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CARLSBERG IN CHINA

26 September 2005

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Objectives:

· · · Background of Carlsberg in China Overview of China beer market Carlsberg's Mission and Strategy in China ­ Carlsberg Brand Strategy ­ Local / mainstream segment strategy · West China strategy · Our current investments ­ Our next milestone Outlook

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Carlsberg Has a Long History in China

· 1876, Carlsberg first entered the Chinese market by importing Carlsberg Beer. 1981, Carlsberg Brewery Hong Kong was established, supplying Carlsberg Beer to the Chinese and Hong Kong market, at the same time sales & distribution network was established in China. 1995, Carlsberg acquired Huizhou Brewery in Guangdong, started to brew Carlsberg Beer there, and supply both China and Hong Kong market. Huizhou Brewery is now one of the best breweries (in terms of quality) brewing Carlsberg Beer. From 2003, Carlsberg initiated "West China Strategy", and started investing in local breweries in West China.

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Overview of the China Beer Market

· · World's largest country ­ 1.3 billion people. World's largest beer market ­ 286 million hl in 2004 from 253 million hl in 2003. 15% growth in 2004 Per capita consumption of 22 liters per capita in 2004. Per capita production & consumption varies greatly between provinces. · Average annual growth estimated at around 15 million hl / year over next five years, i.e. growth of around 5 to 6% per year. Highly fragmented beer market ­ China does not have a definitive national brewery, but many regional breweries. Mainstream and discount segment (local brands) accounts for more than 95% of total market

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Potential of China Beer Market

· China has overtaken US and is now the world's largest beer market. Per capita consumption at 22 liters is still far below US and most European countries. Continued strong growth momentum of the China beer market mainly driven by continue strong economy, current low per capita consumption and substitution from local spirit to beer.

06F to 09F

450.000 400.000

·

05F to 07F +12% +8.0%

286.348

% CHG PA of +5%

402.365

CHG PA of 6.0%

347.565

Sales in HL ('000)

350.000 300.000 250.000 200.000 150.000 100.000 50.000 0

309.287

255.626

2003A

2004A

2005P

2007F

2010F

Source Canadean Report, China 2005 Cycle.

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Top 10 beer groups in China .... Highly fragmented market

Ranking Beer Group Main brands 2004 domestic vol. mio HL 37.1 31.3 26.4 13.0 12.3 % No. 1 No. 2 No. 3 No. 4 No. 5 No. 6 No. 7 No. 8 No. 9 No. 10 Tsingtao Tsingtao, Hans 12.7 10.8 9.1 4.5 4.2 4.0 3.9 3.7 2.0 2.0

CRE/SABMiller Snow Yanjing Harbin Yanjing Harbin, Yinpu

Henan Jinxing Jinxing Golden Lion Chongqing Zhujiang Carlsberg Asahi Others

Jinlongquan, Double Beer 11.6 Shancheng, Chongqing Zhujiang GL, CC, JV brands Yantai, Xihu 11.2 10.6 5.8 5.7

Total China Based on 2003 Canadean report.. Source Canadean Report, China 2005 Cycle and CB internal.

------------286

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China Beer Market by Region ... variance between regions

North China · Volume in 2003: 118,381,000 HL

HEILONGJIANG Harbin

· 46.60% of total China beer market · 6% of total China premium market

INNER MONGOLIA

JILIN

LIAONING XINJIANG UYGURV GANSU BEIJING TIANJIN HEBEI NINGXIA HUIZA QINGHAI XIZANG (TIBET) SHAANXI HENAN SHANXI SHANDONG

East China · Volume in 2003: 34,300,000 HL · 19.01% of total China beer market

SHANGHAI

JIANGSU

Lhasa

SICHUAN Chonging

HUBEI

ANHUI ZHEJIANG

· 50% of total China premium market

JIANGXI

Central/West China · Volume in 2003: 43,115,000 HL · 16.97% of total China beer market · 6% of total China premium market

HAINAN Dali GUIZHOU Kunming GUANGXI YUNNAN

HUNAN

FUJIAN

South China

Guangzhou GUANGDONG

· Volume in 2003: 44,252,000 HL · 17.42 % of total China beer market · 38% of total China premium market

