Zhongpin, Inc. (HOGS) Announces New Meat Processing Plant and Distribution Center in China

In the company’s news yesterday,

Zhongpin Inc. announced plans for a major new processing plant and distribution center to serve eastern China, including Shanghai and the Yangtze river delta area. The plant will be located in Jiangyan, north of Shanghai on the eastern coast of China, and will be operated through a new subsidiary company named Taizhou Zhongpin Food Co., Ltd., with an initial registered capital of $7.3 million. It will produce chilled and frozen pork and prepared pork products, and will significantly broaden Zhongpin’s cold-chain logistics business in Jiangsu province.

Construction of the new plant is set to begin in August, 2010 in two phases. The first phase should be completed in the third quarter of 2011, and will include production lines for chilled and frozen pork. The second phase, with production lines mainly for prepared pork products, is expected to be completed in the first quarter of 2012.

Zhongpin is expected to invest approximately $63 million in the new 36-acre facility, including land use rights. The plant’s annual capacity will be about 130,000 metric tons, mostly chilled pork, including easy-to-cook pork. 60% of the plant’s advanced equipment will be sourced globally. The company’s current distribution network in China covers 20 provinces plus Beijing, Shanghai, Tianjin, and Chongqing, and includes more than 3,000 retail outlets. Its export markets include the European Union and Southeast Asia.

Zhongpin Chairman and CEO, Mr. Xianfu Zhu, commented on the project. “This will be Zhongpin’s first production and logistics entry into the eastern China market, where we expect to create additional returns on investment for our shareholders. This eastern region, which includes the Yangtze River Delta with Shanghai as the center, has a large population and huge consumption potential. The Jiangyan region, in particular, is a rich and fertile growing area with abundant hogs, vegetables, fruits, and other high-quality agricultural products, and is the perfect location where we can produce our food products to serve eastern China.”

He continued, “Zhongpin now has a high brand awareness in the eastern China market. We currently distribute to this market from our plants in Henan province in central China, using our high-reliability cold chain logistics system, so we have a firm foundation in the eastern China market. The newly built plant will save on our delivery costs, quicken our response to the market, further enhance customer awareness of our brand, and is expected to increase our profitability in the eastern China. As we have successfully done in our other market expansions, we will increase our production that is focused on middle and upper income customers, produce high-quality and safe food products, and serve several market segments. We should capture a substantial share of the market in eastern China, which will help increase our sales, profits, and returns on investment.”

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