OREANDA-NEWS. On 20 February 2008 Baltika Breweries, leader in the Russian beer market, announces its annual financial results for 2007.


1. BALTIKA RELEASES EXCELLENT FINANCIAL RESULTS

Despite increased raw material and delivery costs pressures, the Company achieved excellent financial results in 2007. This success was facilitated by the effects of scale from sales and market growth, development of the leading brands and premiumisation of the portfolio, as well as the remaining $20 million synergy effect from the merger of the companies.

Baltika’s sales volume amounted to 44.3 million hectolitres (+19.3% compared to 2006), of which 43.7 million hectolitres was beer, an increase of 19.5% year on year.

2. THE YEAR OF THE ‘BALTIKA’ BRAND WAS SUCCESSFUL FOR THE COMPANY

In 2007, the Company’s main efforts were focused on promoting the key brand Baltika, which strengthened its leadership position thanks to the successful implementation of the Company’s marketing strategy.

According to Company estimates, market share of the Baltika brand rose by +1.8% to 12.7%, with sales growth of +33.5%.

Innovations introduced in the year contributing to this success included:
restyling of the premium line-up of the Baltika brand (bottle with transparent NLL label);
restyling the mainstream line-up (new glass bottle for the key sub-brand Baltika №3 Classic);
introducing Baltika №3 Classic and Baltika №7 Export beer to market in 1-litre cans.

In 2007, the Baltika brand also appeared among the largest global brands in a list drawn up by the research company Millward Brown Optimor (МВО) for the Financial Times newspaper. Among the international beer brands, Baltika received the highest rating for potential and for the brand Baltika’s contribution to overall profits.

Other brands within the Baltika Breweries portfolio also produced excellent results. In the licensed beer, the Tuborg brand grew by +70%, substantially strengthening its leadership position in the segment and raised its market share by +3.1% to 17.8% (according to data prepared by the Business Analytica agency). The other licensed brands Kronenbourg 1664 (+132%), Foster’s (+63%) and Carlsberg (+34%) also demonstrated outstanding growth trends.

Sales of the premium brand Nevskoye grew by +25%, while the regional brands Don and Uralsky Master grew by +33% and +42% respectively.

Thus, by the end of 2007, for the first time, Baltika Breweries became the leader in all segments of the Russian beer market, including the licensed beer segment.
3. STRENGTHENING POSITIONS IN THE RUSSIAN AND GLOBAL MARKETS

According to Company estimates, the Russian beer market grew by 15.7% in 2007. This market growth was driven by unusually mild weather at the start of the year, the positive influence of the changing structure of alcohol consumption, particularly in the less saturated regional markets, as well as by the consequences of regulatory measures with respect to alcoholic beverages.

In 2007, Baltika Breweries increased its market share to 37.6% (+1.2% compared to 2006), growing at a faster pace than the overall market.

Baltika successfully developed its export activities, and entered eight new foreign markets during the year, including Switzerland, North Korea, Mexico and Malta, and resumed deliveries to Mongolia.

The volume of export sales grew by +22.9% compared to last year and amounted to 2.0 million hectolitres. Taking into account licensed beer sales in the Ukraine and in Great Britain, the growth of sales abroad amounted to +32.1% compared to a year earlier.
4. BALTIKA CONTINUES TO INVEST IN DEVELOPING THE COMPANY

During 2007, Baltika’s investments exceeded 262 million Euros. The production capacity of the brewery in Samara tripled, going from 2 to 6.5 million hectolitres of beer per year. Construction continued on a new brewery in Novosibirsk which has a rated capacity of 4.5 million hectolitres per year. The decision was also taken to double production capacity of the Baltika brewery in Voronezh in time for the 2008 season.

A substantial portion of investment money was directed at implementing marketing innovations, raising the quality of products and ecological projects.
5. FORECAST OF MARKET DEVELOPMENT

Considering the continuing decline in the rate of growth of the Russian beer market, we maintain our forecast of market growth in the range of 3-5% during the next few years.

Anton Artemiev, President of Baltika Breweries: ‘2007 was a very successful year for Baltika Breweries. We saw growth in our market share, headlong growth of the Baltika brand both in Russia and abroad, and the strengthening of Baltika’s position as the leader in the field of innovation. All this enables us to look into the future with optimism despite growing competition and high inflation of input costs caused by external factors.’

Baltika Breweries is the largest FMCG producer in Russia. Since 1996, it has been the leader on the Russian beer market. The Baltika brand occupies second place in Europe in terms of sales. The Company comprises 11 breweries across all of Russia. It has a wide portfolio of brands and its employees number around 12,000.