Consumer Analyst Group of New York (CAGNY) Conference February 18, 2004 Roger Deromedi, Chief Executive Officer, Inc.

Thank you, Andrew, and good afternoon everyone. It’s great to be with all of you here at CAGNY, as well as with those of you listening in on our webcast.

Today we are going to take a closer look at some of the key initiatives Kraft has under way to transform our portfolio and help us drive sustainable growth. With me are Lance Friedmann, who leads our Global Health & Wellness initiatives, and Doug Burns, who leads our Global Beverages sector. Jim Dollive, our CFO, is also here for the Q&A session following our presentation.

Before turning to our agenda, I remind you that our comments contain projections and forward-looking statements and are made only as of today’s date. For more information, please refer to the safe harbor statement in our handouts or in the news release we issued.

We’ll start today with a quick review of the Sustainable Growth Plan we announced in January. I’ll discuss the four components of the plan and our commitment to deliver consistent, long-term growth – in revenues, in earnings and in the value we create for investors.

We’ll spend most our time giving you more details on one component of our growth plan: portfolio transformation. Lance and Doug will discuss the significant growth opportunities we’re targeting in the areas of health & wellness and coffee convenience. Finally, I’ll wrap things up and then we’ll take your questions.

As I discussed at the end of January, to get Kraft back on track for sustainable growth, we’ve taken three important steps.

First, we created a new global organization that will be more effective and efficient.

Second, we are implementing an integrated, sustainable growth plan.

And third, we have set realistic targets for the level of growth that we can consistently deliver.

Beginning with our new global structure, it links together three key organizational dimensions. The first is our categories, where our Global Marketing & Category Development group will lead our growth agenda with global category strategies, new product growth platforms and marketing excellence.

The second dimension is geographies, where our commercial units will ensure we stay close to local consumers and customers, drive local sales and marketing execution and have primary responsibility for the P&L.

These two groups will be supported by our global functions that will implement best practices around the world and fully leverage our global scale, including technology efforts, global sourcing and procurement, and employee development.

This new organization will be more effective as it accelerates the flow of innovation from market to market, increases worldwide category and functional expertise, and ensures superior local execution. It will also be more efficient as it eliminates duplication within functions. In short, it provides us the “Best of Global, and Best of Local”. And I’m pleased to report that our transition to the new organization is going well and is on track.

Our new organization structure strongly positions us to execute our Sustainable Growth Plan. Let me summarize the four components of the plan.

Reinvesting in brand value is our first and highest priority. Every one of our products must offer more benefits for the price paid than the competition. And if our value equation gets out of balance on a brand, we will move quickly to address it.

This year we expect to increase our marketing investment by 500 to 600 million dollars over 2003. This stepped up rate of spending, based on a category-by-category, country-by-country buildup, will give us the resources we need to market and price our products even more competitively across both our North American and international portfolios.

The second component of our Sustainable Growth Plan is the transformation of our portfolio in line with changing consumer, customer and demographic trends.

On the consumer side, the growing importance of health and wellness has significantly altered consumption and buying behaviors. Low-carb diets like Atkins and South Beach, concerns about trans fat and obesity, and greater demand for organic and natural products are requiring a shift in what we market and how we market it.

Just as important, consumers continue to demand more convenient versions of all of our products.

Our customer base is shifting, too. Alternate channels of distribution and the away-from-home market continue to grow faster than other segments.

And consumers, especially in the U.S., are increasingly multicultural.

Lance and Doug, in their presentations, will share a number of examples of how we’re capitalizing on these trends to drive sustainable growth.

The third component of our plan is expanding our global scale, with a clear focus on developing markets.

These markets have significant growth potential. Some of the best opportunities for us are in large markets such as China, Russia, Brazil and Mexico, where we have the scale and efficiency to grow more profitably.

We use three strategies to grow in developing markets. First, we will grow our current categories in existing markets. Second, we will expand our core categories across geographies. And third, we will build infrastructure in low scale markets.

Developing markets have gone from 2% of our revenues in 1990 to 11% last year. And it’s here that our new global organization can really help by leveraging our brands, our scale and our growth ideas across international markets faster than ever.

The fourth and final component of our Sustainable Growth Plan is driving out costs and assets. The goal is not only to achieve better asset utilization, but also to provide a source of funds to support our growth initiatives.

