4148852

Industry Review – September 27, 2011 Food and beverage Main product groups: structure and dynamics of production TOP 10 manufacturers in 2010 by major product groups Balance of production and foreign economic activity

Industry Review - Food and beverage

Erste Bank – September 27, 2011

Summary Despite the gradual reduction of the share of expenditure on food, households of Ukraine still spend half their budgets on food. This reflects the high value of this sector to the economy. Price increase for agricultural products on world markets combined with steady demand have created favorable conditions for development of food processing industry. Stabilization of the country's economic state has allowed food and beverage to attract more long-term loans on the capital market. In late 2009, the share of loans with term more than 5 years increased from 2% to 12%. Overall, from the beginning of 2009 the volume of UAH loans increased by half. Since mid-2010 the volume of loans in foreign currency grows. It shows promising reliability of industry as the borrower. The share of exports of food and beverage from total Ukraine's exports over the past three years is the largest among neighboring countries. Most powerful part of the export processing industry is the production of sunflower oil. Ukraine is the largest manufacturer and exporter of this product in the world. Also significant amounts of cheese, vodka, beer and cigarettes are exported. This forms the highly competitive industry in foreign markets. Ukraine moves towards the free trade zone with the EU. The competitiveness of domestic products in this context promises to open new perspectives for food and processing industry and the economy as a whole.



Introduction This review focuses on the food and beverage industry. The basis for the analysis is the group of goods named "Processed food" in the state classification of industrial products (section 15 DKPP). Also the corresponding groups of food commodities of the Ukrainian Commodity Classification for Foreign Economic Activity (UKTZED) are analyzed. The purpose of this report is to provide information about the structure of the industry and analyze its activity in capital markets.

The value of food and beverage industry for local and global economy Food industry is one of the leading industries of the country in terms of consumption in the domestic market and export volume of finished products. This is caused by strong agriculture coupled with significant expenditures of households on food.

65 65 63 59 59 58 57 53 51 49 50

29 25 28 31 32 32 32 35 36 35 35

0%

50%

100%

`99 `00 `01 `02 `03 `04 `05 `06 `07 `08 `09

Households expenses structure

Food and non-alcoholic drinks Alcoholic drinks and tobaccoNonfood goods and services Nonconsumer total expenses

Source: Ukrstat With the financial crisis the volumes food production began to decline, but in 2010 returned back to its growth trend. Compared with neighboring countries, Ukraine consistently demonstrates a positive increase in production compared with the baseline period 1999-2001.

-20-15-10

-505

101520

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

2007 2008 2009 2010 2011

Food-processing, y/y industrial output index

%

-20-10

010203040 Food production index deviation

(1999-2001 = 100%)

2007 2008 2009

%

Source: Ukrstat Source: Bloomberg



Exports of food and processing industry makes up almost a quarter of total country exports. This is the highest level among neighboring countries. Import of the industry is 10% of total imports, which is similar to the share of food import in total imports of the Eurozone.

05

10152025 Food exports

(% of merchandise exports)

2007 2008 2009

%

0

5

10

15

20 Food imports (% of merchandise imports)

2007 2008 2009

%

Source: Ukrstat Source: Bloomberg

Food and beverage and capital markets Food and food processing industry is an active borrower in the domestic market. The volume of loans to food and beverage amounts 6% of all loans of Ukrainian banks.

5,0%5,5%6,0%6,5%7,0%

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2009 2010 2011

Food and beverage loans share in total bank loans

UAH loans share FX loans share

Source: NBU Industry has been actively credited since 2009. With the onset of the crisis the volume of credit granted (especially in foreign currencies) began to decline. A more active lending resumed in 2010, and in 2011 the volume of UAH loans reached new record levels. Since 3Q 2010 the total amount of foreign currency loans increases. The share of overdue foreign currency loans for 2009 - 2010 years increased from 5% to 15% and stabilized at this level in 1Q 2011. The percentage of overdue UAH loans increased during the crisis period from 6% to 11%, and also stabilized at this level in 1Q 2011.

5%

7%

9%

11%

13%

10

12

14

16

18

20

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2009 2010 2011

UAH loans

Total UAH loans % of UAH overdue loans

млрд.грн.UAH bn

0%

5%

10%

15%

20%

10

11

12

13

14

15

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2009 2010 2011

FX loans

Total FX loans % of FX overdue loans

UAH bn

Source: NBU Source: NBU



During 4Q 2009 the share of long-term loans to food and beverage has grown from 2% to 10%. From 2009 and on the share of long-term loans in foreign currency is gradually growing. Since 2009 the share of loans in foreign currency for more than five years term increased from 6% to 12%. Also in 2010 share of loans trerm from 1 to 5 years is growing. This generally reflects the increasing stability of the industry.

0%20%40%60%80%

100%

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2009 2010 2011

UAH loans

UAH loans, year or less UAH loans, 1 to 5 yearsUAH loans, over 5 years

0%20%40%60%80%

100%

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2009 2010 2011

FX loans

FX loans, year or less FX loans, 1 to 5 yearsFX loans, over 5 years

Source: NBU Source: NBU

Industry structure Industry produces all major types of food and beverage production. Specific of the industry is defined by agriculture.

0200400600800

1000

Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May

2009 2010 2011

Main food and beverage products manufacture

Meat products Dairy products BakeryOils and plant fats Sweets Non-alcoholic drinksAlcoholic drinks

tsd tons

1,3; 6% 1,7;

7%

1,7; 8%

3,3; 14%

1,0; 4%

10,2; 45%

3,7; 16%

Main food and beverage products manufacture in 2010, mn tons

Meat productsDairy productsBakeryOils and plant fatsSweetsNon-alcoholic drinksAlcoholic drinks

Source: Ukrstat Source: Ukrstat Sunflower oil and vegetable fats Sunflower oil is the lion's share of production of oils and fats. As of 2010, Ukraine is the largest producer and exporter of sunflower oil in the world.

2 667; 16%

2 533; 15%

2 082; 12%

671; 4%306; 2%

7 147; 43%

Sunflower oil world production 2010/11 (10M), tsd tons

Ukraine EU-27

Russia Turkey

China Pakistan

South Africa USA

India Kazakhstan

Other

2 500; 57%

160; 4%140; 3%

1 140; 26%

Sunflower oil world export 2010/11 (10M), tsd tons

Ukraine EU-27

Russia Turkey

South Africa USA

Paraguay Moldova

Mexico Croatia

Other

Source: Ukrstat Source: Ukrstat



Total production of oil amounted to 3.3 mn tons. This is 14% by volume of natural equivalent from all food produced in the country in 2010.

15%

6%

4%

6%

6%

6%4%7%

7%

39%

Sunflower oil production, 2010, tons

CargilKernelMHPUkr.Chornomor.IndustriyaKirovogradoliyaZaporizh. OliyakombinatZAT KreativDnipropetrovskiy ZavodPologivskiy ZavodOther

13%4%

3%

6%

6%

9%

4%5%6%

44%

Sunflower oil production, 1Q 2011, tons

CargilKernelMHPUkr.Chornomor.IndustriyaKirovogradoliyaZaporizh. OliyakombinatZAT KreativDnipropetrovskiy ZavodPologivskiy ZavodOther

Source: Erste Bank Research Source: Erste Bank Research In 2010 "Kirovograd Oil" and "Ukrainian Chornomorskaya Industry" passed to the property of Kernel Group. Dnipropetrovsk Oil Extraction Plant is owned by Bunge Ukraine. Average output of oil extraction plants 1Q 2011 has not changed significantly since 2010.

0

100

200

300

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Sunflower oil producers

Cargil Kernel MHPUkr.Chornomor.Industriya Kirovogradoliya Zaporizh. OliyakombinatZAT Kreativ Dnipropetrovskiy Zavod Pologivskiy ZavodOther

tsd tons

0%20%40%60%80%

100%

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Sunflower oil producers

Cargil Kernel MHPUkr.Chornomor.Industriya Kirovogradoliya Zaporizh. OliyakombinatZAT Kreativ Dnipropetrovskiy Zavod Pologivskiy ZavodOther

Source: Erste Bank Research Source: Erste Bank Research Sunflower oil is inherent in the natural seasonality. In the period from 2008 till 2011 its production increased every year. TOP 10 plants that produce oil account for more than half the output of the country. The number of smaller producers is gradually decreasing. Market leaders in recent years are Krenel Group and Bunge Ukraine. Trademarks of Krenel Group: "Schdriy Dar", "Chumak", "Stozhar," "Lybonka", "Oriya". Trademarks of Bunge Ukraine: "Oleyna", "Zolota kraplynka", "Rozumnytsya" Less in production capacity, but significant in terms of production are: UkrOliya ("Dykanka", "Dykansky Khutorok", "Maslynka», «Garna»), Oliyar ("Mayola"), Polohovskyy oil extraction plant ("Slavia"), Victor and Co. ("Korolivskyy Smak").

