Business description of PLANET-GREEN-HOLDINGS-CORP from last 10-k form

Conventions

In this annual report on Form 10-K:

• “We,” “us” and “our” refer to the combined business of ALN, ILH and their direct and indirect Chinese operating subsidiaries.
• “ALN” refers to American Lorain Corporation, a Nevada corporation (formerly known as Millennium Quest, Inc.).
• “ILH” refers to International Lorain Holding, Inc., a Cayman Islands company that is wholly - owned by ALN.
• “Junan Hongrun” refers to Junan Hongrun Foodstuff Co., Ltd.
• “Luotian Lorain” refers to Luotian Green Foodstuff Co., Ltd.
• “Beijing Lorain” refers to Beijing Green Foodstuff Co., Ltd.
• “Shandong Lorain” refers to Shandong Green Foodstuff Co., Ltd.
• “Dongguan Lorain” refers to Dongguan Green Foodstuff Co., Ltd.
• “Shandong Greenpia” refers to Shandong Greenpia Foodstuff Co., Ltd.
• “RMB” refers to Renminbi, the legal currency of China.
• “U.S. dollar,” “$” and “US$” refer to the legal currency of the United States.
• “China” and “PRC” refer to the People’s Republic of China.

Overview of Our Business

We are an integrated food manufacturing company headquartered in Shandong Province, China. We develop, manufacture and sell the following types of food products:

• chestnut products,
• convenience foods (including ready-to-cook, or RTC, foods, ready-to-eat, or RTE, foods and meals ready-to-eat, or MRE); and
• frozen food products.

We conduct our production activities in China. Our products are sold in 26 provinces and administrative regions in China and 42 foreign countries. We derive most of our revenues from sales in China, Japan and South Korea. In 2012, our primary strategy was to continue building our brand recognition in China through consistent marketing efforts towards supermarkets, wholesalers, and significant customers, enhancing the cooperation with other manufacturers and factories and enhancing the turnover for our exsting chestnut, convenience and frozen food products. In addition, we are working to expand our marketing efforts in Asia, Europe, the Middle East and North America. We currently have limited sales and marketing activity in the United States, although our long-term plan is to significantly expand our activities there.

Organizational Structure

ALN is a Nevada corporation that was incorporated on February 4, 1986 and was formerly known as Millennium Quest, Inc. Prior to May 3, 2007, when ALN completed a recapitalization, or reverse merger, with ILH, ALN did not engage in active business operations other than to search for a potential acquisition target. Effective November 16, 2009, ALN reincorporated in Nevada from Delaware.

ALN owns 100% of ILH. ILH wholly owns two Chinese operating subsidiaries, Luotian Lorain and Junan Hongrun, directly. Junan Hongrun, in turn, wholly owns Dongguan Lorain. In addition, together with Junan Hongrun, ILH wholly owns Beijing Lorain, Shandong Greenpia, and owns approximately 80% of Shandong Lorain (Shandong Economic Development Investment Co. Ltd. owns approximately 20%). We sometimes refer to our six Chinese operating subsidiaries throughout this annual report on Form 10-K as the Lorain Group Companies. Below is an organizational chart of ALN, ILH and the Lorain Group Companies:

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Products

Our products are categorized into the following three segments:

• chestnut products,
• convenience food products, and
• frozen food products.

We produced 254 products in 2011, including 16 new products in our chestnut and convenience foods segment. We also discontinued 3 products in 2011 in the convenience segment due to slow sales.

Our chestnut products and convenience foods were our main profit centers in 2011. Our convenience foods segment has been the fastest growing portion of our business and was one of the main catalysts of our growth during 2011. Frozen food products accounted for a smaller portion of our revenues in 2011 as compared with 2010 because we have been more focused on generating revenues from higher margin chestnut and convenience food products.

