ITOHAM - BETAGRO

JOINT-VENTURE
BUSINESS PLAN

　　　　　　　

August 25, 2008

ITOHAM FOODS INC.
International Business
Development Dept.
Product Purchasing Division
Contents

1： Purpose of Business

2： Features of Business

3： Related Business Locations

4： Drawing of New Plant

5： New Company

6： Markets and sales

1） Market Conditions in Japan and Thailand
2） Marketing Plan

7： Investment Plan

8： Business Plan

9： Manpower Plan

10： P/L and Fund Flow

1) Fund Plan
2) P/L Plan
3) Other
4) Revenue
5) Cash Flow Plan

11： Business Development Time Line

12： New Plant Time Line

※ Data Appendix
1
1： Business Objective　

Imported sausage for food service industries in Japan is a potential

and promising market for the future due to its extremely low tariff rate,
10%. In light of this market, we should not only focus on China as
usual but also pay more attention to Thailand whose competitive
production is as strong as China’s, and start to develop the sausage
production business to export to Japan.

Meanwhile, we should also target the high-end ham and sausage

market which is rapidly growing in Thailand and other ASEAN
countries lately so as to produce and provide with these quality
products at the same plant in Thailand.

2： Business Characteristic

① In the Japanese food service market, safety and security, especially

traceability of raw materials, are becoming increasingly important after
some serious issues and scandals from China.
In Thailand, Betagro and CP have commercial pig farming facilities with
their own management system. In the case of our business partner
Betagro, 100% of their contract pig farmers are provided with their own
feeds and chemicals as well as technical guidance, and all the pigs are
processed in their own slaughterhouses so that they can have a perfect
traceability system.

② We plan to develop the expansion of growing meat products

including ham and sausage in the Bangkok and surrounding areas that
are considered the core of the ASEAN countries.
③ Our import and wholesale businesses of Rockdale beef, followed by
the establishment of the new company, are not mentioned in this
business plan.
2
3：Related Business Locations　
■ Planed Site for the New Plant
To be constructed in “Food Complex 2” where also Better Foods
Plant (BFS) and Ajinomoto’s newest plant (TAB2) are located.

Land area： Approx. 19,500 ㎡

Lopburi
Betagro Safety Meat Packing Betagro-Dainippon
Techno-Ex Co., Ltd.
（Packing Plant for pork）
（Plant of extracts from
※ Slaughter livestock products） 108 m
New PLant
（Approx. 3,888 ㎡）
36 m

Ayutaya

Bangkok
Ajinomoto Betagro Frozen Foods (Thailand) Co., Ltd.
(Processing Plant for chicken）

Ajinomoto Betagro Specialty

Foods Co., Ltd. Better Foods Co., Ltd.
（Processing Plant for pork） ※ Sausages
※ Pork cutlet

ZONE1 For the purposes of industrial decentralization,

promotion of local industries, and resolution of
ZONE2
income disparity, the whole kingdom is divided
ZONE3（1） by three zones and the local provinces are
ZONE4（2）
extended a special favor.

3
4：Drawing of New PlantーFOOD COMPLEX 2

Planned Site
Surface area：Approx 20,000㎡

4
Drawing of New Plant

35 m.

100 m.

5
5： New Company
【Unit: 1,000 baht / 1,000 yen】
Registered Capital Paid-in Capital
Country Shares %
Baht Yen Baht Yen
ITOHAM FOOD JP 120,000 40% 120,000 408,000 120,000 408,000

BETAGRO PUBLIC CO., LTD. TH 120,000 40% 120,000 408,000 120,000 408,000
100%
AJINOM OTO THAILAND TH 33,000 11% 33,000 112,200 33,000 112,200
Paid-in
AJINOM OTO FROZEN FOODS JP 12,000 4% 12,000 40,800 12,000 40,800

HOEI & CO., LTD. JP 15,000 5% 15,000 51,000 15,000 51,000

TOTAL 300,000 100% 300,000 1,020,000 300,000 1,020,000 -

※1： Investments of Machinery (250 million yen), Building (520 million yen), and Land (130 million yen) to be covered
by Capital.
※2： 1 baht ＝3.4 yen

Company name ITOHAM BETAGRO FOODS CO.,LTD.

