Herbalife to launch Hunan extraction plant

CHANGSHA - US health supplement manufacturer Herbalife Ltd said on Tuesday it plans to invest up to $25 million in its new extraction facility in Changsha, Hunan province, over the next five years.

The facility, due to open in March, will be able to process 8,000 tons of raw materials annually.

Highlighting the important role that the province in Central China will play in the company's operations, Herbalife Chief Operation Officer Richard Goudis said that the raw materials to be collected in Hunan, mostly tea, will account for up to 10 percent of the company's total raw materials processed.

He said cost was not the only factor that led Herbalife to locate in Hunan.

The company "wants to be close to the source of where the raw material is being planted", and that "Hunan province is rich in different species of botanicals and herbal products", added Goudis.

"Next year, we'll spend $8 million on the first phase to start the facility, and $20 to $25 million over the next five years," he said.

The facility will directly purchase materials from farms in Hunan, perform extraction and other conversion processes, and send the processed goods to its manufacturing facilities or third-party manufacturers.

Regarding quality control, Goudis said the company adopts a "seed to feed" strategy. He said that by having a close relationship with local farmers, the company could play a role in determining how the crops would grow and what pesticides were used.

Given the company's high standards, Goudis said that Herbalife would "improve the reputation of herbals grown in Hunan province".

Changsha Mayor Zhang Jianfei said he expected the facility to bring over 1 billion yuan ($150 million) in output value to the local natural plant industry.

The facility is a joint venture with NatSource Chemicals Corp. The new plant will create approximately 120 local jobs, according to Herbalife.

The company entered the Chinese market in 1998 and received its first direct-sales license in the country in March 2007. It now has a manufacturing facility in Suzhou and 75 retail outlets across China.

China Daily

(China Daily 10/14/2010 page14)