About CHINA FEIHE Company

Feihe is headquartered in Beijing. According to Frost & Sullivan reports, it is the largest and most widely known Chinese brand infant formula company in China. As a major market leader, our brand ranked first among domestic and international peers in terms of retail sales value in 2018, with a market share of 7.3%, according to the Frost & Sullivan Report. In terms of retail sales value in 2018, the company also ranked first among domestic infant formula groups, with a market share of 15.6%. In terms of retail sales value in 2018, it ranked second among all domestic and international infant formula groups, with a market share of 7.3%. With extensive expertise in the infant formula business, our brand has a unique value proposition, which is “more suitable for the physique of Chinese babies.” Our product design aims to closely simulate the composition of a Chinese mother's breast milk through in-house development of a formula, so as to achieve the goal of optimal balance of key ingredients according to the biological physique of Chinese babies. According to the Frost & Sullivan report, the retail sales value of infant formula in China is expected to rise steadily, with a compound annual growth rate of 6.9% from 2018 to 2023. The high-end segment consists of ultra-high-end and high-end infant formula, which is expected to continue to drive the entire infant formula industry. This is due to accelerated urbanization, increased disposable income, increasingly educated, health-conscious consumers, and growing demand for high-quality infant formula products. Accordingly, according to the Frost & Sullivan report, the high-end segment is expected to reach RMB 199.8 billion by 2023, with a compound annual growth rate of 16.6% from 2018 to 2023. Benefiting fully from the growth trend of the high-end segment, which is expected to account for an increasing share of the entire infant formula industry, that is, from 37.9% in 2018 to 58.3% in 2023, we have repositioned our products as high-end products in the past few years. As of 2018, we are one of the leaders in the high-end segment, ranking second in terms of retail sales value in 2018, with a market share of 13.1%. In the ultra-high-end segment, we ranked first among domestic and international infant formula groups in terms of retail sales value in 2018, with a market share of 24.7%. Our growth in this segment was driven by our ultra-high-end Starship product line. Revenue increased from RMB 711.5 million for the year ended December 31, 2016 to RMB 5108.2 million for the year ended December 31, 2018, with a compound annual growth rate of 168.0%, and from RMB 2076.5 million for the six months ended June 30, 2018 to RMB 2760.3 for the six months ended June 30, 2019 One million yuan, a growth rate of 32.9%. Our dairy products are mainly sold through an extensive distribution network of more than 1,800 offline customers across the country, covering more than 109,000 retail sales points as of June 30, 2019. Our offline customers are distributors, who usually sell our products to retail stores and, in some cases, to mother and baby product store operators, supermarkets, and large supermarket chains. We believe that the importance of maternal and child product store channels within the industry is becoming increasingly prominent, so we are one of the pioneers in establishing partnerships with them. As for large-scale mother and child product store operators (such as Kids King and Baby Friendly Island), we have also invested dedicated resources to develop and strengthen relationships with the aim of narrowing the gap with end consumers. We believe our single-tier distribution approach, well-managed national distribution pipeline, and high penetration rate of mother and child products stores provide us with a competitive advantage to maintain our profit margins and control over final product sales. Additionally, our barcode scanning feature enables customer inventory tracking, providing good transparency on their inventory levels to avoid inventory backlogs and ensure the highest product quality. In order to seize the rapid growth of e-commerce sales in China, especially for the younger generation of consumers, in addition to our own websites and mobile apps (such as WeChat), our products are also sold directly on some of the largest e-commerce platforms, such as Tmall, JD, and Suning Tesco. Additionally, another key difference of our brand is our ongoing commitment to research and understand Chinese women's breast milk so that our infant formula production is as close as possible to the ingredients in breast milk. We have set up a comprehensive Chinese breast milk database, and we have collected more than 1,500 samples of Chinese breast milk from mothers of various physiques and eating habits in China from different regions. Additionally, we have partnered with leading national and international research institutions to continue research on infant, child and adult nutrition. Furthermore, we insist on providing the highest quality fresh milk for all infant formula production. Our production facilities are close to fresh milk suppliers to ensure that fresh milk is used within 24 hours of receipt to preserve the fresh taste of milk. According to the Frost & Sullivan report, we are the only infant formula supplier participating in the prestigious National 863 Program. This program, also known as the National High-Tech Research and Development Program, is a government-funded program designed to encourage the development of advanced technology. As of the last practical date, we are further developing products for infants and adults, and are expected to launch more than ten products, which are expected to be launched within the next few years. As a result of our continuous efforts to implement these measures, we have strengthened our reputation as a premium infant formula brand and created huge demand for our high-end products, which has led to an increase in our earnings over a record period. For the year ended 2016, 2017 and December 31, 2018, our earnings were RMB3724.4 million, RMB5887.3 million and RMB10391.9 million respectively. For the six months ended 2018 and June 30, 2019, our earnings were RMB4384.6 million and RMB5891.7 million respectively. For the year ended 2016, 2017 and December 31, 2018, our profit was RMB406.2 million, RMB1160.2 million and RMB2242.3 million respectively. For the six months ended 2018 and June 30, 2019, our profit was RMB1091.4 million and RMB170.8 million respectively. Our history can be traced back to 1962, when Hongguang Dairy Factory (“Hongguang Dairy”), the predecessor of Heilongjiang Feihe, became a state-owned enterprise. Our operating subsidiaries are located in mainland China, Hong Kong, the US and Canada.