PODRAVKA GROUP ANNUAL REPORT FOR 2018 CONTENTS INTRODUCTORY WORDS OF THE PRESIDENT OF THE MANAGEMENT BOARD ........................................7 PODRAVKA GROUP PROFILE .......................................................................................................................................... 9 COMPANY NAME AND HEADQUARTERS LOCATION ......................................................................................................................9 ORGANIZATIONAL STRUCTURE........................................................................................................................................................................9 PODRAVKA GROUP BRANDS AND PRODUCTS .................................................................................................................................12 LOCATION OF BUSINESS ACTIVITIES ........................................................................................................................................................16 OWNERSHIP AND LEGAL FORM ......................................................................................................................................................................17 MARKETS ON WHICH THE COMPANY OPERATES .........................................................................................................................18 THE SUPPLY CHAIN .....................................................................................................................................................................................................19 IMPORTANT CHANGES IN THE COMPANY AND ITS CHAIN OF SUPPLIERS .............................................................21 PRECAUTIONARY APPROACH ...........................................................................................................................................................................21 EXTERNAL INITIATIVES .......................................................................................................................................................................................... 22 CORPORATE GOVERNANCE ...........................................................................................................................................23 SYSTEM OF VALUES AND ETHICAL PRINCIPLES ............................................................................................................................24 BUSINESS PRINCIPLES OF THE PODRAVKA GROUP ..................................................................................................................25 GENERAL ASSEMBLY .............................................................................................................................................................................................. 26 SUPERVISORY BOARD ...........................................................................................................................................................................................27 BIOGRAPHIES OF THE MEMBERS OF THE SUPERVISORY BOARD OF PODRAVKA INC. ...........................30 MANAGEMENT BOARD .........................................................................................................................................................................................36 BIOGRAPHIES OF THE MEMBERS OF THE MANAGEMENT BOARD OF PODRAVKA INC. ...........................37 PODRAVKA GROUP EXPECTED DEVELOPMENT ..................................................................................................42 ACHIEVING GROWTH ..............................................................................................................................................................................................43 GENERAL STRATEGIC GOALS ........................................................................................................................................................................43 KEY FACTORS OF SUCCESS ............................................................................................................................................................................44 RISK FACTORS ...............................................................................................................................................................................................................47 BRANDS MANAGEMENT .......................................................................................................................................................................................48 BUSINESS SEGMENT MANAGEMENT ......................................................................................................................................................48 CLIENT RELATIONS MANAGEMENT ..........................................................................................................................................................48 MANAGING MANAGEMENT AND EMPLOYEE RISKS .....................................................................................................................49 QUALITY ASSURANCE AND FOOD SAFETY MANAGEMENT SYSTEM .........................................................................49 FINANCIAL RISKS ........................................................................................................................................................................................................49 CURRENCY RISK..........................................................................................................................................................................................................50 INTEREST RATE RISK ..............................................................................................................................................................................................50 PRICE RISK .........................................................................................................................................................................................................................51 CREDIT RISK AND RISK OF DEBT COLLECTION ...............................................................................................................................51 LIQUIDITY RISK ..............................................................................................................................................................................................................52 NON-FINANCIAL REPORT ...............................................................................................................................................53 RESEARCH AND DEVELOPMENT .................................................................................................................................54 PODRAVKA ....................................................................................................................................................................................................................... 54 ‘’GO WEST’’ PROJECT .............................................................................................................................................................................................. 54 SUSTAINABLE PRODUCT DEVELOPMENT .......................................................................................................................................... 54 SALT REDUCTION ....................................................................................................................................................................................................... 55 PROCESS INNOVATION ......................................................................................................................................................................................... 55 NUTRITIVE STRATEGY (2014 - 2020) – CONTINUED .................................................................................................................. 55 A YEAR OF SCIENTIFIC AND PROFESSIONAL PUBLICATIONS ......................................................................................... 55 COOPERATION WITH THE LOCAL COMMUNITY .......................................................................................................................... 55 PARTICIPATION IN CREATING THE LEGISLATIVE FRAMEWORK OF THE REPUBLIC OF CROATIA, STUDY PROGRAMMES, EU PROJECTS ............................................................... 56 BELUPO ................................................................................................................................................................................................................................57 ŽITO .........................................................................................................................................................................................................................................57 CERTIFICATION OF THE PODRAVKA GROUP MANAGEMENT SYSTEM ......................................................58 PODRAVKA .......................................................................................................................................................................................................................58 BELUPO ............................................................................................................................................................................................................................... 59 ŽITO .........................................................................................................................................................................................................................................60