Soft Drinks in China

Q1 2015

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I. Industry Overview III. Regulation Overview 1. Industry Highlights 1. Government Policy 2. Investment Opportunities

3. Key Industry Indicators IV. Regional Overview 1. Soft Drinks Regional Distribution 4. Industry Forecasts 2. Soft Drinks Production, Distribution and Growth in 2013 5. Industry Drivers 3. Industrial Financial Data by Province 6. Industry Inhibitors 7. Sales Revenue and Cost 4. Industrial Financial Data by Province (cont’d) 8. Output and Retail Sales V. Companies Overview 9. Industry Globalisation 1. Top Listed Companies 10. Imports and Exports 2. Top Industry Deals 11. Exports by Product 3. Top Industry Deals (cont’d) 12. Imports by Product VI. Company Profiles II. Competition Overview 1. Uni-President China Holdings Ltd. 1. Competition Landscape 2. Tingyi (Cayman Islands) Holdings Corp. 2. Industry Concentration 3. V V Food & Beverage Co., Ltd. 3. Top Groups 4. Hebei Cheng De Lolo Co., Ltd. 4. Foreign Players 5. China Huiyuan Juice Group Ltd. 5. Top Players 6. Blackcow Food Co., Ltd. 6. Competition Elements 7. Cost Analysis 8. Profitability 9. Price Indices

Annual Overview China's soft drinks industry had full-year revenues of RMB 578bn in 2014, up 9.5% y/y. The rise was driven by a combination of higher income levels among the country's residents, product innovation, continuing urbanisation and government support. However, the growth rate of the industry's revenues has slowed down in the last three years, along with lower growth of the Chinese economy and falling export of fruit juices. Food safety was a major focus of public attention throughout 2014 and the government continued imposing new safety and quality requirements, adding to the huge number of compulsory food safety criteria in place - which had already exceeded 5,000. This posed a certain challenge to industry players, who also saw slightly declining profit rates in 2014. The milk & vegetable protein drinks segment registered the fastest annual growth of 16.1% in 2014, followed by tea beverages with 12% and bottled water with 11%. The concentrated juice and carbonated soft drinks segments had the lowest growth rates of 2.3% and 2.6%, respectively.

Quarterly Performance

The growth of the revenues of China's soft drinks industry decreased gradually from 11.7% in Q1 2014, to 10.1% in Q2 and to 9.5% at the end of 2014, compared to a revenue growth rate of 12.8% at the end of 2013. The gross profit rate of the industry dropped from 23.7% in Q1 2014 to 22.6% in Q2 and remained relatively flat throughout the rest of the year. The net profit rate decreased from 6.3% in Q1 to 6.1% in Q2 and 5.9% in Q3 of 2014. Declining profitability was attributable mostly to rising operating costs.

Development Trend

China's soft drinks industry is expected to maintain an annual growth rate of around 9-11% in the next two to three years, appreciably lower than the average annual growth rate of over 18% in 2009-2013. The government is expected to continue to impose stricter requirements on product quality and safety. The average price of soft drinks is expected to rise. Despite intense competition, the rising costs of raw materials, labour and logistics are bound to push prices up eventually. Digital advertising platforms are expected to attract a greater share of firms’ investment expenditure in 2015, with budgets shifting away from traditional advertising media such as television and print.

China's soft drinks market has significant potential, given the country's large population and relatively stable economic growth. The promising growth opportunities have so far attracted over 1,790 enterprises and many foreign investors to the industry. As the industry has developed, manufacturing requirements have grown stricter and competition has become more intense. Overview Mergers and acquisitions (M&As) have become more frequent and industry concentration is increasing. This will limit investment opportunities in the next 1-3 years to a certain extent, as the industry's growth rate is slowing down and the ongoing consolidation process will be most favourable to the current market leaders.

Acquisitions present great opportunities for companies to optimise their product structures or eliminate production bottlenecks, M&A as well as to enhance their sales advantages and enter specific segments. With the development of the various segments and opportunities with government encouragement of industry consolidation, numerous M&As have taken place over the last three years.

Healthy soft drinks have become more popular recently. The popularity and wider availability of juices with added vitamins and/or other nutritional supplements have also stimulated the demand for naturally healthy ready-to-drink (RTD) tea and plant- Segments based ingredients. There is also a growing demand for so-called "super fruits" (blueberry, guava, etc). Given increasing health Opportunities awareness and a shortage of water resources, industry segments such as bottled and canned water, dairy & plant-protein and tea beverages will continue to maintain a rapid growth. The share of these segments in total sales is expected to increase.

The government will continue to impose stricter food quality and safety requirements in the sector. This will result in improved industry standards and may push some low-end products and manufacturers out of the market. On the one hand, this trend Government opens up opportunities for quality suppliers, but, on the other, it may limit the market in some less developed regions. The Policy government's encouragement of industry consolidation and of M&As in the soft drinks industry is favourable to the growth of the local market leaders, and aims to strengthen their positions on both local and global markets.

Key Industry Indicators Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- 2012 2013 2013 2013 2013 2014 2014 2014 2014 Industry Revenue, RMB bn 472 117 248 396 528 132 277 436 578 Carbonated Soft Drinks 84.8 19.7 38.7 63.0 78.2 19.0 40.8 64.9 80.3 Bottled and Canned Water 82.3 19.5 45.5 72.1 101.4 24.5 55.2 85.9 113.2 Fruit ,Vegetable Juice and Syrup 107.4 22.6 51.5 80.4 111.5 24.7 55.4 87.4 121.0 Milk & Vegetable Protein Drink 74.9 21.8 43.1 69.7 89.5 25.8 48.3 75.2 103.9 Solid Beverage (concentrated juice) 44.3 12.5 23.3 34.9 48.8 12.8 23.9 36.1 49.9 Tea Beverage and Other Soft Beverage 77.9 21.1 46.3 76.4 98.4 25.3 53.5 86.4 110.2 Number of Enterprises, units 1,582 1,619 1,618 1,641 1,686 1,786 1,757 1,797 1,824 Total Profits, RMB bn 37.5 9.7 18.9 31.9 45.9 11.1 22.6 34.5 48.24 Total Assets, RMB bn 322 321 328 344 361 365 384 392 408

Soft Drinks Production, thou tonnes 130,240 32,604 70,708 113,390 149,268 36,374 83,624 130,607 -

Cost of Sales, RMB bn 358.2 89.0 191.0 305.5 404.8 100.9 214.5 337.7 448

Gross profit, % 24.0 24.1 23.1 22.9 23.3 23.7 22.6 22.5 22.5 Net profit rate, % (divide net profit by industry revenue to obtain) 6.0 6.2 5.7 6.0 6.5 6.3 6.1 5.9 -

Import: soft drinks, USD mn 3,087 723 1,467 2.319 3.051 666 1,423 2,288 -

Export: soft drinks, USD mn 1,328 215 520 888 1,287 280 672 1,123 -

Source: National Bureau of Statistics, General Administration of Customs Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 6 - Industry Forecasts

Revenue Quarterly Forecasts, RMB bn

631 578 . The growth rate of China's soft drinks manufacturing 479 industry declined in 2014. The industry is expected to 436 continue to grow at a slower average annual rate of around 9-11%. 305 . The increase of residents' income and their growing 145 health awareness, as well as the fast urbanisation process, are the major drivers for a steady growth in the soft drinks industry. However, with China's economic slowdown, the industry's growth in 2015 is expected to Sep/14 Dec/14 Mar/15 Jun/15 Sep/15 Dec/15 be slightly slower than in 2014.

Revenue Annual Forecasts, RMB bn . In future, the soft drinks industry will enter a relatively 773 mature stage. The industry's development will mainly 696 depend on product innovation and upgrading. In 2015, 633 health and wellness awareness will continue to shape 578 consumer behaviour and sales patterns. Soft drinks producers are expected to invest more heavily in advertising and new product development, relying on "healthy" concepts in both respects.

. Soft drinks manufacturers will still have to face issues related to strict market regulation, decreasing profitability and strong international competitors. 2014 2015 2016 2017

Resident income

The incomes of Chinese residents have been rising steadily. The per capita income of urban residents was RMB 29,547 in 2013, of which disposable income was RMB 26,955, representing a nominal increase of 9.7% y/y. The per capita net income of rural residents was RMB 8,896 in 2013, representing a nominal increase of 12.4%. The rising incomes and purchasing power of the population will have a positive impact on the soft drinks market, especially on its high-end segment.