Chestnut Products

We believe that we are the largest chestnut processor and manufacturer in China. We have developed brand equity for our chestnut products in China, Japan and South Korea over the past 10 to 15 years. We produced 57 high value-added processed chestnut products in 2011. In 2011 and 2010, this segment contributed 51.7% and 54.9% of our total revenues, respectively.

Our best selling products in 2011 included our aerated open-bottom chestnuts, which are chestnuts packaged with nitrogen; sweetheart chestnuts, which are sweet preserved chestnuts; chestnuts in syrup, which are very popular in Japan and South Korea; and golden chestnut kernels. The majority of our chestnut products are natural and do not contain chemical additives.

The chestnut, in contrast to many other tree nuts, contains small quantities of oil and is very high in complex carbohydrates. This makes them useful for a wider food range than other common nuts. Chestnuts are commonly steamed, boiled, sugar stir-fried, roasted or added into dishes or desserts as an ingredient.

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China is the largest grower of chestnuts in the world, followed by South Korea and Japan. In recent years, the chestnut production in South Korea and Japan has declined. This has been attributed to the increasing labor costs and operational costs incurred in growing chestnuts. Because of the declining domestic production, South Korean and Japanese customers have grown to rely more on imported chestnut products. Our strategy is to take advantage of these trends.

We differentiate our chestnut products based on flavor, size and method of packaging. For instance, some of our chestnut products that are sold in Japan are packaged in plastic bags or tin cans, each considered a different product. Similarly, some of our chestnut products are processed with hot water or cold water, each considered a different product.

Chestnut season in China lasts from September to January. We purchase and produce raw chestnuts during these months and store them in our refrigerated storage facilities throughout the year. Once we obtain a purchase order during the rest of the year, we remove the chestnuts from storage, process them and ship them within one day of production.

Convenience Foods

Our convenience food products are characterized as follows:

• Ready-to-cook, or RTC, food products,
• Ready-to-eat, or RTE, food products and
• Meals ready-to-eat, or MRE, food products.

These products are intended to meet the current demands of our customers for safe, wholesome and tasty foods that are easily prepared.

RTCs can be served after a few easy cooking procedures. Typically, when preparing a RTC, customers need only to heat the food in a microwave or boil it for several minutes before eating. Our best selling RTCs in 2011 were beef and lamb products.

RTEs can be served without any cooking. Our best selling RTEs in 2011 were various bean products and pickle products.

MREs are meal kits with self-heating devices or microwavable kits, such as microwavable rice boxes. Our self heating MREs are primarily for military use since no cooking device or other ingredients are needed other than water. We also introduced microwavable MREs for civilian uses such as camping, traveling and other situations since only simple preparation and a cooking device such as a microwave oven is required.

We produce various MREs based on Chinese cuisine, the best sellers of which were our pork with garlic sauce over rice and kungpao chicken with rice in 2011. Other MREs are based on other styles of food, such as Italian cuisine. Many of our convenience products are natural and do not contain chemical additives.

We produced 138 convenience food products in 2011, including 14 new products such as filled buns and fried sweet potato. In 2011 and 2010, this segment contributed 34.2% and 30.8%, respectively, of our total revenues.

Our convenience foods segment has been the fastest growing portion of our business and was one of the main catalysts of our growth during 2011. We expect our convenience foods segment to continue to be an important area of growth for our business in the future.

Frozen Food Products

We produce a variety of frozen foods, including frozen vegetables, frozen fruits, frozen fish, and frozen meats. We produced 63 frozen food products in 2011. Our best selling frozen foods in 2011 were frozen asparagus and frozen corn.

Our frozen food business allows us to mitigate the significant production seasonality of chestnut products and to increase the utilization rate of our production capacity. Historically, our frozen food division has been a significant portion of our business. We continue to see steady increase in sales of our frozen food segment, but with the fast increase in sales of our convenience food products, the percentage weight frozen foods accounted for in our total revenue decreased from 14.3% in 2010 to 14.1% in 2011. Gross margins in this segment are lower than the margins for chestnut products and convenience foods.

