General Mills Single-Serving Shelf Stable Growth Plan

1. General MillsSingle-Serving Shelf Stable Growth Plan Presented by Elizabeth Dolinski Debbie Nolind Ann Singhakowinta Jay Wohlken Franck Valas Ana Valverde

2. I. Executive Summary • Strong growth is desired for General Mills’ in the single-serving pre-prepared meal category. Barriers to growth include: • Positioning discrepancy • Non-loyal customer base • Undifferentiated product • Retail placement is fragmented • There is currently a disconnect between the consumers targeted for Betty Crocker Bowl Appétit and the consumers actually purchasing the product • Although all consumers desire a basic standard of taste and convenience in single-serving pre-prepared meals, they tend to prioritize one or the other. • Consumer perceptions of all Bowl Appétit attributes are dominated by their perceptions of competitive products’ attributes. • Consumers tend to be self-focused or family-focused. Family-focused consumers purchase products with individuals other than themselves in mind (i.e. spouses, children). Self-focus consumers purchase for their own consumption only. 2

3. I. Executive Summary • Development of products in the taste-seeker, self-focused and taste-seeker, family-focused segments is recommended • The convenience segment is crowded with competitors • General Mills brands have a core strength in taste and quality • Two product concepts recommended: • New & Improved Betty Crocker Bowl Appétit: a higher quality version with wet pack for sauces, cheeses, or dressings and dry pack for Parmesan and herbs. Old Bowl Appétit is phased out. • Progresso Soup Singles: a new a wet, shelf-stable single-serve bowl of soup product. 3

4. II. Contents • Executive Summary • Contents • Situation Analysis • Company • Current Product • Competition • Problem Definition • Marketing Strategy • New Product Concepts • Concept #1 – New & Improved Bowl Appétit • Concept #2 – Progresso Soup Singles • Market Summary • Appendix 4

5. III. Situation Analysis • Company • Background • Competencies • Current Product • Facts: Price, promotion, placement, packaging. • Target Customers and Actual Current Customers • Competitive Landscape • Groupings/Structure • Competitive Set 5

6. Situation - Company • Over $13 billion in sales across numerous food categories • Major businesses include cereals, meals, Pillsbury, baking products, and yogurt • Foodservice and restaurant chains are part of diverse portfolio. • Ownership of some of the best-known brands in the world: 6

7. Situation - Company • Competencies • Core competencies in several food categories • Presence and placement in numerous food aisles • Opportunities to leverage powerful brands • Experience in product innovation • Manufacturing expertise • Economies of scale • Strong retail relationships • Powerful advertising 7

8. Situation - Company • Portfolio Management • Opportunity for Betty Crocker Bowl Appétit to acheive robust volume growth in expanding category • General Mills has opportunity for category leadership and dominant share position • General Mills can achieve long-term growth potential in this category through one or combination of: • Incubation of current product • Creation of new products • Acquisition of similar products 8

9. Situation - Current Product • Betty Crocker Bowl Appétit • “Single-serve, convenient lunch bowls” • Packaging • Self-contained, disposable bowl • Dry, portable product • Single-serve portion (16 oz prepared) • Preparation:Requires water and microwave • 10 Varieties: Pastas (4), Rice (3) Potatoes (3) • Price:$1.50 – 1.89(Range: Average Nielsen figure to local retail price) 9

10. Situation - Current Product • Betty Crocker Bowl Appétit • Retail Distribution • Grocery 92%, Mass merchandisers 8%, Club stores 0% • Placement: Aisle varies by retailer/store • Pasta • Rice/Potatoes • Sides/Meal Starters • Often grouped with other Betty Crocker products • Promotion • Current share largely attributable to heavy couponing: 22% of purchases made with coupon versus 8% weighted average for category 10

11. Situation - Current Product • Sales for Year One • $28 million • Fit with Firm • Consistent with General Mills competency in dry, shelf-stable meal starters • Distribution • Manufacturing • Food technology • Strong branding support 11

12. Target Audience Married women with children Target Audience Consumer Insight For busy moms who do not have time to prepare an elaborate meal, but still want something tasty Consumption Habits Purchased for office or away-from-home meal, but used at home See Appendix A1.1 Actual Current Customers Young singles Younger childless couples Middle-aged childless couples Current Customer Consumer Insight Trial inspired by promotions and coupons Consumption Habits Convenience and ease of preparation most important purchasing factors See Appendix A3 Situation - Current Customers • Current Target Audience and Current Customers 12

13. Category Competition No direct competitor due to highly fragmented category New and growing market Competitors can be grouped by the following characteristics: Situation – Competitive Landscape See Appendix B1 13

14. Situation – Competitive Grouping • Using these competitive grouping characteristics, nine major categories emerged: • Noodle/rice starters with stovetop preparation • Dry with wet pack • Other frozen (family-size, health-based, etc.) • Frozen bowls • Vacuum-packed, shelf-stable • Add-water cups • Microwave cups with meat • Noodle cups • Microwave multi-packs • Categories were mapped based on similarity to the Bowl Appétit product (see next slide) 14

15. Competitive Structure Lipton Pasta & Sauce Rice/pasta/noodle mixes Tamarind Tree Lean Cuisine Stouffer’s Uncle Ben’s Rice Bowls Healthy Choice Bowls Bowl Appétit It’s Pasta Anytime Fantastic meals/soups Knorr’s Tasty Breaks Spice Hunter Chef Boyardee Dinty Moore Maruchan Instant Lunch Nssn Cup of Noodles Ramen Noodles Kraft EZ Mac Ragu Express See Appendix B1 15

16. Situation – Competitive Set • Of the nine categories, six were selected for their point proximity to Bowl Appétit • Hamburger Helper, another General Mills brand, is already a strong offering positioned in the pasta/rice starter category • Non-bowl frozen products were considered inherently similar to frozen bowls • Within each competitive category, the product with the greatest market share was selected to define the current product’s competitive set: • Chef Boyardee: Chicken with Rice & Vegetables • Classico: It’s Pasta Anytime • Knorr: Taste Breaks Chicken and Vegetable Soup • Uncle Ben’s: Chicken and Vegetable Rice Bowl • Kraft: Easy Mac • Maruchan: Chicken and Vegetables Noodles 16

17. IV. Problem Definition

18. Problem - Growth • Growth Goal • “Generate the maximum level of sustainable growth in shelf-stable, single-serve food product revenues for the next three years.” • Options for translation into a measurable objective • Conservative growth (5-15% annually) • On par with category growth, achievable with status quo strategy • Strong growth (15-50% annually) • Requires development of new marketing strategies • Dramatic growth (50%+ annually) • Requires extraordinarily high investment/sacrifices profits • Incurs high levels of risk • Stronggrowth is a reasonable goal • Within General Mills’ stockholders expectations of risk • Inferred from project guidelines to develop new concepts 18

19. Problem - Barriers • Barriers to achieving growth target: Positioning discrepancies Placement constraints Non-loyal customer base Undifferentiated product 19

20. Problem – Positioning • Betty Crocker “Bowl Appétit” positioning is sending mixed signals • The product is designed to be a convenience product, but the Betty Crocker brand stands for high quality • Singles and childless couples are purchasing the Bowl Appétit, but Betty Crocker is perceived to be a mom/family brand • Advertising messages show families at home, but many purchasers are singles/couples eating at work • Bowl Appétit price point ($1.50) is higher than most of the competition for “snack/light lunch” and lower than most of the competition for “meal/dinner” 20

21. Problem – Positioning • Based on focus group data, the following are word associations for Bowl Appétit: Current associations for Bowl Appétit are positive for preparation & negative for appearance/taste Positive Neutral Easy to make Fast Easy and Cheap Fast Home Food Quick No worry Convenient Negative Cheap Economical Cacophony Round Mix Colorful Small Bites Hot Steamy Gritty Dry Salty Flavorful Low Quality Cheesy Fake Cheese Spicy Crunchy Bland Gross 21

22. Problem – Positioning • The focus group also offers insight on perceptions of the Betty Crocker brand: Current associations for Betty Crocker are positive for eating/taste and mixed for image/preparation Positive Yummy Neutral Sweet Home Cooked Cake Family Dinner Hamburger Negative Hot Hearty Dessert Tasty Bland Heavy Savory Feminine Unpretentious Boring Southern Mid-west Like mom Unsophisticated Children Old Fashioned Helper Meal Industrial Processed Box Fast Recipe Long Instructions 22

