Cooperation

The brewery sector’s main markets continue to comprise Denmark, Norway, Sweden, the Baltic countries and Germany, including the Danish-German border area. In addition, specialty products are being exported to a large number of countries which have seen growth in recent years. The past year has seen further consolidation among the company’s customers and among competing suppliers, which has led to a further

strengthening of the competition in the company’s main markets. The company sells its products to the retail sector, primarily within the private-label segment, which is continuing to see growth throughout much of Europe. Despite the extremely difficult market conditions, the brewery sector has chosen to maintain its strategic focus and has continued to drive developments in these markets and to provide customers with

quality, reliable supplies and an up-to-date product programme.

In step with the introduction of the company’s new product portfolio within the juice and smoothies segment, new sales channels within convenience and food service have been opened; a customer segment which the company expects to develop further.

Denmark

Beer consumption has been falling in Denmark over the past ten years and continued to fall further in 2007. Further intensifying price competition, which has meant that branded beer is being sold at discount prices, has led to a drop in sales of private label products by an estimated 6 per cent within the beer segment in 2007. It is estimated that the Danish soft drinks market fell by 4 per cent in 2007, which is also reflected in Harboe’s soft drinks sales.

Germany

Beer sales are believed to be falling in Germany. The soft drinks market is continuing to grow and is believed to have increased by approx. 8 per cent. Growth within the soft drinks segment is based on innovation and new products. Focus on new product areas and new trends spurred investments in a new factory unit for the production of aseptic products such as juices, smoothies and milkbased products. In 2007/08, Darguner Brauerei’s total revenue in the German market was affected by a wet and not very sunny summer, but

otherwise saw positive development with the influx of new customers and sales of an extended product programme to existing customers. Intensifying competition in the border trade across the German/Danish border has led to a fall in sales.

Sweden

The Swedish market has seen a fall in beer sales as well as a fall in sales of soft drinks. New customers and extended collaboration with existing customers will continue to strengthen Harboe’s position in the Swedish market. A strengthened sales organisation, together with a network of skilled distributors, will ensure the continued development of the company’s position, leading to further growth and expansion – helped also by the introduction of new and innovative products.

Baltic countries

The Baltic countries have seen a slight increase in beer sales, while the soft drinks market is growing and open to new products. With Viru Õlu’s focus on new and innovative products, the Estonian market has seen particularly positive developments. To underpin continued expansion and wider distribution, Viru Õlu acquired the rights to the locally well-known PULS beer brand at the end of FY 2007/08. PULS has been marketed intensely in Estonia in the past three years, which has resulted in a high level of consumer recognition. The rights to the beer brand also come with rights to soft drinks and cider products. The new PULS products and their inherent potential are expected to contribute further to Viru Õlu’s positive development.

Exports

The company exports a wide range of beers and non-alcoholic beverages. The export market comprises more than 50 countries on all continents. Distribution is primarily via local distributors with whom long-term agreements have been made. The export markets, which are a strategic focus area, have developed positively in recent years. This development is expected to continue – also in step with the development of new and innovative products intended for the overseas markets.