Huge difference from region to region ­ Per capita consumption in Beijing: 84.3 L versus Yunnan: 4.3 L ­ GDP per capita (RMB) in Shanghai: 46,585 versus Gansu: 4,984

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China Beer Market Segmentation

Price index excess of 150

Super premium 2%

Price index 110 to 150

Premium 2%

Price index below 90 Discount 8% Price index 90 to 109 Mainstream 88%

Foreign premium beers constitute 1 to 2% of the total China beer market now. Local premium and mainstream beer constitute around 2 to 3% and around 95%, respectively. The foreign premium segment is expected to grow to 2.2% by end 2006, hence there is good potential for Carlsberg's growth.

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COMPANY VISION IN CHINA

To become the leading brewery group in West China and to establish Carlsberg brand to be one of the leading brands in the foreign premium segment nationwide

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OVERALL STRATEGY

Achieve through: Acquisitions of controlling shareholdings in breweries in selected provinces / markets. Establishment of strong position / dominance in such provinces / markets. Establishment of strategic alliances in selected provinces / markets to become the major/dominant player. Develop an optimal brand portfolio to capture growth in all segments An international premium brand with nationwide leading position A range of local mainstream and premium brands with profitable leading positions at the regional level. Further develop and improve Carlsberg brand position nationwide. Grow by building on strong mainstream brands and establish strongholds in foreign premium segment.

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Carlsberg in China so far

13 breweries (19 after completion of XH) and over 90 branches/sales office Sales Volume 2005 approx. 6.4 million hl Turnover over RMB1.6 billion Investment since 2003 approx RMB 780million All joint ventures are profitable and we are still investing in CB brands Employees in China +6000

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COMPANY STRUCTURE & SHAREHOLDING

Carlsberg

50%

30%

33%

49%

50%

100%

100%

Lhasa Brewery

Gansu 3 breweries

Xining Brewery

Inv Company

46.09%

Wusu Brewery

100% Kunming Huashi Brewery

Dali Brewery

25% Tsingtao Shanghai 100%

Carlsberg Brewery Hong Kong

99% Carlsberg Brewery Guangdong

Xinjiang Hops

55%

Xinjiang Beer Group

Carlsberg Hong Kong

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Carlsberg In China

(1) Carlsberg Brand Strategy (2) Local / Mainstream Segment Strategy (3) Our next milestone

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Carlsberg Brand Strategy In China

Goal: Establish Carlsberg brand to be one of the leading brands in the foreign premium segment nationwide

Competitive Strength:

Carlsberg brand is highly respected, has good image, high awareness and good ranking in many provinces in the premium segment. High quality production base in Guangzhou. Launch of Carlsberg Chill, a much lighter taste beer, supported with significant level of marketing investment.

Strategy:

Continue to Focus on major cities across China. Strengthen and expand our sales network. Carlsberg brand(s) as part of portfolio (in West China) create significant growth potential for the brand in the region

Positioning of Green Label & Chill: Carlsberg Green Label and Chill supplement each other in different consumer segment and taste preference. Chill supports GL with a younger and fresher image.

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Brand Positioning of Green Label & Chill

Cosmopolitan, Witty, Passion for excellence, Contemporary

Carlsberg Green label Authentic European beer taste; more intellectual

Carlsberg Chill

Easy-to-drink; Fun-loving

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NEW PRODUCT

Easy Drinking Opportunity / Carlsberg Chill Was Launched In HK & China In Q3 2004

Objective: to reach the large segment of "lighter tasting beer" drinker ­ so far very well receive in the market

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Market leading positions in premium segment

Rankings of Carlsberg brand in selected China provinces/cities

Province/City Xinjiang Gansu Qinghai Tibet Yunnan Tianjing Shenyang Harbin Ranking No. 1 No. 1 No. 1 No. 2 No. 3 No. 2 No. 2 No. 2 Province/City Chengdu Chongqing Sichuan Xi-an Shenzhen Ranking No. 2 No. 2 No. 2 No. 2 No. 2

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Thematic Print Visuals

Product Focus

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Carlsberg In China: Guangdong province, Huizhou city

Production base for Carlsberg beer sold in Hong Kong, China and Macau.

