Carlsberg's Slavutich Brewery

Group Sees Plenty of Future

Potential in Ukraine
Extensive investments in KHS technology for planned sales growth

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Jaroslaw Niebisch*

Ludmila Enke**

The brewing industry is in a state of permanent flux worldwide, as illustrated among

other things by the Slavutich Brewery Group in Ukraine (formerly Baltic Beverage
Holding (BBH) and now part of the Carlsberg Group).

BBH was founded by the Finnish company Hartwall and Pripps from Sweden and
operates in the Baltic and the Commonwealth of Independent States or CIS. The
Carlsberg Group and Scottish & Newcastle (S&N) controlled BBH for a long time as
a joint venture. When Heineken and Carlsberg jointly acquired S&N at the start of
2008, the two brewery giants divided up their holdings. Former S&N activities within
the UK – plus various other things – went to Heineken, while the Carlsberg Group
took over the remaining 50% of BBH shares. The BBH Group therefore finds itself
firmly in the hands of Carlsberg and along with it a major proportion of the Eastern
European beer market. This, among other things, consolidates Carlsberg's position
as the fifth largest brewery group worldwide and as number two in Europe. The
Ukraine represents both a growth market for beer and a significant market for the
Carlsberg Group. Beer sales rose by 20% in 2007, while beer sales from Carlsberg
activities rose by even 37%. This trend continued in 2008, when the Slavutich
Brewery Group, a Carlsberg Group company, saw a 25% increase in sales (results
from the report for 3Q08). In order to perfectly meet the demand for continued
future growth, Carlsberg in Ukraine invested in KHS technology again in 2008,
acquiring extensive innovative KHS filling and packaging equipment to augment its
primarily KHS fleet of machines. The outcome of Carlsberg’s collaboration with
KHS in Ukraine for 2008 involved two KHS glass bottling lines, a KHS canning line,
an upgrade of an existing KHS keg line, the expansion of an existing KHS line to
include a new glass depalletizer and the replacement of a KHS single-end bottle
washer. Sergey Chuprina, chief engineer at Slavutich, says, "Thanks to the sharp
increase in demand for our quality beers, it was necessary for the projects to be
completed not only reliably but also very quickly. KHS once again excelled with its
speed, precision, and now par-for-the-course installation of outstanding technical
systems in our production plants."

* Sales Manager for Ukraine, KHS AG, Bad Kreuznach, tel: +49 (671) 852-2608

** KHS General Director in Ukraine, KHS AG, Kiev, tel: +380 (44) 461-9362

Three breweries with a capacity for 10.5 million hl of beer, kwas, and non-alcoholic
beverages

The Slavutich Brewery Group now has three breweries in Ukraine; all of them part
of the Carlsberg Group:the Slavutich brewery in Zaporizhia, the Slavutich brewery
in Kiev, and the Lvivska brewery in Lviv. The BBH Group entered the Ukrainian
market with the acquisition of the Slavutich brewery, founded in 1974
inZaporizhia in the south of Ukraine. In 1999, BBH traveled further west and
acquired the traditional Lvivska Brewery in Lviv that was set up in 1715. Since
2004, BBH has operated a newly constructed brewery in the capital city of Kiev in
the heart of Ukraine. The Slavutich Brewery in Kiev has gone down in Ukrainian
brewing history as the first and to date only greenfield project of the past fifteen
years. Chuprina says, "Unlike the Carlsberg Group, all other international brewery
corporations depend exclusively on the takeover of existing breweries."

After its most recent investment in innovative KHS technology, the Carlsberg Group
breweries now have filling and packing capacities for around 10.5 million hectoliters
of beer, non-alcoholic beverages, andkwas. Capacities are distributed as
follows: Slavutich in Zaporizhia produces approximately 5 million hectoliters,
Slavutich in Kiev around 3.5 million hectoliters, and Lvivska in Lviv about 2 million
hectoliters. Primarily the Kiev and Zaporizhia sites are due for expansion in the
future.