2 000

4 000

6 000

8 000

10 000

12 000

14 000

2007 2008 2009 2010 2011

Sunflower oil producer and export prices

Price of sunflower oil, EXW, demand, companiesPrice of sunflower oil, FOB, export

UAH/ ton

0

2 000

4 000

6 000

8 000

10 000

0,0

100,0

200,0

300,0

400,0

Jan

Feb

Mar

Apr

May Jun

Jul

Aug

Sep

Oct

Nov

Dec

Oil export 2010:price and volume

Sunflower oilOther fatsSunflower oil export price, UAH/ton

tsd tons UAH/ ton




0,0

0,5

1,0

1,5

2,0

2,5

3,0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Oils and fats export 2010

Sunflower oil Other fats

UAH bn

18,7; 84%

3,5; 16%

Oils and fats import 2010, UAH bn

Sunflower oil

Other oils and fats

Source: Ukrstat Source: Ukrstat Sunflower oil is 84% of exports of oils and fats by 2010. Seasonality of export follows the seasonality of production with a shift in a month. Export of sunflower oil is growing rapidly. In 2010 it was exported more than 90% of oil produced during this calendar year.

050100150200250300350

050

100150200250300350

Jan

Feb

Mar Ap

r

May Jun

Jul

Aug

Sep

Oct

Nov Dec

Sunflower oil production and export, 2010, tsd tons

Production Export

tsd ton

2,7; 92%

0,2; 8%

Sunflower oil production and export, 2010, mn tons

Export

Production for domestic market

Source: Ukrstat Source: Ukrstat In the last three years the largest importer of Ukrainian sunflower oil was India. The share of exports to India to total exports in the 2008/09 season was 20%, in 2009/10 - 23%, in 2010/11 - 26%. The second and third largest export volumes are to Turkey and Egypt. The share of Turkey in the 2010/11 season is 12% of all exports, the share of Egypt is 9%.

603; 26%

283; 12%

207; 9%174;

7%150; 6%

132; 6%

64; 3%

527; 22%

Ukrainian sunflower oil world export by countries, 2010/11 (10M), tsd tons

India Turkey

Egypt Netherlands

Russia Italy

Spain Belarus

Saudi Arabia Georgia

Other

598; 23%

124; 5%

379; 14%

170; 6%

64; 2%

114; 4%

67; 3%

926; 35%

Ukrainian sunflower oil world export by countries, 2009/10, tsd tons

India Turkey

Egypt Netherlands

Russia Italy

Spain Belarus

Saudi Arabia Georgia

Other




Almost two-thirds of all imports of oils and fats in 2010 is palm oil. 19% of imports are food and margarine mixture, 9% for palm kernel and coconut oils.

0,0

0,4

0,8

1,2


Oils and fats import 2010

Other vegetable fats and oils Margarine; food fat mixturesPalm kernel, coconut oils Sunflower oilPalm oil Other fats

UAH bn

0,2; 4%

0,9; 19%

0,4;9%

0,01; <1%

3,0; 63%

0,2; 4%Oils and fats import 2010, UAH bn

Other vegetable fats and oils

Margarine; food fat mixtures

Palm kernel, coconut oils

Sunflower oil

Palm oil

Other fats

Source: Ukrstat Source: Ukrstat Meat production Production of meat products almost fully meets the domestic market demands. Total production of meat products in natural equivalent accounts for 6% of total food production in 2010.

020406080

100120140

Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May

2009 2010 2011

Meat production, tons

Pork Beef Fresh Poultry Frozen Poultry Sausages

tsd tons

0%20%40%60%80%

100%

Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May

2009 2010 2011

Meat production, tons

Pork Beef Fresh Poultry Frozen Poultry Sausages

44,5

55,5

66,5

7

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2007 2008 2009 2010 2011 2012

Cattle population, mn

Stock Trend Stock F Trend F

66,5

77,5

88,5

9


2007 2008 2009 2010 2011 2012

Pig stock, mn

Stock Trend Stock F Trend F Source: Ukrstat Source: Ukrstat The structure of meat products remains almost unchanged over the past two years. The exception is the production of beef, which is being gradually reduced. At the same time the share of pork production increases. These two trends are long term. They are a direct reflection of the dynamics of changes in cattle and pigs population.



0

20

40

60

80

100

120


Export 2010: Meat and edible offal

Other meat and edible offalPork, fresh, chilled or frozen:Meat and edible offal of poultryMeat of bovine animals, frozen:

UAH mn

0

100

200

300

400

500

600


Import 2010: Meat and edible offal

Other meat and edible offalPork, fresh, chilled or frozen:Meat and edible offal of poultryMeat of bovine animals, frozen:

UAH mn

Source: Ukrstat Source: Ukrstat Exports of meat and edible offal amounted to less than a quarter of imports in 2010. The basis of exports made meat of cattle and poultry and edible offal of poultry. The largest volume of imports in monetary terms have pork and poultry products. Shelf, sausages and canned meat Prepared meat products represent over 20% of all meat products. Production of finished products has no seasonality. The monthly total production ranges from 30 to 40 thousand tons. The total production of this group of goods in 2009 decreased compared to 2008. In 2010, total production is gradually increasing.

01020304050

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Shelf, sausages and canned meat

OTHER TOV "VMP"PAT "GORLIVSKIY MK" STOV "DRUZHBA NARODIV"ZAT "LUGANSKIY MK" ZAT "UKRAINSKIY BEKON"VAT "YATRAN" TOV "YUVILEYNIY"TOV "GLOBINO" TOV "FAVORIT"MYRONIVSKIY MPZ

tsd tons

0%20%40%60%80%

100%

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Shelf, sausages and canned meat

OTHER TOV "VMP"PAT "GORLIVSKIY MK" STOV "DRUZHBA NARODIV"ZAT "LUGANSKIY MK" ZAT "UKRAINSKIY BEKON"VAT "YATRAN" TOV "YUVILEYNIY"TOV "GLOBINO" TOV "FAVORIT"MYRONIVSKIY MPZ

Source: Erste Bank Research Source: Erste Bank Research TOP 10 manufacturers in 2010 produced 46% of finished meat products in physical terms. The same list of manufacturers for 1Q 2011 produced more than half of production. This shows the consolidation trend of the industry.

7%7%

5%5%4%4%

3%4%

3%4%

54%

Shelf, sausages and canned meat, 2010, tons

MYRONIVSKIY MPZTOV "FAVORIT"TOV "GLOBINO"TOV "YUVILEYNIY"VAT "YATRAN"ZAT "UKRAINSKIY BEKON"ZAT "LUGANSKIY MK"STOV "DRUZHBA NARODIV"PAT "GORLIVSKIY MK"TOV "VMP"OTHER

9%8%

6%

3%

5%

5%4%

3%4%4%

49%

Shelf, sausages and canned meat, 1Q 2011, tons

MYRONIVSKIY MPZTOV "FAVORIT"TOV "GLOBINO"TOV "YUVILEYNIY"VAT "YATRAN"ZAT "UKRAINSKIY BEKON"ZAT "LUGANSKIY MK"STOV "DRUZHBA NARODIV"PAT "GORLIVSKIY MK"TOV "VMP"OTHER

Source: Erste Bank Research Source: Erste Bank Research



The total export value of finished meat products in 2010 amounted to UAH 33 mn. Sausages and similar products have been exported to UAH 10 mn. Packaged and preserved meat were exported to 23 mn. The largest share of exports accounted for canned meat products from cattle (UAH 11 mn).

108

0,697,84

Production Export Import

Other prepared or preserved meat, offal or blood, 2010, tsd tons

Source: Ukrstat Almost all prepared sausages and similar products of meat produced in 2010 were consumed in the domestic market. Out of 108 thousand tons of other finished meat products 7% were exported in physical terms.

012345


Export 2010: Shelf, sausages and canned meat

Sausages and meat products, meat offal, food preparations, manufactured from these articles:Prepared or preserved meat, meat offal or blood:

UAH mn

0,00,51,01,52,02,53,03,5

Jan Feb Mar Apr May Jun Jul Aug Sep Oct NovDec

Export 2010: Prepared or preserved meat

of pork of poultryof liver of any animal of cattlehomogenous prepared food other

UAH mn

Source: Ukrstat Source: Ukrstat Imports of products in 2010 is characterized by rapid growth. Most of the growth was generated with import of finished products and canned pork.

