Ambitious Minds Bring Excellent Results Annual Report 2020 AMBER BEVERAGE GROUP | ANNUAL REPORT 2020 1 2 AMBER BEVERAGE GROUP | ANNUAL REPORT 2020 AMBER BEVERAGE GROUP | ANNUAL REPORT 2020 3 PAGE 2 AMBER BEVERAGE GROUP | ANNUAL REPORT 2020 > CONTENTS > CONSOLIDATED MANAGEMENT REPORT > CHAIRMAN’S STATEMENT > COMPLIANCE AND CORPORATE GOVERNANCE > CONSOLIDATED FINANCIAL STATEMENTS > INDEPENDENT AUDITOR’S REPORT PAGE 3 Contents Consolidated Management Report The Group at a Glance 6 Statement of the Chairman of the Supervisory Board 13 Chairman’s Statement 16 Compliance and Corporate Governance 23 Strategy in Action 24 Corporate Social Responsibility 26 Principal Risks 36 Corporate Governance Report 2020 40 Our brands 42 Riga Black Balsam® 49 Moskovskaya® Vodka 53 Cosmopolitan Diva® 57 Rooster Rojo® tequila 61 KAH® Tequila 65 Cross Keys Gin® 69 Regional performance 72 Distribution 74 International 74 Baltics 75 United Kingdom 78 Austria 79 Australia 80 Production 82 Latvia 82 Russia 84 Estonia 85 Mexico 86 Strategic Our Team 88 Report Consolidated Financial Statements 92 Independent Auditor’s Report 158 4 AMBER BEVERAGE GROUP | ANNUAL REPORT 2020 AMBER BEVERAGE GROUP | ANNUAL REPORT 2020 5 PAGE 4 AMBER BEVERAGE GROUP | ANNUAL REPORT 2020 > CONTENTS > CONSOLIDATED MANAGEMENT REPORT > CHAIRMAN’S STATEMENT > COMPLIANCE AND CORPORATE GOVERNANCE > CONSOLIDATED FINANCIAL STATEMENTS > INDEPENDENT AUDITOR’S REPORT PAGE 5 Our strategic choices • Deliver quality and value to our consumers, customers and suppliers • Strengthen our market positions in all key sectors by building and acquiring brands and companies • Achieve operational effectiveness and efficiency by applying rigor to everything we do • Build a truly effective international team with an ambitious, high performance culture • Generate superior business value through relentless focus on performance ess focus on performance Net revenue 2020 Production 28% € 268.7 million The Group at a Glance Distribution Amber Beverage Group (ABG) is a leading producer, distributor, logistic 72% service provider and retailer of beverages. It operates internationally from its head office in Luxembourg and through its production and distribution companies in Russia, Mexico, the UK, Australia, Austria, and the Baltics, its historical home. 6 AMBER BEVERAGE GROUP | ANNUAL REPORT 2020 AMBER BEVERAGE GROUP | ANNUAL REPORT 2020 7 PAGE 6 AMBER BEVERAGE GROUP | ANNUAL REPORT 2020 > CONTENTS > CONSOLIDATED MANAGEMENT REPORT > CHAIRMAN’S STATEMENT > COMPLIANCE AND CORPORATE GOVERNANCE > CONSOLIDATED FINANCIAL STATEMENTS > INDEPENDENT AUDITOR’S REPORT PAGE 7 Highlights Net revenue, mEUR Volume, k9Lcs Headcount Production 28% Production 51% Volume 15.2m 9l cases sold Amber Beverage Group 268.7 15 164 1 966 Revenue 0% Core brands Products produced by Amber Beverage Group Volume -8% are sold in over 185 countries Distribution 72% Distribution 49% Rest of World 53% Rest of World 69% Headquarters The ABG head office is located in Luxembourg, Production the ABG global management team reports to 74.37 7 752 1 277 Revenue -13% Supervisory Board Volume -10% Baltics 47% Baltics 31% Centralized ABG management and Supervisory Board define, functions coordinate and oversee ABG’s overall strategy and Rest of World 30% Rest of World 15% ensure governance and compliance of ABG affiliates Distribution 194.38 7 412 689 Revenue 6% Volume -7% Baltics 70% Baltics 85% Volume Net revenue Operating Profit EBITDA Sales by markets Volumes by sales markets Volume, k 9Lcs Net sales, m Operating profit, m EBITDA*, m Other 8% Other 9% Other 15% 15 164 € 268.7 € 21.9 € 31.2 Australia 5% Reported movement Reported movement Reported movement Reported movement US 9% -8% 0% 4% 2% US 9% Baltics Baltics Baltics Organic movement Organic movement Organic movement Organic movement 52% 43% US 18% 42% -11% 11% 21% 13% Russia 2020 2020 2020 2020 13% Russia 15 164 268.7 21.9 31.2 35% UK 13% Russia 19% 2019 2019 2019 2019 UK 4% UK 6% 16 563 269.2 21.1 30.6 2018 2018 2018 2018 15 140 242.6 22.0 26.3 * Excluding beer and non-alcoholic beverages, raw material (spirit) * Normalized for one-off items 8 AMBER BEVERAGE GROUP | ANNUAL REPORT 2020 AMBER BEVERAGE GROUP | ANNUAL REPORT 2020 9 PAGE 8 AMBER BEVERAGE GROUP | ANNUAL REPORT 2020 > CONTENTS > CONSOLIDATED MANAGEMENT REPORT > CHAIRMAN’S STATEMENT > COMPLIANCE AND CORPORATE GOVERNANCE > CONSOLIDATED FINANCIAL STATEMENTS > INDEPENDENT AUDITOR’S REPORT PAGE 9 ABG Milestones: the Origins 1752 1847 1894 1900 1948 2003 2007 Pharmacist Abraham In 1847, Albert The production of Latvijas balzams begins Latvijas balzams SPI Regional Business Unit Paying particular Kunze creates his Wolfschmidt Moskovskaya® Vodka operations and opens begins production of BV becomes ABG’s leading attention to the unique