Representatives Chairman： Toshino Sano, President： Vasit Taepaisitphongse
Athapol Uraipriwan, Sankrit Cheawchan,
Board members
Junichiro Tokiwa, Shu Kusaka, Akira Sakaue
Capital 300,000,000 baht （1,020,000,000 yen）
Face amount 1,000 baht
Number of shares 300,000 shares
Articles of
Food processing, imports, and sales
incorporation
Registered address To be advised
Promoter 3 persons
Shareholder 3 persons + 5 companies
Employee 4 persons
Fiscal year January - December

■About Betagro Group

① Sales amount: About 120 billion yen
② Employee: About 2,800 people （Plant staff: 27,200 people）　　　　　　　　　　　　　　　　
③ Group companies： 35 companies　　　
　　　　　　　　　　　　　　　　　　　　　　　　　　　　　
Betagro is the second largest food manufacturer after CP in Thailand. Every year its sales
amount has increased by more than 15%, and recently business investment for the production
facilities is growing and maintaining its 3-billion-yen level every year. From this viewpoint,
this company has more modern production facilities than CP does.
These 35 group companies consist of pork, chicken, feedstuff, and many other fields and
industries including research area. It is indeed a great integrator which single-handedly handles
feedstuff, pork, chicken, food processing, and many others.
6
　6： Markets and Sales

　1） Market Conditions

　■ Imported sausage in the Japanese market：

The imported market in Japan has grown to 42,000 tons by 1.5 times for these five
years, 2002-2007. Of the total, China accounts for 29,000 tons or a 70% share,
meanwhile imports from Thailand remain at as low as the 1,800-ton level.

【Unit: ton】
Share in
2002 2003 2004 2005 2006 2007
2007
China 6,279 10,851 15,465 20,148 28,884 29,039 69%
U.S.A. 12,769 8,024 5,038 6,112 6,618 6,445 15%
Thailand 636 224 289 828 1,471 1,798 4%
Denmark 1,656 1,285 1,874 1,725 1,812 1,680 4%
Canada 3,305 3,739 3,659 3,157 2,308 544 1%
Australia 2,305 1,903 1,931 1,982 58 75 0%
Other 1,105 1,248 1,183 1,513 2,471 2,635 6%
Total 28,055 27,274 29,439 35,465 43,622 42,216 100%

2,008
Jan Feb Mar Apr May Jun
Import amount 2,407 1,342 1,051 1,362 1,783 1,719
China
Ratio based on the Janualy figure 100 100 56 44 57 74 71
Import amount 131 155 246 202 135 231
Thailand
Ratio based on the Janualy figure 100 100 118 187 153 103 176
【Adapted from： Foreign trade statistics from the Ministry of Finance】

7
■ Ham & Sausage in the Thai market:
The ham & sausage market volume in Thailand is about 370,000 tons (estimate
for 2008), which is significantly large compared to the country’s population.
However, about 70% of these products including ground chicken are low-priced
called C-grade, and their profit margins are very narrow.

By contrast, high-quality market called A-grade has gradually but steadily grown
to nearly 70,000 tons or a 12% share of the whole market.

Under these circumstances, our business partner Betagro Foods, the second
largest food manufacturer after CP in Thailand, has only a 7% share in A-grade
compared with CP’s 38% although it accounts for nearly the same share of CP’s
in C-grade.

By taking maximum advantage of Itoham’s brands, skills & techniques, and

know-how, we can proceed and build up the cooperative relationship to fill in this
gap in the A-grade market.

