Aleba Water Business Plans 1999 and 2003

Business Plan
Xi’an Aleba Mineral Water Company

September 17, 1999 1
Table of Contents
1.0 Overall company plan .................................................................................................................1
1.1 Goals and targets..................................................................................................................1
1.2 Summary of major initiatives...............................................................................................1
1.3 Background..........................................................................................................................1
1.4 The Business System ...........................................................................................................2
1.5 Current position ...................................................................................................................3
1.6 Capability gaps.....................................................................................................................4
1.7 Initiatives to bridge gaps......................................................................................................5
1.8 Schedule and milestones......................................................................................................7
2.0 Sales plan.....................................................................................................................................10
2.1 Sales forecast ....................................................................................................................10
2.2 Current situation.................................................................................................................10
2.2.1 Revenue summary, March to August, 1999.........................................................10
2.2.2 Current customers by segment ............................................................................12
2.2.3 Consumption rates by segment............................................................................12
2.2.4 Current sales by channel .....................................................................................12
2.2.5 Aleba price realization by segment and channel .................................................13
2.2.6 Estimated average price realization.....................................................................13
2.2.7 Proﬁtability by channel........................................................................................14
2.3 Dispenser sales...................................................................................................................14
2.4 Sales strategy .....................................................................................................................15
2.5 Sales programs...................................................................................................................15
2.5.1 Convert test market schools.................................................................................15
2.5.2 Take over customers of under-performing retail shops. ......................................15
2.5.3 Start regular dispenser service program. .............................................................15
3.0 Marketing plan ............................................................................................................................16
3.1 Target markets....................................................................................................................16
3.1.1 Family market......................................................................................................16
3.1.2 Institutional market..............................................................................................16
3.1.3 School market......................................................................................................18
3.2 Competition the Xi’an water market..................................................................................18
3.3 Past marketing programs....................................................................................................19
3.3.1 Newspaper public relations .................................................................................19
3.3.2 Newspaper advertising.........................................................................................19
3.3.3 Family promotion: free tickets ............................................................................19
3.3.4 Retail shop promotion: free tickets......................................................................19
3.3.5 School promotion program..................................................................................19
3.3.6 Free water promotions.........................................................................................20
3.3.7 Sales promotional materials ................................................................................20
3.4 Buying decisions................................................................................................................20
3.4.1 Family market buying characteristics..................................................................20
3.4.2 Institutional market buying characteristics..........................................................21
3.4.3 School market buying characteristics..................................................................21
3.5 Growing health concerns over distilled water....................................................................21
3.6 Market positioning.............................................................................................................22
3.7 Marketing strategy for coming year...................................................................................22

3.7.1 Components of the marketing strategy................................................................22
3.7.2 Major target segments .........................................................................................22
3.8 Marketing programs...........................................................................................................23
3.8.1 Expand school promotion program to between 20 to 30 schools........................23
3.8.2 Launch dispenser program to expand sales into institutional market..................23
3.8.3 Launch corporate identity program with logo, uniforms, vans. ..........................23
3.8.4 Upgrade promotional materials to support marketing and sales programs. ........23
3.8.5 Continue public relations program in local media. .............................................23
3.8.6 Continue free water promotions. .........................................................................23
3.8.7 Develop marketing office inside city walls..........................................................24
4.0 Manufacturing plan....................................................................................................................25
4.1 Current situation.................................................................................................................25
4.1.1 Manufacturing costs ............................................................................................25
4.1.2 Manufacturing inventories...................................................................................25
4.1.3 Production history ...............................................................................................26
4.1.4 Bottle damage and losses.....................................................................................26
4.2 Production plan..................................................................................................................26
4.3 Upgrade programs..............................................................................................................26
4.3.1 Upgrade quality assurance program. ...................................................................26
4.3.2 Install fixtures in pre-wash building. ...................................................................27
4.3.3 Reinforce factory ceiling. ....................................................................................27
4.3.4 Install filtered air moving equipment in clean room and laboratory....................27
5.0 Transportation plan ....................................................................................................................28
5.1 Current transportation system............................................................................................28
5.2 Current transportation costs...............................................................................................29
5.3 Current gaps in transportation............................................................................................30
5.4 Transportation initiatives to close gaps..............................................................................31
5.4.1 Increase van fleet to make deliveries to expanded customer base.......................31
5.4.2 Develop central dispatching system using pagers or local service cell phones...31
6.0 Administration plan ...................................................................................................................32
6.1 Current situation: logistics, cash controls, and accounting................................................32
6.2 Current situation: major gaps.............................................................................................33
6.3 Initiatives to close gaps......................................................................................................33
6.3.1 Move central administrative office to better location. .........................................33
6.3.2 Develop transportation department......................................................................33
6.3.3 Develop customer database; establish regular computer back-up routine...........33
6.3.4 Improve financial reporting to investors..............................................................33
7.0 Major purchases and accounts payable................................................................................34
7.1 Major purchases.................................................................................................................34
7.2 Accounts payable...............................................................................................................34
8.0 People ....................................................................................................................35
8.1 Current staffing ..................................................................................................................35
8.2 Current gaps.......................................................................................................................35
8.2.1 Financial and general management skills............................................................35
8.2.2 Computer and database design skills...................................................................35
8.2.3 Graphic design skills and skills to develop promotional materials. ....................36
8.2.4 No bonus system..................................................................................................36
8.3 Initiatives to bridge people gaps ........................................................................................36

8.3.1 Execute Memorandum of Agreement . ...............................................................36
8.3.2 Develop bonus plan for workers tied to ﬁnancial targets. ...................................36
9.0 Special project: Small bottle line...........................................................................................37
9.1 Overview............................................................................................................................37
9.2 Investment, market and distribution analysis.....................................................................37
9.3 Preliminary time schedule..................................................................................................37
10.0 Organization of the Joint Venture ..........................................................................................38
11.0 Financial plan...............................................................................................................................39
11.1 Summary of March-August operations..............................................................................39
11.2 Summary of ﬁnancial plan.................................................................................................39
11.3 Burn rate: Projected monthly operating expense...............................................................41
11.4 Customers required for break-even....................................................................................41
11.5 Projected cash balance.......................................................................................................43
11.6 Schedule of reports ............................................................................................................44
11.7 Useful benchmarks.............................................................................................................44
11.8 Key drivers of the business ................................................................................................44

List of Tables
TABLE 1. Schedule and milestones..............................................................................7
TABLE 2. Sales forecast.............................................................................................10
TABLE 3. Revenue summary, March to August, 1999...............................................10
TABLE 4. Estimated customers by segment...............................................................12
TABLE 5. Estimated consumption by segment ..........................................................12
TABLE 6. Sales by channel in August, 1999..............................................................12
TABLE 7. Customers by retail shop, August, 1999....................................................13
TABLE 8. Price realization by segment and channel, August, 1999 ..........................13
TABLE 9. Average price realization March to August, 1999 .....................................13
TABLE 10. Proﬁtability by channel..............................................................................14
TABLE 11. Dispenser sales March to August, 1999.....................................................14
TABLE 12. Dispenser selling prices and costs .............................................................15
TABLE 13. Overview of family market........................................................................16
TABLE 14. Institutional customers of Marketing Department, August, 1999 .............17
TABLE 15. Potential school market .............................................................................18
TABLE 16. Preliminary segmentation of competition..................................................19
TABLE 17. Buying decisions in the family market......................................................20
TABLE 18. Inventory of school promotional items as of August, 1999.......................23
TABLE 19. Manufacturing costs in RMB ....................................................................25
TABLE 20. Manufacturing supplies inventory as of September 12, 1999 ...................25
TABLE 21. Production from March 1 to September 12, 1999 .....................................26
TABLE 22. Bottle losses from March 1 to September 12, 1999 ..................................26
TABLE 23. Planned production schedule.....................................................................26
TABLE 24. Current transportation cost assumptions....................................................29
TABLE 25. Cost to transport one bottle........................................................................30
TABLE 26. Location of bottles as of September 12, 1999 ...........................................32
TABLE 27. Major purchases planned RMB.................................................................34
TABLE 28. Accounts payable as of September 12, 1999.............................................34
TABLE 29. Stafﬁng and monthly salaries as of September 12, 1999...........................35
TABLE 30. Management team for joint venture...........................................................36
TABLE 31. Preliminary time schedule for small bottle project....................................37
TABLE 32. Investment overview of Joint Venture........................................................38
TABLE 33. Uses of Imagene investment......................................................................39
TABLE 34. Schedule of major purchases.....................................................................40
TABLE 35. Projected monthly operating expenses ......................................................41
TABLE 36. Fixed costs for break even calculation.......................................................41

TABLE 37. Contribution per bottle and per customer..................................................41
TABLE 38. Cash projection, October 1999 to September, 2000..................................43
TABLE 39. Useful benchmarks to measure progress ...................................................44

List of Figures
FIGURE 1. Xi’an Aleba Water Business System ...........................................................3
FIGURE 2. Ticket revenue, March to August, 1999.....................................................11
FIGURE 3. Distribution of dispensers in institutional accounts, August, 1999 ...........17
FIGURE 4. A drawing of the current delivery system. ................................................28
FIGURE 5. Joint Venture Organization .......................................................................38
FIGURE 6. Summary of Operations, March-August, 1999 .........................................39
FIGURE 7. Calculation of customers required for break-even.....................................42
FIGURE 8. Projected cash balance, October, 1999 to September, 2000......................44

