Russian FMCG Brand Launches in Western Europe on Continuing Basis

17/04/07 In Edinburgh Castle, President of Baltika Breweries Anton Artemiev and Director of Scottish & Newcastle Plc. John Nicolson signed a License Agreement to start production of the brand Baltika №3 Classicheskoye beer in Great Britain.

Beginning in May 2007, Russia's number one beer brand will be produced and filled in 0.33 liter glass bottles at the Camerons Brewery in the city of Hartlepool.

At the signing ceremony of the Agreement, Anton Artemiev said, "The start of licensed production in Western Europe of Baltika, one of Russia's most popular brands, is a natural step in the process of integrating Russia into the world economy."

The selection of Baltika №3 brand is the result of extensive research into consumer preferences. More than half of those polled consider Baltika to be an integral part of Russian culture and the most popular Russian brand in Great Britain. At the end of 2006, more than 500,000 liters of Baltika №3 had been sold in Great Britain.

Baltika №3 is positioned in Great Britain in the segment of International Specialty Beers (or World Beers) and has a premium price positioning. The brand is intended for cosmopolitan consumers who are open to appreciation of another culture and wish to try something new. The core target audience is well-educated young people aged 25-35.

In connection with the start of license production, there are plans to significantly broaden distribution during 2007. In the on-trade segment alone (bars, cafes, restaurants), Baltika №3 will be available in 2,800 points of sale by the end of 2007, compared to 500 today. Cooperation with the main very large retail chains such as TESCO, Waitrose, and Sainsbury will also be developed. Due to the forecast, to the end of the fourth quarter, Baltika №3 will appear in more than 1500 retail outlets.

Assumed sales volume of Baltika №3 in Great Britain this year exceeds 1 mln liters.

Baltika Breweries began exporting its products abroad in 1999. Over the years it has acquired the status of an international company which competes successfully with the leaders of the brewing industry worldwide. Baltika accounts for more than 80% of all export shipments of Russian beer. Its outstanding contribution to the expansion of foreign economic relations and development of export has resulted in the Ministry of Economic Development and Trade of the Russian Federation awarding the Company the title of "Best Russian Exporter" five times in row.

In February 2006 production of Baltika was launched in Ukraine. By the end of the year, sales of Baltika beer in Ukraine had grown significantly (+37%), more than double the rate of growth of the Ukrainian beer market as a whole.

In 2006, the total sales volume of Baltika Breweries' brands abroad (including license production) amounted to 18 million deciliters, which is 27% more than in 2005. The Baltika brand accounted for more than 80% of the Company's sales abroad.

Baltika Breweries signed an agreement with Scottish &Newcastle Plc. for regular shipments of Baltika beer on the market of Great Britain in 2003. In the autumn of 2004, a Russian pub called STAVKA was opened in Glasgow, Scotland and one of the rooms - Dvor Baltika — was named in honour of the famous Russian beer brand.

Ever since it entered the market, Baltika has regularly sponsored events which acquaint the British public with Russian culture and traditions, presenting everything that is very best in contemporary Russia.

In particular, the Baltika brand twice was General Partner of the Russian Winter Festival on Trafalgar Square, which takes place in London each year on the day before so called Russian Old New Year (January 14). At the 2007 Festival, Baltika №3 sold for a record price of 4.50 pounds sterling (circa 220 rubles) per 0.5 liter bottle. For one day around 5000 liters of Baltika №3 on the amount of more than 22,500 pounds sterling were sold.