2010 monitor-john gregg-tc logistics strategy

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COMPANY CONFIDENTIAL
SAN FRANCISCO SÃO PAULO SEOUL SINGAPORE TOKYO TORONTO ZURICHSHANGHAI
BEIJING CHICAGO HONG KONGCAMBRIDGE DELHI DUBAI JOHANNESBURG
PARISLOS ANGELES MADRID MUMBAI MUNICH NEW YORKMOSCOWLONDON
Temperature Controlled Logistics
China Strategy -
TC Development Plan
John Gregg, Associate Principal & Head Monitor Emerging Markets Division
Management Summary Presentation
December 12th, 2010

2Copyright © 2009 Monitor Company Group, L.P. — Confidential — LAX
Agenda
Executive Summary
China TC Market Overview & Growth Trends
Global Competitors & Local Players
TC Market Rationale & Proposed Initiatives
TC Market Breakdown & Target Industry Segments
Financial Impacts & Initiative Requirements
Implementation Plan & Risk Assessment
Next Steps & Decision Needs

Executive Summary (1/2)
 Temperature Controlled Logistics, also regarded as Cold Chain Logistics or Perishable logistics, is an
integrated temperature-controlled system in which product quality, integrity and safety are maintained
throughout the process of export, packaging, packing, transport, handling, cold storage, distribution,
delivery and placement at point of sale.
 It applies to all temperature sensitive products such as frozen, chilled & fresh perishable foodstuffs,
pharmaceutical products, Hi-tech electronic equipments, flowers and chemicals.
 As Chinese consumers’ lifestyle and buying habits evolve, more attention has been paid to food safety. In
most inshore cities, cold chain logistics market emerges and begins to boom. According to reliable data from
officials, TC Logistics market in 2005 reached 1.3 trillion CNY and will expand to 10.8 trillion CNY by 2015.
 However, with rapid market development, we have to overcoming market challenges:
- Backward infrastructure, below-standard refrigerator vans, obsolete freezing technology
- Complicated TC-related industry segments make TC logistics a technology and capital intensive industry,
high return and high risk
- Intensified competition from both experienced global competitors and emerging local players
- Out-of-date cold chain management mainly due to scarcity of skilled and qualified professionals
 Notwithstanding, current cold chain logistics market is in primary stage, few players and game rules, but a
more-profit bright future.

Executive Summary (2/2)
 The effective implementation of TC capability development plan will strengthen our existing
advantage in TC-related FMCG market and make emerging TC-related Life Science market our
next profit source.
 Accordingly [ABC Company] ’s total revenue is expected to grow from € 68mn in 2006 to €
184mn by 2010, exceeding the forecast of initial financial planning.
 To achieve these financial targets, investment requirements of € 7.94mn besides of an
increase of 7 indirect headcount are identified.
 In a word, entry into TC market is aligned with [ABC Company] China Strategy, providing big
potential to increase company’s revenue and profit in China’s intriguing and complex TC
market.

Agenda
Executive Summary

Total Logistics
Market Size,
109.1
Total Logistics
Market Size, 190
1.3
4.8
2005 2010
Current TC Market Size in China
‫‏‬ The‫‏‬logistics‫‏‬sector‫‏‬in‫‏‬the‫‏‬People’s‫‏‬Republic‫‏‬of‫‏‬China‫‏‬is‫‏‬growing‫‏‬rapidly.‫‏‬
‫‏‬ The total logistics industry in China was worth about 48.1 trillion RMB in 2005, of this temperature controlled
logistics industry accounted for about 1.3 trillion RMB, with an expected nearly 30 % CAGR in next 5 years. 1)
1) National Development and Reform Commission, National Bureau of
Statistics of China and China Logistics and Purchasing Association
http://en.ndrc.gov.cn & http://www.stats.gov.cn
http://www.chinawuliu.com.cn
Logistics Market in China
2005 - 2010
RMB Trillion
China’s cold chain market is heating up and open
to any player who has a long-term development plan.

Facts & Figures - Opportunities
 China’s‫‏‬current‫‏‬TC‫‏‬market‫‏‬breakdown‫‏‬show‫‏‬TC-related Food
Industry play a dominant role while TC-related Life Science
Industry keeps strong growth.
 Railway transport still remain a large portion of domestic TC-
related transport market while road freight business should be
a key growing element. (21% in China and about 80% in
western countries 2)
 Cold storage capacity per capita for China is only 12% of
that of the U.S.A.
 Millions of money Lost in cold chain
Problems such as backward infrastructure, below-standard
refrigerator vans, obsolete freezing technology and out-of-date
cold chain management result in great wastage in transit and
fail to keep and protect perishable goods in an ideal condition.
This has led to such a big loss in transport links that the cold
logistics fee accounts for 70 percent of all costs. 1)
1) Shanghai Daily 12Jul Cold Chain Logistics
2) China Communication and Transportation Association & China Refer Group http://www.cctanet.org.cn/ & http://www.crgps.com/
Data‫‏‬is‫‏‬collected‫‏‬by‫‏‬China‫‏‬Logistics‫‏‬Council‫‏‬in‫‏,4002‏‬also‫‏‬published‫‏‬in‫‏‬China’s‫‏‬TC‫‏‬Logistics‫‏‬Market‫‏‬Research‫‏‬Report
Food
35%
Fruit, Vegetable &
Flower
30%
dairy products
15%
Cold Drink
10%
Pharm, Chemecial
& High-Tech
10%
China TC Market Breakdown - Industry 2)
Railway
63%
Road
21%
Sea
14%
Air
2%
China TC Market Breakdown - Transport Model 2)
Research results show clearly that huge opportunities remain in Food /
Life Science Industry while road freight business should be a high
potential sector for investment.