Urbanisation

China's growing middle class and rising per capita incomes are results of the country's fast urbanisation process. China's urban population reached 53.7% of the national total in 2013 and its share increases every year. The urbanisation process still has a long way to go. Residents' consumption habits will change and there will be increasing numbers of young people consuming soft drinks, which will be an additional driver for market growth.

New product innovation Manufacturers are increasingly focused on introducing new versions of products or enhancing existing product lines. Such product innovations include, for example, the addition of vitamins and other fortified supplements, and a focus on reduced-sugar or entirely sugar-free healthy and natural products. Players are trying to build healthy brand image through such products in order to meet consumers' increasing health consciousness and demand for healthier options. New product development has helped to maintain the dynamism of the soft drinks industry in China and to make consumer tastes increasingly sophisticated.

Government support

The Chinese government is working to release the nation's economic potential through expansion of domestic demand. Measures aimed at boosting domestic demand will benefit the soft drinks industry as well as other industrial branches. The laws and regulations concerning the food and beverage industry, as well as the government supervision that enforces these rules, are becoming steadily more stringent and effective, with a view to instilling consumer confidence in the sector and boosting its development.

Economic downturn

Beverages are fast-moving consumer goods, so the development of the industry is strongly influenced by the domestic economic environment, unlike consumer staples industries, which are less affected by the performance of the economy. China's economic growth is generally expected to continue to slow down in 2015, so the government's economic policy will remain focused on stimulating growth and domestic consumption. If the country's economic growth continues to decline, the development of the beverage industry will be restrained to a certain degree.

Health and Wellness

With the improvement of living standards, Chinese consumers are becoming increasingly health conscious. The concept of healthy consumption will mean that beverage producers must take new consumer requirements into account and that consumption of some existing products is bound to decrease. Drinks with added sugar, as well as artificially sweetened diet soft drinks, are losing some market share to natural products - a trend that is well illustrated by the declining sales of carbonated drinks.

Cost pressure

The rising costs of raw materials, labour and logistics - as well as the growing investments required in advertising, packaging and building brand awareness among consumers - have slightly lowered the industry's profitability, forcing soft drinks producers to resort to increasing sales prices. Higher sales prices and marketing costs will impact sales volumes to a degree, resulting in slower growth for the industry.

Sales Revenue, ytd, RMB bn Cost of Sales, RMB bn

700 500 Tea Beverage and Other Soft 450 600 Beverage Tea & Other 400 83 Solid 110 Beverage 72 500 (concentrated 350 40 98 juice) 60 Solid Beverage 50 78 39 Milk & 300 64 400 49 86 Vegetable 35 56 82 44 104 Protein Drink 69 76 250 29 Milk & 90 36 58 28 Vegetable 75 300 35 Fruit 59 Protein Drinks 200 75 ,Vegetable 53 39 99 121 70 54 34 92 112 Juice and 19 Fruit Juice 107 46 86 24 Syrup 150 19 72 200 23 87 67 38 80 48 Bottled and 32 43 Canned Water 100 85 101 113 76 19 46 Bottled Drinking 82 25 55 62 43 21 52 86 15 10 65 100 72 13 10 56 Water 13 26 20 22 16 42 46 55 50 35 23 25 19 20 85 78 80 Carbonated 57 59 20 63 25 65 55 15 46 18 47 39 41 28 30 Carbonated 20 19 Soft Drinks 14 14 0 0 Drinks

Industrial Production: Soft Drinks, ytd, mn tonnes

1,3671,493 1,431 1,302 1,306 1,248 1,176 1,163 1,134 1,154 1,075 1,062 986 978 998 1,000 895 852 848 836 784 726 707 669 648 558 599 563 497 430 475 442 328 368 326 364 267 236 217 159 192

Jul/11 Jul/12 Jul/13 Jul/14

Apr/11 Oct/11 Apr/12 Oct/12 Apr/13 Oct/13 Apr/14

Jun/11 Jan/12 Jun/12 Jan/13 Jun/13 Jan/14 Jun/14

Mar/11 Feb/12 Mar/12 Feb/13 Mar/13 Feb/14 Mar/14

Nov/11 Dec/11 Nov/12 Dec/12 Nov/13 Dec/13

Aug/11 Sep/11 Aug/12 Sep/12 Aug/13 Sep/13 Aug/14

May/11 May/12 May/13 May/14

Soft Drinks Retail Sales, ytd, RMB bn

153 156 139 140 126 125 124 114 111 104 109 102 97 93 90 95 84 83 75 78 80 66 67 70 57 57 57 62 48 46 45 52 40 37 35 39 32 28 27

24 20 24

Jul/11 Jul/12 Jul/13 Jul/14

Apr/11 Apr/12 Apr/13 Apr/14

Oct/14 Oct/11 Oct/12 Oct/13

Jan/13 Jun/11 Jan/12 Jun/12 Jun/13 Jan/14 Jun/14

Mar/11 Feb/12 Mar/12 Feb/13 Mar/13 Feb/14 Mar/14

Nov/11 Dec/11 Nov/12 Dec/12 Nov/13 Dec/13 Nov/14

Sep/12 Aug/11 Sep/11 Aug/12 Aug/13 Sep/13 Aug/14 Sep/14

May/11 May/12 May/13 May/14

China imported USD 3.05bn worth of soft drinks in 2013 and USD 2.83bn in January - November 2014. Imports' share in the industry's total revenues has fluctuated around 12% in the last two years - representing a downward trend compared with previous years. Imports As incomes rise, there is a tendency for an increase in the demand for imported soft drinks - especially for those of a high-end sort. However, logistics costs and other factors are, to a certain degree, hindering the development of the imported soft drinks market.

The main exports of China's soft drinks industry are fruit and vegetable juice products. The country exported USD 1.29bn worth of soft drinks in 2013 and USD 1.46bn in January – November 2014. In 2013, the export value of fruit and vegetable juice products accounted for 81% of the total exports of soft drinks. Chinese soft drinks are sold mainly to the United States, Japan, the Netherlands, Germany, Exports Australia, Canada and Russia. These seven countries made up over 80% of China's soft drinks export volume in 2011, according to local consultancy Zhengdian International. In 2014, the export volumes of the major segments in the industry - fruit & vegetable juice, apple juice and orange juice—decreased by 20.6%, 11.7% and 20.9% respectively, year on year.

Many foreign companies, and companies from Hong Kong and Taiwan, are active in China's soft drinks industry. These operate in all segments of the industry and some are market leaders in their segments, with examples including Coca-Cola China Ltd, Ting Hsin International Group, PepsiCo China Ltd, and President Enterprises (China) Investment Co Ltd. Despite their strong presence on the Foreign market, these are facing increasing pressure as a result of lower profits, rising sales costs, and more numerous competitors. Ownership In 2008, Coca-Cola announced plans to acquire China Huiyuan Juice Group Limited, and obtained the approval of Huiyuan's three big shareholders. However, the Ministry of Commerce vetoed this acquisition, claiming that it would adversely affect competition and was not conducive to the healthy development of China's fruit juice industry. Many analysts believe that the ban on the deal was largely aimed at protecting local brands.

Soft Drinks Imports, ytd, USD mn

3,087 3,051 2,759 2,777 2,828 2,485 2,539 2,546 2,222 2,319 2,288 1,917 2,021 2,012 1,735 1,614 1,713 1,467 1,342 1,423 1,227 1,082 1,189 967 848 916 661 723 666 452 509 434

231 340 284

Jul/12 Jul/13 Jul/14

Oct/14 Apr/12 Oct/12 Apr/13 Oct/13 Apr/14

Jun/12 Jan/12 Jan/13 Jun/13 Jan/14 Jun/14

Feb/12 Mar/12 Feb/13 Mar/13 Feb/14 Mar/14

Sep/12 Aug/12 Nov/12 Dec/12 Aug/13 Sep/13 Nov/13 Dec/13 Aug/14 Sep/14 Nov/14

May/12 May/13 May/14

Soft Drinks Exports, ytd, USD mn

1,458 1,328 1,287 1,314 1,199 1,088 1,106 1,123 978 1,016 968 888 846 812 745 757 637 635 672 504 520 536 374 421 407 272 312 280 215 167 125 156

69 47 69

Jul/12 Jul/13 Jul/14

Oct/14 Apr/12 Oct/12 Apr/13 Oct/13 Apr/14

Jun/12 Jan/12 Jan/13 Jun/13 Jan/14 Jun/14

Feb/12 Mar/12 Feb/13 Mar/13 Feb/14 Mar/14

Sep/12 Aug/12 Nov/12 Dec/12 Aug/13 Sep/13 Nov/13 Dec/13 Aug/14 Sep/14 Nov/14

May/12 May/13 May/14

Export Volume by Product, ytd, thou tonnes Exports Value by Product, ytd, USD mn

1,307

680 680 1,144

590 1,042 580 540 907 490 459 776 749 410 407 652 639 340 346 591 288 531 290 489 463 423 244 349 170 277 140 143 121 242 212 175

5.8 1.1 2.4 4.1 5.2 1.2 2.4 3.5 4.6 10.7 2.3 4.8 8.2 10.3 2.5 4.9 7.0 9.1 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14

Fruit and Vegetable Juice Fruit and Vegetable Juice Fruit and Vegetable Juice: Orange Juice Fruit and Vegetable Juice: Orange Juice Fruit and Vegetable Juice: Appple Juice Fruit and Vegetable Juice: Appple Juice

Import Volume by Product, ytd, thou tonnes Import Value by Product, ytd, USD mn

248 1,166 230 1,064 217 923 946 191 898 177 832 169 766 160 163 734 149 704 658 132 136 132 632 126 123 119 560 115 525 478 491 96 441 458 410 422 71 73 329 293 54 253 273 49 51 252 37 41

Dairy Product Dairy Product: Milk Powder Dairy Product Dairy Product: Milk Powder

Competition in China's soft drinks industry is heating up. There were 1,797 enterprises in the industry at the end of September 2014 and their number is increasing. The growing number of enterprises indicates that the industry is at the growth stage of its lifecycle, despite increasing Overview competition and declining profitability. Soft drinks manufacturers continue to increase their market penetration through expansion of their distribution networks and through focus on new product developments designed to meet consumers’ need for greater variety.

Coca-Cola China Ltd, Ting Hsin International Group, Hangzhou Wahaha Group Co Ltd, Nongfu Spring Co Ltd, and PepsiCo China Ltd. are the major players in the industry. Each of them is involved in several soft drink segments. For example, Coca- Cola China Ltd operates in the bottled water, carbonated drinks and juice and RTD tea segments. Ting Hsin International Major Players Group operates in the bottled water, juice and RTD tea segments. Hangzhou Wahaha Group Co Ltd operates in the bottled water, dairy and plant protein, juice and RTD tea segments. These major players have powerful brands and extensive distribution networks. They also take care to promote their brands and boost their sales by means of hefty advertising and marketing campaigns.

The carbonated soft drinks market in China is dominated by two big foreign brands - Coca-Cola and PepsiCo. Foreign Enterprises with foreign shareholders, such as Coca-Cola China Ltd, Ting Hsin International Group, and President Enterprises Players (China) Investment Co Ltd, are among the leading juice manufacturers in the country. In order to be more competitive, such foreign companies are developing different brands in each category.

There are numerous small and local companies in the soft drinks market, operating on a regional level and supplying small market niches. Market Entries The rapid development of the soft drinks industry has made it very attractive to new players. However, brand awareness is an important entry barrier in the sector.

Revenue Market Shares Revenue Shares of Top 5 Listed Companies, 2013, RMB bn

100%

90% Uni-President China Holdings Ltd 12.4 80% Tingyi (Cayman Islands) Holdings 70% 5.6 Corp. 60% 91.6% 90.5% 50% China Huiyuan Juice Group Limited 4.5 40% 30% V V Food & Beverage Co., Ltd. 2.2 20% 10% Hebei Cheng De Lolo Company 8.4% 9.5% 1.5 0% Limited Dec-2013 Jun-14 other Top 5 listed companies

Comments

On the whole, the soft drinks industry in China is rather fragmented, with active enterprises numbering 1,797 at the end of September 2014. Most Chinese soft drinks companies are not listed. The top five listed corporations accounted for less than 9% of the industry's revenues in 2013. Along with the trend to consolidation, the share of the top five players is expected to increase in the coming years. The soft drinks industry has seen many mergers and acquisitions lately, which is another reason to expect further consolidation in future. Government legislation also strongly supports consolidation and the formation of larger groups in the soft drinks industry, because big companies are seen as able to control the quality of products and raise the level of production technology.

Hangzhou Wahaha Group Co., Ltd. is active in the manufacturing of bottled water, carbonated drinks, juices, RTD tea, RTD coffee, Hangzhou sports and energy drinks, dairy products, canned/preserved food and various other products. The company was founded in 1987 by Wahaha entrepreneur Zong Qinghou. Wahaha is known for its large distribution network, which covers not only cities but also rural areas and Group Co., even mountainous regions. In 2013, the total beverages output of the company reached 12.7mn tonnes. Its operational revenue in that Ltd. year was RMB 78.3bn, up 23% y/y. Wahaha has 70 production bases and 170 subsidiaries in 29 different provinces and municipalities countrywide. The company employs 30,000 and has RMB 40bn in fixed assets.

Tingyi Tingyi (Cayman Islands) Holding Corp. and its subsidiaries are engaged in the production and distribution of instant noodles, (Cayman beverages and instant food products. In March 2012, the group expanded its beverages business by establishing a strategic alliance Islands) with PepsiCo. The company is the exclusive manufacturer, packager and distributor of PepsiCo non-alcoholic drinks in China. In 2013, Holdings the company’s sales revenue was RMB 11bn, representing a growth of 18.7% on 2012. At end-2013, Tingyi had a sales network Corp. consisting of 566 sales offices and 75 warehouses, serving 33,504 wholesalers and 110,355 direct retailers.

V V Food & Beverage Co., Ltd. was founded in 1994 and was listed on the Shanghai stock exchange in 2007. The company's major V V Food & products are soybean milk powder products, soybean juice powder products, milk powder for infants and soymilk drinks sold under the Beverage brand name of VV, as well as milk, yoghurt, flour, oil and others. The company has more than 30 production facilities. In 2013, V V Co., Ltd Food & Beverage Co acquired a 51% stake in Hunan Yiqingyuan Tea Co, thus entering the tea segment. The company's sales revenue was RMB 5.06bn in 2013 - down 12.88% on 2012 - while its gross profit margin was 31.17%, higher than in previous years.

French food group Danone first entered the Chinese market in 1987 and since then China has become a market of strategic importance for the Danone Group. The Chinese market generates around 7% of the group's average annual turnover. Danone has 18 production facilities in China and employs around 10,000. Danone is present on the Chinese market with brands such as Mizone, Danone Health, Robust, Evian, Badoit, Dumex, Nutrilon, Karicare, Activia and Nutricia. In autumn 2014, Danone announced it would invest USD 550mn in Chinese infant formula producer Yashili, taking a 25% stake in the company in the process. The deal would tie Danone more closely to local dairy producer China Mengniu Dairy.

In 1996, Danone and Wahaha Group set up a joint venture company, with Danone holding a 51% stake. In 2007, Danone accused Danone and Zong Qinghou, the founder of Wahaha Group, of running lucrative parallel businesses, using the Wahaha brand name. Following a series of protracted lawsuits, Danone announced that the two parties had reached an amicable settlement in 2009. The French firm Wahaha agreed to sell its 51% stake in the joint venture back to Wahaha. According to some analysts, the Danone-Wahaha case could have lasting implications for the Chinese market, as foreign investors will be more cautious when building their business in China.

Swiss food company Nestle was among the first multinational companies to enter China’s food and beverage market. Nestle holds an 80% stake in Shanghai Totole, a leading chicken bouillon producer, as well as 60% in Hsu Fu Chi (a confectionery, cereal-based Nestle snacks and packaged cakes producer), 60% in ready-to-eat rice congee maker Yinlu, 70% in bottled water manufacturer Dashan and 80% in Haoji, a producer of spicy pastes. Nestle runs over 25 production facilities in China and has four R&D centres in the country.