Number three among Ukrainian brewery groups

After Sun InBev and Obolon, the Slavutich Brewery Group is number three among
the brewery groups of Ukraine. Slavutich is forecast to hold 24% of the Ukrainian
beer market share in 2008. This represents significant growth compared to its
market share in 2007 of 20.4%. It therefore comes as no surprise that a declared
objective of the Slavutich Brewery Group is to become number two on the market
in the near future.

Extensive range of beer brands

One definite reason for the Ukrainian brewery's success is its balanced, high-quality
range of beers that are aimed at diverse target markets. The Carlsberg, Baltika,
Tuborg, Holsten, and Fosters beer brands, bottled under license, are positioned in
the super premium segment. Slavutich and Slavutich Ice are positioned as upper
mainstream brands. Lvivske, the traditional beer brand that is particularly popular
in Western Ukraine, falls into the mainstream category. The Arsenal brand has also
been developed for the mainstream market and the discount beer Khmilne is the
lowest priced product.

True to its name, it is no wonder that the Slavutich beer brand is enjoying such great
success. This brand is currently responsible for around 40% of Slavutich beer sales
in Ukraine. After a successful relaunch of Slavutich's branded products in 2007,
sales rose by a heady 125%. Cherry and lime flavor beers were only recently
introduced to the market under the name Slavutich Ice, but have already proved
a resounding success. Results from the 3Q08 report showed a 37.5% sales growth
for the Slavutich brand. At present the Slavutich brand holds a market share of
7.3% on the Ukrainian beer market (excluding Slavutich Ice), thus occupying a firm
fourth place.

Increasing exports

Ukrainian beers from the Slavutich Brewery Group are also popular outside
Ukraine. Around 10% of total beer sales are exported. Significant export markets
include Russia, Belarus and Moldavia, plus the U.S.A., Canada, and Israel. The
Slavutich Brewery Group has even developed its own beer brand especially for
export to the Moldavian market. This is designed to capitalize on the predicted
increase in beer sales on a market that borders directly on the domestic market.

Main focus remains on the domestic market

The main focus of the Slavutich Brewery Group is still predominantly the Ukrainian
market. According to forecasts, it still has plenty of potential for future growth. The
per capita consumption of beer in Ukraine is currently 61 liters a year. Market
research institutes anticipate an increasing trend.

Also a steadily increasing demand for non-alcoholic beverages and kwas

The Slavutich product range within Ukraine also includes non-alcoholic

beverages. The Pepsi brand, for example, is filled here under license. The Taras
brand of kwas is another new non-alcoholic beverage that is enjoying a slice of the
action. Taras is brewed according to a traditional recipe and is BBH's answer to the
constantly increasing demand for kwas in Ukraine.

Breakdown in percent by container type

Glass bottles are still the consumers' preferred containers for beers, non-alcoholic
beverages, and kwas, with PET bottles in second place. Of the containers used at
Slavutich 48% are glass bottles. PET bottles follow at 38%, with cans and kegs
sharing the remaining 14% in approximately equal measure.

Canned beers and non-alcoholic beverages on the increase

Sales of beer and non-alcoholic beverages filled in cans have significantly

increased recently. The reason for this is that beverages filled in cans were
relatively expensive because the cans had to be imported. Now that cans are
manufactured within Ukraine, things have changed. At the same time, cans have
become more popular among consumers.

New KHS canning line for a bigger slice of the action

The Slavutich Brewery Group has been predictably quick to act to secure the largest
possible slice of the action with regard to cans. Investment in a new KHS canning
line at the Kiev site gives it capacity for 50,000 cans an hour. The new KHS canning
line replaces an existing line that could fill 20,000 cans per hour. KHS had to install
the new 50,000 can-per-hour line in exactly the same space occupied by the
previous 20,000-cph system. And on top of all that, Slavutich allowed just six weeks
for installation and commissioning, wanting to guarantee a constant
supply. Chuprina claims that "KHS achieved the well-nigh impossible, adhering to
the timeframe in every detail and managing to perfectly integrate the line into the
confined space between two systems."

Gentle depalletizing

The first station in the new KHS line is an Innopal AS1H depalletizing robot
that fully automatically feeds the waiting palletized cans to the line. Pallets loaded
with new containers are conveyed to the pushoff level on a pallet lift down a shaft
that is enclosed on three sides. Below the pushoff level, the block is centered on
all sides by an additional centering bar. A pushoff frame that is closed on all four
sides gently pushes the containers onto the container table. Because of the
extremely limited amount of space, the steel frame lift is integrated into the pushoff
frame. Intermediate layers are removed by a pivoting intermediate layer remover.

