Technological Improvement Project of Yigancao Herbal Tea Hot-Filling

Technological Improvement Project of Yigancao Herbal Tea Hot-filling Production Line with an Annual Production of 100,000 tons Guizhou Provincial Investment Promotion Bureau 2012

Page 1 Hotline for Investment Service of Guizhou Province:：0851-6826305 11Pages in Total Tel of the Project’s Unit：0850-82222556

Technological Improvement Project of Yigancao Herbal Tea Hot-filling Production Line with an Annual Production of 100,000 tons Guizhou Provincial Investment Promotion Bureau 2012 Technological Improvement Project of Yigancao Herbal Tea Hot-filling Production Line with an Annual Production of 100,000 tons Recommendation for Attracting Investment

Contents 1. Overview ...... 4

2. Introduction of the Site Where the Project will be Operated ...... 4

3. Enterprise’s Profile ...... 5

4. Industrial Background ...... 5

4.1.Product and Its Features ...... 5

4.1.1.Product ...... 5

4.1.2.The Features of the Product ...... 6

4.2.Industrial Characters and Orientation ...... 6

4.2.1.Industrial Characters ...... 6

4.3.Analysis on Project’s Advantages ...... 6

4.3.1 Ingredient Advantage ...... 6

4.3.2 Favorable Price ...... 6

4.3.3. Transportation ...... 6

4.3.4. Public Facilities ...... 7

4.3.5 Social Conditions ...... 7

5. Analysis of Technology ...... 7

Page 2 Hotline for Investment Service of Guizhou Province:：0851-6826305 11Pages in Total Tel of the Project’s Unit：0850-82222556

5.2.Proceedings ...... 8

6. Contents of Construction ...... 9

7. Analysis of Economic Indicators ...... 10

7.1.Estimated Investment ...... 10

7.2.Production Capacity and Estimated Revenue ...... 10

7.3.Estimated Raw Materials Cost...... 10

7.4.Estimated Costs of Workforce, Manufacturing, Management, and Marketing ...... 10

7.4.1. Staffs Arrangement ...... 10

7.5.Conclusion of Economic Analysis ...... 11

8. Conclusion ...... 11

Page 3 Hotline for Investment Service of Guizhou Province:：0851-6826305 11Pages in Total Tel of the Project’s Unit：0850-82222556

Technological Improvement Project of Yigancao Herbal Tea Hot-filling Production Line with an Annual Production of 100,000 tons Guizhou Provincial Investment Promotion Bureau 2012 1. Overview Yigancao herbal tea, characterized by Guizhou features is based on a secret recipe of Miao Minority and Buyi Minority. It is made of natural ingredients like herbs on Miaoling Mount. It is newly-improved healthy drink without sugar, pigment or preservatives.

This project aims at expanding and upgrading the assembly line owned by Guizhou Jinxiang General Industrial Co., Ltd. Owing to having reserved land and workshops for later development, this project only needs more equipments, employees and marketing work without more land or workshops.

In order to lower the risk, this project is to be done in three phases with total investment of 105 million Yuan in which the fixed assets investment is 45 million Yuan and circulating funds is 60 million Yuan.

When the project reaches its design capacity, the annual sales revenue would be 840 million Yuan, the annual cost 715 million Yuan, the annual turnover of interest 125 million Yuan, annual sales tax and added-value tax 50.4 million Yuan. 2. Introduction of the Site Where the Project will be Operated Guiding County is located at the middle of Guizhou Plateau which is at the eastern part of Yunnan-Guizhou Plateau. Guiding County is under the governance of Qiannan Buyi and Miao Autonomous District of Guizhou province, covering a total area of 1.631 Sq.km with a population of 287,000. It is within an hour's drive to Guiyang city, capital of Guizhou Province, Longdongbao International Airport, Duyun City, capital city of Qiannan Buyi and Miao Autonomous District, and Kaili, capital of Qiandongnan Autonomous District. It is endowed with five railways including Guizhou-Guangxi railway, Hunan-Guizhou railway, Shanghai-Kunming railway, Qiangui new railway and Guiyang-Guangzhou high-speed railway going through. Four roads which are Xiamen-Chengdu, Guixin highway, No.210 national highway and No.309 national highway run through Guiding County. With an advantageous location and convenient transportation condition, Guiding County has become an important transportation hub in Southwest China.

