Trimester Meeting Am Rest Russia future of CD

Trimester Meeting Am. Rest Russia: future of CD in Russia May 25, 2012

Summary • Am. Rest should be presented in Russia in CD segment • No future for Pizza Hut in the current format Ø Declining number of transactions Ø CF after renovation to ACDR no more than 20% • Tagliatella is the future of CD in Russia: Ø IRR 49% Ø CF (first year) 23% , CF (sixth year) 25% • Tagliatella development Ø 30 units by end of 2017 Ø start franchising from 2015 2

Am. Rest should be presented in Russia in CD segment visitor preferences of restaurants The dynamics of turnover of public catering in 2004 -2012* 1, 200 1, 000 Sales, bln rub Growth 800 Meat dishes 0. 5 0. 4 0. 3 0. 2 600 0. 1 400 61% Vegetable salads 56% Potato 56% Pizza 55% Dessert 44% Chicken 42% -0. 1 Sushi, rolls 40% -0. 2 Dishes from fish 36% Vegetable Dishes 36% Burgers 35% Seafood 35% 0 200 00 2004 2005 2006 2007 2008 2009 2010 2011 2012 F 2013 F * In price of 2010 th • Growing demand for Italian cuisine • QSR can not cover all customer needs • Hedging is needed Pancakes 32% Soups 27% Meat Poultry 27% Pasta 25% Other 01% 00% 3 20% 40% 60% 80%

No future for Pizza Hut in the current format: present situation Marketshare 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% AGC 2 500 RUB 2 000 RUB 1 500 RUB ra s 2 pa ia lo ch ki W as ab Pi i zz a H ut Ya po sh El a ki -P al ki Il Pl Pa an tio et a Su sh i Ro sa rio Em el ya 1 000 RUB Eu 500 RUB Moscow, St-Pet, CD Pizza Hut CD 4 Check amount Moscow, QSR Check amount person St-Pet, QSR

No future for Pizza Hut in the current format: main conclusions • Declining number of transactions in a growing market • CF after renovation 20% • Pizza Hut has begun to compete with the QSR • About 50% of PH customers are students (as for QSR) – their number is declining due to demographic issue • Absence of YUM! support 5

Tagliatella is the future of CD in Russia: needs of customers Good quality of food / freshness QUICKNESS (= Fits my busy lifestyle) SOCIALIZING (= Meeting with friend and family) Satiation (=Fuels my body) Basic needs (rational level) Emotional needs NOVELTY (= Search for new experiences, creativity) 6 RELEXATION (= Escape from reality) COMFORT (= Comfort & Indulge me)

Tagliatella is the future of CD in Russia: main conclusions • Tagliatella concept covers most of the needs of visitors to CDR • Own brand – no royalties and geographic obstacles • Increasing trend of healthy eating • Increasing the AGC in PH shows that visitors are willing to pay more if there are reasons • Tagliatella should take an empty niche – “niche strategy” • An opportunity to build a factory and begin franchising • IRR 49% • CF 25% 7

Tagliatella development: roadmap 2012 4 conversion units 2013 2014 8 conversion 3 units should units 2015/2016 be closed 15 units in St 2 new units Pets WPSA $50 k 2017 20 units in St Start building Pets of factory 30 units 5 units in (both cities) Moscow Sales $110 Franchising mln business WPSA $70 k Share of CF, 2012 YTD PH 21% Share of CF, 2014 Forecast Tag 30% KFC 79% The units ratio of PH to KFC 1: 4 8 KFC 70% The units ratio of Tag to KFC 1: 6

Tagliatella development: roadmap 2012 3 conversion units 2013 3 units should Building of factory be closed 8 conversion WPSA $50 k units 2 new units in St Pet 2 units in Moscow 2014 15 units in St Pets 10 units in Moscow 5 units in secondary cities Share of CF, 2012 YTD PH 21% 30 units in St Pets 30 units in Moscow 10 units in secondary cities Franchising business Share of CF, 2014 Forecast 2017 30 units in St Pet 50 units in Moscow 20 units in secondary cities Sales $360 mln Tag 30% KFC 79% The units ratio of PH to KFC 1: 4 KFC 70% 9 2015/2016 The units ratio of Tag to KFC 1: 6

• • • Tagliatella development: main conclusions Existing great CD team for 11 units Build foothold in Saint Petersburg Conversion will take about 3 months after closing Conversion of 8 existing units Building a factory by middle of 2015 Am. Rest Tagliatella equity: Ø Saint Petersburg (12% of the total spending on consumer foodservice in Russia) Ø Moscow (16% of the total spending on consumer foodservice in Russia) - mostly through acquisition Ø Kazan Ø Nizhniy Novgorod • Franchising in others Cities 10

Risks & Scenarios • World Crisis – segment of expensive CDR is not very sensitive to crisis; due to higher AGC ( Vs PH) controlled operation leverage; factory in Russia will protect business from currency fluctuation; postponing of building new units and factory • Money gap Vs AOP due to time for conversion – PH by September will have additional funds in CF 2 months in advance; share of PH in Russia CF only 21% • Number of transactions – increased marketing budget to 5%; attracting customers Mama Roma due to discounts by their discount cards; spreading loyalty cards. 11

Next step • Obtaining permission to export goods to Russia. Responsible – Spanish partners • Verifying the menu prices based on clusters analysis • Making critical path by the 8 th of June 12

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Back up slides 14

PEST analysis - Political factors Factor Corruption According to Transparency international: Corruption perceptions index (2010), corruption perception index in Russia was 2. 1. Russia is ranked #154 out of 178 countries Bureaucracy & corruption According to World Bank report (2010) approximately 30 days are needed to start a business and nearly 43 days to register property. Opportunity Threat Difficulties in establishing reliable relationships with partners in Russia. Additional costs could be required. Extra time and efforts are needed to establish business and solve business issues. Political stability Principle changes regarding The current political situation in Russia is stable. The doing business in Russia are political power belongs to the party “United Russia” not expected. and even president elections in 2012 has brought no surprise. The political course is stable. Tight Sanitary & Fire safety norms for catering enterprises Security law implementation and due process violations remain a problem. Judges remain subject to influence from the executive, military, and security forces. International integration Joining of WTO will lead to increase of FDI as followed by the requirement to liberalize the service sphere foreign companies. 15 Tight norms, unexpected checks in combination with bureaucracy and corruption could lead to breaks in business activities The security of enterprises performing on the territory of Russia is still an issue. Overall liberalization of It will attract more economy foreign-based restaurants chain in the companies. Possible tax market changes.

PEST analysis - Economical factors Factor Opportunity Inflation Low depreciation income of enterprises Decrease of inflation rate from due to relative stability of national 11, 65% in 2009 to 6, 86% in 2011 currency close to a pre-crisis level Threat GDP Positive annual growth of GDP in 2010 was 4, 03% signaling that Russia is on the right way to overcome the crisis Income per capita In 2010 the incomes per capita in the target cities – Saint-Petersburg and Moscow are very high compared to those in other cities in Russia. Moscow – 40479 rub. Saint. Petersburg – 27618 rub. The WTO-agreement in the middle of 2012 Overall growth of economy is a fundament for a steady development of an enterprise Rental fees In the target cities – Saint. Petersburg and Moscow the rental fees of commercial real estate are extremely high compared to those in other cities Russian government approved a number of initiatives aimed at increasing rank of “doing business” (by the World Bank) KPI: 20 th place in ranking (now 120 th) by 2018. Additional fixed costs Decreasing costs of Building, connection of electricity and Customs duties. It will attract more competitors 16 Buying power of customers in the target cities is high. Market potential is high. will give an opportunity to take The WTO agreement that is assumed to advantage of decreasing taxes on fruits be a fact in the middle of year 2012 will and vegetables especially. attract more restaurants in the market.

PEST analysis - Social factors Factor Maturing middle class Russia has about 300 million consumers who are affluent, and part of a growing middle class that boosts the consumer goods business in the country. Consumerism Russians have seen their disposable incomes double over the past eight years. Consumerism has become a new religion. High mortality rate Current demographic crisis in Russia is more serious than that in Western Europe It is expected that the population will fall by 30% by 2050 Income inequality The difference between the richest 10% and the poorest 10% among the Moscow population was over 42 times in 2009 compared to 38. 6 times in 2005. Healthy Increased focus on healthy lifestyles: sports, healthy food, time to rest. Speed of life Increasing speed of life and changing behavioral habits due to it. 17 Opportunity Rising market potential as the middle class seems to be the most important part of potential consumers. Threat Increased willingness to pay from the side of potential customers. Labor supply constraints are expected to become a major impediment to economic growth In the two target cities the average income of the population is the highest in Russia. Enterprises which will offer healthy Will grow share of fast service with food in relaxing/cozy atmosphere will concept "place between activities" be able to get price premium for it. Turnover of the food service market has been growing by 12% (average) every year.

PEST analysis - Technological factors Factor Opportunity Threat Penetration of Internet Easily accessible and low cost By the end of 2014 the marketing channel quantity of internet users in Russia will be 80 million people or 70% of population Availability of equipment Unclear as all the equipment required by the company is taken from High availability of equipment abroad through established channels. and technologies 18

19 Г Г -Г -Г М М М Г Г Г -Г -Г М М М М М Г -Г -Г М М М Г Г -Г М М -Г AGC Ind, % М М Г Г -Г М М М -Г Г Г -Г М М -Г Tr Ind, % М Г -Г М AGC, Rub М М Г -Г М М Г Tr, pcs М М -Г М Основной М -Г М Г -Г М М -ГГ М М М -ГГ М М М -ГГ М М М -ГГ М М М -ГГ М М М -ГГ М М М -ГГ М М -Г Г М М М Основной М Г -Г М М М Г Г -Г М М -Г 20 000 М М Г -Г М М М Г -Г М М М PH trends AGC, PH base Основной 130% Основной 125% Основной 120% Основной 115% Основной 110% Основной 105% Основной 100% Linear(AGC Ind, %) 95% 90% Transactions, base 60 000 160% 50 000 140% 40 000 120% 100% 30 000 80% Linear(Tr Ind, %) 60% 10 000 40% 20% 0 00%

Students dynamic General students flow dynamics in Russian educational institutions (2002 -2009 real data; 2010 -2015 prognosis data) 20

Cluster analysis* 005 004 Cluster 1 004 Cluster 2 Quality Cluster 3 Cluster 4 003 Cluster 5 Cluster 6 003 002 21 003 Price 004 005 * based on 184 questionnaires

Pizza Hut Tagliatella Mama Roma 22 Strengths • Already established in both cities: known at the market, known that the restaurants are appreciated, local connections. • Competitive costs because of the size of the company • International company: internationally established reputation, international business relations Weaknesses • Not known for healthy food. • There is a mismatch between the brand name and the variety of dishes they serve. • The brand name gives limitations against having a healthy focus. • High amount of close competitors Strengths • Differentiates itself from the rest of the brands that Am. Rest has already established in Russia. • Launch in Russia could be a part of a bigger launching strategy, since the company already has decided to introduce the brand in both India and China. • Healthy and fresh food Weaknesses • Not yet established in Russia. • The brand is not well recognized by potential consumers. • An entrance in the markets will require a relatively higher marketing cost compared to the already existing brands. • Relatively high start up cost compared to our other restaurant brands, which increases the risk of an introduction. Strengths Wide variety of pastas, hot dishes and soups and tastes Authentic Italian cuisine (according to many visitors) Associations with home-made food (large dishes, tasty, cheap and of high quality) Loyalty program History - In Saint-Petersburg since 1988 Internet community (more than 87 000 people) Healthy food Delivery Weaknesses Small amount of stores (12 in SPb) Perception as an expensive brand Service and speed of service Locations Lack of advertising 50% Corporate business and 50% Franchisees – inconstancy of product, service and quality of design; weak bargaining power with suppliers Brand awareness

P&L & Capex 8 Tag units (existing location) Monthly P&L Sales 55 728 000 р. WPSA 1 620 000 р. WPTA Transactions 100, 0% 1 200 41 280, 00 ABBREVIATED P&L (w/o start up) COS COL SEMIS Common charges Rent Marketing Royalty + G&A Depreciation RESTAURANT PROFIT AGC 1 350 р. COS 23 405 760 р. 42, 0% COL 7 432 400 р. 13, 3% semis 2 720 000 р. 4, 9% 22 169 840 р. 39, 8% RESTAURANT CASH FLOW* [local currency] 2 786 400, 0 р. 5, 0% RESTAURANT CASH FLOW* [PLN] Depreciation 2 400 000 р. 4, 3% Rent 3 700 000 р. 6, 6% *w/o start up costs Bank charg 55 728, 0 р. 0, 1% Insurance 55 728, 0 р. 0, 1% 2 786 400, 0 р. 5, 0% 0, 0 р. 0, 0% 10 385 584, 0 р. 18, 6% 1 st year 10 -year avg 42, 0% 38, 8% 13, 3% 14, 0% 6, 1% 0, 0% 5, 8% 6, 2% 5, 0% 11, 0% 4, 6% 3, 6% 18, 1% 21, 2% OP Marketing G&A Royalty RP CF 23 12 785 584, 0 р. 22, 9% MEASURES IRR NPV [local currency] NPV [PLN] Investment Total Return Period [years] First Year Sales/Initial Investment 18 950 400 24 008 550 1 926 624 22, 7% 2 440 869 24, 8% 48, 8% 78 712 830 8 002 471 2 4/12 2, 1