Fast conversion with the Innofill DMD

Faulty cans are sorted out by a vacuum bridge while "good" cans travel straight to
the rinser and finally to the mechanically controlled Innofill DMD can filler. The
Innofill DMD is equipped with 76 filling stations and is currently intended to fill 0.5-
liter and 0.33-liter cans. The Innofill DMD purposely keeps changeover times
short. The height of the filler turret can be adjusted together with the ring bowl and
filling valves to the desired level within minutes. The height adjustment can likewise
be used to easily change the filling level during ongoing production
operations. There is no need to replace return gas tubes when changing can
types. The result is time and cost savings. A further advantageis the maximum
flexibility provided by the automatic height adjustment facility – also for the future. If
a decision is made to fill other can sizes at a later date, the system will quickly self-
adjust.

Innopas P II SC for precision pasteurization of each product

The pasteurizer in operation is a modular, double-deck Innopas P II SC. It is

equipped with an integrated PU control system and is designed particularly for
gentle product handling. It guarantees individually specified PU values for each
type of beer bottled on the new line. The energy and water consumption in
continuous pasteurizer operation is reduced to a minimum by the heat exchange
between the heating and recooling zones. Active spraying on each deck is a
standard feature of the Innopas P II SC for a uniform pasteurization process.

Various packaging options

Checked cans are transported to the packaging station by a mass conveyor. The
Innopack Kisters SP 080 shrink packer currently handles three-lane processing of
four-packs or two-lane processing of six-packs. The packs are shrink-wrapped in
either clear or printed film. The shrink pack system is flexible and gives Slavutich
additional options at a later date if required. It would be possible, for example, to
shrink wrap additional can sizes or shapes or to choose new pack formations. Such
adjustments can be made simply by reconfiguring the system parameters.

The Innopack Kisters Primus TSP tray shrink packer already in use at Slavutich has
been integrated into the new line. Shrink packs produced by the Innopack Kisters
SP 080 travel directly to this system. The Primus series Innopack Kisters tray shrink
packer is able to repack freshly produced shrink packs either into trays or tray shrink
packs as required. It is even possible to pack individual cans into tray
packs in which case the cans bypass the shrink packer. The Primus series
Innopack Kisters tray shrink packer is the only system that is able to pack individual
cans into trays and/or tray shrink packs.

To make the most of the limited space available, the packs are lifted by a spiral
conveyor to a height of four meters where they are fed to the Innopal PB1H for
palletizing. The pallet conveyor supplied by KHS supplies pallets to the new line
and the existing system. This means that 165 pallets can be checked and
conveyed per hour.

New flexible KHS glass bottling line design also earns high satisfaction scores

Chuprina is equally as satisfied with the new KHS canning line at the Kiev site as
with the two new KHSglass bottling lines in Zaporizhia, each designed to process
about 50,000 bottles per hour. Both systems had to be integrated into one
shop. They also had to be able to communicate with one another. Each of the lines
is equipped to handle both refillable and non-refillable bottles. Glass bottles can be
switched as required from the dry area on one line to the dry area on the other
line. This has the advantage of maximizing flexibility and increasing system
availability. When switching from non-refillable to refillable bottles, for instance, the
remaining non-refillable bottles on one line can be palletized while the other line is
being reconfigured.

System feed and discharge has been kept deliberately simple

Anther special feature of the lines is their U-shaped layout. This means that the
lines are supplied with empty containers in the same shop area where the filled
containers are removed. This simplifies line feed and discharge considerably. In
response to the brewery’s request for a visible line feed and discharge concept,
KHS developed a master plan stipulating how existing lines could be redesigned
within the brewery to result in the U-shaped format. Thought is being given to
incorporating automated line feed and discharge into all lines. Chuprina says, "Our
philosophy is to exploit the potential to optimize. We therefore greatly value the
logistical advice given to us by KHS."