We anticipate that our recently announced three-year restructuring program will result in the closure or exit of up to 20 plants and the reduction of our worldwide employee base by about 6%.

These steps will result in pre-tax charges of up to 1.2 billion dollars, primarily reflecting asset write-offs, severance and associated implementation costs. Importantly, about 50% of these costs are expected to be non-cash. Ongoing annual savings from the restructuring program are significant and are expected to approach 400 million dollars pre-tax by 2006.

In addition to the restructuring program, we will continue our other ongoing productivity efforts, particularly focusing on supply chain initiatives and opportunities to leverage new technologies.

In summary, our Sustainable Growth Plan has four parts: reinvesting in brand value, transforming our portfolio, expanding our global scale, and driving out costs and assets. We are confident that we have the ideas, the funding and the organizational commitment to make it succeed.

The third and final step was setting financial targets that are realistic given the current operating environment, our portfolio, our geographic coverage and the opportunities we see for growth.

In 2004, we expect constant currency revenue growth to be around 3%, including tack-on acquisitions but excluding divestitures. This revenue growth is expected to be driven by volume growth of 2-3%, resulting from the higher marketing spending, contributions from new products, growth in developing markets and tack-on acquisitions.

We project fully diluted earnings per share in 2004 of $1.63 to $1.70, including about $0.30 per share for the charges associated with the restructuring program and we expect first quarter EPS to be in-line with the guidance we gave in January.

And we project discretionary cash flow, which we define as net cash provided by operating activities less capital expenditures, of 2.8 billion dollars in 2004, after funding approximately 200 million dollars in cash outlays associated with the restructuring program.

On a long-term basis, we believe we can grow constant currency revenues, including tack-on acquisitions but excluding divestitures, in the 3% range, supported by volume growth of 2-3%. The difference between revenue and volume growth rates primarily reflects the impact of pricing in developing markets.

And finally, we believe we can deliver long-term EPS growth of 6-9% per year, driven by revenue growth, our continuous focus on cost reduction and the financial leverage from our significant cash flow. In some years we may do better, especially when economic conditions are strong or we reap synergies from acquisitions. But we are setting expectations that we can consistently deliver – because I believe that consistent and predictable earnings growth, together with an attractive dividend, provides a compelling reason for investors to buy and hold our stock.

Of course, the earnings we deliver tomorrow are, in large part, dependent on the steps we take today to transform our portfolio for growth. Two opportunity areas where we’re moving aggressively are health & wellness and convenience in the coffee category.

To be successful in transforming our portfolio, we need to do four things. We must focus on the right growth trends. We must leverage our world-class research and development resources. We must create revolutionary opportunities like , DiGiorno Pizza and that have been key drivers of our historical growth. And, importantly, we must drive this transformation through both organic growth and acquisitions.

We will first take you through our health & wellness initiatives across our five consumer sectors—snacks, beverages, cheese and dairy, grocery, and convenient meals.

Then we’ll describe how we’re meeting consumer demand for greater convenience in coffee, one of our largest businesses with 4 billion dollars in revenues last year.

Taking you through these initiatives are Lance and Doug, who are part of Betsy Holden’s Global Marketing & Category Development group. Our intent in having them present to you today is to bring to life how this global group will drive the initiatives and, ultimately, the growth of our businesses around the world.

Lance has been with Kraft 16 years and, since last summer he has been focused on our health & wellness initiatives.

Doug has been with us for 22 years and has spent the last several years overseeing our coffee business in Europe.

Let me now turn it over to Lance.

Lance Friedmann, Senior Vice President, Global Health & Wellness

Thank you, Roger. The growing focus on health & wellness by consumers, government, and the media represents a lasting change for our industry, and for Kraft. Today, I’ll tell you about our overall approach to health & wellness, which encompasses both Corporate Responsibility and the opportunity for growth. I’ll highlight some of the actions we’re taking in the area of policies and practices. Then, I’ll focus on our initiatives in the marketplace that are designed to capture the growing demand for products that meet consumers’ health & wellness needs.

The starting point for Kraft’s approach to health and wellness is consumer choice. Every day, and for every eating occasion, consumers choose the foods they want, based on their specific needs and preferences.

Sometimes, they choose a product like Kraft Easy Mac, our microwaveable macaroni and cheese, because it offers a fast and convenient meal that kids love.

