Slides from Fritos marketing

1. 1999 Fritos®
& Chili
New Business Proposition
& Product Launch

2. Agenda
The Consumer
The Marketplace
Fritos®
& Chili Opportunity
Fritos®
& Chili + Programming
– Merchandising

3. Agenda
The Consumer
– Changes in Family Structure Have Changed
Traditional Eating Habits & Meals
The Marketplace
Fritos®
& Chili Opportunity
Fritos®
& Chili + Programming

4. 1950 1993
Traditional
65%
Other
15%
Source: Labor Department Bureau of Labor Statistics
Dual Income Families
Increased Over 225%
Between 1950 and 1993
Dual
Income
20%
Traditional
15%
Other
40%
Dual Income
45%
The American Family
Structure is Changing

5. 70% of Today’s Moms
Work. Resulting in
Time-Starved
Lifestyles
Today More Moms
Are at Work
Source: Promo Magazine, 7/96

6. Less Time, More Work
The Dual Income Family
of Today Works 1,000
Hours More a Year Than
the Dual Income Family
of 25 Years Ago!
Source: Bureau of Labor Statistics

7. Source: American Demographics, April 1993
Rushed Moms Need
Cooking Solutions
• 64% of Women in Dual
Income Families
Always Feel Rushed!
• 72% of Single Mothers
Always Feel Rushed!

8. Source: Andersen Consulting, “Supermarket of the 21st Century”
40% of Consumers Don’t
Know What They Are Having
for Dinner Two Hours Before
They Plan to Eat!
Many Consumers No Longer
Plan Dinner In Advance

9. Less Time, Less Cooking
0% of Moms Now Spend
More Than 8 Hours per
Week Preparing Meals!
Source: Promo Magazine, 7/96

10. Convenience Is Critical
67% of Consumers Now Rate
Convenience
Speed
Ease of Preparation
As the Most Important Food Attributes
Source: Promo Magazine, 7/96

11. Meals Decreasing -
Snacking on the Rise
27%
37%
46%
1985 1990 1995
% of Homemakers Who Completely Agree
That Full Meals Are Important Each Day
Source: The NPD Group’s National Eating Trends Service
% of Homemakers Who Snack
70%
57%55%
1985 1990 1995

12. Snack Foods As a Percentage of Total Calories
1985
15%
1995
25%
Snacks Are Sourcing
Calories from Meals
2005
40%
Snacks Meals
Source: Foodservice 2005, McKinsey & Company

13. BFY/GFY
Food
Value
Ultimate
Convenience
Indulgence
Salty
Snacks
Easy
Prep
Meals
Convenience
Foods
Traditional
Meals
Tostitos
Fritos
Breakdown of
Traditional
Meals
Time As
Currency
Convenience Foods Source Usage
Occasions from Traditional Eating Occasions

14. Snacks Meals
“Snacks Are
Fast & Convenient”
“Full Meals
Everyday Are Not
As Important”
Source: Luther & Associates, FL PM Eating Focus Groups
The Line Between Snacks
& Meals Is Blurring
“I Don’t Always Have
Time for Full Meals”
“I Don’t Avoid
Snacks As Often”

15. More Supermarkets Now
Sell Prepared Foods
63%
77%
1995 1996
Source: Nation’s Restaurant News, 6/96
% of Supermarkets That Now
Sell Prepared Foods
+14 pts.

16. 89% of Supermarkets
Now Have Delis
Deli 89%
No Deli 11%
Source: Solganik & Associates “What’s for Dinner?”, 1996

17. Current Delis Might Not
Be Enough to Fully
Satisfy Meal Shoppers
63% of Grocery Shoppers
Do Not Shop the Deli on a
Weekly Basis and 75% of
Deli Users Do Not Believe
That Deli Is Dinner!
Source: Solganik & Associates “What’s for Dinner?”, 1996

18. Numerous “Meal Solutions”
from Food Manufacturers
Are Now Available

19. 100 Billion Growth Forecasted
for Prepared Meals...
$308B
$408B
$377B
$378B
1995 2005
Traditional Groceries
Prepared Meals
Food Sales = $785B by 2005
Source: Foodservice 2005, McKinsey & Company
Total=$685
Total=$785
...But Majority of Growth NOT
in Supermarket Channels
+$80B
+$19B
Commercial
Foodservice
Supermarket
Prepared Foods

20. Foodservice Not Always
Profitable For Retailers
Production Cost
– Food Ingredients
– Labor
– Shrink
– Other
Selling P&L
– Sales
– COGS
– Gross Margin
– Other
Gross Profit
Controllables
– Labor
– Advertising
– Other
Net Profit
Source: Building a Meal Solution Delivery System, The Hale Group, LTD
($1,000)
$196.1
$ 99.6
$ 7.5
$ 52.5
$780.0
$355.7
$424.3
$127.3
$297.0
$196.0
$ 3.9
$116.1
(19.0)
(%)
55%
28%
2%
15%
100%
46%
54%
16%
38%
25%
1%
15%
(2%)
Estimated P&L for a Supermarket Operator Generating $780,000 per Year