05

10152025303540


Import 2010: Shelf, sausages and canned meat


UAH mn

05

10152025303540


Import 2010: Shelf, sausages and canned meat


UAH mn




Fresh poultry Since 2007 there is a clear tendency to increase of poultry population. It naturally leads to increase of poultry meat production. Market of poultry is dominated by a several large vertically integrated agricultural holdings. The most powerful producer in physical volume terms is Myronivsky Hlib Product (MHP)

130150170190210230250270


2007 2008 2009 2010 2011 2012

Poultry, mn


0

20

40

60

1Q 2Q 3Q 4Q 1Q

2010 2011

Fresh poultry

Other CJSC "KURGANSKY Broiler"Volodymyr-Volin. Poultry "Peremoga NOVA" SubsidiryLLC "RUBI ROSES AGRIKOL CO" LLC "Agro-OVEN"DNІPROVSKY Poultry CJSC OREL LIDERCJSC "Druzhba NARODIV-NOVA" LLC "Complex Agromars"CJSC MHP

tsd tons

Source: Erste Bank Research Source: Erste Bank Research MHP produces one third of poultry meat. The second in output is the Complex Agromars. Its production share makes up 14% of 2010 and 16% of 1Q 2011. TOP 10 manufacturers make up three quarters of all manufacturing of industry both in 2010 and 1Q 2011.

33%

14%8%8%

3%4%3%3%2%

22%

Fresh poultry, 2010, tons

CJSC MHPLLC "Complex Agromars"CJSC "Druzhba NARODIV-NOVA"CJSC OREL LIDERDNІPROVSKY PoultryLLC "Agro-OVEN"LLC "RUBI ROSES AGRIKOL CO""Peremoga NOVA" SubsidiryVolodymyr-Volin. PoultryCJSC "KURGANSKY Broiler"Other

32%

16%8%

7%6%

3%2%

26%

Fresh poultry, 1Q 2011, tons

CJSC MHPLLC "Complex Agromars"CJSC "Druzhba NARODIV-NOVA"CJSC OREL LIDERDNІPROVSKY PoultryLLC "Agro-OVEN"LLC "RUBI ROSES AGRIKOL CO""Peremoga NOVA" SubsidiryVolodymyr-Volin. PoultryCJSC "KURGANSKY Broiler"Other

Source: Erste Bank Research Source: Erste Bank Research Production of frozen poultry meat amounted to 7% of total production of poultry meat in 2010. One third of frozen poultry meat was exported in 2010. Imports of frozen poultry products exceeded frozen poultry production more than three-fold.

05101520253035

05

101520253035

Jan

Feb

Mar Ap

r

May Jun

Jul

Aug

Sep

Oct

Nov Dec

Production, import and export of frozen meat of poultry, 2010

Production Import Export

tsd tons

51 18

166


Production, import and export of frozen meat of poultry, 2010




Exports of frozen poultry in 2010 consisted of chicken carcasses and their parts and offal. During this period mostly frozen chicken carcasses and offal were imported.

05

1015202530354045


Export 2010: Meat and edible offal of poultry

Chickens not cut in pieces, frozenParts of chickens and offal, frozenOther meat and offal of poultry

UAH bn

020406080

100120140160


Import 2010: Meat and edible offal of poultry

Parts of chickens and offal, frozenOther meat and offal of poultry

UAH bn

Source: Ukrstat Source: Ukrstat Beef and pork, fresh and frozen Production of meat of slaughtered animals and products of it is uniformly distributed among a large number of plants.

05

10152025303540

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Meat other than poultry: ТОР 10 manufacturers in 2010

TOP 10 manufacturers in 2010 OTHER

tsd tons

02468

10

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Meat other than poultry: ТОР 10 manufacturers in 2010

"Kremenchugmiaso" JSC "ANTONIVSKYY MK" Ltd. "Agro-Oven" LLC "Lugansk MK" CJSCMK "YATRAN" "HORLIVSKYY MK" PJSC"ZEUS" Ltd. "MK MELITOPOLSKYY" JSC"APK-INVEST" JSC "Globino" Ltd.

tsd tonstsd tons

Source: Ukrstat Source: Erste Bank Research TOP 10 manufacturers accounted for one third of the industry production in 2010. Industry tends to consolidate.

6% 6%4%

3%3%3%2%2%

2%67%

Meat, fresh and frozen, 2010, tons

"Globino" Ltd. "APK-INVEST" JSC"MK MELITOPOLSKYY" JSC "ZEUS LTD" Ltd. "HORLIVSKYY MK" PJSCMK "YATRAN""Lugansk MK" CJSC "Agro-Oven" LLC"Kremenchugmiaso" JSC"ANTONIVSKYY MK" Ltd.OTHER

7%7%

3%1%2%3%

3%71%

Meat, fresh and frozen, 1Q 2011, tons

"Globino" Ltd. "APK-INVEST" JSC"MK MELITOPOLSKYY" JSC "ZEUS LTD" Ltd. "HORLIVSKYY MK" PJSCMK "YATRAN""Lugansk MK" CJSC "Agro-Oven" LLC"Kremenchugmiaso" JSC"ANTONIVSKYY MK" Ltd.OTHER

Source: Erste Bank Research Source: Erste Bank Research



Exports of meat of slaughtered animals was 5% of the total production in 2010. 63% of frozen beef produced was exported. Half of the meat imports in 2010 was fresh and frozen pork.

01122334

0,00,51,01,52,02,53,03,5

Jan

Feb

Mar Ap

r

May Jun

Jul

Aug

Sep

Oct

Nov Dec

Production, import and export of frozen beef, 2010


tsd tons

0510152025303540

05

10152025303540

Jan

Feb

Mar Ap

r

May Jun

Jul

Aug

Sep

Oct

Nov Dec

Production, export and import of fresh and frozen pork, 2010


tsd tons

Source: Ukrstat Source: Ukrstat Dairying Dairying is inherent in a clear seasonality. The largest volume of production in physical terms is the production of liquid milk and cream.

050

100150200250300

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Milk products and ice cream

Ice cream, food ice Cheese rennet, curdOther dairy products Powder milkLiquid milk and cream Butter (from milk)

tsd tons

6%

30%

3%39%

18%

4%

Milk products , 2010, tons

Butter (from milk)

Liquid milk and cream

Powder milk

Other dairy products

Cheese rennet, curd

Ice cream, food ice

Source: Ukrstat Source: Ukrstat TOP 10 manufacturers make up a third of the industry production in physical terms during periods of 2010 and 1Q 2011. The scale of the largest producers is sufficient to minimize the seasonal factor.

050

100150200250300350

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Dairy products: share of TOP 10 manufacturers in 2010

Other manufacturers TOP 10 manufacturers in 2010

tsd tons

0102030405060708090

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011


"MOLOCHNYY DIM" Ltd. OJSC KPEMEHCHUK MMZPJSC "BEPSHADMOLOKO" OJSC "GALAKTON"JSC "Pridneprovskoy" "Danone Dnepr" Ltd. JSC "VIM-pain-DAN" "Lustdorf" Ltd. CJSC MMW DONETSK no.2 JSC "GALICIA"

tsd tons

Source: Ukrstat Source: Erste Bank Research



The largest producer by volume in physical terms is CJSC "Galicina".

15%

12%

11%

10%10%9%

9%

9%

8%7%

Dairy products: share of TOP 10 manufacturers in 2010, tons

JSC "GALICIA"

CJSC MMW DONETSK no.2

"Lustdorf" Ltd.

JSC "VIM-pain-DAN"

"Danone Dnepr" Ltd.

JSC "Pridneprovskoy"

OJSC "GALAKTON"

PJSC "BEPSHADMOLOKO"

OJSC KPEMEHCHUK MMZ

"MOLOCHNYY DIM" Ltd.

19%

13%

12%

11%

11%

10%

9%

8%7%

Dairy products: share of 2010TOP 10 manufacturers in 1Q 2011, tons

JSC "GALICIA"

CJSC MMW DONETSK no.2

"Lustdorf" Ltd.

JSC "VIM-pain-DAN"

"Danone Dnepr" Ltd.

JSC "Pridneprovskoy"

OJSC "GALAKTON"


OJSC KPEMEHCHUK MMZ

"MOLOCHNYY DIM" Ltd. Source: Erste Bank Research Source: Erste Bank Research Exports of dairy products in 2010 had exceeded imports four times.

0

100

200

300

400

500

600

700


Dairy products: export and import 2010

Import Export

UAH bn

0%10%20%30%40%50%60%70%80%90%

100%


Dairy products: export and import 2010

Import Export Source: Ukrstat Source: Ukrstat 79% of exports of dairy products are all kinds of cheese. The second largest group of exports (14%) in monetary terms is condensed milk and cream with sugar. The remaining groups of dairy products is up to 7% of industry export in 2010.