Page 4 Hotline for Investment Service of Guizhou Province:：0851-6826305 11Pages in Total Tel of the Project’s Unit：0850-82222556

Technological Improvement Project of Yigancao Herbal Tea Hot-filling Production Line with an Annual Production of 100,000 tons Guizhou Provincial Investment Promotion Bureau 2012 3. Enterprise’s Profile Guizhou Jinxiang General Industrial Co., Ltd was established in 1988. It owns several subordinate companies such as Guizhou Special Pharmacy Co., Ltd, Guizhou Chunlu Beverage Co., Ltd, Guizhou Shuishijie Beverage Co., Ltd, Guiyang Miao Girls Food Co., Ltd and Guiyang Miao Girls Beverage Co., Ltd. It also has jurisdiction over seven second-grade independent corporate enterprises and four second -grade non-independent corporate enterprises. Guizhou Jinxiang General Industrial Co., Ltd was entitled "demonstration base of processing industry for agricultural products in the middle of Qiannan Buyi and Miao Autonomous Prefecture, Guizhou. It is a key and mainstay enterprise in Qiannan Buyi and Miao Autonomous Prefecture and a pillar non-public enterprise in Guiding County.

Products include five medicines that nationally permitted producing, beverages such as Yigancao herbal tea, Miaoguniang regimen tea, botanical drink-Jinhai Xueshanye, and natural water "Baoli" series, food such as Miaoguniang travel special treats, Xianglahui oil chili. It also engages in wine brewing industry, paper making industry, and packaging industry. At present, total volume of assets is 118 million Yuan in which fixed assets amounts to 35 million Yuan.

For consecutive eleven years, Guizhou Jinxiang General Industrial Co., Ltd has been titled as enterprise of credit and honor by Guizhou Provincial Industrial and Commercial Administration Bureau. For six consecutive years, it has been rated as A-class level tax credit enterprise by Guizhou Provincial National Taxation Bureau and Local Taxation Bureau. It has also won honors as demonstration enterprise to protect consumers' legal rights and excellent non-public enterprise in Qiannan Prefecture. 4. Industrial Background 4.1.Product and Its Features 4.1.1.Product Yigancao herbal tea is refined with natural herbs as ingredients based on a secret recipe from Guizhou Miao Minority and Buyi Minority. It contains no sugar, pigment or preservatives so that it tastes natural and sweet.

Page 5 Hotline for Investment Service of Guizhou Province:：0851-6826305 11Pages in Total Tel of the Project’s Unit：0850-82222556

Technological Improvement Project of Yigancao Herbal Tea Hot-filling Production Line with an Annual Production of 100,000 tons Guizhou Provincial Investment Promotion Bureau 2012 4.1.2.The Features of the Product At present, beverages like herbal tea manufactured by most domestic companies are added cane sugar. However our product, Yigancao herbal tea contains no sugar at all, satisfying the need of the diabetic.

The recipe of Yigancao herbal tea has been classified as "the provincial intangible cultural heritage recipe under protection" by People’s government of Guizhou Province. 4.2.Industrial Characters and Orientation 4.2.1.Industrial Characters As people's living standards increase, a variety of beverages including herbal tea have now become ordinary daily drinks like traditional boiled water and tea. Cold tea represented by Wang Lo Kat and Heqizheng, can only quench thirst and clear heat without other functions. Besides, they contain sugar which is not suitable for the diabetic. 4.3.Analysis on Project’s Advantages 4.3.1 Ingredient Advantage Guizhou Province produces large amounts of different kinds of medical plants at low price. Main ingredients of Yigancao such as Cape jasmine, dandelion, Houttuynia cordata and liquorice all widely grow in Guizhou. 4.3.2 Favorable Price With this project implemented, Yigancao herbal tea is to be produced in large scale, reducing cost to 2.2 Yuan per tin which increases market competitiveness. 4.3.3. Transportation Many major railways such as Guizhou-Guangxi, Hunan-Guizhou, and Zhuzhou-Liupanshui parallel railways intersect in Guiding County. Guixin highway which is a main access way to South China, goes across this county, No.320 national highway, No.321 national highway as well as No.304 provincial highway run through Guiding County. Xiamen-Chengdu Highway and Guiyang-Guangzhou high-speed railway

