Transcript - PepsiCo

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FEBRUARY 23, 2012 / 3:30PM, PEP - PepsiCo at Consumer Analyst Group of New York Conference[video playing]Tom Greco - PepsiCoYou know I asked the guy who produced "Man's Best Friend" how did you get that dog to hold that bag of Doritos in his mouth and he said, "Wewent through a lot of Doritos." You know, the commercial still only cost $22 so you have got to love the Doritos consumer.The Super Bowl results that we had this year were unprecedented and really record setting for the industry. "Man's Best Friend" scored numberone in the panel-based USA Today ad meter. But the real driver of this effort is the online and social buzz this program created. It's no surprise thatthe reader was also won the first-ever online Facebook ad meter as well with the "Sling Baby" spot. AC Nielsen also reported that Doritos was themost open about and most-liked advertising in the Super Bowl. Brand Bowl also ranked Doritos as the the number one brand in the Super Bowlwith the most recall of any spots. As a result our year-to-date performance on Doritos our scans, are up double digits.That is what owning andmastering the snack fanatic segment is all about.It's this approach to brand building that we are undertaking for Frito-Lay's mega-brands. We're increasing A&M by 35% by understanding theunique demand segment each brand plays in.We are increasing our share of voice to gain market share within macro snacks.While we're very excited about our brand building plans in 2012, we are equally excited about our deep innovation. Frito-Lay has a great trackrecord on innovation. Our 2012 innovation pipeline is absolutely loaded and very incremental. Some highlights include Doritos Jacked, the ultimatebigger, bolder crunch. John talked about Doritos Diminita. Diminita significantly preferred to our major competitor in consumer taste-testingamong competitive users in the critical Southern California market. Ruffles Ultimate, the new original potato chip with thicker cut and deeper ridgesthat are full of great Ruffles flavor. Russell Smokehouse style barbecue, inspired from the winning recipe at the world they miss Memphis in Maybarbecue competition. Lay's kettle cooked reduced fat -- 40% less fat than regular potato chips. And finally, new flavors on Tostitos Artisan.TostitosArtisans are made with all-natural ingredients like black beans, garlic, chipotle peppers and spices that you can see and taste in the chip. Theseproducts are inspired by culinary recipes developed by Frito-Lay chefs.We also have a big opportunity to innovate and partner our snack and beverage brands together. The max brand is a great example of this. PepsiMax is a brand that is all about maximum taste with 0 calories. It's targeted to young males and as you know, for young males, taste is king. Rufflestargets the exact same consumer with what we call "dude food on a chip." This is a product experience about maximum taste. So we tested aproposition that unites Pepsi Max and Ruffles Max and we found a great opportunity, as 50% of Pepsi Max consumers are also consumers of Ruffles.You'll see this great combination in the back half of this year.Now recognizing the need to innovate beyond mainstream with the rapidly growing value and premium segments, Frito-Lay established growthventures. Growth ventures is an entrepreneurial division that operates with a company-within-a-company mindset.The mission is to build a highlyincremental multibillion-dollar snack business via a dedicated, niche brand portfolio. The agile operating model of growth ventures leveragesmainstream Frito-Lay capabilities while focusing on differentiated offerings to both value and premium consumers. The premium segment is arapidly growing $2 billion opportunity within salty snacks alone. This was the initial focus of growth ventures. Growth ventures has acceleratedour innovation in 2012 to compete or vigorously in the premium segment.One example is the lineup of snacks under the smart food selects Dan or that will be merchandised outside of our traditional gondola and nearother premium snacks. The portfolio offers premium herbs and spices on forms like pop corn, puffed corn, chips and granola popcorn. We areexcited about our lineup in the premium segment, including a great idea from South America called Twistos, which we recently formulated andlaunched in Canada in the fourth quarter. The value segment is a $2.7 billion opportunity and salty snacks alone. In the coming months growthventures will launch a portfolio of value popcorn innovation under the Crackerjack rant as well as a highly differentiated authentic value towardthe edge of hundreds of Taqueros Del Sur brand name in select value-oriented channels and stores.These attractive price per pound offerings willbe complemented by options that offer great opening price points.One area in which we are laser-focused on innovation at the opening race point is Lay's Stax. Lay's Stax has a strong type line of innovative newflavors, including a terrific targeted line of Hispanic flavors. These products build on the rich knowledge and success that we have in our SabritasTHOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us5©2012 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited withoutthe prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliatedcompanies.
