Consumer products business

In October 2009, Chi-Med signed a joint venture agreement between its wholly-owned subsidiary, Hutchison Organic Holdings Limited, and The Hain Celestial Group, Inc. (NASDAQ: HAIN), a leading natural and organic products company ("Hain Celestial"). The joint venture will market and distribute infant and toddler feeding products co-branded under the Earth's Best ® and Zhi Ling Tong brand names as well as selected Hain Celestial brands in China and other markets which can leverage upon the worldwide retail network for product distribution of the Hutchison Whampoa group. Under the terms of the joint venture agreement, each partner will own 50% of a newly created entity, Hutchison Hain Organic Holdings Limited ("HHOH"), to conduct this marketing and distribution business.

Hain Celestial manufactures and sells over forty brands of natural and organic consumer products in almost all natural food categories with some of their well-known brands including: Celestial Seasonings® (herbal tea), Terra® (gourmet chips), Garden of Eatin'® (organic corn chips), Health Valley® (organic cereals, snacks and soups), WestSoy® (organic soy drinks), Earth's Best® (organic infant foods and personal care), Arrowhead Mills® (organic baking products and mixes), MaraNatha® (organic nut and seed butters), SunSpire® (organic chocolate), DeBoles® (organic pasta), Hain Pure Foods® (natural and organic condiments), FreeBird™ (antibiotic and hormone free chicken), Plainville Farms® (antibiotic and hormone free turkey), Spectrum Naturals® (organic cooking oils), Spectrum Essentials® (organic health supplement oils), Walnut Acres Organic® (organic sauces, juices, and salsas), Imagine® (organic soups), Rice Dream® (organic rice drinks), Soy Dream® (organic soy drinks), Linda McCartney® (vegetarian frozen meals), JASON® (natural and organic personal care products), and Avalon Organics® (natural and organic personal care products).

Our goal is for HHOH to become one of the largest organic and natural consumer products companies in Asia. We aim to achieve this via the selling of the entire Hain product line in China and in other Asian or global markets in which we can create mutual advantage for HHOH and HWL. As the first move, in December 2009, HHOH secured agreement from PARKnSHOP, HWL's market leading supermarket chain in Hong Kong (about 230 shops), to list a broad range of Hain products in Hong Kong. The first one-to-two-month pipeline order of about $1.6 million, to be booked as sales in early 2010, has now been delivered to Hong Kong.

HHOH's competitive advantage in Hong Kong is that with the removal of all middlemen, such as distributors and consolidators, we are able to reduce shelf pricing on this broad range of organic and natural products by an average of about 30-50% thereby allowing organic and natural products to be priced on the shelf at a 10-20% premium to non-organic mass-market products. At this moderate price premium, organic and natural products shift from being niche to appealing to mainstream consumers. The second advantage to retailers is that through one supplier (HHOH) they have access to over forty proven brands in almost all grocery categories. This simplifies their operations and allows HHOH to remove major cost from the product supply process given the scale and ability to consolidate shipments. We expect the HHOH business in Hong Kong to grow rapidly as a result.

The second main area in which HHOH will compete is the China infant formula and infant food category. Given the recent product recall and melamine contamination issues, we believe that the market is in flux, and that a high quality, internationally produced, organic proposition should have high levels of consumer appeal.

HHOH intends to launch a range of organic infant formula and food products into the China market over the next several years. These products will be Earth's Best® products adapted for the China market and will be co-branded with HHL's existing strong ZLT premium infant nutrition brand. In the US, Earth's Best is the fastest growing market leading organic baby food brand with an approximate 40% market share in grocery (A.C. Nielsen). We will introduce these products to the China market through our established and growing HHL infant nutrition commercial organisation and expect rapid growth.