Wine & Liquors Industry of

Uzbekistan: an overview

SOBIR SHUKUROV, EXCHANGE PHD STUDENT, PEF CULS

Outline oIntroductionoBrief history of wine and liquors industryoPotential of the industry oChallenges aheadoQuestions & Remarks

A brief history of wine industry

1868 1926-1930 1930-1940 1956 1972 1994

“ALEATIKO”, “SHIRIN”,“GULYA KANDOZ”NEW WINES DESIGNED

FOUNDATION OF WINERY I

SECOND RECONSTRUCTION AND MODERNIZATION

REFORMING INTO STOCK COMPANY

FIRST RECONSTRUCTION – MECHANIZATION OF

WINERY

START UP OPERATION OF NEW INDUSTRIAL COGNAC DISTILARY EQUIPMENT

1870

CREATION OF FIRST TRIAL VINEYARD

2013-2014

THIRD WAVE RECONSTRUCTION AND EXPANSION OF WINEMAKING AND

BRANDIES PRODUCTION

1890

STARTING FOR COGNAC DITILARY SETLING

PRODUCTION CAPACITYprocessing 200 thousand tons of grapes;production of 5 million. decalitres of grape wine;production of 5 million. champagne bottlesproduction of 150 thousand decaliters of cognac;production of 6 million deciliters of ethyl spirit;production of 150 million. decalitres of alcoholic beverage;production of 12 million. pieces of glassware

Some alcohol beverages consumption,among adults, in liters per capita per year:

international comparison

Beer Wine SpiritsAustria 50,4 35,5 14Bulgaria 39,3 16,5 44,1Czech Republic 53,5 20,5 26Uzbekistan 18,3 6,3 75,4

Source: WHO, 2010

Beer, Wine & Liquor StoresOperators in this industry include retail stores specifically licensed to sell alcoholic beverages for consumption;However, strict regulations and administrative barriers of the beer, wine and liquor markets does not allow other stores to enter the industry; hence, very limited competition;On the other hand, heightened competition by providing an opening for supermarkets (usually, out of supermarket) to enter the market. Nevertheless, revenue is expected to grow as these stores generate greater sales of high-margin alcohol beverages

SWEET SOUL OF EAST

WINE ‘GULYA KANDOZ’

Made ONLY on Samarkand Winery named after Khovrenko

Wine with gold color, full harmonic taste and muscat robe

Honored with 7 Gold, including 1 GRAND PRIX and 7 Silver Medals on several International Competitions

BALSAM – proud of SAMARKAND

> Making on unique formulation with extracts of 43 herbs

Achieved a lot of awards at several International and Regional Competitions

One of the last performances is GOLD MEDAL on Russian biggest “PROD EXPO-2014” International Exhibition

VODKA ‘LEGEND OF

SAMARKAND’> Emblemize Samarkand’s vodka production

Filtration based on traditional and safety methods with modern innovative active charcoal using

> Wins number of GOLD and SILVER medals at several International Competitions and Exhibitions

«Gold Grifon»Tasting Competition

Crimea, 2013

UNIQUENESS OF GROWTH

Fixed assets turnover ratio

2010 2011 2012 20130

2

4

6

8

10

12

14

2010 2011 2012 201302468

10

EBIT margin 2010 2011 2012 2013

012345678

Earnings per share

I Samarkand Winery named after Khovrenko I

один в полене воин

Нам извeстно, что51.00%

20.18%

28.82%

I Samarkand Winery named after Khovrenko I

UZVINOSANOAT HOLDING COMPANY

PUBLIC SHARE

MINORITY STAKEHOLDERS

BEST OFFER

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

2000

4000

6000

8000

10000

12000

Wine Exports of Uzbekistan (of fresh grapes, '000 USD)

Source: http://www.trademap.org

Undiversified export markets (Russia and Kazakhstan are still biggest

importers of Uzbek wines)

Challenges aheadoThe still impact of anti-alcohol campaign of 1985 ("On measures to overcome alcohol abuse and alcoholism"), when most of suitable wine yards, along with finest grape types (for wining) were destroyed, andoDecrees that restrict/limit the sale and consumption of alcohol is still not canceled oIncreasing rates of excise tax on alcoholic beverages (per 1 deciliter: ethyl alcohol (+ 20%), wines (+ 15%), vodka and other strong alcoholic beverages (+ 15%)oLack of foreign investment to this industry

Challenges ahead (2)oLack of stable brandsoToo loyal customer problem: The average consumer with great caution relates to new vodka products, preferring well-known and "proven" product itemsoHence the following problem - weak culture of wine consumption; and majority of consumers are not versed in the wines. As a consequence, there are opinions that, in contrast to imported wine, and domestic wines are low-quality as they cost low.

For further information:1. «UZVINOSANOAT-HOLDING»HOLDING COMPANY (https://vinsanoat.uz/en/)

2. “TOSHKENTVINO KOMBINATI” LLC (http://tashkentvino.com/en/glavnaya/)

3. “XOVRENKO NOMIDAGI SAMARQAND VINO KOMBINATI” (http://xovrenko.uz/index.php/uz/)

THANKS FOR YOUR ATTENTION!

Questions & Remarks