Brand quality that bears fruit

Transcription

1 Brand quality that bears fruit Annual Report 2006

2 VISION Leading European fruit juice and fruit beverage company, based on strong Number 1 / Number 2 brands, with an excellent reputation for successful innovations. Profitable and sustainable growth, via organic growth and acquisitions, mainly in Europe. With a motivated and competent team in a very attractive company characterized by an open and entrepreneurial culture.

3 Eckes AG Eckes & Stock Group Eckes-Granini Group National organizations National organizations Corporate Boards Advisory Board of Eckes-Granini GmbH & Co. KG (until November 30, 2006) Peter Thiel Hermann Arnold Chairman Deputy Chairman Dr. Ottokarl Finsterwalder Volker Stühmeier Board of Supervisors of Eckes AG Peter Thiel Stefan Kobold Chairman Deputy Chairman Dr. Karl Brings Dr. Hans Falk-Bjerke Axel Hamm Bernard Huber Management Board of the Eckes-Granini Group GmbH * Thomas Hinderer Sidney Coffeng Heribert Gathof Albert Grätz Sabine Holtkamp Sylvain Jungfer Dr. Peter Nagel Chairman Marketing, R&D, Export and PR General Manager Eckes-Granini Germany Finance, Controlling, M&A Human Resources, Organizational Development General Manager Eckes-Granini France Supply Chain * Eckes-Granini GmbH & Co. KG was formally reconstituted as the Eckes-Granini Group GmbH effective January 30, All key figures for business year 2006 cited in the Annual Report relate to Eckes-Granini GmbH & Co. KG.

4 Key figures Diff. Volume sales in million litres 896 1, % of which fruit beverages (core business) % Net turnover in million EUR % of which fruit beverages (core business) % Earnings before interest and taxes (Ebit) in million EUR % Employees * 1,487 1,457 * Full-time equivalent National organizations Eckes-Granini Deutschland GmbH Oy Marli AB Eckes-Granini France SNC Eckes-Granini Austria GmbH OOO Eckes-Granini Rus Nieder-Olm / Germany Turku / Finland Sarre-Union / France Kröllendorf / Austria Moscow / Russia Eckes-Granini Ibérica S. A. Barcelona / Spain 51 % Eckes-Granini Suisse S. A. Henniez / Switzerland 51 % SIÓ-Eckes Kft. Eckes-Granini Romania S.R.L. UAB Elmenhorster Vilnius Siófok / Hungary Bucharest / Romania Vilnius / Lithuania 100 % interest unless otherwise indicated.

5 Contents 1. Foreword 2 2. Corporate Portrait 5 3. Business Year Leadership for Success An Interview with Thomas Hinderer Brand Philosophy Our Countries 24 Overview Finland Lithuania & Baltic Region France Germany Austria Hungary Romania Russia Spain Switzerland Key Business Figures, Commentary Internet, Publishing Data 40

6 2 Foreword Eckes-Granini: a juicy plus Rising raw material prices and moderate growth in overall consumption, marked by declines in some segments, had a significant impact on the European fruit juice market in In view of this situation, we are particularly proud to note that the Eckes- Granini Group succeeded in setting itself apart from the general market trend and recording a juicy plus. We ended the past business year with doubledigit gains in both turnover and volume sales while strengthening our position as a leading European producer of branded fruit beverages once again. Eckes-Granini is an intact, financially sound company that is now moving dynamically toward the billioneuro mark in turnover from sales of strong international and local brands. Despite a difficult market environment, we have increased investments in our brands substantially in order to strengthen them on a sustained basis over the long term. We provided impetus to growth by introducing new products and entering new market segments once again in In addition to strong organic growth powered by our strategic brands, we also continued to pursue our policy of European expansion with the acquisition of Elmenhorster in Lithuania and the establishment of an Eckes-Granini subsidiary in Romania. As the financial holding company of the Eckes-Granini Group, the Eckes AG took several far-reaching decisions during the past year decisions that will guide and shape our course toward the future. Following the sale of the German spirits division, the company will now focus more rigorously on the non-alcoholic beverage business. Following the acquisition of the outstanding 26 % interest in Eckes-Granini held by Melitta until November 2006, the Eckes-Granini Group

7 Foreword 3 From left to right: Heribert Gathof, Albert Grätz, Sidney Coffeng, Thomas Hinderer, Sylvain Jungfer, Sabine Holtkamp, Dr. Peter Nagel now has full control and decision-making authority in all business matters. These decisions represent both an affirmation and an obligation for us. We intend to take advantage of the resulting freedom and the opportunities it offers to strengthen our market position substantially through internal and external growth. Moving ahead towards realization of our Vision 2010, we established a solid foundation for success during the past business year, to which our employees contributed significantly with their commitment and hard work. We wish to thank each and every member of our staff for their achievements in As we face the tasks and challenges of the future, we know that we can rely on a strong, highly motivated Eckes-Granini team that contributes a wealth of skills and knowledge within the context of multinational cooperation and thus forms the basis for sustained business success. Management Board Eckes-Granini Group

