JSC “LATVIJAS BALZAMS”: ACHIEVEMENTS 2012 Guntis Āboltiņš-Āboliņš, CEO Valters Kaže,...

JSC “LATVIJAS BALZAMS”: ACHIEVEMENTS 2012

Guntis Āboltiņš-Āboliņš, CEOValters Kaže, Brand Director

ABOUT US

#1 alcohol producer in the Baltics>120 products and brands >100 international awards~70 m Bottles annuallyLVL 67.7 m revenue in 2011>600 employees36 direct export markets>160 export markets via SPI Group24% market share in Latvia57% market share among local producers

UNAUDITED BUSINESS RESULTS 9M 2012

50,3 m(+8% vs 9m 2011)

Revenue(LVL)

32,4 mVolume(litres)

+1% volume+8% revenue

Export growth(% vs 9m 2011)

2.5 m(+19% vs 9m 2011)

Unaudited profit(LVL)

26.3 m(including 18.3 m in excise tax)

Taxes paid(LVL)

UNAUDITED BUSINESS RESULTS 9M 2012

2011 201230.0

30.5

31.0

31.5

32.0

32.5

33.0

31.7

32.4

(+2%)

REVENUES 9M 2012 AND 2011TOTAL, LVL m

REVENUES 9M 2012 AND 2011BY MARKET, LVL m

VOLUME REVENUES 9M 2012 AND 2011 TOTAL, m litres

VOLUME REVENUES 9M 2012 AND 2011 BY MARKET, m litres

2011 201245.0

46.0

47.0

48.0

49.0

50.0

51.0

46.8

50.4(+8%)

Latvia Export Latvia Export2011 2012

0.0

5.0

10.0

15.0

20.0

25.0

30.0

7.8 8.3 (+6%)

23.9 24.1 (+1%)

Latvia Export Latvia Export2011 2012

0.0

5.0

10.0

15.0

20.0

25.0

30.0

25.5 27.5 (+8%)

21.222.9 (+8%)

LB INVESTMENTS IN 2012

• New equipment for production of Stolichnaya• IT renovation and infrastructure• Filter housings• New equipment for packaging and corks• Other improvements

Investment in production and logistics

LVL 275,000

• Design concepts • New recipes and technologies • Other improvements

Investment in new product development

LVL 35,000

In 2012 Company has invested LVL 310,000 in development

MARKET LEADING GROWTH• Sustainable market share in Latvia: 24%

share retained despite harsh competition such as import growing by +28% year on year (9m 2012)

• 18 new products and packaging redesigns: focus on consumer insights driven portfolio management

• Growing export volume: SPI Group exports to >160 countries as main source

PUBLIC RECOGNITION• Silver category in «Sustainability Index

2012»: a recognition to to our sustainable strategy and risk management

• «Senior-Friendly Company“: awarded by Ministry of Wellfare and EC

KEY ACHIEVEMENTS IN 2012

NEW PRODUCT DEVELOPMENT

STRONG VODKA «LB VODKA 69%»: FOR HOME-MADE INFUSION FANS

«LB INFUSION»: 3 INNOVATIVE COMPLEX FLAVOURS

VODKAS AND INFUSIONS

«BALTA»: CLASSIC VODKA FOR LITHUANIAN MARKET

«BONAPARTE CINNAMON»: DELICATE BRANDY AND CINNAMON BLEND

«ARAMIS»: 5 YEARS AGED FRENCH BRANDY

BRANDIES AND STRONG SPIRIT DRINKS

«GRAND CAVALIER EXCLUSIVE»:#1 BRAND IN LITHUANIA + INNOVATIVE TECHNOLOGY +

8 YEARS AGED FRENCH BRANDY

LIQUEURS AND BITTERS

«ŠARLOTE»: MARKET LEADER REBORN IN A NEW QUALITY

«ŽOLYNŲ»: 23 NATURE-BORN INGREDIENTSTO RULE THEM ALL IN LITHUANIA

SPARKLING WINE AND FUSION

«RĪGAS DĪVA»: FUSION WINE DRINK FEATURING REAL FRUIT FRESHNESS

«RĪGAS JUBILEJAS» SPARKLING WINE: 60 YEARS OFCLASSIC TECHNOLOGY WITHINCONTEMPORARY PACKAGING

CIDERS AND PREMIXES

«APPLE GARDEN»: DRY CIDER FOR A DEMANDING CONSUMER

NEW PREMIX FLAVOURS:FROM CLASSIC VALUES TO HOT THINGS...

DESIGN RELAUNCH FOR MOST-LOVED BRANDS

AND FINALLY...

HERE COMESTHE MOST INNOVATIVE PRODUCT OF 2012...

High quality vodkaCombines centuries of Riga Black Balsam craftmanship with advanced technologies

The most pure form of vodka – secret hidden in: • Black Charcoal and Silver purification: unique

silver-ionized charcoal applied• 7 times filtered for the most pure taste• purest artesian well water (184m and 198m)• no suggar added – the most pristine taste

Highly competitive to top-notch vodka brands locally and globally

Widely available in stores from January, 2013

0.70.50.35

INDUSTRY IN 2012 AND CHALLENGES AHEAD

PRIORITIES FOR INDUSTRY 2012-2013

Pro-active and meaningful conversation with government started to combat illicit alcohol market in Latvia

Alcohol excise tax unchanged – secures stability and predictability of the licit business framework

More strict measures related to breach of alcohol regulation – age verification for young adult (18-25) consumers introduced

Productive collaboration with State Revenue Service and law enforcement bodies

2013: THE CHALLENGES AHEAD

Top priority: effectively combat illicit alcohol market in Latvia

More severe sentence for distribution of illicit alcohol

Pure alcohol contents based excise taxation legislative initiative

Real estate taxation incentives for the largest employers

Industry as a social partner in legislative decision making

Walk the talk: implementation of the National Development Plan

JSC “LATVIJAS BALZAMS” PRIORITIES IN 2013

• Further development of innovative and cost-effective technologies• Retention of top quality despite the increase of raw material costs• Growth of production volumes driven by economic recovery in world

markets

Production and logistics

• Competitive and profitable new products• Brand building for current brandsNew product

development

• Grow in core markets and selectively enter new• Develop globally competitive product portfolio

Export

• Responsible and moderate alcohol consumption education programs• Combat illicit alcohol market to tackle its social and economic impact• Reduce impact on environment by improving production processes

Corporate Social

Responsibility