GLG Life Tech Corporation Announces Joint Venture in China's Growing Food and Beverage Market
This joint venture provides GLG with a great opportunity to enter China, one of the biggest consumer product markets with one of the fastest growing beverage industry in the world today.
12/15/2010 --- GLG Life Tech Corporation, the vertically-integrated leader in the agricultural and commercial development of high quality stevia, announces that is has entered into a joint venture agreement with China Agriculture and Healthy Foods Company Limited (CAHFC) for the sale and distribution of zero calorie beverage and food products in China that are sweetened with GLG's stevia extract products. The new venture will be called Dr. Zhang's All Natural and Zero Calorie Beverage and Foods Company (ANOC). ANOC will focus on the development of the all natural zero calorie brand of food and beverages (ANOCTM) and the establishment of sales and distribution of the ANOCTM products nationally in China. GLG will hold an 80% controlling stake in ANOC and CAHFC will hold 20%. Dr. Luke Zhang will be the CEO of ANOC and will be supported by an experienced team of senior executives recruited by CAHFC from the beverage industry in China. The Company will hold a conference call Tuesday, December 14th, 10 am EST to review the new venture.
CAHFC has spent the last two years developing its ANOCTM products and production capabilities. They have developed 30 beverage products and 300 food products for the all natural zero calorie product category. All products will use GLG's stevia extract as the main sweetener. CAHFC is the owner of Fengyang Xiaogangcun Yongkang Foods High Tech Co. Ltd. ("FXY") with whom GLG has an exclusive stevia extract supply agreement. FXY will be the manufacturer of the initial products for ANOC. FXY's grand opening of its beverage operations takes place on December 18th at its Xiaogangcun facility in the Anhui Province.
The product concept and brand have been market tested during the last twelve months in a number of major cities in China to refine the brand and product concept. The joint venture partners see a viable market niche to enter with these products and develop the business. CAHFC also brings an experienced team of senior executives to the joint venture from beverage companies in China including Yili, Kang Shi Fu, and Hui Yuan Juice, covering all key management disciplines including, R&D and Formulation, Production, Quality Control, Marketing, Sales and Distribution and Logistics. These individuals were recruited for their expertise in building sales and distribution networks in high growth environments.
China's food and beverage industry has experienced a greater than 20% annual growth rate during the period from 2002 to 2009 with the industry growing from approximately RMB 900 billion in 2002 to RMB 4.7 trillion (equivalent to US$ 693 billion) in 2009. For the first three quarters of 2010 Industry revenue has been RMB 4.5 Trillion which represents a 26% increase from 2009. (26% increase). As China's middle class continues to develop, this is expected to fuel consumption growth in the beverage and food industry in China. The Freedonia Group estimates that the beverage market in China will grow from 105,750 million liters in 2007 to 199,500 million liters in 2017.
The Company also sees issues relating to obesity and diabetes in China as important for the Joint Venture's products. China became the world's second largest country, in terms of the number of diabetic patients (India is largest), with 92 million cases reported in 2009 (up from 10 million in 1987). China's Ministry of Health has also reported that there are currently 350 million people considered over weight and 70 million people are considered obese. Adult Chinese male obesity patients are currently increasing about 1.2% every year, surpassing the obesity growth rates in the USA, the UK and Australia.
GLG Chairman and CEO Dr. Luke Zhang stated, "This joint venture provides GLG with a great opportunity to enter China, one of the biggest consumer product markets with one of the fastest growing beverage industry in the world today. The CAHFC assets include formulations for over 30 beverage and 300 food products sweetened with GLG's stevia, as well as certain patents and trademarks. CAHFC has also already developed relationships in China, including with: the Government; large international supermarkets such as Walmart, Metro AG, Tesco and RT-Mart; and many mainstream Chinese media including CCTV have also been engaged for PR and advertising support. This joint venture is an opportunity to leverage the two company's strengths to participate in the growing China food and beverage industry, a market which GLG believes is largely untapped. The joint venture has assembled a very strong team of executives from the beverage industry in China in order to try to capitalize on this opportunity. The Company anticipates a quick roll-out of ANOC's products starting in the first quarter of 2011 and our goal is to achieve RMB 3.75 billion ($US 568 million) sales in 2013. Additionally we expect to see additional growth in GLG's core stevia extract business driven by the growth of the zero calorie all natural product category in China as well as additional international developments in surrounding Asia countries."
Mr. Song Xiankun, Chairman and President of CAHFC said, "We are very pleased to be working with GLG on this joint venture to build ANOC into a significant provider of all natural and zero calorie healthy food and beverages in the Chinese market. Since 1999, GLG has continued stevia developments in China and is the biggest stevia grower and producer in the world. I believe with the upper stream secure from GLG and that through the combination of ANOC's products, the leadership of Dr. Zhang and the highly experienced executive team of ANOC, we will be successful in this growing market in China and ANOC is expected to be a leading player in the China Food and Beverage Industry based on its all natural zero calorie products within 3 years."