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9 Corporate Portrait 5 Leading European producer of branded fruit beverages As a major beverage producer and a brand supplier with a strong tradition, the Eckes-Granini Group, based in Nieder-Olm near Mainz (Rhineland-Palatinate), holds a leading position in the European fruit beverage market. The foundation for international success was laid in the early 1990s as the borders to Eastern Europe opened. The company, which has operated under the name Eckes-Granini Group GmbH (formerly Eckes- Granini GmbH & Co. KG) since January 30, 2007, is represented by national organizations in ten European countries. With its own management and supervisory boards, Eckes-Granini is a fully independent international corporate group within the Eckes AG and currently employs 1,500 people. Growing closer and growing together is the motto of the international team. The potentials and synergy effects needed to achieve that goal are developed through consistent expansion of an efficient corporate network. Strong brands: international stars and local heroes Enjoyment and good health, innovation and tradition these are the ideas to which the staff of Eckes-Granini has devoted itself from the outset. The Eckes-Granini Group has established a broad European presence in both the retail food trade and the out-of-home sector with the internationally renowned granini and hohes C brands as well as such strong national labels as Joker, Réa, SIÓ and Marli. Superior quality is the top priority in the Eckes-Granini Group, from carefully selected fruits and raw materials via the gentle production process to the finished product. The company s entrepreneurial orientation and self-image as a brand producer are the cornerstones of this quality philosophy. Consumers in more than 70 countries have come to appreciate the juices, fruity thirst-quenchers and refreshing beverages produced by the Eckes-Granini Group. The factors that have contributed most to the success of Eckes-Granini brands are unique positioning, sustained advertising support and outstanding product quality.

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11 Business Year On course for success again in 2006 The market: moderate growth in Europe The European fruit beverage market showed moderate growth in Excluding the Russian market, which recorded double-digit volume growth rates, the overall market suffered slight volume sales losses. While a number of Western European markets were stagnant or experienced declining sales, the markets of Eastern Europe showed strong growth. The market for fruit beverages (data from seven core countries, retail food trade) declined slightly, with volumes down 1.5 %. The positive trends in the French, Spanish and Hungarian markets were opposed by slumping volume sales in the important German market as well as in Austria and Finland. The Swiss market remained stable at the level of the preceding year. Market developments in 2006 were also influenced by substantial increases in raw material prices. In the highly competitive European market, A brands and trade labels made further gains at the expense of B brands. A close look at the trade landscape reveals that discounters continued to strengthen their foothold in Europe. Double-digit growth for Eckes-Granini In spite of a difficult market environment and declining sales in certain areas, 2006 was an extraordinarily positive business year for the Eckes-Granini Group. Net turnover from sales in the core fruit beverage business rose markedly by 11.7 % to EUR 802 million (2005: EUR 718 million). Including sales of water in Hungary, net turnover for 2006 came to a total of roughly EUR 818 million *. This enabled the Group to improve its position as a leading European producer of branded fruit beverages with a value-based market share of 13.7 % (data from seven core countries, retail food trade). With volume sales of 978 million litres of fruit beverages, the company raised its rate of growth in its core business field by 9 % (2005: 896 million litres). If the 90 million litres of bottled water sold under the cooperative distribution agreement with Szentkirályi Water (Hungary) are included, total volume comes to 1,067 million litres * surpassing the one-billion-litre mark for the first time. Nearly all national organizations succeeded in increasing volume sales as compared to The largest contributors to volume growth were Germany (+12.4 %) and Russia (+65.7 %). * Since revenues from cooperative water distribution operations in Hungary were not included in the balance sheet until 2006, no direct reference figures are available for 2005.

12 8 Business Year 2006 Strategic brands continue to drive growth International and local strategic brands * marketed by the Eckes-Granini Group in both the retail food trade and the out-of-home sector continued to drive growth in The two international brands granini (+33 million litres) and hohes C (+19 million litres) were the largest contributors to total volume growth of 82 million litres (core business fruit beverages). Among the strongest-growing local brands during the past business year were Uslada in Russia (+18 million litres) and Marli in Finland (+7 million litres). * The group of strategic brands includes the two international brands granini and hohes C as well as the strong local brands FruchtTiger (Germany and Austria), Réa and Joker (France), Marli (Finland and Estonia), Mehukatti (Finland), SIÓ (Hungary), Uslada (Russia), Elmenhorster (Lithuania) and YO Syrup (Austria). April 20. The new PET bottling line in Bröl is commissioned, thus doubling bottling capacities for this strategically important packaging unit in Germany. Important Events in 2006 January 1. Two strong French brands begin anniversary years: Joker celebrates its 70th birthday, Réa its 50th. February 1. In a logical step in keeping with the new management philosophy and corporate structure, the Management Board of the Eckes-Granini Group is expanded to include the general managers of the two most important national organizations, Germany and France. May 1. SIÓ-Eckes (Hungary) acquires exclusive distribution rights for Szentkirályi water a promising alliance of two Hungarian market leaders. May 10. The third European Convention held since 2001 is attended by 160 employees from all national organizations. The three-day event was devoted primarily to introducing the Group s new strategy and management philosophy.