【Ham & Sausage market in Thailand】 　　

Grade　　　
300 tons/year
Annual Production volume of ham & sausage： 372,600 ｔons/year

66,300t/year Price　120～320 baht/kg Premium Grade: 1%

A-Grade: 17%

◇A-grade Market volume （66,300 tons/year)

97,200 tons/year
Price　60～120 baht/kg

B-Grade: 26% Other

16% CP
Better Foods 7% Interfood
4,500ｔ/年 31%
CP Group 38%
TGM 25,500ｔ/年
10%
208,800 tons/year
Price　40～60 baht/kg BKK BKP
Ham 7%
11% Belucky
C-Grade: 56% 18%

Price　
　 8
2） Marketing Plan 【Unit：ton】
1st year 2nd year 3rd year 4th year
Nov.-Dec., 2009 2010 2011 2012
Export to Japan 100 1,800 2,400 2,400
Sales volume
Domestic sales in Thailand 10 360 640 1,000
※ Fiscal year: January – December

7： Investment Plan

1）Equipment Investment　　　　　　　　　　　　　　　　　　　　
【Unit： 1,000 yen】
　　　　　　
Building
Utility
218,000
102,000
Refridgerator, ventilator, aseptic room 136,000
Plant machinery 251,000
Other equipment 63,000
Total 770,000

※ See Data Appendix for details.

2）Land
Surphase （12.6Rai　about 20,000㎡） 129,000

3） Investment and Depreciation 【Unit： 1,000 yen】

Refridgerat Plant Other
Building Utility Total
or, etc. Machinery equipment
Investment amount 218,000 102,000 136,000 251,000 63,000 770,000
Depreciation rate 5% 5% 5% 20% 20% -
Depreciation expense 10,900 5,100 6,800 50,200 12,600 85,600

※Legal durable years

Building： 20 years of straight-line method

Production facility and machinery： 5 years of straight-line method
9
8：　Business Plan
【Unit： 1,000 yen】
1st year 2nd year 3rd year 4th year
Nov.-Dec., 2009 2010 2011 2012
Export to Japan 100 1,800 2,400 2,400
Sales volume
Domestic sales in Thailand 10 360 640 1,000
Sales amount 55,000 1,080,000 1,520,000 1,700,000
Variable Manufacturing cost 35,567 698,400 982,933 1,099,333
Manufacturing cost 11,667 70,000 70,000 70,000
Fixed Labor cost 13,333 40,000 40,000 40,000
Manufacturing cost Equipment cost 33,333 100,000 100,000 100,000
Depreciation cost 28,533 85,600 85,600 85,600
Gross Profit on Sales -67,433 86,000 241,467 305,067
General Administrative cost 10,000 20,000 20,000 20,000
Administrative cost Expatriat 40,000 60,000 60,000 60,000
Sales Administrative Transport cost 2,420 46,080 65,866 73,667
cost Other 440 10,080 15,200 17,000
Interest （7%） 3,500 21,000 21,000 21,000
Income before tax -123,793 -71,160 59,401 113,400
Corporate tax 0 0 0 0
Profit -123,793 -71,160 59,401 113,400

9： Manpower Plan
① Chairman： Toshio Sano
② President： Vasit Taepaisitphongse
③ Staff Japanese manager: 1 person
　　　　　　　　　 Japanese technical specialist: 1 person
　　　　　　　　　　 Local administrator: 12 persons
　　　　　　　　　　 Production staff: 88 persons
　　　　　　　　　
【 Employees in detail 】
1st year 2nd year 3rd year 4th year
Nov.-Dec., 2009 2010 2011 2011
No. of staff No. of staff No. of staff No. of staff
Japanese expatriates 3 3 3 3
Local administrators 12 12 12 12
Production staff 88 88 88 88
Total 103 103 103 103
10
10： P/L and Fund Plan
　
1） Fund Plan
【Unit: 1,000 yen】
Necessary funds in initial stage Fund procurement
Equipment investment 770,000 Capital 1,020,000
Land 129,000 Long-term debt 300,000
Purchase - - -
Interests 21,000
Other 400,000 - -
Total 1,320,000 Total 1,320,000
Interest： 7％

