2008 Lipton Presentation

1

Lipton Iced Tea

Carly Kinkler

East Division

SMP Project

Date: 8/28/08

2

Sales Management Program 2008

• FDM

• Foodservice

• Category Management

• Field Marketing

• Field Work

• Recommendations

3

Agenda

• Consumer Proposition

• Performance at Retail

• Compared to Category

• Performance by Division

• Distribution Voids

• Bottler Feedback

• Recommendations

4

Attributes

Naturalness Freshness

Power of Nature

Inherent Goodness

OriginEthical

Tea Taps Into Key Vitality Trends

Drivers

Increasing Life

Expectancy

Obesity

Stressful Lives

Processed Foods

Seen As Bad Guys

Consumers Turning to Tea for Health and Wellness Benefits

Consumer Insights

5

Where RTD Tea Stands

•Shelf-Stable Juices & Drinks

•Coffee •Tea

•Energy Drinks •RTD Tea •RTD Coffee

Fun

•CSDs•Alcohol

Fresh Functional

•Milk•Refrigerated Juice

•Water•Sports Drinks

Source: AC Nielsen Homescan Panel Database

6

Lipton Iced Tea S.W.O.T. Analysis

Strengths– Distribution– Trusted Brand– Health and Wellness Benefits– Green Tea

Weaknesses– Large Format Inventory and

Variety– Cold Vault Space

• Full Shelf LIT• Full Shelf Pure Leaf

– Distribution of New Products

Opportunities– LIT JUG

• Grow Sales & Volume

– New Flavors• 2009 Innovation

– Grow Distribution of Innovation Flavors

• White Peach Papaya• Diet Green Berry

Threats– Arizona 1st to Market

• JUG

– Economy• Consumers Price Conscious• Move towards Private Label• C&G Decline

– Paying at the Pump

– Aggressive Nestea Pricing

7

Performance at Retail – East Grocery

Tea Scorecard – Current YTD ending July 27, 2008

Vol Share of RTD Tea Category (East - Grocery)

27

11

18

28

13

3

0

5

10

15

20

25

30

PCNA Coca Cola DPSU Arizona Private Label Other

Vo

l. S

hare

PCNA

Coca Cola

DPSU

Arizona

Private Label

Other

Volume Share of RTD Tea Category

Other, 18%

Brisk, 8%

Leaf, 1% Nestea, 10%

Arizona, 27%

LIT, 19%

Snapple, 18%

8

Volume Sales Chg YAGTotal US Grocery

Current YTD Ending July 20, 2008

0

5,000

10,000

15,000

20,000

25,000

30,000

LIT Nestea Snapple Arizona PrivateLabel

Vo

l S

ales

(00

0)

Total US Volume

Total US Volume YAG

Volume Sales Chg YAGEast Division - Grocery

Current YTD Ending July 20, 2008

02,0004,0006,0008,000

10,00012,00014,00016,000

LIT Nestea Snapple Arizona PrivateLabel

Vo

lum

e S

ales

(00

0)

East Volume

East Volume YAG

Source: IRI InfoScan; East Division Grocery

• LIT Captures Highest Vol. Sales • Nestea & Snapple Showing Decline • Private Label Growing – Low Share

• Arizona High – JUG

• LIT up from Prior Year

• Arizona Holds Highest Vol. Sales

• Nestea Flat

• Snapple Losing Volume

Volume Sales Change from YAG - Grocery

66% - Jug

9

Snapple & Arizona Dominance (NY GMA)

A&P & Hannaford’s

10

LIT Outperforming Pure Leaf and Brisk

Volume Growth Performance (June, 2008 YTD)

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

TM Lipton Leaf LIT Brisk

1 Y

ear

% East

Central

West

B&C Non-Carb-Vol. Growth Performance (June 2008 YTD)

Volume Growth by Brand (TM Lipton)

Broken Down by Division

11

LIT Putting Up Great Numbers in the East

• L.I.T. Outperforming Pure Leaf and Brisk in all BU’s

• Showing Positive Volume Growth (Except Mid-South)

• North East L.I.T. Growth of 12.2%

East Volume Growth (TM Lipton)