13 Business Year More funds for advertising despite increased costs With earnings before interest and taxes (EbIT) of EUR 37 million, the company achieved a gratifying result, which nevertheless remained as expected below the record earnings of 2005 (EUR 43.6 million) (see graphic page 10). in brands were increased significantly in This was reflected above all in markedly higher (+15%) investments in consumer communication, including TV advertising in particular. The launches of hohes C Red Multivitamin in Germany, Austria and Hungary were effectively supported with TV commercials and flanking measures, to cite only one example. One of the primary reasons for the decline in earnings from the level of the preceding year was the significant rise in prices for raw materials in general and especially for orange juice concentrate, which could not be passed on to the market in full. The extraordinary income reflected in the earnings figure for 2005 could not be matched in One-time extraordinary expenditures for restructuring measures, among other things, impacted on earnings in Despite this difficult market environment, the Eckes- Granini Group stepped up its marketing activities once again during the past business year. With an eye to strengthening the company s brands in the long term and achieving sustained earnings growth, investments Taking this into consideration, earnings from ordinary business operation in 2006 remained comparable to those of the preceding year. Since June. Group-wide implementation of new processes and modified structures designed to enhance efficiency and innovative drive, optimize costs and strengthen international cooperation and networking among national organizations. June 1. The Eckes-Granini Group acquires the Lithuanian market leader UAB Elmenhorster thereby significantly strengthening its market position in the Baltic region. June 8. An important growth market in Europe: The newly founded subsidiary Eckes-Granini Romania begins marketing granini in Romania in cooperation with Carlsrom Beverage Co. November 7. Following the sale of the German spirits division, Eckes AG strengthened its focus on the fruit beverage business represented by the Eckes-Granini Group. November 14. Production is launched on the new PET line in Mâcon (France). November 30. Eckes purchases shares of Eckes-Granini GmbH & Co. KG held by Melitta (26% interest) since the buyout of granini in 1994, thus giving the Eckes-Granini Group full control and decision-making authority in all business matters.

14 10 Business Year 2006 Investments in consumer communication +15 % Earnings before interest and taxes (EblT) in million EUR Further progress in Europeanization The European expansion process continued with the addition of two new companies in Lithuania and Romania. The acquisition of UAB Elmenhorster, the market leader in Lithuania, enables Eckes-Granini to strengthen its position in the Baltic region substantially. With these additions, the number of national organizations in the Eckes-Granini Group rose to 10. The strategic partnership with Fructa Napoje in Poland was expanded. In May 2006, Fructa Napoje assumed responsibility for production and distribution of the Clippo brand in Poland. In Romania, an important growth market in Eastern Europe, the newly founded subsidiary Eckes-Granini Romania commenced marketing operations for granini in cooperation with Carlsrom Beverage Co.. New products enliven the market Eckes-Granini provided significant impulses for growth with numerous innovations once again during the past business year.

15 Business Year The hohes C line was extended through the successful launch of Red Multivitamin in several countries. The Eckes-Granini Group expanded its leading role as a supplier of fruit beverages in modern PET bottles. Following the conversion of numerous brands from glass to PET in multiple national markets in 2005, the Joker brand was relaunched in the convenient PET bottle in late PET activities were initiated in Spain with the introduction of granini in large 1.5-litre PET bottles, and the PET business of granini was extended in Germany. With the launches of FruchtTiger Sport (Germany), FruchtTiger Cubito (Germany), the new, attractive 0.2-litre single-portion carton with twist-off cap and straw, a new variety of SIÓ Vitatigris (Hungary), Mehukatti ready-to-drink (Finland) and Réa Réveil Douceur (France), Eckes-Granini continued to strengthen its position in the market for children s beverages. PET: Strategic expansion of production capacities The Group s dual production strategy a combination of in-house production and co-packing by strategic external partners proved highly effective once again in The efficient supply-chain network enabled Eckes-Granini to ensure timely delivery, superior product quality and cost-efficiency. The integration of UAB Elmenhorster (Lithuania), significant volume sales growth and changing market requirements posed new challenges with respect to production processes and procedures. In addition to several new carton-packaging lines, cold-aseptic PET bottling lines were commissioned in Bröl (Germany) and Mâcon (France) in order to increase capacities in response to rising demand. Eckes-Granini also underscored its role as the technology leader in the industry with the installation of a Plasmax plastic bottle barrier coating system in Henniez (Switzerland). Evolution in management Creating a vital culture of leadership and entrepreneurial spirit by empowering people and organization : The adoption of this clear credo by our managers in Vision 2010 was but one of the major highlights of the year Other frequently cited highlights included the European Convention and changes in corporate structures and processes. The new management style not only emphasizes professional qualities but also focuses on entrepreneurial spirit and social skills. Business and human relations, finance and the interpersonal sphere the one side will no longer exist without the other in future. The Convention slogan We do it together means not only what we do but above all how we do it. Sensitivity to others, a constructive approach to conflicts, the ability to listen to different views and a culture of feedback are the qualities needed in order to achieve outstanding results. The objective is to develop a basis of teamwork and cooperation that promotes motivation, trust and progress. A closeknit international network, reduced complexity and enhanced efficiency, as well as a stronger focus on the future business needs, will be required to meet the challenges of the future. In this context, change processes were facilitated, existing programmes and systems adapted wherever necessary and new tools, such as Leadership Feedback and an organizational analysis, introduced as we made further progress on our way to becoming a learning organization.

