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• This presentation (‘Presentation’) has been prepared by PepsiCo. India Holdings Pvt. Ltd. (‘PepsiCo.’) collectively, with any officer, director, employee, advisor or agent (‘Preparers’) for Become Indra’s Advisors Contest (‘BIAC’). • This Presentation is exclusively for the purpose of guiding the persons registering themselves for participating in BIAC (‘Participants’) and no commercial purpose is intended. • This Presentation and the information, data, figures, pictures, projections, estimates, forecasts, analyses etc. (‘Contents’) contained herein are confidential and shall strictly be used for the purposes of BIAC and shall not be reproduced, copied, disseminated or distributed in any manner. • While the information contained in this Presentation is believed to be accurate, the Preparers expressly disclaim any and all liability for representations or warranties, expressed or implied, contained in, or for omissions from, this Presentation or any other written or oral communication transmitted to any Participant in connection with this Presentation so far as is permitted by law. • Neither the Preparers nor any of their respective representatives shall be liable for any direct, indirect or consequential loss or damages suffered by any Participant or any person as a result of relying on any statement in or omission from this Presentation, along with other information furnished in connection therewith, and any such liability is expressly disclaimed. • In furnishing this Presentation, the Preparers reserve the right to amend or replace this Presentation at any time and undertake no obligation to update any of the information contained in the Presentation or to correct any inaccuracies that may become apparent. • This Presentation shall remain the property of PepsiCo and the Participants shall promptly delete all the Contents received in written, electronic or other tangible form whatsoever after their participation in BIAC is completed. Such deletion shall be certified to PepsiCo by the Participants via email to the following email address: contest@pepsico.com • All trademarks as depicted in the Presentation remain property of their respective owners, and are used only to describe the products being provided under such trademarks. The depiction in no way indicates any relationship between PepsiCo and the owners of said trademarks in any manner whatsoever. • Neither the dissemination of this Presentation nor any part of its contents is to be taken as any form of commitment on the part of the Preparers or any of their respective affiliates to enter any contract or otherwise create any legally binding obligation or commitment. The Preparers expressly reserve the right, in their absolute discretion, without prior notice and without any liability to any recipient to terminate discussions with any recipient or any other parties .
PepsiCo Confidential 2
Ghar ke Baahar bhi
Maximizing Out of Home Eating & Drinking Opportunities for PepsiCo
As the year draws to a close, there is much excitement in the PepsiCo office. It is that time of year when plans are made for the next year, and senior leaders in the company are making choices – where should we resource ahead of the curve? India is an exciting market, and has always been a key focus area for PepsiCo. Among the many exciting opportunities present, one of those that is being discussed more often these days is the exciting out of home arena. Globally a huge business, this is now finally taking shape in India too. The buzz around this is evident, as seen by the number of people consuming some beverage or snack while out on the streets or restaurants and malls!. Clearly, there is something here that merits serious attention and resourcing!
Inviting India’s brightest young minds to help PepsiCo India make the most of this opportunity!
PepsiCo is waiting to hear from you!
PepsiCo Confidential 4
The question you are invited to help us answer
How should PepsiCo India participate in the rapidly expanding business opportunity provided by increased out-of-home eating and drinking?* What is the best end-to-end business solution to monetize our brand and equipment assets, to ensure we gain on every front viz. • Volume & Value • Profit • Equity • Partnerships
*also referred to as On Premise(OP) or Foodservice (FS) within the industry PepsiCo Confidential 5
CONTENTS 1. The opportunity 2. Key insights, trends, information data-bank • Consumer • Customer • Pepsico 3. Best practice case studies - inspiration 4. What we expect from you 5. Appendix • About Pepsico • Business fundamentals
PepsiCo Confidential 6
1. THE OPPORTUNITY
Young On-the-Go lifestyles seek food & drink on the move
More young people Urbanization, personal on the move – mobility and longer students, working commutes means women, working men time starved people populations increasing want to eat and drink significantly on the move
OPPORTUNITIES: Packaging (convenience, fresh, cool etc…) Ready to Eat Ready to Cook/Half Cooked
PepsiCo Confidential 8 This has spurned over a trillion $ food service industry! Globally, Food Service comprises a mix of channels serving almost 50% of FB consumption occasions, All Out of Home Channels Airports & Restaurants Sports Vending Hotels Stadiums Hospitals Welfare & Services
Workplace
Education On-board Leisure Retail Street & mobile vendors
Hotels & lodging Nightclubs Takeaways Cafés
Pubs/bars Recreation Cafeterias Education QSR Parks, Movie (Workplace, (Schools University) Theaters, etc. Healthcare, etc.)
40-50%
FSR
Global FS sales (manufacturer)
QSR=Quick Service Restaurant; FSR=Full Service Restaurant; FB= Food & Beverage PepsiCo Confidential 9 In India, too the Food Service footprint is large, varied & growing
Eateries & Dining Entertainment Travel & Lodging Business and Institutions
Cafes & Bars College/Univ. Clubs/Bars
FSR Hotels Workplace
Theme Parks
QSR Govt & Military
Catering & Kiosks & Food courts Cinemas Travel Social Services
PepsiCo Confidential 10 A platform to build both revenue and brand equity
Drives Beverage & Snack Large and Growing Volume Adoption Growing faster than retail since the Compared to home, consumption last 3 years in India, and globally of specialty beverages are higher too and consumption of snacks as a meal replacement are higher
Unique Access to tough-to- Drives Brand visibility and reach consumers equity Has higher per capita trips than Allows controlled quality brand retail among a core target – youth, activations in the “right” mood and working men, upper SECs environment
SEC= Socio Economic Classification PepsiCo Confidential 11 In India, PepsiCo’s On Premise Sales have had a great run over the last 5 years…
Volume Growth Share Hi Double Digit Growth CAGR
ON PREMISE CHANNEL LEADERS Urban Advantage Regular >10% Volume Mix & Brand Growing! Activations
PepsiCo Confidential 12 QSRs and T&L most important channels for beverages today… and tomorrow!
