Trends and Insights From Grain Based Categories

1. Trends and Insights From Grain Based Categories Bill Goergen ACNielsen

2. A Brief Word from our Sponsor… • A VNU Company… • Active in over 100 countries around the world • tracking sales in retail outlets • measuring purchases in households • (online) consumer surveys, interviews, focus groups • VNU Advisory Services • integrate information from multiple sources • transform raw data into strategic insights and tailor-made recommendations • advise on winning business decisions for complexsales and marketing issues

3. What are we going to look at today? • Consumer Sales Trends of a variety of grain based categories • Focus on Bread, Cereal, Pasta, and Rice • Regular vs Whole Grain Trends • Consumer take away and purchase dynamics • Summary and Conclusions

4. Today’s Presentation • Covers Fixed Weight products, with a UPC Code • Fresh Bakery Products not included • Any Product that does not have a UPC • Does not cover fresh or random weight items • Generally, from the Grocery Channel (Outlets noted on each slide) • Wal-Mart is not included

5. Fun Facts to Know and Tell • Low Carb diets first appeared in the 19th Century • Robert Atkins published his first diet book in 1972 • Through the first 6 months of 2004, 994 new low carb products have been launched • Low Carb industry sales will top $25 Billion in 2004

6. A few thoughts for consideration.. • Can we separate trends within “Grains” from trends impacted by “Low Carb”? • Yes, but… • Many factors impact Category Trends • Pricing • Promotion • New Product Innovations • Demographic Trends • Consumer & Historical trends • Etc…

7. Unit Pct Chg vs YAG 52 weeks ending 04/21/01 52 weeks ending 04/20/02 52 weeks ending 04/19/03 Latest 26 weeks thru 01/24/04 TOTAL US - FDM TOTAL CEREAL (-2.4) (-1.5) (-0.9) (-5.0) TOTAL BREAD & BAKED GOODS (-0.2) 0.3 (-0.1) (-2.9) TOTAL PASTA (-1.3) 0.6 (-1.0) (-5.5) DEHYDRATED POTATOES (-2.6) 4.1 2.2 (-8.6) SW. POTATOES & YAMS - CANNED (-2.5) (-7.8) (-4.3) 1.7 POTATO - FROZEN 1.5 0.5 (-1.8) (-4.1) TOTAL PIZZA/SNACKS - FROZEN 4.6 4.9 (-0.5) 2.1 SALAD DRESSING - REDUCED/LOW CAL (-5.5) (-4.5) (-3.2) (-4.7) TOTAL CRACKERS 2.1 (-1.4) 0.3 (-3.0) TOTAL JUICES DRINKS - SHELF STBL (-1.5) 1.2 1.6 0.8 TOTAL PREPARED FOODS - DRY MIXES 1.5 (-0.4) (-2.1) (-4.7) ORANGE JUICE - REFRIGERATED 4.6 (-1.7) 0.3 (-2.9) High Carb Categories have clearly had recent declines in Categories Sales • This includes Grain Based categories as well. • Some categories, like Cereal, may have been impacted but have been declining for years. Source: ACNielsen Strategic Planner – FDM (Food, Drug and Mass Combined xWal-Mart)

8. Some Trends Point Consumers Away from Grain Based Foods Monday, August 30, 2004

9. Declines in Grain Based Categories accelerated after the death of Mr. Atkins Post April ‘03 Pre April ‘03 Current Trend RTE Cereal Pasta Rice Fresh Bread 52 WK 4/12/03 52 WK 4/10/04 18 WK 8/7/04 Source: Strategic Planner

10. Fresh Bread Sales declined dramatically beginning in the Spring of 2003 Total US FDM X WMRolling 4 wk % Chg vs YA

11. Total Bread On a long term basis, we do not see signs of recovery in Total Bread SalesTotal US Food/Drug/Mass Ex Wal MartEq Volume Change - Rolling 52 Week Basis

12. Total Bread Whole Wheat/Oat Bread Representsa Significant Portion of Total Bread Sales and…

13. Total Bread …Whole Wheat Bread continues to grow on a consistent basisTotal US Food/Drug/Mass Ex Wal Mart - Eq Vol Change - Rolling 52 Week Basis

14. Total Bread Segments -1.7 -0.9 -0.2 +0.4 +2.9 -0.7 +0.0 -0.9 Flavor Buyers • More Households purchase non-white Bread than White Bread • Wheat penetration gains were greater than White bread losses Household Penetration Pt. Chg 52 weeks April 24, 2004

15. Total Bread Quarterly Penetration • Total Fresh Bread is declining very slowly over time • # of Households buying White and Wheat bread are nearly the same – White declining and Wheat growing Household Penetration

16. Total Bread Where did the White Bread Buyers Go? • In total, White bread declines were almost equal across three factors – but the largest percent was lost Baked good purchases • However volume was also shifted to other breads and other (non-bread) baked goods Percent of Volume Loss

17. Total RTE Cereal RTE Cereal Volume Trends have been in long term declineTotal US Food $2MMEq Volume Change - Rolling 52 Week Basis

18. Total RTE Cereal The Rate of volume decline for Ready to Eat Cereal quickened in early 2003Total US FDMRolling 4 wk % Chg vs. YA

19. Total RTE Cereal 10-Year Penetration Trend • Like Bread, Penetration Trends on RTE Cereal have been in decline for years % of Households Purchasing RTE Cereal Source: Consumer*Facts 1999 - 2003

20. Total RTE Cereal 10-Year Buying Rate Trend • In addition to penetration declines, Buying Rate Trends for RTE Cereal have been softening for years • The annual decline between ’03 and ’04 is the largest in 10 years Pounds Purchased per Household - RTE Cereal Source: ACNielsen Homescan Consumer Panel

21. Total Pasta Pasta Trends are Similar to Bread and CerealTotal US FDMRolling 4 wk % Chg vs YA

22. Total Pasta Long Term Pasta Declines pre-date the Post Atkins accelerationTotal US Food $2MMEq Volume Change - Rolling 52 Week Basis

23. Total Pasta Total Whole Wheat Pasta sales, while still strong, are moderatingTotal US Food $2MMEq Volume Change - Rolling 52 Week Basis

24. Total Pasta HEALTH CONSCIOUS Health oriented Dry Pasta types are driving the Specialty pasta increases -3% +8% -2% Dry Pasta Dollar Shares & Change vs YAGO Flavored -19% Wheat +28% Organic/Soy +52% Filled +30% All Other -1% -3% Source: ACNielsen RMS Data; Total US; 52 w/e 4/19/04 vs YAGO; $2MM+ Grocery Stores

25. Spaghetti & other Long Pasta Elbows Lasagna Hispanics Empty Nesters Families w/ Kids Total Pasta Some Types of Pasta Appeal to Different Types of Households

26. Do we see Recovery in Recent Rice trends?Total US FDMRolling 4 wk % Chg vs YA Total Rice

27. Total Rice Total Rice Total US Food/Drug/Mass Ex Wal MartEq Volume Change - Rolling 52 Week Basis

28. Total Rice Total Brown/ Wild Rice Volume Trends are softening in recent months - in contrast to whole grain segments of Bread, Cereal, and PastaTotal US Food/Drug/Mass Ex Wal MartEq Volume Change - Rolling 52 Week Basis

29. Total Rice Total Brown/ Wild Rice vs Other Total US Food/Drug/Mass Ex Wal MartEq Volume Change - Rolling 52 Week Basis

30. Summary and Conclusion • Grain trends are clearly impacted by the Low Carb trends • General Mills believes ~ 1% • Long Term trends are impacting overall category performance • Not just a low carb phenom • Whole Grain Segments are generally much stronger than white/processed • Good Carbs vs Bad Carbs? • “Net Carbs” the next Marketing Buzz? • An opportunity for Manufacturers?

31. Thank You!

32. Appendix

33. Total Pasta Regular vs Whole Wheat Pasta Total US Food $2MMEq Volume Change - Rolling 52 Week Basis

34. Total Bread Penetration • Over 60% of Low Carb Diet households still purchase White • They are no less likely to purchase Bread than other households, but fewer purchase White and more purchase Wheat • Wheat is increasing and White declining over all households Percent of Households Purchasing Point Change: -0.1 +0.3 -0.2 -2.2 -3.4 -2.0 +3.0 +2.8 +5.6 6 months 11/03 Vs 11/02