16 12 Business Year 2006 Outlook: developing new growth segments Analysts anticipate stagnating fruit beverage markets in the core countries served by the Eckes-Granini Group with the exception of Russia in Conditions affecting business are expected to remain difficult, due in large measure to rising raw material prices. Thus further price adjustments are likely in the fruit beverage market. The Eckes-Granini Group expects to achieve moderate growth in fruit beverage business in Further increases in brand investments will contribute to ensuring sustained, long-term gains in company value. Another focus for Eckes-Granini in 2007 is the development of additional potentials in the growing thirst-quencher / refreshment and chilled juice segments. In the thirst-quencher / refreshment segment, the Group has now supplemented the successfully established Marli Juissi, granini Frucht Prickler and granini Fruchtig-Frisch brands with a new trend concept hohes C Naturelle. This thirst-quenching combination of natural, non-carbonated mineral water and pure fruit juice responds to the trend in favour of natural, refreshing beverages.

17 Business Year Eckes-Granini meets the rising demand for fresh, chilled fruit juices with products developed specifically for the chilled products section. The company took its first steps into this growing segment in mid-2006 with the launch of Joker Vital and Joker Vital 5 in the French market. Fresh, chilled juices from Eckes-Granini will be introduced in several European countries under the concept granini Sun Fresh in The partnership with Gutta in Russia established several years ago was placed on a firm footing for the medium term in Gutta and Eckes-Granini Rus have agreed to cooperate closely in production and sales, thereby enabling both companies to tap the strong growth potential even more effectively in the years to come. In addition to promoting organic growth, plans call for entry into new growth markets through acquisitions and strategic alliances. Turnover in million EUR * Volume sales in million litres * *Base: core business (fruit beverages) *Base: core business (fruit beverages)

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19 Leadership for Success 15 Leadership for Success An interview with Thomas Hinderer A new team culture at Eckes-Granini: Cooperation within the network and shared responsibility. Mr. Hinderer, 2006 was another banner year for the Eckes-Granini Group. Does that mean that the bar is set even higher for the coming years? Thomas Hinderer: The Management Board has described quite clearly where we intend to be in three years. Our primary goal is to increase company value significantly and on a sustained basis. Expressed in quantitative terms, we want the value of the Eckes- Granini Group to be 50 percent higher in 2010 than in 2005 which means that we must find ways to increase profits with the same structures and under comparable raw material and currency conditions. What pleases me most is that we have articulated these ambitious goals and strategies together within the management team. This underscores the importance of the decision taken in 2006 to include the general managers from Germany and France the two largest national organizations, which together account for 60 percent of total revenue and earnings in the Management Board of the Eckes-Granini Group, where they are now fully integrated and involved in the Board s most important decisions. And you expect this team spirit to spread throughout the entire company? Thomas Hinderer: That is our idea of modern leadership and modern management: emphasizing the achievements of the group rather than the individual. The pillars of our new team culture are cooperation with the network and shared responsibility. The whole organization is more than the sum of its parts our excellent employees. We have established a broad basis for communication and dialogue in order to ensure that every employee at Eckes-Granini truly has the opportunity to contribute to enhancing the value of our company. With the General Managers Meetings, the European Management Convention, frequent meetings involving all departments and work in interdepartmental, international groups, we have established important platforms from which to promote and intensify dialogue beyond all national and departmental boundaries and at all levels of the company. In order to make the best possible use of the extensive skills and know-how in our group, we need intelligent networks and an open, transparent culture in which