Xi’an Aleba Mineral Water Company September 17, 1999 1
Business Plan: October, 1999 to September, 2000
1.0 Overall company plan
This business plan outlines the basis of continued growth for the Company. It sets forth goals and
targets for the coming year. The plan then sets forth the initiatives required by each department of
the Company to reach these goals. As the Aleba business system develops, certain gaps in the
Company’s capabilities will arise between where the Company stands and our goals. The initia-
tives are designed to fill these “capability gaps”.
1.1 Goals and targets
1. By September, 2000 have 5,000 customers.
2. Maintain average realized price of 8 RMB per bottle.
3. No customer quality complaints.
1.2 Summary of major initiatives
To reach these goals, the Company will pursue three major initiatives in the coming year:
1. Launch a dispenser promotion program to increase market penetration in the institu-
tion segment through network marketing.
2. Continue school promotion and direct selling program to convert schools to regular
customers.
3. Create transportation department with expanded van fleet to support larger customer
base.
1.3 Background
The JV began operations in March, 1999 based on a business plan completed in November, 1998.
That business plan called for establishing a strong market position in the school market. In March,
Wang Hui recognized that the school market would be more difficult to penetrate, and he devised
a new plan to sell water to the family market through retail water shops.1
Since we did not have the capital to establish our own retail shops, Wang Hui established a net-
work of independently owned shops and a system of water tickets to control sales and cash. Since
we also did not have a marketing budget geared to a consumer market, Wang Hui used low cost
promotions. Approximately 50% of the production from the factory has been used for promotion
1. The November, 1998 plan called for one prototype water shop to explore the family market.

purposes. Based on a national trade publication based in Beijing, Aleba, by July, 1999, was one of
three most recognized mineral water companies in the Xi’an market.1
In June, 1999 we conducted a market test with ten primary schools. The school promotion pro-
vided each school with free water for a week, as well as pens, volley balls and soccer balls. The
school promotions stimulated family sales, as parents and teachers purchased Aleba for home
consumption.
In June, manufacturing quality problems arose from disintegrating paper filters. This problem was
resolved with adjustments to the line pressure and changes in equipment cleaning procedures.
In July, Wang Hui began a program to take over the family accounts of the retail shops. Eventu-
ally, our plan is to control the customers of all the retail shops. Through the ticket system, Aleba
has all the names, addresses and telephone numbers of the retail shops. As Aleba builds its trans-
portation capacity with more vans, we will take over deliveries to the retail shop accounts.
In August, Aleba confronted an operating cash shortage. Available operating cash declined to
about 10,000 RMB. The shortage is attributable to a variety of factors.
• The family market has a lower productivity than the school market, our initial target. Each
school has an average of fifty classrooms, and water consumption averages one bottle per day.
In contrast, each family has one dispenser and consumes a bottle of water in seven to ten days.
• The November, 1998 business plan assumed that Aleba would collect deposits on bottles.
Competition from the market has limited our ability to collect deposits. Only about 30% of the
central office accounts have paid deposits. Retail shops have collected deposits on only about
20% of their accounts. Aleba has not yet collected the retail shop deposits.
• Part of the cash shortage is also attributable to the currency hedge loans. These loans reduce
the amount of available investment by as much as 20%, and they further impose a monthly
interest expense. Interest income from Aleba’s dollar deposits is not payable until our deposit
contract matures.
In September, Aleba completed a customer survey to determine the factors that influenced cus-
tomers to buy Aleba water. The survey revealed that 80% based their decision to buy on the
advice of a friend. Only 20% purchased on the basis of newspaper articles or advertising.
1.4 The Business System
The current business system includes the following components:
• A well, factory and warehouse located 25 km from Xi’an. Equipped with Felce five gallon fill-
ing equipment with one shift capacity of 1,000 bottles.
• Contract trucking that moves 400 bottles per load to a central office/warehouse in Xi’an.
1. “Xi’an Mineral Water Industry”, an article appearing in a national China food industry newspaper July 14, 1999
and translated by Ye Liu. From the article: “The well-known local mineral water products are Zhang Ba Long
Quan, Da Li and Aleba.”

• A central office staff that manages logistics of bottle delivery from factory and empty returns.
• A central office staff that manages a system of tickets for retail purchases to control cash.
• A central office sales staff with 3 minivans to schedule and make deliveries to central office
customers, including retail shops.1
Sales staff also provides after sales service of dispensers.
• A network of eight retail shops to sell and distribute water primarily to the family market.
• A central administration staff, including the general manager, to develop and manage collec-
tions, billing, management controls, and financial reporting.
FIGURE 1. Xi’an Aleba Water Business System
1.5 Current position
• Distribution network of central office/warehouse and eight retail shops now serves 1,600 cus-
tomers.
(In Aleba’s terminology, a “customer” represents a water dispenser. For example, a bank might
have six Aleba water dispensers. The bank represents six customers. This approach allows uni-
formity across market segments.)
• Need more bottles and minivans. Future growth constrained by current bottle inventory and our
limited capacity to deliver to new customers.
• Internal management procedures control an inventory of 6,000 bottles or 3.75 bottles per cus-
tomer.
• Continuing school promotion program. One school has converted to regular deliveries from the
school promotion program.
• Developing weekly, bi-weekly, and monthly reporting schedule for investors.
• Developing “relationship marketing” programs for institutional and family markets.
• Completed plan for first phase of Imagene investment.
• Current “burn rate” for the JV is 49,300 RMB per month. Of the total, 17,500 RMB is interest.
1. A fourth minivan has been lent to Retail Shop 4 to assist in deliveries.
Administration
Bottling
Operations
and QC
Outbound
Logistics
Marketing
and sales
Service
Empty
Bottle
Return
Logistics
Customer
Delivery
Logistics
Ticket
system and
collectionsRetail Shop
Management

1.6 Capability gaps
Sales and service
• Need more mini-vans to support deliveries to expanding customer base.
• Stronger promotional materials and corporate identity to build the Aleba brand.
• Need to develop service program to clean existing dispensers on a regular basis.
Marketing
• Sales promotion program needs continued development to convert school prospects to regular
customers.
• Need to develop network marketing programs, including supporting marketing materials, to
replace print and broadcast advertising for family and institution markets.
• Need stronger corporate identity program and customer database to support shift away from
advertising and toward relationship/network marketing strategy.
Manufacturing
• Quality program needs improved equipment and procedures.
• New pre-wash building requires additional plumbing and fixtures.
• Compressor provides inadequate pressure for capping.
• Factory ceiling needs reinforcement.
• Factory requires air conditioning in clean room and laboratory.
Transportation
• Not enough vans to deliver to expanding customer base.
• Need to develop more responsive, rationalized delivery system with central management of
routing.
• Central warehouse has inadequate parking to accommodate expanded minivan fleet.
Administration
• Computer data is not regularly backed-up. Computer equipment may need upgrading.
• Current office space inadequate to conduct meetings.
• Financial reporting to investors needs to be concise, consistent, timely, and easy to administer.
• Need expanded customer database and computer capabilities to support network marketing.
People
• Stronger capability to conduct financial forecasting.
• Management development plan to assist Wang Hui.
• Additional sales and delivery people.

• Lack of clear incentive program for key management people.
Special project: Small bottle line
• Absence of a small bottle product may be hindering sales to the family market.
1.7 Initiatives to bridge gaps
Sales
• Convert test market schools to regular customers through extended direct selling effort.
• Take over customers of under-performing retail shops and outlying customers of other shops.
• Start regular dispenser service program.
Marketing
• Expand school promotion program to between 20 to 30 schools.
• Launch dispenser program to expand sales into institutional market.
• Launch corporate identity program with logo, uniforms, vans.
• Upgrade promotional materials to support marketing and sales programs.
• Continue public relations program in local media.
• Continue free water promotions.
• Develop marketing office inside city walls.
Manufacturing
• Upgrade quality assurance program.
• Install fixtures in pre-wash building.
• Reinforce factory ceiling.
• Install filtered air moving equipment in clean room and laboratory.
Transportation
• Increase van fleet to make deliveries to expanded customer base.
• Develop central dispatching system using pagers or local service cell phones.
Administration
• Establish regular computer back-up routine.
• Develop detailed customer database.
• Move central office to better location.
• Improve financial reporting to investors.

Major purchases
• 4 mini-vans for deliveries.
• 1,000 dispensers for marketing program.
• Pagers/cell phones for drivers.
• Air ﬁltration and conditioning equipment for factory.
• Factory ceiling repair.
• Larger compressor for capping.
• Uniforms and vehicle painting for corporate image program.
People
• Execute Memorandum of Agreement among Imagene, ATCO, Aleba Management (Louisiana)
and Aleba Management (Oregon) to develop stronger management team to assist Wang Hui.
• Develop bonus system for workers.
Special project: Small bottle line
• Evaluate installation of small bottle line as next phase of Imagene investment.

1.8 Schedule and milestones
TABLE 1. Schedule and milestones
Department and
programs
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Sales
Convert test market
schools to regular cus-
tomers through
extended direct sell-
ing effort.
On-
going
End
Take over customers
of under-performing
retail shops and outly-
ing customers of other
shops.
On-
going
Start regular dis-
penser service pro-
gram.
Start
Marketing
Expand school promo-
tion program to
between 20 to 30
schools.
Start On-
going
Launch dispenser pro-
gram to expand sales
into institutional mar-
ket.
Start
Launch corporate
identity program with
uniforms, vans.
Start
Upgrade promotional
materials to support
marketing and sales
programs.
Start
Continue public rela-
tions program in local
media.
on-
going
Continue free water
promotions
on-
going

Develop marketing
office inside city walls
On-
going
Manufacturing
Upgrade quality assur-
ance program.
Start
Install fixtures in pre-
wash building.
Start
Reinforce factory ceil-
ing.
Start
Install filtered air
moving equipment in
clean room and labo-
ratory.
Start
Transportation
Increase van fleet to
make deliveries to
expanded customer
base.
Start
Develop central dis-
patching system using
pagers or local service
cell phones.
Start
Administration
Establish routine to
back-up computer data
Start
Develop detailed cus-
tomer database.
Start
Move central office to
better location.
Start
Improve financial
reporting to investors.
Start
Major purchases
4 mini-vans for deliv-
eries.
X
1,000 dispensers for
marketing program.
X
Pagers/cell phones for
drivers.
X
Department and
programs