Our Manufacturing Facilities

General

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We currently manufacture our products in six facilities in China, three of which are located in Junan County, Shandong Province, one in Luotian County, Hubei Province, one in Miyun County, Beijing City and one leased facility in Dongguan, Guandong Province. The following table indicates the year that operations commenced at each of the facilities and the size of the facilities

Production Lines

We currently manufacture our products using 26 production lines. Each production line is used to produce between 10 and 50 products. We currently run three types of product lines:

• deep-freezing lines, which are used to freeze raw materials for year-round production and to produce frozen food;
• canning lines, which are used to produce canned products, including chestnut products; and
• convenience food lines, which are used for producing RTCs, RTEs and MREs, all of which have nitrogen preservation capacity.

The production process for our chestnut products initially involves sorting and cleaning the raw chestnuts purchased during the chestnut season. We then store the raw chestnuts in our refrigerated storage facilities throughout the year. Once we obtain a purchase order, we remove the chestnuts from storage and process them by steaming, decladding and deep-freezing the chestnuts, depending on the particular product. We then package and ship the processed chestnuts within one day of production.

The production process of our convenience products generally involves various steps, including soaking, boiling, coating, drying, deep freezing, packing, sealing and sterilizing.

The following table shows the number and types of production lines, the types of products produced and the production capacity at each facility:

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Our production lines and facilities have all been designed to meet the standards and requirements of our largest customers in Japan and Europe, with Japan being our largest export market. We employ advanced methods of quality control and have obtained various certifications for many of our products, packages and processes, including ISO 9000 or ISO 9001 certification for certain of our chestnut and frozen vegetable products, BRC certification for certain of our frozen fruit and vegetable products and HACCP certification for certain of our frozen vegetable, fruit and chestnut products and our bottom-open chestnuts. We believe that our quality controls and standards of products distinguish our products both in domestic and international markets. The import approvals that we have obtained from the Japanese government for our chestnuts and other convenience foods have been helpful in advocating with the Chinese government for domestic approvals to increase our product offerings.

With limited exception, we operate our production lines year round. In the past, when our production was focused almost exclusively on chestnuts, we experienced seasonal underutilization of our product lines. However, our current facilities have multiple-function designs allowing us to use our production lines for our convenience and frozen products when we are not producing chestnuts at full capacity. Consequently, as we have increased our processed and convenience food offerings over the last several years, we have generally been able to run our production lines at increasing efficiency.

Previously, most of our processed and convenience foods were produced at our Beijing Lorain plant. With the introduction of bean products in 2009, we expanded our facility in Junan Hongrun with the addition of three convenience food production lines designed specifically for bean products with current annual capacity of 13,500 metric tons.

We believe our facilities are adequate for our current levels of production. We anticipate, however, that we may require additional facilities and/or product lines as our business grows. We are exploring the possibility of alliances with one or more OEM partners for the production, in the short-term, of some of our convenience food products and frozen products should our facilities be inadequate to meet increasing demand. We are also exploring the possibility of leasing additional production lines to expand our production capacity. In 2008, we leased two convenience foods production lines in Dongguan, Guangdong Province, which increased production capacity by approximately 3,000 metric tons per year to meet our short-term needs. We did not lease any production facility during 2011. Given the relatively low cost to lease, we may decide to lease additional facilities in 2012, should circumstances require. In the long-term, we plan to increase our own production capacity by acquiring or building new facilities, subject to the availability of adequate sources of funding.

Storage Capacity

Storage of our raw materials and inventory is a critical element of our business. Our raw materials and partially finished products need to be preserved in frozen storages (-18ºC to -20ºC) or constant temperature storages (-5ºC to 5ºC). Storage is particularly critical for our chestnut products because chestnuts are a seasonal fruit.

The following table illustrates on a facility by facility basis the type and capacity of our storage resources: