PepsiCo Health & Wellness
Capturing Growth at the Intersection
Brock Leach
Foundation for American Health Care
Leadership
December 7, 2004
04BL36-d1 6/14/04
1
Wellness will be the Next Big
Consumer Driver
Major Trends
1. Big Demographic Shifts
– Both older and younger
Major New
Growth Opportunities
• Life-stage Tailored Products
• More Taste / Experience Variety
– 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
04BL45-d1 07/30/04
+
• Improved Convenience
• Re-Defined Meals: “Snack
Meals”
+
• Growing Demand for Wellness
– Better-For-You choices
– Good-For-You nutrition
2
Big Idea in Wellness: Energy Balance
Low Fat
Meats
Low Fat
Dairy
Refined Sugars
Fats
Simple Carbs
Endurance
Living
Veggies
Beans
Strength
Whole
Grains
Fruits
Flexibility
Percentages of Calories In
Percentages of Calories Out
Calories In
Calories Out
The
Energy
Balance
04BL45-d1 07/30/04
3
The Big Idea In Nutrition:
Making it Easier and More Enjoyable
Consumer Knowledge Needs
Energy Balance
Macro-Nutrient
Balance
Micro-Nutrient
Needs
Specific
Functional
Benefits
04BL45-d1 07/30/04
•
•
•
•
Biggest
Consumer Opportunities
• Calories In
• Calories Out
• Easier ways to manage
energy balance
Simple carbs
Complex carbs
Proteins
Fats
• Easier ways to replace
simple carbs with
complex carbs, low fat
proteins and healthier
fats.
• Vitamins & Minerals
• Phytochemicals
• Fiber
• e.g. Glucosamine &
Joint Health
• Easier ways to get
micro-nutrients through
a mix of whole foods &
appropriate fortification
4
The Big Idea in Lifestyle Change:
Individual Motivation
Proposed Solutions
Creating an
Appropriate
Environment
Restricting,
Taxing
Food
04BL45-d1 07/30/04
Implementing
Better
Marketing
Practices
Motivating
Individual
Action
Providing
Healthy
Product
Choices
Promoting
Healthy
Lifestyle
Habits
WELLNESS
5
Wellness is Driving Our North
American Growth
2004 YTD Revenue — PepsiCo North America
“Smart Choices” Standards
2004 YTD Q2 Net Sales
Growth vs. YAG
Fun-For-You
9.5%
62%
30%
10.3%
4.5%
8%
GoodFor-You
BetterFor-You
38%
+1.2 Pts. vs. YA
04BL45-d1 07/30/04
Fun-ForYou
BetterFor-You
GoodFor-You
+10% vs. YA
56% of Total Growth
6
. . . And It’s Accelerating
FunFor-You
BetterFor-You
GoodFor-You
13%
11%
11%
10%
4%
9%
5%
4.5%
3%
2002
04BL45-d1 07/30/04
2003
2004
YTD
2002
2003
2004
YTD
2002
2003
2004
YTD
7
We're Starting From A Very Strong
Position
Most Respected Brands in Health
% Consumers Consider Brand Very or Extremely Healthy
76%
Quaker
Dole
72%
Tropicana
71%
68%
Dannon
57%
Minute Maid
54%
Kellogg's
44%
Gatorade
Powerade
34%
Snackwell's
34%
Kraft
32%
Nabisco
32%
17%
Nestle
Frito-Lay
9%
Coca-Cola
6%
Pepsi-Cola
5%
Source: Morgan Stanley Consumer Research
04BL45-d1 07/30/04
+
The Leading Brands
in all Healthy Segments
8
PepsiCo Strategy: Real Action
Focus Our Efforts at the Intersection of Business Interest and Public Interest . . .