Page 6 Hotline for Investment Service of Guizhou Province:：0851-6826305 11Pages in Total Tel of the Project’s Unit：0850-82222556

Technological Improvement Project of Yigancao Herbal Tea Hot-filling Production Line with an Annual Production of 100,000 tons Guizhou Provincial Investment Promotion Bureau 2012 will go through the south of Guiding. All the above facts make Guiding an important transportation hub in Southwest China. The site of the project is located at the East Gate of Chengguan, Guiding, 50 meters from Xinqiao Street in the downtown and 1.6 kilometers from Guixin Highway to the south. Its location is obviously advantageous and convenient for transportation and logistics. 4.3.4. Public Facilities The workshops built for producing and living are all based on the infrastructure in the county with access to water, power and communication, meeting the demands for construction. The workshop is now equipped with two transformers of 315KVA. They are able to provide enough power so that there is no need to increase power volume charge. At present, after updating of a steam boiler of 4 tons capacity, the first phase of the project can be ensured into construction. The site covers an area of 106mu (1/15 of a hectare) with workshops and offices covering 6,860m2. The general production of this project is operable with a flat surface and lots of open space and empty rooms. 4.3.5 Social Conditions This project is proposed by Guizhou Jinxiang General Industrial Co., Ltd. It is a key and mainstay enterprise in Qiannan Buyi and Miao Autonomous Prefecture and a leading enterprise in Guiding County. All departments at all levels from Guiding County, Qiannan Buyi and Miao Autonomous Prefecture and Guizhou Province have been providing great support in policies, finance and technology for a long term. 5. Analysis of Technology 5.1.Analysis of Innovativeness The recipe of Yigancao herbal tea has been stated as "the provincial intangible cultural heritage recipe under protection" by Guizhou provincial government.

The recipe of Yigancao herbal tea takes natural herbs on Miaoling Mount as main ingredients. It is free of sugar, pigment and preservatives. It is for the time being the only sugar-free cold tea drink in China. It also can clear heat, maintain beauty, sober up and protect your liver.

Page 7 Hotline for Investment Service of Guizhou Province:：0851-6826305 11Pages in Total Tel of the Project’s Unit：0850-82222556

Technological Improvement Project of Yigancao Herbal Tea Hot-filling Production Line with an Annual Production of 100,000 tons Guizhou Provincial Investment Promotion Bureau 2012 5.2.Proceedings

Raw material

Sorting*

Ingredients Drink water

Purify

Extract Purified water

Add 150 times water and boil for 30 minutes

Filter

Filter by 300 mesh tubular filter and diatomaceous filter

Filling and Clean tins capping

Sterilization

Sterilizing by hot pressing steam for 30 mins at the temperature of 121℃ Refrigeration

Rub neatly

Packaging擦拭干净

Finished products

Finished quality control Warehousing

Page 8 Hotline for Investment Service of Guizhou Province:：0851-6826305 11Pages in Total Tel of the Project’s Unit：0850-82222556

Technological Improvement Project of Yigancao Herbal Tea Hot-filling Production Line with an Annual Production of 100,000 tons Guizhou Provincial Investment Promotion Bureau 2012 6. Contents of Construction The project to improve technology and expand business of Yigancao herbal tea is hoped to be implemented in three phases. With gradual transformation, annual scale of production reaches 100,000 tons.

Phase one: use the empty land, workshops, electricity and gas facilities of Guizhou Special Pharmacy Co., Ltd to build a new and higher level automatic production line with annual production of 10,000,000 tins or 3100 tons per year as well as a warehouse of 300m2, reconstruct workshop of 400m2, add a set of pure water processing system functioning 6tons of water per hour and corollary equipments to sterilize, test and package and deliver. Besides, expansion space for the second and the third phase project is reserved. The total investment for phase one is 5.5 million yuan with fixed assets investment 3 million and circulating fund 2.5 million yuan.

