Diageo and A 1 form strategic partnership for expansion in Russia

28/02/06 Diageo and an Alfa Group company, A 1 Group Limited, the owner of the Smirnov Trading House announce that they have signed an agreement to form a joint venture company to market, sell and distribute spirits in Russia. It is anticipated that the joint venture will become fully operational in July 2006. The joint venture is conditional on, among other things, receipt of regulatory clearance from the Russian anti-monopoly authorities.

Through the joint venture with A 1, Diageo, the world’s leading premium spirits company, acquires a majority interest in the fast growing Smirnov brand and business which will form the basis of the new operation in Russia. The Smirnov brand will join Diageo’s portfolio within the newly formed company.

The future joint venture company will be owned 75% by Diageo and 25% by A 1 with both parties contributing to the strategic management of the joint venture’s distribution entity in Russia, Diageo Distribution ZAO. This company  will be the exclusive distributor of Diageo spirits brands and the Smirnov vodka brand in Russia. It will be a strong sales and marketing organisation, capable of accelerating growth across the entire spirits brands portfolio with operations in Moscow and major cities across Russia.

On completion of the transaction, Diageo will pay to Alfa Group a total of US$50 million for its interest in the joint venture. The transaction is expected to meet Diageo’s usual financial investment criteria.

Alison Forrestal, General Manager, Diageo Russia, will be appointed General Director of Diageo Distribution, and Andrey Kravets, currently General Manager Smirnov Trading House, will be appointed Deputy General Director.

The new business will represent a strong presence in Russia.  When fully operational, it is expected to employ between 250-300 people, resourced from the current businesses with additional employees recruited from the Russian market. The increased focus behind the brands is expected to improve growth. Completion of the transaction will also unite the Smirnoff / Smirnov brands under common ownership.

Diageo is the world's leading premium drinks business. With its global vision, and local marketing focus, Diageo brings to consumers an outstanding collection of beverage alcohol brands across the spirits, wine and beer categories including Smirnoff, Johnnie Walker, Guinness, Baileys, J&B, Captain Morgan, Cuervo, Tanqueray, Crown Royal and Beaulieu Vineyard and Sterling Vineyards wines.

Diageo is a global company, trading in over 180 markets around the world and listed on both the New York Stock Exchange (DEO) and the London Stock Exchange (DGE). We employ over 20,000 people worldwide with offices in around 80 countries. We have manufacturing facilities across the globe including Great Britain, Ireland, United States, Canada, Spain, Italy, Africa, Latin America, Australia, India and the Caribbean.

Diageo was formed in 1997, following the merger of Guinness and GrandMet and is headquartered in London. The word Diageo comes from the Latin for day (dia) and the Greek  for world (geo). We take this to mean every day, everywhere, people celebrate with our brands.

A 1, a subsidiary of Alfa Group, is the key investment division of the largest Russian consortium.

A 1 typically focuses on value-oriented, longer-term investment projects. Its objective is releasing the potential of portfolio companies through strategic management, consolidation, restructuring assets, crisis management and other aspects of corporate business development.

A 1’s long-term interests are in the creation of sustainable competitive  businesses via the introduction of modern management systems.

A 1’s professionals have unique experience of successful projects in various industries: Alfa Group strategic assets (Alfa Bank, TNK, national retail chain Perekryostok, Vimpelcom and Megaphone - the largest Russian telecommunications operators), as well as establishment of new businesses in oil and gas, metallurgy, pulp and paper industry, agribusiness, FMCG sector, etc.

The Smirnov Trading House, one of the A 1’s FMCG assets, was set up in Moscow in 2002 to resume production of vodka from recipes of the Russia's famous wine maker Petr Arseniyevich Smirnov (1831 – 1898). In 2005, The Smirnov Trading House introduced the new collection of alcoholic beverages to the Russian market so that production and sales volumes have increased four and a half times compared to 2004.

http://www.diageo.com/en-row/NewsAndMedia/PressReleases/2006/PressRelease27FebRussia2006.htm