23. Problem - Loyalty • Betty Crocker Bowl Appétit isn’t attracting unique purchasers, making the consumer base unstable • Couponing rate is one of the highest in the category • Betty Crocker is 22% versus weighted category average of 8% • Betty Crocker users are likely to be heavy purchasers of all types of single-serving pre-prepared meals • Betty Crocker users purchase 8.0 single-serving pre-prepared meals per month vs. an average of 6.3 units per month for all consumers surveyed • When a Betty Crocker purchase is made, it represents a relatively low percentage of the total category volume purchased on that trip (28% versus a weighted average of 53% for all brands in the category) • Purchasers do not perceive Betty Crocker Bowl Appétit to have any attribute advantages over the other products they purchase. 23

24. Problem - Differentiation • According to the web survey, perceptions of Betty Crocker Bowl Appétit qualities are dominated by other brands Attribute Radar (see Appendix A2.3) 24

25. Problem - Placement • Single-serve shelf-stable pre-prepared meals are not located in one aisle of the grocery store, causing consumer confusion • Bowl Appétit is often the only product of its kind in the aisle • High risk of cannibalization as new flavors are introduced 25

26. V. Marketing Strategies

27. Strategy - Buyer Motivations • Consumers may determine type of food based on logic, but use varying “Motivation-in-the-Moment” to select item Am I hungry right now? Am I in a rush? When and where will I eat? How do I feel about myself and family? What mood am I in? Situation Thoughts Feelings Satisfaction Requirements 27

28. Strategy - Buyer Motivations • If buyer motivations vary by situation, how do we make product design and marketing choices? • Define segments: determine factors which influence motivation to purchase single-serving pre-prepared foods • Segment consumers with like-motivations • Demographic characteristics are secondary • Select segments to address • Design strategy to address those factors • Product form is a tool for conveying attributes 28

29. Strategy - Segments • Consumers tend to be oriented to Taste or Convenience • Taste-related attributes are positively correlated with each other, but not correlated with convenience attributes (and vice versa) • Attribute segments: Taste-seekers, Convenience-seekers 29

30. Strategy - Segments • Consumers tend to be self-focused or family-focused • Family-focused consumers purchase products with individuals other than themselves in mind ( i.e. spouses, children) • Self-focus consumers purchase for their own consumption only • Focus determines behavior patterns • Usage location: Family-focused consumers are less likely than self-focused consumers to use single-serving pre-prepared meals as home-meal replacements • Usage occasion: Family-focused consumers are more likely than self-focused consumers to purchase single-serving pre-prepared meals for lunch (probably because they are more likely to be preparing dinner for multiple people) • Women are more likely than men to make food purchases with a family-focus • Focus group data suggests Betty Crocker brand and Bowl Appétit name are less appealing to men 30

31. Strategy – Segment Selection • Which segments should General Mills select? 31

32. Strategy – Segment Selection • Convenience segments are less of a strategic fit • General Mills portfolio doesn’t include a suitable brand for targeting consumers who seek convenience over taste • Launching a new brand is more expensive than making line extensions • Majority of consumers are Taste-seekers • Convenience is a crowded segment (see Attribute Radar) • Would need to compete with offerings with a much lower price point (Maruchan, Fantastic Meals, Knorr) DO NOT FOCUS ON CONVENIENCE 32

33. Strategy - Recommendation • Two product lines are recommended to provide coverage of the Taste-seeker segment in order to achieve growth goals Family-focused Taste-seeker Self-focused Taste-seeker 33

34. Strategy - Evaluative Criteria • Position a product in both taste segments to maximize growth • Both product concepts must meet the following criteria: 34

35. Strategy - Competitive • Each product is positioned against different competitors Hamburger Helper Lipton Pasta & Sauce Rice/pasta/noodle mixes Tamarind Tree New Improved Betty Crocker Bowl Appétit Lean Cuisine Stouffer’s Uncle Ben’s Rice Bowls Healthy Choice Bowls Bowl Appétit It’s Pasta Anytime Fantastic meals/soups Knorr’s Tasty Breaks Spice Hunter Progresso Soup Singles Chef Boyardee Dinty Moore Maruchan Instant Lunch Nssn Cup of Noodles Ramen Noodles Kraft EZ Mac Ragu Express 35

36. VI. New Products

37. New Product - Concept #1 • Product Name & Picture • Positioning • Target Customers • Fit with the Firm • Improvements • Packaging • Distribution, promotion & pricing strategies • Financials 37

38. “New and Improved” Bowl Appétit 38

39. Bowl Appétit - Description • Dry, shelf-stable product with wet pack for sauces, cheeses, or dressings. Dry pack for Parmesan and herbs. • Single-serve bowl of original varieties, with larger vegetables and reduced fat and sodium • Portable • Microwaveable • Self-contained and disposable • 16 oz portion (after preparation) • Position in aisle next to other Betty Crocker products (Hamburger Helper, Instant Potatoes, etc.) • Priced at $1.99 39

40. Bowl Appétit–Positioning/Relevance • Positioning • “New and improved Bowl Appétit is just as easy to prepare, tastes better, and is better for you. A fast, nutritious meal for your family.” • Relevance/Consumer Insight • This product targets the family-focused, convenience-seekers by offering a healthful, easy-to-prepare alternative to frozen meals for families…and does so at a lower price. 40

41. Bowl Appétit – Target Customers • Demographics • Mothers (working and stay-at-home) • Young couples without children • Psychographics • Adults with busy lives who care about taste, quality, and health • Willing to pay a small premium for quality ingredients • Time-constrained parents who want to provide children with a nutritious meal See Appendix A4 41

42. Bowl Appétit – Fit with Firm • Repositioning brand requires fewer resources than brand extension and builds on success of Bowl Appétit • Established retail presence/shelf-space with current product • Bowl format unchanged in New Product Concept #1 or #2, allowing for economies of scope • Leverages equity of Betty Crocker brand as “homemade food” 42

43. Bowl Appétit - Packaging • “New and Improved” prominently displayed on more colorful packaging • Front features very large, fresh vegetables • Emphasizes low fat, low sodium on some varieties • Continues “Box Tops For Education” promotion • Text on back describes quality, natural ingredients, and good taste 43

44. Bowl Appétit - Pricing • Establish pricing benchmarks • Competitive price range: $1.50 - $3.50 (frozen), $2.71 (dry) • Consumer willingness to pay for Taste-oriented, Family-focused segment: $3.25 (web survey) • Previous Bowl Appétit price: $1.50 • Estimated costs for product improvements: $.50 or 30% • Recommended Price: $1.99 • Estimated Contribution Margin: 15% x 1.99 = $.30 • Economic Value Calculation • $3.41 - $1.49 = $1.92 • Willingness to pay - Product Price = Consumer Surplus 44

45. Bowl Appétit - Placement • Retail • Shelving placement instructions to locate product near other Betty Crocker meal starters • Promotion • Maintain marketing mix • Maintain previous level of promotion • Seek “New Product” aisle flags next to product • Select more upscale flavor names to underscore improvement • For example: Tomato Basil Pasta with Natural Parmesan Pouch 45

46. Bowl Appétit – Roll Out Plan • Months 0-2 design package improvements for different sizes and new sauce/cheese/herb packets • Months 2-4 support retailer transition to improved product and allow stocking of both items until old stock consumed • Month 4 raise price to $1.99 • Month 4-6 address any packaging, promotional strategy issues; ensure in-store promotion as “new” product • Maintain identical SKUs and varieties • Maintain previous level of promotions 46

47. Bowl Appétit - Financials Assumptions • 22% of our current customers (those couponing) will not switch to the improved Bowl Appétit. Penetration is therefore: 4.71 (current percentage) * .78 = 3.67 • Repeat rate will improve due to emphasis on taste, beginning at current level and reaching competitors’ weighted average in three years 47

48. Bowl Appétit - Financials Revenues • Revenue estimates for the improved Bowl Appétit using base scenario assumptions 48

49. Bowl Appétit - Financials • Sensitivity Analysis • 2002 sales sensitivity to each of the assumptions, all things else constant 49

50. Bowl Appétit – Financials Crystal Ball • The table below summarizes revenue estimates for the improved Bowl Appétit, taking into consideration all three scenarios by running 1,000 iterations with Crystal Ball. 50