20 16 Leadership for Success leadership can be relied upon and in which people are willing to assume responsibility because it is in their own interest to do so. Of course you can t create such a culture by directive like flipping a switch. Building a common culture of change in which change is viewed as opportunity is a process that takes time and patience, a process that thrives on dialogue and discussion devoted to achieving consensus. Courage and entrepreneurial thinking and action are values that are expressly desired and fostered. You emphasize transparency. How important is transparency in your view? Thomas Hinderer: Transparency is an important part of our new leadership philosophy. I believe that knowledge and transparency form the foundation for management and leadership, the basis for open feedback and thus for mutual trust as well. Furthermore, I am convinced that you can t manage effectively what you don t measure. And that is why we have implemented a new, transparent reporting system that ensures comparability among all national organizations. We firmly believe that good leadership is the basis for successful corporate growth. With this in mind, we have defined a number of management competencies that we view as prerequisites for effective corporate management. These management competencies serve as a basis for feedback and continuous improvement of our managers as we gradually evolve into a learning organization. This is clear evidence that we do practice what we preach, or walk the talk, as people often say. I am confident that we will achieve our ambitious goal because I have seldom witnessed the kind of motivation and commitment we recognize in people at Eckes-Granini. That is truly in a class of its own. One of those ambitious goals is to increase company value. How is that goal to be achieved? Thomas Hinderer: An increase in company value comes primarily from continuous earnings growth and secondly from what we invest in our brands. What counts is not short-term success but rather sustained growth. Thus it is essential that we have healthy, well-known, profitable brands, that we invest enough in our brands, that we lead rather than follow when it comes to innovation and, of course, that we have a strong balance sheet and profit and loss structure coupled with a competitive cost structure. Expressed in simple terms, our corporate strategy concentrates on six focus areas: net prices, innovation, fixed costs, complexity, purchasing and people management. We must and will continue to do our homework in these areas. What direction do you expect new product developments to take? Thomas Hinderer: Trends such as health and convenience as well as aspects of quality and pleasure will continue to play a very important role. The important thing is to introduce only products that come from our brands and strengthen our brands. It makes no sense to innovate just for the sake of innovation. Instead, we aim to take advantage of the strengths of granini, hohes C, Joker, Réa, SIÓ and Marli and to develop them intelligently in order to attract new consumers for our brands. This will involve placing new products like granini Sun Fresh in refrigerated sections or benefiting from the strong potential of the thirst-quencher and refreshment segments with hohes C Naturelle and granini Frucht Prickler. The point is to pursue a sound, efficient brand policy. Are discounters going to spoil your plans? Thomas Hinderer: The fact is that private labels, trade brands, low-priced and discounter products, etcetera, account for 60 percent of our markets. This may be frightening to some people. But I see it as a challenge and an opportunity. Our advantages are our strong brands and our good brand policy, which is in tune with the times and generates innovations. With good products and intelligent concepts supported by

21 Leadership for Success 17 the right kind of communication we have created an excellent basis for differentiation. It is important for us to apply effective concepts to other countries and to take advantage of synergies. We operate internationally, and thus it is essential to establish new products not only in one but in several different countries. This is precisely where our strength and our greatest potential lie in competition with low-priced products. The organization has achieved dynamic external growth through acquisitions in the past. established brands that already hold at least the number 2 and preferably the number 1 position in their respective countries. And the companies we acquire must be integrated intelligently into our network. As a leading European fruit juice and fruit beverages producer, we are in constant contact with a number of companies throughout Europe within the framework of our expansion strategy as we explore potential opportunities for cooperation. Thomas Hinderer: And we will continue to do so in future, but we want to ensure that we grow in our existing markets as well, as in 2006, when nearly all growth was organic. We are especially proud of that. Our strategy calls for sustained internal and external growth. In keeping with the Eckes-Granini philosophy, we seek to acquire brands that fit with our portfolio,

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23 Brand Philosophy 19 Volume shares by brand in 2006 (figures rounded)* Strategic brands 84 % 824 million l Other brands 16 % 154 million l Local brands 36 % 355 million l hohes C 24 % 230 million l granini 24 % 239 million l *Base: core business (fruit beverages) total 978 million l Eckes-Granini: A passion for strong brands Dressing up nicely to visit the neighbours instead of playing? Little Max has painted red spots on his face with Mama s lipstick. I don t think I can go with you, he says with mock sadness. His mother winks and suggests that he d better stay in his tree house and recover instead. She gives him a bottle of hohes C Red Multivitamin. And there in his tree house with Teddy, Max really does feel much better! As this short clip from the TV commercial Get well soon broadcast in support of the market launch of hohes C Red Multivitamin in 2006 clearly shows, brands are more than just products. They appeal to the head and the heart at once. The quality of a product must be beyond doubt, but brands also have the power to trigger emotions. The story of Max and his mother speaks of happiness, loving care, and harmonious, intact relationships. Viewers sense that hohes C and the family simply belong together. Brands as success factors Brands are personalities with their own unique identities. They are points of reference and sources of trust. People buy brands because they associate them with childhood memories, longings and dreams, and often even a whole attitude toward life. Strong brands with

