china consumer -off the shelf -...

www.jpmorganmarkets.com

Asia Pacific Equity Research09 January 2014

China Consumer - Off the ShelfPromotions abating slightly in noodles, but shifting to beverages; price increases in dairy

Beverages

Ebru Sener Kurumlu AC

(852) 2800-8521

[email protected]

Bloomberg JPMA KURUMLU <GO>

Shen Li, CFA

(852) 2800 8523

[email protected]

Bloomberg JPMA SHLI <GO>

Henry Tan

(852) 2800-8559

[email protected]

J.P. Morgan Securities (Asia Pacific) Limited

See page 20 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Signs of promotional activity abating slightly in noodles. Our channel checks indicated slightly fewer promotions and a lower level of discounting from both UPC and Tingyi. Both companies have stopped giving free gifts such as plastic baskets and bowls with the purchase of pack noodles. Nevertheless, free sausages and upsized ingredient packages continue to be on offer. In addition, discounts on selected products remain. We also noticed higher promotional intensity in Xi'an supermarkets compared with Shanghai supermarkets. We see Tingyi launching new noodles products,while we did not see new products from UPC. As we noted in our last channel check report, UPC management’s focus remains on existing products, and there is no intent to push out new products.

Tingyi seems to be shifting competitive focus to beverage segment.Tingyi has stepped up promotions in beverages. While Tingyi has stopped giving plastic baskets and bowls with purchase of instant noodles, it has started to give plastic baskets with beverage purchases. We do not see UPC doing this. As we noted in our recent report on Tingyi (click here for details), Tingyi management believes competition will intensify in beverages, that UPC lacks the capacity to keep up with Tingyi in “600ml upsizing efforts” and that this will allow Tingyi to gain further market share.

Mengniu, Yili and Want Want raised prices 5-10% in Dec-13. Most brands have raised prices in response to higher raw milk prices (+23% y/y in 2013, to Rmb4.17/kg). Mengniu raised prices on Deluxe pure milk and Deluxe low fat by 5% and 10%, respectively, and on kid’s milk future star by 8%. This was the third time Mengniu raised prices in 2013; Mengniu raised prices on the high-end Deluxe series 5-16% in Aug-13 and on low-end pure milk ~5% in Apr-13. Mengniu continues to launch more premium products at higher prices. Yili raised prices on its Satine milk by 5% and pure milk prices by 3%. Want Want raised prices on Hot-kid milk by 10%. We were modeling a c7% ASP increase for this category for 2H13. A 10% ASP increase came late in the year, so revenue is likely to fall slightly short of our expectations. However, we understand that Want Want kept input costs under control until 4Q, thanks to local purchases; hence, we do not see major downside risk to our GPM estimate.

Channel checks in Xi’an indicate relative dominance of regional dairy brands. In Xi’an supermarkets, we noticed regional players Yin Qiao (银桥) taking large shelf space and selling at lower prices than most national

players. Some local brands such as Sheng Mu (圣牧) and Tianshanxue (天

山雪 ) products also have superior store visibility. We believe regional players are likely to dominate in a particular region in fresh milk and yogurt, given proximity advantages (among other factors). This is also a key driver of why foreign players have found it harder to penetrate the liquid milk segment relative to infant formula (shelf life of up to two years).

Figure 1: Figure 2: China consumer staples sector performance

Source: Bloomberg

Recent “China Consumer - Off the Shelf” report links are attached here:

“Dairy brands’ pricing actions; Noodles promotions remain intense” Dated 17 October 13

“Instant noodle and beverage competition continues into 2H; Dairy promotions emerging in mass market”Dated 16 August 13

“Noodles, beverage competition intensifying; discounts in tissue; price cuts in infant formula” Dated 10 July 13

“Shopping milk, noodles, diapers and juice….” Dated 21 Jun 13

https://jpmm.com/research/content/GPS-1147594-0








http://emaillink.jpmorgan.com/t/AQ/AANpwg/AAbRsA/RR2RQA/BRc/ACyc2g/AQ/aJ-o

http://emaillink.jpmorgan.com/t/AQ/AANpwg/AAbRsA/RR2RQA/BRc/ACyc2g/AQ/aJ-o

http://emaillink.jpmorgan.com/t/AQ/AAOsyQ/AAdXvA/RuQV6w/PQ/AC-2Ew/AQ/25F+

2


Ebru Sener Kurumlu(852) [email protected]

What changed?

Instant noodles

Signs of promotional activity abating slightly

Our channel checks indicated slightly fewer promotions and a lower level of discounting from both UPC and Tingyi. Both companies have stopped giving free gifts such as plastic baskets and bowls with the purchase of pack noodles.

Nevertheless, the following promotions continue to be on offer: (1) free sausages; and (2) more ingredient packages. In addition, there are some discounts on selected products. For instance, Tingyi is offering a 9% discount on Roasted beef 5-packnoodles, and UPC is offering a 10% discount on Soup Master bowl.

We also noticed higher promotional intensity in Xi'an supermarkets compared with Shanghai supermarkets. In the Xi'an supermarkets, we noted UPC and Tingyi placingpromotional staff to cook for customers in order to attract them to taste and buy.

Figure 3: Tingyi promotional staff cooking noodles

Source: J.P. Morgan.

Figure 4: UPC promotional staff cooking noodles


3



Tingyi continues to roll out new products; we did not see any from UPC

Tingyi introduced Pickled mustard ribs noodle (老坛酸菜排骨面) into the Pickled mustard noodles series, priced at Rmb3.8 per bowl, and upgraded its fried noodle

series (食面八方) and boiled noodle series (面霸) with more sauces and more flavors.

We did not see any new products from UPC. As we noted in our last channel check report, UPC management has noted that its focus remains on existing products and that there is no intent to push out new products.

Table 1: Instant noodles price comparison

Brand (Company) Model Price (Rmb) Package size (grams) Price per 100 gram

Masterkong 康师傅 Braised beef 红烧牛肉面 3.2 to 3.5 105 3.05 to 3.33

Pickled Mustard beef 酸菜牛肉面 3.0 to 3.7 130 2.31 to 2.85Pickled Mustard Chicken 酸菜仔鸡面 3.0 to 3.7 130 2.31 to 2.85

Pickled Mustard ribs 老坛酸菜排骨面 3.8 126 3.02Luxiang 辣卤/卤香牛肉 3.5 to 3.7 108 3.24 to 3.43

Spicy beef 香辣牛肉 3.5 to 3.8 108 3.24 to 3.52

Potherb mustard pork 雪菜肉丝面 3.2 to 3.8 115 2.78 to 3.30Kimchi seafood soup 泡菜海鲜方便粉丝 3.8 38 10.00

Dry crispy noodle 脆旋风干脆面 1.0 40 2.50Spicy beef 麻辣牛肉面 3.8 112 3.39

Bamboo fried pork noodle 鲜脆雪笋炒肉丝面 3.8 136 2.79Tomato beef 西红柿炖牛腩 3.5 109 3.21

Spicy sour soup noodle 油泼辣子酸汤面 3.7 128 2.89Sour pickled beef 泡椒牛肉面 3.8 109 3.49

XO sauce beef fried noodle XO 酱牛肉炒面 4.8 124 3.87Fragrant beef noodle 香锅牛肉面 4.8 130 3.69

Uni-president 统一 Braised beef 红烧牛肉面 3.5 120.0 2.9Pickled Mustard Beef 老坛酸菜鱼 3.5 to 4.0 116 3.02 to 3.45

Pickled Mustard Beef 老坛酸菜牛肉 3.5 to 3.8 120 2.92 to 3.17

Lurou 卤肉面 3.5 to 3.8 113 3.10 to 3.36Spicy beef 香辣牛肉 3.5 to 3.9 107 3.27 to 3.64

Tomato beef 番茄牛肉 3.7 to 3.8 107 3.46 to 3.55Potherb mustard pork 雪菜肉丝面 3.8 to 3.9 113 3.36 to 3.45

Soup master 汤达人 7.5 130 5.77Spicy sour soup noodle 油泼辣子酸汤面 3.6 128 2.81

Spicy bamboo beef noodle 麻辣笋子牛肉面 3.7 120 3.08Nong Shim 农心 Spicy noodles 辛拉面 5.3 to 5.9 117 4.53 to 5.04

Potato rib noodles 土豆排骨拉面 4.2 120 3.50

Stone Bowl beef 石锅牛肉 5.0 to 5.9 117 4.27 to 4.96Nissin 日清 Sea food 海鲜 3.9 to 5.0 84 4.64 to 5.95

Tonkotsu 九州猪骨浓汤味出前一丁 4.8 100 4.80Jinmailang 金麦郎 Pickled Mustard Beef 酸菜牛肉面 3.5 to 3.6 130 2.69 to 2.77

Sour beans rib noodle 酸豆角排骨面 4.5 160 2.81Hotpot beef noodles 香锅牛肉面 3.6 130 2.77

Spicy beef 香辣牛肉面 3.5 101 3.47


Flavor analysis: Shanghai vs. Xi’an

Both UPC and Tingyi have customized their offers in terms of flavors between Shanghai supermarkets and Xi’an supermarkets in this space. Both have introduced more sour and spicy flavors in Xi’an (to cater to local taste) and less in Shanghai.