Business Interest:
• Healthy
Product
Choices
Capture Growth
Opportunity
+
• Healthy
Lifestyle
Habits
Public Interest:
Promote Real
Solutions
Making it Easier and More Enjoyable for Mainstream Consumers
04BL45-d1 07/30/04
9
U.S. Health & Wellness Progress
Report
Choices
Habits
1
2
3
Accelerate
Accelerate
BFY
BFY/ /GFY
GFY
Product
Product
Development
Development
Improve
Improve
Healthfulness
Healthfulness
of
ofExisting
Existing
Products
Products
Deliver
Healthy Food
& Bev Solutions
to Schools
• 70%+ of 3-Year New
Product Revenues
• Eliminated Trans Fats
at Frito-Lay
• Major New Product
Launches in Every
Division
• Establishing “smart
choices” Standards
• New Platform
Teams Operational
– Value-added
Proteins
– Fruits and
Vegetables
– Whole Grains
04BL45-d1 07/30/04
• 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 schoolspecific products
• Promoting Them in
Schools
– Bevs: 17,000
Aquafina &
Gatorade vending
– Foods: BFY / GFY
bids +36%
• New Schools
Marketing Policies
4
Promote
Healthy Kids
Lifestyles
• Promoting Youth
Sport
• Supporting Behavioral
R&D
• Motivating Lifestyle
Change: America On
The Move™
– Curriculum for
2.5 Million Kids
• Supporting School
Decision-Makers:
“Health Is Power™”
10
2004 New Product Highlights
Reducing Fat
Reducing Sugar
Bevs:
Adding Positives
Foods:
04BL45-d1 07/30/04
11
Tropicana Fruit Integrity —
Nothing but Fruit
Latest Estimates of Fruit Servings
Strips
=
1 serving
Bars
=
3 servings
Nibblers
=
3 servings
Squeezers
=
1 serving
Drinkable Fruit
=
2 servings
04BL45-d1 07/30/04
12
Key Lifestyle Programs:
Making It Easier
Promoting Healthy Lifestyles
Supporting School Decision-Makers
• National movement to help people
get started
• American School Food Service
Association Partnership
• Private / public partnership
• Health Is Power™
School Resource
Guide
• Our Partnership Includes:
– “Power of One” Marketing
Property for Smart Spot™ at
Point-of-Purchase
• Interactive Wellness System
– Development of Healthy Kids
Lifestyle Programs in Schools
04BL45-d1 07/30/04
13
Energy Balance Education for 2.5mm
Elementary School Children
Lesson Plans
1-2 Grades
04BL45-d1 07/30/04
3-5 Grades
14
Enlisting the Best Support
Forming Enabling Partnerships . . .
Blue Ribbon Advisory Board
on Health & Wellness
Dr. Kenneth Cooper
Dr. Jim Hill
Dr. Dean Ornish
Gatorade
Partnership
YMCA
American School Food
Service Assoc.
04BL45-d1 07/30/04
. . . And Broadening Our View
Gro Brundtland, M.D.
Former Director General, WHO
W. Casscells, III, M.D.
Professor of Cardiology, University of Texas
Ken Cooper, M.D., M.P.H.
Founder, The Cooper Aerobics Center
Antonia Demas, Ph.D.
Director, Food Studies Institute
Amb. Thomas Foley
Partner, Akin Gump
Kenneth Gladish, Ph.D.
National Executive Director, YMCA of the U.S.A.
George Graham, Ph.D.
Professor of Kinesiology, PA Univ.
David Heber, M.D., Ph.D.
Professor of Medicine & Public Health, UCLA
James Hill, Ph.D.
Professor of Pediatrics & Medicine, Univ. of CO
Gov. James B. Hunt, Jr.
Former Governor of North Carolina
David Kessler, M.D., J.D.
Dean, School of Medicine, U.C. - San Francisco
Susan Love, M.D.
Co-Founder & Senior Partner, Lluminari
Mario Maranhao, M.D.
Former president, World Heart Federation
Dean Ornish, M.D.
Founder, Preventive Medicine Research Institute
Pamela Peeke, M.D.
Assistant Professor of Medicine, Univ. of MD
Janet Taylor, M.D.
Pediatric Psychiatrist, Harlem Columbia Hospital
Fernando Trevino, Ph.D.
Dean, School of Public Health, Univ. of N. Texas
15
Helping Consumers Make Smarter Choices —
Communication Objectives
Key Objective:
Build Consumer Loyalty
to PepsiCo’s Portfolio of BFY / GFY Products
by Making It Easier for Consumers.
An Integrated Consumer Identity that . . .
. . . delivers a compelling benefit: making it easier
. . . unifies the BFY / GFY products and links them to programs
and to retail
. . . derives credibility from real PepsiCo products, programs and
actions, secondarily from endorsements
04BL45-d1 07/30/04
16
Consumer Communication:
Smart Spot™
04BL45-d1 07/30/04
17
Our Consumer Learning Has Been
Clear and Consistent
Keep it . . .
Simple:
• The green dot symbol.
• “Smart choices made easy” language.
Optimistic:
• Encouraging, “positive choices” message.
Real:
• 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.
Transparent:
04BL45-d1 07/30/04
• Referral to SmartSpot.com for:
– more nutrition information
– healthy lifestyle programs I can use
– more information about PepsiCo and the SmartSpot™
Program.
