Agrana

- Strategy workshop -

May 26-27, Lebada Complex, Bucharest

Roland Berger & Partner GmbH – International Management Consultants

Barcelona – Beijing – Berlin – Brussels – Bucharest – Budapest – Buenos Aires – Detroit – Düsseldorf – Frankfurt – Hamburg – Kiev – Lisbon
London – Madrid – Milan – Moscow – Munich – New York – Paris – Prague – Riga – Rome – São Paulo – Shanghai – Stuttgart – Tokyo – Vienna – Zurich

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Agrana - Strategy Guidelines

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Agrana’s mission clearly expresses the company’s goals

Our group is committed to the To become the market leader in the
Romanian sugar market. Romanian market in terms of
- Quality
We will lead this market based on - Market share
To create value [added] to:
long-term partnership with our - Shareholders
customers, suppliers and farmers. - Customers
- Employees …
- Consumers
The commitment of our team is to To develop partnership with
satisfy our consumers and - Customers
- Suppliers/Farmers
shareholders by offering them
value to their products and lives.

Guiding rules

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The sugar market will grow in line with the GDP in the future years

- Romanian sugar market and consumption -

[‘000 to]
CAGR:
CAGR: 5.0%
CAGR: 4.0%
600 CAGR:
CAGR:
3.0%
2.0%
1.5% 537
512
500 470 488
450 454.5
583
400
555
534
518
300 507.5
500

200

100

0
1999 2000* 2001* 2002* 2003* 2004*

Production + Imports - Exports

* Forecast
Domestic Consumption

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Agrana addresses both industrial and households market segments, its goal
being to become market leader in both segments

Sugar market

Industrial 40%
consumption

Agrana’s target

50 • To reach 45% market share

Household 60% % - 40% of the consumer
consumption market
40
% - 50% of the industrial market

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"No profit without customer" – Fulfillment of customer’s requirements creates
growth

Customer requirements - Agrana’s assessment

Industrial customer’s requirements Consumer market’s requirements

• Technical quality • Quality (color/size of crystal)

• Services/delivery • Availability

• Availability • Packaging (size/standing)

• Better payments conditions/credit • Price (low & stable)

• Long term contracts (6 months to 1 year) • Product diversification

• Price stability • Brand/Image

• Product identification • Healthy

• Specification • Romanian origin

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 Agrana face serious competition from other sugar producers, especially from
Pfiffer, who has recently introduced the “Diamant” brand

No sales force
• No adequate S & D system
(just started)
• No sales/pricing policy

Pfiffer
Marquentere
Speculators /
X Traders

Low price
Better
agricultural Very good
links quality Brand/paper
bag

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The SWOT Analysis outlines major achievements as well as possible risks
with major implications for Agrana’s future
Strengths
Strengths Weaknesses
Weaknesses
• Packaging (product diversification)
• Top management
• No brand
• Vision
• Lost farmers links
• Largest player in the market
• Lack of customer understanding/market
• Experience in sugar production
• orientation
Quality of product
• Unstable quality
• Product availability through the year
• Water treatment/environmental issues
• Good image/tradition with industrial customers
• Equipment inefficiency
• Open-minded orientation
• Coordination/communication between
• Market aggressivity
• companies
Cost-cutting orientation
• Organization/HR problems
• Core business orientation
• 2nd level management with limited flexibility
• Pro-active sales approach

Opportunities
Opportunities Threats
Threats

• Support of Agrana International • No market protection

• Only one brand in the market [not well
supported]
• Slightly growing market
• Weak competition for 1 kg bags
• Retail consolidation/development of retail
chains, entry of hyper-markets
• Traders moving into production
• Substitute products (liquid sugar, sweeteners)
• No sugar beet quota when joining EU
• High price volatility both for raw sugar and final
product
• Instability in legislation (VAT, profit tax)

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Agrana will reach full national coverage by using different promotion vehicles
and a well defined price strategy

Product Price
• For industrial customers the price is established as:
average market price + X%

• A premium price of 10% above the market average

will be charged for the branded normal crystals sugar

• Brown and candle sugar imported

from Austria
will be priced at
25% above market average

• National coverage
Marketing Strategy
• Print media

• POS materials • Retail channel

• TV (?) – Super markets/hyper markets

– Small groceries (urban & rural)

Promotion Place

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Agrana’s main objective is to meet its customers’ needs

Product

• Branded sugar

• Crystal sugar (normal and fine)

• Cubic sugar

• Powder sugar
End-users
• Brown and candle sugar (imported from Austria and packed in Romania)

• Packed sugar in 0.5 kg, 1 kg and 2 kg (family packs) for specific high consumption periods e.g.
Christmas

• Non-branded sugar-based products

• Trade mark Agrana

• Sugar packed in 25 kg, 50 kg, 500 kg and 1,000 kg bags

Industrial
clients • Pallets

• Quality required: 30 - 50 ICUMSA

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 Agrana will employ two distribution channels, in order to reach efficiently
both
industrial and end-user customers

1 2
Industrial Customers

Direct channel and

Super/Hyper markets

Traders/distributors Small groceries

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Agrana’s established sales target can be reached only by processing both raw
and sugar beet extracted sugar

