Beer.
We are the largest beer producer both in Argentina and in the combined southern cone markets based on our internal estimates. In 2002, according to internal estimates, our breweries enjoyed leading market shares of 64.5% in Argentina, 76.1% in Paraguay, 51.9% in Uruguay and approximately 97.5% in Bolivia, and in Chile, our market share was 10.8%. On January 31, 2003, we completed a strategic relationship with AmBev, the largest brewer in Brazil and in South America, involving the integration of our respective operations in the southern cone markets. Pursuant to this alliance, we have begun to manufacture, market, sell and distribute the AmBev beer brands in the southern cone markets under a perpetual royalty-free exclusive license, and AmBev may distribute some of our beer brands in Brazil, which would provide us access to AmBev's extensive distribution network in that country. After accounting for the AmBev transaction, we estimate that our share of the beer market in Argentina is currently above 80%, although this will likely decrease once we sell some of our brands as required by the Argentine antitrust authority.

Our consolidated net sales totaled US$468.6 million in the year ended December 31, 2002, of which US$342.6 million, or 73.1%, was attributable to sales of beer and US$163.8 million, or 35.0%, was attributable to beer sales in Argentina. With 11.4 million hectoliters of beer sold in 2002, based on internal estimates, our sales accounted for 56.6% of all beer sold in the combined southern cone markets. As of December 2002, we had a total brewing capacity of 19.6 million hectoliters. For 2002, according to Company estimates based on AmBev's earning releases, AmBev sold 2.6 million hectoliters in the southern cone markets, and total sales amounted to US$64.6 million.

Until January 13, 2003, Heineken, one of the largest beer producers in the world, held a 15% equity interest in QIB. In connection with this relationship, Heineken provided us with technical advice regarding our brewing facilities and beer products and granted us the Heineken License, pursuant to which we manufactured, sold and distributed Heineken beer in the southern cone markets. In January of 2003, Heineken sold its interest in QIB to BAC for cash as part of a Memorandum of Agreement between Quinsa, BAC and Heineken. Subsequently, we received a notification from Heineken terminating the Heineken License.

Our business has grown considerably in the ten-year period between 1991 to 2001 as beer consumption increased by 48.5% in Argentina, 42.2% in Chile, 96.2% in Paraguay, and remained stable in Uruguay and Bolivia. We believe that there will be further growth in consumption in all of our markets. As the following table demonstrates, per capita beer consumption in each of our countries of operation remains lower than that in many other countries.

* Indicates country in which Quinsa operates
Sources: Canadean Beer Service, The Global Beer Report, Octoberr 2002 Edition.

In addition, compared with the countries of Western Europe and North America, the demographics in our countries of operation indicate relatively faster growth in the drinking age population. We believe that we are well placed to promote and participate in any growth in the region's beer consumption given our:

• leadership position in the southern cone markets;
  
• strong and diversified product portfolio;
  
• marketing and distribution capabilities;
  
• significant market share position; and
  
• technologically advanced breweries.

Soft Drinks and Mineral Water.
In October of 2000, QIB sold its 57.97% equity stake in Paraguay Embotelladora S.A. ("Paresa"), a Coca-Cola(R) franchise in Paraguay, to Coca-Cola(R) Interamerican Corporation, having chosen to focus on expanding its ownership interest in certain PepsiCo(R) franchises in Argentina, and in Uruguay.

Our sales of soft drinks in Argentina and Uruguay began in December 1999 with the acquisition of Baesa, the largest PepsiCo bottler in Argentina and the sole PepsiCo bottler in Uruguay. We subsequently acquired a 99.21% interest in EDISA, the second largest PepsiCo® producer and bottler in Argentina. We now own exclusive rights to produce, sell and distribute PepsiCo soft drink products, including Pepsi Cola , Pepsi Cola Light , Pepsi Twist , Pepsi Max , Seven-Up , Seven-Up Light , Mirinda , Paso de los Toros , Kasfruit Juice , Kas , Tropicana and Gatorade. In December 2001, we introduced ready-to-drink Tropicana and started manufacturing and distributing Gatorade nationwide, so that we now distribute the three lines of PepsiCo beverages. During 2002, we launched Pepsi Twist, and introduced the Gatorade Fierce line of products. Based on management estimates, we currently control more than 84% of the production and sale of PepsiCo carbonated soft drinks in Argentina and 100% in Uruguay.

Our soft drink business in Argentina accounted for sales of 5.4 million hectoliters of soft drinks and juices and 0.1 million hectoliters of bottled water during 2002. Its market share in Buenos Aires, the principal region in Argentina, was 22.6%. In Uruguay our soft drinks business sold 0.2 million hectoliters of soft drinks and water in 2002 and our market share in that market was 11.3% .

The mineral water business in Argentina comprises mainly three brands, Eco de los Andes, Glaciar and Nestle Pureza Vital. In July 1999, we entered into a strategic association with Perrier Vittel to manage our Eco de los Andes brand through a new company, Eco de los Andes, in which we own a minority interest representing 48.95%. With the spin off of Eco de los Andes, the results of operations of this mineral water brand were no longer consolidated with our financial results as of July 1999. This strategic association is accounted for under the equity method of accounting. We acquired the Glaciar and Villa de los Arroyos brands as part of our acquisitions of Baesa and Embotelladora del Interior S.A. ("Edisa"), in December 1999 and 2000, respectively. We transferred certain assets related to the mineral water business of Glaciar and Villa de los Arroyos to Eco de los Andes during the first quarter of fiscal 2001.