formula for the establishes the factory begins under the as Riga State Spirits Stolichnaya vodka shareholder distribution of products beverage which forms that produces Kunzen’s auspices of the Russian Warehouse No.1 manufactured by the base of Riga Black Riga Black Herbal Empire’s vodka The formula was created Stolichnaya vodka and the company, active Balsam® balsam monopoly in Russia ten years earlier Moskovskaya® Vodka are expansion of Latvijas in 1938 now bottled for the global balzams export market market takes place, adding 10 new countries ABG Milestones: Building for the Future 2014 2015 2016 2017 2018 2019 2020 Amber Beverage Group is ABG acquires Moskovskaya® Moskovskaya® Vodka is Rooster Rojo® tequila is ABG acquires a majority ABG updates its strategy After naming KAH® Tequila as its core brand, the registered on October 24 Vodka brand rolled out to 68 markets launched for the rapidly stake in Permalko, 100% with the ambition to Group brings super-premium tequila’s marketing and globally growing global tequila of Remedia and a majority become TOP10 spirits distribution in-house Amber Logistics starts to category stake in Think Spirits industry leader provide logistic services ABG steps into tequila To ensure exceptional field-to-bottle control over Tequila business by acquiring the ABG acquires shares in the ABG confidently enters Riga Black Balsam® production, ABG acquires 220 hectares of agave fields in Cosmopolitan Diva® – an tequila producer Fabrica de UK distribution company the premium gin market Espresso, Cross Keys Mexico innovative and strategic Tequilas Finos in Tequila, Cellar Trends with the new Cross Keys Gin® Black Currant, export product – is Mexico Gin® brand Moskovskaya® Pink ABG announces its plans to build a fully automated high- launched ABG acquires a majority Vodka, Moskovskaya® bay warehouse, which will be one of the most hi-tech stake in Talvis spirit Arnold (RobotOne) Infusions, and warehouses in Europe distillery in Tambov, Russia starts working in ABG Cosmopolitan Diva® companies Passion Fruit are With the resumption of can filling, ABG starts to explore launched on the market the booming RTD (ready-to-drink) category 10 AMBER BEVERAGE GROUP | ANNUAL REPORT 2020 AMBER BEVERAGE GROUP | ANNUAL REPORT 2020 11 PAGE 10 AMBER BEVERAGE GROUP | ANNUAL REPORT 2020 > CONTENTS > CONSOLIDATED MANAGEMENT REPORT > CHAIRMAN’S STATEMENT > COMPLIANCE AND CORPORATE GOVERNANCE > CONSOLIDATED FINANCIAL STATEMENTS > INDEPENDENT AUDITOR’S REPORT PAGE 11 Statement of the Chairman of the Supervisory Board Dear reader, It is my privilege to introduce you to a highly ambitious and To grow its global footprint, during the year several new adventurous global spirits company, Amber Beverage Group partnerships were formed with new importers of ABG core (ABG), which started its extraordinary journey in late 2014. brands in several key markets including the US and Mexico – Since its establishment, the Group has grown from a pan- two of the biggest Tequila markets in the world which now are Baltic producer and distributor of alcoholic beverages into offering KAH® Tequila and Rooster Rojo® tequila. Other ABG core a leading spirits industry player seizing opportunities in the brands have also experienced significant growth in this market, global market. I am proud to say that ABG has managed to end accompanied by impressive results in other strategic markets. this extraordinary year on a high and once again has exceeded its previous year’s results despite the challenging Covid-19 Last year Amber Beverage Group has been named Best Leading circumstances. International Beverage Company of the Year 2020 - Luxembourg in the Global 100 Annual Awards. In addition to the overall Under the precise steering of the Board of Managers and top standards of excellence in operations and quality, the Award management, the Group has adapted quickly to the changing recognises the business results of ABG, which exceeded its last world, and all of us on the Supervisory Board have been year’s performance despite the global pandemic, as well as impressed by the dedication and agility across the whole Amber the spirit of innovation developing new brands and markets. Beverage Group family. The year of 2020 once again confirmed We would like to note that also Amber Beverage Group CEO, that determination and passion towards your work is the key to Jekaterina Stuģe has been named Best Female CEO from Latvia produce the desired result. for pivoting the Group by means of an innovation agenda. Amber Beverage Group has successfully continued to grow In our capacity as the Supervisory Board, we have provided the awareness of its core brands Moskovskaya® Vodka, Riga Black Board of Managers with in-depth advice on how to streamline Balsam®,