Air ﬁltration and con-
ditioning equipment
for factory.
X
Factory ceiling repair. X
Larger compressor for
capping.
X
Uniforms and vehicle
painting.
X
People
ExecuteMemorandum
of Agreement among
Imagene, ATCO,
Aleba Management
(Louisiana) and Aleba
Management(Oregon)
X
Develop bonus sys-
tem for workers.
Start
Special project:
small bottle
Evaluate installation
of small bottle line.
Start
Department and
programs

2.0 Sales plan
2.1 Sales forecast
• Target of 5,000 customer accounts by September.
• Assumption on bottles per customer per month: 3.
• Assumption of average price realized: 7.75.
2.2 Current situation
2.2.1 Revenue summary, March to August, 1999
TABLE 2. Sales forecast
Begin cus-
tomers
1,600 1,800 2,000 2,200 2,400 2,700 3,000 3,300 3,700 4,100 4,500 5,000
Add net
new cus-
tomers
200 200 200 200 300 300 300 400 400 400 500 --
Bottles per
month
3 3 3 3 3 3 3 3 3 3 3 3
Total bot-
tles
4,800 5,400 6,000 6,600 7,200 8,100 9,000 9,900 11,100 12,300 13,500 15,000
Average
price per
bottle
7.75 7.75 7.75 7.75 7.75 7.75 7.75 7.75 7.75 7.75 7.75 7.75
Revenue 37,200 41,850 46,500 51,150 55,800 62,775 69,750 76,725 86,025 95,325 104,625 116,250
TABLE 3. Revenue summary, March to August, 1999
Bottles
Delivered Ticket revenue
Numberof
dispensers
Dispenser
revenue
March 180 1,698 29 4,915
April 147 1,771 11 2,985
May 925 8,839 192 28,713
June 4,555 37,241 48 9,631
July 1,497 12,383 57 18,218
Aug 3,411 26,429 61 17,152
Total 10,693 88,364 398 81,617

FIGURE 2. Ticket revenue, March to August, 1999
• Impact of school promotion program clearly shows in June.
• Fall off in July sales due in part to selling tickets in books of ten. In July, people are consuming
water with tickets they purchased in June.
1,698 1,771
8,839
37,241
12,383
26,429
March April May June July Aug
March April May June July Aug
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
RMB

2.2.2 Current customers by segment
2.2.3 Consumption rates by segment
2.2.4 Current sales by channel
TABLE 4. Estimated customers by segment
Retail shops
Aleba marketing
department Total
Percent Number Percent Number Percent Number
Family customers (%) 90% 1,152 67%a
a. Central marketing office has taken over the accounts of retail shop 6 and is continuing to take over the
outlying accounts of other retail shops.
240 82% 1,392
Institution customers (%) 10%b
b. The percentage of institutional accounts for retail shops represent an estimate based on review of one
retail shop customer list.
128 33% 119 15% 248
School customers (%)c
c. One school customer with fifty classrooms began as a regular customer in September. Aleba shares this
account with retail shop #7.
--% 1 --% 1 --% 1
Total 100% 1,281 100% 361 1,641
TABLE 5. Estimated consumption by segment
Days per bottle
Bottles per
month
Family 7-10 3
Institution office 5-7 5
School classroom 1 20
TABLE 6. Sales by channel in August, 1999
Total
customers Percent
Retail shop channel 1,276 78%
Direct channel Aleba Marketing Department 360 22%
Total 1,636 100%

2.2.5 Aleba price realization by segment and channel
2.2.6 Estimated average price realization
TABLE 7. Customers by retail shop, August, 1999
Retail shop Customers Comment
1 280 Slowed taking new customers, unable to expand delivery.
2 220
3 140 Taken over by Marketing Department. Location has
become new ofﬁce for Aleba.
4 200 Slowed taking new accounts. Delivery constraint.
5 70
6 -- Taken over by Marketing Department
7 196
Xi’an Yang 10
Lantian 160
Total 1,276
TABLE 8. Price realization by segment and channel, August, 1999
Segment Direct
Through
retail
shops
Family 10 7.27a
a. JV provides one free ticket for every ten purchased. Effective discount off selling
price of 8 RMB per ticket. (80 RMB/11 tickets = 7.27 per ticket.)
Institution 8-10 7.27
School 10.0 8.0b
b. Sale to ﬁrst school is arranged through Retail Shop 7. Most future sales to schools
will be direct.
TABLE 9. Average price realization March to August, 1999
Revenue bottles delivereda
a. Revenue bottles are distinguished from promotional bottles
10,693
Ticket revenue 88,364
Average revenue per bottle RMBb
b. The average price per bottle is subject to distortions from timing differ-
ences between when tickets are sold and when bottles are delivered. This
estimate does not adjust for tickets that have been sold and are currently
held by customers. For example, if 10% of the total tickets for the period
are still outstanding, the average price realization would be 10% lower.
8.24

2.2.7 Profitability by channel
• Calculating profitability by channel requires including transportation costs.
• Transport from factory to Xi’an by large contract trucks. See Section 5.0 Transportation Plan.
• Transport to customer in retail channel is responsibility of retail shop.
• Transport to customer in direct channel from Aleba central warehouse is with minivans.
2.3 Dispenser sales
• The Company has sold dispensers to 24% of its customers.
TABLE 10. Profitability by channel
Retail channel Direct channel
Realized price 7.27 10.00
Less:
Manufacturing cost 2.11 2.11
Transport to Xi’an 1.45 1.45
Transport to retail shop 1.10
Transport to customer 2.27
Equals: Net to Aleba 2.61 4.17
TABLE 11. Dispenser sales March to August, 1999
Units sold Revenue
Average
price Memo
March 29 4,915 169
April 11 2,986 271
May 192 28,713 150
June 48 9,632 201
July 57 18,219 320
August 61 17,153 281
Total 398 81,617 205
Total customers 1,636
Percent of customers purchasing dispensers from Aleba 24%

• Dispensers come in three models: table top, hot only and hot/cold.
2.4 Sales strategy
• Build up direct channel to control customers and generate higher returns.
• Focus on school and institutional markets where consumption rates are higher and delivery
costs are lower.
2.5 Sales programs
2.5.1 Convert test market schools to regular customers through extended direct selling
effort.
• Major leverage available from the school market: high price realization, high consumption, rel-
atively low transportation costs.
• Complex purchase decision with many actors to influence the decision.
• Major obstacle 1: Parents objecting to school fees.
• Major obstacle 2: School administrators’ concerns over food safety.
• Success in first school indicates the market is still viable, but selling effort will take time.
• Focus on personal selling by Wang Hui of school officials.
2.5.2 Take over customers of under-performing retail shops and outlying customers of other
shops.
• Begin to expand direct selling channel by “pruning” accounts from existing retail shops.
• Next candidates for take over: Retail shops 3 and 4.
2.5.3 Start regular dispenser service program.
• Dispensers require regular cleaning.
• Use service program as opportunity for customer research.
• Feed information into customer database.
TABLE 12. Dispenser selling prices and costs
Model
Cost
RMB
Selling price
RMB
Margin
RMB
Margin
%
Table top 120 180 60 33%
Hot only 500 650-800 150-300 23%-38%
Hot/cold 840 1,250 410 33%

3.0 Marketing plan
3.1 Target markets
3.1.1 Family market
• Relatively high income, two professional families.
• Focus of retail channel.
• Most customers switching from distilled water.
• Primary market in number of customers.
• Not as price sensitive. Retail price of 10 RMB.
• Competitive pressure appears primarily in bottle deposits, not price competition. Retail shops
collecting only 20% to 30% of family bottle deposits. (Part of this problem comes from weak
incentives for retail dealers to collect bottle deposits that they turn over to Aleba.)
3.1.2 Institutional market
• Larger government-owned organizations, such as banks and companies.
• Primary focus of Aleba marketing department
• Relatively weak penetration of this market. Most early efforts directed toward building and
supporting retail channel.
• Accounts for 30% of marketing department customers
TABLE 13. Overview of family market
Xi’an population 5.4 million
Average family size 5
Number of families 1.08 million
Families with sufﬁcient income to buy water (%) 25%
Families with sufﬁcient income to buy water 270,000
Families within geographic market of Aleba retail shops 10%
Target families within geographic market of Aleba retail
shops 27,000
Monthly consumption per family (bottles) 3
Total target family market (monthly bottles) 81,000
Estimated family accounts: See table 3 1,392
Estimated penetration of target family market 3%

Relatively few high volume institutional accounts. Average dispensers per account: 3.6
FIGURE 3. Distribution of dispensers in institutional accounts, August, 1999
TABLE 14. Institutional customers of Marketing Department, August, 1999
Number of
institutional
accounts
Number of
dispensers
Average
number of
dispensers
per account
33 120 3.6
27 2 3 17 5 6 15 8 22 10 23 12 13 18 29 21 28 25 7 9 26 20 16 11 32 14 30 1 24 31 33 4 19
0
5
10
15
20
25
0
5
10
15
20
25
umber of dispensers
Institutional Account

3.1.3 School market
• High consumption market: 1 bottle per classroom (customer) per day.
• Low price sensitivity. Selling direct should net average realized price of 10RMB.
• Distilled water not competitive due to health concerns.
• Major promotion opportunity. June tests revealed that teachers will buy water and that students
will inﬂuence their families to purchase water.
3.2 Competition the Xi’an water market
The following market report on the Xi’an water market appeared in a Beijing-based food industry
newspaper on July 14, 1999:1
In 1999, in the Xi’an market there are over 20 brands of distilled and mineral
water from southern China. Compared to Xi’an local water products, southern
water has much bigger sale networks and aggressive advertising through all
kind of media. For the small bottle water or 5 gallon family size water, south-
ern products own more than 80% of market share in Xi’an. In fact most fami-
lies are buying distilled water from the southern producers. (EFM Note:
analysis of the local market appearing in a Xi’an newspaper estimates that
70% of water sales are distilled.)
Today's situation reminds me that several years ago in Xi’an's juice market, all
of the juice products came from southern manufactures. Today, Ru-Shi, Xi’an
local juice manufacture has earned the biggest market share in the Xi’an juice
market. Local consumers have been educated that Shaanxi apples are better
than southern apple and realized that the quality of local juice is the best. (from
TABLE 15. Potential school market
Number of schools
Xi’an 150
Xianyang 30
Total 180
Average classrooms per schoola
a. School size varies from ten to sixty classrooms.
15
Total classrooms 2,700
Current sales to schools (classrooms) 50
Current market penetration of school class-
rooms 2%
1. Translated by Ye Liu.