Other times, they may choose a treat like chocolate because they’re looking for a pleasurable snack or dessert.

Increasingly, though, consumers are opting for products like Balance Bar, because it offers a specific health and wellness benefit that they’re seeking-- in this case, lasting energy.

One of Kraft’s strengths – and one that we will maintain -- is a portfolio that delivers against this broad range of consumer choices. And as we work to develop more products and programs to address the growing interest in health and wellness, we will use consumer insights as the primary driver.

Those insights start with the fact that “health & wellness” is not just one thing. In fact, there is a world of different health needs that consumers seek to address.

In developed markets, obesity is currently the number one consumer issue. Diabetes is a rising concern. Many consumers don’t get enough nutrients like calcium and fiber. And more consumers are seeking positive nutrition from ingredients like soy.

In developing markets, the needs are different. Here, caloric deficiency is a key concern, as are deficiencies in key nutrients like iron, iodine and protein.

These consumer needs are the starting point for Kraft’s health and wellness initiatives, which encompass two broad areas. The first is policies and practices, a critical part of our overall commitment to Corporate Responsibility. These help to guide our actions in the second area, products and programs, which are the major initiatives that will help transform our portfolio and drive growth.

I’ll start by highlighting some of the actions we’ve taken in these four Policy and Practice areas which we announced last summer.

In the area of product nutrition, we’ve committed to reducing or eliminating trans-fatty acids in all our products, while preserving the taste consumers love, and recognizing that in some products, like meat and cheese, naturally occurring trans fat cannot be eliminated.

In the area of marketing practices, we are eliminating all in-school advertising and promotion.

We will enhance the information available to consumers by adding nutritional labeling to all the products we sell in every country in the world, even when local regulations do not require this labeling.

And in the area of advocacy, we have assembled a Worldwide Advisory Council of ten experts in nutrition science, fitness science, communication and other disciplines to provide guidance as we continue to evolve our policies and practices.

At Kraft, we take corporate responsibility and our role as a food company seriously. These are a few of the steps we’re taking now to fulfill that responsibility. As we go forward, we hope that by partnering with public health authorities, government, industry and advocacy groups, we can work together to make meaningful progress in this area

Now, let’s turn to the health and wellness products and programs that will drive our growth.

We are pursuing four growth strategies. We will offer health alternatives across our current categories to leverage our brands and the breadth of our portfolio. This enables us to meet more consumer health and wellness needs, with more products.

We will enter select categories to capture additional growth, as we’ve done with the Balance and Boca acquisitions.

We will communicate health and wellness benefits through brand-specific as well as scale-based marketing.

And, we will leverage enabling technologies to deliver health benefits with superior taste, because we know that consumers won’t compromise on either.

These growth strategies will be applied across four consumer opportunity areas based on the needs I described earlier: weight management, nutrient delivery, performance nutrition and natural and organic. We will pursue these across our global sectors to fully capture market opportunities.

Weight management is our highest-priority opportunity. In the U.S., 64% of adults and 15% of children were considered overweight in 2000, with the percentage for children having more than doubled since 1980

As a result, 46% of adults in the U.S. were on some form of diet last year. While dieters continue to focus most on limiting fat, sugar and caloric intake, the percent of dieters limiting carbs has become significant. Kraft’s broad portfolio enables us to offer product choices to meet all of these different needs. Let’s look at some products and programs that address each of these opportunities, starting with our lower carb initiatives.

Our portfolio includes many products which naturally contain no, or few, carbohydrates. These products will prominently feature carb amounts on their packaging and in their advertising. Here’s a print ad for our cheese products with the headline, “If you can count to 1, you can count our carbs”.

Our meat products will also flag the carb count on their packages. Given the dieting trends, it’s no surprise that our premium ham and bacon consumption were up 8% and 4%, respectively, in 2003.

We’re particularly excited about our introduction later this quarter of Kraft CarbWell products into the salad dressing and barbeque sauce categories. These two categories are attractive first entries for this brand because of their large size, the strength of the Kraft trademark, and our strong capabilities in flavor technology. So not only do these items have fewer carbs, but they deliver the taste that consumers expect from Kraft. We’re actively pursuing other category opportunities for the CarbWell brand.