Calsberg Brewery Guangdong Ltd. ·Stake: 99% (by CBHK) · Acquired in 1995. · Capacity of 790,000 HL · Main brands: Carlsberg, Chill, Skol, and Jolly Shandy, Dragon8

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Products from Huizhou Brewery

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Carlsberg Sales Offices In China

HEILONGJIANG Harbin Urumqi JILIN XINJIANG GANSU INNER MONGOLIA LIAONING Shenyang BEIJING TIANJING Dalian HEBEI NINGXIA Lanzhou QINGHAI TIBET Lhasa SHANXI Shijiazhuang SHANDONG Taiyua Zhengzhou n SHAANXI JIANGSU HENAN Nanjing Xi-An Chongqin HUBEI g Wuhan Guiyang Kunming YUNNAN GUIZHOU SHANGHAI ANHUI Hangzhou Ningbo/Suzhou ZHEJIANG Nanchang Fuzhou

North region branch/rep office Total 8 offices, 59 staffs. East region branch/rep office Total 4 offices, 44 staffs. Central region branch/rep office Total 10 offices, 86 staffs. South region branch/rep office. Total 9 offices, 99 staff. Huizhou Brewery 263 staffs.

SICHUAN Chengdu

Changsha JIANGXI HUNAN

FUJIAN

GUANGXI

GUANGDONG

Guangzhou

HAINAN

Offices in Guangdong are in Shenzhen, Dongguan, Zhongshan, Foshan, Zhanjiang and Huizhou.

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China Strategy

(1) Carlsberg Brand Strategy (2) Local / Mainstream Segment Strategy (3) Our next milestone

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Focus on West China ... Why?

1. Growth in beer market supported by strong future economic growth potential. GDP growth in most West China provinces are close or above the national level mainly due to Central Government's "Go West" policy to accelerate economic growth in the West region to catch up with other parts of China. This is one of the main source for the beer market growth in West China. 2. Low per capita beer consumption. Most provinces (except Tibet) have per capita consumption of less than 50% of the national average of 22 liters per capita. The potential for growth is very huge. The drivers for growth includes conversion from spirits to beer due to health concern, higher disposable income from economic development and influx of mobile population (investors, workers and tourists) to the region. 3. Less saturated and competitive beer market. The top local brewers and international brewers are already present in the economically more developed North, South, East and Central regions. Acquisition opportunities in these regions are scare and costly. Future volume, market share and profit growth will be challenging in these markets which are mostly over-capacity, hence price war is inevitable.

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Consumption per capita in selected west china provinces

Below national average with strong potential for growth.

GDP/capita (RMB) National Yunnan Tibet Gansu Qinghai Xinjiang

Note: 2004 statistics

GDP real growth 9.0% 8.6% 12.1% 9.0% 11.0% 9.1%

Beer Market (HL) 250 million 2.11 million 0.73 million 2.17 million 0.75 million 2.70 million

Beer Consumption litres/capita 19.0 4.8 20.1 8.4 11.3 13.9

9,030 5,647 6,874 4,984 7,276 9,686

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Why west China? Less saturated and competitive beer market

SAB-Miller owns 49% of CRB

Chinese Resources Brewery - 35 breweries Strong in North/NE/East/Central

Budweiser owns 27% of Tsingtao

Tsingtao - 50 breweries Strong in NE/East/South

Budweiser & Harbin

Harbin x 13 breweries (100%) Strong in North/NE HEILONGJIANG

XINJIANG GANSU NINGXIA TIBET QINGHAI

INNER MONGOLIA

JILIN

LIAONING BEIJING TIANJING HEBEI SHANXI SHANDONG JIANGSU

SHAANXI SICHUAN

HENAN CHONGQING HUBEI

Carlsberg

Lhasa Brewery, Dali Brewery, Kunming Huashi, Huanghe Breweries (3 in Gansu, 1 in Qinghai), Wusu Brewery , Huizhou Brewery

ANHUI ZHEJIANG JIANGXI FUJIAN

GUIZHOU YUNNAN

HUNAN

GUANGXI GUANGDONG

Heineken

Guangdong x 5 breweries (21%) (Kingway) Heineken/Asia Pacific Breweries JV

Scottish-Newcastle & Chongqing

19.5% stake in Chongqing Chongqing - 7 breweries

Interbrew

KK - 5 breweries (70%) Zhujiang - 2 breweries (24%)

