China Huiyuan expects sales to quintuple

By Samuel Shen

SHANGHAI (Reuters) - China Huiyuan Juice Group Ltd (1886.HK: Quote, Profile, Research, Stock Buzz), the country's biggest maker of pure juice drinks, expects its revenue to grow five-fold in the next three to five years as consumers opt for healthier beverages.

Huiyuan plans to boost sales to 10 billion yuan ($1.3 billion) during the period, from 2 billion yuan last year, and targets gross margins between 30 and 35 percent each year, Vice President Matthew Gene Mouw said at the Reuters China Century Summit.

"Our target is to grow twice the rate of the market," Mouw said at the summit, held at the Reuters office in Shanghai. "We grow by taking market share from our competitors and from other beverages, such as carbonated drinks and water."

China's juice market is growing 10 percent a year and is crowded with players including Tingyi (0322.HK: Quote, Profile, Research, Stock Buzz), Uni-president (1216.TW: Quote, Profile, Research, Stock Buzz) and Coca-Cola (KO.N: Quote, Profile, Research, Stock Buzz).

Huiyuan, 22.2 percent owned by France's Danone (DANO.PA: Quote, Profile, Research, Stock Buzz), controls 40 percent of China's pure juice market.

Huiyuan's business has tremendous potential to grow as per capita consumption of juice is only 3.4 liters in China, compared with 19 liters in Japan, 34 liters in the United States and 40 liters in Canada, Mouw said.

Huiyuan's 2006 net profit doubled to 221.6 million yuan while sales jumped 48 percent, and the company's shares surged 66 percent on the day of their Hong Kong debut in February.

Huiyuan plans to strengthen its dominant position in more profitable pure fruit and nectar markets, expecting that Chinese consumers will gradually shift to drinks with high fruit content.

The pure juice and nectar markets are growing faster than the juice drink market and their margins are much higher, Mouw said.

Nectar contains 25 to 99 percent pure fruit juice, compared with 24 percent or less for juice drinks.

Taiwan's Uni-president dominates China's juice drinks market with about a 35 percent share, compared with 6 percent for Huiyuan.

Huiyuan also plans to accelerate its expansion in southern and eastern China, after securing markets in northern, northeastern and central China, Mouw said.

In June, Huiyuan said that it would expand capacity by 10 percent this year to 2 million tonnes by adding two new plants.

($1=7.5496 Yuan)