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CHINA HUISHAN DAIRY HOLDINGS COMPANY LIMITED
Stock Code: 6863
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Disclaimer
This presentation has been prepared by China Huishan Dairy Holdings Company Limited ("Huishan" or the
"Company") and is solely for the purpose of corporate communication and general reference only. The presentation
is not intended as an invitation, offer, recommendation or solicitation for you to buy or sell securities or to engage in
any investment activities whatsoever, or to form any basis of investment decision for any securities (whether or not in
relation to the Company) in any jurisdiction. All such information should not be used or relied on without professional
advice. The presentation is a brief summary in nature and do not purport to be a complete description of the
Company, its business, its current or historical operating results or its future business prospects.
This presentation material may contain forward-looking statements. These forward-looking statements are based on
a number of assumptions about the future, some of which are beyond the Company’s control. The Company does
not undertake any obligation to update any information contained in this presentation (including but not limited to the
forward-looking statements) to reflect events that occur or circumstances that arises after the date of this
presentation. Potential investors should bear in mind that actual financial results may differ materially from the
forward-looking statements contained herein.
The information contained in this presentation is not verified by any independent third party. No warranty or
representation of any kind, whether express or implied, is made as to, and no reliance should be placed on, the
fairness, accuracy, completeness or correctness of the information contained herein. The information contained in
this presentation should be interpreted under the prevailing circumstances. There will be no update of matters in the
presentation to reflect any significant change in the development. The Company, its directors, management,
employees, agents or advisers specifically disclaim all responsibilities in respect of any use or reliance of any
information, whether financial or otherwise, contained in this presentation, and shall not be liable for any and all
losses incurred (whether directly or indirectly, financial or otherwise) by any person in reliance on any information
contained in this presentation.
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1
Contents
#1
About Huishan Dairy
#2
Key financials highlights
#3
Review of operations
#4
Outlook and strategies
#5
Operations Update
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2
About Huishan Dairy
Big concern of
food safety &
quality of dairy
products in China
Fully
integrated
company with
self-operated
farm to
ensure quality
and safety
Unique
„Grass to
Glass‟
business
model
Most trusted brand
Consumers
looking for quality
dairy products
2nd largest herd
size in China
Safe and high
quality premium
dairy products
(eg3.6gm
protein)
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A full
range of
premium
dairy
products
3
Business overview
Grass to Glass
Feeds growing and processing
Liquid milk
 The largest commercial alfalfa plantation field in China
(total 140,000mu)
No.1 Market Share in
Northeastern China
 Total 480,000mu of plantation field
 #1 in Northeastern China（market
share of 19.5%)
 Significant cost benefits
 Scaled plantations with fixed rents and
strategically located in the Golden Corn Belt
 Nationwide: #5 by retail value
 Brand well known in Northeastern
China for its quality and
safety assurance
 Secured safety from the origin
Unique “Grass
to Glass”
Business Model
Golden Corn Belt
Dairy cow farm
Alfalfa/other feeds plantation
 Only IMF brand in China using solely
self-produced raw milk for production
 Only company in China with official
approval for production and sales of
D90 whey powder
Liquid milk/milk powder
production facility
 Second largest herd in China
with 144,191 dairy cows
Suitable weather,
particularly precipitation
 59 dairy farms in operation
Faku
 Industry leading milk yield
A China-based
major IMF brand
 Faku milk powder facility GMP certified.