Facts & Figures - Challenges
1) Online Article from http://www.crgps.com
2) Shanghai Daily 12Jul, Logistics road remains bumpy for domestic refrigerated deliveries
3) Standard Chartered - The Guide to Supply Chain Manegement and Logistics 2006 / 2007
Infrastructure
Railway
 Rail routes are lacking in certain regions, e.g. between Guangdong and Fujian
 Limited TC-related train, almost 8,000, accounting for 2%, with outmoded fresh-keeping carriage 1)
Road
 Lack of a less-than-truck-load (LTL) system with broad reach
 40,000 backward refrigerator vans in 2000, accounting for 0.3% of its total freight cars 2)
Facilities
Warehouse
 Most of the refrigerated warehouses date from the 1950s and 1960s
 Old-fashioned and full of difficulty providing different storage temperatures
 Fragmented located with obsolete equipment and technology
Logistics center
 Mono-functional playing role mainly as warehousing or cross docking
 Inadequate management information system
Regulation
 Large gaps between central government policy and local practices
 Food safety standards and regulations in cold chain logistics are still empty
 Local protectionism and complicated licensing
Technology
 Some improvements in recent years but lag large behind western countries
 Packing technology and standards in cold chain have not well developed
Operation &
Management
 Out-of-date cold chain management and lack of TC-related training in relation to Ops
 By 2010, China will need 400,000 supply chain and logistics professionals of junior
college level or above 3)
Current market condition and regulatory landscape show us
challenges in all sectors to overcome in coming years.

Major Growth Trends - General Overview
Rapid economic growth
 The Chinese economy has grown by over 9% annually in recent years. And growth rate in the logistics sector were even
higher while the infrastructure conditions, along with the lack of logistics know-how remain the very important
challenges which China is facing
Increasing domestic consumption
 The per capita income in China is rapidly approaching USD 7500, which is the threshold for strong cold-chain demand
 In recent years, with the rapid growth of China’s middle class, estimated to be approaching 150 million
 Great potential in domestic consumption 1)
WTO entry and foreign investments
 After the entry of WTO in 2001, more market opened and deregulated policies attracted huge foreign investments
 More and more MNCs set foot in China’s market
 At the same time, international standard for cold chain is heating up
Rising expectation of safe and better quality products
 According to several recent studies, products safety is one of the hottest topic and a public concern in China’s big cities
 Government makes efforts to improve the situation and ensure product safety such as food and medical partly due to
upcoming events of Beijing 2008 Olympics and Shanghai exhibition in 2010
Outsourcing service remain strong and professional cold chain logistics companies emerge
 60% of manufacturing companies will choose outsourcing their logistics activities in China, including temp-control
services 2)
 T&L outsourcing in China is expected to grow at 22% per year to reach 178.4 billion RMB by 2008 3)
 This trend provides opportunities to develop China’s local 3PLs in cold chain logistics industry
1) BNP Paribas 2) Research result from Mercer Consulting and China Logistics Alliance Network
3) AT Kearney – Outsourced Logistics Market Outlook, 1998-2008
Increasing demands and higher requirements in TC market will
make it alluring for all pioneers.

Major Growth Trends - Details
Infrastructure
 Road infrastructure will be expanded to over 75,000 miles of expressway by 2008 1)
 Domestic airfreight market will have an additional 100 airports by year 2015
 By 2010, USD 30 billion will have been invested in sea port expansion
 An additional 25,000 kilometers of new lines in the railway network during the next 15 years
Facilities
Warehouse
 More and more modern warehouses have been constructed catering to the demand of
increasing strict logistic requirements
 Newly-established ones are changing their roles in line with increasing demand from mono-
function to providing various logistics service such as repacking and labeling
Logistics / Distribution Center
 Many local governments are developing local logistics centers to build scale, e.g. Huatai
Cold Chain Logistics zone in Hefei, Bohai Cold Chain Logistics Center in Tianjin 2)
Regulation
 Both local and international industry associations endeavor to enhance the standardization
of Cold Chain in China
 Central government decides to establish agriculture product cold chain system
 Government plans to establish ”green roads network” for fresh and live products to flow
across regions ( 2005 Feb, MOC)
Technology
 Urgent information development and process standardization
 Domestics players with government’s support begin RFID technology operation, such as
Bailian Group
Operation &
Management
 Talent Development and Deployment
 Local education in relation to logistics management booms
Government is investing $600Bn in 12TH Five Year Plan to
Develop Transport infrastructure – Early Market Entrants Will Gain Significant
Comparative Advantage
1) The Way Forward – The Future of the China Logistics Industry by Mark Millar, China Supply Chain Council

Agenda
Executive Summary

TC Market Breakdown
Temp- Range -35oC -20oC +2oC to +8oC +12oC to +25oC
Types Deep Frozen Frozen Chilled A/C （temp-controlled）
Commodities Fish Products
Sashimi
Ice Cream
Frozen Meat
Frozen Seafood
Dairy Products
Drinks
Fruit
Vegetables
Flowers
Chocolates
Hi-tech electronic components
Pharmaceuticals
Flowers
Chemicals
Existing
Customers
NA NA Starbucks
Kodak
J&J Medical
Mars / Cadbury / Karft
Ferrero & Rocher
Xian Janseen / BM Squibb
Novatis / Heidelberg / J&J
Medical
Kodak / Agfa / P&G
Potential
Customers
Local Producers Wall’s
Bright
Mengniu
Yili
Hormel Food
Bright
Mengniu
Yili
Danone
Wrigley / Yake Food
AstraZeneca / Roche Group
Merck / Baxter
Philips / Toshiba Medical
BASF / Shell / Bayer AG
L’Oreal / Nice Group
Source: The temperature ranges are based on the internal research
conducted by Envirotainer and on the predefined requirements
by the authorities, Packaging & Logistics- Business briefing by Martin Peter
Current Focus
Most of existing TC customers can be satisfied
by providing air-conditioned logistics service
currently, however profit can only be enhanced
by widening current market focus
A detailed market breakdown and [ABC Company] ’s potential TC
customers indicate that chilled products logistics market should be
right place for strategic thrusts.
Future Focus

Target Industry Sub Segments
Food:Candy & Chocolate with 12% CAGR and Quick-frozen Product segments show good reason
for [ABC Company] to invest heavily.
Source: National Bureau of Statistics of China & others refer to Appendix
Segment [ABC Company] ription
Existing
Customers
Potential
Customers
Meat Product
More than 2,500 factories produce 58 million tons of meat
products in 2004 with the figure increasing each year at a
rate of 5%
NA
Yurun Food Group
Hormel Food
Aquatic product
Annual output 49 million tons in 2009, 4% CAGR
70% of total production provided to worldwide consumers
NA Local Producers
Cold Drink
About 4,000 cold drink producers with a 1.6 million tons
output in 2003, consumption estimated to reach 2.6 million
tons by 2010, 7% CAGR
Turnover reached 0.9 billion CNY in 2002
Starbucks
Wall’s
Bright
Mengniu
Yili
Dairy Product
More than 1,500 dairy industry factories
28.3 million tons of raw milk in 2005 with an annual
increase of about 25 percent
Total market value increased to RMB 85.5 billion by 2005
NA
Danone
Bright
Mengniu
Yili
Candy &
Chocolate
Almost 5,000 local players remain besides limited foreign
competitor
Output 1.28 million tons, turnover 20 billion CNY in 2005
12% CAGR
Mars
Cadbury
Karft
Ferrero & Rocher
Meiji
Wrigley
Yake Food
Fruit &
Vegetable
More than 1534 million ton in 2004
The 1st producer in the world
Consumption is booming in recent years
NA Local Producers
Quick-frozen
Product
More than 1000 manufacturers with total sales over 10
billion
An output of 8.5 million tons in 2004, 10% CAGR
NA
Wanzaimatou
Sanquan
Sinian

Target Industry Sub Segments – Food
Rising concern of product quality & safety and strong growth of temp-controlled food
consumption make China’s Food Industry first target for TC development plan.
 In China, 90% meat product, 80% aquatic product and
most milk, bean product are transported and sold
without temperature control. However, in west
countries, only 20% without temp control.
 Due to lack of chill value-added service, the export
price is only 60% of import price for apple and orange,
and only 1/3 for grape.
 China accounts 13% of global fruit production & 40%
of vegetable output.
 Vegetables and fruit spoilage in transport: 75 billion
RMB every year because of primitive distribution and
transportation system.
 12 million tons of fruit and 130 million tons of
vegetables damaged on annual basis. 1)
 Food Safety Regulation & Law is expected to be
established before year-end 2006.
Key Findings
 Fresh, prepared, ready to eat foods will become a
key growth driver in China’s food retailing industry.
 For instance, frozen meat has accounted for 10 to
15 percent of per capita yearly meat consumption.
2)
 The consumption of temp-controlled products
is keeping an annual increase of 8% over the
past 5 years. Temp-controlled products account
for 20% sales in retailer outlets.
 Consumers are influencing the growth of
temperature controlled food products in China.
Based on recent survey, consumers pay more
and more attention to food safety.
 Such segment as Dairy Industry show lowest
interest on outsourcing of logistics.
Key Trends
1) Cold Chain China Summit 12Jul 2006 - Alfred Cheung’s Presentation
2) Challenges and Opportunities: Cold Chain Logistics in China by Bill Tang – China Summit Cold Chain

Target Industry Sub Segments - Life Science
Pharmaceuticals and medical equipment segment remain the key growing market
in China’s TC-related landscape
Existing
Customers
Potential
Customers
Pharmaceuticals
Total sales of pharmaceuticals in China –
excluding traditional Chinese medicine (TCM) –
reached an estimated US$19.2bn in 2005
Estimated to over $24billion by 2010, as the
5th largest pharmaceutical market in the world
Xian Janseen
BM Squibb
Novatis
GSK
AstraZeneca
Roche Group
Merck
Baxter
Invitro Diagnostics
Clinical chemistry, infectious diseases,
hematology, endocrine, blood banks, drug
abuse tests
NA MNCs
Medical equipment and
devices
The total sales revenue for medical equipment
in China stood at USD 9 billion in 2003 and
will reach USD17 billion by 2008
J&J Medical
KODAK
GE
Siemens
Philips
Toshiba
Medical
Medical/Nursing/
Surgical Supplies
IV therapy, drug delivery, syringes, garments NA MNCs
Source: Datamonitor Industry Report & GCS Industry Strategy

Target Industry Sub Segments - Life Science
Regarded as High Risk and High Rewards. Heavy investment in fundamental phase
would deliver highest profit in coming years
 At less than USD 15, China’s annual per-capita
expenditure is one of the lowest in the world.
 An estimated 97% of the drugs (excluding TCMs)
produced by local companies are generics or
counterfeit.
 Sate Food and Drug Administration of China (SFDA)
was set up in 2003 to streamline the process of drug
approvals and registrations.
 Implementation of a Good Manufacturing Practice
(GMP) policy in July 2004 immediately forced more
than 1,300 non-compliant companies to stop selling
their products.
 Since the 1980s, hundreds of foreign pharma
companies have entered China’s highly fragmented
market, where the top ten players control just 15% of
total industry sales.
 Today, multinationals have over 600 active joint
ventures in China and most global industry giants have
a China presence: Johnson & Johnson, Roche,
Novartis, GlaxoSmithKline.
 China’s 9,000 domestic producers of medical
equipment occupy the low end of the market and
present little competitive threat to MNCs.
Key Findings
 A fast-growing middle-class consumer segment in
size and spending power and concerns over drug
safety and counterfeits will drive sales of
imported pharmaceuticals.
 Imported medical equipments account for
significant market share and will remain key
dominator for quite a long time.
 More and more focus on operational quality and
industry knowledge required - service failure can
result in death
 Global players will remain dominators in high end
market while M&A will continue to play a key role
in competition.
 More opportunities for 3PL
-demands increase for greater transparency in the
system and validated, temp-controlled logistics
-mergers and acquisitions result in unnecessary,
expensive duplicate warehouses
-pharma company core competencies are in
research, development and sales – not supply
chain
Key Trends
Source: Datamonitor & others refer to Appendix

Target Industry Sub Segments – Chemicals
Most chemicals products require long term storage and special handing procedure such as DG handing,
which makes market entry a costly endeavor
1) These figures only include the 22,985 state-owned and other enterprises with annual sales of over RMB 5 million. Source: Xinhua’s China Economic Information Service,
“Petroleum and chemical industry maintains leader of China’s industrial sector,” 7 July 2006
2) Datamonitor: Chemicals in China 2004 (base, consumer, pharmaceutical and speciality chemicals)
Existing
Customers
Potential
Customers
Chemicals
Basic, intermediate, and specialty chemicals; petrochemicals;
plastic resins and materials used in synthetic fibers; and paints
and coatings
KODAK
BASF
Shell
Bayer AG
Personal Care Skin and hair care, oral care, first aid, women’s health.
P&G
Unilever
L’Oreal
Nice Group
Key Findings Key Trends
Chemicals
 In the first 5 months of 2006 the turnover of China’s
petroleum and chemical industry stood at RMB 1.57
trillion, up 31 percent from the same period in 2005.
Profits rose 27 percent to RMB 178 billion. 1)
 China, currently as the 4th largest chemical producer is
forecasted to become the 3rd largest chemical producing
country by year-end 2006.
 China is also the largest importer of chemicals globally.
 The production of staple petrochemical products will
remain either off-limits to foreign companies or subject to
ownership restrictions.
 Personal care
 Market value: 109.4 billion RMB in 2008=9
 Cosmetic products play a primary role, 58 billion RMB in
2008.
Chemicals
 A spectacular growth rate for the next 5 to 10 years,
driven by intense demand from the domestic
manufacturing sector. Total value US$162.4 2008. 2)
 Import dependence remains a concern and will shape
government policy towards the sector.
 Chinese companies are also looking for outward
investments and more potential for innovative forms
of cooperation both inside and outside.
Personal care
 Limited profit (compared with petrochemicals and
plastic chemicals, etc) and more intensified
competition

Agenda
Executive Summary

Competitor Movements - Global Players
 According to our limited available data source, TNT Logistics and Kerry Logistics Network (KLN) outperform
other global competitors in China TC Market nowadays.
 TNT’s newly-established national life science distribution centre in SHA has turned itself into a key market
player, especially in life science cold chain logistics industry.
 Growing from a humble local warehouse operator in Hong Kong since 2000, KLN has grown to now a global
logistics player with coverage of more than 150 cities in 16 countries and regions. Totally more than 54,000 sq
m warehouse facilities for cold storage have helped KLN to widen its network even faster.
 Besides, we also found some Japan-based logistics companies performed well, although their target customers
limit to Japanese-related ones.
 In a word, the giant players are still relatively weak in China’s local TC market with no major player staking a
claim to market leadership yet. Therefore, the market is open to anyone that can develop TC capabilities
despite that this takes time.

Global Competitors’
TNT still remains the primary competitor in CL market as well as in China’s TC market.
Major Global
Competitors
Key Findings & Figures TC-related Service
TC-related
Customers
TNT
1 million euros invested in China TC market, a dedicated
medical logistics facility, utilised as the national life
science distribution centre, launched in the WGQ FTZ in
Mar, 2006
Temperature controlled warehousing, kitting
services and regulatory and customs expertise upon
request
TC services connected to TNT’s express network in
China, which covers more than 500 cities
J&J Medical
Roche
Auchen
Kerry EAS
Awarded Storage Company of the Year in China Logistics
Awards 2006
KLN enjoyed a 5,100 (HK $ Million) annual turnover.
(4,739 in logistics revenue and 361 in warehouse
revenue)
KLN owns more than 1,000 sq m warehouse for cold
storage in mainland China and another 53,000 sq m in
HK.
Increasing investment in healthcare logistics sector
Temp-controlled local distribution network
covering 1,100 China cities
Temp-controlled and frozen cargos management,
import-bonded and export-customs-approved
J&J Medical
GE Healthcare
Fujifilm
etc
Schenker +
BAX Global
By joining forces, Schenker and BAX Global have access
to the No.6 in global contract logistics.
No aggressive TC plan in China yet
Leverage strong Healthcare footprint in APAC
Schender is focusing on large quantity OFR
Merck
Pfizer
J&J Medical
UPS
UPC Supply Chain Solutions focus on Freight
Management services for medical devices
Integrated freight management and UPS courier
service
J&J medical
GE Healthcare
NYK Logistics
Together with Oki Electric and the HILLS Corporation,
NYK Logistics has developed the world's first passive IC
tag equipped with a temperature sensor so as to help
detect and record the internal temperature of a
container, when only attached to the outside of a
container
Seafreight Transportation with temp-controlled
containers
Warehousing
Japanese Clients

Aggressive Action - Local Players
 The total number of officially registered logistics service providers in China is said to be 800,000. No
reliable figures for the number of unregistered carriers.
 But mainly due to high-level cost and risk into cold chain logistics, there are few competitors with
remarkable operation volume. Reliable data from relevant association shows that there are almost 20
local players whose cold chain storage capability is above 20,000 tons and most of the providers only
possess less than 10,000 tons capabilities with old-fashioned warehouse and vans. 1)
 Major Advantages of local players consist of low cost, high flexibility and adaptive to local practice.
 However below-standard cold chain facilities and lack of enough talents, few domestic players have
strong predominance except some state-invested cold chain logistics providers, mainly centralized in
coastal cities such as SHA, BJS and CAN.
 Among them, Sino-trans Yuhe Cold Chain Logistics exceeds due to its strong financial background and
fast-developing players include Shanghai Xintiantian Cold Logistics Co Ltd, Shenzhen ST-Anda Logistics
and Eternal Asia Supply Chain Management Co., LTD.
 Some company-owned cold chain logistics companies perform even better in TC market, such as Speed-
fresh logistics under “Bright Diary” company and Shuanghui logistics under Shuanghui Group.
1) China Froze Food Network, http://www.freezefood.cn ; Shanghai Association of Refrigerated Warehouse, http://www.csarw.com

Local Players’
Large SOEs such as Sino-trans determined to become the leading logistics provider despite of
intrinsic SOE mindset and inadequate management skills.
Local
Developing
Players
Key Findings & Figures TC-related Service TC-related Customers
Sino-trans Yuhe
Cold Chain
Logistics
Established in 1992
More than 100 refrigerator vans owned
Sino-trans will invest 3.5 billion RMB in coming 3 years
so as to set up regional cold chain distribution center in
SHA, BJS, CAN and other major coastal cities
Temp-controlled transportation
and warehouse service
KODAK
Wall’s
Nestle
Danone
AFG
Shanghai
Xintiantian Cold
Logistics Co Ltd,
Co-founded in 2003 by JinJiang Intl, Dazhong Transport
(Group) Co Ltd and Mitsui & Co Ltd
Adopts the most advanced cold chain technology from
Japan
China’s first professional cold logistics company
Totally more than 34,000 sqm floor area of facilities in
Shanghai with a total food storage capacity of 1.38
million tons
38 refrigerator vans owned
Service scope covering multi-
temperature warehousing
Distribution specialized in Shanghai
and East China
Value added service as picking &
packing etc
Metro
ASHAHI DENKA
Christine
MARUBNI
Shenzhen ST-
Anda Logistics
Formed in 1995 as JV with Singapore-based SembCorp
Logistics
32 Facilities, totally 250,000 sq m located in China
including limited warehouse room for cold storage
Warehousing
Domestic Transportation
J&J Medical
Kraft / Lianhua
Supermarket
Enwei Pharm
Wyeth
Xi’an Janssen
Eternal Asia
Supply Chain
Management Co.,
LTD
Founded in 1997 in Shenzhen
Logistics network cover more than 200 cities in China
8 DC owned including about 1,000 sq m refrigerated
room
Among its 400 clients, many of them are in IT industries
Strong attention to expand its service to other industries
including TC market development
Warehousing
Domestic Transportation
NA
Note: Local Players List includes Large SOEs, local and JV players
Source: company website & limited online news release

Special Case - Nontraditional Players
Zuellig Pharma China
http://www.zuelligpharma.com.cn
Founded in 1939 with the name F.E. Zuellig, the
Company was engaged in general trading activities for
many years. In 1992, a separate pharmaceutical
business was incorporated to focus on the
development of a modern pharmaceutical and
healthcare product distribution company.
With rapid growth, despite WTO timeline, in May,
2003 Zuellig Pharma was granted the first foreign-
invested pharmaceutical distribution license by the
Ministry of Commerce and State Food and Drug
Administration, and became the first foreign investor
in China to legally distribute pharmaceuticals.
Nowadays, ZPC has become a leading provider of
cutting-edge logistics services covering inventory
management, warehousing, distribution and customer
order management despite of higher quotation
Source : company website & personal network
HAVI FOOD SERVICES GROUP
http://www.hfssea.com/ & http://www.havigroup.com/
Founded in 1974 in USA, HAVI FOOD SERVICES GROUP has
been reputable exclusive logistics provider of McDonald’s with
successful cold chain management.
Kang Xin Logistics
http://www.kxlogistics.com/ & http://www.rich.com/
Invested by world’s premier family-owned food companies -
Rich Products Corporation, KXL has become the leader in
domestic TC-related Food & FMCG industry.
Since Rich is known around the world as the founder of the
non-dairy segment of the frozen food industry and a leading
supplier and solutions provider to the food service, in-store
bakery and retail marketplaces, Tianjin-based KXL owns nearly
10,000 sqm cold storage capabilities and 50 refrigerator vans
(estimated). Its WMS also remain the most advanced among
the industry.
Source : company website & online article
Health and Life Science Food & Beverage

Agenda
Executive Summary

[ABC Company] Current TC Capabilities Overview – Facilities
Operating total TC WHS area of 99,800m2, [ABC Company] has stable foundation for further
investment despite of limitation caused by road transportation vendor management.
Source: [ABC Company] China Presentation & Interviews with Site Managers
Shanghai
Air-conditioned, multi-user
Air-conditioned + freezer (Kodak)
Air-conditioned + freezer (J&J)
Air-conditioned, dedicated (LV)
Chengdu
WHS Location Total Space Facility Type
16,650m2
Facilities
1 x 6,900m2
1 x 8,420m2
1 x 520m2
1 x 760m2
1 x 50m2
46,000m2 Air-conditioned, multi-user
1 x 14,000m2
1 x 32,000m2
19,000m2 Air-conditioned, multi-user
1 x 10,000m2
1 x 9,000m2
6,000m2 Air-conditioned, multi-user1 x 6,000m2
350m2 Air-conditioned, dedicated (Mars)1 x 350m2
300m2 Air-conditioned, dedicated (Mars)1 x 300m2
Wuhan
Tianjin
Kunming
Fuzhou
Shenyang
Beijing
Guangzhou
The total temp-
controlled warehouse
space consists of
 98,520m2 air-
conditioned space for
more than 10 TC
customers, 83% space
is centralized in SHA,
BJS & CAN
 more than 1,280m2
freezer room space
Current solutions for
temp-controlled road
transportation are
 highly reliant on
external
transportation
providers /
subcontractors
NOT EXHAUSTIVE
Road Transport Key Facts
Pan-China
- 6 x 24 mt A/C trailers owned, used for long haul transportation
between BJS, SHA & CAN, i.e. 5-6 dept per week SHA/BJS
- Above TC 100 Trucks leased to cover 25 cities in mainland China
- The complex subcontractor structure hampers effective quality
and performance management
Current Focus

Existing Major TC Customers Breakdown
 As complete
acquisition of EAC
(Mars logistics) in
1994, Mars
remains the largest
TC customer of
[ABC Company]
in China until now
 Customers in Life
Science Industry,
i.e. J&J, Novatis
indicate high
potential to invest
heavily
 By 2012, the total
revenue is
forecasted to
double
 Current key customers are Mars, Cadbury, Ferrero Rocher, Starbucks, Kraft, Xian-Janssen,
BM Squibb, Novatis, J&J Medical and Kodak. Total revenue reached 144 million CNY in
2005 and is expected to exceed 300 million CNY by 2010.
 85% - 90% of total TC-related revenue generated by WHS operation and road
transportation in relation to customers mentioned above.
Source: [ABC Company] China Presentation and attachable financial data from ops supervisors
Kodak
J&J Medical
Novatis
BM Squibb
Xian Janseen
Karft
Cadbury
Starbucks
Mars
5.5%
13.6%
14%
14%
14%
12%
12%
7%
12%
CAGR
2005 act. 2006 . 2010 est.
[ABC Company] TC Customers’ Revenue 2005 - 2010
estimate in CNY mn]
144.4
191.5
214.3
239.9
268.6
300.1

Space Planning - SHA*
Mars, taking more than 60% of total stock volume, will continue to play a leading role
in coming years while our capacity is expected to meet shortage by 2010 Q3.
 Without any planned TC
capacity development
initiatives, [ABC
Company] experienced
risk of performance
failure due to
unexpected stock
volume boom during Jul
to Aug 2006
 Despite of enhanced
capacity 18,500 plts
equipped, [ABC
Company] is still facing
capacity shortage from
2007 Q3, mainly due to
strong growth of FMCG
customers, i.e. Mars,
Cadbury & Kraft
 We are also expecting
5% additional biz gain
per year from potential
TC customers from both
FMCG & Life Science
Industry
Source: On-Site Data collected from Mars Ops, Team Analysis 1) Huting 11,000 + YinXi 7,500 = 18,500
Stock Volume 2009 act.
Without TC Initiatives
Underlying Stock Volume Growth vs TC Capacity Supply [pallets]
18,500
11,000Starbucks
Janssen
BMS
Heideberg
Agfa
Kraft
Cadbury
Mars
Estimated
11,287 9,223 7,275 10,870 15,387 13,374
*‫‏‬Kodak‫‏‬and‫‏‬J&J‫‏‬Medical‫‏‬Stock‫‏‬Volume‫‏‬don’t‫‏‬include‫‏‬due‫‏‬to‫‏‬limited‫‏‬size
Stock Volume 2012 est.
CAGR 16%
[ABC Company]
Capacity On-Hand1)
5% add. biz
per year
14,068 12,499 10,139 14,612 20,687 18,157
18,500
Capacity Shortage