Contribution
1% Others Ent’t 11%
B&I 10% The top contributors to growth 2012- 2016 T&L 21% Tier 1 growth drivers Retail Café/Bar 4% 1. QSR FSR 10% 2. T&L
Next level growth drivers 1. Entertainment QSR 43%
2012
QSR- Quick Service Restaurant; T&L- Travel & Lodging, B&I – Business & Institutions PepsiCo Confidential 13
Led by key accounts who will drive growth • Top 5 Global QSR’s Global QSR key contributes 85% of Acceleration of • Rapid growth in regional accounts growth growth in QSR’s cities expanding • Outlet growth of 20% rapidly per annum
Travel & Lodging Market leaders • TAJ and ITC to contribute • Room nights set to to significant portion of growth through double over next 5 years strengthening new development their share of T&L the total growth
• PVR and INOX becoming • Number of multiplex Cinemas Rapid growth more dominant, screens to double by dominated by key acquiring smaller through Cinemas 2018 players National operators
Source: Euromonitor PepsiCo Confidential 14
Channels provide different benefits to PepsiCo
XX X XX
Railways Institutions X X X X QSRs/Food Courts X Hotels Vending X X X X X X
FSRs Airports
Profitability + Profitability
- Cinemas
- Branding + (MM) 8 oz ‘13 ‘17
*size of the bubble indicates volume PepsiCo Confidential 15 And gives us new opportunities to grow for Food Service
Day Part Portfolio FACT #1 FACT #2 80%+ of business from Morning & Evening Huge Mix of CSDs for PepsiCo
FACT #3 75% of industry sales is from foods 75% 76% 54% Breakfast Morning Snack Evening 73%
Grow beyond morning & evening Grow beyond CSDs Grow beyond beverages
PepsiCo Confidential 16 An example of how we can make the most of the channel opportunity…
Differentiated portfolio based on Customized Pack Solutions that provide Lodging location/occasion within Lodging channel Travel convenience, portability, and competitive pricing
• Drive Quaker Breakfast meal solutions Breakfast • 100% premium juice offerings CSD 150ml Cans Trop Tetra 200ml • Explore low-cost Water option In Room • Penetrate distribution on Salty Snacks and Quaker Cookies Water - Cups Lipton Fitness • Broaden Gatorade and G-Series trial Center • Introduce Premium Water brands Restaurant • Development of Pepsi Hi-Image contour bottle Lays Stax - Minis Quaker Cookies /Bar • Drive Mixology range – chef-led recipes and innovation
• Gift Shop Introduce high end coolers to drive impulse purchase Peanuts/Snacks Quaker Inst. Oats
Event • Represents up to 60% of total Beverage Catering sales Vending Solutions
Source: US Travel & Lodging Fact book 2012 PepsiCo Confidential 17 The way to think about this opportunity: 3 Lenses Examine the WIFM* for each of the 3 key players What brings customer footfalls, increases revenue per customer? What is the role of our category in their portfolio? How do we give them a Competitive advantage? How can we ensure best Service?
CUSTOMER How do we build brand visibility and equity in a unique and impactful Who is he? What’s his life like? way? Where is he? How do we innovate around What is he doing there? equipment to satisfy consumer and What is he looking for from the PI BRANDS/ customer needs in a way that occasion/channel? CONSUMER ensures profitability and gains us a competitive advantage? What is the interaction with our EQUIPMENT categories today? What is the role for culinary innovation? How do we design and implement against this? SWEET SPOT
*WIFM: what’s in it for me PepsiCo Confidential 18
2. KEY INSIGHTS & TRENDS The Consumer
Global trends show high potential for India Frequency Of Eating Out Is High In The Developed World; Translating Into Huge Potential For India Key drivers of beverage adoption are hanging out Annual Per Cap Trips with friends and visiting your favorite restaurant 220 Drivers of Beverage Adoption* 121 40 26 15 15 Favorite Hangout with 26% Friends Total FS QSR FSR C&G/Ent Grocery Super Club Eating Out Retail Favorite Restaurant 23%
Huge Eating Out potential in India Going to the Movies 17% 42 Drinking at the Mall 8% 1.2 Entertaining Advertising 8% India Singapore
Source – Annual visits, Foodservice - NPD/Crest June 08, Retail - IRI Panel (Q308) PepsiCo Confidential 20 Supported by key indicators already evident in India
PepsiCo Confidential 21 Consumers are more emotionally connected here
Foodservice Retail
Environment With Friends Spontaneous Alone Routine
Relax & connect Chore Emotional Savor the time Get it done Framework 45 minutes plus Complete in < 20 minutes
Decision Consumer Shopper Maker
PepsiCo Confidential 22 Afternoon-Evening and social gatherings are a natural affinity for LRB
WHERE – Significant In Home play but WHEN – LRB consumption mostly OOH is a strength ; High consumption during non-meal occasions while relaxing
