Global Market Entry Strategy: Tea & Coffee World Cup

1. Tea & Coffee World Cup/Europe 2010April 25-27, 2010Vienna, Austriawww.tcworldcup.com/vienna Organized by:

2. Organized by: STRATEGIC ENTRY INTO NEW EMERGING MARKETS April 26, 2010 Presentation by Alexander Aginsky www.aginskyconsulting.com www.aginskyconsulting.com

3. Organized by: Presentation Outline • Who is ACG? • Why go global? • Global Outlook for Tea • Why Russia? • How to go Global • Approach for Selecting the Best Market Entry Strategy • Case Studies & Examples • Lessons Learned www.aginskyconsulting.com

4. Organized by: WHO IS ACG? • Truly international boutique firm • Focused on emerging markets, particularly economies of Russia and the CIS • Target mid-market companies • Staffed with graduate-degree holders from top-tier schools • Customized project teams for each individual client engagement • Entrepreneurial! www.aginskyconsulting.com

5. Organized by: ACG Service Offering MARKET ENTRY • Strategy development • Primary and secondary research • Customer mapping and field research • Competitive landscape analysis • Marketing planning • Distribution and channel partnership building • Cross-cultural communication and integration • Sales and channel management • Emerging markets product/service launches • Strategic alliances CORPORATE FINANCE • Financial planning / modeling • Investor relationship management • Business valuations • Capital fundraising • Equity sales • M&A advisory www.aginskyconsulting.com

6. Organized by: Why go global? • To increase sales, revenues, and profits • To grow the company’s global market share • To achieve greater economies of scale • To reduce costs • To reduce risk • To establish a foothold in a promising market • To learn from a leading market • To build a global brand • To respond to competitors • To receive investment from PE & VCs www.aginskyconsulting.com

7. Organized by: Global Outlook for Tea www.aginskyconsulting.com

8. Organized by: Global Outlook for Tea www.aginskyconsulting.com

9. Organized by: Global Outlook for Tea www.aginskyconsulting.com

10. Organized by: Global Outlook for Tea As can be seen from the graph, the average per capita consumption of tea in Russia was 1.3 kg, which was far greater than the average per capita consumption of tea both globally (0.3 kg) and in India (0.7 kg). www.aginskyconsulting.com

11. Organized by: Global Outlook for Tea Future Trends • Possibility of an oversupply of black tea in the coming years in the global tea market • A growing health and wellness trend boosting the sales of specialty tea varieties such as fruit/herbal tea, green tea, and other tea • Higher disposable incomes in many developing economies such as China, India, and Russia, prompting a shift from unpackaged to branded and specialty tea varieties • For the next 5-7 years • World black tea production is expected to grow at 1.9% annually to reach 3 million tons • World green tea production is expected to grow at 4.5% annually to reach 1.6 million tons www.aginskyconsulting.com

12. Organized by: Why Russia? Economy • The IMF predicts that Russia's GDP will grow 4% in 2010. Meanwhile, it expects inflation to reach 7 percent in 2010 before declining to 5.7 percent in 2011, allowing for more borrowing. • The fastest growing economy in the G8 group of industrialized nations • Investors pouring money into improved storage facilities, infrastructure, and logistics • Improving financial services, rule of law, and banking infrastructure www.aginskyconsulting.com

13. Organized by: Why Russia? Consumers • 140 million consumers • Price conscious consumers but willing to pay for quality • Disposable income increasing, consumers willing to spend on brand names • Real wages ↑, increased consumer spending • Consumers more health conscious than ever • Russian consumers are now the fourth biggest spenders on high end goods behind the U.S, Japan and China (Business Week) www.aginskyconsulting.com

14. Organized by: Why Russia? Reasons for Entry • Grow revenues • Lower fixed costs per unit • Higher prices + lower costs = greater margins • Mature home market and/or excess capacity • Global competition • Gain access to a distribution network • Broaden existing products portfolio • Global branding, exposure, and geographic reach • Diversify business risks www.aginskyconsulting.com