18
We’ll Advertise It In the Context of
Our Brands
04BL45-d1 07/30/04
19
Smart Spot™ will make it Easier at Retail. . .
National Fast Start Event
04BL45-d1 07/30/04
20
. . . And Unify Our Products &
Programs in Schools
04BL45-d1 07/30/04
21
Smart Spot™ Impact on Purchase
Intent
Gatorade
Users
Baked Lay’s
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
04BL45-d1 07/30/04
22
We Will Limit Smart Spot™ to
Demonstrable GFY/BFY Benefits
FFY
GFY
PepsiCo Nutritional Varieties
Demonstrable
Nutrition Benefits
GoodFor-You
Quaker Oats
Tropicana PP
Gatorade
Aquafina
BetterFor-You
Diet-Specific
Offerings
Health
Perception
Benefits
Indulgent Products
with Health
Improvements
Low-Carb
Natural
& Organic
Trans
Fats
Baked Lays
Diet Pepsi
Pepsi Edge
A Credible Consumer Identity Requires Demonstrable Nutrition Benefits.
• Consumers want a short-cut to better nutrition they can trust
• GFY / BFY are scientifically supportable
• Build lasting consumer identity that transcends diet fads
• Focus ourselves on providing real benefits
04BL45-d1 07/30/04
23
Nutrition Standards Are Based Upon
Authoritative Statements from FDA and NAS
Smart Spot™ Criteria
FDA
Criteria
NAS Dietary
Recommendations
Beverages
Fat
< 3g
20- 35% of kcal
3g
Saturated Fat
< 1g
low
<1 g
No Std
low
0
Trans Fat
Cholesterol
Sodium
Vitamin A, C, Fe,
Foods
Snacks
30% of kcal
35% of kcal
<1 g
< 7% of kcal
0
0
60 mg
60 mg
60 mg
60 mg
480 mg
480 mg
480 mg
270 mg
10%
10%
10%
Not applicable
< 25% of kcal
or 10% fiber
< 25% of kcal
or 10% fiber
Fiber or protein
Add sugar
No std
<25% of kcal
< 25% of kcal
or 10% fiber
OR
A Functional Benefit having Significant Scientific Agreement
OR
Reduced: Calories,
Sugar, Fat, Sodium
< 25%
Source: LiveWire Mom’s Internet Screen, April 2004, N=300
04BL45-d1 07/30/04
Not defined
< 25%
< 25%
< 25%
24
SmartSpot.com
Will Be A Consumer Lifestyle Portal
The Smart Spot™
Commitment to Health
04BL45-d1 07/30/04
Healthy Lifestyles
Tools for Professionals
Energy Balance Tool
Healthy Kids
Product Page
25
Consumer Advertising Starts 10/1
September
October
November
December
January
February
Influencer Print
National Dailies
Consumer
Print - Weeklies
Print - Monthlies
Online
Spreads
Spreads
NOV Issues
FEB Issues
Spreads
Spreads
Trade Print
On-Line
Mom’s: 88% Reach
9.2 Frequency
75% 3+
04BL45-d1 07/30/04
26
Smart Spot™ Media Partnership with
Discovery Communications
+ FitTV
• Health Eating PSA’s in “Roadblocks” across all six channels
– Healthy Snacking Reminders at 3:00PM
– 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 FitTV’s “Fit Family Week”– March 21-26, ’05
• Delivery of Balance First curriculum to all middle schools through
Discovery Schools
• Quaker Sponsorship of Animal Planet’s Family Showcase
04BL45-d1 07/30/04
27
The Smart Spot™ Unifies Our Health
& Wellness Efforts
Health
Professionals
Consumers
• Shortcut to “smart choices
made easy.”
• American Dietetic
Association
• American Academy of
Family Physicians
• American Academy of
Pediatrics
• SmartSpot.com provides
portal to:
– Nutrition information
– Lifestyle programming like
America On The Move™
www.SmartSpot.com
Customers
• Accelerated Growth
Opportunity
Employees
• Health Roads™ Program
• Fresh Merchandising Ideas
– Healthy Lifestyle
Incentives.
• Link to Lifestyle
Programming
– Wellness Website
Powered by WebMD.
04BL45-d1 07/30/04
28
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.
04BL45-d1 07/30/04
29
PepsiCo Health & Wellness
Capturing Growth at the Intersection
Brock Leach
Foundation for American Health Care
Leadership
December 7, 2004
04BL36-d1 6/14/04
30