After this project goes into operation, sales revenue is to be increased by 28 million Yuan. Net profit is 1.5 million Yuan after turning over taxation expense of 2.2 million Yuan including corporate income tax, leading to employment of 30 more people.

Phase two: add one more production line producing 25 million tins annually or 7750 tons per year and corollary equipments. When the second phase project finishes, the comprehensive capacity is to be 35 million tins annually or 10850 tons per year. The total investment of the second phase is 10.5 million Yuan in which fixed assets investment 4.5 million Yuan and circulating fund 6 million Yuan.

When the second phase is implemented, the sales revenue will increase by 70million Yuan annually. After paying tax of 5.5million Yuan (including corporate income tax), the net profit will be 4 million Yuan and another 70 people are employed.

Phase three: add five more production lines aim at producing 58 million tins annually or 18,000 tons per year per line and corollary equipments. When the third phase project finishes, the comprehensive capacity is to be 325 million tins annually or 100,000 tons per year. The total investment of the third phase is 89 million Yuan in which fixed assets investment 37.5 million Yuan and circulating fund 51.5 million Yuan.

Page 9 Hotline for Investment Service of Guizhou Province:：0851-6826305 11Pages in Total Tel of the Project’s Unit：0850-82222556

Technological Improvement Project of Yigancao Herbal Tea Hot-filling Production Line with an Annual Production of 100,000 tons Guizhou Provincial Investment Promotion Bureau 2012 When the third phase starts to operate, the sales revenue will ascend by 742 million Yuan annually. After paying tax of 47.3 million (including corporate income tax), the net profit will be 32.5 million Yuan and another 300 people are employed. 7. Analysis of Economic Indicators 7.1.Estimated Investment The total project investment amounts to 105 million Yuan in which fixed assets investment is 45 million Yuan while circulating funds reaches 60million Yuan(At present, the production cost is about 2.2 Yuan per tin, if calculated by monthly production of 27 million tins, the cash flow needed will be 60 million Yuan). 7.2.Production Capacity and Estimated Revenue When the third phase completes construction and put into operation, the annual production scale is 325 million tins per year (100,000 tons per year). Calculated by unit price 2.6 Yuan per tin, the annual sales revenue will reach around 845 million Yuan.。 7.3.Estimated Raw Materials Cost With the unit price of product at 2.2 Yuan per tin, the total yearly cost is 715 million Yuan. 7.4.Estimated Costs of Workforce, Manufacturing, Management, and Marketing 7.4.1. Staffs Arrangement

（1）Working shift

According to the market demand, Yigancao herbal tea processing line basically works with two shifts -morning and noon. It may work with three shifts -morning, noon and afternoon with four groups of workers in turns

（2）Number of Staffs and skills required

When the three phases starts operating, 500 employees are needed.

Page 10 Hotline for Investment Service of Guizhou Province:：0851-6826305 11Pages in Total Tel of the Project’s Unit：0850-82222556

Another 20 administrative staffs will be needed for the project.

The corporation boasts a complete set of system of raw material procurement, process control and product quality management and inspection as well as a complete organization and a quality assurance system.

（4）Employees training

Guizhou Special Pharmacy Co., Ltd, one of the subordinates of Guizhou Jinxiang General Industrial Co., Ltd is equipped with a training base. Workers who have accepted professional training are mainly from Guizhou Special Pharmacy Co., Ltd in line with production demand of medicines. Newly enrolled staff will have professional training and education on food production before they officially engage in their work under elder staff's instruction. For those employees of key positions, intensified training and strict test will be accepted before working. For newly added projects of products out of factory test, a systematic training is required for quality technicians to adjust to quality control and product inspection on new products. 7.5.Conclusion of Economic Analysis With this project reaching its design capacity, the annual sales revenue will amount to 840 million Yuan. The total annual cost is 715 million Yuan and annual total profit is as much as 125 million Yuan. The annual sale tax and added value tax is 50.4 million Yuan. 8. Conclusion This project aims to transform and expand a mature product. Workshops and land owned by this corporation can satisfy the need of project construction. Funds are mainly used to add facilities and increase circulating funds. Investment risk is relatively low.

Page 11 Hotline for Investment Service of Guizhou Province:：0851-6826305 11Pages in Total Tel of the Project’s Unit：0850-82222556