-35.00% -30.00% -25.00% -20.00% -15.00% -10.00% -5.00% 0.00% 5.00% 10.00% 15.00%

North East (Conlon)

Mid Atlantic (Brown)

Mid South (Lee)

South East (Gray)

Vol. %

Brisk

LIT

Pure Leaf

B&C Non-Carb-Vol. Growth Performance (June 2008 YTD)

12

Green Tea Citrus and White Raspberry Leading

• East C&G (20oz)#1: Reg. Green Tea Citrus#2: Diet Green Tea Citrus#3: Reg. Raspberry White

• East Grocery (1.5Lt.)#1: Diet Green Tea Citrus#2: Reg. Green Tea Citrus#3: Reg. Raspberry White

• East Grocery (16.9oz. 12ct.)#1: Diet Green Tea Citrus#2: Reg. Green Tea Citrus#3: Diet Raspberry White

East Division – Best Sellers

13

LIT Needs More Space in Order for More Variety

Hannaford’s – Carmel, NY

14

Distribution of New Flavors

Account Stores LIT Growth Dt. Green Citrus Dt. Green Berry Dt. Peach Dt. Rasp. Reg. Rasp.Total Grocery -1.7% 96.50% 63% 72.70% 88.40% 83.60%

A&P 79 -8.1% 78.5% 57.0% 12.7% 72.2% 70.9%Food Lion 1026 -12.6% 98.1% 52.2% 82.8% 94.1% 85.4%Pathmark 104 8.6% 99.0% 66.7% 78.1% 99.0% 99.0%

Publix 929 3.7% 99.6% 83.6% 83.7% 81.3% 84.4%ShopRite 166 21.7% 94.6% 75.9% 85.5% 91.6% 92.8%

Stop & Shop 317 42.6% 98.8% 55.8% 76.0% 94.7% 95.3%

YTD Fighter Pack Distribution (East Grocery)

Account Stores LIT Growth Dt. Green Citrus Dt. Green Berry Dt. Peach Dt. Rasp. Reg. Rasp.Total C&G -14.4% 62.70% 7.70% 16.80% 11.50% 42%7-Eleven 2237 17.5% 48.90% 0.10% 5.6% 5.9% 42.1%BP Amoco 2056 -18.6% 55.40% 8.00% 22.5% 8.8% 31.9%Chevron 1410 -18.5% 60.20% 9.40% 23.5% 7.0% 31.0%

Cumberland Farms 537 -35.6% 65.50% 3.20% 4.8% 26.8% 35.6%Exxon Mobile 2589 -18.2% 48.40% 5.60% 17.8% 14.3% 31.8%

Hess 793 24.0% 76.70% 24.30% 23.0% 23.7% 71.2%

YTD 20oz. Single Serve Distribution (East C&G)

Star2 – YTD Distribution Total East

15

1.5 Liter is a Huge Opportunity for Grocery + C&G

Account Stores LIT Growth Dt. Green Citrus Dt. Green Berry Dt. Peach Dt. Rasp. Reg. Rasp.Total Grocery 140.6% 93.70% 45.50% 59.50% 58.40% 76%

A&P 79 45.80% 81.0% 31.6% 46.8% 50.6% 77.2%Food Lion 1026 135.60% 97.2% 10.8% 55.4% 39.8% 93.6%Pathmark 105 185.90% 99.0% 39.0% 70.5% 60.0% 99.0%

Publix 929 118.60% 93.8% 58.4% 81.3% 56.8% 71.5%Shop Rite 166 171.80% 94.6% 77.7% 84.3% 78.9% 93.4%

Stop & Shop 321 New 98.1% 80.1% 4.7% 84.4% 16.5%

YTD 1.5 Liter Distribution (East Grocery)

Account Stores LIT Growth Dt. Green Citrus Dt. Green Berry Dt. Peach Dt. Rasp. Reg. Rasp.Total C&G 97.3% 8.50% 1.10% 3% 2.10% 5.20%7-Eleven 2237 219.9% 5.7% 0.7% 1.4% 1.1% 3.6%BP Amoco 2056 8.9% 6.2% 1.1% 2.6% 0.8% 3.6%Chevron 1410 17.7% 6.0% 1.3% 2.1% 1.3% 3.5%

