PepsiCo National Sales Meeting

1
PepsiCo Health WellnessCapturing Growth at the
Intersection
Brock Leach Foundation for American Health Care
Leadership December 7, 2004
2
Wellness will be the Next Big Consumer Driver
Major Trends

• 1. Big Demographic Shifts
• Both older and younger
• Increasing ethnicity
• Income level bifurcation

• 2. Increasing Time Pressure
• Dual income families
• Increasing work time

• 3. Increasing Health Concerns
• Emerging obesity epidemic
• Increasing age-related
• Behavioral shift to prevention

3
Big Idea in Wellness Energy Balance
Low Fat Meats
Refined Sugars
Fats
Endurance
Living
Simple Carbs
Low Fat Dairy
Veggies
Beans
Strength
Whole Grains
Fruits
Flexibility
Percentages of Calories In
Percentages of Calories Out
Calories Out
Calories In
The Energy Balance
4
The Big Idea In Nutrition Making it Easier and
More Enjoyable
Consumer Knowledge Needs

• Calories In
• Calories Out

Energy Balance

• Simple carbs
• Complex carbs
• Proteins
• Fats

Macro-Nutrient Balance

• Vitamins Minerals
• Phytochemicals
• Fiber

Micro-Nutrient Needs
Specific Functional Benefits

• e.g. Glucosamine Joint Health

5
The Big Idea in Lifestyle Change Individual
Motivation
Proposed Solutions
6
Wellness is Driving Our North American Growth
2004 YTD Revenue PepsiCo North America Smart
Choices Standards
Fun-For-You
62
30
8
Good- For-You
Better- For-You
7
. . . And Its Accelerating
8
We're Starting From A Very Strong Position

The Leading Brands in all Healthy Segments
Most Respected Brands in Health
Consumers Consider Brand Very or Extremely
Healthy
76
Quaker
72
Dole
71
Tropicana
68
Dannon
57
Minute Maid
54
Kellogg's
44
Gatorade
34
Powerade
34
Snackwell's
32
Kraft
32
Nabisco
17
Nestle
9
Frito-Lay
6
Coca-Cola
5
Pepsi-Cola
Source Morgan Stanley Consumer Research
9
PepsiCo Strategy Real Action
Focus Our Efforts at the Intersection of Business
Interest and Public Interest . . .
Business Interest
Public Interest
Capture Growth Opportunity
Promote Real Solutions
10
U.S. Health Wellness Progress Report

• Eliminated Trans Fats at Frito-Lay
• Establishing smart choices Standards
• Successful New Portion-Controlled Offerings
• 12/24 Sacks
• 8 oz. cans/12 oz. bottles
• Total Calorie Labeling on Single Serve

• Introducing New BFY / GFY Choices
• 30 new SKUs
• New school-specific products
• Promoting Them in Schools
• Bevs 17,000 Aquafina Gatorade vending
• Foods BFY / GFY bids 36
• New Schools Marketing Policies

• Promoting Youth Sport
• Supporting Behavioral RD
• Motivating Lifestyle Change America On The Move
• Curriculum for 2.5 Million Kids
• Supporting School Decision-Makers Health Is
  Power

• 70 of 3-Year New Product Revenues
• Major New Product Launches in Every Division
• New Platform Teams Operational
• Value-added Proteins
• Fruits and Vegetables
• Whole Grains

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2004 New Product Highlights
Reducing Fat
Reducing Sugar
Bevs
Adding Positives
Foods
12
Tropicana Fruit Integrity Nothing but Fruit
Latest Estimates of Fruit Servings
Strips Bars Nibblers Squeezers Drinkable Fruit
1 serving 3 servings 3 servings 1 serving 2
servings

13
Key Lifestyle Programs Making It Easier
Supporting School Decision-Makers
Promoting Healthy Lifestyles

• National movement to help people get started
• Private / public partnership
• Our Partnership Includes
• Power of One Marketing Property for Smart Spot
  at Point-of-Purchase
• Development of Healthy Kids Lifestyle Programs
  in Schools

• American School Food Service Association
  Partnership
• Health Is PowerSchool Resource Guide

• Interactive Wellness System

14
Energy Balance Education for 2.5mm Elementary
School Children
Lesson Plans
1-2 Grades
3-5 Grades
15
Enlisting the Best Support
Forming Enabling Partnerships . . .
. . . And Broadening Our View
Gro Brundtland, M.D. W. Casscells, III, M.D. Ken
Cooper, M.D., M.P.H. Antonia Demas, Ph.D. Amb.
Thomas Foley Kenneth Gladish, Ph.D. George
Graham, Ph.D. David Heber, M.D., Ph.D. James
Hill, Ph.D. Gov. James B. Hunt, Jr. David
Kessler, M.D., J.D. Susan Love, M.D. Mario
Maranhao, M.D. Dean Ornish, M.D. Pamela Peeke,
M.D. Janet Taylor, M.D. Fernando Trevino, Ph.D.
Former Director General, WHO Professor of
Cardiology, University of Texas Founder, The
Cooper Aerobics Center Director, Food Studies
Institute Partner, Akin Gump National Executive
Director, YMCA of the U.S.A. Professor of
Kinesiology, PA Univ. Professor of Medicine
Public Health, UCLA Professor of Pediatrics
Medicine, Univ. of CO Former Governor of North
Carolina Dean, School of Medicine, U.C. - San
Francisco Co-Founder Senior Partner,
Lluminari Former president, World Heart
Federation Founder, Preventive Medicine Research
Institute Assistant Professor of Medicine, Univ.
of MD Pediatric Psychiatrist, Harlem Columbia
Hospital Dean, School of Public Health, Univ. of
N. Texas
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Helping Consumers Make Smarter Choices
Communication Objectives
Key Objective
Build Consumer Loyalty to PepsiCos Portfolio of
BFY / GFY Products by Making It Easier for
Consumers.
17
Consumer Communication Smart Spot
18
Our Consumer Learning Has Been Clear and
Consistent
Keep it . . .