For example, Tingyi has Spicy sour soup noodle (油泼辣子酸汤面), Sour pickled

beef noodle (泡椒牛肉面), Spicy beef noodle (麻辣牛肉面), Fragrant beef noodle

(香锅牛肉面) and XO sauce beef fried noodle (XO酱牛肉炒面) selling in Xi’an supermarkets, while we did not see such flavors in Shanghai supermarkets.

4



UPC also has Spicy sour soup noodle (油泼辣子酸汤面) and Spicy bamboo beef

noodle (麻辣笋子牛肉面) selling in Xi’an supermarkets only.

We also noticed some local players such as Hua Feng (华丰) and Da Han Kou (大汉

口) selling local flavored noodles and displaying at superior shelf space locations in Xi’an supermarkets.

Beverages

Tingyi stepped up promotions in beverages; UPC did not follow suit

Interestingly, while Tingyi has stopped giving plastic baskets and bowls with purchases of instant noodles, it has started to give plastic baskets with beverage purchases. We did not see UPC doing this.

As we noted in our recent note on Tingyi (click here for details), Tingyi management believes competition will intensify in beverages, that UPC lacks the capacity to keep up with Tingyi in “600ml upsizing efforts” and that this will allow Tingyi to gain further market share.

We also observed the following giveaways/ promotions:

UPC is offering “buy two Asamu milk tea get one for free”

Tingyi offering a “9% cut in Milk coffee 3 pack”

Tingyi is also offering a 4% cut in smoked plum tea 4-packs

Kirin offered a 14-25% discount to its Coffee Latte series

Figure 3: Tingyi beverage giveaways


Figure 4: Tingyi beverage giveaways


http://emaillink.jpmorgan.com/t/AQ/AAOsyQ/AAdXvA/RuQV6w/PQ/AC-2Ew/AQ/25F+

5



New products

1. Tingyi introduced Milk coffee (养奶咖) selling at Rmb3.8 for 500ml.

2. UPC introduced high-end milk tea: Citea Matcha Milktea (希蒂抹茶奶茶) priced at Rmb8 for 280ml, the most expensive among all beverages.

Table 2: Beverage price comparison

Brand (Company) Model Price (Rmb) Package size (ml) Price per 100 ml

Masterkong Lemon iced tea 冰红茶 2.0 to 2.4 600 0.33 to 0.40

Jasmine tea 茉莉清茶 2.2 to 2.5 600 0.37 to 0.42 Milk Coffee 养奶咖 3.8 500 0.76

Milk tea -milk flavor 经典奶茶炼乳味 3.1 to 3.3 500 0.62 to 0.66Milk tea - tea flavor 经典奶茶香浓味 3.1 to 3.3 500 0.62 to 0.66

Ice green tea 冰绿茶 2.2 to 2.6 600 0.37 to 0.43

Green tea (sugar free) 绿茶 2.2 to 2.5 600 0.37 to 0.42 Orange Juice (每日 C) 2.4 to 2.7 450 0.53 to 0.60Tea Juice (冰糖雪梨) 2.0 to 2.4 500 0.40 to 0.48Tea Juice (冰糖柠檬) 2.0 to 2.4 500 0.40 to 0.48

Uni-president Lemon iced tea 冰红茶 2.0 to 2.4 500 0.40 to 0.48ice tea 冰绿茶 2.3 to 2.5 500 0.46 to 0.50green tea 绿茶 2.3 to 2.5 500 0.42 to 0.50

Jasmine tea 2.1 to 3.0 500 0.42 to 0.60

Wheat milk tea(麦香口味) 1.9-2.0 250 0.76 to 0.80Chocolate milk tea(巧克力口味) 1.9-2.0 250 0.76 to 0.80

Milk tea 伯爵奶茶 3.8 to 4.4 500 0.76 to 0.88Milk tea 阿萨姆 3.80 500 0.76

Citea Matcha Milktea 希蒂抹茶奶茶 8.00 280 2.86

Oolong tea(茗茗是茶) 4.50 500 0.90Tea Juice (冰糖雪梨) 2.5 to 2.9 500 0.50 to 0.58

Chrysanthemum tea(蜂蜜菊花) 3.6 to 3.9 500 0.72 to 0.78Roselle tea(洛神花茶) 3.6 to 3.9 500 0.72 to 0.78

Tea Juice (冰糖金桔) 2.5 to 2.9 500 0.50 to 0.58

Minute Maid Orange Juice (果粒橙) 2.9 to 3.4 450 0.64 to 0.76Sugarcane Waternut juice(甘蔗马蹄味) 2.9 to 3.4 450 0.64 to 0.76

Ice Orange Lemon juice(冰橘柠檬味) 2.9 to 3.4 450 0.64 to 0.76

Uni-president Orange Juice (鲜橙多) 2.5 to 2.8 450 0.56 to 0.62

Tropicana Orange Juice (鲜果粒) 2.7 to 3.2 420 0.64 to 0.76Huiyuan 100% orange juice 3.3 to 3.9 200 1.65 to 1.95

Tenwow Honey cranberry tea(蜂蜜蔓越莓茶) 3.50 500 0.70Jasmine white tea(白茶茉莉) 3.50 500 0.70

Kirin Milk tea(新疆哈密瓜) 3.30 500 0.66Coffee Latte(火咖拿铁) 3.50 500 0.70

Pepsi Pepsi 百事可乐 2.90 600 0.48Mirinda 美年达 2.90 600 0.48

Coca cola Coca cola 可口可乐 2.90 600 0.48Dianhong red tea(滇红红茶) 2.40 480 0.50

Cuilv green tea(翠缕绿茶) 2.40 480 0.50Jasmine tea(清香茉莉) 2.40 480 0.50

Spirit 雪碧 2.90 600 0.48Fanta 芬达 3.20 600 0.53


6



Milk

Dairy pricing actions continue in Dec-13

Many brands have raised prices due to the tight supply of domestic raw milk and the decline in milk imports. Raw milk prices increased 23% in 2013, to Rmb4.17/kg.

Mengniu raised prices on Deluxe pure milk and Deluxe low fat by 5% and 10%,respectively, and on kid’s milk future star by 8%, to Rmb54 for 190ml*15packs.This was the third time Mengniu raised prices in 2013; Mengniu raised prices on the high-end Deluxe series 5-16% in Aug-13 and on low-end pure milk ~5% in Apr-13.

Yili raised prices on its Satine milk by 5%, from Rmb62 to Rmb65 for 250ml*12packs, and 3% on pure milk.

Want Want raised prices on Hot-kid milk by 10%, to Rmb55.8 for 245ml*12packs.We were modeling a c7% ASP increase for this category for 2H13. A 10% ASP increase came late in the year, so revenue growth is likely to fall short of our expectations. However, we understand that Want Want kept input costs under control until 4Q, thanks to local purchases; hence, we do not see major downside risk to our GPM estimate.

Mengniu continues premiumization efforts in new product launches

Mengniu introduced a new yogurt product, Just Yoghurt (纯甄酸牛奶), at a premium price (Rmb2.75 per 100ml) to the majority of brands.

Mengniu also introduced new flavors to its Latte milk, which is selling at Rmb57.6 for 243ml*12packs. Latte milk currently has three flavors: banana, vanilla and chocolate.

Channel checks in Xi’an indicate relative dominance of regional brands

In Xi’an supermarkets, we noticed regional player Yin Qiao (银桥) taking large shelf space and selling at a relatively lower price (Rmb31 for 227ml *12packs) than most national players.

Other regional brands also dominate store visibility. We noticed some local brands

such as Sheng Mu (圣牧) organic kids’ milk (selling at Rmb68 for 250ml*12) and

multiple Tianshanxue (天山雪) products labeled as “hot items.”

We believe regional players are likely to dominate in a particular region in fresh milk and yogurt, given proximity advantages (among other factors), We note that shorter shelf lives in liquids (~5 days for fresh milk, ~15 days for yogurt, 30 days to 6 months for UHT) means geographical advantages for local players relative to national players, given proximity/access to milk sources in the country.

Imported milk gaining shelf space

We also noted more imported milk products such as Arla and Anchor being displayed in shelf space locations with superior visibility.

Price comparison: Imported milk vs. local milk: Arla and Anchor products are priced higher than local milk products. Arla organic is priced at Rmb79 for 250ml* 10 packs, while Anchor (New Zealand) is priced at Rmb59 for 250ml*10 packs.These translate into Rmb2.4-3.2 per 100ml compared to Rmb2.2 per 100ml for Mengniu's Deluxe milk (high end) and Rmb1 per 100ml for Mengniu’s Pure milk (mass market).

7



Arla and Anchor products are also priced at a relative premium to other imported milk such as Asda branded milk, which sells at Rmb1.7 per 100ml through the Yihaodian online platform. We highlighted in our recent "Eye on China Consumers -The MNC View" report that Yihaodian (majority-owned by Walmart now) now sells more than 90,000 units of imported milk per day. Given that volumes are still small and that logistical issues over the transportation of liquid milk remain, we believe online sales pose little threat to the current sales channel for now.