• Packaged Beverages & Soft Drinks over- • Over half of soft drinks consumption index on out of home consumption 3-4 happens in the afternoon/evening times vs. Average beverage consumption (between lunch & dinner), & another (which is mostly in home) 1/5th happens in the morning (between breakfast & lunch) • Over 60% of beverages consumption happens during leisure/relaxation time • But other packaged beverages have a more even consumption profile through the day – 1/3rd in afternoon/evening – 1/3rd at breakfast/morning – 10-15% in mid morning – 10-15% post dinner too
PepsiCo Confidential 23 And freshly-prepared food forms the core of what these food services deliver
PepsiCo Confidential 24
Our core consumer for this opportunity is… Consumers who eat and drink outside home, and are positive to our categories are more likely to be: • Male & Female • Younger (<35 years) • Urban, from larger town classes • Newly-working and students • Across all SEC groups, but those who frequent organized E&D outlets come from upper SEC
PepsiCo Confidential 25
Some key insights about our core consumer 1. Relationships are changing Need to deliver shared experiences • Nuclearization of joint families- less time for extended families, higher cost of living together in urban • Hidden cost of nuclearization- no emotional anchors • Friends are the new family- Fun is New Experiences with friends • Reduced power distance with celebrities
2. Self as a Project Need to help build social & evolving identity
“I’m a Rapper, Social Media Expert, Lyricist, Musician” Harshit, Roadies Introduction
PepsiCo Confidential 26
Some key insights about our core consumer 3. MONEY, TECH, BRANDS Need to deliver individual progress & success
Today if you were to see any graphic or poster in my room, I would have either found it online or created it myself on either Photoshop , Picasa.. I can create things which I personally identify with and have it with me
It is best to buy famous MONEY is an absolute brands, not only must, I will only go because they are good after something (a quality but they also profession) if there is say something about big money in it! who you are in society
4. Digital Native Need to provide tech solutions
PepsiCo Confidential 27
Some key insights about our core consumer 5. Health & Wellness: Should not compromise on taste Talking Health Walking Indulgence Health = Not-Fall-Sick & Do-My-Work ‘Pleasure Foods’ Mental Energy Immunity Agility
Personalized consumption (in shared contexts too) Eating well is a way of life, Physical activity is not
Balanced Meals 71% Never Exercise Quasi-meals growing
PepsiCo Confidential 28
2. KEY INSIGHTS, TRENDS & INFO BANK The Customer Trends : QSRs/Fast Food chains will dominate the restaurant landscape in the years ahead
2011 2015 Channel Company Total Outlets QSR Domino's Pizza 403 900 QSR McDonald's 255 385 QSR Papa John's 30 74 QSR Sbarro 12 40 QSR Subway 250 410 QSR KFC 123 400 FSR PH/PHD 253 500 Cafes Barista Lavazza 145 165 Cafes Whitbread/Costa Coffee 80 100 FSR Carlson/ TGIF 10 13 FSR Blue Foods/Pan India 70 150 FSR Nirulas 25 25 FSR Specialty Group/MLC 68 90 FSR BJN Group 35 42 FSR Barbeque Nation 17 20 FSR/QSR Litebite Foods 43 90 FSR Encore/Twinkle Hospitality 100 200 FSR Kebab Factory 12 20
PepsiCo Confidential 30 Trends: Entertainment channel – Malls, Cinemas Up
Mall Mania – Driving New Cinemas - 3.7 Trips p.a. Consumption Points (vs <1% for other APAC countries) #1 Entertainer For Indians • Mall visits emerge as a key hangout activity, • PVR acquisition of Cinemax makes it the largest both during weekends and weekdays • Inox is in acquisition mode – Fame & CCPL Cinemas (9 Locations)
Hang out/shopped at 87 80 the mall 1100 Visited 80 885 relatives/friends 74 Watched movies in 84 multiplex 70 Been to 78 Rest/Hotel/Cafe 69 Screen Number Been to 57 clubs/pubs/parties 57 2011 2013 Been on a long 57 drive/vacation 56
Weekends Weekdays Source – MTV
Helping Expansion of FS & Cinemas Invest in the Investors (Cinepolis)
PepsiCo Confidential 31
Trends: Hotels also seeing high growth Room Supply in India set to grow exponentially No of Rooms India Upcoming Supply (2010-13) 173000 18497 114000 5714 6874 95087 2514 1835 543 23185 2010 2013
Upscale Midscale Economy 1998/99 2008/09 2012 2017 Source – HVS Research, Knight Frank Research Hotel Expansion (2012-17) 150 137 120 112 100
38 42 37 42 24 28 35 26 30 33 31 17 20 12 7 10 5 12 10 9 12 10 14
ITC Leela EIH Ltd. Taj Hyatt Marriott Bharat Park Starwood Pride Accor Royal Carlson IHG Hotels Orchid
2012 2017
Source: Euromonitor, PepsiCo Confidential 32 Customers typically want us to help their business grow in different ways…
Attract new / Drive Occasion / Day-part / right consumers Health / Sustainability agendas
Increase ticket size Drive productivity with value adds via operations
PepsiCo Confidential 33
How do restaurants/cinemas generate sales?