Top 10 Manufacturers in 2013 Top 10 Juice Manufacturers in 2013

No Company Name No Company Name 1 Coca-Cola China Ltd 1 Coca-Cola China Ltd 2 Ting Hsin International Group 2 Ting Hsin International Group 3 Hangzhou Wahaha Group Co Ltd 3 President Enterprises (China) Investment Co Ltd 4 Nongfu Spring Co Ltd 4 Beijing Huiyuan Beverage & Food Group Corp 5 PepsiCo China Ltd 5 Coconut Palm Group Co Ltd 6 President Enterprises (China) Investment Co Ltd 6 Hangzhou Wahaha Group Co Ltd 7 Shenzhen C'est Bon Food & Beverage Co Ltd 7 China Green (Holdings) Ltd 8 Guangdong Jiaduobao Beverage & Food Co Ltd 8 Beijing Qianshou Fruit & Vegetable Beverage Co Ltd 9 Guangdong Robust Corp 9 Nongfu Spring Co Ltd 10 Guangzhou Wanglaoji Pharmaceutical Co Ltd 10 PepsiCo China Ltd

Comments

With almost 1,800 enterprises engaged in the manufacture of soft drinks, the list of the biggest 10 remains relatively stable year on year. Coca-Cola China Ltd was the top soft drink manufacturer in 2013 and ranked first in juice segment as well. The company has established itself as one of the most popular and well-known beverage brands in China, with high brand awareness not only in first-tier cities but also in second- and lower-tier cities. Ting Hsin International Group was the second largest soft drinks and juice manufacturer in 2013.

Price

The rising costs of raw materials, labour and logistics are bound to result in increasing sales prices, despite producers' efforts to stay competitive by keeping prices down. Advertising and marketing campaigns will put additional pressure on prices.

Products

Product innovation is vital to enterprises in the soft drinks industry, with both international and local brands engaged in such innovation in recent years. For instance, Xi'an Tangyun Drinks Co. has released a new Asian specialty drinks product called "Shihuatang". Some small juice manufacturers have developed premium 100% "super fruit" juices targeting high-end consumers. More and more companies are striving to increase their market share by launching similar products.

Distribution

Distribution networks are also a key success factor for players in the soft drinks industry. Most soft drinks enterprises have invested much effort and money in building their own distribution networks, including both traditional and innovative sales channels.

Promotion

Soft drinks promotions rely mainly on advertising and large-scale marketing activities, including online advertising and sponsorship activities, promotions and interactive campaigns. For example, Jiaduobao Beverage & Food Co Ltd spent RMB 250mn to become the title sponsor of the third season of "The Voice of China", a popular musical talent contest.

Cost Elements in 2013, % of total operating costs

Depreciation . Raw materials are the major cost element in the cost 8.3% Other operating cost 2.5% structure of soft drinks manufacturers. Nearly 50% of Wages 11.6% revenue is spent on raw materials. Selling and distribution cost 13.4% Management and . The industry's profitability has been slowly decreasing administration year-on-year in the past few years, with increased cost 4.0% competition.

Financial cost . The gross profit rate has also decreased slightly, from 0.7% 24.0% in 2012, to 22.9% in 2013 and 22.5% in the first three quarters of 2014.

Profit 11.3%

. Since the product portfolios and business models of the different beverage enterprises vary, so too do Raw materials their profit levels. 48.2%

Total Profit, RMB bn Gross profit rate, %

60 Beverage Tea & Other Beverage 29 7 50 8 28 Tea & Other 27 27 27 27 Carbonated Beverage 27 27 7 27 Drink 9 26 8 40 3 Solid Drink 25 25 25 25 6 24 Bottle of 4 25 24 9 6 24 24 24 Drinking 24 24 24 Water 6 13 23 Milk & 23 23 30 23 23 3 6 Vegetable 22 23 23 13 2 22 22 22 Protein Drink 22 Fruit Juice & 3 4 21 21 Fruit Juice 21 10 10 Fruit Juice & 21 21 Drink 3 4 20 11 Fruit Juice Drink 20 10 20 3 8 2 19 19 Milk & 2 19 6 7 Vegetable 8 Bottle of 2 18 18 18 18 6 5 Drinking Water Protein Drink 10 2 2 2 9 1 4 10 17 17 1 7 17 3 5 3 16 17 Solid Drink 8 3 4 Carbonated 2 1 3 4 4 Drink 1 4 2 2 4

0 1 1 2 1

Apr-13 Oct-13 Apr-14 Oct-14

Jun-13 Jun-14

Feb-13 Feb-14

Dec-12 Aug-13 Dec-13 Aug-14 Dec-14

Soft Drinks, Retail Price Index Soft drinks, Urban and Rural Retail Price Index

106 105 105 104 104 103 103 102 102 101 101 100 100 99 Urban Rural 99 98 98 97 97 96 96 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

CPI, Soft Drinks CPI, Soft Drinks 106 106 105 104 104 103 102 102 101 100 100 99 98 Urban Rural 98 97 96 96 95 94 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Food safety is one of the most sensitive issues in China and there are a dozen national government bodies in charge of ensuring it. China's local governments and the sector's companies have been under pressure to take a more active role in tackling food safety Policy issues. The country's Food Safety Law was initially introduced in 1982 and has since been amended several times. The latest draft Overview amendments to the law were released for public comment in December 2014. The amendments envisage increased penalties for violations of the law including seizures, fines, and licence cancellations, as well as criminal prosecutions.

In December 2014, China's National Health and Family Planning Commission issued an update of the national food safety standard for use of food additives, which will become effective in May 2015. Food additives The updated standard contains more specific information regarding the principles governing the use of food additives, the types of food additives permitted, the scope of application, and the maximum level or residue levels.

Packaged The National Health and Family Planning Commission also approved an updated standard for packaged drinking water, which will take drinking effect in May 2015. The update introduces new requirements for packaged drinking water differentiated by water source - i.e., water according to whether tap water or surface/underground water is used for bottling.

Production Distribution, 2013 Sales Revenue by Region, 2013 Southwest China 12.7% North China North China 11.9% East China 11.5% 21.6% East China 31.4% Northeast Northeast 8.7% 10.2% Southwest China 7.7%

Northwest Northwest China 6.0% China 5.2%

South Central South Central 35.1% 38.1%

Total Profits by Region, 2013 Comments

North China . China's soft drinks production is mainly concentrated in the South East China Central and Eastern regions of the country. 30.1% 10.0% Northeast . Guangdong province is China's largest soft drinks producer, with 5.7% output of 23.69mn tonnes in 2013 - accounting for 15.9% of the Southwest national total. China 8.0% . The country's South Central region accounted for 38.1% of the production, 35.1% of the sales revenues and 41.0% of the total profits Northwest of the sector in that year. China 5.3% . East China was responsible for 21.6% of the production, 31.4% of the South Central sales revenues and 30.1% of the total profits in 2013. 41.0%

Source: National Bureau of Statistics, EMIS Insight Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 29 - Soft Drinks Production, Distribution and Growth in 2013

Northwest China (thou tonnes, % ) North China (thou tonnes, % ) Shaanxi: 5,239; 22.9% Beijing:4,626; 5.9% Northeast China (thou tonnes, % ) Gansu: 1,750; 58.1% Tianjin: 4,356; 6.0% Liaoning: 4,317; -2.6% Qinghai: 260; 14.4% Hebei:3,742; 22.2% Jilin: 7,549; -3.1% Ningxia: 66; -44.1% Shanxi: 1,469; 14.5% Heilongjiang: 3,364; 24.9% Xinjiang: 1,591; 15.2% Inner Mongolia: 2,941; 10.0%

East China (thou tonnes, % ) Shanghai: 2,805; 2.6% Jiangsu: 4,101; -6.7% Zhejiang: 8,637; -4.6% Anhui: 2,343; 22.7% Fujian: 4,876; 8.4% Jiangxi: 3,050; 29.0% Shandong: 6,371; 3.1%

South Central China (thou tonnes, % ) Southwest China (thou tonnes, % ) Henan: 12,022; 23.6% Chongqing: 3,031; 16.0% Hubei: 8,625; 16.2% Sichuan: 11,045; 42.0% Hunan: 4,898; 14.4% Guizhou: 1,939; 44.4% Guangdong: 23,692; 7.2% Yunnan: 2,813; 5.2% Guangxi: 7,120; 5.4% Tibet: 133; 15.2% Hainan: 499; 0.9%

