- Company Increases Production and Customer Support to Meet Significant Rise in Consumer Demand for Safe Products -
BEIJING, Sept. 29 /PRNewswire-FirstCall/ -- American Dairy, Inc. (NYSE:ADY), one of the leading producers and distributors of premium infant formula, milk powder and soybean, rice and walnut products in China, today announced it has substantially increased its production output and customer support to meet consumer demand for reliable, high quality, premium infant formula products.
There has been a flight towards quality by consumers nationwide since the Chinese government's announcement on September 16, 2008 that 22 dairy enterprises had products containing melamine. As a result, the Company's Feihe branded products have been sold out in many areas. Particularly in Hebei province, where the melamine crisis broke, the Company's sales orders increased more than sevenfold. In other areas such as Henan and Shandong provinces, sales orders have more than quadrupled. The Company has responded by increasing production and is running at full capacity 24 hours a day to keep up with demand. Additional packaging equipment was also installed to meet the increasing demand.
Since the government's initial announcement, more companies with failed products have been implicated. However, all of the Company's products have passed all government inspections. The Company is also working with the government and attended several emergency meetings to discuss ways to improve the dairy and overall food industry in China. At a meeting on September 21, 2008 with China's General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), the Company submitted a written commitment to provide safe and quality products.
The Company was the first infant formula producer to offer its customers a toll-free hotline and, since the crisis, the Company increased staff and extended hours for its hotline to accommodate increasing inquiries. The hotline has experienced more than 500 calls a day with the majority of callers asking for the retail locations of Feihe branded products.
Mr. Leng You Bin, Chief Executive Officer, states, "We are saddened by the recent events and are committed to ensuring that babies in China continue to have access to the premium, high quality infant formula that they deserve. We have always been committed to quality and will provide any support we can. We apply a 25-step quality control process that involves over a hundred points of testing from the feed for the dairy cows, throughout the manufacturing process, and extending to the semi-finished and finished products. Our facilities also comply with strict pharmaceutical manufacturing standards, a higher level of quality control than what's required for consumer goods manufacturing facilities in China." Feihe branded products have maintained a strong presence in second-tier and third-tier cities. However, increased demand in first-tier cities such as Beijing has accelerated the Company's entry into those markets. The Company has increased its marketing and sales team as demand continues to rise. In addition, to step up its marketing efforts, the Company has launched a nationwide marketing campaign, with television commercials running on Chinese Central Television Channels (CCTV) 1, 2, 3, 8 and provincial stations all across China. The Company has also been featured in more than 40 news segments and news articles for its commitment to quality production nationwide. Despite the rising demand, the Company has not raised prices at this time.
In a recent interview with BusinessWeek, Mr. Liu Hua, Vice Chairman, stated, "As milk buyers fought over milk supplies, their standards for quality fell." Mr. Liu continues, "The fragmented nature of the supply is not only a threat to controlling the quality of raw milk but also lets the intermediary milk collectors have the opportunity to reap profits from poor farmers." Mr. Leng continues, "The melamine crisis partly resulted from fierce competition over the supply of raw milk. As one of the leading dairy producers in the Heilongjiang province, we have invested heavily in our infrastructure to ensure the safety of our products, including building Company-owned dairy farms and centralized milking stations using top-of-the- line equipment from Europe. As a result, we are able to support local farmers while growing and ensuring the quality of our raw milk supply." Vertical Integration with Organic Dairy Farms The Company is the first and only infant formula producer to build its own organic dairy farms that meet international standards and can accommodate approximately 10,000 cows at each farm. The two large-scale dairy farms, located in the Gannan and Kedong counties of Heilongjiang province, currently have over 6,000 Holstein cows which were imported directly from Australia during the first half of 2008. The Company expects that each farm will provide approximately 60,000 to 70,000 tons of organic milk to be used mainly in the Company's branded products.
Mr. Jonathan H. Chou, Chief Financial Officer, states, "The recent events in China's dairy industry prove the success of the Company's integrated strategy, including the pursuit of the highest quality product, starting from the source. Our vision and integrated strategy has proven to be a key differentiator among dairy producers in China. As a manufacturer of products for children, strict quality controls and an adherence to high standards are simply non-negotiable. Our next phase of development will include continued strengthening of the Company's internal infrastructure and scalable operations." Pending Reaudit of Historical Financial Statements As previously announced, the Company was informed by the Securities and Exchange Commission (SEC) in late 2007 of an investigation being conducted by the SEC related to individuals and entities that provided accounting or certain advisory services to the Company, including the Company's independent registered public accounting firm at that time. As a result, the Company terminated that independent registered public accounting firm and in January 2008, engaged Grant Thornton, the Hong Kong member firm of Grant Thornton International, as its new independent registered public accounting firm. Also as previously disclosed, as a result of the investigation being conducted by the SEC, the Company proactively initiated voluntary reaudits of the Company's financial statements for certain prior years (the "Reaudits"). The Company, along with Grant Thornton, is continuing to work diligently to complete the Reaudits, as well as an audit of the Company's financial statements for the year ended December 31, 2007. When the Reaudits are completed, the Company expects to file reports with the SEC that will include financial statements for the periods that are the subject of the Reaudits, for the 2007 fiscal year, and for interim periods for 2008.
About American Dairy, Inc.
American Dairy, Inc. conducts operations in The People's Republic of China ("China") through its wholly owned subsidiary, Feihe Dairy. Founded in 1962, Feihe Dairy is one of the leading producers and distributors of premium infant formula, milk powder and soybean, rice and walnut products in China. Feihe Dairy is headquartered in Beijing, China, and has processing and distribution facilities in Kedong, Qiqihaer, Baiquan, Gannan, Shanxi, and Langfang. http://www.americandairyinc.com/ / http://www.feihe.com/ Certain of the statements made herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks associated with the effect of changing economic conditions in The People's Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.
CONTACT
In the U.S.:
Ashley Ammon MacFarlane and Wei-Jung Yang
Integrated Corporate Relations, Inc. 1-203-682-8200
DATASOURCE: American Dairy, Inc.
CONTACT: Ashley Ammon MacFarlane and Wei-Jung Yang, Integrated Corporate Relations, Inc., +1-203-682-8200 Web site: http://www.americandairyinc.com/
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