AgendaAgendaAgenda
Sustainable Growth Plan
2004 Progress
Growth Drivers
2005 Outlook
48 GrowthGrowthGrowth DriversDriversDrivers
Scale Leverage and Increased Focus
New Product Innovation and Marketing
49 ScaleScaleScale ANDANDAND FocusFocusFocus
ScaleScale
Business system efficiencies
Sales capabilities
Cross-category product development capabilities
Marketing leverage
50 CrossCrossCross-Category--CategoryCategory ProductProductProduct DevelopmentDevelopmentDevelopment
BackBackBack tototo NatureNatureNature NaturalNaturalNatural /// OrganicOrganicOrganic FoodsFoodsFoods
51 MarketingMarketingMarketing LeverageLeverageLeverage
ConsumerConsumerConsumer RelationshipRelationshipRelationship Marketing MarketingMarketing
Personalized Email Recipes #3 Magazine in U.S.
#1 Con sum for er Man Fo Site ufa od ctu rers
52 MarketingMarketingMarketing LeverageLeverageLeverage
SouthSouthSouth BeachBeachBeach DietDietDiet™™ConsumerConsumerConsumer PromotionPromotionPromotion
18 brands featured in 3-week fall promotion Over 2 million recipe samplers distributed Strong retailer support Participating brands up double-digits during promotion period
53 ScaleScaleScale ANDANDAND FocusFocusFocus
ScaleScale FocusFocus
Business system efficiencies Category expertise
Sales capabilities Dedicated resources
Cross-category product Simplified organization development capabilities
Marketing leverage
54 ScaleScaleScale ANDANDAND FocusFocusFocus
ScaleScale FocusFocus
Business system efficiencies Category expertise
Sales capabilities Dedicated resources
Cross-category product Simplified organization development capabilities
Marketing leverage
Goal:Goal: Leverage Leverage Scale Scale ANDAND Sharpen Sharpen Portfolio Portfolio Focus Focus
55 PortfolioPortfolioPortfolio FocusFocusFocus
Strategies
Drive for clear leadership in global core categories
Build / grow geographic leadership in attractive regional core categories Exit businesses without sustainable competitive advantage or scale benefits
56 GlobalGlobalGlobal CoreCoreCore CategoriesCategoriesCategories
Cheese & Dairy
Coffee
Specialty Refreshment Beverages
Biscuits
57 GlobalGlobalGlobal ConsumerConsumerConsumer SectorsSectorsSectors
200420042004 RevenuesRevenuesRevenues $32B$32B$32B
(in billions) Cheese & Dairy Grocery $6.2 $5.3 Coffee $4.2
Convenient $5.2 $2.3 Specialty Beverages Meals Refreshment $1.4 $4.4 Beverages Salted $3.2 Snacks Biscuits Confectionery
Snacks
58 GlobalGlobalGlobal ConsumerConsumerConsumer SectorsSectorsSectors
200420042004 RevenuesRevenuesRevenues $32B$32B$32B
(in billions) Cheese & Dairy $6.2
Coffee $4.2
$2.3 Specialty Refreshment $4.4 Beverages
Biscuits
GlobalGlobalGlobal CoresCoresCores ---$17B$17B $17B (53%(53%(53% ofofof Total)Total)Total) 59 StrongStrongStrong BrandsBrandsBrands ininin GlobalGlobalGlobal CoresCoresCores
CheeseCheeseCheese &&& DairyDairyDairy CoffeeCoffeeCoffee
(U.S. License)
SpecialtySpecialtySpecialty RefreshmentRefreshmentRefreshment BiscuitsBiscuitsBiscuits BeveragesBeveragesBeverages
(U.S. License) 60 RoleRoleRole OfOfOf RegionalRegionalRegional CoresCoresCores
Capture opportunities in large and growing categories
Provide scale on a regional or country- specific basis Create cross-category opportunities (eg., promotional, product development)
61 CategoryCategoryCategory StrengthStrengthStrength –––NorthNorth North AmericaAmericaAmerica
#1#1#1 ininin 222222 ofofof TopTopTop 252525 U.S.U.S.U.S. CategoriesCategoriesCategories
Beverages Snacks