The two newly installed KHS glass bottling lines at the Slavutich brewery site
in Zaporizhia are equipped with identical technical components. While one of the
lines integrates existing KHS filling and labeling systems, the second line is
comprised of all new components.

Innopack SP times two

Non-refillable bottles are handled by the Innopal AS1H palletizer with a pallet
lift. Refillable bottles are processed by an Innopal RS3 1EKN1 depalletizer, with an
Innopack SP decrater downstream. The Innopack SP is a twin-axis machine that
gives exceptional accessibility and ease of operation. It is extremely flexible and is
ideally designed for both crating and decrating. It was thus no coincidence that not
one but two Innopack SPs were ordered for each glass bottling line.

Cutting-edge single-end bottle washing system

The Innoclean EM single-end bottle washer is equipped with state-of-the-art Triple-

i-Drive technology and energy-saving bottle carrier. Here the bottles undergo
intensive pre-washing before the main washing operation. Two rotating tubes spray
the bottles internally at high pressure, enabling discharge of coarse soiling residue
with outstanding efficiency. This increases the service life of the caustic
solution. This user-friendly machine also incorporates automatic removal of
broken glass.

Tried-and-tested Innofill DMG filler

The filling system of choice is the mechanical Innofill DMG pressure filler. Chuprina
explains, "We already traditionally depend on this reliable filling system. We
currently have five Innofill DMG fillers in operation within Carlsberg's Slavutich
Brewery Group and we are extremely satisfied with the bottling results." The Innofill
DMG operates without filling tubes but with return gas tubes. It is pressurized with
CO2 until the pressure between the bowl and the bottle is equal. As soon as the
pressures have been equalized, the fluid valve opens. The liquid displaces the
pressurization gas and forces it back into the ring bowl. The filling phase is
completed when the beverage rising in the bottle closes the return gas
tube. Pressure is relieved by the snifting valve. The prime benefit of this filling
method is the gentle and low oxygen bottling process – plus simple operation and
maintenance as well as exact and reproducible fill levels. The filled glass bottles
are then fed to either the crowner or the ring pull capper.

Modular design labeling machine guarantees maximum flexibility

The need for maximum flexibility lies behind the choice of the Innoket SE 2080
labeling machine. The basic setup of this labeler generation has been kept
relatively simple. It is comprised of a table structure and a central labeling
carousel. The labeling carousel can then be fitted with a wide range of labeling
stations. The Innoket SE 2080 installed at the Slavutich Brewery in Zaporizhia is
currently equipped with three docking stations. One is for the adhesive-pressure
labeling station, one is for the cold glue labeling station, and the third is for the
camera-based alignment module. This configuration can be changed at any
time. They could be replaced, for instance, with hot melt or roll-fed labelers. If
additional labeling processes are required, the only necessary investment would be
in appropriate labeling stations. Stations are simply docked to the Innoket SE 2080
and undocked, making labeling station changeover quick and easy. If a labeling
station is changed, the software and computers always automatically synchronize
all stations.

Whether refillable or non-refillable bottles, the line is able to handle both with the
Innopack SP that packsglass bottles into crates, or even with the Innopack Kisters
TSP 050 B that packs them into tray or pad shrink packs. Once packed, the glass
bottles are palletized either by the Innopal PB1H2 palletizer (non-refillable bottles)
or the Innopal RS3 1 BGN1 palletizer (refillable bottles). Packed loads of non-
refillables are secured in shrink film.

Perfect technical systems in place for future success

Chuprina says, "The performance delivered by KHS in 2008 was outstanding in

every respect. From the upgrade of the existing keg line in Zaporizhia to integration
of the new glass depalletizer and replacement of the existing bottle washing
equipment in Lviv, everything went like clockwork. "
With innovative KHS systems the Slavutich Brewery Group in Ukraine is equally
prepared for further sales growth as well as for a new era under the exclusive aegis
of Carlsberg. Chuprina says, "We are proud to be a member of such an
internationally significant brewing corporation as the Carlsberg Group. Carlsberg
demands the highest quality standards for its products and, precisely because of
this, has undergone significant expansion in recent years. Here in Ukraine we also
live the Carlsberg philosophy. We see this as a fundamental basis for future
success on the marketplace."