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Our acquisitions & targets: Breweries with strong position (1)

An important asset common among the acquired breweries is the strong local brand that each brewery has, which would be its fundamental strength for future growth. Tibet - Lhasa Brewery Market leader with 40% market share Lhasa beer brand is one of three in China that has been allowed to use the name of the province Tibetan consumers are brand loyal to "Lhasa Beer" as it is part of their heritage Awarded the "China Famous Trademark" status Opportunity for export is huge: Beer brewed with water from the roof of the world

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Our acquisitions & targets: Breweries with strong position (2)

Gansu - Huanghe Group (comprise of Lanzhou Huanghe Brewery, Tianshui Benma Brewery and Jiuquan Xibu Brewery) - Market share of >50% in Gansu province - Huanghe Beer brand is awarded the "China Famous Trademark". Only five beer brands in China have been awarded this trademark status - Strong local management team - The JV included a green field brewery in Qinghai. This is the only brewery in Qinghai. Xinjiang ­ Wusu Brewery Geographical location advantage, i.e. high transportation for competitors - Well established sales and distribution network. - Market share of 55% - Strong local management team.

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Carlsberg Investments

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Carlsberg In China: Yunnan

Kunming Huashi Brewery · Market share: 7% · Shareholding: 100% (by CBHK) · Acquired in 2002. · Capacity of 650,000 HL · Main brands: Ice Dragon, · Bailongtan, KK (licensed) · 2004 sales 160,000 HL

Dali Brewery · Market share: 38% · Position in province: No. 1 · Shareholding: 100% · Acquired in 2003. · Capacity of 1.1 million HL. · Main brands: Dali & · Wind Flower Snow Moon · 2004 sales 0.85 million HL

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Carlsberg In China: Tibet

Lhasa Brewery · Market share: 50% · Position in province: No. 1 · Shareholding in JV: 33% (JV with Tibet Galaxy and IFU) · JV formed in 2004 · Capacity of 1.2 million HL · Main brands: Lhasa, Lhasa Ice beer, Qingke beer · 2004 sales 380,000 HL; · Awarded China Famous Trademark status.*

* Lhasa beer is the fifth and latest beer brand in China to be awarded the "China Famous Trademark" status. The other brands are Tsingtao, Yanjing, Zhujiang and Huanghe. · The "Lhasa beer" brand is one of the three beer brands in China that has been given the right to use the name of a place as the brand name. The other two are Tsingtao and Harbin beer.

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Carlsberg In China: Gansu

Jiuquan Xibu Brewery · Shareholding in JV: 30% (JV with Lanzhou Huanghe Enterprise and IFU) · JV formed in 2004. · Capacity of 100,000 HL. · Main brands: Xibu

Lanzhou Jianiang Brewery · Total Market share: 50% (incl. Jiuquan and Tianshui Brewery) · Group position in province: No. 1 JV Stake: 30% (JV with Lanzhou Huanghe Enterprise and IFU) · JV formed in 2004 · Capacity of 1.5 million HL. · Main brands: Huanghe (Yelow River) · 2004 sales 1.8 million HL (3 breweries) · Awarded China Famous trademark status.

Tianshui Benma Brewery · Shareholding in JV: 30% (JV with Lanzhou Huanghe Enterprise and IFU) · JV formed in 2004. · Capacity of 250,000 HL. · Main brands: Benma

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Carlsberg In China: Qinghai

Xining Brewery · Greenfield brewery of capacity 0.5 million HL · Commence production in August 2005 · Market share: > 50% · Shareholding in JV: 33% (JV with Lanzhou Huanghe Enterprise, Xining Government and IFU) · JV formed in 2004

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Carlsberg In China: Xinjiang

Wusu Brewery · Market share: 56% · Group position in province: No. 1 · Shareholding in JV: 50% (other main shareholder is Blue Sword) · JV formed in 2004. · Capacity of 2.5 million HL . 6 breweries of which 5 are in Xinjiang region. · Main brands: Wusu beer · 2004E sales 1.5 million HL

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Local Operations

Distribution Mix of direct sales and through wholesalers but majority of sales volume for JV breweries are sales through wholesalers. Also varies according to sales channel. Payment method Generally the beer industry is moving towards cash basis. At our JVs, there is a mix of cash and credit sales but the trend for most of our JV breweries is on cash basis, hence account receivables at most of our JV breweries are at low level. JV breweries will often adopt a flexible approach to meet the needs of market. Eg. in the case where the brewery is trying to penetrate into a new market, and to support the wholesaler it may as an exception accept credit sales. Brewery have been trying to improve their monitoring of account receivables.