• The green dot symbol.
• Smart choices made easy language.

Simple

• Encouraging, positive choices message.

Optimistic

• Mandatory product benefit linkage on-package
  e.g. Tropicana Light Healthy is a smart
  choice because it has half the sugar of regular
  orange juice.
• Line-breadth One of over 100 smart choices from
  PepsiCo.

Real

• Referral to SmartSpot.com for
• more nutrition information
• healthy lifestyle programs I can use
• more information about PepsiCo and the SmartSpot
  Program.

Transparent
19
Well Advertise It In the Context of Our Brands
20
Smart Spot will make it Easier at Retail. . .
National Fast Start Event
21
. . . And Unify Our Products Programs in Schools
22
Smart Spot Impact on Purchase Intent
Gatorade Users
Baked Lays Users
Diet Pepsi Users
Oatmeal Users
OJ Users
(450)
(280)
(512)
(450)
(450)





Much more likely
24
23
28
30
27
A little more likely
26
35
22
29
32
50
58
50
59
59
Neither more nor less likely
48
41
50
40
38
A little less likely
1
1
0
1
1
Much less likely
1
1
0
0
1
2
2
0
1
2
23
We Will Limit Smart Spot to Demonstrable GFY/BFY
Benefits
FFY
GFY
PepsiCo Nutritional Varieties
24
Nutrition Standards Are Based Upon Authoritative
Statements from FDA and NAS
NAS Dietary Recommendations
FDA Criteria
Beverages
Foods
Snacks
20- 35 of kcal low low lt25 of kcal
30 of kcal lt1 g 0 60 mg 480 mg 10 lt 25 of
kcal or 10 fiber
35 of kcal lt 7 of kcal 0 60 mg 270 mg Not
applicable lt 25 of kcal or 10 fiber
Fat Saturated Fat Trans Fat Cholesterol Sodium Vit
amin A, C, Fe, Fiber or protein Add sugar
lt 3g lt 1g No Std 60 mg 480 mg 10 No std
3 g lt1 g 0 60 mg 480 mg 10 lt 25 of kcal or 10
fiber
OR
A Functional Benefit having Significant
Scientific Agreement
OR
Reduced Calories, Sugar, Fat, Sodium
lt 25
lt 25
lt 25
lt 25
Not defined
Source LiveWire Moms Internet Screen, April
2004, N300
25
SmartSpot.com Will Be A Consumer Lifestyle Portal
26
Consumer Advertising Starts 10/1
Influencer Print
National Dailies
Consumer
Spreads
Spreads
Print - Weeklies
NOV Issues
FEB Issues
Print - Monthlies
Spreads
Spreads
Online
Trade Print
On-Line
88 Reach 9.2 Frequency 75 3
Moms
27
Smart Spot Media Partnership with Discovery
Communications
FitTV

• Health Eating PSAs in Roadblocks across all
  six channels
• Healthy Snacking Reminders at 300PM
• Prime time Healthy Breakfast reminders with
  Sharon Mann of FitTV.
• Sponsorships of the National Body Challenge on
  Discovery Health and at Discovery Stores
• Sponsorship of FitTVs Fit Family Week March
  21-26, 05
• Delivery of Balance First curriculum to all
  middle schools through Discovery Schools
• Quaker Sponsorship of Animal Planets Family
  Showcase

28
The Smart Spot Unifies Our Health Wellness
Efforts
Health Professionals
Consumers

• Shortcut to smart choices made easy.
• SmartSpot.com provides portal to
• Nutrition information
• Lifestyle programming like America On The Move

• American Dietetic Association
• American Academy of Family Physicians
• American Academy of Pediatrics

www.SmartSpot.com
Employees
Customers

• Accelerated Growth Opportunity
• Fresh Merchandising Ideas
• Link to Lifestyle Programming

• Health Roads Program
• Healthy Lifestyle Incentives.
• Wellness Website Powered by WebMD.

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Making Healthy Living Easier A Wish for Scale

• Make the communication consistent, simple,
  encouraging and UNAVOIDABLE
• Smart Spot-type labeling program industry-wide
  (e.g. ADA, AHA, ACS)
• Common energy balance messaging re getting
  started with simple steps.
• Make simple Get Started interventions available
  everywhere
• Example America on the Move
• Build consensus around implementation of a
  comprehensive Healthy Schools Policy everywhere,
  consistently.
• Example Convene a national summit with school
  constituencies on implementing IOM
  recommendations in schools.
• Pilot comprehensive healthy lifestyle solutions
  for African American and Latino Consumers in
  urban environments interventions and food
  marketing.

30
PepsiCo Health WellnessCapturing Growth at the
Intersection
Brock Leach Foundation for American Health Care
Leadership December 7, 2004