2） P/L Plan
① Sales Amount
1st year 2nd year 3rd year 4th year
Nov.-Dec., 2009 2010 2011 2012
Sales amount 55,000 1,080,000 1,520,000 1,700,000

② Expenditure
1st year 2nd year 3rd year 4th year
Nov.-Dec., 2009 2010 2011 2012
Variable Manufacturing cost 35,567 698,400 982,933 1,099,333
Fixed Manufacturing cost 86,867 295,600 295,600 295,600
General Administrative cost 50,000 80,000 80,000 80,000
Sales Administrative cost 2,860 56,160 81,066 90,667
Interest 3,500 21,000 21,000 21,000
Tax and public charge 0 0 0 0
Total 178,793 1,151,160 1,460,599 1,586,600

11
3） Other
① Depreciation cost （in accordance with the accounting rules in Thailand）
　　Building： 5% of Straight-line method
　　Production facility and machinery： 20% of Straight-line method

② Corporate tax　30%
We can qualify for full tax exemption for the first 8 years because of an　　　
investment incentive scheme of BOI, the Board of Investment of Thailand.
The amount of tax exemption because of an investment incentive scheme of
BOI

1）Machinery: approx. 10,000,000 yen

2) Corporate tax: 51,840,000 yen

The maximum investment amount (excluding the land property) for the
accumulated amount of tax exemption: 700,000,000 yen

4） Revenue
　　・ First year： 　 –123,793,000 yen
　　・ Second year： -71,160,000 yen
　　・ Third year： 59,401,000 yen
　・ Fourth year： 　 113,400,000 yen

12
5） Cash Flow Statement　
■ First year 【 Unit： 1,000 yen 】
Oct-08 Nov-08 Dec-08
Sales Amount - - -
Accounts Receivable - - -
Expenses - 2,500 2,500
Equipment / Land - - 129,000
Interests - 1,750 1,750
Paid-in Capital - 1,020,000 -
Long-term Debt 300,000 -
Cash - 1,315,750 1,182,500

■ Second year
Jan-09 Feb-09 Mar-09 Apr-09
Sales Amount - - - -
Accounts Receivable - - - -
Expenses 2,500 2,500 2,500 2,500
Equipment / Land 218,000 - - -
Interests 1,750 1,750 1,750 1,750
Paid-in Capital - - - -
Long-term Debt - - - -
Cash 960,250 956,000 951,750 947,500

May-09 Jun-09 Jul-09 Aug-09

Sales Amount - - - -
Accounts Receivable - - - -
Expenses 2,500 2,500 2,500 2,500
Equipment / Land 251,000 301,000
Interests 1,750 1,750 1,750 1,750
Paid-in Capital - - - -
Long-term Debt - - - -
Cash 692,250 688,000 382,750 378,500

Sep-09 Oct-09 Nov-09 Dec-09

Sales Amount - - 27,500 27,500
Accounts Receivable - - 27,500 27,500
Expenses 2,500 2,500 87,647 87,647
Equipment / Land - - - -
Interests 1,750 1,750 1,750 1,750
Paid-in Capital - - - -
Long-term Debt - - - -
Cash 374,250 370,000 308,103 246,207
13
 ITOHAM FOODS INC.
11： Business Development Time Line INTAERNATIONAL BUSINESS DEVELOPMENT DEPT.
Aug-25 08

Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09
W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4

・Advisory agreement concluded

（Mizuho Bank） ・Preparation of
Business plan
・Preparation of
joint-venture ・Approval at Itoham's board meeting （12/Sep）
agreement 　　・Meeting with Betagro (5/Aug）
　　（Business plan/Joint-venture agreement） ・Registration of incorporation
Itoham-Betagro ・The corporate name, articles of incorporation, ・Corporate tax, VAT registration
Joint-venture Thailand general assembly ・Job interview
Company Preparation for the founding ・Representative temporarily
　　　　　 visits Thailand ・Representative officially transferred
・Visa issuance ・ Work permit application
・Visa application ・Work permit approval