050

100150200250300350400450


Dairy products: exports in 2010

Other dairy productsMilk and cream, concentrated or sugarCheese of all kinds, milk cheese

UAH bn

1%1%

14%

2%3%

79%

Dairy products: export 2010

Butter, fats from milk

Buttermilk, yogurt, kefir

Milk and cream, concentrated or sugarMilk and cream non-condensed without sugarWhey

Cheese of all kinds, milk cheese

UAH bn




Cheese of all kinds make up the largest share of imports of industry in 2010. It accounts for 45% of the import in monetary terms. 29% of imports accounted for butter and milk fat. 10% of import are imports of condensed milk and cream with sugar and 10% of import are dairy drinks (buttermilk, yogurt, curd, kefir, etc.). All other dairy products account for 6% of imports in monetary terms.

050

100150200250


Dairy products: import 2010

Cheese of all kinds, milk cheeseWheyMilk and cream non-condensed without sugarMilk and cream, concentrated or sugarButtermilk, yogurt, kefirButter, fats from milk

UAH bn

29%

10%

10%

2%4%

45%

Dairy products: import 2010

Butter, fats from milk

Buttermilk, yogurt, kefir

Milk and cream, concentrated or sugarMilk and cream non-condensed without sugarWhey

Cheese of all kinds, milk cheese

UAH bn

Source: Ukrstat Source: Ukrstat Liquid milk and cream Production of liquid milk and cream is the largest subindustry by physical production volume. The largest volume of production in 2010 in physical terms is LLC "Lustdorf." TOP 10 manufacturers are 40% of the total production in 2010. The share of the mentioned manufacturers of the total volume gradually increased over the past three years.

0102030405060708090

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011


OTHER MANUFACTURERS TOP 10 manufacturers

tsd tons

25%

18%

9%9%

7%

7%

7%

6%6%

6%

Shares of TOP 10 manufacturers in 2010, tons

"Lustdorf" Ltd.


CJSC Ternopil MZ

CJSC MMW DONETSK number 2

MOHYLIV-Podolsk MZ Ltd.

CJSC LITYHCKYY CN

Tulchinsky MRZ Ltd.

Burinska PLANT

JSC AK "Pridneprovskoy"

JSC "VIMM-BILL-DANN UKRAINE" Source: Ukrstat Source: Erste Bank Research Liquid milk and cream make up 3% of exports of dairy products. Export of this group of products is almost entirely composed of milk with average content of fat. Imports of liquid milk and cream is 2% on imports of dairy products. 87% of imports of liquid milk and cream falls on products containing more than 6% fat mass.

0,6; 1%

94,8; 97%

2,3; 2%Milk and cream, non-condensed:

export 2010, UAH bn

containing fats not exceeding 1 wt.%:

fats containing more than 1 wt.% but not more than 6 wt.%:fats containing more than 6 wt.%:

0,0; 0%

3,2; 13%

22,0; 87%

Milk and cream, non-condensed: import 2010, UAH bn

containing fats not exceeding 1 wt.%:

fats containing more than 1 wt.% but not more than 6 wt.%:fats containing more than 6 wt.%:




Despite fluctuations in average export and import prices for liquid milk, in 2010 any significant changes in prices of these products did not take place.

02468

1012141618


Liquid milk and cream: export prices in 2010

fats containing more than 6 wt.%:fats containing more than 1 - 6 wt.%containing fats not exceeding 1 wt.%:

UAH/ton

05

101520253035


Liquid milk and cream: import prices in 2010

fats containing more than 6 wt.%:fats containing more than 1 - 6 wt.%containing fats not exceeding 1 wt.%:

UAH/ton

500

800

1100

1400

1700


2007 2008 2009 2010 2011 2012

Milk, tsd tons


Source: Erste Bank Research Most of the other dairy products are produced and consumed domestically. Export and import of these small groups of goods is insignificant both in physical and in monetary terms. This is primarily due to a short period of storage of such products.

020406080

100120140

1кв

2кв

3кв

4кв

1кв

2кв

3кв

4кв

1кв

2кв

3кв

4кв

1кв

2008 2009 2010 2011

Other dairy products manufacture

Yogurt Flavored Other dairy products Canned milk

tsd tons

Source: Ukrstat



Cheese The total production of cheese slowly declines over the past three years. Seasonal fluctuations experiences manufacture of all types of cheese except fatty cheese. Fatty cheese is the largest among product groups in physical terms. They represent over 40% of total production in physical terms.

010203040506070

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Cheese

Fat Cheese Grated cheese, powderProcessed cheese Cheese, sour and fresh

tsd tons

0%20%40%60%80%

100%

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Cheese

Fat Cheese Grated cheese, powderProcessed cheese Cheese, sour and fresh

tsd tons

Source: Ukrstat Source: Ukrstat TOP 10 manufacturers form 44% of the total production of cheese of all kinds in 2010.

010203040506070

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Dairy products: share of ТОР 10 producers in 2010


tsd tons

16%

14%

13%

11%9%

8%

8%

7%

7%7%

ТОР 10 producers 2010:shares of production 2010, tons

CJSC PYPYATYHCKYY CZ

JSC "HADYACHSYR"

JSC "Dubnomoloko"

"Menskyy Syr" Branch

JSC "Bashtanka"

JSC "VO" MOLIS "

OJSC "Shostka"

JSC "Zolotonosha"

"Okhtyrka SK", PE "ROS"

OJSC "HOBOKAXOBCKYY SZ" Source: Ukrstat Source: Erste Bank Research 99% of cheese exports in 2010 are fatty cheeses. This group of cheeses is also the largest share of imports in monetary terms (41%). Processed cheese is 35% of imports. The fresh curd comprises 20% of total imports of cheese in 2010.

0

5

10

15

20

25

0

5

10

15

20

25

Jan

Feb

Mar Ap

r

May Jun

Jul

Aug

Sep

Oct

Nov Dec

Production, import and export of hard cheese, 2010


tsd tons

201; 41%

19; 4%

96; 20%

170; 35%

1 All types of cheese and curd: import, 2010, UAH mn

fat cheese

blue cheese and the like

fresh and sour milk cheese

melted cheese

cheeses in powder




Ice cream Ice cream production is inherent in the natural seasonality of the largest possible fluctuations shoulder. The output is stable year on year. TOP 10 manufacturers produced 75% of all ice cream in 2010. The most powerful in physical terms of production is Zhytomyr Butter Plant.

0

5

10

15

20

25

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Ice cream: share of TOP 10 manufacturers in 2010


tsd tons

23%

15%

12%11%

10%

10%

7%4%4% 4%

TOP 10 manufacturers of 2010, tons

JSC "ZHYTOMYR MZ""LASUNKA" Ltd. "ELITE" Ltd. LVIV HOLODOKOMB.Firm "LASKA"CJSC "Hercules"JSC "HLADOPROM"JSC "Zaporozhye Ice"JSC "GALICINA""Musketeer" Ltd.

Source: Ukrstat Source: Erste Bank Research Industry fully meets the domestic market. Exports and imports are insignificant. Bakery Natural production of bakery products is 8% in physical terms of total production in 2010. This year the volume of exports amounted to 7% of manufactured products. 47% of the total produced production in 2010 amounted to wheat bread. Wheat-rye bread made up 31% of bakery produced in 2010. 21% of production amounted to bakery and rolls. Other bakery products amounted to 1% this year.

0306090

120150180

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Bakery:commodity structure, 2010

Other Bread wheat-rye Bakery Bread wheat

tsd tons

367; 21%

795; 47%

527; 31%

15,8; 1%

Bakery:product shares, 2010

Bakery and rollsBread wheatBread wheat-ryeOther

Source: Ukrstat Source: Ukrstat TOP 10 manufacturers make up 47% of bakery production of 2010. Manufacturers are sets of plants grouped by regional basis.



0306090

120150180

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Bakery: TOP 10 manufacturers in 2010

Other manufacturers TOP 10 manufacturers

tsd tons

020406080

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Bakery: TOP 10 manufacturers of 2010

"STIOMI-HOLDING" Ltd. JSC Cherkassky Bakery"SALTIVSKY" Bakery Association "HLIB"JSC "HLIB" OJSC "ODESSKY KOROVAI"OJSC "KOROVAI" "KULYNYCHIVSKYY" BakeryJSC "KYYIVHLIB" Subsidiary OJSC "Concern HLIBPROM"

tsd tons

Source: Ukrstat Source: Erste Bank Research The most powerful for physical indicators of production in 2010 is "Kyivhlib" Concern. It has over twenty bakeries in Kyiv region. "Khlibprom" Concern is the second largest by natural production. It has over twenty bakeries in western regions of the country.

32%

15%9%

8%

8%

7%

6%

6%6% 3%

TOP 10 manufacturers of 2010: shares of production in 2010, tons

JSC "KYYIVHLIB" SubsidiaryOJSC "Concern HLIBPROM""KULYNYCHIVSKYY" BakeryOJSC "KOROVAI"OJSC "ODESSKY KOROVAI"JSC "HLIB"Association "HLIB""SALTIVSKY" BakeryJSC Cherkassky Bakery"STIOMI-HOLDING" Ltd.