Driving Revenue
Inside the Four Walls Trading Area Marketing
• Trading Area
Schools Offices 87% of business within 5 km • 50% live there Restaurant • 37% work/ shop/go to school/cinema Primary “traffic generators” may be Shops Homes different by day part Cinemas
PepsiCo Confidential 34 The restaurant profit equation uses TATC to grow revenues
Restaurant Sales Equation
Sales = TC x TA Objectives Increase Transaction Count (Traffic) Increase Average Check
Increase Sell More Items Per Strategies Build Traffic Sell Larger Items Conversions Transaction
• Grand opening • Great Ambience • Upsizing • Combos • Newspaper Ads • Great Product/NPD • XL Combos – Premiums • Newspaper Inserts • Great Customer Service • Suggestive selling – Special prices • Direct Mailers • Speed of Service • Crew Incentive – Proper use of POS • Anniversary/Spl Event • Multiple Vending points • Staff Buttons “Go Large” • Suggestive selling Tactical • KA Cross Promo • Service On Seats • Feature better value • Kids Meal Packs Techniques • PET Label Promo • Currency/Price-offs • Impactful POSM • Take Away • News: NPD Preview, etc. • Scratch card Promo • Family meal days/nights • Celeb Meet & Greet • Great Collectibles • Combo Crew Incentives • Loyalty Cards (Buy 4 get 5th Free)
Target Actions must get Actions are targeted to Current Customers Audience New Customers
PepsiCo Confidential 35
Key challenges for customers • Full Control over the Supply Chain • Shortage of trained manpower & attrition • Margin pressures accentuated by rising real estate costs • Currently turbulent economic environment • Differentiation
PepsiCo Confidential 36
2. KEY INSIGHTS & INFO DATABANK PepsiCo Brands & Strategies PepsiCo India owns an incredibly rich house of brands Powerhouse of Muscular Brands • The largest Food & Beverage combined business • 8 Rs1000 crore+ brands: Pepsi, Lay’s, Mirinda, Kurkure, 7Up, Slice, Aquafina, Mountain Dew • Every brand well known & loved across the country (awareness of 50%+ & distribution reach of 60%+ on most brands) • A strong mix of globally advantaged brands that have loyal following (like Pepsi, Lay’s & Dew), as well as locally crafted lovemarks, anchored on India rituals (like Kurkure, Slices, Nimbooz) • Strong innovation footprint & locally created brands: Slice, Kurkure, Nimbooz, Atom, Kurkure puffed snacks, Nimbooz Masala Soda
PepsiCo Confidential 38 That span all consumer needs through the day
Mid-Day Indulgence
Through The Day Treat Afternoon Family Snack
Morning Health Dose Different Tastes of Evening Refreshment
Mind & Body Boost Breakfast Nutrition
Thirst Thru The Day Sports Hydration
PepsiCo Confidential 39 Our Brands own priceless image and associations
Family: Modern Twist Youth Aspiration Older Adults on Tradition
Super Grain for International Flavors, Kitchen Logic Nourishment Irresistible Taste Ingredients and Health
Energy for today, Heart Healthy for Life
PepsiCo Confidential 40 Our Brands own priceless image and associations
Indian Adults/ Family (Younger) Adults, middle Tweens Snacking class
Traditional Indian Hunger Filling, Light & Fun Shapes Namkeens Satisfaction & Flavours
Bole Mere Lips...I Love Joy of Sharing Cheesy Mischievous Fun Uncle Chips
PepsiCo Confidential 41 Our Brands own priceless image and associations
Youth: Capture the Youth: Impulsive Young Adults: Young Men: excitement of Uninhibited Fun Mood Uplifting Courage liquid NOW
Electric Taste of Bold Orange Lemon Mind & Body Cola Taste Refreshment Boost
PepsiCo Confidential 42 Our Brands own priceless image and associations
Young Families: Young Adults: Sports & Active Breakfast All Adults Sensorial Pleasure Fans Nutrition
Rehydration, Quality, Purity, Mango Indulgence 9 Fruit Nutrients Sports Taste Achievement
Make Breakfast The Purest Part Is it in you? 100% of You
PepsiCo Confidential 43
The PepsiCo Foodservice Philosophy Help our customers grow their entire business! Towards that end, we believe that • One solution doesn’t work for everyone • Our focus is customized and based on the customer’s priorities • We aim to set best-in-class standards in service, quality and innovation • We use the power of shared Insights
PepsiCo Confidential 44 PepsiCo leverages 4 most commonly used strategies in QSR/Cinema
1. Combos 2. Cup Upsize
3. Crew 4. News
PepsiCo Confidential 45 Some examples of how PepsiCo has partnered them…
Drive Occasion/Day Attract new/right consumers part/Health/Sustainability agendas
Utilizing fleet vehicles to drive awareness and Quaker in a cup format footfalls for our customized for airlines customers
Increase ticket size with value adds Drive productivity via operations
Leveraging Lowered cost of platforms/celebs to ingredients, packs; drive high ticket operational efficiencies size items saving labor cost…
PepsiCo Confidential 46
And extended our range into various solutions QSR FSR Cinema BEV
Lipton FTN Juice FTN Premium Water Premium Glass Frozen Bottle
Asian Specialty Bev. Smoothies Mixology Powder Teas/Juice Premium Water Mixology FOODs
Breakfast Snacks Breakfast Muffins Nachos Station
Muffins Cookies Nachos Premium Snacks
PepsiCo Confidential 47
2. KEY INSIGHTS & INFO DATABANK PepsiCo Equipment PepsiCo India owns an array of equipment assets
• In both the foods and the beverages categories • Equipment is critical to success in this space – it must match customer needs on several dimensions: – Financial – Operational – Space – Imagery – Portfolio • Each machine may perform a different function – ranges from simply stocking to a complete creation of finished product from scratch
The next few pages explains the functions of each of these, along with some basic financials to help you understand how the business works, and devise suitable solutions either using these or better still, developing your own out-of-the-box ideas.
