This printed article is located at http://qianhu.listedcompany.com/qa_20080728.html

Chat with Kenny

Dated 28 July 2008

Dear friends,

Thanks for your questions posted over the past week. I am happy to answer your questions online. I will repost the questions in blue italics followed by my comments in black.

Kenny the fish

Dear Jayster, you wrote:

Hi Kenny,

Congrats on your business growing despite growing inflation and oil prices!

I would like to seek your opinion on the effects of climate change or often referred to as global warming.

Do you think the rising temperature caused by carbon emissions will affect fish breeding businesses like yours eventually?

What eco-friendly measure does Qian Hu engages in to reduce its carbon footprint and wastage of natural resources?

Hi Jayster,

Thank you for your kind words about our result.

Evolutionary theory indicates that species will evolve according to the changing environment. I believe many species will survive through evolution.

Advance farming technics rely less on environmental factor, it harnesss the marvell of technology to control climate artifically. Many farmers are doing this and strong R&D capabilities coped with training skilled workers will help us rise to the challenge.

Qian Hu is an ISO 14000 certified company since 1998. The ISO 14000 environmental management standards exist to help organizations minimize how their operations negatively affect the environment (cause adverse changes to air, water, or land), complying with applicable laws and regulations.

The standard helps to reduce the negative impact to the environment, natural resource wastages and business cost. This is why I frequently refer Qian Hu as an "EQ" company. Which means "Environmentally Friendly" and "Quality Assured" company.

Kenny the fish

Dear Serene Lim, you wrote:

Hello Kenny,

Seems that China is the fastest growing market for Qian Hu.

Would Qian Hu consider starting a fish farm in China if the demand continues to escalate?

Given the problem of brand "piracy" in China as in the case of OSIM products. What steps have Qian Hu embarked on to protect its intellectual properties?

Hi Serene,

China's emerging domestic consumer market potential is of growing importance to Qian Hu. Many companies around the world hopes to grow their revenue in China like us.

Our current capability in any market is to establish a distribution network, farms or factories to support our growth strategy. Should the demand in China calls for larger fish farm in China, we will do it. Currently we have a small fish farm in Beijing.

Established distribution network, mutually trusted strategic partners, quality assured products, product differentiation, innovative R&D and effective marketing strategies are ways to protect the intellectual properties for many companies. Qian Hu is moving towards these strategies.

Kenny the fish

Dear Gerald Toh, you wrote:

Hello Kenny,

Your plastic business doesn't seem to be doing well because of the rising cost of plastic resins.

What measures have Qian Hu taken to mitigate the rising cost of raw materials?

Is it possible to use alternative material like metal, wood, glass or silicon to replace plastic to lower the cost of raw materials?

Hi Gerald,

Our plastic business profit margin is facing pressure from the rising cost of resins but it is still profitable.

The plastic business is an auxiliary business to Qian Hu. We do not need to invest any more capital into this business as it provides healthy cash flow to the group. I would say the plastic business is a cash cow to Qian Hu.

I believe our plastic business profit will be comparable to last year's figures despite the fact that resins prices are going up. This is because we do not sign long term contracts with customers and are able to adjust prices giving three month notice.

Our plastic bags are used in the food, retail, electronic and fish industries. Plastic packaging are irreplacable by other materials because of the hygienic and cost effectiveness of plastic bags.

Kenny the fish

Dear Sam Wee, you wrote:

Kenny the fish

I would attribute Qian Hu's success due to its strong emphasis on Research & Development and Branding strategy.

Have Qian Hu considered aligning all its various brands like "Ocean Free" and "BARK" into a common brand like "Qian Hu" to save on marketing cost and have a unified branding strategy?

Hi Sam,

Thank you for concurring with our strategies of having strong brands and placing emphasis on R&D.

We had many branding projects and exercises over the years and decided to have two forms of brands. One is the company brand, "Qian Hu" and the other, product brands for each category of business activities such as "Ocean Free" for fish accessories and "Bark" for dog products, etc.

So far it has worked well for Qian Hu. I am open to the option of eventually having one core brand for all of our products considering the pros and cons of doing so.

Kenny the fish

Dear Mac Koh, you wrote:

Hi Ken,

Do you own the retail stores or lease them?

What's your strategy on the location of retail stores? Are they mostly in the rural or urban areas?

Do you think the retail or distribution strategy is more profitable in the long run?

Hi Mac,

We currently lease all our retail stores.

We decide where to open our stores depending on the location, rental, size and distance between our operating outlets. It could be in the rural or urban areas depending on whether it meets the criteria listed above.

In some countries we have a mixture of Retail and Distribution and others only Retail or Distribution.

Retail would give us more profit margin but a global distribution strategy deriving economies of scale would give us a similar profit given volume.

Both strategies have a role in Qian Hu as we deploy our Retail and Distribution strategy globally according to the market condition of the country.

Kenny the fish

Thanks again to all the investors who have posted their questions here. I hope I have answered them to your satisfaction. The next chance for us to correspond again will be the time when we announce our Full Year 2008 results. In the meantime, do feel free to visit our corporate website: http://www.qianhu.com/ and our IR website: http://qianhu.listedcompany.com/ for more information.

Take care and I look forward to our next online Q&A.

Kenny the fish