UKRPRODUCT BECOMES THE EXCLUSIVE DISTRIBUTOR OF `ARSENIEVSKY` KVASS IN UKRAINE: Latest news

06 September 2010

Kyiv, Ukraine – September 6, 2010 – Ukrproduct Group Limited (`Ukrproduct` or the `Group`) (AIM: UKR), one of the leading producers and distributors of branded dairy products in Ukraine, announces that it has entered into an agreement with LLC Zhyvyi Kvas (`Zhyvyi Kvas`) to become the exclusive distributor of `Arsenievsky` branded kvass, a traditional fermented beverage made from rye, black bread or barley, in Ukraine. The agreement is effective until the end of 2011 and can be extended further.

Ukrproduct`s strategy includes leveraging its distribution network through the delivery of complementary third party products to utilise surplus capacity. In line with this strategy, Ukrproduct has added kvass to its portfolio of third party products which are distributed through its network. Ukrproduct expects to benefit from the growing market for kvass in Ukraine and to expand its market share in this attractive product niche, based on the superior quality of the `Arsenievsky` brand and the strength of Ukrproduct`s distribution system and broad network of retail clients.

`Arsenievsky` kvass, a popular Russian brand, is produced by Zhyvyi Kvas in Zhytomyr near Ukrproduct’s butter and cheese plant. The production facility operates with an annual capacity of 12 million litres. The close proximity of these two sites allows the Group to leverage its wide distribution network and supply the beverage to the majority of leading retail chains throughout Ukraine. Presently, Ukrproduct delivers kvass to 27 retail chains, including Auchan, Billa and Megamarket.

Alexander Slipchuk and Sergey Evlanchik, directors of Ukrproduct, are each beneficial owners of 35% of the issued share capital of Zhyvyi Kvas. The remaining 30% of the share capital is owned by the shareholders of the Arseniev Kvass Plant. The directors of Ukrproduct who are not involved in the transaction as related parties consider, having consulted with WH Ireland Limited, Ukrproduct`s nominated adviser, that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.

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Notes to the editor:
`Arsenievsky` kvass is made according to the original Russian recipe developed at the Arseniev Kvass Plant, one of the leading producers of kvass in Russia. Kvass has a low alcohol content of less than 1.2% and therefore is classified as a non-alcoholic beverage. Unlike other brands in the market, which are made using a soft drinks technology, i.e. gassed, ‘Arsenievsky’ kvass is fermented, according to a traditional recipe, in order to maintain its unique taste and flavour.

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