American Dairy, Inc.'s Formula for Success.

HEILONGJIANG PROVINCE, China -- American Dairy, Inc. (OTCBB:ADIY), one of the leading producers and distributors of milk powder and soybean products, is prepared for China's emerging dairy industry. China's increasing consumption of dairy products in their daily diet has led many companies into the industry.

There are obviously good reasons for industry experts to predict the growth of Chinese dairy consumption, as the society becomes increasingly health conscious and prosperous. "In the next five years, the dairy market will maintain an average two-digit growth every year," said Chen Yu, an industry expert from the China Dairy Market Consultancy in Beijing.(1)

Despite several attempts, foreign producers have been unsuccessful at taking a firm position in China's growing milk market. Records have shown many firms resorting to "Plan B," purchasing equity interest in market leaders.

"Multinational companies are trying to re-enter the rapidly growing Chinese milk market through mergers and acquisitions after having backed away from the market due to poor business," said Yu.(2)

For example, Danone (NYSE:DA) recently became the third largest stockholder of Shanghai-based Bright Dairy.(3) Another dairy giant, New Zealand-based Fonterra, is in final talks with Shijiazhuang Sanlu Group Co. Ltd., to buy a 39 percent stake in the firm. Multinational giants are represented by Nestle (OTC:NSRGY), MeadJohnson -- a Bristol-Myers Squibb Company (NYSE:BMY), Wyeth (NYSE:WYE) and Intel.(4)

According to China Marketing and Media Study (CMMS), foreign dairy giants have failed because: (1) Multinational companies have fewer dairy farms in China because of sensitivity of land issues, which has put them at a comparative disadvantage since parents prefer high quality, safer and healthier goods for their children.(5) (2) Advertising on television and newspaper is not always the best marketing strategy; traditionally, dairy distribution relies on a network reaching every street and community of a city.(6) (3) Multinational companies focus on high-end products (yogurt, cheese, etc.) which are not aligned with Chinese consuming habits as of yet.(7)

China's dairy industry's tremendous growth is largely attributed to the infant market, with 20 million babies born each year. According to the CMMS data, 63% of the families surveyed had fed their children with milk powder or rice flour refined specially for babies. Among them, 58% had bought milk powder and 32% had purchased rice flour.(8)

Because of China's single-child policy, quality of products is one of the highest priorities for parents, who demand only the best for their one child.

"It is our commitment to nourish our newborns and their mothers with the finest products," said CEO Leng You-Bin of ADIY.

"Our analyses and knowledge of China's dairy industry give us compelling evidence that we have found the formula for success -- by becoming the leader in China's infant dairy industry," said Leng.

Certain of the statements made herein constitute forward-looking statements that involve risks and uncertainties. In such instances, actual results could differ materially as a result of a variety of factors including the risks associated with the effect of changing economic conditions at home and abroad, variations in cash flow, reliance on collaborative retail partners, and on new product development, variations in new product and service development, risks associated with rapid technological change, and potential of introduced or undetected flaws and defects in products and services and other risk factors detailed in forms filed with the Securities and Exchange Commission from time to time.

(1) Milk Companies Vie For Re-Entry
(2) Milk Companies Vie For Re-Entry
(3) Foreign Dairy Giants Won't Cower From Chinese Markets
(4) Milk Companies Vie For Re-Entry
(5) Baby Good's Quality Causes Concern
(6) Foreign Dairy Giants Won't Cower From Chinese Markets
(7) Foreign Dairy Giants Won't Cower From Chinese Markets
(8) Baby Good's Quality Causes Concern