Sales target for year 2004 Sugar beet targets

• 30 - 35 tons per ha
• 40,000 ha for Agrana Group
• Agrana can manage 1.8 tons of sugar beet
per plant
• For a 12% purification from the 40,000 ha of
Agrana Group, a quantity of 170,000 tons of
sugar can be obtained from sugar beet

In order to achieve the sales target,

another 100,000 tons will need to be
270,000 tons per year obtained from raw sugar
(6 ships per factory if only raw sugar is processed)

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 Serious investments are required in a number of “sensitive” areas:
raw material supply, manufacturing process, logistics
Raw material/sugar beet
• Agreement with the farmers,
including stable price and cash
payment possibility
• Support to farmers in terms of
agricultural machines, pesticides
and fertilizers
• Partnership with research institutes
for demonstration fields
• Increase in extraction capacity (now
10,000 tons per year)
Manufacturing process Logistics
• Improved laboratory testing • Improvement of logistics
• Environmental investments (in water - warehousing
treatment) - sugar transportation
• Improvement and increasing of filtering
capacity • Increase of storage capacity from
• Transition from plastic to paper bags will 120,000 tons to 270,000 tons
require packaging capacity
• Elimination of bottlenecks in packaging • Need to grow together with the transport
and delivery; process optimization company
• Reduction of energy consumption
• Potential specialization of factories (to
be further analyzed):
- one for industrial consumers
- two for end-consumers
• ISO 9002 certificate
- end of 2001 for Roman
- end of 2002 for Buzau and Tandarei
Investments required
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In order to become successful, Agrana must start building “one team” as core
of its organization

Improve
communication &
coordination

Career development
plans
Build corporate culture
and share the same values
Job rotation/self
development

Performance driven Successful

Build one team
compensation policies organization
Safety and security
Contingency plans for
management retirement

Motivation (including trading)

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As an indispensable tool in today’s business world, Agrana will integrate its IT
structure, preparing the transition toward its e-age

Agrana’s needs

• An integrated system for accounting & controlling,

logistics and sales

• WAN between factories and with Agrana

International

• Agrana’s Internet site (to be developed together by

the IT and Marketing Departments)

• Production control system/automation (to be further

analyzed)

• E-commerce (B2B)

• EDP team

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Service improvements and a tailored banking strategy are top priorities for
Agrana’s financial department, who must fully support Agrana Romania to
become financially independent

Implementation and integration of Banking Strategy

IT system

• Controlling

• Accounting reports • 3 - 4 banks

• Reports toward shareholders

Development of
• Treasury/cash clearing IAS reporting
system

Reduction of financial costs in

Measurement of
refinancing and credit assessment
shareholder value Agrana Romania must finance itself
(not with money from Agrana Austria)

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To develop further the strategic concept, six teams were formed to detail
Agrana’s top priority areas

Production and analysis of Organization and Human

Marketing and Sales
plant specialization Resources
• Anca Marinas • Iulian Antoniu • Daniela Branzei
• Doriana Nitu
• Viorel Dumitrache • Nicoleta Kmen
• Ion Manciu
• Mihai Anitei • Liviu Patrichi
• Mihai Anitei
• Iulian Antoniu • Adrian Nastase
• Laurentiu Ene
• Dragos Dima • Dragos Dima • Manfred Stohl

IT and Automation Financial Spinning-off opportunities

• Adrian Nastase • Marian Dascalu • Laurentiu Ene

• Liviu Patrichi
• Gabriel Lencar • Marian Dascalu
• Nicoleta Kmen
• Laurentiu Ene • Ion Manciu • Adrian Ispas
• Dragos Dima
• Iulian Antoniu • Liviu Patrichi
• Gabriel Lencar

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Agrana’s management will combine it’s experience and knowledge with
strategy and vision in order to obtain a deeper strategic image that will be
presented end of September

The teams should break down the objectives into yearly targets, should detail the
respective strategies, outline the related benefits and risks as well as estimate the
required investments and expenses budgets.

Next meeting will take place end of

September
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Appendix

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Attendees of Agrana Romania Strategy Workshop (1)

Name Position Business Unit

• Christian Medved • Chairman of BA • ARHT + factories

• Manfred Stohl • Member of BA • ARHT + factories

• Dragos Dima • Sales & Marketing Director • ARHT

• Daniela Branzei • HR Director • ARHT

• Gabriel Lencar • Key Account Consumer • ARHT

• Marian Dascalu • Financial Director • ARHT

• Iulian Antoniu • Technical Director • ARHT

• Anca Marinas • Key Account Industrial • ARHT

• Doriana Nitu • Agricultural Coordinator • ARHT

• Adrian Nastase • IT Manager • ARHT

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Attendees of Agrana Romania Strategy Workshop (2)

Name Position Business Unit

• Ion Manciu • General Director • SC Zaharul Buzau SA

• Viorel Dumitrache • Financial Director • SC Zaharul Buzau SA

• Liviu Patrichi • Financial Director • SC Beta Tandarei

• Mihai Anitei • General Director • SC Beta Tandarei

• Nicoleta Kmen • Financial Director • SC Danubiana Roman SA

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Moderators of Agrana Romania Strategy Workshop

Name Position Company

• Anca Ioan • Project Manager • Roland Berger & Partner

• Andrei Filip • Consultant • Roland Berger & Partner

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