Ye: The concentrated apple juice that Ru-Shi used is from Fu-An Company,
one of Aleba's business partners in Xi’an)
In order to change the Xi’an mineral water market situation, the local consum-
ers must be educated that Xi’an has the best mineral water resources anywhere.
The advertising for local products must be more aggressive and attractive. The
packaging of the products must be improved.
3.3 Past marketing programs
3.3.1 Newspaper public relations
• Focused on telling the Aleba story.
• Focus on high quality, international investment team.
• Articles featuring Dr. Bradley, Mr. Tani, Jim Ray.
3.3.2 Newspaper advertising
• Early advertising focused on small ads providing contact information.
• Later, larger ads using trade-outs to build Aleba image as quality mineral water.
3.3.3 Family promotion: free tickets
• Aleba provides one free ticket in every book of ten tickets.
• 11 for price of 10 reduces effective price realization in this segment from 8 to 7.27 RMB per
bottle.
3.3.4 Retail shop promotion: free tickets
• To stimulate the quick development of accounts, Aleba provides ﬁve free tickets to the retail
shop for every new account.
3.3.5 School promotion program
• Provided free water for a week to ten test primary schools in June, 1999.
• Also provided soccer balls, basketballs, pens, wall calendar and booklets to each school.
• Focused on primary schools where children inﬂuence over parents is likely to be highest.
TABLE 16. Preliminary segmentation of competition
Distilled water Mineral water Total
Southern producers 80%
Local producers 20%
Total 70% 30% 100%

• Focused on schools in high income neighborhoods.
3.3.6 Free water promotions
• Approximately half of factory production from March to August has been used for free water
promotions.
• Three principal uses:
1. Gain local publicity and build networks by providing water for “public” purposes, e.g.,
for construction workers renovating old city wall;
2. Gain access to large potential accounts, such as schools;
3. Gain exposure at important public events that attract large numbers of people and ofﬁ-
cials, e.g., Xi’an trade and investment fair.
3.3.7 Sales promotional materials
• Developed sales promotion materials from xerox copies of newspaper articles.
• Stapled in a package for the institutional market.
• Some individual pieces professionally done by graphic artist, but no design continuity or cor-
porate identify.
3.4 Buying decisions
3.4.1 Family market buying characteristics
• Conducted telephone survey of 200 customers in August.1
• 80% purchased Aleba water based on word of mouth; 20% on basis of advertising.
• Segment this market between families switching from distilled water and families new to buy-
ing water.
1. This survey also polices the retail accounts to make certain they do not submit fake customer names to get their
ﬁve free tickets.
TABLE 17. Buying decisions in the family market
Family segment Characteristics of buying decision
Switching from distilled Focus on health factors
Familiar with “system” for dispensers and bottle returns.
Resistant to paying bottle deposits
New to market Concern about family budget: new expenditure.
Detailed explanation often required of “system” for dis-
pensers and bottle returns.

• Price seems less of a factor than family well-being.1
• For two income family with each parent earning 500 RMB per month, three bottles of water
represent an expenditure of 30 RMB per month or 3% of income.
3.4.2 Institutional market buying characteristics
• Price sensitive. More difficult bargaining over price. Sophisticated buyers.
• Very low likelihood of getting deposits on bottles.
• Separation of purchaser and user. Single purchaser will make decision over installation of mul-
tiple dispensers. 2
• Buyer making the decision to provide water to employees as a benefit. Less influenced by
health issues of mineral v. distilled. More focused on bottled v. boiled water.
• Institutional customers often lead to family customers as employees learn the quality of the
water.
3.4.3 School market buying characteristics
• Complex buying decision. Many parties influence a “committee” decision.
• School administration sensitive to pressure from parents over fees.
• Also worried about food purity. Boiled water is known and acceptable. Bottled water repre-
sents risky innovation in routine.
• School administrators more willing to put bottles into faculty rooms.
• Less sensitive to price.
• Strongly influenced by health arguments in favor of mineral water.
• Not a market in which distilled water will be able to compete effectively. Administrators are
aware of the health risks to children of distilled water. (Shanghai recently banned the sale of
distilled water in schools.)
• School promotion appears to have broken down some of these barriers, but additional direct
selling effort will be required to convert schools to regular customers.
3.5 Growing health concerns over distilled water
• Increasing public attention in news media to the health impacts of drinking distilled water.
• News impacts schools most directly. Shanghai schools have prohibited distilled water sales.
1. Only about 2% to 3% of our customers have complained about price, as distilled water companies have dropped
their price to as low as 6 RMB per bottle.
2. Creates quality problem: the job of keeping dispensers with filled bottles usually falls to low level office employee.
They are less concerned over removing label before installing bottle on dispenser. Pieces of the paper label then
become stuck on the inside of the bottle, creating a cleaning problem.

• News also has impacts on family consumers drinking distilled water.
• Least impact on buying decisions in the institutional market.
3.6 Market positioning
• Focus on three attributes:
1. Highest quality mineral water for your health.
2. Local source deep in the mountains of Lantian.
3. Highest quality production with Japanese expertise.
3.7 Marketing strategy for coming year
3.7.1 Components of the marketing strategy
Build marketing programs around the following components:
• Expand institutional sales and use institutional customers to introduce Aleba to employees
(family market).
• Continue school promotions and direct selling to higher income primary schools. Focus on the
children to introduce Aleba to both school and family markets.
• Use dispenser network marketing program to bring three to ﬁve customers for each new dis-
penser.
• Encourage distilled water users in family market to switch through continued public relations
program and network marketing program to encourage word of mouth referrals.
• Use part-time marketing people paid on commission to expand our sales force.
3.7.2 Major target segments
1. Institutional accounts
Institutional networks developed by Wang Hui and local partners.
2. Schools
10 test market schools and between 20 to 30 primary schools in higher income neighborhoods.
3. Families switching from distilled water
Difﬁcult to reach except through on-going public relations and promotion program.

3.8 Marketing programs
3.8.1 Expand school promotion program to between 20 to 30 schools.
• Begin October. Follow pattern of June tests.
• Focus on primary schools.
3.8.2 Launch dispenser program to expand sales into institutional market.
• Provide free dispenser (property of Aleba Water) to institutional buyers willing to sign long
term supply agreement and refer new potential customers.
• Details of the program will develop as Wang Hui experiments with different approaches.
• Initial test will involve 100 dispensers.
3.8.3 Launch corporate identity program with logo, uniforms, vans.
• Develop corporate image design regulations.
• Implement in uniforms, vans, promotional materials.
3.8.4 Upgrade promotional materials to support marketing and sales programs.
• Develop new promotional materials that reﬂect higher quality, professional look.
• Consider customer newsletter on health topics.
3.8.5 Continue public relations program in local media.
• Use Shinzawa to promote tie to Imagene in local media.
• Use Tatsuo Ohbabra, Toshi Tanaka, Ron Bradley, Jim Ray and Ed Morrison to give local inter-
views during their visits to Xi’an.
3.8.6 Continue free water promotions.
• Continue water promotions as appropriate, as determined by General Manager.
• Not to exceed 4,000 bottles per month.
TABLE 18. Inventory of school promotional items
as of August, 1999
Item
Initial
Order
Used in
June
promotions
Available
on hand Unit price
Inventory
value
Balls 2,000 900 1,100 30 33,000
Pens 50,000 25,000 25,000 0.89 24,475
Notebooks 100,000 32,500 67,500 0.80 54,000

3.8.7 Develop marketing ofﬁce inside city walls.
• Expand marketing program inside city walls by locating a marketing ofﬁce (similar to a retail
shop)
• Increase visibility for Aleba and access to family and institutional accounts.

4.0 Manufacturing plan
4.1 Current situation
4.1.1 Manufacturing costs
4.1.2 Manufacturing inventories
TABLE 19. Manufacturing costs in RMB
Daily production in bottles 400 800 1,000
Percent of one shift capacitya
a. Production runs at 130 bottles per hour or 1,066 bottles per 8 hour shift.
38% 76% 100%
Materials
bottleb
b. Bottle costs 35 RMB and is depreciated over 50 trips.
0.70 0.70 0.70
cap 0.35 0.35 0.35
label 0.11 0.11 0.11
bag 0.03 0.03 0.03
Subtotal material 1.19 1.19 1.19
Utilitiesc
c. Utilities based on monthly production of 20 days and monthly cost of 1,500 RMB.
0.19 0.09 0.08
Labord
d. Labor based on manufacturing headcount shown in Section 8.0 People below. Total
monthly manufacturing wages equal 5,800 RMB.
0.73 0.36 0.29
Total manufacturing costs 2.11 1.64 1.56
TABLE 20. Manufacturing supplies inventory as of September 12, 1999
Units
Months
supply
Unit Price
RMB
Value of
inventory
RMB
Bottles 6,000 N.A. 35.0 105,000
Caps 30,000 3 0.35 10,500
Plastic bags 180,000 18 0.11 20,000
Labels 480,000 48 0.03 14,000
Total 149,500