In process of having all facilities
GMP certified
Zhangwu
 Premium quality raw milk with
high nutritional value
 Transportation cost savings from
strategic layout of
production base
 Only major dairy company in China
using solely self-produced raw milk
for production
Yixian
Fushun
Shenyang
Dairy farming
Milk powder and dairy ingredients
Note: 1. 1 mu ≈ 666.7 m2
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4
Key financials highlights
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Highlights
•
Turnover reached RMB3,530m, + 38.8% yoy
•
Gross profit margin(1) improved from last year’s 54% to 62.4%
•
Operating profit(2) +46.9% yoy to RMB1,401m
•
Net profit was RMB1,249m vs RMB945m last year, +32.1% yoy
•
Earnings per share were RMB10 cents, vs last year’s RMB8 cents, +25% yoy
•
Proposed final dividend per share of RMB2.16 cents, representing a payout ratio
of 25%
Remark:
(1) Before biological fair value adjustments
(2) Profit net of equity-settled share option expenses and IPO expenses. Equity-settled share option expenses are non-cash in nature and IPO are non-recurring in nature
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6
Revenue Summary
RMB’m
FY13/14
%
FY12/13
989
+45.3
681
2,288
+34.0
1,707
254
+188.2
88
-
n/a
77
3,530
+38.3
2,552
Dairy Farming
External Sales
Liquid Milk
Milk Powders
Grain Processing
Total
Milk
Powder
7.2%
Dairy
Farming
28.0%
FY13/14
Liquid Milk
64.8%
Milk
Powder
3.4%
Grain
Processin
g & trading
3.0%
Dairy
Farming
26.7%
FY12/13
Liquid Milk
66.9%
7
Costs Breakdown
Costs of Raw Milk
Staff costs
4.50%
Depreciation
2%
Labor costs
3%
Depreciation,
fuel and
others
14.30%
Utilities and other
processing costs
3%
Raw materials
19%
Alfalfa
6.00%
Corn Silage
8.20%
Costs of Liquid Milk Production
Concentrated
feeds
67%
Raw milk
73%
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8
Gross Profit and Margin
RMB’m
Gross Profit
2500
1,378
2,205
Gross Margin
92
2000
1500
3
53
1,499
1000
922
58.7%
54.0%
60.6%
500
62.0% 65.5%
36.2%
614
399
0
FY12/13
FY13/14
FY12/13
Dairy Farming
Dairy Farming
Liquid Milk
Liquid Milk
Milk Powder
Milk Powder
FY13/14
Grain Processing and Trading
9
Operating Expenses
RMB’m
Years ended 31 March
FY12/13
FY3/14
106
344
n/a
117
IPO expenses
8
35
Others
83
218
197
714
Distribution costs
Administrative Expenses
Equity-settled share option expenses
(non-cash)
10
Cash on Hand and Debt Update
RMB’m
6000
6500
Cash on Hand
5,063
5000
5500
4500
4000
4,679
3000
3500
2000
2500
1000
Bank Loans
2,103
826
1500
1,641
0
500
FY12/13
FY13/14
909
FY12/13
Short Term Loan
*
FY13/14
Long Term Loan
•
Cash and cash equivalents were RMB5,063mn compared to last year’s RMB826mn
•
Total bank loans of the Group were RMB6,320mn compared to last year’s RMB3,011mn
•
Current ratio was 34.6% compared to 0.85 (FY12/13), debt ratio* was 4.4% compared to 34.6%
(FY12/13)
Debt ratio was calculated by net debt (aggregated bank loan and other borrowings net of cash and cash equivalents, pledged deposits and restricted cash
and amounts receivable from banks for wealth management products purchased) over equity attributable to owners of the Company.
11
Review of operations
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Feeds growing and processing
 Alfalfa plantation field of about
140,000mu, an increase of 20,000mu
A total of 480,000 mu of Plantation Field
 40,000mu alfalfa plantation field was
awarded the “National Demonstrative
Area for High Yield and Quality Alfalfa”
340,000 mu
480,000mu
 Harvested 3 times in the year with a total
production volume of about 140,000
tonnes
 Cost of production was USD92/tonne,
lower than the average CIF price of
imported alfalfa of about USD400/tonne
120,000 mu
140,000 mu
01 Jan 2013
01 Jan 2014
Alfalfa fields
Other feed fields
Domestic and imported Alfalfa price (China),
Jan 2009-Mar 2014
Alfalfa (RMB/Tonne)
4,000
 Cost saving: average domestic
transportation cost of RMB600-800/tonne
3,500
3,000
2,500
2,000
1,500
1,000
Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan
2009 2009 2009 2010 2010 2011 2011 2011 2012 2012 2013 2013 2014
Domestic Alfalfa price (RMB/Tonne)
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Imported Alfalfa price (RMB/Tonne)
13
Dairy Farming
FY2013/14
FY2012/13
Sales Amount
RMB”m
Sales Volume
Tonne
ASP
RMB/Tonne
Sales Amount
RMB’m
Sales Volume
Tonne
ASP
RMB/Tonne
External Sales
989
196,119
5,042
681
151,431
4,495
Internal Sales
1,432
286,309
5,001
910
200,980
4,530
2,421
482,428
5,017
1,591
352,411
4,515
Raw Milk
Subtotal
 Operated the largest number of dairy farm in China with
59 standardized dairy farms
 A herd size of 144,191 dairy cows, up from last year’s
112,851 dairy cows
Herd Size (No. of cows)
82,905
62,962
144,191
112,851
 Produced 501,700 tonnes of raw milk, an increase of
37.4% yoy
 Recorded an average milk yield per milkable cow of 9.0
tonnes
49,889
61,286
FY 2012/13
FY 2013/14
Milkable cows
Heifers and Calves
14
Cow Farm Distribution
Faku
Zhangwu
Fushun
Yixian
Shenyang
15
Liquid Milk Products
FY2013/14
Liquid Milk Products
FY2012/13
Sales Amount
RMB”m
Sales Volume
Tonne
ASP
RMB/Tonne
Sales Amount
RMB’m
Sales Volume
Tonne
ASP
RMB/Tonne
2,288
287,528
7,957
1,707
246,162
6,935
Market Share
20%
•
Produce and sell a variety of liquid milk products in 4 categories:
pasteurized
milk,
ultra-high
temperature
milk
(“UHT” milk), yogurt and milk beverages
18%
•
Continue to launch different high-end products
16%
•
Entered into a new area of yogurt with short shelf life by introducing “10
Days” which is additive-free and natural, was well received by the market
and recorded sales of over RMB100m in the year
14%
•
•
•
•
“10 Days” received recognition as Provincial Science and Technology
Research Result by the Liaoning Provincial Department of Science and
Technology
Protein content of “Jersey Farm” series, which launched in Sept 2013,
reaches 3.6% compared with 3.3% in the market
“Jersey Farm” series won the gold prize in the International Organic and
Green Food Expo in May 2014
19.50%
13.70%
12%
10%
FY12/13
FY13/14
Huishan had the largest market share in
liquid milk products in NE China in 2013. *
* Source: Frost & Sullivan
Pasteurized milk recorded a strong sales volume growth and double than
that in last year
16
Milk Powder Products
FY2013/14
Milk Powder Products



FY2012/13
Sales Amount
RMB”m
Sales Volume
Tonne
ASP
RMB/Tonne
Sales Amount
RMB’m
Sales Volume
Tonne
ASP
RMB/Tonne
254
4,875
52,055
88
759
116,011
Launched milk powder of Huishan Gold Queen and Huishan Gold
Label
Dairy ingredients: Launching new products
In Mar 2014, we successfully launched the new infant milk formula
powder series “Huishan
Red Label”
Proposed strategic partnership with FrieslandCampina, jointly
operate an infant milk formula brand in China
Endorsement by China Dairy Industry Association
 Unique grass to glass business model: Most innovative, quality
assurance
 Recognition, assistance & long-term benefits
• Winner in IMF industry consolidation process (cut down number
of brands from 300 + to 50)
D90 whey
powder
Internally
used
Non-dairy
creamer
Whole-milk
powder
IMF base
powder
Industrial
customers
A Chinabased major
IMF brand
17
Brand building
“New Safety Power in China‟s Dairy Industry”
(中国乳业安全新力量)
Advertisements on TV and other media platforms
Sole Title Sponsor of Reality Program
“Miracle Audition”(奇迹梦工厂)

Innovative advertising campaign featuring popular TV anchors

Acting enthusiasts audition before a panel of popular actors
and directors
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18
Expanding our reaches beyond Northeastern Area
Liquid Milk
• Initial set up in Shandong, Hebei, Sichuan etc
• Distribution network comprised 400 distributors and
392 supermarkets
• 49 SKUs in Northeastern region, 5-6 SKUs outside NE
(22 SKUs in Heibei)
Milk Powder
• Initial set up by selecting major distributors in key
cities for cooperation in Hebei, Shandong and Henan;
will gradually increase the number of these cities and
distributors to increase our product coverage.