Cookies Aseptic Juice Drinks Crackers Powdered Soft Drinks Snack Nuts Cheese & Dairy Coffee (#2) Cottage Cheese Cream Cheese Grated Cheese Natural Cheese Grocery Convenient Meals Process Loaves Dry Packaged Desserts Process Slices Bacon Frozen Toppings Cold Cuts RTE Refrig. Desserts Dry Dinners Salad Dressings Frozen Pizza Spoonable Dressings Lunch Combinations Steak Sauce Hot Dogs (#2) RTE Cereal (#3)
62 Source: A.C. Nielsen with Wal-Mart on a dollar basis CategoryCategoryCategory StrengthStrengthStrength –––InternationalInternational International
#1#1#1 ininin 191919 ofofof TopTopTop 252525 Int’lInt’lInt’l CountryCountryCountry CategoriesCategoriesCategories
Snacks Beverages Chocolate: Coffee: - Austria - Belgium - France - Germany - Brazil - Norway - Poland - Sweden - Sweden - France (#2) - Italy (#2) - Russia (#2) - Germany (#3) - U.K. (#4) - U.K. (#2) Salted Snacks - Scandinavia Powdered Beverages: Biscuits - Venezuela - Brazil - Mexico - Venezuela
Cheese & Dairy Grocery & Cream Cheese - Italy Convenient Meals Cream Cheese - U.K. Yeast Spreads - Australia Process Cheese - U.K. Sliced Beef - Italy
63 Source: A.C. Nielsen, IRI, DTI on a pound basis ContinuedContinuedContinued PortfolioPortfolioPortfolio TransformationTransformationTransformation
External Development
Internal Development
64 ExternalExternalExternal DevelopmentDevelopmentDevelopment
AcquisitionsAcquisitions // AlliancesAlliances DivestituresDivestitures
Focus on global cores No sustainable competitive advantage Strengthen international potential position Not critical to scale Build route-to-market capabilities Primarily tail brands
65 ExternalExternalExternal DevelopmentDevelopmentDevelopment
AcquisitionsAcquisitions // AlliancesAlliances DivestituresDivestitures
Focus on global cores No sustainable competitive advantage Strengthen international potential position Not critical to scale Build route-to-market capabilities Primarily tail brands
DisciplinedDisciplinedDisciplined FinancialFinancialFinancial ApproachApproachApproach
66 NewNewNew ProductProductProduct InnovationInnovationInnovation SpectrumSpectrumSpectrum
NewNew BusinessBusiness SystemSystem BreakthroughBreakthrough
SameSame NewNew ConsumerConsumer ConsumerConsumer BehaviorBehavior BehaviorBehavior
LineLine ExtensionsExtensions CurrentCurrent BusinessBusiness SystemSystem
67 NewNewNew ProductProductProduct InnovationInnovationInnovation SpectrumSpectrumSpectrum
NewNew BusinessBusiness SystemSystem BreakthroughBreakthrough
yy lliitt ttaa eenn SameSame eemm NewNew ccrr ConsumerConsumer IInn ConsumerConsumer BehaviorBehavior BehaviorBehavior
LineLine ExtensionsExtensions CurrentCurrent BusinessBusiness SystemSystem
68 NewNewNew ProductsProductsProducts DrivingDrivingDriving ImprovedImprovedImproved MixMixMix
NewNewNew ProductsProductsProducts Vs.Vs.Vs. BBBaseasease ---Revenue/LbRevenue/Lb Revenue/Lb Index IndexIndex
150150 120120
8080
20032003 20042004 20052005 ProjectionProjection
69 GrowthGrowthGrowth PlatformsPlatformsPlatforms
New Product Ideas That: Address large unmet consumer needs Offer multiple incremental extension opportunities Provide geographic expansion potential Can be leveraged across brands Utilize protectable technologies
70 KeyKeyKey 200520052005 GrowthGrowthGrowth PlatformsPlatformsPlatforms
Developing Market Powdered Beverages
Cracker Chips
U.S. Frozen Pizza
Health & Wellness On-Demand Coffee
71 72 FlavorFlavorFlavor VarietyVarietyVariety
5555 Flavors Flavors ofof Tang TangAcross Across80 80 Countries Countries
73 74 ProteinProteinProtein NeedsNeedsNeeds
MilkMilk Preparation Preparation Technology Technology
75 76 RestaurantRestaurantRestaurant /// TakeTakeTake-Out--OutOut QualityQualityQuality
CrustCrust and and FlavorFlavor Variety Variety