Observations on promotions and giveaways

1) Modern Farming (by Modern Dairy) is offering buy one box (250ml*12) getRmb8 off.

2) Yili Gu Li Duo (谷粒多) is offering buy one box (Rmb36 for 250ml*12) get one box for free.

3) Yili is also offering free giveaways for buyubf kids’ milk QQ star.

4) Mengniu is offering free gifts for buying future star milk.

Table 3: Milk price comparison

Brand (Company) Model Price (Rmb) Package size (ml) Price per 100 ml

Mengniu Pure milk 纯牛奶 2.5 to 2.6 250 1.0 to 1.04

Breakfast milk 早餐奶 28.9 230*12 1.05

Kids’ milk 未来星 54.0 190*15 1.89

Deluxe milk 特仑苏 65.0 250*12 2.17

Deluxe milk - fiber特仑苏 - 醇纤 65.0 250*12 2.17

Deluxe milk -low fat 特仑苏 - 低脂 68.0 250*12 2.27

Deluxe milk -organic 特仑苏 - 有机 73.0 250*12 2.43

Fruit Milk-真果粒 48.0 250*12 1.60

Modern farming 现代牧场 67.9 to 69 250*12 2.26 to 2.30

Just Yoghurt 纯甄酸牛奶 66.0 200×12 2.75

Latte 奶特 57.6 243×12 1.98

Yili Pure milk 24.8 to 26.4 240*12 0.84 to 0.92Breakfast milk 早餐奶 25.2 230*12 0.91

Kids’ milk QQ星儿童成长牛奶 57.0 190*12 2.50

Satine 金典 65.0 250*12 2.17

Satine organic 金典有机 73.0 250*12 2.43

Shuhua milk 营养舒化 52.7 250*12 1.76

Yili yogurt优酸乳 42.9 to 43.1 250*24 0.72 to 0.74

Bright Pure milk 24.8 243*12 0.85Kids’ milk - 嘟嘟儿童高品质奶 45 to 46.8 190*12 1.97 to 2.05

Kids’ milk - 嘟嘟牛奶 27.5 190*12 1.21

Kids’ milk - 小小光明 13.4 100*6 2.23

Momchilovtsi 63.0 110*18 3.18Excellent +优+ 45.9 to 66.5 250*12 1.53 to 2.22

Excellent + low fat优+ - 低脂 50.0 250*12 1.7

Yogurt 酸牛奶 56.5 110×18 2.9

Want Want 兒童成長牛奶Kids’ milk 50 to 50.3 190*12 2.19 to 2.21

Apple milk 4.0 245 1.63Juice milk 3.6 245 1.47

Hot-kid Milk 旺仔牛奶 55.8 245*12 1.70

Arla Arla organic 79.0 250*10 3.16Anchor Anchor (New Zealand) 59.0 250*12 2.36

Milk sold online

Asda Asda milk 16.9 1,000 1.69


http://emaillink.jpmorgan.com/t/AQ/AAOpeQ/AAdRGw/RsobgQ/UA/AC-GTQ/AQ/HK-g

http://emaillink.jpmorgan.com/t/AQ/AAOpeQ/AAdRGw/RsobgQ/UA/AC-GTQ/AQ/HK-g

8



Diapers and infant formula – Price comparison across online, hypermarkets and mom-and-baby stores

Infant formula

Hypermarket and mom-and-baby stores (MBS) have priced their infant formula products competitively relative to each other. However, online prices (we checked 360buy.com) of infant formula products are on average ~5% cheaper than hypermarkets and MBS (online discounts to hypermarkets MBS range 3-12%).

Table 4: Infant formula powder price comparison

Brand (Company)

Product Hypermarket MBS (Love Baby Room) Online (360buy.com)

Price(Rmb)

Pkg size (g)

Price/100g

Discount Price(Rmb)

Pkg size (g)

Price/100g

Discount Price(Rmb)

Pkg size (g)

Price/100g

Discount

Wyeth illuma启赋 408 900 45.33 408 900 45.33 358 900 39.78

Gold 220 to 248 900 24.44 to 27.56

213 900 23.67 buy 5 get 1 free

202 900 22.44

Kabrita 佳母羊乳 NA NA NA 398 800 49.75

398 800 49.75

MeadJohnson

Enfamil安婴

儿

248 to 252 900 27.56 to 28

get 50 off 500

purchase

238 900 26.44 230 900 25.56

Nestle NAN. H.A.超级能恩

285 to 362 800 35.63 to 45.25

buy 2 get 50 off

358 800 44.75 buy 3 get 150 off

348 800 43.50

Beingmate regular 183 to 218 900 20.33 to 24.22

get 50 off 298

purchase(expect

stage 1)

228.6 1000 22.86 get 150 off

500(single receipt)

176 1000 17.63

Biostime Super gold 347 900 38.56 366 900 40.67 386 900 42.89Gold 270 to 298 900 30 to

33.11290 900 32.22 290 900 32.22

Pro-kid 436 to 460 900 48.44 to 51.11

460 900 51.11 460 900 51.11

Meiji 珍爱儿 220 to 245 900 24.44 to 27.22

212 900 23.56 239 900 26.56 4 off

Abbott Similac喜康

宝

219 900 24.33 235 900 26.11 223 900 24.78

Essence菁

智

470 900 52.22 470 900 52.22 buy 3 get 150 off

469 900 52.11

Rearing Baby

Gold NA NA NA 328 800 41.00 NA NA NA

Dumex precinuti 221 to 225 900 24.56 to 25

213 850 25.06 199 900 22.11

Arla Baby & me NA NA NA 470 800 58.75 NA NA NAFrisco Gold NA NA NA 235 900 26.11 get 10 off

for stage 1,buy

two stage2/3

get 40 off

215 900 23.89 get 10 off

Ausnutria allnutria能力

多

NA NA NA 358 800 44.75 get 50% off

second one( stag

e 3/4 only)

358 800 44.75 get 58 off

organic NA NA NA 398 800 49.75 398 800 49.75 get 77 off

Source: J.P. Morgan. * Note: all prices of stage 1.

9



Diapers

We find diapers cheapest in MBS (5-20% cheaper than online and hypermarkets). MBS currently accounts for one-quarter of total diaper industry sales and is growing twice as fast as the industry.

Diapers in hypermarkets are priced slightly higher than online. However, we note 360buy.com offering more promotions (gifts, discounts for additional purchases) relative to MBS and hypermarkets.

Table 5: Diapers price comparison

Company

Brand Model Hypermarket MBS (Love Baby Room) Online (360buy.com)

Price(Rmb)

Pkgsize (pcs)

Price/piece

Discount Price(Rmb)

Pkgsize (pcs)

Price/piece

Discount Price(Rmb)

Pkgsize (pcs)

Price/piece

Discount

Kao Merries domestic 顺

爽透气

125.0 66S 1.89 78.0 48S 1.63 112.0 66S 1.70 get 60 off 199

imported 180.0 82S 2.20 178.0 82S 2.17 139.0 64M 2.17 get 4 offKimberly Clark

Huggies Soft & Thin (Gold) 超柔贴身

218 to 249

120M 1.82 to 2.08

259.0 120+8M 2.02 179.0 72+16M 2.03 add Rmb29

get more gifts

Dry & Comfort (Silver) 干爽

舒适

149 to 179

120M 1.2 to 1.49

145.0 120M 1.21 119.0 80M 1.49 add Rmb29

get more gifts

P&G Pampers Super soft (White) 超柔贴身

185.0 84M 2.2 58 off big

box(RT mart),

buy two box get

80 off (Carrefo

ur)

135.0 56M 2.41 329.0 168M 1.96 get 70 off, get Rmb20 coupon for next purchas

e

Thin & Dry (Green) 超

薄干爽

178.9 112M 1.6 29.5 off big

box(RT mart)

143.0 100M 1.4 289.0 192M 1.5 get 63 off

Biostime

BM care 爱心宝宝 118.0 48S 2.5

Unicharm

Moony 新生儿 149.0 64M/81S

2.3 get 20% off

second one

119.0 64M/81S

1.9 add Rmb29

get more gifts

MamyPoko

Boys/Girls 125 to 135

100S 1.25 to 1.35

60.0 58S 1.03 get 30 off 150

purchase

79.0 58+8S 1.20 get 9 off


10



SnacksNew products: Tingyi introduced new Calbee chips; Want Want launches CNY package

Tingyi introduced new potato chip product Calbee. Four flavors are available, pricedat Rmb4 for 40ml.

We also noticed that a Want Want Chinese New Year package (a mix of Want Want popular snacks) has launched, with prices ranging Rmb39.9-82.9, depending on content and the size of the package.

Other notable changes include:

Kraft introduced a new flavor, Gold chocolate cookies, into its Oreo series.

Orion introduced a new imported product, Dr.You Diget biscuits, priced at Rmb15.5 for 194g, the most expensive among biscuits.