TC Market Rationale - by Market
FOR DISCUSSION
Opportunities [ABC Company] Strength [ABC Company] Weakness
Overall Market
Regulation &
Technology
Competition
Infrastructure
& Facilities
Operation &
Management
Challenges
 The demand for cold chain
logistics service is keep
increasing
 Millions of money Lost in
cold chain
 Cold Chain service price is
more than customers can
accept
 Strong intention to be a
primary player in China’s TC
market
 Still no detailed investment
plan
 Outmoded facilities
 Lack of modern logistical
hardware
 Backward infrastructure
 Below-standard refrigerator
vans
 High Investment - Compared
with ambient logistics, 4
times bigger in warehouse, 2
times bigger in trucks
 6x24 mt air-suspended, air-
conditioned trailers
 Long term partnership with
subcontractors, up to above
100 temp-controlled vehicles
 Existing temp-controlled
vans don’t cover pan-
China’s TC requirements
 Supports from government:
Tax, Tolls and management
fee
 Urgent information
development and process
standardization
 National standards for cold
chain operation is still
empty
 Temperature, humidity,
sanitation, safety and time
are strictly required
 Global experience  Limited understanding of
CIQ, HACCP, GMP, GSP, etc
as well as cold chain
technology
 Little or no cold chain
knowledge / experience and
lack of general cold chain
training
 Cold chain operation is very
complicated
 Almost 15 years experience,
mainly focusing on FMCG
industry
 Still lack of qualified
logisticians to meet
increasing business needs
 Few players and less
competition – First In, First
Win
 Aggressive global and local
players remain, e.g. TNT,
Sino-trans Yuhe
 Good relationship with Sino-
trans
 EXEL’s TC capabilities and
experience can help
 Limited partnership with TC-
related vendors
 Lag behind compared to TNT
or Sino-trans

TC Market Rational
Focus on Life Science and keep primary advantage in TC-related Food Industry;
Develop chemicals sub segment strategy and domestic cut flower logistics market.
FOR DISCUSSION
Opportunities [Strength Weakness
Food
Chemicals
Life
Science
Flower
Challenges
 Booming domestic
consumption and
urgent need to
improve food safety
and quality
 Such segment as
Dairy Industry show
low interest on
outsourcing of
logistics
 Local players with
lower price play a
primary role currently
 Almost 15 years
experience
 Especially in candy &
chocolate segment
industry
 Good relationship with
local partners
 Limited capabilities and
validated, temp-
controlled WHS facilities
restrict us from
strengthening our services
to existing customers as
well as developing new
business
 Booming domestic and
global consumption
 Global industry giants
play a key role, while
most of them are GCS
customers
 Strong intention to
outsource logistics ops
 Strict regulatory
requirements from GMP
and SFDA
 Huge competition from
global and local players
 Almost 10 years
experience commenced
from relationship with
Xian Janseen
 Ditto
global consumption
 Dangerous goods
handling are strictly
required as well as time
and temperature
sensitive products
 Global experience in
relation to handling
low-DG and chemical
goods
 segment, i.e. P&G
 Ditto
global consumption
 Pre-cooling services and
transportation monitoring
services are required
 No qualified freight cars
for flowers transportation
until now
 EXEL’s strong presence
in perishables logistics
handling focusing on air
export biz
 Ditto

Proposed Initiatives - BTS temp-controlled facility (1/2)
No. Developer
Proposed
Site
Location
Rental Rate
Property
Managemen
t Fee
Lease
Commence
ment Date
Lease
Term
(Fixed +
Optional)
Rental Review
Building
Standard
Comments from Property
1
Macquarie
Goodman
Kangqiao,
Current
BTS facility
RMB 1.54/sqm.day
( equivalent rate
for 9m height
building, or RMB
1.72/sqm.day for a
12.5m high
building same as
current BTS facility)
To be agreed
on open
book format
Practical
completion
date of Aug
31st, 2007
10 + 10
years
3.5% fixed
annual
increase.
Steel portal
frame + metal
cladding.
Good solution, but the rental
is higher than our
expectation.
2
Kangqiao,
Phase II
Land
RMB 1.2 ~
1.4/sqm.day
Ditto Ditto Ditto Ditto Ditto
The location is just next to
current Kangqiao BTS, which
is only couple of kilometers
away from A20 (outer ring
road). Transportation to PVG,
Hongqiao airport,
Waigaoqiao, Yangshan etc is
convenient (no toll gate
except to Linggang). Rental is
cheaper.
3 AMB
Shining,
Fengxian
RMB
1.625/sqm.day
RMB
1.80/sqm.mt
h
(RMB
0.06/sqm.da
y)
Oct. 1st,
2007
10 + 5
Years
In an upward
only direction
to 'open
market rental
value'.
Steel portal
frame + metal
cladding.
It is located in the current
Shining RDC, which is good
for synergy of operations.
Transportation is good, but
the toll gate fee of the high
way (A4) to the facility might
be a concern. The rental is
relatively higher.
Source: Proposals Summary for TC Facility by Jack Yang