• We have approximately 418 distributors
(2013: 69 distributor)
• 21 SKUs
• We aim to have over 2,000 direct sale baby stores in
the coming year
Northeast region
Shandong, Hebei,
Henan, Sichuan etc
We will gradually increase the number of these cities and distributors to increase our market share in
these new regions
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19
Retail display of our products
(Liquid milk and Milk Powder)
Retail product display of milk powder
Retail product display of liquid milk
Shandong
大润发历城店 大润发天桥店 华联大明店 华联东方家园店
Jiangsu Pei County
宝宝记
Fujian Quanzhou
宝贝加油站母婴用品专家
家乐福
乐购经四路店
天下乳业
扶沟一峰
欧尚金牛
欧尚华阳
Henan
Hunan Xianyang
咸阳贵族世家
北环家乐福 世纪联华橄榄城 万果园40店
金阳光超市
Sichuan
Hubei Xianning
嘉鱼县天使宝贝
Anhui Anqing
安庆金贝贝
Hunan Xianyang
咸阳成长快乐
北京华联江北店
新世纪鸿
恩寺
重百北碚
中心店
家乐福红牌楼
Hubei
Jiangsu SuQian
好孩子孕婴生活馆
Real
Scene
大润发– 江汉路店 大润发 – 姑嫂
树店
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大润发– 荆州店
大润发– 孝感店
大润发– 随州店
20
Outlook and strategies
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Industry outlook
 Food safety still a big concern
 Big gap between supply and demand of raw milk
 Consumers looking for high quality and high protein of liquid milk
 Stringent control of infant milk formula powder
 Surging demand of milk formula powder because of the new “Two
Child” policy
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22
Strategies
1
4
Expand upstream operations and resources to uphold highest
standards of product safety and quality
2
Continuously expand product portfolio and offer innovative
products to improve profitability
3
Strengthen brand recognition across China and enhance
consumer loyalty
Enhance distribution network and penetrate additional
geographical end-markets beyond Northeastern China and expand
industrial customer base
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23
Operations Update
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Operations Update
Business Update April to June 2014
25
Expanding to East China markets
The Project
• Backed by Sheyang County People’s Government to establish a vertically
integrated dairy value chain for feeds growing, dairy farming, processing,
sales and marketing of dairy products in Yancheng, Jiangsu
• Partnered with current shareholder, Nantong Zongyi Investment Co., Ltd to
set up a JV for the project, of which Huishan owns 65%, total equity funding
of the JV is RMB1,000mn
• Total investment for the project is up to RMB2,500mn including the cost for
acquiring land, constructing farms and building processing plants between
Sept 2014 to Dec 2018
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26
Liquid Milk Market in East China
11.0
7.6
9.2
8.2
12.6
Market size by retail
sales (RMB bn)
100%
90%
24.70%
39.00%
80%
Market Share
70%
54.40%
60.40%
60.70%
60%
48.20%
50%
34.50%
40%
30%
25.80%
16.30%
20.30%
UHT Milk
20%
10%
19.80%
23.00%
Jiangsu
Anhui
27.10%
Pasturized Milk
26.50%
19.30%
Yorgurt
0%
Shanghai
Zhejiang
Shandong
27
Sales Structure Analysis
140
RMB bn per year
120
42.5
100
Pasturized Milk
80
UHT Milk
60
40
87.73
31.15
20
9.85
15.98
37.08
33.35
Anhui
Zhejiang
20.63
0
Shanghai
Jiangsu
28
An Analysis of Liquid Milk Market in East China
Retail sales (RMB bn)
90
89.0
Liquid Milk Market by Retail Sales (20082018)
80
72.5
70
59.7
60
50
15.0
40.2
26.6
9.2
6.5
4.7
5.0
4.9
5.5
4.4
4.6
14.8
8.2
7.2
6.2
6.3
5.3
9.2
11.6
10.4
9.2
12.9
14.4
7.3
8.2
13.7
14.9
16.1
17.4
18.8
2014E
2015E
2016E
2017E
2018E
8.2
8.8
9.6
11
11.8
12.6
2008
2009
2010
2011
2012
2013
11.%
10.5%
Shandong
8.9%
8.3%
Zhejiang
13.0%
12.0%
Shanghai
13.6%
12.7%
Anhui
10.2%
9.6%
Jiangsu
11,2%
10.7%
11.8
10.4
5.5
East China
16.6
13.2
7.0
6.4
7.2
10.0
8.4
7.6
7.9
30
12.0
9.2
10.0
31.1
13/18
CAGR
10.9
12.2
11.0
34.4
40
10
13.5
44.2
08/13
CAGR
16.5
54.0
48.5
20
18.2
65.9
0
Shandong
Zhejiang
Shanghai
Anhui
Jiangsu
29
JV with FrieslandCampina
1st Chinese infant milk formula joint venture
• A fully integrated infant milk formula supply chain: locally sourced,
manufactured, marketed and distributed
• Fits well in the latest food safety regulation and policy of the Chinese
government
• New infant milk formula brand for Chinese market
• Both companies will continue to run their existing infant formula
• Businesses separately
• Huishan will carry on marketing its own brands.
• FrieslandCampina’s Friso® brand will still be exclusively produced in
the Netherlands and marketed by FrieslandCampina.
