Capital Markets Days

Speaker: Victor Semak

VP Sales West Division, Baltika Breweries

St. Petersburg, 26 September 2006

1
Baltika Brewery
 Content

I. The market place

II. Route to market and distribution setup
III. On trade and retail key accounts

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Baltika Brewery
 The market place

3
Baltika Brewery
Leading in Sales & Distribution in Russia

Evolving process starting back in 2004 with change in distribution

model
Combination of in-house distribution and external distributors
Merger of breweries enables us to do next step:
More efficient use of sales force, no overlap
Bigger coverage
Combined brand portfolio

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Baltika Brewery
 Russia. Marketplace
Off trade contributes 92% of total beer volume
Total Russia. Total Beer

Volume
Volume Share,
Share, %
% Value
Value Share,
Share, %
%
100%
6,8 6,9 7,7 8,3 7,9 8,2 100%
9,8
10,9 11,3 12,8 14,0 12,8 12,8
16,1

80% 80%

60% 60%

93,2 93,1 92,3 90,2 91,7 92,1 91,8

89,1 88,7 87,2 86,0 87,2 87,2
40% 40% 83,9

20% 20%

0% 0%
MJ05 JA05 SO05 ND05 JF06 MA06 MJ06 MJ05 JA05 SO05 ND05 JF06 MA06 MJ06

Off-Trade On-Trade Off-Trade On-Trade

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Baltika Brewery
 Russia. Marketplace
Retail formats with limited shelf space capacity contribute 95% of off trade beer sales volume
Open Markets Kiosks Pavillions

Food Store Supermarkets

60 127,5 140
53,4 120
50
Share of Market, %

SKU per outlet

100
40
80
30 63,0
52,7 55,7
50,5 60
20 19,4
16,0 40
10 20
6,8 4,4
0 0
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Baltika Brewery Open Markets Kiosks Pavillions Food Stores Supermarkets
 Baltika in Russia
Our aim number one in scale and efficiency of sales operations
Center East
13,8 mln. people
Baltika covers
Moscow 64,7 l/per capita 200 000 retail outlets
17,1 mln. people
market share: 39,5% across Russia
82,3 l/per capita
market position: I
market share: 27,6%
market position: I
North-West
13,6 mln. people
85 l/per capita
market share: 44,6%
market position: I
Far East
6,5 mln. people
Volga Urals 55,4 l/per capita
20,5 mln. people 18,0 mln. people market share: 47,3%
52,2 l/per capita 76,7 l/per capita market position: I
market share: 32.4% market share: 32,8%
South market position: I market position: I
22,8 mln. people
49,6 l/per capita
market share: 43,6%
market position: I
West Siberia East Siberia
Center West 11,3 mln. people 8,4 mln. people
10,8 mln. people 64,8 l/per capita 62,2 l/per capita
60,6 l/per capita market share: 20,9% market share: 33,5%
market share: 41,9% market position: II market position: I
market position: I 7
Baltika Brewery
 Route to market and
distribution setup

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Baltika Brewery
 Route to Market
2 005 current 2 007
In 2006 Baltika managed to double Share of direct delivery (own
share of direct delivery to retail and distributors) (%) 25% 50% 60%+

Baltika
99% (95%)

Distributors
Baltika Delivery
Service
delivery of product
Distributors
Delivery Service is facilitated by
Baltika own
delivery of product logistics function
to retail outlet is
Other wholesalers directly to retail
facilitated by
Distributor outlet

50% (25%) 49% (75%) 1% (5%)

Retail (100%) ( ) - Y2005
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Baltika Brewery
 Selecting Specific Off trade Distributors
Four Principal Criteria
1) Superior level of Retail Customer Service (credit terms for retail and min. drop size)
2) Storage Facility and Truck Fleet sufficient to operate with target volume
3) Financial ability to operate with Unified BBH Portfolio
4) Willingness to work on Exclusivity basis

2005* 2006 2007

Number of Number of Number of

distributors: distributors: distributors
Baltika - 269 New Baltika 164 Number of distributors:
Vena - 35 New Baltika 185 Yarpivo 163 New Baltika 164
Pikra - 18
Total - 322 Total -185 Total - 327 Total -164
Yarpivo -163 Yarpivo 163
Grand Total - 485 Grand Total - 348

* Start of distributor selection process for new Baltika

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Baltika Brewery
 We Increase Efficiency of Distributors
Partnership Key Initiatives 2006-2007
Online order processing 24/7
Optimizing stock management process by implementing web data exchange
with Distributors
Implementing consignment model with selected distributors
CRM system implementation transfer orders from retail and delivery execution
control

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Baltika Brewery
 Market leadership is driven by strong retail
coverage ...
BBH New Baltika
2005 2006

Total personnel in sales 4500 4500

Field sales force* 3400 3900
Retail Coverage 100 000 160 000
Outlet Coverage and Number of Sales Representatives vs Competitors
180000 3500

