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American Lorain's Big Shift

Stocks in this article: ALN

JUNAN COUNTY, Shandong Province, China ( TheStreet) -- American Lorain (ALN) is a China-based food manufacturer with three primary segments: chestnut-based snack foods, convenience foods such as heat-and-eat meals and frozen foods.

Alan Jin, the company's chief financial officer, recently sat down with The Street to discuss the company's history and prospects.

TheStreet: Can you provide us with some history about American Lorain?

Jin: American Lorain has been in existence for 15 years, has five factories and is the largest chestnut products producer in China. The chestnut business composed 60% of our revenue in 2009. We have established over 40 sales offices across the country, and our distribution network in China covers 26 provinces and administrative regions. In the meantime we work with over 300 distributors to help us access new market places, and are planning on expanding this number to 1,000 by the end of 2010. Hopefully, this will extend our products points from the current 5,000 to 8,000. We are well on our way, as we recently signed a contract to sell products in 550 7-Eleven stores in Guangdong province.

Can you discuss your various business segments?

We have three primary segments: chestnut products, convenience food products and frozen food products. The chestnut segment is our largest, and we expect growth in the range of 15%-20% in the segment in long term. Our convenience food products segment is our second largest and the fastest growing, and we are looking for growth of at least 50% in the next three years for this line. Finally, our cold food line has become our smallest line; we will be phasing out the products until they will eventually disappear since we see higher margins in the other two lines and thus they are worth more focus.

Who are your biggest competitors?

Both the chestnut and the convenience food markets are very fragmented in China. There are many players in the chestnut industry but none competes with us head to head. The second largest chestnut player in China only has half the capacity we have, and they do not have close to the same size distribution network that we have. In terms of the convenience food segment, the sector is very young in China. Most companies are still conducting R&D trying to determine consumer preferences. There are only two players in the lunch box product market at country level. They are both large food corporations with hundreds of products, with lunchboxes not being one of their primary focuses.

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