James Aschberger Federico C á nepa Julio Cubill á n Javier Dominguez Mikael Granstrom Aqualyn Laury

1. Marketing StrategyGeneral Mills Project, Part B: Milkbuds Product LaunchProfessor Christine Moorman Monday, November 19, 2001Team 6, Section 202 James Aschberger Federico Cánepa Julio Cubillán Javier Dominguez Mikael Granstrom Aqualyn Laury

2. Agenda • Market Trends 2001-2005 • Market Overview Nutraceuticals • ‘MILKBUDS’ • Product Strategy • Product Concept • Company Analysis • Distribution Analysis • Communication Strategy • Financial Projections

3. M A R K E T T R E N D S2 0 0 1 – 2 0 0 5

4. Global Trends in Food and Drinks

5. Drivers of Innovation I • Health issues • functional and pro-biotic ingredients • freshness • organic • Pleasure issues • flavor • indulgence (guilt-free) • ‘eatertainment’ • positive enhancements (stimulation) • Presentation issues • packaging • convenience • format

6. Drivers of Innovation II • Convenience and ‘One-stop nutrition’ • Blurring boundaries between breakfast, lunches, dinners, and snacks • Size • Varying single serve options • Timing • As an appetizer, a meal, a snack, or a dessert • Location of consumption (portability) • Anywhere the consumer goes – always fresh • Desire for additional variety and flexibility

7. Health, Drivers, and Implications

8. Pleasure, Drivers, and Implications

9. Presentation Issues • Convenience as the main driver • Variety (increased individuality) • Flexibility (amount of consumption, timing) • Availability (less planning, more different locations) • Portability • Storage • Handling (less experts) • Disposal

10. M A R K E T O V E R V I E WN U T R A C E U T I C A L S

11. Definition of Nutraceuticals ‘Functional foods and drinks that provide benefits beyond basic nutrition by way of added components and may prevent disease or promote health. These benefits can range from the prevention of osteoporosis through calcium fortification, to the use of omega-3 in fats and spreads to lower cholesterol levels and added ingredients in soft drinks that stimulate or promote muscle growth.’ Neil Broome, Datamonitor Consumer Markets Practice Area, 2000

12. Nutraceutical Trends

13. Key Product Categories

14. Key Consumer Groups

15. Demographic Note • 35+ age group is growing faster than the total population • Incidence of conditions such as congestive heart failure and cancer increase despite advances in medicine • Prevention preferable to cure • Maintain general well being • Increasing demand for digestive products • Women as a good target audience • Often family decision maker • Weight-consciousness and skincare • Pregnancy and new mothers • Solutions for osteoporosis and menopause as two potential market opportunities

16. Key Geographical Regions

17. Key Success Criteria

18. Key Consumer Attitude Factors

19. Key Consumer Attitude Factors:Consequences • Consumers need to trust a brand so that health claims will be easily accepted • Advantage of food and drinks manufacturers compared to pharmaceutical companies • Use of branded ingredients to defend market positioning • Use of a food and/or drink format, where benchmarking against non-functional products is more difficult • Use active ingredients with proven effectiveness that address important health concerns that are not addressed by other products • Increased legal liability and regulatory issues

20. M I L K B U D S The snack you drink A revolutionary nutritious product By Yoplait

21. Product Strategy • Leveraging General Mills’ business knowledge into a high-growth market • Process knowledge of Yoplait (milk, yogurt, fruits) • Distribution knowledge of General Mills’ subsidiaries • Brand equity (track record, General Mills #1 position in the U.S. yogurt market) • Introduction of a new, innovative multifunctional drink, based on milk, yogurt and fresh fruit chunks to meet various customer needs • Health and prevention • bone support, digestion, immune system • Increased mental fitness • Quality and taste (no artificial flavors) • Flexibility

22. Industry Analysis • Food and drinks companies are under big innovation pressure due to high level of competition in a largely stagnant market • Pharmaceutical companies face stiff competition in their core markets and are looking to expand their range of businesses • Increased intensity of the ‘fight for the share-of-stomach’ between food and drinks companies, pharmaceutical companies, restaurant, fast-food chains, weight-loss programs and other players

23. U.S. New Product Launches by Health-Positioning (1999)

24. U.S. New Product Launches by Age Group (1999)

25. Consumer Lifestyle Trends 2001 - 2005 • Increasing importance of health issues • Taste and quality of food as main decision variable • Market areas for nutraceuticals • Standard plus (fortification with vitamins and minerals) • Standard plus for everybody • Lifestyle (support mentally or physically demanding lifestyle activities) • Lifestyle more for younger consumers • Medical (competition with OTC and even prescription drugs) • medical more for older consumers • Image-led consumption • Brand influences lifestyle and vice-versa

26. Nutraceutical Market Trends 2001 - 2005 • Fast growing market • New market entrants into the food and drink industry • Pharmaceutical companies • Ingredient manufacturers • Increased volatility • Uncertain consumer acceptance of functional food and genetically modified products • Increasing regulatory pressures and uncertainty • Biotechnology and genetically modified organisms • Declaration of ingredients

27. What kind of product are consumers longing for? • Focus Group and additional one-on-one interviews suggest • Snack-drink solution that meets specific needs • health, disease, energy • Natural, organic, fresh, non-fat • Milk or juice as recommended solutions • Not too sweet (should be more refreshing) • Appealing, indulgent • Premium product (reward mentality) • Real fresh fruit chunks to chew • High degree of autonomous portability (cupholder, bag etc.) • Function • Bone support • Energy provider (mental energy) • Vitamins and minerals are regarded as givens • Improved digestion