We noticed very few promotions in this space. There were a few select ones: (1)Orion is offering buy 3 bags of potato chips, get Rmb2 off; (2) Oishi is offering a 23% cut on Japanese Crackers; and (3) Tingyi is offering an 11% cut on Calbee.

Table 6: Snacks price comparison

Brand (Company) Product Price (Rmb) Package size (gram/ml) Price per 100gram/100ml

Want Want Snow Crisps 旺旺雪饼 21.4 to 21.5 618 3.46 to 3.48Want want crisps 旺旺仙贝 21.4 to 21.6 618 3.46 to 3.48

Master Kong 3+2 sandwich cracker 3+2苏打夹心 4.2 to 4.8 125 2.91 to 3.33

3+2 sandwich cracker, shortening (3+2 松派) 4.4 to 5.1 125 3.52 to 4.08Salt sandwich cracker 甜酥夹心 9.9 288.0 3.4

shortening sandwich cookie 酥松夹心 11.9 354.0 3.4Salt delicious cookie 美味酥 9.4 255.0 3.7

Chocolate 榛子巧克力 13.0 354.0 3.7

Kraft Oreo (奥利奥) 17.3 360.0 4.8Oreo Gold Chocolate (金装巧克力饼干) 17.8 318.0 5.6

Ugan (优冠） 3.7 to 4.5 130 3.28 to 3.46Prince(王子） 3.6 120.0 3.0

Chips Ahoy！（趣多多） 4.88 to 5.65Tiki (甜趣） 3.5 to 3.6 90 3.89 to 4Tuc (闲趣） 3.5 to 3.6 90 3.89 to 4

Cake

Master Kong Mufin(妙芙） 4.9 to 6.0 96 5.1 to 6.25

Orion Chocolate pie 可可派 9.9 23*6 7.2Chocolate layered cake 12.1 168.0 7.2

Tiramisu 提拉米苏 10.9 23*6 7.9Orion pie 8.2 204.0 4.0

Gao Xiaomei cookies 高笑美原味饼干 12.5 160.0 7.8Dr. You Diget (全麦消化饼) 15.5 194.0 8.0

Panda chocolate cookie 熊猫派派 8.7 25*5 7.0

Lotte Cocoa bouchee 可可布司 6.9 to 8.9 150 4.6 to 5.93Potato chipsMaster Kong Calbee 4.0 40 10.00

Orion Potato wish 薯愿 6.9 to 7.9 104 6.63 to 7.6Bag 厚片 4.5 to 5.2 75 6 to 6.93

Oishi Crispy 醇脆 4.8 to 5.6 90 5.33 to 6.22Japanese Crackers 日式鱼果 3.2 50 6.40

Lays traditional 4.3 to 5.0 75 5.73 to 6.67BBQ 4.7 to 5.3 75 6.27 to 7.07

Lekaicui 乐开脆 2.8 to 3.2 48 5.83 to 6.67Cucumber 5.8 75.0 7.7


11



Raw materials price outlook

Palm oil

Our ASEAN Plantations team has revised its 2014 CPO price forecast to M$2,650/MT (+6% from M$2,500/MT earlier) and rolled out a 2015 CPO price forecast of M$2,700/MT, mainly driven by: (1) rising biodiesel blending targets; (2) structurally slower production growth; and (3) tighter inventory for palm oil and overall vegetable oil complex.

Drivers in place for a structurally higher CPO price: Demand has become moresustainable with the firm rollout of biodiesel mandates in various countries, led by the recent Indonesia B10 blending program that is expected to absorb a significant portion of CPO production. Production growth is also expected to slow down, so supply should be tighter, due to the slower pace of new plantings in the past three to four years and a new rule to cap plantation size to 100,000 ha in Indonesia.

Our ASEAN Plantations team also expects a tighter picture for global vegetable oil supply. Our 2014 CPO price forecast is at a c.US$100/MT discount to current soybean oil prices against the historical average of US$180/MT, as we believe the discount gap will close as we expect tighter palm oil inventory levels in 2014. (From ASEAN Agri-Commodities – Upgrade 2014 CPO price forecast to M$2,650/MT, by Ying-Jian Chan, dated November 9, 2013).

Table 7: Palm oil price forecasts

US$/MT M$/MT2010 856 2,7482011 1,071 3,2742012 928 2,8662013 734 2,3502014E 828 2,650

Source: Bloomberg, J.P Morgan estimates

Figure 5: CPO average price forecast

M$/MT

Source: Bloomberg, J.P. Morgan estimates

2475

2864

2261

2748

3274

2866

2350

2650

2000

2200

2400

2600

2800

3000

3200

3400

2007 2008 2009 2010 2011 2012 2013 2014E

12



Wheat

Our global commodities research team expects CME wheat to average US$6.26/bu in 2014E, for a decline of c9% from the average price of US$6.9/bu in 2013.

Wheat new crop supply will weigh on the market. Given it is losing market share to corn, wheat prices will need to move to more competitive pricing. Our global commodities research team envisages the prompt CBOT corn/wheat spread trading at or under $1.80/bu for most of 2H14 and forecasts CBOT average wheat prices at $6.20/bu and $6.10/bu in 3Q14 and 4Q14, respectively.

Figure 6: CME wheat average price forecast

US$/bu


Sugar

Our global commodities research team expects international sugar prices to average USc17.2/lb in 2014, for a decline of c2% from the average price of USc17.6/lb in 2013.

Our commodities team believes the global sugar surplus will continue to weigh on the ICE raw sugar market over 2H14. The start of both the Indian and Thai harvests already looks promising. Lower prices will still be needed to stir more global demand while incentivizing a greater switch into ethanol in Brazil. Our commodities team forecasts that raw sugar prices will average USc17.25/lb andUSc17.50/lb in 3Q14 and 4Q14, respectively.

Figure 7: International sugar average price forecast

US cents/lb.


6.4

8.0

5.35.8

7.17.5

6.9

6.3

4.0

5.0

6.0

7.0

8.0

9.0

2007 2008 2009 2010 2011 2012 2013 2014E

9.9

12.1

18.0

22.3

27.1

21.617.6

17.2

8.0

12.0

16.0

20.0

24.0

28.0

2007 2008 2009 2010 2011 2012 2013 2014E

13



Soybeans

Our global commodities research team expects soybeans prices to average US$10.8/bu in 2014, for a decline of c24% from the average price of US$14.1/bu in 2013.

With the pending arrival of a large South American soybean crop in 2Q14, the world’s consumers may finally get the opportunity to rebuild inventories. This large supply is a headwind for price. Our commodities team forecasts prompt month CBOT soybeans will average $10.50/bu and $10.00/bu in 3Q14 and 4Q14, respectively.

The CBOT Nov14/Dec 14 ratio is trading near the highest level of the last 10 years. There is now a strong incentive for the U.S. farmer to plant more soybeans and less corn in March and April 2014. Reports of a large South American soybean crop early in the New Year may not be enough to weaken this ratio. It may be only after the U.S.farmer has planted that this ratio weakens. But there is high risk this new crop spread corrects substantially back to 10-year average levels.

Figure 8: CBOT soybeans average price forecast

US$/bu


8.6

12.3

10.3 10.5

13.3

14.814.1

10.75

8.0

10.0

12.0

14.0

16.0

2007 2008 2009 2010 2011 2012 2013 2014E

14



Table 8: Raw materials price outlook – International prices

Palm Oil Wheat Rice Sugar BarleyOrange Juice Concentrate Raw Milk NZ Milk Powder PET

NBSK Pulp

M$/ton US$/bu US$/cwt US$/lb Eur/ton US$/lb US$/cwt US$/MT US$/ton US$/ton

2010 2,748 5.8 12.5 22.3 210 145 14.4 3,520 1,276 9602011 3,274 7.1 15.1 27.1 261 176 18.2 3,732 1,656 9772012 2,866 7.5 14.9 21.6 255 139 17.4 3,083 1,423 8722013 2,377 6.8 15.5 17.5 222 134 18 4,785 1,407 8582014E 2,650 6.3 13.9 17.2 217.5 147 17.66 5,095 1,420 844% chg y/y2011 19.10% 21.70% 20.90% 21.50% 24.50% 21.20% 26.60% 6.00% 29.80% 1.80%2012 -12.50% 5.90% -1.70% -20.30% -2.30% -21.00% -4.40% -17.40% -14.10% -10.80%2013 -12.80% -9.40% 4.40% -16.60% -19.60% 0.00% 1.40% 51.10% -3.50% 3.20%2014E 11.49% -7.35% -10.58% -1.71% -2.16% 9.34% -1.89% 6.49% 0.94% -1.61%Breakdown for 1H and 2H1H10 2,549 4.8 12.6 20 156 139 13.5 NA 1,261 9372H10 2,954 6.8 12.4 24.6 225 151 15.2 3,520 1,291 9831H11 3,499 7.7 14.3 27.5 257 176 16.9 4,008 1,730 9982H11 3,053 6.5 15.9 26.7 264 176 19.5 3,462 1,583 9571H12 3,218 6.4 14.6 22.9 250 158 15.9 3,097 1,476 8852H12 2,519 8.6 15.2 20.3 260 121 19 3,068 1,369 8581H13 2,324 7 15 18 241 134 18 4,589 1,454 8372H13 2,427 7 16 17 205 134 18 4,957 1,360 877% chg y/y1H10 14.00% -13.40% 0.00% 45.50% NA 77.80% 33.30% NA 26.60% 57.90%2H10 29.90% 35.00% -11.40% 11.30% NA 42.10% 22.50% NA 16.30% 36.00%1H11 37.30% 59.10% 13.00% 37.70% 65.40% 26.00% 24.90% NA 37.20% 6.50%2H11 3.40% -4.00% 28.80% 8.60% 17.40% 16.80% 28.20% -1.70% 22.60% -2.70%1H12 -8.00% -16.20% 2.10% -16.80% -3.00% -10.10% -6.20% -22.70% -14.70% -11.30%2H12 -17.50% 31.70% -4.90% -24.00% -1.70% -31.40% -2.80% -11.40% -13.50% -10.30%1H13 -27.8% 12.5% 5.5% -22.3% -3.7% -14.9% 11.6% 48.2% -1.5% -5.4%2H13 -3.64% -24.11% 2.15% -15.31% -21.16% 10.87% -3.94% 61.59% -0.66% 2.25%

