Scottish

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Scottish NewcastleDrKW Beverages
ConferenceMadrid26 April 2005
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Scottish NewcastleStephen Glancey - Group
Operations Director
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Running Order
History, strategy
Overview of operations
Route to market
Production
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Scottish NewcastleExpansion has created a new
business

• 1985 No 5 brewer in UK
• 1995 UKs No.1 brewer
• 2000 Expansion outside UK
• 2003 A major European brewer

Beer Sales Profit Popn (mhl) (m
) (m) 1985 6 93 7 2003 50 644 502
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Scottish Newcastle in 2004No.2 in Europe
EBITA in m
Source Company annual reports/analysts
estimates and including 50 of BBH for SN and
Carlsberg est for 2004
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Driving Value, Driving Growth Progress on our
priorities

• Improving our organisation
• greater focus on key markets
• improved functional capabilities
• greater management control
• Cultural change, clear priorities for the
  business
• Investing in brands and innovation
• Brand investment up 17
• AP requires a return like any other investment
• Investing in growing markets
• Russia, Ukraine, India, China
• Integration and operational efficiency
• Integration across the group is reducing costs

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Key challenges for Group Operations

• Stable volumes in Western Europe
• Continual improvements in manufacturing
  efficiency
• Scale and scope change of Group
• Supporting product innovation
• Supporting development of our high growth
  businesses

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Running Order
History, strategy
Overview of operations
Route to market
Production
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Scope of responsibility
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Volume splits (in mhl)Western Europe
By Pack Keg 14.5 Can 8.0 Bottle 16.0 Total
38.5
By Country UK 19.0 France 8.5 Belgium 1.5 F
inland 4.0 Portugal 5.5 Total 38.5
plus BBH total volume 37.0 mhl
Total beverage volumes
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Distribution activityWestern Europe
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Value Chain
BBH Cost base 1.1 bn

• Input costs
• 48
• Materials
• Products
• Royalties

• Manufacture
• 13
• Sites
• Support
• Kegs

• Warehouse
• Distribution
• Primary
• Secondary
• Support
• Contracts

• Technical
• Services
• Installs
• Maintain
• SDE JV

• Sales
• 5
• Sales Team
• Support

• Support
• 9
• Systems
• Support
• Functions
• Premises

• Marketing
• 8
• Brand
• Customer
• Consumer
• INPD

13
3
c. 3.2 bn

• Cost base - UK International c. 4.2 bn
• Asset base - UK International c. 1.5 bn

100 BBH Tangible fixed assets as at 31 Dec
2004
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Structure
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Running Order
History, strategy
Overview of operations
Route to market
Production
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Production Create a flexible production platform
with a hard working asset base
Platform rationalisation Bulmers (cider
beer) Federation / Caledonian (specialist
ales) Third party brewing contracts Group
technical centre
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Bulmers Consolidation of worlds largest cider
mill into UK production network
Production at Hereford Packaging changes Kegging
to Royal/Federation Bottling to Tadcaster Third
party primary distribution PET expertise added to
group Cider production for Europe concentrated at
Staasen, Belgium
Fountain/ Caledonian
Tyne/ Federation
Royal
Tadcaster
Hereford
Berkshire
Annualised synergies of 16m
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Federation/Caledonian Consolidation of
heartland brewing production
McEwans ales to Caledonian Local brand heritage
maintained Fountain assets moved to
Tadcaster Caledonian capacity utilisation from
33 to 100 Newcastle Brown Ale to
Federation Local brand heritage
maintained Federation capacity utilisation from
40 to 85
Fountain/ Caledonian
Tyne/ Federation
Royal
Tadcaster
Hereford
Berkshire
Cash release of c.100m
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Third party brewing contracts
Large breweries with long production runs bring
low cost/hl Niche brands play an important
commercial role Production platform needs to
accommodate both national and niche
brands Industry solution of contract brewing and
packaging Linked to brand distribution/commercial
strategy
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Group technical centre

• Building on established excellence
• New Product Development
• Brewing technology
• Quality
• Eliminating duplicated resource
• Lisbon and Edinburgh units to close

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Support product innovation

• Fosters superchilled
• Condensation font
• Enhances brand equity
• Improves product quality
• Eiffel bottle
• 300/350 bottles per min
• 300ml or 330ml flexibility
• Unique design
• Enhances brand equity

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Running Order
History, strategy
Overview of operations
Route to market
Production
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Route to market Create a distribution system
tailored to market dynamics
Core beer business and WaverlyTBS in UK Western
European on-trade Sales integration in
France Combined distribution in Portugal
Opportunities in BBH
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UK Core beer business
Semi-stocked (14)
Stockless (5)
RDC (4)
Transit (10)
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UK Core beer business

• CO3 - 14.82 per hl
• CO5 - 13.37 per hl

Service measures remain high
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WaverleyTBS - No.1 wholesaler in UK

• Complementary to Scottish Courage beer led, high
  volume pubs market
• Customer focussed service proposal
• Flexibility and one-stop shop proposition
• Low cost and efficient service
• Strong wine portfolio
• Strong niche/speciality brand portfolio
• gt 450m turnover
• 5m annualised cost savings by 2006
• On-trade wine market 9 p.a. growth

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Sales integration in France
Elidis is an on-trade business with national
coverage On-trade comprises a large number of
small volume outlets Channel segmentation Business
model needs to balance profitability per
delivery with customer service More to do ..
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Combined loads in Portugal
No.1 water brand, No.2 lager brand Opportunity to
expand Luso in on-trade where Sagres is
strong Wholesaler partnership structure Effective
use of technology for customer service and cost
efficiency
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Opportunities in BBH
Russian market 2004 volume of 82.2 mhl Volume
growth 11 Per capita consumption c. 1/2 of
Western European levels BBH scale 32 distribution
centres Over 90 of volume through own
distribution centres Direct delivery to over
10,00 customers 1,500 railway wagons Major
investment in outlet refrigeration
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Opportunities in BBH
BBH
Kazakhstan
Ukraine
Russia
Baltics
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Opportunities in BBH
Leverage our scale (gt double size of No.2) Group
wide knowledge transfer Eliminate duplication of
effort Geographical challenges
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Operations summaryImprovement across the value
chain
Manufacturing Distribution Procurement Technical
RD
Clear opportunity to drive
sustained growth in net margins
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Questions
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Supplementary slides
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Overview of production assets
Russia Baltika (5) Vena (1) Yarpivo (2) Pikra
(1) Zolotoy Ural (1)
Finland Lahti Tornio
UK Fountain/Caledonian Tyne/Dunston Royal Tadcaste
r Berkshire Hereford
Belgium Alken Jumet Kobbegem
Eire Cork
Baltic States (4)
Kazakhstan (2)
France Champigneulles Strasbourg/Obernai
Ukraine(3)
Portugal Lisbon
Plus 24 breweries in India and China
Greece Thessaloniki