21. Supermarkets Can Leverage
New Convenience Foods to
Capture Growth
Convenience
Foods
Snacks Meals

22. Convenience Foods
Core Motivators
Versatile
Available/Easy to Eat
Taste/Flavor
Substantial
Target/Occasion
Portable/On-the-Go
Popcorn LunchablesTM
Hot PocketsTM
“Fast Food”
Fritos Chili &
Scoops! TM
Strong Moderate WeakAssociation/Differentiation:
Source: Frito-Lay/PM Eating Presentation 072798/MRD# 9796-044/MCD

23. Why Are Convenience
Foods Popular?
• Quickest
• Taste
• Fresh
• No Prep.
• Portable
• Quicker
• Taste
• Fresh
• Filling
• Minimal Prep.
• Not as Slow
• Filling
• Less Prep.
• Simulates
Traditional
Meal
• Slow
• Filling
• Lots of Prep.
Snacks Convenience Foods
“Meal Solutions” Meals
Ultimate
Convenience!
Source: Frito-Lay PM Eating Focus Groups, 1997

24. A New Portfolio of Meals
Traditional Grocery Meals
Made from Scratch
• Prep Time: 1 Hour+
• Food Eaten: Traditional
Grocery Items Such as
Meat & Potatoes
Source: World Of Snacks - P.M. Eating
New Convenience Foods
• Prep Time: 10 Minutes
or Less
• Foods Eaten:
Lunchables TM
, Hot
Pockets TM
, Fast Food,
New Fritos Chili &
Scoops! TM
Kits
Easy Meals with Minimal
Preparation
• Prep Time: 30 Minutes
• Foods Eaten: Hamburger
Helper TM
, Frozen Pizza,
Mac & Cheese

25. SDV $1.89
SRP $2.59
Retail Margin 27%
Fritos®
Chili 10.75 oz. Jar
New Product Details
• 10.75 Oz. of New Fritos®
Chili
• Ideal for Making “Fritos®
Chili Pie” or As
Topping on Hotdogs, Pasta, Crackers &
More!
• No Preparation or Cooking Necessary.
Ready to Eat!
• Meets Full USDA Guidelines for Meal Usage
When Combined with Fritos®
Corn Chips!

26. Moms and Kids Across
America Love Fritos®
Chili Pie!
89%
92%
94%
Low Medium High
70%
75%
80%
Low Medium High
Fritos®
BDI Fritos®
BDI
% of Kids Who Would Ask
for Fritos®
Chili Pie
% of Moms Who Would
Make Fritos®
Chili Pie
Source: NPD Group

27. 25-44 Years Old
HH Size 3+
60/40 Male/Female
Split
Middle Income
Skew
Blue Collar Skew
HS Education
25-54 Years Old
HH Size 3+
62/38 Male/Female
Split
Middle Income Skew
Blue Collar Skew
HS Education
25-44 Years Old
HH Size 4-5
Female Skew
Middle Income Skew
Blue Collar Skew
HS Education
Fritos®
, Chili &
American Originals… with the
Same Core Consumer Profile
Source: 1997 IRI Fact Book Source: NASCAR®

28. Frozen
Hot
Snacks
Heavy
Fast
Food
Lunch
Kits
Frozen
Pizza
Fz
Complete
Dinner
Pkg
Instant
Potatoes
Frozen
Main
course
Meal
Replacement
131%
128% 128%
121% 120% 120%
118% 117%
100Index
Fans Are Already
Eating Convenience Foods
Fans &
Fritos®
Chili Pie
Source: NASCAR®

29. Facts
• Largest Spectator Sport
– 190,000+ Attend Each Weekend
• Fastest Growing Sport
– +60% Since 1990
• TV Ratings Second Only to NFL
– 150 Million Viewers in 1997
• Sports’ Longest Season
– 34 Weeks from February to November
• More Women Watching Than All Other Sports
– 2nd Only to Figure Skating
• A National Sport
– 50% of All Races Take Place Outside of Southeast

30. Jeff Gordon Highlights
Broad Appeal to Women & Kids
Youngest Winston Cup Champion, 1995, 1997, 1998
Wins One of Every Three Races Entered
Gordon POS Most Ordered Piece of POS in Pepsi®
History
Expected to Break All NASCAR®
Records

31. FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN
Sampling
Variety
Value
Continuity
Visibility
Featuring Jeff Gordon & Kits
Merchandise
Merchandiser Featuring Jeff Gordon & Poduct News
1999 Calendar
MEDIA

32. Media New Products
Consumer Pull Merchandising
Moms Are Seeking
Simple and Fun Meal
Solutions for Their
Families
The Fritos®
Chili Pie
Proposition Makes It
Easier for Retailers to
Meet Mom’s Expectations
Summary

33. Fritos®
Potential
Index
Very High: 229 & Above
High: 115 to 228
Average: 85 to 114
Low: 64 to 84
Very Low: 63 & Below
(22)
(39)
(84)
(46)
(17)

34. Chili-Shelf Stable
Potential
Index
Very High: 206 & Above
High: 169 to 205
Average: 55 to 168
Low: 29 to 54
Very Low: 28 & Below
(18)
(42)
(89)
(43)
(15)