Planters Nuts, another product in our portfolio that naturally contains few carbs, will use Mr. Peanut in its print and television advertising to reinforce the low-carb message. Let’s watch Mr. Peanut gettin’ jiggy.

For those dieters looking to reduce calories, we’re expanding our lower- calorie product choices. In the middle of the year, we’ll launch 100 Calorie Packs, a four-item line featuring several of our top biscuit brands. These portion-control, single-serve products include thin-crisp versions of , Chips Ahoy! and , as well as mini-. They’re specially formulated to be have 3 grams or less of fat, with zero grams of trans-fat and no cholesterol. We believe this line offers great incremental opportunity as we regain consumers that have switched to lower carb and lower fat snacking options.

In Beverages, Sunrise is our latest entry from this growing brand. It targets breakfast consumption, and combines great taste, and 100% of the daily value of Vitamin C with only five calories per serving.

In addition to products, we use scale communications to present low-calorie choices such as our Healthy Living recipes, with around 1,000 recipes now available online on our website. Here’s an example of a reduced calorie sandwich that uses products from our Cheese, Meals and Grocery sectors.

To offer choices for those watching their fat intake, we’re launching Newton Bars with yogurt in the first quarter. These great tasting bars are low in fat , made with real fruit, and are a good source of calcium. With almost three- quarters of the respondents in our research saying they would eat Bars as a morning snack, we believe this item will deliver strong incremental volume.

As mentioned earlier, we’re reducing or eliminating trans fatty acids from many of our products. Here you see our zero gram trans-fat , the first of many biscuit product changes that will reduce trans fat levels.

Obesity and diabetes are highly linked, which is why they have grown in tandem. At Kraft, we have long been committed to offering products to diabetics through our Diabetic Choices program, now entering its seventh year, with twenty brands participating. This program, which is endorsed by the American Diabetes Association, reaches diabetic consumers with targeted media messages, as well as in-store merchandising programs that often include the store pharmacy. Both consumers and our retail partners are enthusiastic about this program.

We have several new products that will join the Diabetic Choices lineup this year, including these sugar-free SnackWell’s , which will launch in March…

…And new Kool-Aid Jammers 10, with only 10 calories per pouch. This product leverages our sugar substitute technologies and also has real fruit juice. While we’ve taken most of the sugar out, we’ve left all the fun in, with the bright colored drink that kids can see through the clear back panel. This extension will build on the success of Jammers, which now exceeds $100 million dollars in revenue.

Our second opportunity area is Nutrient Delivery.

Here, our efforts are designed to address these nutrient gaps. In the U.S., two out of three kids and three out of four adults don’t get the recommended daily value of calcium. Similarly, nine out of ten Americans don’t get the recommended daily servings of dietary fiber. On the heart health front, 60 million Americans today have some form of heart disease, which remains the number one cause of death. In developing markets, the deficiencies are more basic, with multiple vitamin, mineral and macronutrient deficiencies resulting in a variety of health issues.

To address the calcium gap and improve bone health, last year we fortified our Singles brand to deliver double the level of calcium of most competitive slices, while maintaining our great taste and meltability. Consumers responded positively to this benefit, and this half-billion dollar brand recorded mid-single digit growth in 2003.

We’ve combined our unique Creme Savers flavor technology with calcium fortification to develop Creme Savers Smoothies, a dairy beverage launched in January. Each 10-ounce serving is 98% fat free and has 25% of the recommended daily value of calcium.

Across our dairy portfolio, we’ve worked closely with the Dairy Management Institute to develop the powerful “3-A-Day” campaign, which communicates the bone health benefits of three servings a day of cheese, yogurt or milk. During 2004, this campaign will be supported by tens of millions of dollars in marketing that will help drive category growth. As the category leader in cheese, we are well positioned to benefit from this growth.

As we look to promote our higher fiber and lower fat products, we unified seven cereal brands representing nearly 5% of the category, under the Post Healthy Classics umbrella last year. All these products carry a consistent message emphasizing the heart health benefits of high-fiber, low-fat products. Consumption trends have shown solid improvement since the transition. Let’s take a look at a Post Healthy Classics ad.

We continue to fortify several of our products, including , for specific nutrient deficiencies in developing markets. Tang uses our fortification technology to customize the product for the specific nutritional needs in each geography—such as Vitamins A and C and iron in Brazil, and Vitamin C and calcium in Saudi Arabia--while also tailoring the flavors to local taste. The combination of nutrient fortification and flavor customization has driven the Tang brand to 10% volume growth per year since 2000, and to a half billion dollars in revenue in 2003.

