Baltika Breweries Announces Financial Results for the First 9 Months of 2008

St. Petersburg, 7 November 2008. Today Baltika Breweries, leader on the Russian beer market, have announced the financial results for the first 9 months of 2008.

1. BALTIKA HAS DELIVERED GOOD FINANCIAL RESULTS

For the first 9 months of 2008, the Company achieved high levels of profit and profitability, all of which were largely due to strong execution on strategic initiatives including on-going premiumisation of the brand portfolio, effective management of expenses, realization of the agricultural project as well as projects on logistics and commercial excellence. This enabled the Company to increase margin in Q2 and Q3 compared to last year despite the substantial negative influence from the growth of prices for basic raw materials.

For 9 months of 2008, total sales volume of the Company’s products amounted to 35.9 mln hectolitres (+2.7% compared to the results of the same period of 2007), including 35.3 mln hectolitres of beer (+2.5% compared to the same period of 2007).

2. BALTIKA BREWERIES IS THE LEADER ON THE RUSSIAN BEER MARKET

According to the company’s estimates, during the first 9 months of 2008 the Russian beer market grew by 1%. Market development was affected by unseasonably cold weather in the last part of August and all of September, as well as, to a certain extent, higher than usual rise in prices, connected mostly with a price increase for basic raw materials and a high rise in excise taxes, all of which significantly affected outdoor consumption.

Nonetheless, judging by the results of 9 months of 2008, Baltika grew at a rate that was ahead of the market’s growth. Compared with the same period of 2007, the Company’s market share grew by +0.3% and amounted to 38.0%.

The volume of export sales for the period grew by +19.4% compared to last year and amounted to 1.9 mln hectolitres. Taking into account licensed sales abroad, sales growth came to +24.5% compared to last year.

3. THE BALTIKA BRAND HAS TAKEN FIRST PLACE IN EUROPE

According to data published in October 2008 by the international agency Canadean, the Baltika brand ranked number one in Europe by its sales volumes in 2007. In the words of Kevin Baker, Director of the Department of Alcoholic Beverages at Canadean, the gap separating the Baltika brand from the nearest competitor amounts to 16%.

The key tools for Baltika’s to achieve the №1 position in Europe were the strengthening of the brand’s unconditional leadership on the Russian market through a combination of product and communications innovations, as well as development of the brand on the CIS markets, image promotion and building brand loyalty in Western Europe.

In Europe, Baltika beer has been known since the year 2000. During this time, the Company succeeded in strengthening its position in 18 European countries as well as exerted a substantial influence on improving the image of Russian goods abroad.

For 9 months of 2008, growth in sales of the Baltika brand came to +17% including the contribution from growth of premium Baltika №7 (+26.8%), Baltika Cooler (+29.5%) and the new variety, Baltika Lite. The Baltika brand’s share of the Russian market during the first 9 months of 2008 is estimated to have grown by +1.9% to 14.6%.
 

4. THE STRATEGY OF FOCUS ON PREMIUM IN THE COMPANY’S BRAND PORTFOLIO IS CONTINUING
 

The Company is maintaining its leadership in all price segments of the Russian beer market. The successful development of premium and licensed brands confirms the effectiveness of the strategy of Baltika Breweries and its focus on premium products in the portfolio.

During the first 9 months of 2008, the Company continued to strengthen its leadership in the licensed segment, where its share came to 28.5% (9 months 2008 per data of the agency Business Analytica).

Sales of Tuborg — the №1 brand in the licensed segment — grew for 9 months of 2008 by +24%, as the brand increased its share in the segment by +2.5% tо 19.4% (data from the agency Business Analytica, September 2008).

Good results were achieved by the licensed brand Kronenbourg 1664, which increased sales by +42.2%. In July the new super premium variety Kronenbourg 1664 Blanc was brought to market and it became the most expensive brand in the Company’s portfolio.

Moreover, in 2008 the line-up of licensed brands in the Company’s portfolio was extended with a new licensed brand, Asahi Super Dry.
 

5. BALTIKA IS INVESTING IN THE COMPANY’S FURTHER DEVELOPMENT 
 

For the first 9 months of 2008, Baltika Breweries’ investments amounted to 253 million Euro. In August 2008, the Company completed its acquisition of its first assets abroad — the brewery Baku-Castel Ltd (Azerbaijan).

Anton Artemiev, President of Baltika Breweries commented: ‘Thanks to the Company’s consistent actions to strengthen the position of the Baltika brand in Russia and abroad, we have succeeded in reaching our strategic goal — leadership of the Baltika brand in Europe.’

Baltika Breweries is the largest FMCG producer in Russia. Since 1996, it has been the leader on the Russian beer market. The Company comprises 11 breweries in Russia and one brewery in Azerbaijan. It has a wide portfolio of more than 40 brands, including such well-known brands as Baltika, Nevskoye, Yarpivo, Arsenalnoye, Tuborg and Carlsberg. There are more than 12,500 employees in Russia.