Heineken continues Russian expansion

13/07/05 Heineken N.V. has signed an agreement to acquire 100% of Baikal Beer Company in Irkutsk, Russia. The transaction will be funded from available cash resources and is subject to regulatory approval. The acquisition will be earnings enhancing in 2006 and is value enhancing in 2011.

As a result of this transaction, the market share of Heineken in Russia will grow to 10.6%, with volumes over 8.5 million hectolitres, further strengthening the number three position of Heineken in the world’s fifth largest and rapidly growing beer market.

Jean François van Boxmeer, member of the Executive Board of Heineken N.V. commented: “Acquisition of the Baikal brewery further strengthens Heineken’s network of regional production and distribution units spread over Russia and will enable Heineken to acquire a leading position in the Eastern part of the Siberian region.”

The Baikal brewery is located in Irkutsk, situated in Siberia, which accounts for 6.3% of the total beer market. The Baikal Brewery is the only significant brewery in Eastern Siberia. The brewery has a sales capacity of 1 million hectoliters, which can be upgraded to 2 million hectoliters. The portfolio consists of the regional beer brands including Zhigulevskoye, Yantarnoe, Rizhskoe, Komanda, Gubernatorskoe, and Brandmayor, which represented a total volume of 557,000 hectolitres of beer. In 2004, national market share of Baikal Brewery was 0.6% and market share in the Siberian region was 13%.

Since August 2004, Heineken has acquired Volga brewery in Nizhny Novgorod (Northwest of Volga), Shikhan Brewery in Sterlitamak (Southeast of Volga), Sobol brewery in Novosibirsk (West Siberia) and Patra Brewery in Yekaterinburg (Urals). Recently, Heineken announced the signed agreement to acquire Stepan Razin Brewery in St. Petersburg (North-West) and today Heineken announced it has signed an agreement to acquire Baikal Brewery in Irkutsk (East Siberia).

Following the closure of the acquisitions of both the Stepan Razin and Baikal Breweries, Heineken in Russia will hold a portfolio of the international and national brands: Heineken, Buckler, Bochkarev, Ohota, Stepan Razin, Löwenbrau (the latter is brewed under license), Draught Guinness and Kilkenny (distribution from 1 July 2005) and the regional brands Shikhan, Sedoy Ural, Solyanaya Pristan, Okskoye, Volga, Rusich, Sobol, Patra, Strelets, Zhigulevskoye, Kalinkin, Ordinar, Yantarnoe, Rizhskoe, Komanda, Gubernatorskoe and Brandmayor.

Heineken say that the Russian beer market is expected to grow by more than 5% to over 89 million hectolitres in 2005.