Source: Bloomberg (Palm Oil: PAL2MALY index, Sugar: SB1 Comdty, Wheat: W1 Comdty, Barley: BRL1 Comdty, Orange Juice: JO1 Comdty, Rice: RR1 Comdty, NBSK PULP: FOEXNBSK

Index, Raw Milk: DA1 COMB Comdty, NZ Milk Powder: MMR1 Comdty), PET: CMAIL Global. J.P. Morgan global commodities research team

Table 9: Raw materials price outlook – Local prices

Palm Oil Wheat Sugar HogRmb/ton Rmb/ton Rmb/ton Rmb/kg

2010 7,593 2,640 5,681 11.92011 8,723 2,687 7,235 15.82012 7,400 2,739 6,211 15.22013 6,455 2,444 5,286 14.92014E 7,197 2,264 5,195 15% chg y/y2011 14.90% 1.80% 27.40% 33.20%2012 -12.50% 1.90% -14.20% -17.00%2013 -12.77% -10.77% -14.89% -1.97%2014E 11.49% -7.35% -1.71% 0.67%Breakdown for 1H and 2H1H10 6,837 2,559 5,127 10.52H10 8,326 2,718 6,165 13.31H11 9,374 2,721 7,170 162H11 8,093 2,656 7,293 18.61H12 7,924 2,693 6,538 15.32H12 6,892 2,785 5,904 151H13 5,904 3,089 5,500 152H13 5,266 2,340 3,532 16% chg y/y1H10 15.80% 8.50% 47.70% -8.40%2H10 38.60% 10.80% 45.60% 12.10%1H11 37.10% 6.30% 39.90% 52.90%2H11 -2.80% -2.30% 18.30% 39.90%1H12 -15.50% -1.00% -8.80% -4.40%2H12 -14.80% 4.90% -19.00% -19.00%1H13 -25.50% 14.70% -15.88% -5.23%2H13 -23.59% -16.00% -40.18% 4.39%Source: Bloomberg (Palm Oil: CNOM24HU, Sugar: JCIASGNN Index, Wheat: CNWHWBEI Index), Hog: www.caaa.cn.

15



Table 10: Raw materials price outlook – International prices

Palm Oil Wheat Rice Sugar BarleyOrange

Juice Milk NZ Milk Powder PETNBSK

PulpUnit M$/ton US$/bu US$/cwt US$/lb Eur/ton US$/lb US$/cwt US$/MT USD/ton US$/MT

1Q10 2,569 5 13.5 24.39 NA 140.8 13.9 NA 1267.7 8472Q10 2,529 4.7 11.7 15.53 155.5 138.1 13.2 NA 1253.3 9463Q10 2,639 6.5 10.9 20.17 211.1 144.1 15 NA 1162.3 9764Q10 3,268 7.1 13.8 29.01 239.1 156.9 15.4 3520.4 1419.3 9571Q11 3,649 7.9 14.3 30.5 240.6 172.1 16.5 4151.6 1773.3 9552Q11 3,349 7.5 14.2 24.46 274.1 179.3 17.4 3864.8 1686.3 10083Q11 3,092 6.9 16.7 28.68 270.7 178.4 20.6 3433.3 1655 9924Q11 3,014 6.2 15.2 24.74 258 173.4 18.5 3490.2 1511 8871Q12 3,218 6.4 14.3 24.56 269.4 189.7 16.3 3398.6 1565.9 8332Q12 3,218 6.4 14.8 21.18 229.8 126 15.5 2794.9 1386.7 8463Q12 2,851 8.7 15.3 20.95 262.8 122 17.7 2848.2 1333 7884Q12 2,188 8.5 15.1 19.66 256.7 119.2 20.2 3287.5 1405.7 7911Q13 2,324 7.4 15.3 18.43 244.1 124 17.4 3775.5 1519 8232Q13 2,324 7 15.5 17.14 237.3 144.8 18.1 5401.6 1388.3 8513Q13 2,344 6.5 15.6 16.7 211.1 136.5 17.8 4,948.5 1,395.3 860.84Q13 2,511 6.6 15.5 17.7 198.9 131.9 18.7 4,966.4 1,324.7 893.9% chg y/y1Q10 33% -9% 7% 92% NA 94% 36% NA 35% 43%2Q10 -1% -17% -7% 6% NA 64% 30% NA 19% 60%3Q10 17% 35% -18% -2% NA 52% 36% NA 6% 45%4Q10 43% 35% -5% 23% NA 34% 12% NA 26% 24%1Q11 42% 59% 6% 25% NA 22% 19% NA 40% 13%2Q11 32% 60% 21% 57% 76% 30% 31% NA 35% 7%3Q11 17% 6% 53% 42% 28% 24% 37% NA 42% 2%4Q11 -8% -13% 10% -15% 8% 11% 20% -1% 6% -7%1Q12 -12% -18% 0% -19% 12% 10% -1% -18% -12% -13%2Q12 -4% -14% 4% -13% -16% -30% -11% -28% -18% -16%3Q12 -8% 26% -9% -27% -3% -32% -14% -17% -19% -21%4Q12 -27% 38% -1% -21% -1% -31% 9% -6% -7% -11%1Q13 -28% 15% 7% -25% -9% -35% 7% 11% -3% -1%2Q13 -28% 8% 5% -19% 3% 15% 16% 93% 0% 1%3Q13 -18% -25% 2% -20% -20% 12% 1% 74% 5% 9%4Q13 15% -23% 2% -10% -23% 11% -8% 51% -6% 13%% chg q/q1Q10 12% -5% -7% 3% NA 21% 0% NA 13% 10%2Q10 -2% -6% -14% -36% NA -2% -4% NA -1% 12%3Q10 4% 40% -7% 30% 36% 4% 13% NA -7% 3%4Q10 24% 8% 27% 44% 13% 9% 3% NA 22% -2%1Q11 12% 11% 3% 5% 1% 10% 7% 18% 25% 0%2Q11 -8% -5% -1% -20% 14% 4% 6% -7% -5% 6%3Q11 -8% -7% 17% 17% -1% -1% 18% -11% -2% -2%4Q11 -3% -11% -9% -14% -5% -3% -10% 2% -9% -11%1Q12 7% 5% -6% -1% 4% 9% -12% -3% 4% -6%2Q12 0% 0% 4% -14% -15% -34% -5% -18% -11% 2%3Q12 -11% 36% 3% -1% 14% -3% 14% 2% -4% -7%4Q12 -23% -3% -1% -6% -2% -2% 14% 15% 5% 0%1Q13 6% -13% 2% -6% -5% 4% -14% 15% 8% 4%2Q13 0% -6% 1% -7% -3% 17% 4% 43% -9% 3%3Q13 1% -7% 1% -3% -11% -6% -1% -8% 1% 1%4Q13 7% 1% -1% 6% -6% -3% 5% 0% -5% 4%Annual prices2009 2,261 5.3 13.3 18.0 NA 92.4 11.3 NA 1052.8 6582010 2,748 5.8 12.5 22.3 209.6 145.1 14.4 3520.4 1275.7 9322011 3,274 7.1 15.1 27.1 260.9 175.8 18.2 3731.9 1656.4 9612012 2,866 7.5 14.9 21.6 253.0 139.0 17.4 3060.3 1422.8 8142013 2,377 6.8 15.5 17.5 222.3 134.4 18.0 4784.5 1406.8 8582014 YTD 2,562 6.0 15.7 16.0 204.1 140.8 20.1 4920.0 NA 908Current 2,515 5.9 15.6 15.7 201.0 142.5 20.4 4900.0 1318.0 908

Source: Bloomberg (Palm Oil: PAL2MALY index, Sugar: SB1 Comdty, Wheat: W1 Comdty, Barley: BRL1 Comdty, Orange Juice: JO1 Comdty, Rice: RR1 Comdty, NBSK PULP: FOEXNBSK Index,

Raw Milk: DA1 COMB Comdty, NZ Milk Powder: MMR1 Comdty), PET: CMAIL Global. Prices as of January 9, 2014.