15. Organized by: Why Russia? Reasons for Entry • Largest importer of tea in the world. The total value of Russian tea imports was ~$310 million, which is nearly 14% of the global market. • Retail volume growth rates of 15% and 12% in black standard tea bags and black specialty tea bags respectively. • BOTTOM LINE – Large Market and Growing Quickly www.aginskyconsulting.com

16. Organized by: How to go global? Risk vs. control • Entering a new market= start-up situation: no sales, no marketing, no knowledge of the market. • Low intensity modes of entry minimize risk and control. More financial involvement gives more marketing control. High www.aginskyconsulting.com Low

17. Organized by: Approach for selecting market entry • Identify market segment opportunities • Due diligence • Focus on long-term benefits • Connect with other successful foreign firms in the market • Budget plan, entry marketing and promotion www.aginskyconsulting.com

18. Organized by: Approach for selecting market entry • Analyze the four market entry • dimensions (marketing, finance, • market environment, and strategic • flexibility) • Receive Tea player's feedback on • six sub-categories (control, • profitability, market penetration, • customer feedback, financial risk, • cash required) and order them using • a weighed average • Assume a long-term presence and • planning horizon www.aginskyconsulting.com

19. “From the business side, we have such a combination of high potential, high growth and fast change that there is no question in my mind, that this is the most dynamic and exciting place in the world to work.” Xyzard Smyth General Manager, Russia and CIS The demand for professional services is growing at a rate of up to 40% a year, fueled by a booming economy, the development of the capital market and significant changes in Russian business culture. Mike Kubena Senior Partner for Central and Eastern Europe, Russia and the CIS Russia has been a strong performer for Wrigley and now ranks in the top 5 among the 180 countries in which we do business around the world. Ralph Scozzafava VP – Worldwide, Commercial Operations Organized by: Success stories and Case studies Source: American Chamber of Commerce in Russia www.aginskyconsulting.com

20. Organized by: Success stories and Case studies Latest Example: • U.S. Company – privately held • R&D for over 5 years before launch • Top-notch management team • Well capitalized, with millions invested • Numerous international patents • Proprietary technology • No debt • Highly innovative • Mass-market international strategy • Unique and differentiated product offering www.aginskyconsulting.com

21. Organized by: Success stories and Case studies What is it? • Holy grail of the beverage industry • Self-heating cup • Heats in under 60 seconds • Strongest and most reliable • Consistent • Ease of Use:Push → Shake → Drink • Perfectly safe • Convenient • Fun & interactive • Works with all types of beverages (coffee, tea, hot chocolate, cider, or soup) • Self-cooling technology being developed www.aginskyconsulting.com

22. Organized by: Success stories and Case studies HOW IT WORKS www.aginskyconsulting.com

23. Organized by: Success stories and Case studies Product substitutes Low Degree of Prep • ACG CLIENT • Mug Heaters • Vendor High Degree of Mobility Low Degree of Mobility • Other • Thermos www.aginskyconsulting.com High Degree of Prep

24. Organized by: Success stories and Case studies What next? • In product launch phase • Already entertaining offers from investors • Strategic partners • Distribution and licensing • Co-branding • International (perfect for new market entry) • Perfect tool for your company to enter new markets www.aginskyconsulting.com

25. Organized by: Success stories and Case studies LESSONS LEARNED • Management team • Preparation • Long-term vision • Capitalization • Timing • Innovation and technical prowess • Clear strategy and an end result in mind • Know the process and requirements for getting to that end result • Rely on experts who can “bridge” the needs and wants of all parties internationally www.aginskyconsulting.com

26. For a copy of this presentation please contact us.Thank you WEB: www.aginskyconsulting.com EMAIL: info@aginskyconsulting.com TEL: +1-503-546-4049 www.aginskyconsulting.com