Cumberland Farms 537 - 0.2% 0.0% 0.0% 0.0% 0.0%Exxon Mobile 2589 189.3% 8.7% 1.9% 2.8% 2.8% 7.0%

Hess 793 1703.4% 38.6% 1.4% 12.6% 6.4% 20.2%

YTD 1.5 Liter Distribution (East C&G)

Not a Strong Presence

Star2 – YTD Distribution Total East

16

Bottler Feedback

“LIT is a quality product with

tremendous equity. Sales have flattened

in 2008, largely because of the new

multi-pack competition (Arizona & Nestea) at $4.99, which is generally $1.00 below where we are every day.”

“What I believe the brand needs is

some new product news (new flavors)

and some packaging

innovation.”

“Our system needs to determine what the right cold vault single

serve RTD tea balance should be. We offer 6 varieties of LIT, up to 8 varieties of Pure Leaf, and up to 3

varieties of Brisk. While all are viable, strong brands, I guarantee

that as you go from market to market you will see a vast

difference in merchandising priorities across the trademark. We

systemically haven't figured out the right combination here yet.”

Dave Petta – GM Fitzgerald Bros. BottlingTom Strahle – VP Pepsi HV

Flavors & PackagingFlavors & Packaging

Right Mix of ProductsRight Mix of Products

Competitive Market/PricingCompetitive Market/Pricing

“I believe that the Jug will help out a

lot, IF priced correctly. “

JUGJUG

17

Two Different Stores, Same GMA

Rite Aid – Brewster, NY & CVS – Mahopac, NY – Aug. 12, 2008

• 16 Facings of Pure Leaf & No LIT

• Rite Aid (NY GMA)

• 7 Facings of LIT

• Only 2 Flavors

• CVS (NY GMA)

18

Recommendations

• Close Distribution Voids on LIT

• Determine Right Cold Vault Mix

• Merchandising Standards

• Communicate Standards to National Account Teams and Bottlers

• Activate JUG

• Incremental Feature Ad and Merchandising through CDA Negotiation

• Competitively Priced

19

QUESTIONS???

20

PCNA Plans for 2009

National Launch:Q1 2009

Projected Sales Impact:

20MM cases 70% Incremental

DRIVE SHAREREINVIGORATE GREEN

Projected Sales Impact:

10MM cases 40% Incremental

Launch Timing:P4 2009

Projected Sales Impact:

5MM cases 40% Incremental

National Launch:P6 – P10 2009

REIGNITE BLACK

AOP ppt – Vinny Croce

21

2008 AOP Plan – Widen White Tea Appeal

• New Diet Flavor Extension

• Strengthen White Lead

• Focus on High Velocity Diets

AOP Deck 2008

22

Current YTD Volume - Innovations

Volume (% of Brand

Mix)

Diet Green Berry

White Raspberry

Diet White Raspberry

Diet White Peach

Papaya

Atlantic BU 5.3% 7.6% 6.2% 3.3%

Central BU 6.8% 9.0% 7.6% 3.3%

Great West BU

7.3% 5.4% 4.8% 3.1%

Southeast BU 3.3% 5.2% 4.6% 3.0%

West BU 6.6% 6.4% 5.0% 2.1%

Current YTD ending July 27th – Tea Scorecard (PBG Field)

Diet White Peach Holds the Lowest Percent of Total Brand Mix

23

24

LIT Package Vol. Share

0 5 10 15

20oz

1.5 Lt.

16.9oz

128oz

Pck

g. S

ize

Share (Vol.)

128oz

16.9oz

1.5 Lt.

20oz

Packaging and Flavors – East Grocery

LIT Volume MixEast - Grocery

13.6

2.9 1.8

0

5

10

15

Green White Black

Tea

Vo

l. S

har

e

Green

White

Black

25

Closing the Gaps

• Volume Opportunity

• East Grocery

• Diet Peach Papaya at 90% Distribution

Current Vol. Sales VS. OpportunityDiet Peach Papaya - 16.9oz - 12ct

60

334,567

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Current Vol. Sales Volume at 90% Dist.

Vo

l. S

ales

Latest 12 Weeks – Ending August 3rd – IRI