34%

17%9%7%

8%

2%7%

7%6% 3%

TOP 10 manufacturers of 2010: shares of production in 1Q 2011, tons

JSC "KYYIVHLIB" SubsidiaryOJSC "Concern HLIBPROM""KULYNYCHIVSKYY" BakeryOJSC "KOROVAI"OJSC "ODESSKY KOROVAI"JSC "HLIB"Association "HLIB""SALTIVSKY" BakeryJSC Cherkassky Bakery"STIOMI-HOLDING" Ltd.

Source: Erste Bank Research Source: Erste Bank Research The share of exports of bakery products is relatively small. It is 7% of production in 2010. This is mainly caused by a short period of storage of such products. However, bread and confectionery account for 84% of exports in 2010 in monetary terms. 7% in 2010 accounted for exports of pasta and 7% for finished food products from flour and cereals and malt. Export roasted and fried grain products (eg corn flakes) was 2% of total exports. Exports in physical equivalent are in same proportions as exports in monetary equivalent. For 2010 the average export prices of the mentioned product groups had minor fluctuations.

12; 7%

4; 2%

11; 7%

136; 84%

Preparations of grains, flour: exports in 2010, UAH mn

Production of macaroni dough

Prepared foods (eg corn flakes)

Food preparations of flour, groats, malt

Bakery, flour confectionery

910111213141516

Січ Лют Бер Кві Тра Чер Лип Сер Вер Жов Лис Грг

Preparations of grains, flour: export prices in 2010

Production of macaroni doughPrepared foods (eg corn flakes)Food preparations of flour, groats, maltBakery, flour confectionery

UAH/kg

Source: Ukrstat Source: Ukrstat Imports in 2010 in monetary terms was distributed as follows. Pasta imports accounted for 34% in money terms and 16% in physical volume. Imports of roasted and fried grain products amounted to 5% in money terms and 6% in physical volume. 23% in money terms and 34% in real terms were in food preparations of flour and cereals and malt. Imports of bakery and confectionery was 38% in money terms and 44% in in physical volume.



118; 6%53; 3%

130; 6%

1 695; 85%

Preparations of grains, flour: exports in 2010, tsd tons





199; 16% 65; 6%

419; 34%

538; 44%

Preparations of grains, flour: imports in 2010, tsd tons





Source: Ukrstat Source: Ukrstat Production of sweets Total production of sweets in physical terms was 4% of the total natural production of food and beverage industry. Production dynamics shows clear seasonality, formed mostly by chocolate and cocoa products. The total production consists of three comparable groups in terms of natural volume. These groups are: confectionery, chocolate and cocoa, cookies and cakes.

020406080

100

Jan

Mar

May Ju

lSe

p

Nov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May

2009 2010 2011

Sweets manufacture

Confectionery Chocolate, cocoa Biscuits, waffles

tsd tons

0%20%40%60%80%

100%

Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May Ju

lSe

pN

ov Jan

Mar

May

2009 2010 2011

Sweets manufacture

Confectionery Chocolate, cocoa Biscuits, waffles

tsd tons


020406080

100

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Sweets: commodity structure

Chocolate white, dragee CaramelArticles with sugar other Chocolate products, pastesChocolate Chocolate candyArticles sugar with cocoa Gingerbread productsWaffles

tsd tons

0%20%40%60%80%

100%

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Sweets: commodity structure

Chocolate white, dragee CaramelArticles with sugar other Chocolate products, pastesChocolate Chocolate candyArticles sugar with cocoa Gingerbread productsWaffles

tsd tons

Source: Erste Bank Research Source: Erste Bank Research The structure of sweets in 2010 by major product groups as follows. The biggest natural output is the share of wafers. Waffles are a third of total production. The second volume is the share of caramel - 23%. Chocolates make up 16%. Sugar products with cocoa comprise 12%. 6% are of gingerbread. Chocolate bars and other confectionery up to 4%. The share of white chocolate and jelly beans in total is 1%. In 1Q 2011 the structure of production for these goods remained almost unchanged.



336; 34%

53; 6%119; 12%

161; 16%

37; 4%38; 4%

223; 23%

9; 1%

Sweets: product shares in 2010, tsd tons

WafflesGingerbread productsArticles sugar with cocoaCandyChocolateChocolate products, pastesArticles with sugar otherCaramelChocolate white, dragee

83; 34%

15; 6%25;

10%44; 18%

9; 4%12; 5%

53; 22%

2; 1%

Sweets: product shares in 1Q 2011, tsd tons

WafflesGingerbread productsArticles sugar with cocoaCandyChocolateChocolate products, pastesArticles with sugar otherCaramelChocolate white, dragee

Source: Ukrstat Source: Ukrstat The largest producer by physical volume of sweets in 2010 is PJSC "Roshen". Share of "Roshen" is 27%. The second and third output is JSC "AVK" and PJSC PO "Conti". Share of "AVK" is 14% and share of "Conti" is 12%. Other manufacturers of TOP 10 largest account for a quarter of sweets production. Rest of smaller manufacturers account for less than a quarter of the industry capacity.

0

20

40

60

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Chocolate and sugar confectionery products: commodity structure

JSC "SVITOCH" JSC "Poltavakonditer"Chocolate COMP. "MIR" JSC "KRAFT FOODS UKRAINE"JSC "ODESA-KONDITER" CJSC KB "HARKIV'YANKA"JSC "ZHYTOMYR LASOSHI" CJSC PA "KONTI"JSC "AVK" PJSC "Roshen"

tsd tons

27%

14%

12%7%5%

3%2%

2%

23%

Chocolate and confectionery products: shares of production 2010, tons

PJSC "Roshen"JSC "AVK"CJSC PA "KONTI"JSC "ZHYTOMYR LASOSHI"CJSC KB "HARKIV'YANKA"JSC "ODESA-KONDITER"JSC "KRAFT FOODS UKRAINE"Chocolate COMP. "MIR"JSC "Poltavakonditer"JSC "SVITOCH"OTHER

Source: Erste Bank Research Source: Erste Bank Research Production capacities of the industry are largely working for export. Most of the produced chocolate and cocoa products in 2010 are exported. Import of this group of products is 12% of the total amount of produced and imported products. Most of the imports accounted for 4Q 2010. This coincides with the seasonal increase in production and consumption of this group of products.

0

10

20

30

40

50

0

10

20

30

40

50

Jan

Feb

Mar

Apr

May Jun

Jul

Aug

Sep

Oct

Nov

Dec

Production, export, import of chocolate products with cocoa, 2010


tsd tons

316

201

43

Production Export Imports

Production, export, import of chocolate products with cocoa, 2010, tsd tons

Source: Ukrstat Source: Ukrstat Biscuits and wafers are produced in comparable quantities to chocolate and cocoa, but exported to a lesser extent. 29% of the total amount of produced and imported products of this type is exported, 2% is imported. Seasonal fluctuations in production of wafers and biscuits are less significant than chocolate. Foreign trade area according to the this has a stable export dynamics.



0510152025303540

05

10152025303540

Jan

Feb

Mar Ap

r

May Jun

Jul

Aug

Sep

Oct

Nov Dec

Production, import and export of biscuits and wafers, 2010


tsd tons

336

100 7


Production, import and export of biscuits and wafers, 2010, tsd tons

Source: Ukrstat Source: Ukrstat Soft drinks The biggest in natural output subindustry is 45% of all manufactured products in 2010 by volume. Table and mineral water are 10% of the industry production. The rest falls on soft drinks of all kinds. Production of all types of soft drinks has natural seasonality with peak production, which fall on 2nd and 3rd quarters of the year.

010203040506070

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2009 2010 2011

Waters and soft drinks:commodity structure

Soft drinks Mineral water and tablespoon

mn dal

24; 9%

244; 91%

Water and soft drinks:shares of production in 2010, mn dal

Mineral and tablespoon waters

Soft drinks

Source: Ukrstat Source: Ukrstat Most part of production of soft drinks are refreshing drinks. Lions share of manufactured mineral and table water has carbonated mineral water. Since 2010 4Q the share of non-flavored water increases.

0102030405060

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2009 2010 2011

Soft drinks: commodity structure

Soft refreshing drinks Soft drinks with milk Kvass Soft drinks, other

mn dal

048

121620

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2009 2010 2011

Waters: commodity structure

Water non-flavouredMineral water Non-carbonated

mn dal

Source: Ukrstat Source: Ukrstat The most powerful domestic producer of soft drinks and waters is "Obolon". The share of "Obolon" in 2010 is 44%. Beer and soft drinks factory "Slavutich" held a share of 14% of the total natural volume. Other domestic manufacturers have a share of less than 7% of total production each.