Sales Revenue of Soft Drinks, RMB mn Total Profits of Soft Drinks, RMB mn Number of Province enterprises, Dec-13 Mar-14 Jun-14 Sep-14 Dec-13 Mar-14 Jun-14 Sep-14 Sep-14

Anhui 10,770 2,846 6,208 10,255 1,431 415 845 1,356 64 Beijing 15,065 3,857 8,344 12,784 546 45 349 340 26 Chongqing 5,668 1,382 2,760 4,297 259 58 102 170 28 Fujian 24,988 6,640 13,143 20,512 1,475 481 709 1,120 75 Gansu 3,522 965 2,139 3,065 243 106 175 222 23 Guangdong 72,611 15,466 36,457 61,316 6,071 1,104 2,741 4,980 151 Guangxi 16,244 3,418 7,449 11,521 2,583 216 545 796 52 Guizhou 3,197 986 2,199 3,020 635 72 149 234 26 Hainan 1,147 374 765 1,142 76 18 43 58 17 hebei 20,810 6,150 11,141 18,170 2,705 785 1,819 2,703 66 Heilongjiang 8,578 1,774 4,165 6,420 522 134 274 408 50 Henan 48,249 12,624 25,787 44,696 5,831 1,669 2,962 4,876 179 Hubei 30,183 7,342 14,207 21,240 3,385 728 1,380 1,914 103 Hunan 16,970 4,610 8,555 13,586 890 292 533 780 88

Inner Mongolia 7,866 1,474 3,395 6,296 702 68 125 218 35

Jiangsu 44,447 12,311 24,446 36,548 3,344 987 1,982 2,960 63

Source: National Bureau of Statistics, EMIS Any redistribution of this information is strictly prohibited. Copyright © 2015 EMIS, all rights reserved. - 31 - Industrial Financial Data by Province (cont'd)

Sales Revenue of Soft drinks, mn Total Profits of Soft drinks, mn Number of Province enterprises, Dec-13 Mar-14 Jun-14 Sep-14 Dec-13 Mar-14 Jun-14 Sep-14 2013

Jiangxi 10,897 2,768 5,718 9,403 683 192 368 639 37 Jilin 15,661 4,191 7,948 11,952 736 251 358 582 82 liaoning 21,725 5,068 10,634 15,803 1,357 286 580 905 89 Ningxia 351 103 171 268 -3 4 6 -4 6 Qinghai 1,701 336 941 1,442 -178 -31 -24 -35 8 Shaanxi 18,321 4,134 7,999 12,672 2,057 559 1,018 1,563 71 Shandong 38,124 9,559 21,271 30,574 3,125 1,010 1,932 2,565 140 Shanghai 8,984 2,035 4,839 7,498 378 72 313 501 27 shanxi 5,073 1,100 2,466 3,531 401 77 215 260 30 Sichuan 26,539 7,689 17,030 24,854 2,291 532 1,166 1,816 109 tianjin 13,934 3,842 8,290 14,162 227 88 139 12 25 Tibet 354 52 124 302 101 7 28 114 4 Xinjiang 3,404 816 1,667 2,797 296 50 163 249 18 Yunnan 5,112 1,505 3,156 5,157 366 92 208 363 46 Zhejiang 27,296 6,689 13,730 20,619 3,384 713 1,404 1,871 60

Top Listed Companies by Operating Revenue in 2014 Q3, RMB mn

Competitors Sep-13 Dec-13 Mar-14 Jun-14 Sep-14

Uni-President China Holdings Ltd - 21,406 - 12,367 -

Tingyi (Cayman Islands) Holdings Corp. 8,972 11,011 2,815 5,614 8,612

V V Food & Beverage Co., Ltd. 3,883 5,062 1,147 2,223 3,306

Hebei Cheng De Lolo Company Limited 2,039 2,633 1,286 1,533 2,107

China Huiyuan Juice Group Limited 1,701 4,004 2,077 4,523 1,973

Blackcow Food Company Limited 459 697.2 159.7 255.8 407.8

Top Listed Companies by Total Profit in 2014 Q3, RMB mn

Competitors Sep-13 Dec-13 Mar-14 Jun-14 Sep-14

Tingyi (Cayman Islands) Holdings Corp. 723.7 723 245 464.9 746.8

Uni-President China Holdings Ltd - 1116.1 - 454.6 -

Hebei Cheng De Lolo Company Limited 374.4 458.9 328.34 362.5 470

V V Food & Beverage Co., Ltd. 265.8 242.4 82.4 110.4 123.3

China Huiyuan Juice Group Limited -43.1 1.5 116.7 318.8 59.0

Blackcow Food Company Limited 2.9 22.9 8 12 3.1

Deal Value Date Target Company Deal Type Buyer Stake % USD mn Shenzhen Jinsu Asset Management Center LP; 25-Nov-14 V V Food & Beverage Co Ltd Minority stake purchase Shenzhen Gamuda Equity Center LP; Shenzhen 130.28 8.73 Jinhui Equity Center LP 5-Nov-14 Tibet Highland Natural Water Minority stake purchase Tibet 5100 Water Resources Holdings Ltd 97.64 20

15-Sep-14 Tycoon Beverage Group Co Ltd Acquisition Keen Smart Capital Ltd 8.39 82.3

15-Jul-14 Vita Coco Minority stake purchase Reignwood Group 165 25

Beijing Huiyuan Group Huanggang 12-May-14 Acquisition Chengdu Huixin International Investment Co Ltd 49.67 100 Co Ltd Suntory (Shanghai) Foods Co Ltd; 100; 20-Mar-14 Suntory (Shanghai) Foods Acquisition China Huiyuan Juice Group Ltd 19.12 50 Marketing Co Ltd 28-Oct-13 Laiyang Yi Tian Juice Co Ltd Acquisition Shangdong Lu Hua Group Co Ltd 4.25 100

23-Oct-13 Donghua Fruit Industry Co Ltd Acquisition Private investor 9.06 60

20-Aug-13 Axton Inc Minority stake purchase V V Food & Beverage Co Ltd 3.68 30

Tibet Tiandi Green Beverage 10-Apr-13 Acquisition Tibet 5100 Water Resources Holdings Ltd 82.11 30 Development Co Ltd Beverage products manufacturing 28-Mar-13 Acquisition Ton Yi Industrial Corp 98.84 100 machinery and equipment China Culiangwang Beverages 21-Mar-13 Minority stake purchase Private investor 20.88 16.67 Holdings Ltd Shenzhen PepsiCo Beverage Co 20-Mar-14 Minority stake purchase PepsiCo (China) Investment Co Ltd 15.15 10 Ltd

Deal Value Date Target Company Deal Type Buyer Stake % USD mn 9-Jan-13 Besunyen Holdings Co Ltd Minority stake purchase Undisclosed investors 3.86 3.58

Guangdong Tiandi Yihao Beverage China Science & Merchants Venture Capital 23-Apr-12 Minority stake purchase 37.87 6 Co Ltd Management Co Ltd; Shenzhen Capital Group Co Ltd

5-Apr-12 Qing Dao Nannan Beverage Co Ltd Acquisition Buyer(s) unknown in this case 2.2 70

19-Feb-12 Shanxi Taizhou Food Co Ltd Acquisition Deyu Agriculture Corp 5.5 100

Long Chuan Shen Long Mineral 12-Jan-12 Acquisition CVM Minerals Ltd 25.75 51 Water Co Ltd Longkou Andre Bio-feedstuff Co Ltd; Baishui Andre Bio-feedstuff Co Ltd; 8-Dec-11 Acquisition Yantai North Andre Juice Co Ltd 1.47 75 Xuzhou Andre Pomace Products Co Ltd Shenzhen PepsiCo Beverage Co 30-Aug-11 Acquisition PepsiCo (China) Investment Co Ltd 22.55 15 Ltd

27-Apr-11 Xianyang Andre Juice Co Ltd Acquisition AGRANA AG 16.78 50

27-Apr-11 Yongji Andre Juice Co Ltd Acquisition Yantai North Andre Juice Co Ltd 8.75 50

A non-alcoholic beverage joint China Resources Enterprise Ltd; 60; 24-Jan-11 Form a joint venture venture Kirin Holdings Co Ltd N/A 40 Jialinshan Mineral Water Factory; C'ESTBON FOOD & BEVERAGE (SHENZHEN) CO., 10-May-10 Acquisition N/A 100 Yonglong Beverage Co., Ltd. LTD. Laiyang Yi Tian Juice Co Ltd; Yi 9-Apr-10 Acquisition China Haisheng Juice Holdings Co Ltd 10.39 100 Tian Juice (Shaanxi) Co Ltd Shishi Xianghe Food Science and 1-Jan-10 Acquisition China Marine Food Group Ltd 278 80 Technology Co., Ltd.