24 20 Brand Philosophy prominent profiles are one of Eckes-Granini s competitive advantages. They are key factors in the company s success. The Group believes in its brands and relies on them. They are the basis for sustained growth in company value. Eckes-Granini: a perfectly tuned brand portfolio The success story of Eckes-Granini brands is closely related to a brand portfolio that is perfectly tuned to the market and the needs of consumers. The combination of international brands such as granini and hohes C with so-called local heroes (Marli, Mehukatti, Joker, Réa, SIÓ, YO Syrup, Uslada, FruchtTiger and Elmenhorster) has made the company so successful. This dual brand strategy, a mix of international and local brands, is carefully designed to ensure that none of the individual brands competes with the others. Brands are clearly and distinctively positioned and combined in keeping with the relevant dimensions of the fruit beverage market health (e.g. hohes C, Joker) and pleasure / enjoyment of life (e.g. granini, SIÓ). In this way, different consumer needs are fulfilled precisely and in accordance with the dictates of the market. The regional roots of our local heroes in their home countries often play an important role in brand identification and brand image. The pillars of the Eckes-Granini brand philosophy The positioning of our brands are as diverse as the brands themselves. Yet what they all have in common is the consistent and brand-typical realization of their respective positions in all elements of the marketing mix and the sustained support provided to all of our brands: Superior product qualities respond to the specific positions of given brands and the specific requirements of the respective segments. We regard quality as a self-evident objective, in all sectors and business fields, and especially in excellent practical application. life. This premium brand is available internationally through all sales channels in supermarkets as well as in top restaurants and exclusive hotels. The typical brand presentation in the famous dimple design guarantees that consumers would always recognize the bottle and thus the product even if they were blindfolded. In the 0.2- or 1.0-litre bottle or served in a glass in a restaurant the dimples give granini its unparalleled recognition factor. The creation of brand worlds with which consumers are happy to identify and which give brands their unique character. SIÓ is an excellent example. The success story of our Hungarian brand began in The key to success? Strong local roots. SIÓ is the brand Hungarians see as their own and with which they identify closely. Our brand philosophy relies on sustained, long-term investments in our brands and the knowledge that temporary, short-term success is not the only thing that counts. In spite of difficult market conditions, investments by the Eckes-Granini Group in consumer communication rose by 15 % in Maintaining the balance between continuity and staying in tune with the times: Continuity is essential to the success of a brand, but it must be combined with a keen eye for changes in consumer needs and sensitivity in the implementation of innovations. Successful, long-term, strategically sound brand management begins with the customer and is consistently pursued with the consumer s needs in mind. This brand philosophy requires a certain degree of closeness to consumers and an awareness of their wishes and needs. For Eckes-Granini, that means staying in tune with the times without sacrificing a Unique, typical brand features ranging from packaging design to advertising to drinking glasses. A brand like granini, for example, is regarded in over 70 countries as the very symbol of pleasure and enjoyment of

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27 Brand Philosophy 23 measure of brand continuity. The TV commercial for hohes C Red Multivitamin is a good example. The hohes C brand traditionally stands for family and loving care. Yet the image of the family has changed, as have approaches to child-raising as well. There is more room for understanding in the modern mother child relationship. The mother goes along with the child s game and allows him a certain amount of independence. Loving care also plays an important role for modern mothers. With hohes C Red Multivitamin, the mother fulfils her obligations as a caring, protecting parent, while hohes C retains its position as a healthy vitamin supplier for the whole family. This is a mixture with which hohes C has held its leading position in the market for non-alcoholic fruit beverages for over 50 years. TV advertising conveys brand messages The TV commercial for hohes C Red Multivitamin required a year to develop from the initial idea to the first shooting session. Every detail counts and helps ensure that consumers recognize themselves in the short episode and can identify with the characters. Success has proven that Eckes-Granini chose the right course. Within one year, hohes C Red Multivitamin advanced to the position of the third strongest product in the hohes C range, measured in terms of customer reach. Surveys clearly indicate that the TV commercial contributed to an outstanding level of product recognition and conveyed the important brand messages according to plan. Setting a trend with PET Brands need to be communicated through advertising, yet daily contact between millions of consumers and the product and its packaging also plays a crucial role in brand communication. Shapes and designs, such as the brown hohes C bottle, the typical granini dimples or the rectangular Joker bottle, help brands stand out on store shelves and make them recognizable at a single glance. But brands must not ignore the spirit of the times in their external appearance. They must remain vitally alive. Eckes-Granini has consistently succeeded in maintaining the balance between preservation and change. Thus, for example, Eckes-Granini has affirmed its role as a trend-setter in Europe with the introduction of the convenient PET bottle for fruit beverages a strategy that consumers have rewarded and one that has also boosted growth substantially. The brand philosophy runs like a continuous thread through all marketing measures and is also reflected in the consistent, brand-conforming implementation of POS activities and promotions. A strong sales organization ensures that the company s products are present everywhere and in just the right quantities from the wholesale food and beverage trade to restaurants and hotels to petrol station shops and kiosks. Moving towards the future with continuity and innovation The examples cited above clearly show that all brands marketed by the Eckes-Granini Group have their own unique histories and their own unmistakable faces. Despite the diversity of our brands, the basic prerequisite for success are the same for all: A keen sense of consumers needs coupled with precise, systematic market research as a basis for our brand policy. A good balance of quality and innovation, of new impulses, of staying in tune with the times and preservation and strengthening of the brand core is the foundation for the sound decisions made by the Eckes-Granini Group. And that creates new impulses for our brands. Eckes-Granini will once again focus on two new growth segments this year: chilled juices, with the granini Sonnenfrisch / Sun Fresh / al Sol concept, and non-carbonated thirst-quenchers, with the introduction of hohes C Naturelle.

28 24 Our Countries Finland Russia Lithuania Germany France Switzerland Austria Hungary Romania Spain Overview European markets grew only moderately in 2006, while the market in our core countries (data from seven core countries, retail food trade), declined slightly by 1.5 %. In spite of difficult market environments in some countries, the Eckes-Granini Group succeeded in achieving overall growth with its strong brands and raising the value-based market share of the Group as a whole to 13.7 % (data from seven core countries, retail food trade). Our national organizations defended and extended their number 1 and number 2 positions in their local markets. The Group also recorded dynamic growth in export markets. Export volume sales increased by 19 % over the preceding year. The largest contributor to export growth was granini. Réa, hohes C, YO Syrup and SIÓ also achieved gains over the previous year. In order to improve strategic planning for export activities and ensure more effective planning support, a new international business division responsible for coordinating all export activities was established in October 2006.