PepsiCo Confidential 49
What is Post Mix?
• Soft drink made on location- miniature factory installed on-premise • Local water must be filtered, carbonated and blended with syrup at the location while being dispensed.
Tubing Valve 60 -65 psi Syrup Pump (Gas)
Fountain Dispenser Bag-in-Box 1200 psi
80-85 psi Pre-carbonation cooling coil
Carbonator Water supply (filtered) CO2
In remote chilled systems, the syrup is chilled in a back room away from the dispenser and then pumped through the tubing into the dispenser.
PepsiCo Confidential 50
The process at the PLANT
Concentrate
Sugar Simple Finished Syrup Syrup Post Mix ….syrup rests
Soda Water Treatment Water
Filter Bottles, Carbonator Cans, Premix
CO2
PepsiCo Confidential 51
Cooler Refrigeration System Type
D
A C
B
PepsiCo Confidential 52
Functioning of Refrigeration System • COMPRESSOR - Low temperature low pressure vapor at State A is compressed to high temperature pressure vapor at State B (SUPERHEATING PROCESS) • CONDENSER - Vapor is condensed into high pressure vapor at State C (DE-SUPERHEATING/ HEAT REJECTION/ SUB COOLING PROCESS) • CAPILLARY - Condensed liquid passes through expansion devise (capillary) where high temperature & pressure gets converted into low temperature & pressure • EVAPORATOR - Vapor is throttled down to low pressure liquid & passed on to evaporator at State D. where it absorbs heat from surroundings from circulating fluid (being refrigerated) & vaporizes into low pressure vapor at State A • HEADER - Excess liquid coming from evaporator gets stored here which helps in reducing excessive liquid getting into compressor. Excess liquid in compressor would result in increasing load on pumping & thereby failure of Compressor • FILTER DRIER - Moisture is absorbed from Refrigerant
PepsiCo Confidential 53
Beverages Equipments Cost Rs 2.85 Lakh Rs 8000/Annum Maintenance Cost One Trip/Month Water Connection Yes Bunn Machine No. of Valves 2 Input Ingredients Water, Concentrate Output Product Frozen Slush Dimensions (cm) 80 (H) X 40 (W) X 62 (D) Hurdle rate 35 glasses/day Cost Rs 10,000 Maintenance Cost Rs 300/Annum Water Connection No No. of Valves NA Counter Top Input Ingredients NA Cooler Output Product NA Dimensions (cm) 89 (H) X 44 (W) X 43 (D) Capacity 70 Litres (42 Bottles of 300ml) Hurdle rate 100cases/year
PepsiCo Confidential 54
Beverages Equipments Cost Rs 35,000 Maintenance Cost Rs 850/Annum Water Connection No No. of Valves NA Visi Cooler Input Ingredients NA Output Product NA Dimensions (cm) 200 (H) X 64 (W) X 72(D) Capacity 650 Litres (315 Bottles of 300ml) Hurdle rate 700 cases*/year Cost Rs 55,000 Maintenance Cost Rs 1200/Annum Water Connection No No. of Valves NA Double Door Input Ingredients NA Visi Cooler Output Product NA Dimensions (cm) 200 (H) X 116 (W) X 84 (D) Capacity 1000 Litres (760 Bottles of 300ml) Hurdle Rate 1500 cases/year
PepsiCo Confidential * 1 case = 24 servings of 300ml beverage 55
Beverages Equipments Rs 1.75 Lac/unit (Installed in Pair) + Cost Rs 2.6 Lac (other equipment's) Rs 10,000/Annum. 2 Trips Monthly –for Maintenance Cost Preventive Main and Sanitation Water Connection Yes Pmx Tower No. of Valves 8 per machine (Total 16) Input Ingredients Conc., CO2, Water Output Product Carbonated Beverage Dimensions (cm) 69 (H) X 47 (W) Hurdle rate 100 cups/day Cost Rs 2.65 Lakh Rs 1200/Annum Rs 10,000/Annum Maintenance Cost 2 Trips Monthly – One for Preventive Main., Other for Sanitation Pmx Machine Water Connection Yes No. of Valves 6 Input Ingredients Conc., CO2, Water Output Product Carbonated Beverage Dimensions (cm) 90 (H) X 55 (W) X 78 (D) Hurdle rate 65 cups/day
PepsiCo Confidential 56
BEVERAGES/FOODS EQUIPMENTS Cost Rs 4.5 Lakh Water Connection No No. of Valves NA Input Ingredients NA Avm Output Product NA Merchant 6 Dimensions (cm) 180 (H) X 110 (W) X 95(D) Maintenance Cost Rs 12,000/Annum 30 Packs of Snacks + 200 Bottles of Capacity Beverages Hurdle rate 2920 cases/year
PepsiCo Confidential 57
FOODS EQUIPMENTS Counter Top Rack Counter Top Rack Premium Hospitality Rack
Cost Rs 1500 Cost Rs 2500 Cost Rs 4000 Shelves 2 Shelves 2 Shelves 4 Facings/Shelf 2 Facings/Shelf 5 Facings/Shelf 4 Depth/Facing 2 Depth/Facing 2 Depth/Facing 8 Capacity (Packs) 8 Capacity (Packs) 20 Capacity (Packs) 128
PepsiCo Confidential 58
FOODS EQUIPMENTS MODC Rack Foods Rack Quaker Cinema Express Rack Hawking Tray
Cost Rs 1800 Cost Rs 5000 Cost Rs 1500 Cost Rs 2500 Shelves 5 Shelves 5 Shelves 3 Facings/Shelf 5 Facings/Shelf 5 Facings/Shelf 2 Depth/Facing 3 Depth/Facing 5 Depth/Facing 2 Capacity (Packs) 75 Capacity (Packs) 125 Capacity (Packs) 12
PepsiCo Confidential 59 An example of a recent innovation success …Pepsi Touch
• Touch Screen User Interface • Small footprint • Capable of running digital media • Suitable for Self Serve or Crew serve • 12 ingredients e.g.: 8 brands & 4 flavor shots • Capability for high-low-non carb • One common architecture supports multiple languages, brands globally