4.1.3 Production history
4.1.4 Bottle damage and losses
4.2 Production plan
4.3 Upgrade programs
4.3.1 Upgrade quality assurance program.
• Testing kits for biological contamination meets Chinese standards but are not up to Western
standards.
• Testing kit required for ozone levels. High ozone levels impart bad taste to the water.
TABLE 21. Production from March 1 to September 12, 1999
Bottles Percent
Total bottles produced 22,104 100%
Total bottles sold 12,012 54%
Bottles used for promotion 10,092 46%
TABLE 22. Bottle losses from March 1 to September 12, 1999
Bottles
Percent of total bottle
inventory
Broken bottles 20 0.3
Dirty, scratched 32 0.5
Lost 7 0.1
Total 59 1.0%
TABLE 23. Planned production schedule
Sales 4,800 5,400 6,000 6,600 7,200 8,100 9,000 9,900 11,100 12,300 13,500 15,000
Promo-
tiona
a. From Section 2.0 Sales Plan.
4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Total 8,800 9,400 10,000 10,600 11,200 12,100 13,000 13,900 15,100 16,300 17,500 19,000
Promo-
tion as%
of total
45 43 40 38 36 33 31 29 28 25 23 21
One shift
capacity
(%)b
b. Assumes average of 20 production days per month.
41 44 47 50 53 57 61 65 71 76 82 89

• Bottling machine goes through four cycle cleaning. Last cycle involves chlorine rinse. Impor-
tant to maintain proper concentration of chlorine.
4.3.2 Install fixtures in pre-wash building.
• Four cycle cleaning does not solve all cleaning problems.
• Important to add pre-wash station. New building has been constructed to accommodate this
station.
4.3.3 Reinforce factory ceiling.
• Differential air pressure has put pressure on ceiling panels. Some have come loose.
• Reinforcement required.
4.3.4 Install filtered air moving equipment in clean room and laboratory.
• Required in laboratory and clean room during summer months.
• Sanitation bureau regulations require filtration and positive pressure in clean room.

5.0 Transportation plan
5.1 Current transportation system
FIGURE 4. A drawing of the current delivery system.

5.2 Current transportation costs
TABLE 24. Current transportation cost assumptions
Assumptions Unit Amount
3 wheeled bike:
Cost per vehicle RMB 400
Average daily deliveries bottles 20
Daily deliveries (high) bottles 40
Labor cost per day RMB 22
Annual license fee RMB
Useful life of bicycle years 2
Small minivan:
Cost per vehicle RMB 45,000
Useful life for depreciation years 5
Headcount per vehicle people 1
Average daily deliveries bottles 40
Customers per minivan customers 200
Distance traveled per day km 100
Gas consumed per 100 km liters 10
Price of gas per liter RMB 2
Daily cost of gas RMB 20
Daily wage rate for driver RMB 30
Contract trucking:
Bottles per truck bottles 400
Contract rate per truck: direct deliv-
ery to Aleba central ofﬁce and retail
shops
RMB 420
Contract rate per truck: city delivery,
multiple stops for institutional
accounts
RMB 450
Additional contract labor per truck people 4
Rate per trip per contract labor head RMB 40
Total contract labor per trip RMB 160

TABLE 25. Cost to transport one bottle
5.3 Current gaps in transportation
• Inadequate capacity to support customer base of 5,000.
• Growth in retail delivery system has led to “irrational” delivery patterns for outlying accounts.
• No system developed to provide fast response to customer delivery requirements. Drivers must
return to central ofﬁce for delivery instructions.
• May be incurring cost penalties on contract trucking from Lantian to Xi’an over a self-oper-
ated vehicle.
Route Unit Cost
Contract trucking from Aleba factory to Aleba central ofﬁce
or retail shops
Contract fee RMB per bottle 1.05
Labor RMB per bottle 0.40
Total RMB per bottle 1.45
Contract trucking from Aleba factory to institutional
accounts in Xi'an
Contract fee RMB per bottle 1.13
Total RMB per bottle 1.53
Minivan delivery from Aleba central warehouse or retail
shops to customer
Gas RMB per bottle 0.50
Depreciation RMB per bottle 1.02
Total 2.27
Bike delivery from retail shop to account
Depreciation RMB per bottle 0.05
Total 1.15

5.4 Transportation initiatives to close gaps
5.4.1 Increase van ﬂeet to make deliveries to expanded customer base.
• Increase minivan ﬂeet to four.
5.4.2 Develop central dispatching system using pagers or local service cell phones.
• Use pagers or local cell phones to dispatch drivers.

6.0 Administration plan
6.1 Current situation: logistics, cash controls, and accounting
• The Company has developed a manual management control system that enables us to know
where all bottles are in the system.
TABLE 26. Location of bottles as of September 12, 1999
• The Company has developed a system of tickets to manage cash. This system centralizes cash
collection in the central office. Periodic changes in the tickets enables the central office to
detect counterfeit tickets.
• The Company uses a manual accounting system set to Chinese accounting standards. No effort
has been made to automate the system or conform the system to U.S. GAAP.
Factory warehouse empty 318 Retail shop 1 372
Factory warehouse full 1,043 Retail shop 2 514
Factory use 13 Retail shop 3 487
QC samples 52 Retail shop 4 754
Office 3 Retail shop 5 85
Broken, scratched, dirty 52 Retail shop 6 85
Fu An (JV partner) 1 Retail shop 7 374
Lantian nuclear company 8 Economic zone 156
Lantian development zone 16 Radio Shaanxi 44
Lantian government office 8 Xi’an Yang retail shop 50
Xi’an Yang customer 10 Xi’an Yang retail shop 16
Lantian customer 3 School 58
Lantian customer 1 Central marketing dept. 288
Lantian customer 8 Lost 7
Lantian customer 2 Sold 8
Lantian customer 1 Customer 2
Shinzawa apartment 1 Xi’an warehouse 542
Lantian retail shop 293 Receipt no deposit 280
Lantian County government 20 Sanitation bureau 8
Marketing department 5
Subtotal (Lantian) 1,853 Subtotal Xi’an 4,135
Total 5,987

6.2 Current situation: major gaps
• Inadequate office space to conduct negotiations with institutional accounts and inadequate
parking for expanded fleet of minivans.
• Quicker response system needed for minivan deliveries.
• Inadequate customer database to conduct extensive relational marketing programs; inadequate
back-up of computer.
• Weak financial reporting to investors.
6.3 Initiatives to close gaps
6.3.1 Move central administrative office to better location.
• Move planned for October 1999 to office building owned by Post Office.
• Location in Southwest section of the city, our strongest market area.
6.3.2 Develop transportation department
• Develop separate transportation department for regular accounts.
• Maintain one minivan at direction of administration department.
• Minivans dispatched through pagers or local cell phones.
6.3.3 Develop detailed customer database; establish regular computer back-up routine.
• Develop customer database on Access, a relational database program, instead of Excel.
• Purchase equipment required for regular computer back-up and train staff in necessary tasks.
6.3.4 Improve financial reporting to investors.
• Develop schedule of weekly, 2 week and monthly reports.
• Consult with KPMG to determine if evaluation of the current accounting system is appropriate.

7.0 Major purchases and accounts payable
7.1 Major purchases
According to the Company’s financial model additional investments will be required, if sales pro-
jections are met. The financial model appears in the Appendix:
• Cap purchases will likely be required in December, March and May.
• Bottle purchases will be required in February, May and July.
• An additional four will be required by May of next year.
These investments are contingent on whether the Company meets its sales projections.
7.2 Accounts payable
TABLE 27. Major purchases planned RMB
Item Quantity
Unit
Price Total Investment
Dispensers 1,000 130 130,000
Minivans 4 30,000 120,000
Bottles 3,000 35 105,000
Factory air conditioning units 3 8,000
Cell phones 4 1,500 6,000
Paint vans 8 500 4,000
Aleba uniforms 50 60 3,000
Factory ceiling reinforcement 2,000
Larger compressor for filling machine 1 2,000 2,000
Total 380,000
TABLE 28. Accounts payable as of September 12, 1999
Payee Reason
Amount
(RMB)
Construction company Construction of pre-
wash building
100,000
Construction company Rock sign at factory 20,000
Lantian hotel Shinzawa, Ray stay 5,000
Other 75,000
Total 200,000

8.0 People
8.1 Current staffing
8.2 Current gaps
8.2.1 Financial and general management skills
• Wang Hui needs assistance in financial management to prepare cash forecasts.
• Wang Hui has inadequate management assistance to complete the projects scheduled for the
coming year.
• No financial arrangement in place to support Wang Hui.
8.2.2 Computer and database design skills
• Need database design for customer database.
TABLE 29. Staffing and monthly salaries as of September 12, 1999
Xi’an Office RMB Lantian Factory RMB
General manager 1,500 Production manager 700
Assistant manager 1,000 Chief technician 700
Accountant 900 Administrator 600
Transportation manager 800 Assistant production manager 600
Cashier 600 Quality control technician 450
Warehouse keeper 600 Cashier, warehouse keeper 550
Chief administration department 800 Guard 500
Secretary 400 Worker 500
Marketing manager 800 Worker 400
Assistant marketing manager 700 Worker 400
Driver 600 Secretary 400
Driver 500
Delivery 400a
a. Delivery workers will be increased in October to 500 from 400 currently.
Delivery 400
Delivery 400
Total Xi’an Office 9,300 Total Lantian Factory 5,800
Total salaries 15,100
Total headcount 26

8.2.3 Graphic design skills and skills to develop promotional materials.
• The Company does not have professionally designed sales and promotion materials.
• Need outside assistance to develop corporate image program.
• Wang Hui needs assistance in developing promotional materials, such as a customer newslet-
ter.
8.2.4 No bonus system
• No bonus system in place to reward key employees for hitting targets.
8.3 Initiatives to bridge people gaps
8.3.1 Execute Memorandum of Agreement among Imagene, ATCO, Aleba Management
(Louisiana) and Aleba Management (Oregon) to develop stronger management team to
assist Wang Hui.
8.3.2 Develop bonus plan for workers tied to ﬁnancial targets.
TABLE 30. Management team for joint venture
Responsibilities Paid by
Wang Hui General management ATCO, Imagene
Ed Morrison Business planning ATCO
Financial reporting to ATCO
Jim Ray Financial reporting to Imagene Imagene
Evaluation Phase 2 Imagene investment
Ron Bradley Technical consulting JV
Ye Liu Financial analysis and translation Aleba Oregon
Marketing and promotional materials
Shinzawa Marketing and promotion in Xi’an Imagene
Evaluation Phase 2 Imagene investment