29 Our Countries 25 Country Strategic brands Value-based market share Market position Germany hohes C, granini, FruchtTiger 13.1 % 1 France Joker, Réa, granini 12.9 % 2 Spain granini 10.3 % 2 Finland Marli, Mehukatti, granini 34.7 % 1 Hungary Sió, hohes C 24.7 % 1 Switzerland granini, hohes C 10.6 % 1 Austria YO Syrup, hohes C, FruchtTiger 10.4 % 2 Russia Uslada, granini developing market developing market Romania granini developing market developing market Lithuania Elmenhorster 23.7 % 1 Source: leading market research institutes (Base: value sales retail trade) Contribution to turnover by country in 2006 ** (figures rounded) 1 % Lithuania, Baltic Region 2 % Russia 4 % Austria 4 % Switzerland 5 % Hungary 7 % Finland 8 % Spain 27 % France 35 % Germany ** Base: core business (fruit beverages)

30 26 Finland Finland Oy Marli AB: Focus on strategic brands continues to pay dividends Volume sales in the Finnish fruit beverage market declined slightly by 1.0 % * in 2006, although the extremely warm summer boosted syrup sales in Finland by 1.6 % *. Oy Marli AB once again recorded double-digit growth driven by strategic brands (+19%). The company s value-based market shares rose to 34.7 % * (fruit beverages) and 35.3 % * (syrup), respectively. This gratifying result was achieved by focusing on the strategic brands Marli, Mehukatti and granini and boosting investments in TV and print advertising substantially. Value-based market share * : 34.7 % Strategic brands: Marli, Mehukatti, granini New products / important events: Marli Juissi Red Energy, Marli Vital syrup range, Mehukatti ready-to-drink, granini 1.0-litre carton range Volume sales of the Marli brand rose by 20 %, and the Marli Juissi, Marli Vital and Marli Natur lines contributed significantly to overall growth. The most successful innovations were Marli Juissi Red Energy and Marli Vital syrups, the first syrup line with vitamin supplements in the Finnish market. Highly popular among families with small children in 2006 was the new Mehukatti ready-to-drink concept in the 0.5-litre PET bottle with sport cap and a 1.5-litre carton assortment. Granini gained positive impulses from the launch of the new 1.0-litre carton range. The company has set its sights on continued growth with numerous new products in The new Marli Juissi fruit beverage line without added sugar is expected to attract young consumers in particular. A special syrup edition will be introduced in conjunction with the thirtieth anniversary of the Mehukatti brand. The most important innovation in the Mehukatti portfolio will involve the consistent extension of the ready-to-drink range through the addition of the practical 0.25-litre single-portion Cubito carton. Oy Marli AB plans to strengthen and improve its market position in the premium segment with the launch of the granini Sun Fresh line of chilled juices. * retail food trade

31 Lithuania & the Baltic Region 27 Lithuania & the Baltic Region Eckes-Granini acquires the market leader in Lithuania, strengthening its position in the Baltic Region The Baltic markets (Estonia, Latvia and Lithuania) for fruit beverages showed strong growth in the range of 7 10 % in Business in the Baltic region was expanded substantially with gains of 35 % in turnover and 19 % in volumes sales, to which Estonia was the largest contributor. Positive trends were also evident in Latvia and Lithuania. These results were augmented by significant increases in turnover and volume sales achieved through the acquisition of the Lithuanian market leader UAB Elmenhorster (June 2006), which clearly strengthened our position in the Baltic region. Activities in 2007 will focus on strengthening the Elmenhorster brand in Lithuania with innovative concepts and advertising support. Emphasis will be placed in Estonia and Latvia on expanding innovative product concepts for the Marli and Elmenhorster brands. The most important product launch in the Baltic countries in 2006 was the new granini line in 1.0- litre cartons. Initiated concurrently in Estonia, Latvia and Lithuania, the launch was supported by print ad campaigns and promotions in the retail trade. The presentation of the new flavour variety Marli Red Multivitamin resulted in volume sales gains in the 2-litre range in Estonia. A similar concept was established for the Elmenhorster brand in Lithuania in late Value-based market share: 23.7 % (Lithuania) Strategic brands: Elmenhorster, Marli, granini New products / important events: granini 1.0-litre carton range, Marli Red Multivitamin, Elmenhorster Red Multivitamin Acquisition of UAB Elmenhorster, Lithuania

