Source:  Tom Johnston, MEATINGPLACE.COM. 6/11/10

Chinese pork processor Zhongpin Inc. said today that in August it will begin construction of a new production plant and distribution center in the city of Jiangyan.

The new facilities, which will produce chilled and frozen pork and prepared pork products, mark the company's "first production and logistics entry" into the eastern China market, Chairman and CEO Xianfu Zhu said in a news release.

"This eastern region, which includes the Yangtze River Delta with Shanghai as the center, has a large population and huge consumption potential," he said, adding that the Jiangyan region features fertile farming land and an abundance of hogs.

Zhongpin has established strong brand awareness in the eastern China market, to which it distributes product from the company's plants in Henan province in central China. "The newly built plant (in Jiangyan) 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 eastern China," Zhu said.

As with other market expansions, Zhongpin plans to ramp up production of products intended to serve middle- and upper-income customers.

Nuts and bolts

Zhongpin said it will invest some $63 million in the new plant, whose construction will begin in August in two phases. The production lines, mainly for chilled and frozen pork, and the associated cold-chain logistics system will be completed in the first phase in the third quarter of 2011. The second phase will entail prepared pork production lines and is expected to be completed in the first quarter of 2012.

The plant's annual capacity will be roughly 130,000 metric tons, with chilled pork, including easy-to-cook product, accounting for nearly 80,000 metric tons, frozen pork accounting for about 20,000 metric tons and prepared pork products accounting for 30,000 metric tons.

A new subsidiary company, Taizhou Zhongpin Food Co. Ltd., will have an initial registered capital of $7.3 million.

Shares of Zhongpin were $11.42, up 20 cents, in mid-morning trading on the NASDAQ stock exchange.

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