PepsiCo Confidential 60 Another recent success: ICE BOLT frozen slush at cinemas
PepsiCo Confidential 61
Our Equipment priorities are to • Get the right throughput from the equipment to justify ROI • Ensure Quality Control • Reduce base equipment acquisition cost & service costs • Meet customer need of space constraints & energy efficiency, while be attractive looking to drive impulse purchase • Support innovations that can drive innovative products (e.g. Flavor Shots)
PepsiCo Confidential 62 The Key Considerations for PepsiCo when launching an innovation
• How will we differentiate so as to earn a premium revenue realization • Does the capex justify the volume and ROI • Who will be our partners – in-house, franchisee, 3rd Party manufacturer, customer, etc. • How will we distribute effectively: go-to-market strategy • How will we control product quality • How will we protect the brand from dilution
PepsiCo Confidential 63
3. BEST PRACTICE CASE STUDIES The Sweet Spot: Consumer, Customer And PEPSICO A few of our success stories from across the world
Country Initiative Customer A INDIA Cinemas Activation PVR B Mexico Doritos street snack C Puerto Rico Quaker QSRs D US Culinary Innovation Taco Bell E UK Breakfast McDonald’s F Other Products/Cases
PepsiCo Confidential 65
A. CINEMAS ACTIVATION India
Cinema is the no. 1 entertainer in India 3.04 1200% 988+ Average trips Growth in multiplexes Multiplex screens p.a. to a cinema over past five years Opportunity to engage with consumers & generate billions of consumer impressions
3770 million Number of tickets sold p.a.
Fuelled by a exponential growth in multiplex culture Consumers are most engaged in this channel
PepsiCo Confidential 67
CINEMA IS A RELIGION IN INDIA
PepsiCo Confidential 68 We first identified barriers to beverage consumption
Unreasonable Pricing 42%
Wasn't Enough Time 16%
Lack of Choice 10%
Packaging 10%
Show Time 6%
Others 16%
PepsiCo Confidential 69
Tackling Barrier 1: Too expensive
SR Strike Rate
PepsiCo Confidential 70 Overcoming Barriers 2/3: Time shortage, Less choices
Mirinda Freeze
7Up Nimbooz Masala Soda
PepsiCo Confidential 71 Ensuring we built brand imagery at every touch point
Queues
PepsiCo Confidential 72 RESULTS: Both Volumes and Imagery Up significantly
PepsiCo Confidential 73
Learnings captured in a 6*2 framework…
PepsiCo Confidential 74 Resulting in continued leadership at Indian Cinemas
PepsiCo Confidential 75
B. DORITOS Mexico
Winning on the Street in Mexico Leverage existing packaged offering; Doritos Spicy Sweet Chili Customize for a portable Center of Walking Chicken Curry Plate/Snack
PepsiCo Confidential 77
C. QUAKER Puerto Rico
Consumer lifestyles are changing On the go lifestyle. 55% of consumers that eat breakfast, consume it OOH. 45% of consumers that have breakfast OOH, eat @ a Quick Service Restaurant (QSR) Chain. Consumers have considerably reduced their grocery expenses. Consumers look for prepared meal options.
PepsiCo Confidential 79
Quaker has strong equity in the market Quaker Oatmeal #1 in the World Total PR SOM - Hot Cereal High SOM 83% (Value) High TOM 90% 7% 2% Penetration 85% 4% Strong Health related attributes: Nutritious, Healthy and Good for the 16% Heart Cholesterol “helper” and Fiber among the most remembered product characteristics Puerto Rico carries one of the highest 71% Oatmeal Per cap around the world (1 KG) Oatmeal is the most important Oatmeal Wheat segment in Hot Cereals PR, accounting Cream of Corn Rice for 71% of mix Mixed
SOM - Share of market | TOM - Top of Mind
PepsiCo Confidential 80
Based on Customization, Logistics… Channel Customized Product Quick Delivery Response
Client BH Delivers Final Order’s 48 hours Client Product: Instant Oatmeal Fortified Engaged through Ballester Hermanos with Iron (Distributors) Food Service Cut: PR’s Market Oatmeal Special Cut Representatives Size: 70.5 ounces/2,000 Grs. per bag Case Count: 6 units/per case Cost: $XX per case
PepsiCo Confidential 81
…Profitability and Partnership High Margin Proposition Contract Elements
In Store Visibility
Oatmeal Cooking Media Exposure Trainings • Client Cost per bag- XX – XX% SRP/Kilo benefit
• Servings per bag- 32 (for a finished 8 ounce Targeted product) Specialized Equipment Nutritional Seminars • Ounces per serving- 2.0 Oz (0.2oz of spoilage) • Oatmeal cost per serving- XX • Media, In Store and equipment negotiations varies by QSR Average SRP per cup - XX Based on BE
PepsiCo Confidential 82
Created a strong Quaker QSR relationship
Register Topper Billboards
Windows Decal Banners
Menuboard Trayliner
Menuboard
In-Store Dangler Table Tent
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Product Specifications (e.g.)