Similarly, in Asia, we fortify our cheese brands to address local nutritional deficiencies. Our brand in the Philippines offers iodine, Vitamins B1 and B2, while Qeju in Indonesia offers Vitamin A and added calcium.

Meeting the specific nutritional needs of children is also a key priority, and many of our classic brands already deliver against these needs. This year, we’re adding two new items to the Lunchables Fun Fuel line of nutritionally balanced meals. Let’s look at this ad for Lunchables Fun Fuel.

Kraft 2% string cheese is another lunch box favorite. By using 2% milk, this product delivers calcium but with less fat than our regular string cheese. Because this product delivers so well against both health and wellness and convenience, it’s no surprise that sales of our 50 million dollar string cheese business grew over 20% last year.

And, finally, we are introducing Capri Sun Fruitwaves in the first quarter, for parents looking for all natural beverages with great flavors that are also 100% juice.

Our third opportunity area is performance nutrition.

This fast-growing area includes products with value-added nutrition for physical well-being. We’ve seen particularly strong growth in the past two years in nutrition and energy bars, which were up 15% annually, and sports and energy drinks, up 18%.

Our primary brand in this area is Balance. When we acquired this brand in 2000, it held a distant number three share position in the nutrition and energy bar category. By increasing distribution and delivering great taste within the 40-30-30 ratio for carbs, fat and protein, Balance Bar grew consumption by 18% in 2003, translating to a share gain of about one-and-a-half points in this fast growing category.

In March, we will extend the brand with Balance GoMix, a delicious mix of snacking ingredients with 11 essential vitamins and minerals that has twice the protein and one-third less fat vs. the leading trail mixes.

In the Sports Beverage category, we’ll add new flavors to the successful Capri Sun Sport line, the first sports beverage formulated specifically for kids. This line, launched just last year, recorded more than 30 million dollars in revenue and achieved the #2 position among kids sports beverages.

Our final opportunity area is natural and organic categories and channels.

Growth in natural and organic products has been strong and consistent, up 9% in each of the past three years. We expect this trend to continue as mainstream retailers add natural and organic sections to their stores and natural and organic retailers continue to open new stores.

Our Boca business has benefited from these trends with strong growth in the natural channel, and its revenues have more than doubled since our acquisition a few years ago. We expect strong growth to continue as we leverage our flavor technologies for soy-based meat alternatives.

And we are announcing today a major expansion of our Back to Nature brand into several new categories. Here, we’re leveraging our formulation and manufacturing capabilities to extend this cereal and granola business, acquired just last August, into macaroni and cheese, organic cheeses, cookies and crackers. All of these will be launched in the first half of this year. We are optimistic about the incremental growth potential of this brand, because it’s on-trend and will reach new consumers.

In summary, we are excited about the opportunity that Health & Wellness presents to Kraft. We recognize and understand our corporate responsibility as a food company, and will continue to advance in this area.

We will capture growth opportunities by addressing consumer needs in four key areas: weight management, nutrient delivery, performance nutrition and natural and organic. Our goal is to offer choices and lead the health segment in each of the categories in which we compete.

And finally, these opportunities will not only drive growth in the short-term, but also help transform our portfolio over the long-term.

I’ll now turn it over to Doug who will take you through our initiatives in coffee.

Doug Burns, Senior Vice President, Global Beverages Sector

Thank you, Lance. The consumer need for convenience has always been a driving force in the food industry. But as our lives get busier, consumer expectations keep rising, whether for ease of preparation, greater portability, or the convenience of single-serve packages. My aim is to demonstrate that combining quality coffee brands with new levels of convenience across geographies, results in a strong business with outstanding growth prospects.

I’ll start today by reviewing the large and growing coffee category. Then I’ll show you how Kraft combines its strong global presence with a truly global approach to managing the business. And finally I’ll profile our convenience- focused growth platforms, including our plans to introduce an exciting new coffee at home system.

The coffee market within the retail grocery channel is a truly global market, with sales of $33 billion. The addition of the food service or away-from-home segment adds a considerable amount to this figure.

