China Nutrifruit Group Limited to Expand into Fruit and Vegetable Powder Production

The new facility will produce tomato, pumpkin and other popular fruit and vegetable powders that can be used as ingredients in a variety of products, including baby food, ready-to-drink mixes, instant soup mixes, snack foods, and other confectionery items.

29 Jan 2010 --- China Nutrifruit Group Limited, a leading producer of premium specialty fruit based products in China ("PRC"), announced the Company's plan to construct a new fruit and vegetable powder manufacturing facility in Daqing, Heilongjiang Province.

The Company plans to acquire land use rights in Daqing to build its new fruit and vegetable powder manufacturing facility with an annual production capacity of 10,000 tons and is expected to begin production in September 2010. The new facility will produce tomato, pumpkin and other popular fruit and vegetable powders that can be used as ingredients in a variety of products, including baby food, ready-to-drink mixes, instant soup mixes, snack foods, and other confectionery items. According to the Company's estimates, average selling price is estimated to be $2,640 (RMB 18,000) per ton with an average gross margin of 45.0%. The Company expects the new line to contribute approximately $13.5 million in revenue for fiscal year 2011.

"Based on our market research, the fruit and vegetable powder segment is a high growth segment that complements our current product lines. We can leverage our supplier relationships along with our network of distributors to sell our new fruit and vegetable powder products. Furthermore, we believe entering this segment provides a more attractive return on investment than our previous plan of acquiring a concentrate pulp production line. We will continue to outsource production of our concentrate pulp products and may seek additional acquisition targets in the concentrate pulp segment in the future," commented Mr. Changjun Yu, Chairman of China Nutrifruit

The total capital investment for the new facility is expected to be $19.1 million (RMB130 million), which includes the acquisition of the land use rights of approximately 40,000 square meters, the construction of the manufacturing facility, and purchase of equipment. The first payment of approximately $1.5 million (RMB 10 million) for the acquisition of land use rights will occur in the second calendar quarter of 2010. The Company expects to finance this investment with proceeds from its recent financing deal in October 2009 and working capital from operations.

Over the last year, China Nutrifruit's research and development team has developed and refined its manufacturing technology for fruit and vegetable powder production, resulting in powders with a longer shelf life, simpler packaging and lower transportation costs than its competitors. This reduces waste and lowers manufacturing costs for end product manufacturers. In addition, China Nutrifruit's fruit and vegetable powders can be combined with other ingredients to improve production efficiency while retaining the original flavor and nutrition of the end products.

"Consumer awareness and demand for natural food products has resulted in increased use of fruit and vegetable powders in place of refined sugars and artificial flavors in the production of food and confectionary products. Our manufacturing technology, strong distribution network and cost benefits set us apart from domestic competitors and allow our Company to establish a strong footprint in this rapidly growing market," concluded Mr. Yu.