16



Table 11: Raw materials price outlook – Local prices

Palm Oil Wheat Sugar Hog PET MilkUnit Rmb/ton Rmb/ton Rmb/ton Rmb/kg Rmb/ton Rmb/kg

1Q10 6,545 2,560 5,171 11 10,110 2.72Q10 7,129 2,558 5,082 10 10,790 2.83Q10 7,801 2,683 5,487 13 9,780 2.94Q10 8,851 2,752 6,843 14 11,300 3.11Q11 9,692 2,752 7,175 15 12,690 3.22Q11 9,055 2,690 7,165 17 13,620 3.23Q11 8,599 2,638 7,512 20 12,900 3.24Q11 7,586 2,674 7,073 17 13,100 3.31Q12 7,797 2,678 6,561 16 12,180 3.32Q12 8,050 2,708 6,514 14 11,890 3.33Q12 7,570 2,706 5,918 15 11,000 3.34Q12 6,213 2,864 5,890 15 10,620 3.31Q13 6,097 3,141 5,538 15 11,180 3.42Q13 5,710 3,037 5,461 14 10750 3.43Q13 4,566 2,274 3,202 16 10,470 3.6 4Q14 5,966 2,405 3,862 16 NA 3.9 % chg y/y1Q10 27% 8% 62% -14% 35% 9%2Q10 7% 9% 36% -2% 34% 22%3Q10 32% 13% 38% 8% 8% 28%4Q10 44% 9% 53% 16% 25% 24%1Q11 48% 8% 39% 36% 26% 18%2Q11 27% 5% 41% 70% 26% 13%3Q11 10% -2% 37% 54% 32% 9%4Q11 -14% -3% 3% 26% 16% 6%1Q12 -20% -3% -9% 11% -4% 2%2Q12 -11% 1% -9% -17% -13% 2%3Q12 -12% 3% -21% -25% -15% 3%4Q12 -18% 7% -17% -12% -18.90% 2%1Q13 -22% 17% -16% -8% -8.20% 4%2Q13 -29% 12% -16% -3% 90% 4%3Q13 60% 84% 54% 105% 95% 109%4Q13 96% 84% 66% 104% NA 119%% chg q/q1Q10 7% 1% 15% -9% 12% 9%2Q10 9% 0% -2% -7% 7% 4%3Q10 9% 5% 8% 26% -9% 4%4Q10 13% 3% 25% 8% 16% 5%1Q11 10% 0% 5% 7% 12% 4%2Q11 -7% -2% 0% 17% 7% 0%3Q11 -5% -2% 5% 14% -5% 0%4Q11 -12% 1% -6% -12% 2% 2%1Q12 3% 0% -7% -6% -7% 0%2Q12 3% 1% -1% -13% -2% 0%3Q12 -6% 0% -9% 3% -7% 0%4Q12 -18% 6% 0% 5% -3% 2%1Q13 -2% 10% -6% -2% 5% 2%2Q13 -6% -3% -1% -9% -4% 0%3Q13 -20% -25% -41% 12% -3% 6%4Q13 31% 6% 21% 0% NA 9%Annual prices2009 5,966 2,405 3,862 12 8,393 2.4 2010 7,593 2,640 5,681 12 10,495 2.9 2011 8,723 2,687 7,235 16 13,078 3.2 2012 7,400 2,739 6,211 15 11,423 3.3 2013 5,792 3,108 5,422 15 10,800 3.6 2014 YTD 5,825 3,170 4,823 15 NA 4.2 Current 5,750 3,170 4,710 15 NA 4.2

Source: Bloomberg (Palm Oil: CNOM24HU, Sugar: JCIASGNN Index, Wheat: CNWHWBEI Index), Hog: www.caaa.cn. PET Local -Tingyi . Prices as of January 9, 2014

http://www.caaa.cn/

17



Table 12: Sensitivity to earnings and required ASP increase to offset raw materials price impact

Company Raw materials % of COGS % chg in our model

(2013E)

% chg in our model

(2014E)

Impact from 1% increase

ASP increase needed to pass 10% increase

Tingyi Palm oil 13.0% of instant noodles, 5.1% of total -12.0% 12.0% -0.5% 0.8% of instant noodle ASP, 0.6% overall

Flour 18.7% of instant noodles, 7.3% of total -3.0% 2.0% -0.9% 1.6% of instant noodle ASP. 1.2% overall

Sugar 11.3% of beverage, 6.6% of total -15.0% 0.0% -0.2% 1.1% of beverage ASP, 0.3% overall ASP

Packaging material 44.6% of total -7.0% 3.0% -1.3% 4.6% overallTsingtao Malt 13.1% of total -1.0% 0.0% -0.8% 1.5%

Rice 8.6% of total 0.0% 2.0% -0.5% 1.0%Packaging material (mostly glass)

49.9% of total -1.0% 1.3% -3.1% 5.7%

UPC Palm oil 5.7% of total -10.0% -5.0% -0.6% 0.6% overall ASPFlour 5.0% of total -3.0% 1.0% -0.6% 0.5% overall ASPSugar 11.8% of total -14.0% 0.0% -1.4% 1.2% of overall ASPPET 14.0% of total -4.0% 3.0% -2.2% 1.4% overall ASPOther packaging material

26.4% of total 1.0% 1.0% -4.8% 2.6% overall ASP

Mengniu Raw milk 57.2% of total 12.4% 4.7% -9.1% 2.0%Packaging cost 21.9% of total -1.5% 1.0% -0.1% 0.3%

Hengan Pulp 56% of tissue paper 2.3% 4.4% -1.0% 5.6% of tissue paper ASP.Petrochemical 60% of sanitary napkin and 55% of diaper 0.0% 1.0% -0.6% 6% of sanitary napkin and 5.5%

of diaper ASP.Want Want Milk powder 30% of beverage, 20.1% of total 2.50% 1.50% -0.60% 5% of Dairy products ASP

Sugar 6.3% of total -12.00% 0.00% -0.20% 0.6% of overall ASPRice

21% of rice cracker, 4.0% of total 2.00% 0.00% -0.12%2.5% of rice cracker products ASP

Palm oil8% of rice cracker, 2.2% of total -11.00% 0.00% -0.10%

0.8% of rice cracker products ASP

Packaging materials 31.6% of total -0.10% -0.30% -0.95% 9% of Dairy products ASPChina Foods Base liquor 40% of wine, 2% of total 1.00% -17.00% -1.25% 4% of wine products ASP

Packaging 30% of wine, 2% of total -1.00% -5.00% -0.88% 3% of wine products ASPSugar 20% of beverage, 7% of total 5.00% 0.00% -3.51% 2% of beverage products ASPPET 40% of beverage, 14% of total -2.00% 1.00% -6.80% 4% of beverage products ASP

Source: J.P. Morgan estimates.

18



China staples valuations

TickerMkt cap P/E (x) EPS CAGR PEG (x) P/B (x) Div yield EV/EBITDA (x) ROE (%)(US$ M) 2012 2013E 2014E 2015E 2013E-15E 2013E-15E 2012 2013E 2014E 2015E 2012 2013E 2014E 2015E 2012 2013E 2014E 2015E 2012 2013E 2014E 2015E