9.0 Special project: Small bottle line
9.1 Overview
Small bottle line includes:
• injection molding equipment to manufacture preforms from PET;
• blow molding equipment to manufacture bottles;
• ﬁlling and capping line to produce 600 ml bottles of water.
9.2 Investment, market and distribution analysis
• Need to conduct investment, market and distribution analysis by November, 1999 if production
is to be complete by Summer 2000.
• Different business than ﬁve gallon:
1. Production economics: Selling plastic, not water.
2. Distribution system: Different distribution system to small retail shops.
• Aleba project started as small bottle project. Wang Hui has experience in this market.
9.3 Preliminary time schedule
TABLE 31. Preliminary time schedule for small bottle project
Month Year
Feasibility analysis complete November 1999
Investment decision December
Start building constructiona
a. Weather in Xi’an is a factor in building construction. The weather has to be warm
enough to pour a building foundation.
December
End building construction March 2000
Equipment installation March
Test production April
Sanitation bureau approvals May
Begin production June

10.0 Organization of the Joint Venture
FIGURE 5. Joint Venture Organization
TABLE 32. Investment overview of Joint Venture
Party a
a. In the corporate documents, Xi’an Aleba Soya is Party A and Aleba Water Company is
Party B.
Form of Investment
Investment
(RMB millions) Percent
Xi’an Aleba Soya Land, buildings 1.6 24.62%
Aleba Water Company Cash, equipment 4.9 75.38%
Total 6.5 100.00%
24.62% 75.38%
Xi'an Aleba
Mineral Water
Company
Aleba Water
Company
U.S.
ImageneEagle Capital
Aleba
Management
Oregon
Aleba
Management
Louisiana
Xi'an Aleba Soya
Company
Fu An

11.0 Financial plan
11.1 Summary of March-August operations
Detail on first six months of operation are presented in the Appendix. Before allowance for depre-
ciation and amortization, the Company lost 338,000 RMB during its first six months of opera-
tions.
FIGURE 6. Summary of Operations, March-August, 1999
11.2 Summary of financial plan
• Use Imagene investment to expand delivery capability, bottle inventory, and customer base
through dispenser program.
• Major purchases will be phased to maintain flexibility.
TABLE 33. Uses of Imagene investment
RMB %
Sources:
Imagene investment 1,203,500
Uses:
Investments in major purchases 1,042,000 87%
Working capital 161,500 13%
Total uses 1,203,000 100%
Sales Manufacturing Marketing Administrative Financing costs
-400
-300
-200
-100
0
100
200
-400
-300
-200
-100
0
100
200
RMB (000)
163
114
-127
-272
-338

TABLE 34. Schedule of major purchases
Majorpurchases
RMB
% of Imagene funds
invested
Cumulative percent
of Imagene funds
invested
Oct 331,000 28% 28%
Nov 189,000 16% 43%
Dec 52,000 4% 48%
Jan 0 - 48%
Feb 105,000 9% 56%
Mar 0 - 56%
Apr 0 - 56%
May 225,000 19% 75%
Jun 0 - 75%
Jul 140,000 12% 87%
Aug 0 - 87%
Sep 0 - 87%

11.3 Burn rate: Projected monthly operating expense
11.4 Customers required for break-even
For the coming year, the Company can operate with an operating budget of 49,300 RMB per
month.
TABLE 35. Projected monthly operating expenses
RMB
Salaries 16,000
Electricity 1,500
Telephone 2,600
Gasoline 3,000
Contract truck transportation 4,200
Ofﬁce expenses 500
Travel 1,000
Entertainment 1,000
Q.C. Testing 500
Repairs 500
Contingency 1,000
Subtotal 31,800
Loan Interest 17,500
Total monthly operating expenses 49,300
TABLE 36. Fixed costs for break even calculation
Monthly Annual
Operating expenses 49,300 591,600
Marketing programs 5,000 60,000
Total ﬁxed 59,300 651,600
TABLE 37. Contribution per bottle and per customer
RMB
Revenue per bottle 8.50
Less:
Manufacturing costs (1.64)
Transport to Xi’an (1.45)
Transport to customer (2.27)
Equals: Contribution per bottle 3.14

FIGURE 7. Calculation of customers required for break-even
Average bottle consumption per
customer per month
3.75
Average consumption per year 45
Contribution per customer per year 141.34
TABLE 37. Contribution per bottle and per customer
RMB
2 4 6 8 10 12 14 16 18 20
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
RMB in millions
Thousands of customers
Fixed Costs
Contribution

11.5 Projected cash balance
• Cash balances, after the Imagene investment should decline to 706,000 RMB in May, 2000.
After July, the Company should begin accumulating cash from operations.
FIGURE 8. Projected cash balance, October, 1999 to September, 2000
TABLE 38. Cash projection, October 1999 to September, 2000
Cash in Cash out Balances
Opera-
tions
Invest-
ment
Total
cash in
Opera-
tions Purchases
Total
cash out
Net
Monthly
Cash
Cash
Balance
Oct 43,850 1,203,500 1,247,350 49,300 331,000 10,000 867,050 877,050
Nov 56,450 - 56,450 49,300 189,000 877,050 -181,850 695,200
Dec 61,700 - 61,700 49,300 52,000 695,200 -39,600 655,600
Jan 66,950 - 66,950 49,300 0 655,600 17,650 673,250
Feb 77,325 - 77,325 49,300 105,000 673,250 -76,975 596,275
Mar 84,675 - 84,675 49,300 0 596,275 35,375 631,650
Apr 92,550 - 92,550 49,300 0 631,650 43,250 674,900
May 105,550 - 105,550 49,300 225,000 674,900 -168,750 506,150
Jun 115,525 - 115,525 49,300 0 506,150 66,225 572,375
Jul 126,025 - 126,025 49,300 140,000 572,375 -63,275 509,100
Aug 141,650 - 141,650 49,300 0 509,100 92,350 601,450
Sep 128,625 - 128,625 49,300 0 601,450 79,325 680,775
October
November
December
January
February
March
April
May
June
July
August
September
-100,000
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
-100,000
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
RMB
Net Operating Cash
Cash Balance

The summary of operations in presented in the Company’s financial model in the Appendix.
11.6 Schedule of reports
11.7 Useful benchmarks
11.8 Key drivers of the business
1. Number of customers
2. Transportation efficiency
3. Price realization
TABLE 39. Schedule of Reports
Report Frequency
Production and dellivery Weekly
Marketing Every 2 weeks
Financial Monthly
TABLE 40. Useful benchmarks to measure progress
Data Benchmark
Report
Frequency Comment
Production and deliveries to Xi’an Increasing Weekly Deliveries include revenue and
promotional bottles.
Daily deliveries to customers 300 Weekly Deliveries 7 days per week. 300
represents about break-even
volumes.
New customers per month 200-300 Monthly Budget projection.
Bottles per customer 4-6 Monthly Below 4 and deliveries degrade;
above 6 and inefficiencies arise.
Revenue per bottle 8 Monthly Below 8 indicates too deep dis-
counting on price.
Promotional bottles per month 4,000 Monthly Above 4,000 exceeds budget.
Accounts receivable retail shops Monthly Increases in A/R should track
increases in customers. Inidca-
tor of financial condition of
retail shops.
Cash balance 500,000 RMB Monthly Should not go below 500,000
RMB

Index
A
Accounting 32
Accounts payable 34
Administration plan 32
Administrative gaps 33
Administrative initiatives 33
B
Background 1
Benchmarks 44
Bonus plan 36
Bottle damage and losses 26
Bottle locations 32
Break-even analysis 41
Burn rate 41
Business System 2
Buying decisions 20
C
Capability gaps 4
Cash balance, projected 43
Cash controls 32
Company plan 1
Competition 18
Consumption rates by segment 12
Contribution 41
Current position 3
Customers by segment 12
D
Dispenser sales 14
Dispensers in institutional accounts 17
F
Family market 16
Financial plan 39
G
Goals and targets 1
H
Health concerns over distilled water 21
I
Imagene investment, uses 39
Initiatives, overview 5
Initiatives, summary 1
Institutional market 16
J
Joint venture organization 38
L
Logistics 32
M
Major purchases 34
Major purchases, schedule 40
Management team 36
Manufacturing costs 25
Manufacturing inventories 25
Manufacturing plan 25
Manufacturing upgrade programs 26
Market positioning 22
Marketing plan 16
Marketing programs 19, 23
Marketing strategy 22
Memorandum of Agreement 36
P
People 35
People gaps 35
Price realization 13
Price realization, segment and channel 13
Production plan 26
Production, 1999 26
Proﬁtability by channel 14
R
Revenue summary, 1999 10
S
Sales by channel 12
Sales forecast 10
Sales plan 10
Sales programs 15
Sales strategy 15
Sales, current situation 10
Schedule and milestones 7
School market 18
Small bottle line 37
Stafﬁng 35
Summary of Operations, 1999 39
T
Target markets 16
Ticket revenue, 1999 11
Transport costs for one bottle 30
Transportation costs 29
Transportation gaps 30
Transportation initiatives 31
Transportation plan 28
Transportation system 28

2003 Business Plan
October 2, 2002
Business Confidential

Xi’an Aleba Mineral Water JV Business Plan -1- October, 2002
Table of contents
Summary of Key Points ....................................................................... 1
Background on the Joint Venture ......................................................... 4
Time line ....................................................................................................... 4
Existing market conditions and operations in Xi’an ................................... 9
The price war ............................................................................................... 9
Competitors ..................................................................................................10
Price realization, gross margins and cash balances ...................................17
Product development plan ...............................................................................21
Background: Health effects of Aleba water ..................................................21
Background: Beijing market test ..................................................................22
Background: Health water license ...............................................................23
Background: Developments in the US water market ...................................23
Overview of product development plan ........................................................24
Preliminary product planning .......................................................................28
Investment plan 2003-2005 .........................................................................31
Update: Beijing market test ..........................................................................33
Management plan ..............................................................................................38
Next steps ....................................................................................................38
Business objectives for 2003 ..........................................................................40
Financial statements .........................................................................................42

Summary of Key Points
• The five gallon business in Xi’an continues to operate under severe price pressure brought on by a price war. Aleba is
not participating in this price war. The company requires no additional capital to continue operations.
• The company operates its 5 gallon business at close to a cash neutral basis with a relatively strong cash balance.
• Our current production system maintains high quality ratings from the Geology Ministry, and we have passed the most
recent rounds of quality inspections.
• Our current delivery system serves 6,000 customers and delivers an average of 9,000 bottles per month. The distribu-
tion system includes a central warehouse, three direct, Aleba-owned shops, and eleven contract shops.
• Our initial business model forecast profitability in the five gallon business based on a retail price of 15 RMB per bottle.
Although the price war may abate somewhat in the next year or two, it is unlikely that retail prices will recover to 15 RMB
per bottle.
• We are rebuilding our business model based on the core strength of our product. Our water has relatively high levels of
minerals and trace elements. This feature has led to some demonstrable health benefits for some consumers. These
benefits vary, but they generally relate to relief of chronic health problems -- constipation, colonitis, gastritis. These
health problems appear to be related to the lack of certain minerals and trace elements in the Chinese diet.
• The new business model is based on the following hypotheses:
• We can continue to operate a high quality, five gallon business in Xi’an. The prospects for this business will
gradually improve as the price war abates.
Table 1: Summary of cash balances
January 1, 2002 August 30, 2002
Cash Balancea
a. Includes cash on hand, cash in bank and savings account in USD
699,102 RMB 696,177 RMB

• We can build a related business that relies on selling a product line of healthy waters to more affluent con-
sumers in Beijing. We can develop this product line of healthy waters by putting additives in our water.
• We can manage a product development process for this new product line.
• We can manufacture disposable bottles of 4 liters and under to supply this business.
• We can contract with an independent company to provide distribution in Beijing and meet our volume and
profit targets.
• The higher quality of our mineral water can initially establish a competitive advantage for Aleba. To sustain
this advantage, we can execute effective, but low cost “word of mouth” marketing programs.
• With effective marketing, we will be able to increase our price premium over other mineral waters selling in
Beijing by 20% to 30%.
• On selected products, we can gain a government health drink license. A license will increase the value of our
product by enabling us to increase margins. On licensed products, we will reduce the bottle size and increase
the relative price.

Background on the Joint Venture
Existing market conditions and operations in Xi’an
New product development plan
Management plan
Business objectives for 2003
Financial statements and projections

This section reviews the history of the Joint Venture in terms of time line and ownership structure.
Time line
• ATCO formed the Joint Venture in 1998 to produce mineral water for the Xi’an market. The product is sold in returnable
five gallon bottles.
• Imagene invested in the Joint Venture in 1999. Imagene’s investment included both cash and non-cash contributions.
Under the initial agreement, Imagene obtained the option to make an additional investment in the Joint Venture. This
option expired in November, 2001.
• The Joint Venture began water sales in 2000.
• The Joint Venture’s marketing plan initially targeted the school market. This market proved very difficult to penetrate.
Buying decisions are both complex and political. In response, the Joint Venture shifted strategy to the family market
beginning in June 2000.
• Price conditions in the market began to deteriorate in July 2001 when a leading distilled water producer, Lian Ye,
launched a price war in an effort to gain market share.

• In response to the price war, the Joint Venture reduced its cost structure by:
• Shifting from company-owned retail shops to a mix of company -owned and contract retail shops.
• Reducing company-owned vans and selling excess vehicles;
• Moving to contract labor, where possible, to reduce labor overheads;
• Developing compact distribution patterns and eliminating accounts with relatively high cost;
• Reducing factory labor and moving to an incentive pay system.
Figure 1. Time line of major developments
Joint venture formed: Drill well
Begin factory renovation
Imagene investment
Factory opening
California meeting
Shift to family market
Newspaper articles against distilled water: Lian Ye loses share
Lian Ye adds mineral water
Lian Ye starts price war drops to 5 RMB
Decision to develop new products
Jan-1998 Jan-1999 Jan-2000 Jan-2001 Jan-2002 Jan-2003

Figure 2. Ownership structure
• The Joint Venture is owned by three Chinese partners and Aleba Water Company, LLC, a limited liability company,
based in Louisiana.
• Wang Hui is manager of the Joint Venture. The board includes Jim Ray, Tatsuo Ohbora, Ed Morrison, Ed Crawford and
Will Atkins. Ed Morrison serves as chairman of the board.
• Aleba Management Company (Louisiana) is controlled by Ed Morrison.
• Aleba Management Company (Oregon) is controlled by Jim Ray.
• The Chinese partners to the Joint Venture include Fu An (a fruit processing company) and the Lantian County Govern-
ment.
65%
17.5%
8.75%
8.75%75%25%
Joint
Venture
Chinese
Partners
Aleba Water
Company,
LLC
ATCO
(Eagle Capital)
Imagene
Aleba Management
Company Louisiana
Aleba Management
Company Oregon

This page intentionally left blank

Management plan
Financial statements and projections

The price war
• Intense price competition continues. The fragmented market undercuts efforts at price rationalization. Currently, 17 min-
eral waters available for sale in Xi’an. There are about 70 distilled water factories. About 5 companies sell both.
• It is unlikely that Aleba will achieve its initial target price of 15 RMB in the forseeable future.
Figure 3. Evolution of retail market pricing for mineral water in Xi’an and Beijing.
Our initial price target was based on
the hypothesis that we could penetrate
the school market with a premium
product.
We would be able to sustain the price
premium by enabling school adminis-
trators to make a profit selling water to
each student. This approach failed.
F
1998 1999 2000 2001 2002
0
5
10
15
20
25
Xi'an market price
Aleba published retail price
Beijing market price
F Aleba initial target retail price

Figure 4. TIme line of the price war
Competitors
• The water market in Xi’an has three tiers.
• Aleba is a leading company in the second tier of producers. We are the third largest mineral water company behind
Zheng Ba and Dali.
Lian Ye introduces five gallon business
Zheng Ba enters market
Aleba enters market
Smaller producers enter market
Lian Ye starts price war
Jan-1997 Jan-1998 Jan-1999 Jan-2000 Jan-2001 Jan-2002
5 companies with over 30,000
bottles per month
10-15 companies with 1,000 to
10,000 bottles per month
100+ companies with less than
1,000 bottles per month

Table 2: Major companies in Tier 1 and 2
Product lines
Tier Companies Distilled water Mineral water Monthly production
First tier companies (over 10,000 customers)
Lian Ye X Xa
a. Lian Ye added mineral water, but in very low volumes.
80,000
Zheng Ba X 30,000-40,000
Hao Que He X X 30,000-40,000
Dali X 30,000-40,000
Dong An X 30,000
Second tier companies (under10,000 customers)
Hangtian X 10,000
Aleba X 9,000-10,000
Liu Aob
b. Selling fake mineral water
X 10,000
Lotus X 5,000
Le You Yuan X 5,000
Robust X 5,000
WaHaHa X 5,000-6,000
Zhen Guan He X 3,000
Yiduoduo X 2,000
Xinglin X 1,000-2,000

Table 3: Summary of competitors: all of the first tier companies are suffering from the price war.
Company Mineral Distilled Distribution Comment
Lian Ye Secondarya Primaryb 40 owned retail
shops
Introduced 5 gallon product to Xi’an in
1997. Faced initial barriers of con-
sumer acceptance and high cost dis-
pensers. Primary victim of Zheng Ba’s
growth. Started price war in July 2001.
Added mineral water during 2001.
Zheng Ba Primary None 4 big contract shops
in Xi’an; sales in out-
lying counties suffer-
ing.
Developed 5 gallon market with heavy
advertising. Missed opportunity to
build price premium for mineral water.
Dropped price to 6RMB in response to
price war. Preparing to produce juice
drinks in a new factory.
Dali Primary Secondary 20 contract shops Dali did not obtain mineral water certi-
fication from Geology Bureau. Quality
Control Bureau took Dali to court and
obtained judgement for 100,000 RMB.
Hao Quai Huo Secondaryc Primary 30 owned shops Current leader of the price war.
Aleba Primary None 16 owned and con-
tract shops
Lotus Primary None Competes only in Lantian market

• Provincial government analysis presented in April 2002 concludes that both large and small producers will go out of
business in next two to three years. Outside companies will then enter the market to rationalize production.
WaHaHa None Primary 20 contract shops Licensee of large food processor. Only
tries to keep existing customers. Lian
Ye has been targeting customers of
WHH.
Robust Primary None 20 contract shops Prominent company from Guangdong
(South China). First responded to the
price war with an ad offering to clean
dispenser free every month but no
price concessions below its 10 RMB
level. later dropped price to 7 RMB.
Relied on reputation to establish fran-
chise-based distribution. Difficulty
keeping distribution system together.
Tried to rent Aleba factory. Relatively
poor quality local source.
Dong An Primary 30 contract shops Focused on downtown Xi’an. One of
the older companies. Losing custom-
ers.
a. Probably a hand filling operation.
b. Distilled factory in Northern industrial zone.
c. Bottled form other factory
Company Mineral Distilled Distribution Comment

Figure 5. Aleba business system as a value chain
• Wang Hui has reduced permanent head counts to run this system from 26 in 2001 to 18.
Table 4: Headcounts for Aleba, September 2002
Central office 6
Logistics and distribution 7
Factory 5
Total 18
Factory
operations
Logistics for
delivery and
return
Retail shop
management
Customer
relations
management
Finance, accounting, ticket management and cash control
Strategy and public relations
and quality
control
Equipment maintenance and real estate leasing