Recipe for 8 ounces Quaker Oats Milk Sugar Salt Cup, Lid & Spoon serving/Costs X X X X X
Estimated Raw Material Cost: XX Average SRP 8 ounces-XX
Oats Cooker Storage/Quality Preservation
Additional Equipment
Cooking Time: 20 min/Cost per unit XX Canister/Cost per unit X
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D. CULINARY INNOVATION USA
How Does PepsiCo add Value Our brands provide flavor, texture and fun to existing offerings
… and they also must be simple for an operator to execute
PepsiCo Confidential 86 Taco Bell: Evolution from CSD Supplier to Total Culinary Solutions Provider
YESTERDAY: TODAY: Total Food & Beverage CSD Supplier Solutions Partner
PepsiCo Confidential 87 New Opportunity: Drive “Center of the Plate” Menu Innovation Leveraging PepsiCo Brand Portfolio and Culinary Expertise
Taco Bell needed to “re-invigorate” the menu
PepsiCo Confidential 88 Building a solid, incremental foods business with Taco Bell
Establish Build Launch Permanent Menu Item Culinary Pipeline Iconic Signature News • 2010: P5 National Launch • 2011: P1-P5 (X MM) • 2011: Test Market (XX MM) • 2012: P1-P2 (X MM) • 2012: P3 National Launch • 2011: FY (XX MM) • 2012: FYF (XX MM)
PepsiCo Brands can Add Value by Differentiating Base Offerings Through Branded Innovation
PepsiCo Confidential 89 Doritos Loco Taco… “Re-inventing the Taco!” Greg Creed
Taco Bell’s DLT Launch Objective: Build a $1B platform
Fire and Ice…
PepsiCo Confidential 90 … driving increased PepsiCo importance to Taco Bell
Taco Bell Sales 2008 $X Billion Taco Bell Sales 2012F $X Billion
Pepsi = Pepsi + Frito-Lay = 13-15% of TB Sales 22-25% of TB Sales
We have just begun…
DLT Extensions Late Night Breakfast OASIS
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E. BREAKFAST UK
Bending breakfast habits in the UK
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Overview/Launch Rationale We launched Quaker with McDonald’s at the end of 2004 as part of their new Breakfast menu…
Front window display Drive Thru menu
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Overview/Launch Rationale …the key benefit for McDonald’s was huge positive PR. Their objective was to drive consumer re-evaluation of the offer
Sandwell Express Walsall Express Wolverhampton Express
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Product Proposition Simple and high quality porridge, a healthier way to start the day – Porridge Oats served with Jam or Syrup breakfast positioning
FMO Build The product consists of approximately 27gr of Quaker Rolled Oats that is topped with skim milk 100% organic. Made-to-order in single servings, it is served hot – microwave - and offered in a paperboard cup with plastic spoon
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Product Performance We also refreshed our packaging in 2007 and McDonald’s gave Oatso Simple a more defined role supporting Healthier core food items
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Product Performance Quaker breakfast bowl giveaway leverages momentum and adds value
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Stringent Operations Procedures
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Huge Success
Delivered over 3.5 Million servings annually through McDonald’s. Sales driven predominantly by significant up weight in McDonald’s Marketing spend to support Breakfast
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F. SOME OTHER EXAMPLES
In China, Unilever has seen big success in Food Service
Unilever Food Solutions success driven Outside of Unilever most concentrate by 3-step philosophy & powder players are small Concentrate 1 Open 2 Pour powder 3 Pour water Powder For LRB, Lipton currently provides mango tea and lemon tea in powdered format for preparation on- premise
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Factors that have contributed to this success Dedicated team and Value added service outside Tailored GTM model organization support realm of food and beverage Unilever Food Unilever Solutions Specialized restaurant Corporate HQ F/S HQ distributors
F/S China Country Unilever F/S Personal Ice- Foods Sales Chef team care cream Separate reporting org. Tailor designed GTM model Deep culinary expertise • Team reports directly to Global • Both dedicated KA sales and chef Chefs provide new menu items Food Solutions head team serving all major restaurants with recipes and ingredients to • Dedicated sales force, servicing key • Relying on specialized restaurant customers accounts distributors to distribute, Comprehensive partnership model • Experienced chef in each key areas leveraging their scale benefits with restaurants, providing restaurant for sales and service related training Kitchen management Restaurant service management Consumer management
PepsiCo Confidential 103 The QSR ‘Wholesome’ Breakfast Landscape across markets
PepsiCo Confidential 104 Finally, some examples of partnering customer led beverage innovation
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4. WHAT WE EXPECT FROM YOU
Bringing up the core business challenge again…
How should PepsiCo India participate in the rapidly expanding business opportunity provided by increased out-of-home eating and drinking?* What is the best end-to-end business model solution to monetize our brand and equipment assets, to ensure we gain on every front viz. • Volume & Value • Profit • Equity • Partnerships with ‘Food Service’ Customers
*also referred to as On Premise(OP) or Foodservice (FS) within the industry PepsiCo Confidential 107 Specifically, we would like you to answer questions such as….
