Yantai North Andre Juice Co Ltd, an apple juice supplier to beverage giants such as Coca Cola, Pepsi and Nestle, plans to more than double its output in the next two years.

The Shandong-based firm, whose shares are traded on Hong Kong's secondary board, will acquire smaller rivals to fuel its development in the mainland's segmented juice market.

"Our output will amount to 180,000 tons in the 2006-07 fiscal year," Rex Chow, special assistant to the company's chairman, told China Daily in an interview. "That will be a big jump from 80,000 tons in 2005-06."

But Chow said that does not mean sales will also double, because "it's hard to say whether prices will stay at the same level."

Andre's output dropped considerably in 2005-06 due to a sharp rise in apple prices.

The company had planned to produce as much as 170,000 tons in that fiscal year.

More than 90 per cent of Andre's output is sold to overseas beverage firms in the United States, Japan and Europe. But a growing number of domestic players are showing interest in Andre's product, which is relatively expensive.

Andre, which produces juice in six plants in Northeast China's Liaoning, North China's Shaanxi and East China's Shandong and Jiangsu, said it would undertake more mergers and acquisitions to expand its presence on the mainland.

"Our seventh plant will probably be acquired from rivals," he said, adding it would be cost-efficient for Andre to head into other markets that already had local players.

"We have a few targets under negotiation," Chow said, without revealing the number, though it is thought to be less than 10.

Yantai Oriental, a juice maker that produces 30,000 tons of juice in its three plants, is one of the targets, Chow said. Andre almost acquired the firm in 2004, but after a trial operation it found the firm had management problems.

"We will consider buying it after these problems are solved," Chow said.

The mainland's juice market is still in the developmental stage, with a per capita consumption of only 1.6 kilograms a year, lagging far behind the world's average of 7 kilograms.

However, that market is growing fast as consumers' health awareness and disposable incomes increase.

Apart from apple juice, Andre will begin to produce pectin, a by-product of juice making that can be used to gel together certain foods, drugs, and cosmetics.

The company's US$20-million pectin joint venture in Yantai, in East China's Shandong Province, will be put into operation in the second half of the year. Chow said it could produce 5,000 to 6,000 tons of pectin in two years, "if everything proceeds smoothly."

Chow also said Andre is preparing for a main board listing, although it has to wait for approval from the China Securities Regulatory Commission.

The company's shares are now traded on the Growth Enterprise Market, Hong Kong's secondary board that could soon be reorganized.

The company hopes the listing can be made in the first half of the year.

The move, if successful, will mark the first H-share company to transfer from the GEM to the main board.

"Internally, it's no problem; we are ready," he said.

Source: China Daily