FEBRUARY 23, 2012 / 3:30PM, PEP - PepsiCo at Consumer Analyst Group of New York Conferencebusiness in Mexico. And Lay's Stax is very well positioned within the Stax PC segment. In 2011 Stax grew 9% and the brand is off to a blistering startin 2012, growing 40% year-to-date while our competitor declined. And importantly, Lay's is growing household penetration.In the past three years Pringle's sales have declined 1.5% per year and they have lost a 0.5 point of market share within the salty snack segment.Bottom line, we are energized about our growth plans on Lays Stax and see significant volume and share upside with this product. In total, we'veseen the brands from growth ventures grow more than 20% annually in measured channels since 2008. Now that we are managing them as acollective portfolio which shared resources we expect this growth to accelerate in the coming years. Growth ventures will deliver a significantportion of Frito-Lay's growth in the future. In fact we expect to contribute two full points of net sales growth in 2015.Now let's talk execution.You know, go to market is all about selling ordering the liver in and merchandising and our multiple go to market solutionsprovide unmatched service in the CPG industry.The majority of our business is classic DSD, as most of you know where we have over 18,000 routethat make over 500,000 weekly service calls on over 280,000 customers. To service customers and products that are a better fit for warehousedelivery we're leveraging PepsiCo's warehouse delivery infrastructure. Finally we have a go to market solution with the unique [price-sized]architecture for our food service vend customers through our distributor partners. And John will talk to you about an exciting product we arelaunching in food service and a few moments.Our direct store delivery system gives Frito-Lay the capability to customize product assortment to the channel and consumer we serve.This allowsfor dynamic product customization and innovation that meets the needs of consumers. A great example of this is our "choose any two" offeringhere in a Sam's Club which provide strong value and a flexible assortment of Frito-Lay snacks. To drive immediate consumption we leveragedSobritas in Mexico to launch new products in New York City, Los Angeles, and many other urban cities. In 2011, these urban markets grew at anaccelerated rate and we have plans to sustain that momentum into 2012.Localization is an important component in exceeding special geographic and summer needs.We're constantly leveraging local knowledge to giveour customers locally relevant varieties of their favorite Frito-Lay brands. I know many of you are familiar with GES. GES is a critical unlock for futuregrowth, productivity, and speed to market at Frito-Lay.With GES, we eliminate redundant distribution Center inventory and we leverage best-of-bestbest material handling automation to pick store level orders back at the manufacturing plant.This gives Frito-Lay unmatched DSD capabilities.Weremain on track to complete deployment of GES.Our productivity agenda is more robust than ever, and will reduce operating costs and support our growth through reinvestment in our brands.In addition to the tremendous go to market advantage we see as we ramp up GES, our manufacturing automation program gives us a uniqueopportunity to reduce costs while improving product value. By removing touches on each bag we not only realize labor savings, that we also helpdeliver improved quality at the shelf.So let me -- allow me too summarize our plans for Frito-Lay North America. A significant step up in A&M in 2012, our most incremental lineup ofinnovation in several years, a relentless focus on execution across multiple go to market systems and a powerful productivity program designedto remove waste. We expect that this will yield low single digit volume growth and translate to mid single digit revenue growth. Frito-Lay is anamazing organization. We have an unquestionably advantage portfolio of brands and a perpetual focus on invention, driving innovation andsustaining our pricing. Our world-class operation has unmatched distribution capabilities and going forward, we will elevate our intensity onproductivity. It's an exciting agenda indeed. And now allow me to turn the podium back over to John Compton to talk to you about One PepsiCo.John?John Compton - PepsiCo - CEOSo let me wrap up today and get a little focus on what we are doing to bring our snack and beverage brands together and hopefully you will seethat this is a differentiated approach going forward and not just the same we have done in the last ten or 15 years.You know, it's a simple fact that consumers think about our beverage and snack brands together.When she makes her list, she plans them together.When she goes to the store, she buys them together. And when she's home, she celebrates them together with her family. So to us, having snacksand beverages together in the same company clearly makes consumer sense as much as it does shareholder sense.THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us6©2012 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited withoutthe prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliatedcompanies.
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