Growth has averaged 2% over the past two years, with the developing markets of Central and Eastern Europe and Asia providing most of the growth. The growth rate shown for Western Europe reflects the negative impact from the 2003 summer heat wave.

The market growth potential is reinforced when you consider per capita coffee consumption, where the developing markets have significant head- room before they approach Western European or North American consumption levels.

Against that backdrop of market growth, Kraft is well-positioned with a strong global presence across all regions of the world, with the exception of Latin America. In Japan and Korea, we operate through joint ventures.

And we have a portfolio of icon brands that all generate more than $100 million in revenues. All share the same image of high quality and authenticity, largely stemming from years of roast coffee heritage.

Uniquely among coffee companies, we have a solid presence across all forms of coffee, and overall we occupy a strong number two position worldwide, expressed in terms of cups of coffee consumed. Our experience across all forms is important given the different local preferences.

And our global infrastructure is set up to deliver growth around the world.

The Global Marketing & Category Development group develops the category strategies for coffee, builds the equity of our global brands and leads the growth platforms.

We manage R&D out of a center of expertise in the U.K., supported by three regional hubs in the U.S., Japan, and Korea.

Global sourcing is tightly managed via a single team to ensure that we optimize investment and asset utilization.

And to leverage our scale, we have centralized our global coffee procurement. In a category like coffee, it is vitally important to manage the commodity swings with precision and this organization allows us to reap real benefits in expertise, quality, cost and efficiency.

Let’s now turn to the four convenience-focused global platforms that will drive coffee growth in the future: soluble, mixes, ready-to-drink, and coffee-on- demand.

Starting first with soluble, or instant coffee, you may be surprised to learn that segment volumes have grown 3% on average over the past two years, with particularly strong growth in developing markets.

Our strategy is to mirror our high quality, authentic roast coffee credentials in the premium soluble segment of the market. We support these global and local brands with unsurpassed quality, backed by world-class technology that delivers outstanding roast and ground coffee flavor and in-jar aroma.

The three print ads you see here illustrate how a common strategy, packaging solution and quality delivery are reinforced in different markets: in this case Germany, the UK and Sweden. In all cases, we’re communicating the idea of ‘‘authentic roast coffee taste in an instant coffee.”

Growth in developing markets offers considerable potential. Last year in Russia, for example, Kraft’s soluble coffee volume grew 68%. That incremental volume equated to 1.2 billion cups of coffee. And it’s our premium and Carte Noire brands that are driving the growth. Our business is supported by a local plant and the strong national salesforce that came with our Stollwerck chocolate acquisition. Let’s take a look at a recent Jacobs ad from Russia.

Our second global growth platform is coffee mixes, which are combinations of soluble coffee, creamer, sugar and flavors.

The coffee mix segment volumes have grown 15% on average over the past two years, driven largely by Asia and Europe.

Mixes offer a convenient way to get cappuccino-style and flavored coffees at a lower cost than coffee houses, making them attractive to young adults. We are leveraging our authentic coffee credentials to provide quality assurance, as well as new foaming technologies to deliver cappuccino-style froth in varieties and flavors that reflect our deep knowledge of local taste preferences.

In Asia, we have recorded strong double-digit growth in “3-in-1” mixes that combine coffee, sugar and creamer. Growth is particularly robust in our convenient single-serve sticks.

This format has been successfully expanded into Central and Eastern Europe, where the accessible single serve price point is attractive given the relatively low per capita income.

And, in Europe we are expanding our offerings by cross-branding our coffee mixes with our strong confectionery trademarks. Pictured here are new single serve mugstick introductions that include Daim and chocolate.

Our third growth platform is ready-to-drink coffee, which provides Kraft with an exciting opportunity to address convenience and portability head-on.

The largest market in the world for ready to drink coffee is Japan, where the form accounts for 25% of total coffee servings and Kraft has a strong presence with our Blendy brand. Outside Asia, the business is in an early development stage, but the trends are encouraging and we’re confident that this area represents a real opportunity to attract young adults with innovative products.

We’ve drawn on our experience in Asia to market Ice Presso in Europe, which is currently available in 11 countries and marketed in a common fashion under the banners of our regional icon brands. We continue to expand this successful line throughout Europe.

In this print ad from Austria and the television commercial from Greece that follows, I think you’ll see what I mean when I talk about the potential to target young adults with Jacobs Ice Presso.