VI. Company Profiles

Major Stakeholders, 2014 Q4 Highlights Shares Shareholding, Stakeholders number, mn % Chase managed Saudi Arabia Central Bank 187.701 3.44% . Uni-President China Holdings Ltd. is an investment holding company engaged in the manufacturing and sale HSBC (Taiwan) 161.822 2.96% of beverages and instant noodles in China. Hou boming 142.069 2.60% Hou boyu 123.959 2.27% . It is a unit of Taiwan's largest food conglomerate Uni- President Enterprises Co. Standard Chartered 98.540 1.80%

Florescence Bank of Taiwan 96.445 1.77% . The company's beverage portfolio includes juice drinks, Deutsche Fs Global 92.356 1.69% ready to drink teas, milk tea, coffee, bottled water and Gao Xiuling 89.599 1.64% yoghurt. Its instant noodles range includes bowl noodles, pack noodles, and snack noodles in different flavours. Key Executives

English Name Position . Uni-President China Holdings employed 38,453 people in Chih-Hsien Lo Executive Chairman of the Board 2013 and claimed a 17.6% share of the domestic instant noodles market. Jung-Lung Hou President, Executive Director Kuo-Hui Chen Chief Financial Officer, Executive Director . The company's subsidiaries include Uni-President Asia Holdings Ltd., Uni-President Enterprises (China) Jui-Fen Chen General Manager - Group Tea Business Investments Ltd., Xinjiang President Enterprises Food Chih-Chung Wei General Manager - Juice Business Co., Ltd., Beijing President Enterprises Food Co., Ltd. and Kunshan President Enterprises Food Co., Ltd., among Chia-Heng Chen Head - Combined Drink Products Business others. Xin-Hua Liu Head - Food Department

Annual performance, RMB mn Semi-Annual performance, RMB mn Indicator Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Indicator 2011 2012 2013 Operating Operating revenue 16,932 21,406 23,329 revenue 10,648 21,406 12,204 23,329 12,367 Operating cost 16,876 20,857 23,346 Operating cost 10,247 20,857 12,034 23,346 12,101 Total profit 396 1,077 1,116 Total profit 616 1,077 729 1,116 455 Net profit 505 856 575 916 355 Net profit 312 856 916 Net profit rate Net profit rate (%) 1.84 4.00 3.93 (%) 4.74 4.00 4.71 3.93 2.87 Total assets 13,737 16,540 18,968 Total assets 16,540 16,540 18,978 18,968 21,192 Earnings per share, Earnings per 0.14 0.24 0.16 0.25 0.10 RMB 0.09 0.24 0.25 share, RMB

Financial performance Semi-annual performance

. Uni-President China Holdings posted revenues of RMB 23.3bn in . During the first half of 2014, the company's revenue growth slowed 2013, representing an increase of 9% against 2012. down along with the slowing pace of China's economy. The company recorded revenues of RMB 12.4bn, representing an increase of 1.3% . Revenue and profit growth in the last two years is largely attributed to y/y. the company's continuous investments in product development. . The profitability of Uni-President China Holdings in the first six . Revenues from instant noodles and beverages in 2013 rose by 7.7% months of 2014 dropped y/y, mainly due to an aggressive increase in and 8.9% to RMB 7.8bn and RMB 15bn, respectively, accounting for the company's investments in improving its instant noodles business 33.5% and 64.9% of the company's total revenues. in order to obtain a larger market share.

Revenue by Product in 2013, RMB mn Revenue by Product in 2014 Q2, RMB mn

beverage beverage business business 15,152 8,092

other products instant other instant 336 noodles products 352 noodles business business 7,826 3,939

Revenue Growth by Product in 2013, %, y/y Revenue Growth by Product in 2014Q2, %, y/y

47.0% 33.3%

9.8% 11.4% 4.3% 7.7% 6.6% 8.7% 1.0% 1.3%

instant noodles Tea drinks juice drinks milk tea Bottled Water instant Tea drinks juice drinks milk tea Bottled coffee business noodles Water -9.9% business

Major Stakeholders, 2014 Q3 Highlights

Stakeholders Shares Shareholding, number, mn % . Tingyi (Cayman Islands) Holding Corp. (Tingyi Holding) and its subsidiaries are engaged in the production and Sanyo Foods Co., Ltd. 1854.8 33.11 distribution of instant noodles, beverages and instant food products in China.

Ting Hsin (Cayman Islands) Holding Co., Ltd. 1854.8 33.11 . The company started its instant noodle business in 1992 and expanded into instant foods and beverages in 1996.

Wei Yingzhou, Wei Zhanglvyun 13.2 0.24% . Tingyi Holding was listed on the Hong Kong Stock Exchange in February 1996.

Key Executives . In March 2012, the company expanded its beverage business, establishing a strategic alliance with PepsiCo. Chinese Name English name Position

Executive Chairman of the Board, 魏应州 Ing-Chou Wei Chief Executive Officer . In July 2014, Tingyi Holding employed 76,753, down from Vice Chairman of the Board, 80,541 at the end of 2013. 井田纯一郎 Junichiro Ida Executive Director . According to AC Nielsen, in December 2013, the 林清棠 Frank Lin Chief Financial Officer company ranked first in China in terms of sales of instant 吴文聪 Wilson Wu Chief Auditor noodles, RTD tea, bottled water and overall juice, accounting for 44.1%, 51.8%, 23.6% and 25.9% of the 魏应交 Ying-Chiao Wei Executive Director respective markets.

叶沛森 Pui-Sum Ip Company Secretary

Annual performance, RMB mn Quarterly performance, RMB mn Indicator Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Indicator 2011 2012 2013 Operating Operating revenue 7,913 9,275 11,011 revenue 8,972 11,011 2,815 5,614 8,612 Operating cost 7,360 8,686 10,412 Operating cost 8,235 10,412 256 5,138 7,847 Total profit 663 828 723 Total profit 724 723 245 465 747 Net profit Net profit 420 455 409 383 409 128 232 392 Net profit rate Net profit rate (%) 5.3% 4.9% 3.7% (%) 4.3% 3.7% 4.6% 4.1% 4.5% Total assets 5,809 7,473 8,424 Total assets 8,757 8,424 8,996 9,529 9,578 Earnings per share, RMB 0.08 0.08 0.07 Earnings per share, RMB 0.07 0.07 0.02 0.04 0.07 Financial performance Quarterly performance

. In 2013 the company's sales revenue was RMB 11bn, up 18.7% y/y. . The operating revenues of Tingyi Holding for the first three quarters . The company distributed its products through its own extensive sales of 2014 stood at RMB 8.6bn, down by 4.01% y/y, however, its net network consisting of 566 sales offices and 75 warehouses serving profit for the same period reached RMB 391.6mn, up by 2.36% on 33,504 wholesalers and 110,355 direct retailers at the end of the year. December 2013.

. The sales network is a significant contributor to the company's . The company's total assets increased by 9.38% y/y in the first three leading market position, enabling it to introduce new products rapidly quarters of 2014. and effectively.