Proposed Initiatives - BTS temp-controlled facility (2/2)
No. Developer
Proposed
Site Location
Rental Rate
Prope
rty
Mana
geme
nt
Fee
Lease
Commence
ment Date
Lease Term
(Fixed +
Optional)
Rental Review Building Standard
Comments from
Property
5
Prologis
Prologis Park,
Songjiang
Year 1 ~ 3, RMB
1.388/sqm.day;
Year 4 ~ 6, RMB
1.483/sqm.day;
Year 7 ~ 9, RMB
1.588/sqm.day;
Year 10, RMB
1.702/sqm.day
RMB
2.13/
sqm.
mth
(RMB
0.07/
sqm.
day)
10 months
following
signing off
lease
agreement
10 years
10% escalation
every 3 years, as
shown in 'rental
rate'.
Ditto Location is not ideal.
6
Prologis Park,
Jiading
Year 1 ~ 3, RMB
1.381/sqm.day;
Year 4 ~ 6, RMB
1.475/sqm.day;
Year 7 ~ 9, RMB
1.577/sqm.day;
Year 10, RMB
1.690/sqm.day
Ditto Ditto Ditto Ditto Ditto Ditto
7 Gazeley
Juncho
Logistics
Park, Jiading
RMB
2.05/sqm.day
NA
Base
building
completion
in 20 weeks
after
planning
permission.
10 years
Fixed rate for 10
years.
Steel portal frame +
metal cladding.
Location is not ideal.
Rental is high.
Source: Proposals Summary for TC Facility by Jack Yang

Agenda
Executive Summary

Financial Impacts - Total Revenue
 With TC Initiatives
equipped, [ABC
Company] ’s revenue
growth is forecasted
to reach CARG of
27.4%
 The total revenue is
forecasted to increase
at least € 10 mn
compared to former
financial planning
without TC Initiatives
 Effective
implementation of TC
initiatives will enhance
[ABC Company] ’s
capabilities to meet
forecasted demands
from existing and
potential TC clients
Source: [ABC Company] China Strategy, Team Analysis, Interviews
Underlying Business Growth and Initiatives Impacts
[in € mn]
Revenues Estimate 2008 - 2012
54
13114
43
2012
Underlying
Business
Other Initiatives1)
68
2008
174
CAGR 26%
54
35
111
14
43
19
30
2012
Underlying
Business
Other Initiatives1)
TC Initiatives
68
2008
184
CAGR 27.4%
35
TC Initiatives Executed
Revenues Estimate 2008 - 2012
CAGR '06 to '10
Revenue from
business as usual
Additional revenue
from TC Initiatives
Revenue from
other initiatives
FOR DISCUSSION
1) Other Initiatives = Healthcare, SPL, I2M initiatives
mentioned in [ABC Company] Logistics China – Strategy 2010

Initiatives Requirements - Proposed TC Strategy
People &
Organizational
Infrastructural &
Capacity Growth
 Set up long-term people development plan in relation to cold
chain management
(Learning & Development Center)
 1 Ops Manager for SHA Facility in 2009
3 Ops Manager in BJS & CAN from 2009
 Build up an Temp-controlled Logistics Promotion Team focusing
on global and local business development support - 3
Executives required in SHA, BJS & CAN
Technology
 Development or implement TC-related IT system, i.e. RFID
to enhance operational performance
Operational
Assets
 TBD
€ 2.0mn (SHA BTS)
€ 3.2mn (BJS)
€ 2.3mn (CAN)
Requirement Details Incremental cost/Investment Need
€ 0.1 mn1)
€ 0.06 mn
Source: Team Analysis 1) Additional cost besides of € 0.6 mn budgeted for LDC
 Implementation of proposal BTS facility set up in SHA to
consolidate all services for existing TC customers, expanding
TC capability to 20,000sqm by 20111
 Invest in BJS facility to expand TC capability to 50,000sqm by
2010
 Invest in CAN facility to expand TC capability to 25,000sqm by
mid 2010
FOR DISCUSSION
TBD
TBD
Incremental indirect staff cost
'07 '08 '09 '10
€ mn 0.02 0.08 0.08 0.10
~ € 0.44 mn

Agenda
Executive Summary

Implementation Plan & Potential Risks - TC Initiatives
Launching of multi-user TC Facilities and recruitment of local talents who are experienced in TC market are our
upcoming main focus.
2010 2011 2012 2013
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014
Q1 Q2 Q3 Q4
Multi-user
TCFacilitiesPeople&OrganizationTBD
 TBD
Responsible
TBD
TBD
TBD
Action
 Roll-out TC facility - SHA
 Roll-out TC facility - BJS
 Roll-out TC facility - CAN
DG1)/WW1)
DG/WW
DG/WW
Recruitment
& Training Team Development, Knowledge Improvement
Go-Live
Go-Live
Go-LiveID Planning Implementation
Risk
 Slowdown in business outsourcing and/or loss of minor accounts
 Delay in construction of multi-user TC Facility
 Operational problems due to lack of qualified ops managers and knowledge in relation
to cold chain management
 High operating cost due to regulatory alteration, especially in FMCG industry
Approval
Source: Team Analysis 1) DG: Desmond Gay, WW: Windy Wu
Approval
Planning
PlanningID
Approval
Implementation
Implementation
ID
 Develop detailed learning &
development plan
 Build up Temp-controlled
Logistics Promotion Team
Planning
Roll-out Cold Chain Management Knowledge ChampionID

Agenda
Executive Summary

Decision Needs & Next Steps
Action Plan Responsibility Due date
Develop implementation organisation TBD TBD
Develop detailed implementation plan TBD TBD
Next Steps
Confirm China TC Development Plan
Sign-off of investment needs
Approval of headcount increase
I
II
Decisions

2010 monitor-john gregg-tc logistics strategy

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