Shareholder Newsletter

July 1, 2006 - Issue No. 32

Back to List of Newsletters

DEAR FELLOW SHAREHOLDERS:

LBIX MONTHLY NEWSLETTER

Our AGM was held on Wednesday, June 28, 2006.  All matters on the agenda were passed and David Bowra, Peter Buckley and Thomas Gaglardi were re-elected as directors for a three year term.

It has been a busy Spring and, by all accounts, it is about to become a busier Summer.  The Canadian and US launches of TREK® Natural Sports Drinks and NITRO™ Energy Drinks are under way.

Caesar® Cocktail has been well-received by those who serve the rapidly growing Hispanic community in the Southern States.  Caesar® creates the first legitimate competitor for Motts Clamato® in the US.  There are very few plants in North America that have the capability to bottle tomato juice.  Our Vancouver plant is one of those.

TREK® and NITRO™ are unique products that are properly priced and fill a much-needed gap in the industry.  According to the April 2006 edition of Beverage World magazine, the sales of branded sports drinks in 'food, drug and mass merchandise outlets only (excluding Wal-Mart)' exceeded $1.5 billion in 2005 and are growing strongly at +25% annually.  Energy drink consumption in the US in those types of stores grew a whopping 77% last year.  Convenience stores, where most of these products are ultimately purchased, were not included in the report.  For TREK® Natural Sports Drinks the health-food stores are a wide-open opportunity as the ingredients of conventional products do not meet the standards of most of those chains.

We are excited that the Loblaws® chain will soon carry TrueBlue® in Canada.  Loblaws® is the largest grocery retailer in the country with more than 1,000 grocery stores under that and other banners sporting some 30% market share.  With that development, TrueBlue® will shortly be available in virtually every grocery store in Canada.  In spite of that, we have still only made a small dent in the potential for TrueBlue® in this country, not to mention the US.  TrueBlue® 16oz has been a great hit in convenience and food service outlets.  We need to quadruple the facing counts in each grocery store.  We have as yet to move with any force into the drug channel.  We have barely scraped the surface of the institutional market (schools, universities, hospitals, military, etc.).  New flavors, new brand extensions; so much yet to do!

We continue to work on upgrading our plant capabilities to include a canning line.  There is progress to be made, but indications are that we will have some developments before the end of 2006.  Third-party production volumes held strong during the Spring and this period of unseasonably warm weather usually bodes well for a hectic Summer.  We are planning Eastern production for TrueBlue® within the next month or so.  That will reduce our logistics costs of moving the brand to market and thereby result in increased margins.

As our share price has moved some 400% in the past months you may from time to time see company employees exercising stock options and selling some of their shares.  Most of those people have been long time and, remain, dedicated members of our team but are not in a position to simply reach into their bank accounts to exercise and hold their shares.  Their reasons for selling principally relate to either having a pressing personal need, requiring the proceeds from sale to exercise the options in the first place or having to deal with the tax consequences of the exercise.  In many instances these people have been with the company for the better part of a decade and if their options were not exercised, they would expire. That certainly doesn't change either my view that the company remains under-valued or their commitment to our cause.

Thank you for your continued support.

Sincerely,
LEADING BRANDS, INC.

Per:

Ralph D. McRae
Chairman & CEO

P.S. What do you think TrueBlue® and RIM have in common?

We Build Brands™

Disclaimer:
Certain information contained in this press release includes forward-looking statements. Words such as “believe”, “expect,” “will,” or comparable terms, are intended to identify forward-looking statements concerning the Company’s expectations, beliefs, intentions, plans, objectives, future events or performance and other developments. All forward-looking statements included in this press release are based on information available to the Company on the date hereof. Such statements speak only as of the date hereof. Important factors that could cause actual results to differ materially from the Company’s estimations and projections are disclosed in the Company’s securities filings and include, but are not limited to, the following: general economic conditions, weather conditions, changing beverage consumption trends, pricing, availability of raw materials, economic uncertainties (including currency exchange rates), government regulation, managing and maintaining growth, the effect of adverse publicity, litigation, competition and other risk factors described from time to time in securities reports filed by Leading Brands, Inc.

Any non-GAAP financial measures referenced in this release such as “EBITDA”, “cash inflow from operations” or the like do not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers.