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The Secret Behind Successful F&B Product Development – The Customer

Andrew Spencer, Director Customer Insights DNC

Todd Kaplan, Brand Director Mountain Dew

Being Focused on Customer adds Value

Kickstart by Mountain DewTodd Kaplan - Director of Brand Marketing

There are no new ideas…

Innovation Overview

…yet we are living in an era of perpetual innovation

Why do some succeed?

Innovation Overview

…and others fail?

Innovation OverviewWe know it isn’t as easy as...

LANDING ON A KEY INSIGHT

LETTING THE PROPOSITION

SELL ITSELFGOING WHERE

NOBODY ELSE IS

HAVING A GREAT TASTING PRODUCT BEING FIRST

GETTING A NEW LOOK

1. KEY CONSUMER INSIGHT

2. PRODUCT DEVELOPMENT

3. PROPOSITION AND IMAGE

4. MARKETING PLAN

5. EXECUTION

We will continue to learn, try new things, and evolve as we go through the innovation process at PepsiCo

Looking at products that have done well, the stars have generally been aligned around 5 core elements…

Innovation is HARD

1) Unearthing a Key Insight

Key Considerations:• Know the consumer • Understand the true need • Understand the barriers• Recognize the current

landscape

• Opportunity exists to revive morning occasion at C-Stores• 2nd largest occasion• Trips and $ per trip declining

• Millenials not satisfied with current morning offerings• Millenials + Gen X make up more than half of morning occasion• Hot Coffee and Juice account for more than half of occasions• Millenials under-index on hot coffee and juice

• CSDs under-index on AM occasion

2) Getting An Optimal Product

Key Considerations:• Taste• Efficacy• Ingredients• Calories• COGS• Testing

Kickstart Formula:• Dew + 5% fruit juice • Caffeine > Dew• Vitamins C & B• Mid-Calorie (80/can) • 2 Flavors:

• Orange Citrus• Fruit Punch

3) Nailing the Proposition and Image

Key Considerations:• Cannibalization• Occasion• Package Type• Package Size• Brand Hierarchy• Name• Role of Ingredients• Graphics

Creating a Sub-Brand:• Position around AM occasion• Establish role of name / Dew• Rigorous Consumer Testing

• Dew users significantly interested in trying KS

• Strong projected repeat• Projected incremental to

LRB and CSD category

4) The Marketing Tidal Wave

Key Considerations:• Awareness• Trial• Creative • Media Mix• Timing• PR

Integrated Campaign:• TV, OOH, Digital• PR: Over 500MM+

earned media impressions

• March Madness Promo with ESPN

• Mike & Mike Integration

• Over 2MM+ samples• Digital ‘Dawn Patrol’

5) Executing with Excellence

Key Considerations:• Distribution• Pricing• Bundling• On Shelf Execution• Equipment• Value• System Focus

Getting it on Shelf:• Line Priced with 20oz• Over 65 ASPs • Multiple IRCs for trial• Meal Deal Partnerships• Right Equipment / Tools • Precise System

Communication

The Results

• Kickstart is the biggest PepsiCo beverage launch in the last 10 years!

• #1 LRB Category Innovation in 2013• Projected to reach over $180MM in Year 1

• Achieved its distribution targets across all channels in first 2 weeks

• In C&G Kickstart dollar sales are bigger than Coke Zero 20oz and 6x bigger than Dr Pepper 10

• Among highest repeat rates of any recent beverage launch – 48% vs. 32% avg• 153 index to LRB, 137 CSD

• Highly Incremental:• 85% incremental to TM Dew• 75% incremental to PEP CSDs• 43% incremental to CSDs• 10% incremental to LRB

Kickstart your Night…

…coming soon in 2014!

Where do we go from here?

Questions

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DNC Tools for gathering Voice of the Customer data

Delaware North is investing in processes and systems to capture more VOC more

efficiently

Internal

Integrating Multiple Sources- Primary Research- Social- POS- Insights and Trends

Total Listening™ process provides us with 360⁰ degrees of gathering customer insights

Delaware North using community panel to talk directly with NHL fans

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250

500

750

198

242

212NashvilleColumbusBoston

652 NHL Panel Members

• Understand challenges and problem areas

• Understand Site by Site what is missing

• Direct Feedback on Concepts, food preferences and local optionsFast Flexible

Focused

Total Listening™ Community Panel

Highly flexible tool to gather insights...

“Transporting can be tricky, so I take that into consideration when purchasing my food. Food vendors on the first level, while they have a better variety of food, transporting to get the condiments or to find a place to sit can be tricky.”

- Nashville Female STH

What is most inconvenient about ordering or buying food/ beverage at the arena?

43% of STH Under Spend Budget

…and create innovative packaging that solves the problem and captures more of

the budget

Two Andrew Spencers at DNC

Andrew Spencer

Andrew Spencer (CORP)

Contact:Andrew Spencer (Corp)aspence1@DNCINC.com716 858 5127

Thank you very much Todd & Pepsi!