China: one country  – many  opportunities 12% Western China beer market  growth (CAGR) 2007-2011. 3-5% Expected annual beer market  growth in the next five years. 60% Market share in western China. HIGHLIGHTS There is no simple for- mula for success in China.  The country’s sheer size  in terms of population  and geography, together  with the major differences  in consumer behaviour  from region to region and  between rural and urban  markets, presents signifi- cant challenges.  Within China, beer consumption  varies significantly. Per capita  consumption in the economically  less developed western part of the  country is less than half that in  the north-east. However, in recent  years market volume growth in  western China has outperformed  national growth rates. From 2007  to 2011, beer market volumes in  western China grew by approxi- mately 12% (CAGR) versus a na- tional growth rate during the same  period of approximately 6%. While  public forecasts are not available  for individual regions, according to  the independent research company  Canadean the overall Chinese beer  market is expected to grow annu- ally by 3-5% in the next five years. developments, such as increasing  urbanisation, a growing middle  class and generally higher living  standards, consumers are increas- ingly willing to pay a higher price  for premium brands. value growth as well as continuous- ly improving commercial execution  and capabilities by investing in and  developing employee competences  and capabilities. We are also apply- ing best practices learned from other  areas within the Carlsberg Group  such as supply chain, administration  and sales and marketing, which has  resulted in operational efficiency  gains and cost reductions.  Carlsberg has a twofold strategy  for growth in China. One part of  the strategy focuses on developing  and expanding our existing busi- ness. With 39 breweries, more than  11,000 employees (incl. Chongqing  Brewery Group) and an overall  market share in the western part of  China of around 60%, Carlsberg has  a strong footprint in the country.  Local brands, which fall into  the mainstream market, include  Shancheng, Chongqing, Wusu, Dali, Huang He and Xixia.  The second part of Carlsberg’s  growth strategy in China involves  growing and marketing Carlsberg’s  premium international brands  nationwide. In addition to the long-standing presence of the  Carlsberg brand in China, this has  seen the launch in specific market  segments of Kronenbourg 1664  Blanc in 2011 and Tuborg in 2012  and, most recently, the relaunch  of Carlsberg Chill in 2013. Our pre- miumisation strategy has resulted  in increasing beer volumes in the  high-margin segment.  During the past 10 years, Carls- berg’s M&A efforts in China have  focused on expanding our business  from western China towards the  east and increasing our sharehold- ing in partly-owned businesses.  An important step was taken in late  2013, when Carlsberg completed the  partial takeover offer for Chongqing  Brewery Company, taking our own- ership share to 60%. Carlsberg now  directly manages the company,  which enables us to drive greater  synergies and leverage the ex- panded production footprint across  several new provinces in China. Our innovative approach to the  market has expanded the Carlsberg  portfolio to cover the full spectrum  of local and international brands.  This positions Carlsberg strongly  with customers, who can offer con- sumers a wide choice of beer, from  economy to super-premium. In addition to volume growth  expectations, premiumisation is the  long-term trend in China. Current  estimations are that the very large  mainstream segment makes up  approximately 90% of the beer  market, but due to demographic  Where there are challenges, how- ever, there are also opportunities.  The Chinese beer market is big.  More beer is consumed in China  than in any other country. While  independent research indicates  that one in every four litres of beer  consumed globally is consumed in China, per capita consumption is only about half that of Europe  and America.  This strategy involves premiumising  the local portfolio and bringing more  of our international premium brands  to the market to take advantage of  increasing consumption and market  A CARLSBERG WAY OF BUSINESS Carlsberg is committed to its busi- ness in China. This is apparent in  our cooperation with local external  stakeholders and also in the way  staff are supported with attractive  employment conditions, train- ing and career development. Our  way of business has established  a strong platform for Carlsberg to  expand its footprint in the region  even further. We also increased our ownership  in the Qinghai and Lanzhou joint  ventures in 2013, taking our owner- ship share to 50%. M&A IN CHINA PREMIUM BRAND STRATEGY EXPANDING OUR PRESENCE 