Instant noodles & juicesTingyi 322 HK 16,094 44.9 41.2 34.3 27.7 22.0% 1.9 6.3 5.8 5.2 4.6 1.1% 1.0% 1.2% 1.4% 14.3 15.3 13.3 11.7 15.5 14.7 16.1 17.8Uni-president China 220 HK 3,616 25.6 28.2 23.5 19.0 21.9% 1.3 2.9 2.6 2.4 2.2 0.0% 0.0% 0.0% 0.0% 14.8 12.6 10.8 8.7 11.8 9.6 10.6 11.9Tibet 5100 Water Resources 1115 HK 994 19.0 16.0 13.8 11.8 16.6% 1.0 2.7 2.3 2.0 1.7 0.0% 0.0% 0.0% 0.0% 10.8 9.5 8.5 7.6 15.6 15.7 15.5 15.5Average 29.8 28.5 23.8 19.5 20.2% 1.4 4.0 3.6 3.2 2.8 0.4% 0.3% 0.4% 0.5% 13.3 12.5 10.9 9.3 14.3 13.4 14.1 15.1Snack manufacturersChina Lifestyle^ 1262 HK 774 16.5 14.9 12.4 10.3 20.6% 0.7 2.8 2.4 2.1 1.8 1.2% 1.4% 1.8% 2.3% 10.6 8.4 7.0 5.9 17.3 17.4 18.1 18.8Want Want 151 HK 18,895 34.1 28.1 23.3 19.4 20.4% 1.4 11.8 10.4 9.1 7.9 2.0% 2.4% 2.9% 3.5% 23.1 18.9 15.8 13.2 37.9 39.6 41.8 43.9Average 25.3 21.5 17.9 14.8 20.5% 1.1 7.3 6.4 5.6 4.9 1.6% 1.9% 2.4% 2.9% 16.8 13.7 11.4 9.5 27.6 28.5 30.0 31.4Personal CareHengan International 1044 HK 14,062 30.9 26.7 23.1 19.7 16.4% 1.6 7.7 7.0 6.3 5.7 2.1% 2.6% 3.0% 3.5% 21.6 18.6 15.9 13.7 26.6 27.6 28.9 30.5Vinda^ 3331 HK 1,622 23.1 23.1 20.1 17.2 15.7% 1.5 3.1 2.8 2.5 2.3 1.1% 1.2% 1.4% 1.6% 15.0 14.8 12.7 11.1 14.8 12.6 13.4 14.1Magic Holdings^ 1633 HK 822 28.3 29.2 23.6 19.8 21.5% 1.4 3.7 ~ ~ ~ 0.7% 0.7% 0.8% 1.0% 17.1 ~ ~ ~ 15.2 15.2 15.8 #N/A N/ABawang^ 1338 HK 176 -1.7 -12.2 183.4 45.8 ~ ~ 2.6 ~ ~ ~ 0.0% ~ ~ ~ -3.0 -11.5 28.0 15.5 (52.4) (31.3) 2.5 9.2Average 20.1 16.7 62.5 25.6 17.9% 1.5 4.3 4.9 4.4 4.0 1.0% 1.5% 1.7% 2.0% 12.7 7.3 18.9 13.4 1.1 6.0 15.1 17.9BreweriesBeijing Yanjing Brewery^ 000729 CH 3,577 31.3 27.1 23.9 22.0 11.0% 2.5 2.0 2.1 1.7 1.4 ~ 1.8% 2.1% ~ 11.3 13.4 12.6 11.7 9.0 7.6 7.2 6.6China Resources Enterprise 291 HK 7,734 15.2 36.6 17.3 15.2 55.0% 0.7 1.5 1.4 1.4 1.3 2.5% 1.0% 2.2% 2.5% 7.1 8.2 6.1 5.4 3.9 3.9 4.6 5.4Tsingtao Brewery 168 HK 10,693 38.1 33.5 29.1 26.0 13.4% 2.5 5.3 4.7 4.1 3.6 0.5% 0.7% 0.7% 0.8% 20.0 18.8 16.8 15.0 14.8 14.9 15.0 14.8Average 28.2 32.4 23.4 21.1 26.5% 1.9 2.9 2.7 2.4 2.1 1.5% 1.2% 1.6% 1.6% 12.8 13.5 11.9 10.7 9.2 8.8 8.9 8.9LiquorKweichow Moutai^ 600519 CH 20,686 9.4 8.4 7.7 6.6 13.2% 0.6 3.7 3.0 2.4 2.0 3.6% 6.0% 6.6% 7.8% 5.7 5.0 4.4 3.8 44.4 36.1 32.8 31.5Luzhou Laojiao^ 000568 CH 4,379 6.0 6.5 6.5 5.9 5.3% 1.2 2.7 2.5 2.1 1.7 8.3% 10.0% 8.6% 8.4% 3.6 4.0 3.7 3.2 53.1 39.7 35.0 31.9Shanxi Fen Wine^ 600809 CH 2,639 12.0 11.3 10.0 8.8 13.4% 0.8 4.5 3.8 3.2 2.5 2.1% 4.6% 4.4% 4.1% 6.7 6.3 5.6 4.6 36.9 34.1 31.5 31.5Wuliangye Yibin^ 000858 CH 9,178 5.6 6.2 6.2 5.5 6.5% 1.0 1.8 1.5 1.2 1.0 4.1% 5.2% 5.6% 6.4% 2.3 2.5 2.5 2.2 33.0 26.3 23.5 21.9Average 8.3 8.1 7.6 6.7 9.6% 0.9 3.2 2.7 2.2 1.8 4.5% 6.4% 6.3% 6.7% 4.6 4.5 4.0 3.4 41.8 34.1 30.7 29.2WineriesChina Foods 506 HK 1,093 22.3 -13.5 94.6 21.1 ~ ~ 1.2 1.4 1.3 1.3 2.0% 0.0% 0.5% 2.1% 10.1 22.6 9.2 6.8 5.7 (9.8) 1.4 6.1Dynasty Fine Wines^ 828 HK 232 ~ 80.0 30.0 ~ ~ ~ 0.9 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ #N/A N/A 1.9 #N/A N/A #N/A N/AYantai Changyu Pioneer Wine^ 200869 CH 2,633 7.5 8.3 8.4 8.0 2.2% 3.7 2.2 1.9 1.6 1.4 7.2% 5.2% 4.5% 3.6% 5.7 6.5 6.1 5.5 31.9 21.4 20.7 20.3Average 14.9 24.9 44.3 14.5 2.2% 3.7 1.4 1.7 1.5 1.3 4.6% 2.6% 2.5% 2.9% 7.9 14.6 7.6 6.2 18.8 4.5 11.1 13.2DairiesBright Dairy^ 600597 CH 4,155 73.3 52.6 33.7 23.5 49.8% 1.1 6.3 5.8 5.1 4.4 0.2% 1.1% 1.6% 2.5% ~ 28.0 18.2 13.3 27.4 11.0 15.6 19.4China Mengniu Dairy 2319 HK 8,367 38.7 33.7 24.8 18.2 36.2% 0.9 3.9 3.6 3.2 2.7 0.6% 0.6% 0.7% 0.9% 18.4 16.3 11.9 9.2 10.5 11.2 13.8 16.3China Modern Dairy^ 1117 HK 2,515 35.0 16.2 10.5 8.8 35.9% 0.5 2.7 2.2 1.9 1.6 0.0% 0.3% 1.6% 1.4% 29.2 15.1 11.4 9.9 8.0 12.9 18.9 18.8Yashili International^ 1230 HK 2,093 26.8 23.4 20.0 15.4 23.3% 1.0 3.1 3.7 3.4 3.1 1.9% 4.4% 2.8% 3.4% 15.6 12.8 10.6 8.0 12.1 14.9 18.0 21.8Inner Mongolia Yili Industrial^ 600887 CH 12,658 35.0 26.5 22.9 18.2 20.5% 1.3 8.2 4.9 4.3 3.6 0.5% 1.0% 1.1% 1.4% 22.9 19.4 14.5 11.7 22.5 21.4 20.0 20.7Average 41.8 30.5 22.4 16.8 33.1% 0.9 4.8 4.0 3.6 3.1 0.7% 1.5% 1.5% 1.9% 21.5 18.3 13.3 10.4 16.1 14.3 17.3 19.4Food retailersBeijing Jingkelong^ 814 HK 135 7.9 8.2 6.2 7.9 1.4% 5.7 0.5 0.5 0.5 0.4 7.3% 4.2% 4.5% 4.2% 5.5 6.3 5.7 5.3 9.2 4.9 5.3 4.2Sun Art^ 6808 HK 13,705 34.8 29.6 25.9 22.4 14.9% 2.0 4.9 4.4 3.9 3.5 1.1% 1.2% 1.4% 1.6% 14.4 12.5 10.7 9.2 14.6 15.6 16.2 16.6Lianhua^ 980 HK 824 14.9 15.6 13.9 10.2 23.5% 0.7 1.5 1.4 1.3 1.3 3.4% 2.4% 2.6% 2.6% -1.0 -1.5 -1.3 -1.1 14.8 8.7 9.3 9.6Wumart Stores^ 1025 HK 2,019 20.3 19.5 17.9 14.9 14.4% 1.4 3.5 3.1 2.6 2.5 2.3% 2.3% 2.5% 3.0% 8.3 8.3 7.5 6.3 19.1 16.7 16.6 18.0Average 19.5 18.2 16.0 13.9 13.6% 2.4 2.6 2.3 2.1 1.9 3.5% 2.5% 2.8% 2.9% 6.8 6.4 5.6 4.9 14.4 11.5 11.8 12.1

19



Company TickerMkt cap P/E (x) EPS CAGR PEG (x) P/B (x) Div yield (%) EV/EBITDA (x) ROE (%)(US$ M) 2012 2013E 2014E 2015E 2013E-15E 2013E-15E 2012 2013E 2014E 2015E 2012 2013E 2014E 2015E 2012 2013E 2014E 2015E 2012 2013E 2014E 2015E