77 FasterFasterFaster PreparationPreparationPreparation
MicrowavableMicrowavable Dough Dough Technology Technology 20042004 20052005
78 DiGiorno Commercial AcceleratedAcceleratedAccelerated FrozenFrozenFrozen PizzaPizzaPizza GrowthGrowthGrowth
RevenueRevenue Growth Growth – –2004 2004 Vs. Vs. 2003 2003
14%14%
10%10%
(2)%(2)% (2)%(2)%
Q1Q1 Q2Q2 Q3Q3 Q4Q4
Share Chg (3.3) pp (1.9) pp +0.8 pp +2.5 pp
80 Source: A.C. Nielsen with Wal-Mart; dollar basis 81 U.S.U.S.U.S. RitzRitzRitz ChipsChipsChips
2003/20042003/2004 20052005
82 RitzRitzRitz ChipsChipsChips InternationalInternationalInternational ExpansionExpansionExpansion
83 84 WeightWeightWeight ManagementManagementManagement
%% of of Dieters Dieters LimitingLimiting
Fat Sugar 64% of Americans overweight or obese Calories 83% 80% Carbs 50% dieted in past year 66% 25% currently dieting 56% 82% dissatisfied with most recent diet
85 Source: 2003 Gallup Poll 86 ReducedReducedReduced CalorieCalorieCalorie BeveragesBeveragesBeverages
87 Crystal Light – Shake Your Bottle Commercial ReducedReducedReduced CalorieCalorieCalorie SnacksSnacksSnacks
NabiscoNabisco 100 100 Calorie Calorie Packs Packs
89 “Right“Right“Right Carbs”Carbs”Carbs” ---WholeWhole Whole GrainsGrainsGrains
SnacksSnacks
90 “Right“Right“Right Carbs”Carbs”Carbs” ---WholeWhole Whole GrainsGrainsGrains
CerealsCereals
91 SouthSouthSouth BeachBeachBeach DietDietDiet™™
Right Carbs – Whole grains – Fiber Right Fats – Saturated/trans fats minimized – Mono/poly unsaturated fats preferred Lean Sources of Protein – Promotes feeling of fullness/satiety
92 SouthSouthSouth BeachBeachBeach DietDietDiet™™---AA A TotalTotalTotal SolutionSolutionSolution
93 SouthSouthSouth BeachBeachBeach DietDietDiet™™Vs.Vs.Vs. CompetitionCompetitionCompetition
KeyKey Consumer Consumer Advantages Advantages
More Products Key Competitor FiberProtein Other
Frozen Entrees Lean Cuisine 9 9 Satisfying portions Frozen Pizza Lean Cuisine 9 9 Less calories, whole grain crust Wrap Kits Subway Wraps 9 Less fat Meal Bars Slim Fast 9 9 Less sugar Meal-on-the-Go Cereal Bars Nutra-Grain, Special K 9 9 Less sugar Cereal Special K 9 Excellent whole grain source
94 Source: Nutritional panel comparisons of leading items 95 KraftKraftKraft CoffeeCoffeeCoffee FilterFilterFilter PodPodPod SuccessSuccessSuccess
UnitedUnited KingdomKingdom FranceFrance FranceFrance
NordicNordic Germany/AustriaGermany/Austria U.S.U.S.
96 TassimoTassimoTassimo HotHotHot BeverageBeverageBeverage SystemSystemSystem
97 TassimoTassimoTassimo ---TechnologicalTechnological Technological InnovationsInnovationsInnovations
® System/Exclusive T-Discs – One-button operation – Integrated bar code reader – Optimal water temperature and brewing conditions – Proprietary dairy technology for lattes / cappuccino foam – Multiple drinks & sizes
Patent protected
98 StrongStrong TTassimoassimo FranceFrance ResultsResults
99 200520052005 EuropeanEuropeanEuropean GeographicGeographicGeographic ExpansionExpansionExpansion U.K.U.K.
100 Tassimo Commercial OnOnOn-Demand--DemandDemand CoffeeCoffeeCoffee ---MixMix Mix ShiftShiftShift
FranceFrance AvgAvg.. Cost Cost / /Cup Cup – –Index Index Vs. Vs. Filter Filter Coffee Coffee
AtAt HomeHome FilterFilter CoffeeCoffee 1.0x1.0x InstantInstant CoffeeCoffee 1.2x1.2x OnOn--DemandDemand PodsPods 3.2x3.2x TassimoTassimo 6.2x6.2x
AwayAway--FromFrom--HomeHome >> 25.0x25.0x
102 StrongStrongStrong GrowthGrowthGrowth PlatformsPlatformsPlatforms
NewNew BusinessBusiness SystemSystem
SameSame NewNew ConsumerConsumer ConsumerConsumer BehaviorBehavior BehaviorBehavior
Whole Grains Fortification
CurrentCurrent BusinessBusiness SystemSystem
103