010203040506070

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2009 2010 2011

Water and soft drinks: TOP 10 manufacturers

MYKULYNTSI, "BROVAR" "EKOILLICHPRODUKT" Ltd.JSC "LVIVSKA PIVOVARNYA" First Private Brewery"Okhtyrsky" Plant "Radomyshl""Crimea" Plant "YASEN""OBOLOH" Brewery "SLAVUTICH"

mn dal

148,9; 44%

47,5; 14%

7%

7%

5%4%3%

1% 8%

Mineral water and soft drinks: shares of TOP 10 manufacturers of 2010,

mn dal"OBOLOH" Brewery"SLAVUTICH""YASEN""Crimea" Plant"Radomyshl""Okhtyrsky" PlantFirst Private BreweryJSC "LVIVSKA PIVOVARNYA""EKOILLICHPRODUKT" Ltd.MYKULYNTSI, "BROVAR"OTHER

Source: Erste Bank Research Source: Erste Bank Research Manufacture of fruit and vegetable juices has no clear seasonality. The largest volume of production in 2010 has Odessa cannery. The share of its production is 18%. Beer and soft drinks combine "Radomyshl" amounted to 14% of the total. 10% falls on Saratsky food factory, 9% - to Rahnyansko-Lisovyy cannery. The remaining plants produced less than half the juice in 2010. The share of each of the other producers does not exceed 8% of manufacturing in 2010.

0

20

40

60

80

100

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2009 2010

Fruit and vegetable juices:commodity structure

Fruit and vegetable juices, tsd tons

tsd tons

14%

10%

9%

18%8%7%

7%

5%4%

3%15%

Fruit and vegetable juices: shares of TOP 10 manufacturers, 2010, tons

"Radomyshl"Saratsky Food ProductRAHNYANSKO-LISOVYY PlantODESSKYY PlantPLODOKOMBINAT "Kherson"JSC "ADAMS""PRODTOVARY""POPOVETSKYY" PlantBUSKYY PlantNovomoskovsk PlantOTHER

Source: Ukrstat Source: Erste Bank Research In 2010 95% of the produced beverage is consumed domestically. 5% drinks exported. The share of imports is negligible.

0

10

20

30

40

50

0

10

20

30

40

50

Jan

Feb

Mar Ap

r

May Jun

Jul

Aug

Sep

Oct

Nov Dec

Production, exports, imports of soft drinks, 2010


mn dal

244

13 1


Production, exports, imports: Soft drinks, 2010, mn dal

Source: Ukrstat Source: Ukrstat The share of mineral water consumed in the country in 2010 is 81% of the total volume of production and consumption of this group of products. Exports and imports do not depend on seasonality of this group of products. Export is 10% of production, imports is 6%.



024681012141618

02468

1012141618

Jan

Feb

Mar Ap

r

May Jun

Jul

Aug

Sep

Oct

Nov Dec

Production, export and import of mineral and tablespoon waters, 2010


mn dal

92

127


Production, exports, imports: mineral water, 2010, mn dal

Source: Ukrstat Source: Ukrstat Value of natural output, exports and imports of juices in 2010 is identical to the value for mineral water: 82% for the domestic market, 10% of exports, 6% imported. Exports of juices follows trends in output.

0102030405060708090

0102030405060708090

Jan

Feb

Mar Ap

r

May Jun

Jul

Aug

Sep

Oct

Nov Dec

Production, import and export of fruit and vegetable juices, 2010

Виробництво Імпорт Експорт

tsd tons

741

86 53


Production, exports, imports: fruit and vegetable juices, 2010, tsd tons

Source: Ukrstat Source: Ukrstat The exports structure of juices is determined primarily by favorable conditions for growing apples. 73% of exports of juice in 2010 is apple juice. Tomato and orange juice comprise 6% of natural volume of exports. Fruit and other citrus fruits juices are 5% export. The largest volume of imports is orange juice. Its share is 26% of total imports in 2010. 16% are other citrus juices. 23% for apple juice. Imports of grape juice is 13%. 10% is the share of imports of juices of other fruits and vegetables, 8% for pineapple juice. Grapefruit juice and Pamela takes 3% of imports.

6%36,1;6%

63; 73%

5%5%

Fruit and vegetable juices: shares of exports in 2010, mn tons

Pineapple juice

orange juice

Grape juice (including grape must)

grapefruit juice (including pomelo)

Tomato juice

apple juice

Other citrus fruit juices

juices from other fruits or vegetables

Mixtures of juices

4; 8%

14; 26%

7; 13%

2; 3%

12; 23%

5; 10%

9; 16%

Fruit and vegetable juices: shares of imports in 2010, mn tons

Pineapple juice

orange juice

Grape juice (including grape must)

grapefruit juice (including pomelo)

Tomato juice

apple juice

Other citrus fruit juices

juices from other fruits or vegetables

Mixtures of juices




Alcoholic drinks Production of alcoholic drinks is 16% of the total production volume in 2010. 84% of the total alcohol is malt beer. Dynamics of beer production is seasonal. Output minimum is in early 1Q, rising to the middle 3Q, declines till 4Q begins, sustainable over 4Q and again falls to year minimum in early 1Q.

01020304050

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

2009 2010 2011

Alcohol: commodity structure

Beer, non-alcoholic Wine, brandy, liqueursVodka, strong acloholic drinks Cognac, brandy

mn dal

310; 84%

57; 16%

Alcoholic beverages: shares of 2010, mn dal

Beer, non-alcoholic

Alcoholic beverages except beer

Source: Ukrstat Source: Ukrstat The second largest group of alcoholic products is vodka. Vodka is 74% of all alcohol except beer. 20% accounted for liqueurs, brandy, liqueurs, 6% - for cognac.

0

2

4

6

8

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

2009 2010 2011

Alcohol except beer: commodity structure

Vodka, strong acloholic drinks Cognac, brandyWine, brandy, liqueurs

mn dal

3,2; 6%

42; 74%

12; 20%

Alcoholic beverages except beer:shares of 2010, mln

Cognac, brandy

Vodka, strong acloholic drinks

Wine, brandy, liqueurs

Source: Ukrstat Source: Ukrstat The largest by volumes of beer production in 2009 is JSC “Obolon”. The second by volume in 2009 producer of beer is OJSC "SUN InBev Ukraine" ahead of JSC "Obolon" in 2010 with a share of 32%. Share of JSC "Obolon" in 2010 was 28%. 23% of total production in 2010 accounted for beer and soft drinks factory "Slavutich". 5% took JSC "Lviv Brewery" 4% for “Sarmat" Other manufacturers make up a quarter production of 2010.

010203040

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Beer: TOP 10 manufacturers

OTHER BERDICHEVSKAYA BREWERYHMELNITSKY BREWERY PSC "Crimea"OJSC "BROVAR" "First Private Brewery"PSC "Radomyshl" CJSC "Sarmat"OJSC "Lviv Brewery" PSC "SLAVUTICH"OJSC "SUN INBEV UKRAINE" CJSC "Obolon"

mn dal

0%20%40%60%80%

100%

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Beer: TOP 10 manufacturers shares

OTHER BERDICHEVSKAYA BREWERYHMELNITSKY BREWERY PSC "Crimea"OJSC "BROVAR" "First Private Brewery"PSC "Radomyshl" CJSC "Sarmat"OJSC "Lviv Brewery" PSC "SLAVUTICH"OJSC "SUN INBEV UKRAINE" CJSC "Obolon"

mn dal



87; 29%

72; 24%38; 13%17; 6%10,9; 4%

66; 22%

Beer: producer shares in 2009, mn dal

CJSC "Obolon"OJSC "SUN INBEV UKRAINE"PSC "SLAVUTICH"OJSC "Lviv Brewery"CJSC "Sarmat"PSC "Radomyshl""First Private Brewery"OJSC "BROVAR"PSC "Crimea"HMELNITSKY BREWERYBERDICHEVSKAYA BREWERYOTHER

82; 28%

95; 32%

67; 23%

14; 5%

10; 3%19; 6%Beer: producer shares in 2010, mn dal

CJSC "Obolon"OJSC "SUN INBEV UKRAINE"PSC "SLAVUTICH"OJSC "Lviv Brewery"CJSC "Sarmat"PSC "Radomyshl""First Private Brewery"OJSC "BROVAR"PSC "Crimea"HMELNITSKY BREWERYBERDICHEVSKAYA BREWERYOTHER

Source: Erste Bank Research Source: Erste Bank Research Among the two largest producers by volume in 2010 is «Nemiroff» (21% of production) and LLC "National Alcohol Company" (20% of production). Ltd. "Crimean Vodoka Company" and JSC "Image Holding APS" hold shares 14% and 12% respectively. Lviv Distillery and "Prime" Distillery own shares of 6% and 5% respectively. The remaining producers make less than a quarter of vodka in 2010.