28. Drink Market Forecast - Fruit and Vegetable Volume(million liters)

29. Drink Market Forecast - Functional Volume(million liters)

30. Drink Market Forecast- Functional Sales (million liters)

31. Dairy Market ForecastYogurt Volume(million liters)

32. Product Concept • Name of the Product • Milkbuds by Yoplait • Unique Selling Proposition • Nutraceutical-enriched, shelf stable milk-yogurt-mix smoothie • Premium Positioning • All natural, real fruit drink • Room temperature or cold consumption satisfaction • Description • One size: 10.5 oz • 10.5 oz: $1.39 single, $7.29 six-pack, $ 13.99 twelve-pack • Food/Drug/Mass/Club retailers, convenience stores, drink machines, K-12 schools

33. Our Product • Refreshing milk-yogurt-mix drink • Creamy and smooth • No artificial flavoring • Contains real fruit chunks to boost flavor sensation • New technology allows shelf stable positioning • Three flavors to start (Strawberry, Banana, Blueberry) • Four specific targets • Mental power • Bone support • Improve immune system (prevention) • Improve digestion • Use of a branded bacteria ingredient (positioning)

34. Product Benefits • Consumer realizes benefits from: • liquids • carbohydrates • protein • fibers • vitamins • minerals • Dextrose to supplement energy and hydration level • Milkbuds delivers: • Nutrition with sole or complementary usage • Refreshment and hunger mitigation • Probiotic to aid digestion (bifido bacterium) • Includes several cereal fibers

35. The Bottle • New functional form • Easy-grip bottle, small enough for child’s hands, twist-off cap • Appropriateness • Will fit in car cup holder and standard bottle/cup holders • Special aluminum seal • Freshness sealed, quality promise • Trendy design (brand + coolness + fruits) • Playing of the incarnation idea of an actual milkbud • Easy disposal • Recycle-friendly • Promotional bottle packaging • Co-marketing with GM cereals and desserts

36. Targeted Market • Multi-stage roll-out • Stage one: U.S. (prime market, second highest growth potential) • Stage two: E.U. (newer to market, highest growth potential) • Timeline • 2002 roll-out for U.S. • 2003 roll-out for E.U. • U.S. ready, education needed in E.U. • Focus on families with kids, empty nesters, exercisers • Infiltrate yogurt and confectionary market – ease of use • Usage patterns • Product can be consumed anytime, as a drink, as a snack or even as a light lunch

37. Macroeconomic Competitive Pressures • Limited population growth in the U.S. • Aging population • Internationalization of Trade • Frequent and aggressive cross-border competition • Retail pressure • Consolidation • Better information • Decreasing customer loyalty • Fight for shelf space • Higher pace of working life

38. Categorical Forecast - New Market Entry

39. Competitive Analysis

40. Competitive Groupings • Direct competitors • Indirect competitors

41. The Business Opportunity • Mathematical Equation: • 18% growth in Functional products • Resulting from increased focus on health, lifestyle + • Busier single and family lifestyles • Leading to more on-the-go consumption + • Uniquely branded GM ingredient • Leveraging existing strengths in food portfolio = Milkbuds by Yoplait: America’s first drink snack

42. Company Analysis of General Mills

43. General Mills’ Growth Outlook • To catch up with some of its competitors GM suggests growth by: • Product Innovation • Enhances unit volume growth and market share gains • Channel Expansion • Look beyond traditional grocery stores • International Expansion • Target fast-growing markets • Margin Expansion • Through productivity innovation

44. Capabilities of General Mills • Distribution and marketing skills • Great relationships with retailers enhances a better product fit in the market • Since taste and quality are of paramount importance, advantage of GM over several competitors (dairy, food, pharma)  yoplait • Proven track record in new product development • Able to leverage the strong brand equity • Yoplait is one of GM’s star brands right now, and has overtaken Dannon in yogurt category

45. Risks for General Mills • Need for partner (ingredients) joint ventures with pharmaceutical company, because GM can provide process technology, distribution and marketing capability (plus customer knowledge) • Constant product and research innovation can make consumers switch to other substitute products and decrease demand for Milkbuds

46. Distribution Analysis • Have to identify the consumers’ needs and make the product available to them • Two different consumer needs: • Impulsive – high availability, e.g. convenience stores and drink machines • Planned – part of every supermarket’s offering and available for home shopping • Leverage the superior GM sales force’s relationship with retailers

47. Distribution Trends

48. Communication Strategy • Address the health conscious part of the population • Stress convenience, preventive health care and improved life style • Target women since they are the main decision makers at home • Reach her by lifestyle magazines, television advertisements and in-store promotion

49. Revenue Projections • Launch in 2002 • Target to reach 5% of US households the first year (2002) • A successful product is usually tested by 10% of the US households, and Milkbuds will target 50% of these households • Repetition ratio of 40%, but loss in volume will be offset by international expansion. • Europe and Asia are two fast-growing markets that are able to offset the decline of US sales • Assumes that every household, on average, consumes 1 Milkbud per day • Assume to sell six 1-packs for every one 12-pack and 6-pack sold • This makes the average price $1.234 • Since it is a new product, we assume that the competitors will apply a “wait and see”-tactic • Leads to low competition the first year • Due to first mover advantages and the strong Yoplait brand name, we assume the switching rate to be low

50. Revenues 2002-2004