A unique product that we’re continuing to test in a UK lead market is Kenco Cappio—an indulgent, foamy cappuccino-style drink delivered by use of innovative widget technology, first pioneered in the UK beer industry. And we have several other value-added products in the pipeline targeting the ready- to-drink segment.

Finally, let me turn to the remaining growth platform, coffee on-demand. By this I mean the highest quality, authentic coffee available at the touch of a button. Consumers today are becoming less willing to prepare coffee using the “old fashioned” filter basket, paper and machine. So, we are adapting our portfolio of roast coffee products to match these trends.

Kraft pioneered the filter pod market in Switzerland in 1982. Filter pods are single portions of roast coffee enclosed in a filter paper that work in machines that produce an espresso or crema coffee, which has a thin layer of foam on top. Today, sales of machines offering some element of ‘on demand’ benefit are growing quickly in Europe and we see a myriad of new pod-based systems being launched throughout European markets and the U.S. Our growth formula is to offer high quality filter pods across our preferred brands, which results in a favorable mix-shift.

We already offer filter pod products under our icon brands across most European markets, with more markets planned.

Filter pods are one important element of our ’on demand’ strategy. The other is a new entry that we are excited to introduce to you today. First, a word of background. Kraft has extensive experience in proprietary systems stretching back to 1989 in the away-from-home market in Europe. So we understand the growing consumer demand for coffeehouse quality and variety in the home, with the added requirement of easy preparation.

That is why we are excited about the introduction of -- a proprietary hot beverage system for use in the home that provides a wide range of premium quality hot beverages at the touch of a button. Our first launch market is planned for France later this year.

Tassimo allows consumers to enjoy a full range of coffeehouse quality hot beverages including filter coffee, cafe crema, espresso, cappuccino, hot chocolate and tea. On a country by country basis, we will leverage Kraft’s strong local brands as well as partner brands. In the case of the lead market France, the products will be Carte Noire coffees, Suchard hot chocolate, and Twinings tea.

There are several elements of the Tassimo system that we believe make it unique and advantaged. The exclusive Tassimo disc, or T-disc, allows the consumer to make a wide range of different drinks and drink volumes with no adjustments necessary. Just the simple touch of a button.

The combination of a product specific T-disc and an integrated bar code reader in the machine ensures that each drink is produced using the optimal water temperature and brewing conditions. In addition, Tassimo uses a liquid milk disc that transforms a base espresso into a frothy cappuccino. And finally, T-discs are engineered to accommodate the different drink sizes required in different markets around the world. As you would imagine on an innovative system like this, we have numerous patents pending.

And our business model is somewhat unique as well. In our France lead market, the Tassimo brewer and the T-discs will be available through retail channels. Kraft is the manufacturer and seller of all T-discs, and is responsible for all aspects of marketing the system. The brewer is manufactured by Saeco, the global leader in espresso machines. The brewer is sold, distributed, serviced and promoted by Braun, a worldwide leader in innovative, high quality domestic appliances. Let’s look at the following short video that should give you a better sense for this exciting new way to make coffee.

As I said before, the lead market for Tassimo is France in 2004. We believe that ‘on-demand’ coffee offers significant growth and profit potential and that Kraft’s combination of technology, consumer insights and leading brands is a potent growth formula. Given the significant size of the global coffee category, at 33 billion dollars in revenue, it’s not hard to envision an on- demand segment that will reach several billion dollars in the not-too distant future. We have global ambitions and look forward to announcing rollout plans as they are confirmed.

Thank you and I’ll now turn it back over to Roger for a wrap-up.

Roger Deromedi, Chief Executive Officer, Kraft Foods Inc.

Thank you Lance and Doug.

Let me briefly summarize the key points of our presentation today. First, Kraft is quickly establishing a new global organization--one that will move faster in adapting good ideas like the ones you heard today around the world.

Second, we are executing against a Sustainable Growth Plan that we are confident can deliver consistent revenue and earnings growth.

And third, as you’ve seen in the many exciting ideas we’ve shown, we are leveraging global growth platforms such as health and wellness initiatives and convenience in coffee to drive growth.

While we focused on health and wellness and coffee as examples today, I can assure you that we have great ideas across all our sectors, and these ideas are at the heart of our ongoing efforts to transform our portfolio.

Thank you for your attention today. We have time for a few questions before moving to the break-out session. ###