1,31; 21%

1,19; 20%

0,84; 14%

0,77; 12%

0,34; 6%

0,34; 5%

0,71; 12%

Vodka: shares of producers1Q 2011, mn dal "NEMIROFF"

JSC "National Alcohol Company"

"Crimean Vodka Company" Ltd.

"IMAGE Holding APS"

LVIV Distillery

"PRIME" Distillery

"Zlatogor" Distiller

Stanislavska Trade Company

"Atlantis" Ltd.

Lutskyy alcohol beverage works

OTHER

0,23; 31%

0,11; 14%0,10;

13%

0,08; 11%

0,08; 10%

0,06; 7%

0,04; 5%

0,02; 3% Cognac, brandy: shares of producers 1Q 2011, mln

"Shabo" Ltd.

JSC "Odessa Cognac Factory"

Buchach OJSC "GALSPIRIT"

JSC "TAVRIA"

Uzhgorod Cognac Factory

"Koktebel" Cognac factory

"ALEF-VINAL-Crimea" Ltd.

Simferopol wine factory

"AKVAVINTEKS" Ltd

JSC "BAKHCHISARAY"

OTHER Source: Erste Bank Research Source: Erste Bank Research In 2010 9% of beer produced was exported. The amount of beer import is insignificant. Dynamics of exports coincides with the dynamics of production.

0510152025303540

05

10152025303540

Jan

Feb

Mar

Apr

May Jun

Jul

Aug

Sep

Oct

Nov

Dec

Production, export, import of beer, 2010


mn dal

310

29 4


Production, export, import of beer, 2010, mn dal

Source: Ukrstat Source: Ukrstat Seasonality of vodka production did not influence the dynamics of imports in 2010. Exports amounted to a quarter of the total produced and consumed vodka 2010. 4% of vodka imported this year.



0

1

2

3

4

5

6

0

1

2

3

4

5

6

Jan

Feb

Mar Ap

r

May Jun

Jul

Aug

Sep

Oct

Nov Dec

Production, export, import of vodka, 2010


mn dal

42

11 2


Production, export, import of vodka, 2010, mn dal

Source: Ukrstat Source: Ukrstat Peak production of wine in 2010 occurred in the period after the vintage. Exports of wine are not affected by seasonal changes in output. The export of wine was 12% from total volume of production. The share of imports was 11%. Almost the entire volume of imports took place in 4Q 2010.

0

2

4

6

8

10

12

0

2

4

6

8

10

12

Jan

Feb

Mar Ap

r

May Jun

Jul

Aug

Sep

Oct

Nov Dec

Production, exports, imports of wine, 2010


mn dal

50

7 6


Production, exports, imports of wine, 2010, mn dal

Source: Ukrstat Source: Ukrstat Tobacco Manufacture of tobacco products decreases since 2008. In 2010, the market is divided between the four big players. Share of "Phillip Morris Ukraine" is 31%, "Imperial Tobacco Production" - 24%, "JT International" - 27%, JSC "Priluky" is 17%, remaining manufacturers - 1%

020406080

100120140

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2008 2009 2010 2011

Tobacco cigarettes: producers structure

OTHER GallagherJSC PRILUKI JT InternationalImperial Tobacco PRODUCTION PHILIP MORRIS

bn pcs

297; 31%

230; 24%

261; 27%

156; 17%

12; 1%

Tobacco cigarettes: producer shares2010, bn pcs

Philip Morris

Imperial Tobacco Production

JT International

JSC Priluky

Other

Source: Erste Bank Research Source: Erste Bank Research Most significant share of exports in quantity and in physical terms in 2010 were cigarettes. Exports of other tobacco amounted to 15% in monetary terms, exports of raw materials and waste amounted to 5%.



5; 23%

13; 61%

3; 16%

Exports of cigarettes, raw tobacco and waste, 2010, tsd tons

Another tobacco industry production and substitutes

Cigars and cigarettes

Raw tobacco; tobacco waste

234; 15%

1 259; 80%

81; 5%

Exports of cigarettes, raw tobacco and waste, 2010, UAH mn




Source: Ukrstat Source: Ukrstat Imports consisted mostly of raw materials and waste. These two groups accounted for 64% in monetary and 77% in real terms. 19% in monetary terms amounted to cigars and cigarettes, 17% to other industrial production and tobacco substitutes.

17; 17%

6; 6%

77; 77%

Imports of cigarettes, raw tobacco and waste, 2010, tsd tons




682; 17%

779; 19%

2 636; 64%

Imports of cigarettes, raw tobacco and waste, 2010, UAH mn




Source: Ukrstat Source: Ukrstat Exports of cigarettes exceeded imports twice in real terms and almost twice in monetary terms.

12,6

6,2

Export Import

Exports and imports of cigarettes,2010, tsd tons

1 259

770

Export Import

Exports and imports of cigarettes,2010, UAH mn

Source: Ukrstat Source: Ukrstat Half of imports of raw tobacco and waste in money equivalent consisted of tobacco "Virginia" with thermal drying. Tobacco "Barley" and tobacco with dark shadow drying amounted 12% and 13% respectively. A quarter of imports fell to other tobacco (19%) and tobacco waste (6%).



7; 11%

6; 10%

7; 11%

27; 43%

16; 25%

Imports of raw tobacco and waste, 2010, tsd tons

Other tobacco

Dark tobacco, shadow drying

Light air-cured Burley type tobacco

Virginia-type tobacco heat-cured

tobacco waste

430; 19%

267; 12%

290; 13%

1 136; 50%

127; 6%

Imports of raw tobacco and waste, 2010, UAH mn

Other tobacco

Dark tobacco, shadow drying

Light air-cured Burley type tobacco

Virginia-type tobacco heat-cured

tobacco waste

Source: Ukrstat Source: Ukrstat Exports of tobacco substitutes, and industrially produced tobacco by 92% in money terms consisted of tobacco for smoking. 8% was other tobacco. Recycled tobacco is not exported.

1,2; 26%

3,5; 74%

Export of tobacco production and substitutes, 2010, tsd tons

Renewed tobacco

Other tobacco

Smoking tobacco

19,9; 8%

214,6; 92%

Export of tobacco production and substitutes, 2010, UAH mn

Renewed tobacco

Other tobacco

Smoking tobacco

Source: Ukrstat Source: Ukrstat Imports of tobacco substitutes, and industrially produced tobacco by 20% in money equivalents consisted of renewed tobacco. 80% was other tobacco. Tobacco for smoking in 2010 was not exported.

5,3; 32%

11,4; 68%

Import of tobacco production and substitutes, 2010, tsd tons

Renewed tobacco

Other tobacco

Smoking tobacco

136,4; 20%

545,1; 80%

Import of tobacco production and substitutes, 2010, UAH mn

Renewed tobacco

Other tobacco

Smoking tobacco


Analyst: Ivan Ulitko

[email protected]