160000
3000 3000
140000 2650
2500
120000

100000 2000

80000 1500
60000 1200
1000 950 1000
40000
500
20000

0 0
Baltika Sun Heineken Efes SAB-Miller
Interbrew Pilsner
* Including field sales management
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Baltika Brewery coverage SRs
 Gaining extra shelf space and higher off-
take through higher cooler penetration
180000
2004
160 000 2005

Increasing
160000 2006

133 000
140000
(37%) competition in retail
121 000
(34%) turn coolers into the
120000
100 000
most effective tool
100000
of retail shelf share
management
80000

60000
Baltika aims to
18 000 retain leadership
(10%)
40000
25 000
26 000
(7%)
and get 40% of total
(7%)
20000 5 000 beer market cooling
(2%)
capacity
0

BB Su SA Mo He PI Co Pe
H nI B sc i ne T ke ps
To n te Mi ow ke i
tal rb r l le Ef n
ew r es bre
w er y
Source: internal market monitoring 13
Baltika Brewery
 And better brand availability through
distribution
Baltika Families Numeric Distribution. Total Russia Off-Trade Beer

95%

85%

75%

65%

55%
Tuborg +11 %
45%
Nevskoye +9%
35%
K1664 +7%
25%

15%
Next Step -
5% Yarpivo
JA05 SO05 ND05 Jan.06 Feb.06 Mar.06 Apr.06 May.06 Jun.06

Baltika Zhigulevskoye Arsenalnoye Yarpivo

Nevskoye Volga, Yarpivo Tuborg 1664
Carlsberg Foster's
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Baltika Brewery : BA Retail Audit, Total Russia off-trade
 On-trade and Retail Key Accounts

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Baltika Brewery
 Retail Key Accounts (Chains) Sales
Dynamics & Baltika RKA share, 2003- 2006 *
RKA market v olume, Baltika RKA vol
MHL 29,4% share,%
2,5 27,8% 30%

23,7%
2,0
22,4% 25%

20%
1,5

15%
1,0 2,1
1,7 10%
1,3
0,5
5%
0,7
0,0 0%
2003

2004

2005

june 05-
june 06
RKA market volume* Baltika RKA vol share*

Retail Key Accounts (Chains) is important brand communication channel focus

on in store visibility and category management Source: BA, Off-trade Cities16
Baltika Brewery * All the calculations are based on the accumulated data of 13 cities with population > 1 million people
On-trade (HoReCa) Sales Dynamics and
Baltika On-trade share, 2002- 2006
On-trade market Baltika on-trade v ol
v olume, MHL share,%

7,0 35%
30,2%
6,5 29,7%
6,0 30%
5,5 25,8%
5,0 23,1% 25%
4,5 20,0%
4,0 20%
3,5
3,0 6,1 15%
2,5
5,4 5,3
4,6 4,8
2,0 10%
1,5
1,0 5%
0,5
0,0 0%
2002

2003

2004

2005

june 05-
june 06
On-trade market volume
Baltika on-trade vol share
Source: BA, on trade 17
Baltika Brewery
 On-Premise Trade
On-Premise Trade Includes Two Different Business Concepts

Marketing + Sales Sales

Image Outlets Volume Outlets

Superior Quality High Quality Normal Quality

(very few outlets) (up to 20% of outlets) (80%+ of all outlets)

Sales Department coverage and budget

Marketing budget
Boost penetration with mainstream brands
High number of target consumers
Gain share of tap, aim for exclusive
TM programs
presence
Seeding Launches of new brands
Standard package, no innovations
Draft and bottled beer support
Marketing support only for large chains
Baltika technicians support
Draft and bottled beer support
Distributors technicians support

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Baltika Brewery
 BALTIKA Sales In Russia 2006/2005, Beer
5 000 1 0 ,0 0 %

2005 +8,5%
4 500 2006 +6,5%
2006/2005 month vs month + 4,2% 5 ,0 0 %

4 000 +7,7%
2006/2005 YTD + 2,9%

3 500 +5,5%
+ 1,5% 0 ,0 0 %

3 000
Volume '000 Hl

- 1,2%
-15,1% +4,9%
2 500 -5 ,0 0 %

- 15,1%
- 5,4%
2 000

3 764
3 469
3 393
3 186
-1 0 ,0 0 %

1 500

2 771
2 573
2 392
2 267
1 856

1 829

1 000
1 744
1 576

-1 5 ,0 0 %

500

0 -2 0 ,0 0 %

January February March April May June

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Baltika Brewery
 Operational Excellence in Each Channel
(Quality Not Quantity)

Project Target Measurement

POP / POS activities in brand and trade Shelf share alignment
In store presence
marketing, supporting shelf share domination with SOM
Increase presence in RKA. Utilize retail
Modern Trade consolidation opportunities in the fastest RKA share SOM
developing channel . Category management
Increase share of sales by our sales staff ,
Increase Sales Force 80% of total volume
reduction sales share of secondary supply
efficiency sold by our field force
chain
To implement agreed distributors development according to
Distributors excellence
plan distributors
Increase share in Moscow for company
Moscow portfolio of brands. Focus on license and 30% SOM
premium

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Baltika Brewery
 Baltika beer of the world!

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Baltika Brewery