• What are the “low hanging fruit” opportunities & solutions and which ones are farther out? • For Innovations, how should we do “custom” innovation that gives us a sustainable pipeline and builds PepsiCo incumbency? And how should we do “platform” innovation that creates menu by day part and/or cohort? • What kind of segmentation model might be most useful to identify opportunities – consumer X customer X occasion? • How can we take our brand activations to the next level in this space? What should be our brand portfolio strategy – i.e. which brands for which customers, occasions, cohorts? • What new/modified equipment can we employ to maximize the opportunities keeping in mind cost, space, simplicity, image and convenience considerations? • What is the ‘Business Model’ of the idea - P&L impact of the solutions, Manufacturing details, Distribution, Partnerships, etc. Both short term and longer term? For us and for our customer partners?
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For each “Solution” that you propose:
Please ensure that you have considered well, and have described: • A business model solution that captures: – Should it be completely company owned or have a mix of partnerships with franchise/3rd parties to deliver your recommendation – Please present the pros & cons properly before suggesting recommendation • Benefits to PepsiCo in terms of: – Strategic Win – Volume – Value – Profit – Brand Equity – Sustainability and – Customer relationship – Partnerships • Benefits to the Customer in terms of: – Attracting/retaining consumers – Ticket upsizing – Portfolio planning/gaps – Value/volume/profit gains – Longer term strategic intent • Benefits to the Consumer in terms of functional and emotional payoffs from the product and the experience together
PepsiCo Confidential 109 How We Will Evaluate Not more than 5* pages per entry
Will be entertained for the first shortlist. If shortlisted, you will get the chance to submit a more detailed entry for the next round . Evaluations will be on the basis of: 1. Appreciation of the business problem 2. Power of Insight identified for the situation analysis 3. Equipment Innovation and P&L workings 4. Creativity and Feasibility of solutions proposed – For Customer and for PepsiCo 5. Clarity of articulation/presentation Ideas that drive revenue profitably will be given high weightage
*In power point slides, not including the cover slide. Longer entries will get automatically disqualified at the first stage PepsiCo Confidential 110
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6. APPENDIX About PepsiCo Acronyms
PepsiCo: Great Performance, Great Values! Ranked 1st in 2011 Dow $26 mm contribution to World No.3 in FMCG Jones Sustainability foundation causes World Index F&B sector
Presence in 200 Revenues $65 bn countries with over 500 brands
Water Global Awards- 22 brands > $1 bn sales Environmental Company World No.2 in F&B each of the Year
3rd in CR Magazine- 100 285,000 employees Best Corporate Citizens
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PepsiCo India: An Exciting Journey
2012
2011
2010
2009
2008 2006 2000
VOLUME 2002
1999
1998 1996
1995
1993
TIME
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PepsiCo India: Performance with Purpose!
CII National Award Water Golden Peacock Award Water AMCHAM Innovative CSR Award Management Conservation Kolkata Plant
Social Governance Award Water Digest Award For Water PepsiCo Award Environmental “Waste to Wealth” Practices Sustainability
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Vast & structured Make -Sell-Deliver footprint Company owned bottling plants BEVERAGES
Franchise owned bottling plants Plant Foods plants Jammu
Channo Distributor Hub Phillaur Bhiwadi Faridabad Panipat Wholesaler Urban spoke Rural spoke Chaupanki Channo Bazpur Delhi Sonepat Noida Guwahati Kosi Guwahati Jainpur Patna Retailer Retailer Retailer Jodhpur Sataria Kanpur Bharuch Kolkata Retailer Rajkot Bhopal Gwalior Jharkhand Kolkata Nagpur Cuttak Mahul Roha Dukes Pune FOODS Aurangabad Kolhapur Pune Vizag Plant Hyderabad Dharwad Guntur Goa Hyderabad Bangalore DC Bangalore Hosur Chennai Erode Pondicherry co-packer Distributor Wholesaler Palakkad Trichy co-packer Madurai
Retailer Retailer
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Beverages Portfolio Pepsi/7Up/Mirinda/ Mountain Dew/Innovation- Pepsi Atom/7Up Nimbooz Carbonated Soft Drinks (CSD) Masala Soda
Evervess Soda Core products Slice Juice Based Drinks (JBD) Nimbooz Water Aquafina Juices Tropicana
Sports Drinks Gatorade Premium products Ice tea Lipton Ice Tea
Water Himalayan
Value TATA Gluco+ Products TATA Water+
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Foods Portfolio Lay’s
Potato Chips Lay’s Baked Uncle Chipps Salty Bridge Kurkure Cheetos Extruded Extruded (Monster Paws/ Puff Corn)
Traditional Lehar
Oats Poha Quaker Upma
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Frequently used acronyms
LRB Liquid Refreshment Beverage CSD Carbonated Soft Drink MBD Mango Based Drink FS Food Service OP On premise QSR Quick Service Restaurant FSR Full Service Restaurant T&L Travel & Lodging SEC Socio Economic Classification WIFM What’s in it for me SR Strike Rate SSG Same store growth CTS Consumer Track Survey SOM Share of market CAGR Compounded Annual Growth Rate TOM Top of mind
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