　　・Production 　・Production 　・Production

　　　（Tokyo Plant） 　　　（Tokyo Plant） 　　　（Tokyo Plant）
Japan
・Narita (Tokyo) airport ・Narita (Tokyo) airport ・Narita (Tokyo) airport

Domestic Sales
in Thailand
FDA application procedures 　　・Bangkok airport 　　・Bangkok airport 　　・Bangkok airport

Thailand ・Preparation of labels 　　　・Custom clearance/transport 　　　・Custom clearance/transport 　　　・Custom clearance/transport

Presentation to retailers Test sales Start of production (Target timing)

・Test production
・Order ・Order ・Order ・Order ・Order ・Order ・Order ・Order
Japan Launch

Sausage Import
Project

Thailand Better Foods plant

Price quotation
Japan

・Sample shipment (Aug. 25)

Australia
Rockdale Beef
Project

Import of sample

Thailand Import application procedures

Training
Start of sales

Looking into the New Plant （Design～Land～Construction～Equipment, etc.）

※ See attached for details.
New Plant Thailand
Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09

・Start of production

14
12：New Plant Time Line

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Main Task Mths 2008 2009 2010
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
8/27 Final Confirmation of Basic Design
Design 8/31 Approved by ITOHAM and BETAGRO
Conceptual design
9/16 Architect and Structure
Preliminary to final design 9/30 M&E+Machine
Designer work to blue print 2
Bidding & Contract
Call for tender
Bidding 1
Contract
Construction
Land Development
Mobilize to working site
Kick off construction
Construction 9
Finishing
Utilities & Machines
Utilities TOR,Bidding,Purchaing & Delivery Installation
Main machines TOR,Bidding,Purchasing & Delivery Installation
Test run
Official Permission (DLD,etc.)
MAFF Inspection and Approval
Lacal sales
Export Sales

15
※ Data Appendix
List of Plant Equipment 【Unit: 1,000 yen/1,000Baht】
No. @ Baht Yen

Meat washer 0 1,000

Meat Grinder (Mincer) 1 1,800 1,800 6,120
Bowl Chopper (Silent Cutter) 1 6,000 6,000 20,400
Vacuum Mixer 1 3,000 3,000 10,200
Marinate Mixer 3 150 450 1,530
Brine Injector 1 2,500 2,500 8,500
Trumbler 1 2,500 2,500 8,500

Frankamatic Linker 2 4,500 9,000 30,600

Vacuum Stuffer 0 7,000 0 0
Hamler 1 2,500 2,500 8,500

Steam-Smoke Chamber 1X2 2 2,500 5,000 17,000

Steam Kettle with Hoist & Basket 2 1,500 3,000 10,200
Intensive cooler 1x2 0 2,000 0 0

Sausage Cutter 2 2,000 4,000 13,600

Automatic Packing (Multihead) 0 10,000 0 0
Automatic Packing (Thermoform) 1 8,000 8,000 27,200
Full Line Conveyer and Checker 2 500 1,000 3,400
Vacuum Packer 1 1,800 1,800 6,120
Metal detector 2 600 1,200 4,080
Weigh Checker 2 500 1,000 3,400
X-Ray 0 2,500 0 0

Freezer ( Air blast ) 0 2,000 0 0

Pasteurization System 1 8,000 8,000 27,200

Cartoning Line 2 600 1,200 4,080

( Forming, Taping, Coding, Strapping) 0 0 0

Stacker , Forklift , Handlift truck 1 2,000 2,000 6,800

Others 5,000 17,000
Total 68,950 234,430

Accessories & Tools etc：5,000 baht

Total：73,950 baht

16