Shareholder Newsletter

September 1, 2006 - Issue No. 34

Back to List of Newsletters

DEAR FELLOW SHAREHOLDERS:

LBIX MONTHLY NEWSLETTER

When first deciding to skip this edition of our Monthly Newsletter, I didn't anticipate that so many people would claim to miss it.  So, in response to popular demand...

I want to start off by thanking you all for wishing for hot weather this summer.  Amazingly, it seems to have worked!  The past couple of months were certainly warmer than normal in most of North America and that generally bodes well for beverage sales.  As we move into fall our food sales start to pick-up and we are well along in planning the balance of our year for continued growth in both food and beverage.  As shareholders, we shouldn't underestimate the positive impact that Leading Brands' food business has on our operations in the last half of the year.  While most other beverage companies can slow down after the summer months, the other side of our business revs up.  Our sales trend will also be assisted this year by our ongoing efforts to push distribution into warmer climes.

As we continue to grow, we constantly review our distribution plan and work to improve our customer service.  In order to take ourselves to yet another level, we will undertake a complete supply chain management assessment this fall and winter.  We do things like this to stay ahead of our growing business so that in the event we see a spike in sales we can react in a timely and cost-effective manner.  This should also help us further drive costs out of our system and enhance net margins.  We will at the same time be adjusting the way we go to market in Western Canada by delivering through third party carriers in some instances where we now go direct.  This will let us increase the size of our in-store merchandising teams without adding cost and allow us to focus our energies on broader markets and opportunities.

As part of this ongoing process, we have just established a regional distribution center in the Chicago area to service our growing account base in the mid-West and Eastern US.  As our business expands in the Southeast we will explore similar arrangements there.  That now gives us two US distribution centers where a year ago we had none.  Production planning for the East continues.

We are putting the final touches on our new enhanced water product and hope to have an announcement soon on that as well.  Enhanced water has developed into a significant category in the beverage aisle (Propel®, Glaceau® Vitamin Water, etc.) and we plan to release a unique and exciting offering that incorporates several years of research and development in this area.  This new brand should be making its way to the store shelves before next spring.

West Coast advertising for TrueBlue® has been booked and we are now working to coordinate release with in-store sampling opportunities.  (You see the ad, take the coupon to the store and are able to sample the product right then and there.) A similar program will follow shortly in Eastern Canada.  I hope you all have been able to enjoy our on-line coupon at www.trueblueberry.com.  On that website you will also see a "TrueBlue® in the News" tab that will take you to a score of print news articles written about our great new brand that you will no doubt find of interest.  Thanks to the continuing efforts of our intrepid Marketing and PR Department, in the past three or four months alone TrueBlue® has further been featured on a dozen TV news and variety shows across the US and Canada and is scheduled to soon be the focus of on-air segments with both the CBS and NBC Dallas, Texas affiliates:

• ABC, Grand Rapids, MI – Take Five News
• CBS, Kalamazoo, MI – 11pm News
• CBS, Dallas, TX – Air Date TBA
• NBC, Dallas, TX – Air Date TBA
• Good Morning Arizona
• Wake Up Rochester, NY
• Global, Vancouver – Noon Hour News (with dietician)
• CityTV, Edmonton – Morning News
• Global, Calgary – Morning News
• Global, Red Deer – Agriculture program
• CTV, Calgary – Noon Hour News
• CBC, National – Evening News
• Rogers, Ottawa – 10am Daytime program
• A-Channel, Ottawa – Morning News

PR is an extremely cost effective way of conveying the healthful message of TrueBlue® to our prospective customers and nicely supplements our other media, sampling and promotional initiatives.  It further provides trusted third party verification of the great taste and health benefits of the brand that traditional advertising simply cannot deliver.

We continue the roll-out of TREK® Natural Sports Drink and NITRO™ Energy Drink in both the US and Canada.  NITRO™ will be marketed primarily through a direct to store distribution network and TREK® will stake out its territory in the growing health and wellness channel, where it has little competition.  As you have no doubt heard me say before, people who exercise and train seriously are careful about what they consume and we believe that TREK®, with its all natural ingredients, will become an important part of their daily regimen.  Conventional sports drinks do not have a presence in the health channel because their ingredients do not meet the stricter standards enforced by those stores.

I was a touch dismayed last month when our share price took a tumble on the release by Hansen's of what I thought were great quarterly numbers.  Our energy drink business continues to build at a phenomenal pace and our long time relationship with Hansen's has a lot to do with that.  It is important to remember, however, that Leading Brands is a much more significant business than any one product or service.  That is the nature of what we have built here and something that I hope our shareholders appreciate.  Diversity and scope of operations are keys to the long term success of any enterprise.  I personally anticipate many great things from Hansen's in the months and years to come.  They are a dynamic and creative company that has built an enviable position in this category and we are proud to be associated with them.

Sincerely,
LEADING BRANDS, INC.

Per:

Ralph D. McRae
Chairman & CEO

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.