch of Vita Bubs in the VMS segment, which has been extremely well received domestically, is now poised to launch into the China and other international markets. The U.S.A., China and Asia Pacific account for 80% of the USD 10 billion global children's vitamin category market. In addition, expansion of our Bubs toddler milk portfolio into geographic markets beyond China and Asia is a considerable opportunity. The U.S.A. formula market is worth around USD 3.84 billion annually and the solutions and specialty segments in which Bubs sits is the fastest-growing segment. In conclusion, we are well positioned to deliver sustainable long-term growth as we navigate through the disruption of the COVID-19 macro environment. We uniquely have supply chain, manufacturing and brand focus. We are deep into goat dairy and wide across children's nutrition. China represents a significant market opportunity for our core infant formula and premium goat and organic products. Demand for our portfolio of products continue to be strong, notwithstanding COVID-19 as Chinese parents continue to trade up to premium and authentic infant nutritional products for which we have an unrivaled providence story. Our portfolio covers all key feeding occasions and nutritional needs for every stage of a child's development, increasing share of basket and lifetime customer value through increased customer loyalty. We have a very clear vision across our 3 growth horizons to realistically aspire to a business turning over $400 million in 5 years' time, a vision shared by our institutional investors whoever subscribed to the recent share placement. Shareholders, we thank you for your ongoing support throughout the year. We are proud of our talented team's achievements and their dedication in executing our expansion strategy to create the next Australian success story in a dynamic category with enormous global potential. I will now address questions that you have already submitted or wish to ask about any of the items covered in our key business today as well as our resolutions. As I mentioned in my introduction, your questions may be moderated or if we receive multiple questions on one topic amalgamated together. Finally, due to time constraints, we may run out of time to answer all your questions. If this happens, we will endeavor to answer them in due course via e-mail.

With that in mind, I might move on to some of the questions. They have now appeared on screen here. So the first question is from our shareholder, [ Dr. Holowan and Mrs. Holowan. ] And I'll just repeat the question. Can the Board explain how the gross sales vesting conditions for the proposed CEO share options can be described as an incentive, given the levels of revenue already achieved in FY 2020? How are the conditions of future gross sales of $50 million and $60 million consistent with incentivizing progress towards the 2025 gross sales aspiration of $400 million? Thank you, Dr. [ Holowan and Mrs. Holowan ] for your question. This is in relation, in particular, to Resolution #7. And I should probably start by saying that the granting of this option is not in addition. But instead, it replaces the options that were initially granted and are due to expire. And in relation to the option conditions, they are aligned with the options they have currently being granted to myself. In terms of your specific question around the revenue target, I think it's perhaps relevant to point out that in addition to revenue, this is an end condition such that there is a profit target attached to the granting of both tranches of options. In considering and taking a very balanced approach of ensuring that board and management in particular, Kristy, together with the team, are appropriately incentivized to ensure that the business sticks to the fundamentals of making sure that we do have the underlying healthy value chain, being the right gross margin in aiming for profitable growth. We felt that it was appropriate to ensure that we took a balanced approach in designing both the revenue as well as the profit hurdles and that the test back then continue to apply. That's the basis for us in coming up with those particular KPIs. And that's why we felt that it was not necessary in this particular time to increase that revenue target. At this particular juncture, can I just check if any of the other Board directors wanted to provide additional input? Okay. The next question is from our shareholder, Ms. [ Jennifer Pierce. ] How are you going to mitigate the risk of market manipulation by China, such as that, which led to Bellamy's demise and takeover? I am repeating the question as has been put forward by -- to us by Ms. [ Pierce. ] In relation to this particular question, I think it's fair to say that no matter which market we operate in, and that's both Australia, New Zealand, China and other parts of the world, we are always working with the in-country hurdles, whether it be market-driven or regulatory driven. I certainly wouldn't go to the extent of stating that there is market manipulation by China. I think we understand the underlying idiosyncrasies of working in different jurisdictions. And as we have mentioned before, we do believe, over the last 3 years, thanks to the support of the shareholders of the Board and particularly the management team in executing strategies, we have put this particular business in an area -- in a position of strength to be able to continue to build on those foundations. In particular, in Australia, secondly in China; and thirdly, international. So in my mind, I think we have both management and the mitigation strategies in relation to the risks that are being posed, not just necessarily by China. But by the market forces that may present itself at any particular point in time. Did any of the Board members wanted to provide any answers? Matthew?

Yes, I would. Just to supplement what Dennis has said. I think in terms of approaching how we mitigate, I think the way the business has been built over the 3 phases or the first phase moving into the second phase is we've been very selective as a board and as management in our partnering relationships. And I think it's difficult to do business globally. But if you select the right partners, you can certainly position yourselves very well as we have done to manage the risks of any country's particular system of government. So that's the only addition I would add. I think our partners are instrumental in assisting us to work through issues that we may face in -- whether it be China or the U.S. or Malaysia.

Thank you, Matthew. The next question is from [ Mr. Harry. ] In early 2019, Deloraine Dairy was acquired for circa $40 million and was best placed for Bubs to secure SAMR. Since then, there has been no progress with the SAMR application. Now Bubs is on track to purchase Beingmate facility with the same view that is best placed to acquire SAMR. How is this any different from the Deloraine acquisition? Are we going backwards instead of making any progress? And will this secure SAMR? Share price has fallen drastically since late 2019. Thank you, Mr. Harry, for your question. I think similar vein to the question that we had just answered. It's necessary to understand that ultimately, we are in business. And therefore, we do need to be able to deal with the idiosyncrasies and the volatilities that come with operating a particular business. And naturally, as we have presented, we are always interested in ensuring that, firstly, we protect the shareholders' interest. And secondly, that we further the shareholders' interests in the business judgment calls that we make with the available facts and our judgment calls at a particular point in time. With that in mind, I should firstly say in relation to Deloraine and the SAMR application, we continue to be cautiously optimistic in ensuring that we will still progress the SAMR applications that relate to the Deloraine facility. The Beingmate facility and the SAMR application there is in addition to the Deloraine facility as we are looking to provide differentiated product range between the ones that are created through the Beihai facility compared to the product range that will be produced by the Deloraine facility as and when SAMR comes through. Naturally, given that SAMR is a regulatory approval process, we follow and respect the procedures at any one time that are followed by the regulators. And we will continue to engage as the best we can. And given our providence, given our transparency as a listed company, I certainly remain confident that SAMR will come through in time. Can I just check whether any of our members wanted to provide additional input? Okay. Thank you. The next question, and I will just deal with them in sequence. The next question is from [ Mr. Sims ] representing [indiscernible] Discretionary Account. With China is the catalyst for Bubs Global growth as stated in your presentation, please confirm the current status of the strategic partnership and memorandum of understanding negotiations with being made? Thank you, [ Mr. Sims. ] I think we did mention in one of our presentations and it was mentioned in this particular presentation that we are continuing with our negotiations and discussions on the Beihai facility. At this particular point in time, we don't have any additional information that requires disclosure to the market other than what has been stated in that we are continuing to negotiate. And that we are still hopeful and confident that the transaction will come to fruition in the short term. Did anyone wanted to provide any additional input? No? Okay. The next question is from [ Dr. Smalley. ] Is the Indian market a viable opportunity? I think in relation to this question, I might ask Kristy to answer, if that's all right?