Operations
We produce and market a broad range of wheat flour for use in bread, dumplings, noodles, and confectionary products. Our flour products are marketed under the "Long Feng" brand name and sold throughout China at both wholesale and retail levels.
We provide a wide range of instant noodle products to our customers. Our products can be separated into two broad categories for selling and marketing purposes: (i) packet noodles for home preparation and (ii) snacks and cup noodles for outdoor convenience.
In late 2005, we started producing two types of soybean products - soybean protein powder and soybean powder. They are principally supplied to food and beverage producers.
We believe that we have a reputation in China for producing some of the highest quality food products. We believe our production plants operate at the highest level of hygiene and efficiency and all of our plants are certified under the ISO9002 standards. Most of our manufacturing equipment is purchased and imported from Switzerland, Japan and South Korea. We also use strict quality control systems, resulting in what we believe to be a favorable customer perception of the "Long Feng" brand.
Our products are regionally marketed and distributed throughout China. Our sales and marketing strategy focuses on maintaining strong distribution relationships by holding annual sales order meetings, regular distributor conferences and an excellent quality/price dynamic.
We believe our distribution system is the key to our continued success in developing the "Long Feng" brand as one of the leading domestic brands in China. We have more than 200 points of distribution in China, which are owned and managed by distributors. Most of our distributors have long-term relationships with us.
Our primary domestic customer base for both our flour products and instant noodles consists of small retail stores in the rural areas throughout China where we believe that our brand has long been recognized as the highest quality available for the price. The rural market is rapidly growing, benefiting from increases in rural consumer income. We believe that brand loyalty by our customers is very strong in this sector. In addition to the small retail sector, we sell to larger supermarkets located in urban areas.
In addition to domestic sales, we export noodles to other countries such as South Korea, Australia, Malaysia, and Indonesia. We also obtained HACCP (Hazard Analysis Critical Control Point) certification from CCIC Conformity Assessment Services Co. Ltd., a Chinese quality assurance examination authority, enabling the company to begin exports of instant noodles and soybean powder to Europe. From the second quarter of the year 2006, we began export sales to Sweden and Greece.
We also receive orders for flour from certain KFC Corporation locations in China and KFC's intermediary suppliers for flour. KFC requires rigorous quality control standards for its flour of at least the ISO9002 level. We believe that KFC's orders reflect the brand reputation and quality of the Long Feng brand, as well as our commitment to international quality standards.
Strategy
Our strategy for growth is to capitalize on our strong brand name and pursue strategic partnerships and acquisitions that will enhance our sales. The following are some of the key elements of our business growth strategy:
-Acquire additional locations to increase our production capacity
-Build strategic alliances with multinational food groups to enhance product range and capitalize on our China distribution network
Plans for expansion of the existing plants are expected to be funded through current working capital from ongoing sales. Acquisitions of plants will require an additional infusion of funds in the form of debt or equity, or a combination of both. However, there can be no assurance these funds will be available.
Competition
The flour industry in the PRC is very competitive. Our largest competitors are Shandong Guang Rao Ban Qiu Flour and Hebei Wu De Li Flour in the Northern market and Shenzhen Nanshun Flour in the Southern market.
The instant noodle segment in the PRC is also highly competitive. We compete against well-established foreign companies and many smaller companies. Our largest competitors are the "Master Kang" brand manufactured by Tingyi (Cayman Island) Holdings Corporation and the "President" brand manufactured by Uni-President Group, both based in Taiwan. Both are focused predominately in the more developed and competitive urban markets.
Employees
We employ approximately 1,500 employees. All of them are located in the eight plants and the executive office located in Shenzhen. We have maintained good relationships with our employees and no major disputes have occurred since our inception.