Revenue by Product in 2014 Q2, RMB mn Gross Profit by Product in 2014 Q2, %

Convenience 35.27 foods 90 33.45 27.29 Instant noodles 2,034

drinks 3,332 others 49 drinks Convenience foods Instant noodles

Revenue Growth by Product in 2014 Q2, %, y/y Sales and Production Information in 2013

Number of 2009 2010 2011 2012 2013 2.54 2.05 Sales Office 493 548 555 571 566 drinks Convenience Instant noodles others Warehouse 79 89 91 95 75 foods Wholesaler 5,798 6,155 6,188 32,424 33,504 -9.56 Direct Retailer 72,955 73,282 86,755 107,131 110,355

Employee 50,023 64,436 64,309 79,419 80,541

Production Line 414 457 510 607 654 -39.78 Production Centre 56 53 65 108 119

Major Stakeholders, 2014 Q3 Highlights

Shares Shareholding, Stakeholders number, mn % Weiwei Group 532.9 31.87 . V V Food & Beverage Co., Ltd is engaged in the GIANT HARVEST LIMITED 316.8 18.95 production and sale of food products, including soybean Otsuka (China) Investment Co., Ltd. 104.7 6.26 milk powder products, soybean juice powder products, China Growth Investment Fund 5.0 0.3% milk powder for infants and soymilk drinks under the Chen jianping 3.556 0.21% brand name VV, as well as milk, yoghurt, flour, oil and Zhejiang Sanmei Chemical industry Co.,Ltd 3.014 0.18% others. China CITIC Bank Corporation Limited-CCB 2.911 0.17% lasting value Securities Investment Fund . The company also sells wine and operates coal mines. Bank Of Communacations(LOF) 2.499 0.15% LI chengxun 2.493 0.15% . V V Food & Beverage Co was founded in 1994 and listed Key Executives on the Shanghai stock exchange in 2007.

Chinese Name English name Position . Since 2006, V V Food & Beverage has accelerated the Legal Representative, 杨启典 Yang Qidian pace of its diversification strategy by increasing its Chairman of the Board involvement in the wine, grain and oil industry, launching 霍立娟 Huo Lijuan Chief Financial Officer snack foods, beverages, liquor and other products. Umeno, 梅野雅之 Vice Chairman of the Board Masayuki . In 2013, entered the tea industry by acquiring a 51% stake in a tea company based in Hunan province. 熊铁虹 Xiong Tiehong General Manager, Director

曹荣开 Cao Rongkai Executive Deputy General Manager

藤谷阳一 Fujitani, Yoichi Deputy General Manager, Director

Annual performance, RMB mn Quarterly performance, RMB mn Indicator Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Indicator 2011 2012 2013 Operating Operating revenue 5,369 5,810 5,062 revenue 3,883 5,062 1,147 2,223 3,306 Operating cost 5,150 5,675 5,218 Operating cost 3,959 5,218 1,068 2,128 3,236 Total profit Total profit 319 233 242 266 242 82 110 123 Net profit 146 91 56 65 73 Net profit 221 154 91 Net profit rate Net profit rate (%) 4.1 2.7 1.8 (%) 3.8 1.8 4.9 2.9 2.2 Total assets Total assets 7,089 8,070 7,027 7,370 7,027 7,625 7,579 7,286 Earnings per share, Earnings per RMB 0.09 0.05 0.05 share, RMB 0.08 0.05 0.03 0.04 0.05 Financial performance Quarterly performance

. In 2013 the company's sales revenues reached RMB 5.06bn, down . V V Food & Beverage posted operating revenues of RMB 3.3bn for by 13% y/y while its gross profit margin was 31.17%. the first three quarters of 2014, down by 14.86% y/y. The decline in revenue was due to falling sales of vegetable protein beverages . Sales of soy milk and vegetable protein beverages maintained a and wine. steady growth. The revenues from soy milk powder products grew by 9.77% over the period and sales of vegetable protein drinks were up . The company's total profit and net profit reached RMB 123.3mn and by 15.08%. RMB 72.6mn at the end of September 2014, both down over 50% y/y. This was due to the separation of the company's energy business in . The main reason for the decrease in revenue and assets in 2013 is 2013, resulting in a further reduction of the operating income and the reduction of the trade income from V V's energy business, which profit in the first three quarters of 2014. was taken out of the scope of the consolidated financial statement.

Revenue by Product in 2014 Q2, RMB mn Gross Profit by Product in 2014 Q2, %

41.49 42.81 Beverage Including Dairy and Plant Protein wine 741 20.77 382

Solid Solid Beverage Beverage Including Dairy wine Beverage 713 and Plant Protein

Revenue growth by product in 2014 Q2, %, y/y Revenue by Region in 2014 Q2, RMB thou North China 309 Solid Beverage Beverage Including Dairy wine Southwest and Plant Protein Central China 188 -3.15 618 Northwest China 157 -10.01 South China 75 Northeast China 64 East China Other 31 -19.46 640

Major Stakeholders, 2014 Q3 Highlights Shares Shareholding, Stakeholders number, mn % . Hebei Chengde LoLo Company Limited, founded in 1050, Universal Sannong Group Co. Ltd. 204.16 40.68 is principally engaged in the production and distribution of 104 combinations of China Social Security beverages. 14.99 2.99 Fund Agricultural Bank of China - Penghua Power 11.31 2.25 . The company produces vegetable protein beverages, Growth Mixed Securities Investment Fund including walnut milk as well as almond milk, under the 109 combinations of China Social Security 11.30 2.25 brand name of LoLo (known as Lulu on the market). It Fund distributes its products on the domestic market. Agricultural Bank of China -Dacheng Innovation 9.24 1.84 Growth Mixed Securities Investment Fund . In 1997, the company was listed on the Shenzhen Stock China Social Security Fund 8.86 1.77 Exchange. Its major shareholder is Universal Sannong Holdings Limited. Key Executives . The company's most competitive product is the Lulu Chinese Name English name Position almond milk. Its production relies on local almond 管大源 Guan Dayuan Chairman of the Board resources.

李兆军 Li Zhaojun Finance Director, General Manager . The company claimed a 90% share of the domestic almond milk market in 2013. 王旭昌 Wang Xuchang Deputy General Manager

Deputy General Manager, Secretary 王新国 Wang Xinguo . The company is headquartered in Chengde and has four of the Board production bases in Beijing Huairou, Hebei Langfang, 陈跃鹏 Chen Yuepeng Deputy General Manager, Director Henan Zhengzhou and Chende, with annual production capacity of 400,000 tonnes. 左辉 Zuo Hui Deputy General Manager

Annual performance, RMB mn Quarterly performance, RMB mn Indicator Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Indicator 2011 2012 2013 Operating Operating revenue 1,937 2,138 2,633 revenue 2,039 2,633 1,286 1,533 2,107 Operating cost 1,680 1,829 2,188 Operating cost 1,673 2,188 958 1,179 1,646 Total profit Total profit 258 311 459 374 459 328 363 470 Net profit 278 344 245 269 348 Net profit 195 228 344 Net profit rate Net profit rate (%) 10.0 10.7 13.1 (%) 13.6 13.1 19.1 17.6 16.5 Total assets Total assets 1,498 1,547 1,875 1,418 1,875 1,746 1,471 1,613 Earnings per share, Earnings per RMB 0.53 0.55 0.83 share, RMB 0.68 0.83 0.6 0.53 0.68 Financial performance Quarterly performance

. For the nine months ending September 2014, Hebei Chengbe LoLo’s . In 2013, the company's sales revenue grew by 3.34% to reach RMB revenues rose by 3.34% y/y to RMB 2.11bn. 2.63bn. The revenue growth reflects an increase in the demand for . Its net profit increased by 25.4% to RMB 348.4mn. This was mainly the company's products and services due to favourable market due to an increase in operating income and a decline in operating conditions. costs. The steady growth in the sales volumes of vegetable protein beverages also contributed to the rising profit. . Its gross profit margin was 38.18%, slightly less compared to 2012. . The company's profitability benefited from a 2.86% drop in sales The net profit rate rose to 13.05% in 2013 from 10.65% in 2012. costs to RMB 357.7mn. General and administrative expenses also decreased by 3.5% to RMB 46mn.

Revenue by Product in 2013, RMB mn Gross Profit by Product in 2013, %

39.34 Almond milk and other 2,483

19.06

Walnut 147

Walnut Almond milk and other

Revenue Growth by Product in 2013, %, y/y Production and Sales Volume by Product, thou tonnes

328 42.41 310

241 241 246 253

22.22

9 8 13 13 18 19

2011 2012 2013 Walnut-production Walnut-Sales volume Walnut Almond milk and other Almond milk and other-production Almond milk and other-Sales volume

Major Stakeholders, 2014 Q2 Highlights

Shares Shareholding, Stakeholders number, mn % . China Huiyuan Juice Group Limited was established in China Huiyuan Juice Holdings Limited 1071.809 53.58 1992 and was listed on the Hong Kong Securities Exchange in 1996. Sino Fountain Limited 716.516 16.87 Temasek Holdings (Private) Limited 238.586 10.99 Su yingfu 6.042 0.30% . The company and its subsidiaries are engaged in the production and sale of fruit juice, fruit and vegetable juice Liang minjie 0.15 0.01% and other beverages. Song houquan 0.15 0.01%

Zhao yali 0.15 0.01% . The company produces 100% juices, nectars and juice Zhao chen 0.15 0.01% drinks based on juice concentrate. Most of the products of Yan yan 0.15 0.01% the company are sold under the Huiyuan brand. Key Executives . The company has more than 50 subsidiaries, 9,447 employees and over RMB 4.5bn of annual sales revenues. Chinese Name English Name Position

Chairman ; . According to AC Nielsen, at the end of 2013, Huiyuan 朱新礼 Zhu Xinli Legal Representative ranked first in China in terms of sales of 100% juices and nectars with market shares of 56% and 45.2%, 于洪莉 Yu Hongli chief executive officer respectively.