Contacts Group Research Group Institutional & Retail Sales Head of Group Research Institutional Equity Sales Vienna Friedrich Mostböck, CEFA +43 (0)5 0100 - 11902 Head: Brigitte Zeitlberger-Schmid +43 (0)5 0100 - 83123 Macro/Fixed Income Research Cash Equity Sales Head: Gudrun Egger, CEFA (Euroland) +43 (0)5 0100 - 11909 Dieter Benesch +43 (0)5 0100 – 83131 Adrian Beck (AT, SW)) +43 (0)5 0100 – 11957 Hind Al Jassani +43 (0)5 0100 - 83111 Mildred Hager (US, JP, Euroland) +43 (0)5 0100 - 17331 Werner Fuerst +43 (0)5 0100 - 83121 Alihan Karadagoglu (Corporates) +43 (0)5 0100 - 19633 Josef Kerekes +43 (0)5 0100 - 83125 Peter Kaufmann (Corporates) +43 (0)5 0100 - 11183 Cormac Lyden +43 (0)5 0100 - 83127 Carmen Riefler-Kowarsch (Covered Bonds) +43 (0)5 0100 - 19632 Stefan Raidl +43 (0)5 0100 - 83113 Elena Statelov, CIIA (Corporates) +43 (0)5 0100 - 19641 Simone Rentschler +43 (0)5 0100 - 83124 Macro/Fixed Income Research CEE Derivative Sales Co-Head CEE: Juraj Kotian (Macro/FI) +43 (0)5 0100 - 17357 Christian Luig +43 (0)5 0100 - 83181 Birgit Niessner (CEE) +43 (0)5 0100 - 18781 Manuel Kessler +43 (0)5 0100 - 83182 Co-Head CEE: Rainer Singer (Macro/FI) +43 (0)5 0100 - 11185 Sabine Kircher +43 (0)5 0100 - 83161 CEE Equity Research Christian Klikovich +43 (0)5 0100 - 83162 Co-Head: Günther Artner, CFA +43 (0)5 0100 - 11523 Armin Pfingstl +43 (0)5 0100 - 83171 Co-Head: Henning Eßkuchen +43 (0)5 0100 - 19634 Roman Rafeiner +43 (0)5 0100 - 83172 Günter Hohberger (Banks) +43 (0)5 0100 - 17354 Institutional Equity Sales London Franz Hörl, CFA (Steel, Construction) +43 (0)5 0100 - 18506 Head: Michal Rizek +44 20 7623 - 4154 Daniel Lion, CIIA (IT) +43 (0)5 0100 - 17420 Jiri Feres +44 20 7623 - 4154 Christoph Schultes, CIIA (Insurance, Utility) +43 (0)5 0100 - 16314 Tatyana Dachyshyn +44 20 7623 - 4154 Thomas Unger, CFA (Oil&Gas) +43 (0)5 0100 - 17344 Declan Wooloughan +44 20 7623 - 4154 Vera Sutedja, CFA (Telecom) +43 (0)5 0100 - 11905 Institutional Equity Sales Croatia Vladimira Urbankova, MBA (Pharma) +43 (0)5 0100 - 17343 Damir Eror (Equity) +38 562 37 28 13 Martina Valenta, MBA (Real Estate) +43 (0)5 0100 - 11913 Zeljka Kajkut (Equity) +38 562 37 28 11 Gerald Walek, CFA (Machinery) +43 (0)5 0100 - 16360 Institutional Sales Czech Republic International Equities Head: Michal Rizek +420 224 995-53 Hans Engel (Market strategist) +43 (0)5 0100 - 19835 Ondrej Cech (Fixed income) +420 224 995-577 Stephan Lingnau (Europe) +43 (0)5 0100 - 16574 Radim Kramule +420 224 995-53 Ronald Stöferle (Asia) +43 (0)5 0100 - 11723 Jiri Smehlik (Equity) +420 224 995-510 Editor Research CEE Pavel Zdichynec (Fixed income) +420 224 995-590 Brett Aarons +420 233 005 904 Institutional Sales Hungary Research Croatia/Serbia Gregor Glatzer (Equity) +361 235-5144 Head: Mladen Dodig (Equity) +381 11 22 09 178 Attila Preisz (Equity) +361 235-5162 Head: Alen Kovac (Fixed income) +385 62 37 1383 Norbert Siklosi (Fixed income) +361 235-5842 Anto Augustinovic (Equity) +385 62 37 2833 Institutional Equity Sales Poland Anela Tomic (Fixed income) +385 62 37 2295 Head: Andrzej Tabor +4822 330 62 03 Davor Spoljar; CFA (Equity) +385 62 37 2825 Pawel Czuprynski (Equity) +4822 330 62 12 Research Czech Republic Lukasz Mitan (Equity) +4822 330 62 13 Head: David Navratil (Fixed income) +420 224 995 439 Jacek Krysinski (Equity) +4822 330 62 18 Petr Bittner (Fixed income) +420 224 995 172 Institutional Equity Sales Turkey Head: Petr Bartek (Equity) +420 224 995 227 Simin Öz Gerards (Head) +9 0212 371 2525 Vaclav Kminek (Media) +420 224 995 289 Mine Yoruk +9 0212 371 2526 Jana Krajcova (Fixed income) +420 224 995 232 Institutional Equity Sales Slovakia Martin Krajhanzl (Equity) +420 224 995 434 Head: Dusan Svitek +48 62 56 20 Martin Lobotka (Fixed income) +420 224 995 192 Andrea Slesarova (Client sales) +48 62 56 27 Lubos Mokras (Fixed income) +420 224 995 456 Saving Banks & Sales Retail Research Hungary Head: Thomas Schaufler +43 (0)5 0100 - 84225 Head: József Miró (Equity) +361 235-5131 Equity Retail Sales Bernadett Papp (Equity) +361 235-5135 Head: Kurt Gerhold +43 (0)5 0100 - 84232 Gergely Gabler (Equity) +361 253-5133 Fixed Income & Certificate Sales Zoltan Arokszallasi (Fixed income) +361 373-2830 Head: Uwe Kolar +43 (0)5 0100 - 83214 Research Poland Treasury Domestic Sales Head: Piotr Lopaciuk (Equity) +48 22 330 6252 Head: Markus Kaller +43 (0)5 0100 - 84239 Magda Zabieglik (Equity) +48 22 330 6250 Corporate Sales AT Tomasz Kasowicz (Equity) +48 22 330 6251 Mag. 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Notes



Important Disclosures General disclosures: All recommendations given by Erste Group Research are independent and based on the latest company, industry and general information publicly available. The best possible care and integrity is used to avoid errors and/or misstatements. No influence on the rating and/or target price is being exerted by either the covered company or other internal Erste Group departments. Each research piece is reviewed by a senior research executive, the rating is agreed upon with an internal rating committee of senior research executives. Erste Group Compliance Rules state that no analyst is allowed to hold a direct ownership position in securities issued by the covered company or derivatives thereof. Analysts are not allowed to involve themselves in any paid activities with the covered companies except as disclosed otherwise. The analyst's compensation is primarily based not on investment banking fees received, but rather on performance and quality of research produced.

Description of specific disclosures: (1) Erste Group and/or its affiliates hold(s) an investment in any class of common equity of the covered company of more than 5% (for Croatian companies 1%). (2) Erste Group and/or its affiliates act(s) as market maker or liquidity provider for securities issued by the covered company. (3) Within the past year, Erste Group and/or its affiliates have managed or co-managed a public offering for the covered company. (4) Erste Group and/or its affiliates have an agreement with the covered company relating to the provision of investment banking services or have received compensation during the past 12 months. (5) Erste Group and/or its affiliate(s) have other significant financial interests in relation to the covered company. Erste Group rating definitions

Buy Accumulate Hold Reduce Sell

> +20% to target price +10% < target price < +20% 0% < target price < +10% -10% < target price < 0% < -10% to target price

Our target prices are established by determining the fair value of stocks, taking into account additional fundamental factors and news of relevance for the stock price (such as M&A activities, major forthcoming share deals, positive/negative share/sector sentiment, news) and refer to 12 months from now. All recommendations are to be understood relative to our current fundamental valuation of the stock. The recommendation does not indicate any relative performance of the stock vs. a regional or sector benchmark.

Distribution of ratings

Coverage universe Inv. banking-relationshipRecommendation No. in % No. in %Buy 63 35.2 14 70.0Accumulate 44 24.6 3 15.0Hold 45 25.1 1 5.0Reduce 9 5.0 1 5.0Sell 6 3.4 1 5.0N.R./UND.REV./RESTR. 12 6.7 0 0.0Total 179 100.0 20 100.0

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This research report was prepared by Erste Group Bank AG (”Erste Group”) or its affiliate named herein. The individual(s) involved in the preparation of the report were at the relevant time employed in Erste Group or any of its affiliates. The report was prepared for Erste Group clients. The information herein has been obtained from, and any opinions herein are based upon, sources believed reliable, but we do not represent that it is accurate or complete and it should not be relied upon as such. All opinions, forecasts and estimates herein reflect our judgment on the date of this report and are subject to change without notice. The report is not intended to be an offer, or the solicitation of any offer, to buy or sell the securities referred to herein. From time to time, Erste Group or its affiliates or the principals or employees of Erste Group or its affiliates may have a position in the securities referred to herein or hold options, warrants or rights with respect thereto or other securities of such issuers and may make a market or otherwise act as principal in transactions in any of these securities. Erste Group or its affiliates or the principals or employees of Erste Group or its affiliates may from time to time provide investment banking or consulting services to or serve as a director of a company being reported on herein. Further information on the securities referred to herein may be obtained from Erste Group upon request. Past performance is not necessarily indicative for future results and transactions in securities, options or futures can be considered risky. Not all transactions are suitable for every investor. Investors should consult their advisor, to make sure that the planned investment fits into their needs and preferences and that the involved risks are fully understood. This document may not be reproduced, distributed or published without the prior consent of Erste Group. Erste Group Bank AG confirms that it has approved any investment advertisements contained in this material. Erste Group Bank AG is regulated by the Financial Market Authority (FMA) Otto-Wagner-Platz 5,1090 Vienna, and for the conduct of investment business in the UK by the Financial Services Authority (FSA). Notice to Turkish Investors: As required by the Capital Markets Board of Turkey, investment information, comments and recommendations stated here, are not within the scope of investment advisory activity. Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses, portfolio management companies, non-deposit banks and clients. Comments and recommendations stated here rely on the individual opinions of the ones providing these comments and recommendations. These opinions may not fit to your financial status, risk and return preferences. For this reason, to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations.

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