Achieving many with one quick action, Bright is planning the future composition

There are all signs that Bright is quite satisfied with this overseas acquisition congenial to both.

This acquisition will help speeding up the development of primary operations of the Company and ensure realization of the strategic target for Bright. Guo Benheng, President of Bright explained briefly on the original intention of this action at an interview with journalists.
Early in 2007, the new leader Guo Benheng, taking office at a time of distress, set the rejuvenation growth soaring up strategy for Bright, and quickly implemented bold and resolute reform in a number of fields: the strategic positioning was changed from focusing on fresh to focusing on dairy industry, enhancing fresh, making breakthrough in normal temperature products and starting out for milk powder ; the organization framework was changed from matrix to a flatter hybrid pattern, and more powerful incentive system and achievement culture were established; it was the first in the world to pursue the 1000 scores for pasture standard to continue deepening the milk source revolution , the first in China to implement the 1000 scores for pasture standard in all production bases, and the first in the industry to implement the WCM system to deepen the management revolution . In a short period of three years, both short boards of marketing and channel of Bright got enhanced quickly, with a series of breakthroughs in all areas. In the situation of encountering the impacts from Kedi Chain Store Transfer in 2007, Quit by Danone in 2008 and Prohibition to advertise Milk without antibiotics in 2009 for its own and the collective crisis of tripolycyanamide in the industry, Bright still realized a growth of about 60% in the primary operation income from dairy products during three years, and the growth rate was higher than that of the whole industry in every year.

The daily stronger Bright is not content with the present status. To Guo Benheng, the future pattern of dairy industry will still change, and it is early to make the conclusion. The dairy industry of China still has a great opportunity to realize surpass in the growth pattern.

Up to now, the development of the dairy industry in China has been mostly in quantity, with little in quality. To Guo Benheng, China is not a powerful country in dairy production, despite its position as a large dairy consuming country, and there is still substantial gap as compared with developed dairy industry countries and transnational dairy companies.

In view of long-term sustainable development, the dairy industry in China should open up an international vision in all aspects, and we should first borrow and learn the standards, science and technology and international market operation experience of countries with developed dairy industry and leading companies. Guo Benheng indicated, given the outstanding quality management and excellent international reputation of the dairy industry of New Zealand, this acquisition can share the advanced experience of New Zealand accumulated in the dairy science and technology and quality standards through Synlait Milk, over the years, Bright has been adhering enterprise standards higher than national standard and linking with international standards, and this will further strengthen the competing superiority of all lines of Bright products.
It is known that Bright invited a project team of known companies such as Rabobank, PWC and DLA Piper UK LLP, all with rich experience in the acquisition in dairy industry. The initial contact was in May 2010 and the agreement was signed on July 16, 2010. With such quick action to hold Synlait Milk, Bright has intention more than that.

The high quality milk source in New Zealand in steady supply also contributes to the quick overseas action of Bright. In recent years, with the rapid expansion of dairy consuming market in China, there were major rivalry for milk supply between major dairy producers, short milk source and unstable quality have become the main barrier restricting the healthy and rapid growth of the dairy industry in China.
Canterbury, the site place of Synlait Milk, is located at the Southern Island of New Zealand, which is the largest plain and largest administrative area of New Zealand. At this place, the dairy industry has been growing at 7% annually during the past decade, and the cow pasture also got rapid development, becoming the area with most rapid growth of raw milk output in New Zealand.

According to the planning, in the future, Synlait Milk will further expand the share of its own milk sources. Based on this deduction, with this overseas high quality milk supply base at hand, Bright will continue to hold the commanding height in dairy product quality in the future competition.

Analysts believe that with the costs on raw milk, packaging materials, auxiliary materials and logistics staying high and the marketing expenses rising markedly, the average gross profit for the dairy industry of China is thinning daily. Therefore, dairy giants will surely be compete for the market of medium and high end infant milk powder with relatively decent profit margind, and Bright has thus made milk powder one of the three pillar sectors of the company. With this background, the good international reputation and consumer recognition of the dairy products of New Zealand will provide not only a good access point and production base for Bright to enter the high end infant milk powder market, but also an ideal industrial platform for it to seek new profit growth, helping enhancing its competition superiority in infant milk powder, and also further upgrading its overall profiting ability.

At present, starting out for milk powder by Bright is only a trial, and the true moves will be in the following two years. Today, milk powder is fostered strategically as main point as a pillar sector, Guo Benheng said when interviewed. Early last year, he disclosed to journalists, At present, the Xinyouyou infant milk powder is positioned at upper of medium section, which complies with the positioning of the main brand of Bright and its present position in the industry. We will surely make product at higher level, but we should wait for opportunities.

The opportunity has come. As reported, with the strategic positioning of Main supplier of formula milk powder (mainly infant formula milk powder) on Asian market, Synlait Milk has started concentrating on research and development and production of high end products for regions and customers with high profit, and the new No. 2 Plant was built just for producing high end formula milk powder, and is expected to be put into operation next year.
As indicated by previous overseas reports, Synlait Milk once expressed that the company will make some special high quality dairy products by optimizing the feed for cow, to meet the need in immune system of consumers, such as focusing on brain health and wound curing ability. For this purpose, some cow will be fed with grain of special formula, to increase relevant beneficial elements in the milk. We can see from this the unique competing superiority of Synlait Milk.

But these are not the whole story for Bright Dairy to go overseas this time.

According to senior executives of Bright Dairy, the Company has reached another agreement with the original shareholders of Synlait Milk, by which Bright consents with the Synlait Milk s plan to listing within 5 years after the completion of this transaction, either at Hong Kong or New Zealand; and Bright has the right to subscribe a certain quantity of shares when new shares are issued at the time of listing, to maintain its holding proportion of 51%.