吴文楠 Wu Wen Nan Chief Financial Officer . In March 2014, the company expanded its product portfolio to tea and coffee drinks by buying USD 19mn 高彦祥 Gao Yanxiang Vice president worth of assets from Suntory (China) Holding Co Ltd. 江旭 Jiang Xu Vice president

Annual performance, RMB mn Semi-Annual performance, RMB mn

Indicator 2011 2012 2013 Indicator Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Operating Operating revenue 3,826 3,981 4,504 revenue 1,690 3,981 2,063 4,504 1,966 Cost of Sales 2,861 2,866 3,106 Cost of Sales 1,270 2,866 1,427 3,106 1,388 Gross profit 964 1,115 1,398 Gross profit 420 1,115 636 1,398 577 Profit for the Profit for the period 310.5 16.2 235 period -32 16.2 114 235 20.5 Net profit rate (%) Net profit rate 8.1% 0.4% 5.2% (%) -1.9% 0.4% 5.5% 5.2% 1.0% Total assets 10,046 11,160 17,213 Total assets 10,019 11,160 11,263 17,213 16,953 Earnings per share, 0.14 0.01 0.21 Earnings per RMB share, RMB -0.02 0.01 0.08 0.14 0.01 Financial performance Interim performance

. Despite being one of the biggest fruit and vegetable juices players, . The company's sales reached RMB 4.52bn in 2013, up by 12.96% y/y Huiyuan had a relatively slow revenue growth in 2014. and gross profit margin was 31.05%.

. In the first half of 2014, the company's 100% fruit juice sales . The company's total assets came in at RMB 17.2bn at the end of decreased by 7.1%. 2013.

. Its gross profit margin dropped to 29.4% in the first half of 2014. The . Huiyuan's production facilities and distribution network are some of its main reason for the decline was the increased fixed cost and most valuable assets. The company has 43 production facilities and a depreciation. network of 14 direct sales branches.

Performance by Product in 2013 Revenue by Product in 2013, RMB mn

Market share (%) Sales 100% Juice Sales volume Revenue 1,205 First: Huiyuan Juice 56 50 Nectar 1,456 Second ranked competitor 24.9 28.9 100% Third ranked competitor 6.2 5.7 Juice Other drinks Fourth ranked competitor 2.9 2.9 832

Fifth ranked competitor 1.5 1.6 Juice drink 1,011 Nectar First: Huiyuan Jucie 45.2 38.5

26%- Second ranked competitor 28.1 22.9 Revenue by Product in 2014 Q2, RMB mn 99% Third ranked competitor 4.5 6.3 100% Juice Concentr Fourth ranked competitor 4.5 6.4 394 ation Fifth ranked competitor 3.1 3.3 First ranked competitor 30.8 32.4 Nectar 589 Juice Second ranked competitor 26.2 24.1 drink

(25% & Third ranked competitor 20.4 18.2 below Other drinks Fourth ranked competitor 6.5 6.3 547 Concentr ation) Fifth ranked competitor 4.0 4.7 Sixth: Huiyuan Juice 2.4 2.2 Juice drink 435

Major Stakeholders, 2014 Q3 Highlights

Stakeholders Shares number, mn Shareholding, % Lin Xiuhao 135.86 43.41 . Blackcow Food Company Limited, founded in 1998, is principally engaged in the research, development, Wu Dinian 8.98 2.87 production and distribution of soybean and grain nutritious Lin Xiuwei 8.09 2.58 drinks. Yang Tianyi 7.49 2.39 Liu Guanjun 7.02 2.24 . The company's main products are soybean protein drinks, oatmeal and other grain cordial drinks, soybean milk Lin Xiuhai 7.02 2.24 powders, sesame pastes and walnut powders, as well as Huang Lihong 4.00 1.28 liquid milks, among others. It distributes its products Gao Liang 3.10 0.99 primarily on the domestic market.

Key Executives . The company was listed on the Shenzhen Stock Exchange's SME board in 2010. Chinese Name English name Position 林秀浩 Lin Xiuhao Executive Chairman of the Board . Its subsidiaries include Jieyang Heiniu Food Industry Co., Ltd., Liaoning black cattle food Industrial Co. Vice Chairman of the Board, General Ltd., and Anhui Province black food industry Co., Ltd. 吴迪年 Wu Dinian manager In July 2013, the company obtained operational license 林秀海 Lin Xiuhai Deputy general manager . for a newly established subsidiary, a Guangzhou-based company that is engaged in the wholesale and retail of 何玉龙 He Yulong Chief Financial Officer packaged foods. 黄树忠 Huang Shuzhong Secretary of the board of directors

Annual performance, RMB mn Quarterly performance, RMB mn Indicator Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Indicator 2011 2012 2013 Operating Operating revenue 857 763 697 revenue 459 697. 160 256 408

Operating cost 727 693 684 Operating cost 462 684 152 262 418

Total profit 136.9 73.4 22.9 Total profit 2.9 22.9 8.0 12.0 3.1 Net profit 2.2 14.6 6.5 7.3 2.5 Net profit 102.8 55.3 14.6 Net profit rate 0.5 2.1 4.1 2.9 0.6 Net profit rate (%) 12.0 7.3 2.1 (%)

Total assets 1,444 1,580 1,799 Total assets 1,700 1,799 1,802 1,857 2,102 Earnings per Earnings per share, RMB 0.43 0.18 0.05 share, RMB 0.01 0.05 0.02 0.02 0.01

Financial performance Quarterly performance

. The company's sales revenue reached RMB 6.97bn in 2013, . For the nine months ending September 2014, Blackcow Food's decreasing by 8.61% compared to 2012. revenues decreased 11.17% y/y to RMB 407.8mn. The main reason for the revenue decline was the adjustment of the product structure

initiated in 2013, clearing of the channel inventory and strengthening . The revenue decline was due to adjustment in the product structure, the distributors management. optimisation of the dealership structure and a channel inventory . The net profit for the period increased by 12.1% to RMB 2.5mn. The clean-up. reduction of sales and administration expenses was the major profit growth driver. . The firm's total assets reached RMB 1.8bn at the end of 2013, up by . Total assets rose to RMB 2.1bn from RMB 1.7bn in the same period almost RMB 220mn from the year-ago period. of the previous year.

Revenue by Product in 2014 Q2, RMB mn Gross Profit by Product in 2014 Q2, %

Soybean milk 43.18 powder 83 37.59 38.35 37.28 34.2

Oatmeal 30

Sesame paste 12 Liquid soy Walnut milk 122 powder 7 Liquid soy milk Soybean milk Oatmeal Sesame paste Walnut powder powder

Revenue Growth by Product in 2014 Q2, %, y/y Income by Region in 2014 Q2, RMB mn 140 128.72 Northeast China 35 120

100 Southwest 80 Central China 34 75 60 53.76 Northwest 40 China 14 -3.07 20 -17.51 -25.03 North China 11 0 -20 Liquid soy Soybean milk Oatmeal Sesame paste Walnut South China 7 milk powder powder East China 78 -40

Corporate Headquarters Americas Headquarters Asia Headquarters 6-8 Bouverie Street 225 Park Avenue South Eucharistic Congress Bldg. No. London EC4Y 8DD New York, New York 10003 III UK US 4th Floor, 5 Convent Street Voice: +44 20 7779 8100 Voice: +1 212 610 2900 Mumbai 400 001 Fax: +44 20 7779 8224 Fax: +1 212 610 2950 India Voice: +91 22 22881123 Fax: +91 22 22881137

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