Figure 6. Aleba logistics requires managing bottle flows
• The economics of the business depends on strict control of the returnable bottles.
• Aleba’s annual bottle loss is under 5%.
Table 5: Economics of bottles
Initial bottle cost 30 RMB
Loss factor 10 trips 30 trips 50 trips
Amortized bottle cost 0% 3 RMB 1 RMB 0.6 RMB
10% 3.3 RMB 1.1 RMB 0.66 RMB
20% 3.75 RMB 1.25 RMB 0.75 RMB
Factory
Central
office
5 Aleba retail shops
5 contract shops
outside Xi’an
6 contract shops
inside Xi’an
Bottle delivery
Empty returns
Institutional accounts

Figure 7. Aleba has been shipping increasing bottle volumes through its system
Monthly volumes
Jan-2000
Mar-2000
May-2000
Jul-2000
Sep-2000
Nov-2000
Jan-2001
Mar-2001
May-2001
Jul-2001
Sep-2001
Nov-2001
Jan-2002
Mar-2002
May-2002
Jul-2002
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Bottles shipped

Price realization, gross margins and cash balances
• Aleba distributes product through three channels.
• The channels do not generate significantly different margins per bottle.
• Lower costs in the institutional market are offset by lower price realization. Institutional customers are price sensitive
and use their bargaining leverage.
• None of the channels generates any significant bottle deposits. Intense price competition has eliminated this feature
from the market.
Factory
Central
office
5 Aleba retail shops
5 contract shops
outside Xi’an
6 contract shops
inside Xi’an
Bottle delivery
Empty returns
Institutional accountsChannel 3:
Institutional accounts
Channel 2:
Contract shop accounts
Channel 1:
Aleba shop accounts

Table 6: Price realization and gross margin profits for a 5 gallon bottle by channel (RMB per bottle)
Channel 1:
Aleba Retail
Channel 2:
Contract shops
inside Xi’an
Channel 2:
Contract shops
outside Xi’an
Channel 3:
Institutional
accounts
Manufacturing costs
Bottle 0.50 0.50 0.50 0.50
Label, packing, caps 0.25 0.25 0.25 0.25
Labor 0.30 0.30 0.30 0.30
Electricity 0.15 0.15 0.15 0.15
Total mfg. costs 1.20 1.20 1.20 1.20
Transportation from factory to Xi’an 0.47 0.47 0.47 0.47
Transportation from central ware-
house to retail shop or institutional
account
0.15 0.15 N/A 0.15
Transportation from retail shop to
customer
1.40 N/A N/A N/A
Total costs 3.22 1.82 1.67 1.82
Retail shop costs 1.50-2.50 N/A N/A N/A
Average revenue to Aleba 10.0 6.50 5.50 8.00
Gross margin per bottle 4.28-5.28 4.68 3.83 6.18
Bottle shipments: 20% 24% 36% 20%

• Wang Hui operates Aleba at close to a cash neutral position. From July 2001 to August 2002, the business has been
burning cash at a rate of about 5,000 RMB per month. Based on current market conditions, the business has a 3 to 5
year cash supply.
Figure 8. Monthly operating cash balance, 2000-20021
1. Excludes a USD savings account of RMB 166,000.
Jan-2000
Mar-2000
May-2000
Jul-2000
Sep-2000
Nov-2000
Jan-2001
Mar-2001
May-2001
Jul-2001
Sep-2001
Nov-2001
Jan-2002
Mar-2002
May-2002
Jul-2002
0
100
200
300
400
500
600
700
800
900
0
100
200
300
400
500
600
700
800
900
Cash balance
Price
war starts

Management plan
Financial statements

Product development plan
Background: Health effects of Aleba water
• The only way out of our current situation in Xi’an is to develop new products that build off our core strength: the high
quality of Aleba mineral water.
• Aleba has relatively high levels of minerals and trace elements.
• From the beginning of our production, we began receiving reports of the health benefits of drinking Aleba water. In
August 2000, Wang Hui began organizing these reports. In October 2000, we produced a report that concluded that the
health reports from Aleba customers primarily fall into three categories. Generally, customers reported that Aleba water
helps them by relieving:
Table 7: Comparison of Aleba with two mineral waters popular in the Beijing market
Aleba
Strontium
Magnesium 21.9
Calcium 34.1
Potassium 3.4
Sodium 85
Table to be completed

• digestive disorders, primarily constipation;
• auto-immune disorders, such as gastritis, colonitis, and arthritis; and
• neurological disorders, such as migraine headaches.
• Dr. Bradley visited Xi’an early in 2001 with a colleague, Dr. Jing Sheng, from Peking Union Medical College. They inter-
viewed several patients and concluded that the health claims should be investigated more fully.
• They recommended that the JV sponsor one or more clinical trials to establish whether there is a scientific basis for the
claim that Aleba water can help patients. They also indicated that the high levels of minerals and trace elements in
Aleba water could explain why customers claim that Aleba water is helping them with certain chronic health problems.
• The dissolved minerals and trace elements in Aleba water may address a chronic shortage of these minerals and ele-
ments in the urban Chinese diet. Vegetables are grown on urban plots with increasingly depleted soils. In addition,
unlike the U.S., Chinese food processors do not yet routinely add back minerals destroyed in the cooking process. As
the Chinese diet shifts from fresh to processed foods, these minerals and trace elements may be depleted in the body.
Background: Beijing market test
• The critical business issue is whether the health effects of Aleba water will support a higher price. In the Xi’an market,
the price premium is minimal. But can a price premium be built in Beijing, where consumers have higher incomes and
the product could be perceived as more “rare”?
• Beginning in August 2002, Wang Hui started an informal to answer these questions. He is giving 600 bottles of water to
consumers in the northwest part of Beijing. Each consumer is being asked to fill out a “before and after” questionnaire.
• We are packing the water in high quality 4 liter bottles.
• Based on interviews with consumers, we will determine if there may be a basis for a price premium for Aleba water by
simply selling it in smaller bottles.

• As a benchmark, Nongfu Spring mineral water, a well-known national brand, is imported from Hangzhou and sells in
Beijing for between 5.5 RMB to 7.0 RMB for a 4 liter bottle.
Background: Health water license
• We have been struggling with the problem of how to develop a brand premium for our mineral water without investing
heavily in advertising and promotion. After all, even though Aleba water may have some health benefits, consumers can
easily perceive it as “just water”.
• To address this issue, Wang Hui and Dr. Bradley have investigated the option of obtaining a “health drink” license from
the Ministry of Health.
• To facilitate this process, Wang Hui and Dr. Bradley recommend that we develop a partnership with Fanhua Pharma-
ceutical Research Company. Fanhua is experienced in managing licensing applications for new pharmaceutical prod-
ucts.
• Although it is legally possible for a mineral water, standing alone, to obtain a health drink license, Dr. Bradley and Fan-
hua recommend that we include a proven additive for constipation in the water.
• Testing would require one year to complete and cost about 900,000 RMB ($US110,000).
Background: Developments in the US water market
• Within the past year, a range of different health water products have begun appearing on retail shelves in the U.S.
• These products start with water -- either mineral water or distilled water -- and add different proven compounds, such as
fluoride, calcium, and vitamins. Most of these waters include flavoring, others do not.
• These “vitamin and mineral” waters make no health claims, beyond basic factual claims, such as “Antioxidant vitamins
C and E help neutralize free radicals.”, or “100% Vitamin C per bottle”, or “Fluoride to go...Floride will help your children
build strong teeth.”

• Dr. Bradley believes that a similar strategy could work in China. This approach would avoid the need for obtaining a
health license. Initial conversations with Beijing consumers indicates that they would be more willing to pay a higher
price for Aleba water if there were something added to it.
Overview of product development plan
• These investigations and others have led us to conclude that there are three different levels of product development for
us to pursue: additive products, nutraceutical products, and processed products.
Table 8: Overview of additive, nutriceutical and processed products.
Need
license?
Retail price range
(RMB per liter)
Relative product
volumes required
Relativeinvestment
required
Mineral water No 1.4 to 1.8 High Low
Additive products 2 to 5? High Low
Vitamins No
Fluoride No
Calcium No
Nutraceutical products 70 to 160a
a. Based on existing cost of traditional Chinese medicines. These are usually sold in 10 ml vials with 10 vials to a package.
Low Moderate
Constipation Yes
Heart disease Yes
Processed products High High
Vinegar No 3 to 5
Soy sauce No 3 to 5
Beer No

Figure 9. Product development map for Aleba
Mineral
water
Additives
Nutriceuticals
Processed
Strategy
As we move out from the center, we
generally encounter more market risk
and higher investment requirements.
We will start with additive products,
and then move to nutriceuticals.
Nutriceuticals
Nutriceutical products are
based on Chinese traditional
medicine. We will leverage
existing licensed products with
proven markets.
We will then reformulate these
products using Aleba water.
We will either acquire an exist-
ing license or reapply for a
license based on our reformu-
lation.
Additive products
These products involve
relatively little product
risk. They involve mix-
ing existing, accepted
elements to the water.
Examples include vita-
mins, calcium, and fluo-
ride.
U.S. water producers
are starting here.

Figure 10. Potential product map for Aleba, 2005-2010
Implementation
Aleba will begin developing
two products.
In additives, we will start with
multi-vitamin product. This
product will be sold in 4 liter
bottles.
By adding an existing consti-
pation medication to our
water, we will begin develop-
ing a nutraceutical drink tar-
geted at women suffering from
constipation.
We will eventually add three
bottle sizes to our product line:
• 4 liter (generally for addi-
tive products)
• 600 ml (for a multi-vitamin
product similar to U.S.
products)
• 250 ml (generally for nutra-
ceutical products requiring
relatively small doses)
Mineral
Water
Calcium
Multi-
vitamin
Fluoride
Constipation
Hypertension
Asthma
Colds and flu
Anti-
oxidant
“cocktail”
Heart
Disease

Aleba Water Business Plans 1999 and 2003

Aleba Water Business Plans 1999 and 2003

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