30
Appendix
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Rapidly growing China dairy market with tremendous
potential
Rising wealth and continued urbanization…
Per capita disposable income
(2012-2017 CAGR)
15%
14%
Urbanization rate
63%
53%
… driving rapid growth in China‟s dairy sector
Dairy products market by retail sales value (China), 2008-2018e
Retail sales value
(RMBbn)
600
513.4
462.5
500
400
2012
Urban
Households
2017e
Rural
Households
300
200
… complemented by other secular tailwinds…
100
 Rising health awareness
0
 Increasing demand for
high-end products1
194.5
15.7
79.1
87.4
94.0
99.7
2008
2009
2010
US
!
!
!
96.2
EU
300.4
23.8
336.0
26.7
149.0
167.5
416.4
33.3
187.5
41.5
37.2
209.4
233.5
120.2
131.8
144.8
160.3
177.2
195.6
238.4
131.6
215.9
121.0
2011
2012
2013
2014e
2015e
2016e
2017e
2018e
Milk powder
Other dairy products
… but, recurring scandals relating to dairy products have eroded
consumer confidence and increased scrutiny on dairy industry
… but per capita consumption is still low
84.6
58.0
China
189.5
14.9
80.6
Liquid milk
 Improved distribution network
Japan
174.4
14.0
73.0
240.9
19.5
100.3
273.5
21.7
374.5
29.8
Melamine-tainted IMF and liquid milk products
High levels of aflatoxins in liquid milk products
Unusual level of mercury content in IMF products
?
28.9
0
20
40
60
80
Per capita consumption of dairy products
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100
120
The competing economic interests among participants across
critical segments of the dairy industry value chain is the principal cause
of food safety issues in China’s dairy industry!
32
Raw milk prices are expected to continue to rise
Raw milk ASP continue to increase
Fuelled by increasing gap between supply and demand
Raw milk ASP (RMB/kg)
6.0
Huishan
Raw milk supply and demand (million
tonne)
80
Huishan
5.5
60
5.0
4.5
40
6.7
2.7
3.1
5.3
2007
2008
2009
8.2
9.1
10.0
11.2
12.3
13.6
15.1
4.0
20
3.5
3.0
0
2.5
2.0
Apr-09
Jan-10
Oct-10
China avg
Jul-11
Apr-12
YST
Jan-13
CMD
Raw milk supply
Oct-13
Huishan
Source: Company data, Wind, Macquarie Research, November 2013
2010
2011
2012
Raw milk demand
Smaller farms slaughtered cows to sell beef
Cumulative change (base = Mar 2009)
200%
(Million farms)
2.7
94%
92%
2.6
180%
2.5
160%
2.4
87%
2.3
140%
2.2
120%
2.1
100%
2.0
1.9
Feb-10
Jan-11
Dec-11
Raw milk
Source: National Bureau of Statistics, Macquarie Research, November 2013
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Nov-12
Beef
Gap between supply and demand
Notes:
1. Raw milk only represents cow milk and excludes other types of milk;
2. Raw milk supply is represented by annual raw milk production;
3. Raw milk demand is estimated based on dairy products production.
Source: Raw milk supply from 2007 to 2012 is sourced from National Bureau of Statistics of China, Frost&Sullivan
Beef price has been rising faster than raw milk
80%
Mar-09
2013e 2014e 2015e 2016e 2017e
Oct-13
2008
2009
2010
% of total raw milk production
(% of total raw milk production)
96%
94%
92%
90%
88%
85%
86%
84%
84%
82%
80%
78%
2011
2012
No of small farms (<1k head)
Source: Euromonitor, Macquarie Research, November 2013
33
Raw milk market in 2013
Raw milk production volume (China), 2008-2013
Raw milk production volume (million
tonnes)
Annual growth rate
40
10%
35.6
35.2
35.8
36.6
37.4
35.3
30
5%
1.7%
20
2.2%
2.2%
0%
-1.1%
-5.6%
10
-5%
0
-10%
2008
2009
2010
Raw milk production volume
2011
2012
2013
Annual growth rate
Source: Frost & Sullivan
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34
Premiumization trend in dairy consumer products
Premium liquid milk sales to rise above 20%
Industry sales (RMB bn)
Powder market to double in 4 years, led by premium
% premium
350
25%
300
20%
250
200
15%
150
10%
100
5%
50
0
0%
2008
2009
2010
2011
2012
Premium milk
2013e 2014e 2015e 2016e 2017e
Regular milk
Industry sales (RMB bn)
% premium
200
180
160
140
120
100
80
60
40
20
0
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
2008
Premium %
2009
2010
Premium milk
2011
2012
2013e 2014e 2015e 2016e 2017e
Regular milk
Premium %