32 28 France France Eckes-Granini France SNC: Sharper brand positioning focus on course for the future Volume sales in the French fruit beverage market rose by 2.9 % * in 2006, driven above all by strong growth in sales of chilled juices as well as 1.5- and 2.0-litre family-size containers. Value-based market share * : 12.9 % Strategic brands: Joker, Réa, granini New products / important events: Joker Vital, Joker Vital 5, Réa Réveil Douceur, granini Orange-Maracuja and Orange-Carrot- Lime, Joker Pulpéa Orange and Multivitamin in the new 0.33-litre PET bottle Launch of production on the new PET line in Mâcon Eckes-Granini France SNC profited from this general growth trend and increased turnover sales with 10 %. The company now holds a value-based market share of 12.9 % *. The Joker and Réa brands occupy leading market positions, which they were able to defend in a highly competitive market. Especially noteworthy accomplishments during the past business year were the double-digit (+11%) gain in sales of Joker in the unique oval carton and the entry into the chilled beverages segment with the innovative Joker Vital and Joker Vital 5 concepts. Joker Vital 5, a mix of five fruits that meets consumers total daily vitamin requirements, reached many new consumers within the first six months. This line was selected for the Saveur de l année award as one of the best innovations of the year.

33 France 29 The major TV advertising campaign launched in 2006 will be extended in The objective is to underscore the brand s promising position in the health segment and to strengthen Joker in the chilled beverages segment on a sustained basis in Réa introduced Réveil Douceur in a 2.0-litre carton as a mild variety that is particularly attractive for children. This course will be pursued in 2007 with the rigorous repositioning of Réa as a children s brand supported by a mascot created especially for this purpose, a new package design and the conversion of all juices to mild varieties. Granini was extended through the addition of two new flavours: Orange-Maracuja and Orange- Carrot-Lime. In the out-of-home sector, Eckes-Granini France SNC strengthened its lead over competing producers, with Joker as the number one brand. The acquisition of new clients, including Air France and Club Méditerranée, and the presentation of new products contributed significantly to overall results. Turnover from sales of Joker Pulpéa doubled over the preceding year following the introduction of the 0.33-litre PET bottle for the Orange and Multivitamin varieties. One of the outstanding events of the past year was the commissioning of the new PET line in Mâcon in November By December, the first 1.0-litre PET bottles of Joker were coming off the bottling line. This was a milestone event, as the installation of this system represents a major change of strategy in favour of PET in place of glass bottles. In 2007, the company plans to convert the direct juices of the Joker line as well as the products in the granini range from glass to convenient PET bottles. * retail food trade

34 30 Germany Germany Eckes-Granini Deutschland GmbH: The German market leader pulls away The German market for fruit beverages continued to shrink in 2006, with volume sales down 3.7 % *. The situation was accompanied by major structural changes resulting from the progressive conversion from glass to PET bottles and the trend toward one-way rather than returnable packaging systems. Value-based market share * : 13.1 % Strategic brands: hohes C, granini, FruchtTiger New products / important events: hohes C Red Multivitamin, granini Fruchtig- Frisch Citrus-Mix, FruchtTiger Sport Apple- Citrus, FruchtTiger Cubito, granini Cocktail Basics range Commissioning of the second cold-aseptic PET bottling line In contrast to this general negative trend, Eckes- Granini Deutschland GmbH once again extended its lead among brand producers with double-digit gains in turnover and volume sales in The company s value-based market share rose to 13.1 % *. With these outstanding results, the German national organization made yet another significant contribution to the success of the Eckes-Granini Group as a whole. The high rates of growth were achieved despite price increases. Once again, growth was driven above all by the strategic brands hohes C (volume sales +10 %), granini (volume sales +19 %) and FruchtTiger. This success was attributable in large measure to the expansion of base business. Additional growth impulses came from the introduction of new, innovative product concepts. Highlights included the launch of hohes C Red Multi-

35 Germany 31 vitamin, which became one of the volume leaders in the hohes C line within just a few months. This success was confirmed by awards received from consumer and trade organizations. granini strengthened its position thanks to continued strong growth in sales of juices and nectars in PET bottles. Additional impulses were generated by the refreshing granini Frucht Prickler carbonated beverage line and the non-carbonated thirst-quencher range Fruchtig-Frisch, which was expanded with the introduction of the new Citrus-Mix variety. The FruchtTiger brand attracted new consumers with the successful presentation of the Sport Apple-Citrus variety and the launch of the innovative Cubito single-portion unit in a 0.2-litre carton with twist-off cap and straw. Investments in consumer communication were increased again in 2006 in order to provide sustained brand support. The most important measures included TV advertising for hohes C Red Multivitamin, granini Fruchtig-Frisch and FruchtTiger Sport. In the out-of-home sector, sales support measures focused above all on the provision of dispenser systems, glasses and advertising material. The most successful products in this sector were the 0.2-litre table bottle in typical granini design and the newly introduced granini Cocktail Basics range. Eckes-Granini Deutschland GmbH not only generated decisive impulses in terms of products, sales and marketing but also built its lead in the field of packaging technology as well. As a logic consequence of the pioneering decision taken several years ago to focus mainly on one-way PET bottles, the second cold-aseptic bottling line in Germany was commissioned at the Bröl facility in Plans for 2007 call for development and further expansion of the growing chilled juices and fruity thirst-quencher / refreshment segments with granini Sonnenfrisch and hohes C Naturelle, respectively. * retail food trade