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Carlsberg Has Good Cooperation with JV Partners & Adding Value to Local Operations

Commercial input · Assistance to local breweries in new product development. · Utilize Carlsberg Group brand portfolio tools in local operations to improve local breweries' product portfolio. · Improved packaging design and rejuvenated local breweries' products. · Started commercial improvement projects in all JV operations. Technical input · Technical support from headquarter and Carlsberg Hong Kong to all JV breweries. · Utilize Carlsberg's quality control system to improve local breweries' quality level. · Upgrade local breweries equipment and improve maintenance system. · Supply local brewery with yeast strain and technical specifications and support in developing new products. Financial and procurement input · Strengthened financial and controlling system. · Improving procurement efficiency. Staff Development · Provide opportunities for training and further development for local employees.

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China Strategy

(1) Carlsberg Strategy (2) Local / Mainstream Segment Strategy (3) Our next milestone

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Next Step

Continue our acquisition strategy in West China as well as investigate into other potential attractive targets in other parts of China Integration for more efficient resource utilization ­ technical, sales, distribution and marketing Agree with JV partners to implement growth plan to strengthen JV position in the province/region

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Realizing our Identified Potential Synergies

Portfolio Strategy - Sharing of brands - Our portfolio of local premium and mainstream brands through acquisitions would give opportunities for breweries in the Group to use each other's brand to fill gaps in existing portfolio. - Brands from another brewery can also be added to existing portfolio to give consumers more choices. Aggressive portfolio management: products, company & geographical region Potential for development of a common pan-provincial and provincial brand Sharing of distribution system For instance Carlsberg would be able to leverage on the sales and distribution network of the acquired breweries to increase its presence in the region. Operational synergies Synergies in marketing, sales and distribution, supply chain and procurement, finance and IT and public relations have been identified. For instance, joint procurement of raw materials would give us higher bargaining power.

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Continue Improvement Projects and Knowledge Transfer

· Portfolio optimization ­ improve portfolio structure to optimize all brands Tools used at CPN and Europe such as "Optima" have potential to be used to improve our local breweries portfolio. · Brand planning best practices For long-term brand building: introduce a structured approach to SWOT analysis, ATL and BTL planning, promotion and activities plan, brand budgeting, etc. · Carlsberg HQ Administration, Finance, Production and Commercial Excellence projects These projects have proven to be very successful where it has been applied in Europe and will be evaluated for their potential of being applied at our China JV breweries.

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Carlsberg ­ China Environmental Program

· · Traditionally China environmental standards have been weak However new Government legislation and enforcement is tightening and approaching Western standards All breweries as a minimum is required to install SO2 reduction systems (main energy source is coal) and Waste Water Treatment plants within next 2 years

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Carlsberg China ­ Environmental Next Steps

· Carlsberg Central Technical Function set-up to provide overall co-ordination and supervisory role in China High priority is to perform Corporate Responsibility Audit (Environmental and Health & Safety) of all breweries including JV's Minimum standard will be established that surpasses local government directives Key Performance Indicators and targets will be established Measures will be supported by Capex spend over next 3 years Monthly reporting system will establish up to date Environmental Protection System All 100% owned companies will look to adopt ISO14000 next year as part of corporate policy

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Conclusion

· Carlsberg's investment strategy is in line with the "Go West" policy recommended by the Chinese government, to enhance economic development and prosperity in the western regions of China. Carlsberg appreciates the good cooperation and support from Chinese local governments, and look forward to continue these good and constructive relationships Carlsberg will continue to develop its business in China, which will imply further investment activities in the brewing business

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CARLSBERG BREWERIES

Probably the best beer company in the world

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