High-end milk brands driving premium growth

Consumers willingness to pay a premium for quality for their children,
particularly for the younger generation of Chinese parents (those that
are born after 1980)

Premium milk sales as a percentage of total liquid milk rose from
0.5% in 2005 to 15% by 2012

One-child policy further relaxed

Euromonitor estimates the premium segment could further rise to
21% by 2017, implying a premium sales CAGR of 19%, far outpacing
8% for regular milk

Government toughened policies and supervision on imported
dairy products
Source: National Bureau of Statistics, Euromonitor
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Industry concentration – Raw milk
Ranking Company
Raw milk
production
2012 ('000 tonnes)
2012
market share
Ranking Company
Raw milk
production
2013 ('000 tonnes)
2013
market share
1
Modern Dairy
584.1
1.56%
1
Modern Dairy
700.0
2.00%
2
Huishan Group
327.8
0.88%
2
Huishan Group
452.2
1.30%
3
Lvhe-Dairy
270.5
0.72%
3
Lvhe-Dairy
270.0
0.80%
4
Shenmu High-tech
187.9
0.50%
4
Shenmu High-tech
205.0
0.60%
5
Shanghai Dairy
Group
182.5
0.49%
5
Yili
175.5
0.50%
6
Others
35,887.2
95.85%
6
Others
33,413.9
94.80%
37,440.0
100.00%
Total
35,310.0
100.00%
Total
 Despite rapid development in large scale dairy farming operation in China dairy farming industry remains fragmented
 Top 5 raw milk producers only account for approximately 5.2% of China‟s raw milk output in 2013, compared to 4.15%
in 2012
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Industry concentration – Liquid milk
Liquid milk market
concentration (China), 2012
Market share of top 5
players in liquid milk
market
(China), 2012
100%
2.0%
2.0%
Liquid milk market
concentration (China), 2013
Market share of top 5
players in liquid milk
market
(China), 2013
2.4%
100%
2.2%
10.6%
22.2%
22.8%
9.5%
80%
80%
Top 5
56.00%
Top 5
60.10%
60%
60%
20.3%
22.0%
40%
40%
Others
44.00%
20%
Mengniu
Yili
20%
Mengniu
Bright
Yili
Sanyuan
Bright
JunleBao
0%
Huishan
Others
39.90%
Source: Frost & Sullivan
0%
JunleBao
Source: Frost & Sullivan
 National Players Mengniu & Yili have approximately 45% of market share but limited growth
 Regional players like Huishan are growing fast
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Industry concentration – Milk powder
Infant formula milk powder
market concentration
(China), 2012
Market share of top 5
players in infant milk
powder market (China), 2012
100%
Infant formula milk powder
market concentration
(China), 2013
Market share of top 5
players in infant formula
milk powder market (China),
2013
100%
7.6%
Top 5
47.10%
80%
10.1%
8.4%
12.1%
80%
Top 5
46.60%
8.0%
8.7%
60%
60%
9.8%
9.9%
9.5%
40%
Others
52.90%
40%
Source: Frost & Sullivan
20%
Mead Johnson
Wyeth
Dumex
Beingmate
Wyeth
Dumex
Yili
0%
Others
53.40%
Mead Johnson
Beingmate
20%
9.5%
0%
BiosTime
Source: Frost & Sullivan
 Top five players have 48.6% market shake but regulatory changes may shake up the industry, releasing market share
 Brands controlling quality raw milk sources are best positioned to gain in market shake up
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Regulation changes in milk powder industry
 June 2013 – Ministry of Industry and Information Technology (MIIT) – Application of new licenses
 June 2013 – State Council – Notice on Opinions of Further Strengthening Infant formula Quality Safety
 December 2013 – China Food and Drug Administration – View of production certificate to be completed before 31 May 2014
 JUNE 2014 – MIIT – Restructuring of infant formula industry – By the end of 2018, 5-6 large-scale infant formula with 5 billion
Yuan annual turnover, top 10 domestic brand enterprises reaches up to more than 80% of market share

New rules and regulations are much more demanding for source of milk
 Registration management for overseas production enterprises of infant formula from 1 May 2014, infant formula products from
the unregistered overseas production enterprises are not allowed to be imported
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Thank you!
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