China RestaurantsCafé de Coral* 341 HK 1,796 31.9 24.9 21.6 36.1 -16.9% -1.5 3.9 3.8 3.6 ~ 3.7% 3.4% 3.9% ~ 14.5 13.3 11.6 ~ 12.8 15.5 17.2 NAAjisen China Holdings Ltd. 538 HK 1,190 59.4 36.8 29.2 23.1 26.2% 1.4 3.1 3.0 3.0 2.9 1.4% 2.3% 2.9% 3.6% 21.3 15.4 12.5 10.2 5.2 8.3 10.3 12.8Gourmet Master^ 2723 TT 944 ~ 32.6 21.1 15.9 43.0% 0.8 ~ ~ ~ ~ 2.2% 2.1% 2.6% 3.9% ~ ~ ~ ~ 18.5 13.5 21.7 #N/A N/AWowprime 2727 TT 1,211 34.2 28.9 24.1 22.2 14.0% 2.1 8.8 ~ ~ ~ 2.3% ~ ~ ~ 22.4 ~ ~ ~ 38.0 27.1 #N/A N/A #N/A N/ATenfu 6868 HK 609 12.5 15.0 13.1 10.4 20.4% 0.7 2.0 1.9 1.8 1.7 4.4% 3.7% 4.3% 6.0% 6.6 7.7 6.2 5.3 16.0 12.5 12.5 #N/A N/AAverage 45.6 30.9 25.4 29.6 4.7% 0.0 3.5 3.4 3.3 2.9 2.6% 2.8% 3.4% 3.6% 17.9 14.4 12.1 10.2 9.0 11.9 13.8 12.8Meat ProcessorsChina Yurun 1068 HK 1,152 -14.8 -10.8 -44.5 20.5 ~ ~ 0.6 0.6 0.6 0.6 0.4% 0.1% 0.6% 1.8% 48.4 23.7 11.3 8.5 (0.6) (1.1) 1.8 4.4Henan Shuanghui^ 000895 CH 16,421 34.5 25.4 20.6 16.7 23.5% 1.1 8.5 5.2 5.5 4.0 0.9% 1.0% 1.2% 2.2% 22.2 16.4 13.0 10.6 26.7 31.1 30.7 29.3Average 9.9 7.3 -12.0 18.6 23.5% 1.1 4.5 2.9 3.0 2.3 0.6% 0.5% 0.9% 2.0% 35.3 20.0 12.2 9.6 13.0 15.0 16.2 16.8Tobacco and Tobacco FlavourHuabao International 336 HK 1,684 7.6 7.7 7.0 6.6 8.4% 0.9 1.8 1.7 1.5 1.3 5.3% 4.3% 5.7% 6.0% 5.1 4.9 4.7 4.4 31.7 26.4 24.1 22.6AMVIG Holdings^ 2300 HK 425 8.0 8.3 7.7 7.2 7.5% 1.1 0.9 0.9 0.8 0.8 14.6% 5.2% 5.4% 5.9% 5.3 4.6 4.1 3.8 8.9 10.8 11.2 11.2Average 7.8 8.0 7.3 6.9 7.9% 1.0 1.4 1.3 1.2 1.0 10.0% 4.8% 5.6% 5.9% 5.2 4.8 4.4 4.1 20.3 18.6 17.6 16.9Agri-industrial companiesChina Agri-Industries 606 HK 2,539 13.2 12.9 10.9 9.3 17.6% 0.7 0.6 0.7 0.7 0.6 1.9% 2.0% 2.3% 2.7% 12.5 10.0 9.0 8.0 5.0 5.5 6.2 6.9Average 13.2 12.9 10.9 9.3 17.6% 0.7 0.6 0.7 0.7 0.6 1.9% 2.0% 2.3% 2.7% 12.5 10.0 9.0 8.0 5.0 5.5 6.2 6.9

Source: Bloomberg, J.P. Morgan estimates, Prices as of January 8, 2014. ^ Consensus estimates used for the company. * Values for next FY taken since FY ends in Jan-May period.

20



Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or intervention.

Important Disclosures

Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan–covered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing [email protected] with your request. J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail [email protected].

Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research website, www.jpmorganmarkets.com.

Coverage Universe: Sener, Kurumlu Ebru: Ajisen China Holdings Ltd (0538.HK), Belle International Holdings Ltd. (1880.HK), Cafe de Coral Holdings Ltd (0341.HK), China Foods Ltd (0506.HK), China Mengniu Dairy Co. Ltd. (2319.HK), China Resources Enterprise (0291.HK), Chow Tai Fook Jewellery Company Ltd. (1929.HK), Dairy Farm International Holdings Limited (DAIR.SI), Esprit Holdings (0330.HK), Golden Eagle Retail Group Ltd (3308.HK), Hengan International Group Ltd (1044.HK), L'Occitane International SA (0973.HK), Li & Fung (0494.HK), Lifestyle International Holdings (1212.HK), New World Department Stores Ltd (0825.HK), Parkson Retail Group Ltd (3368.HK), Prada S.P.A (1913.HK), Sa Sa International Holdings Limited (0178.HK), Thai Beverage Public Company Ltd. (TBEV.SI), Tibet 5100 Water Resources Holdings Ltd (1115.HK), Tingyi (Cayman Islands) Holding Corp (0322.HK), Tsingtao Brewery - A (600600.SS), Tsingtao Brewery - H (0168.HK), Uni-President China Holdings Ltd (0220.HK), Want Want China Holdings Ltd (0151.HK)

J.P. Morgan Equity Research Ratings Distribution, as of January 1, 2014

Overweight(buy)

Neutral(hold)

Underweight(sell)

J.P. Morgan Global Equity Research Coverage 43% 45% 12%IB clients* 57% 49% 36%

JPMS Equity Research Coverage 43% 50% 7%IB clients* 75% 66% 59%

*Percentage of investment banking clients in each rating category.For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.

Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email [email protected].

Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.

mailto:[email protected]

http://www.jpmorganmarkets.com/



https://jpmm.com/research/disclosures

21



Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.

Other Disclosures

J.P. Morgan ("JPM") is the global brand name for J.P. Morgan Securities LLC ("JPMS") and its affiliates worldwide. J.P. Morgan Cazenove is a marketing name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and its subsidiaries.

All research reports made available to clients are simultaneously available on our client website, J.P. Morgan Markets. Not all research content is redistributed, e-mailed or made available to third-party aggregators. For all research reports available on a particular stock, please contact your sales representative.

Options related research: If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options, please contact your J.P. Morgan Representative or visit the OCC's website at http://www.optionsclearing.com/publications/risks/riskstoc.pdf

Legal Entities Disclosures U.S.: JPMS is a member of NYSE, FINRA, SIPC and the NFA. JPMorgan Chase Bank, N.A. is a member of FDIC. U.K.: JPMorgan Chase N.A., London Branch, is authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and to limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from J.P. Morgan on request. J.P. Morgan Securities plc (JPMS plc) is a member of the London Stock Exchange and is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England & Wales No. 2711006. Registered Office 25 Bank Street, London, E14 5JP. South Africa: J.P. Morgan Equities South Africa Proprietary Limited is a member of the Johannesburg Securities Exchange and is regulated by the Financial Services Board. Hong Kong: J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong. Korea: J.P. Morgan Securities (Far East) Ltd, SeoulBranch, is regulated by the Korea Financial Supervisory Service. Australia: J.P. Morgan Australia Limited (JPMAL) (ABN 52 002 888 011/AFS Licence No: 238188) is regulated by ASIC and J.P. Morgan Securities Australia Limited (JPMSAL) (ABN 61 003 245 234/AFS Licence No: 238066) is regulated by ASIC and is a Market, Clearing and Settlement Participant of ASX Limited and CHI-X. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private Limited, having its registered office at J.P. Morgan Tower, Off. C.S.T. Road, Kalina, Santacruz East, Mumbai - 400098, is a member of the National Stock Exchange of India Limited (SEBI Registration Number - INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBI Registration Number - INB 010675237/INF 010675237) and is regulated by Securities and Exchange Board of India. Thailand: JPMorgan Securities (Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Philippines: J.P. Morgan Securities Philippines Inc. is a Trading Participant of the Philippine Stock Exchange and a member of the Securities Clearing Corporation of the Philippines and the Securities Investor Protection Fund. It is regulated by the Securities and Exchange Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by J.P. Morgan Securities Singapore Private Limited (JPMSS) [MIC (P) 049/04/2013 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is regulated by the MAS. Japan: JPMorgan Securities Japan Co., Ltd. is regulated by the Financial Services Agency in Japan. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the Securities Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and custody, with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai: JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE.

Country and Region Specific Disclosures U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMS plc. Investment research issued by JPMS plc has been prepared in accordance with JPMS plc's policies for managing conflicts of interest arising as a result of publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients" only. This material does not take into account the specific investment objectives, financial situation or particular needs of the recipient. The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the term "wholesale client" has the meaning given in section 761G of the Corporations Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities plc, Frankfurt Branch and J.P.Morgan Chase Bank, N.A., Frankfurt Branch which are regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. Hong Kong: The 1% ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may

http://www.optionsclearing.com/publications/risks/riskstoc.pdf

22



be based on the month end data from two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants, callable bull bear contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: http://www.hkex.com.hk. Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading, JPMorgan Securities Japan Co., Ltd., will be receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan, Type II Financial Instruments Firms Association and Japan Investment Advisers Association. Korea: This report may have been edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures section above. India: For private circulation only, not for sale. Pakistan: For private circulation only, not for sale. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest money. JPMSAL does not issue or distribute this material to members of "the public" as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded as professional clients as defined under the DFSA rules. Brazil: Ombudsman J.P. Morgan: 0800-7700847 / [email protected].

General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.

"Other Disclosures" last revised December 7, 2013.

Copyright 2014 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. #$J&098$#*P

china consumer -off the shelf -...

Documents