Pink Berry

Confidential

January 1, 2007

Business OpportunityBusiness Opportunity사업기획사업기획

Nothing tastes better than…

Confidential

Major Presentation TopicsMajor Presentation Topics

• Company Introduction• Korean Market Overview• Why Pinkberry?

– Consumer Insights– Yogurt Trends– Targeting– Menu– Store Layout– Current Performance

• Organization & Management • Operation Flow• Implementation Milestones• Investment Details

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History of Pinkberry History of Pinkberry

• Start in West Hollywood, California in USA more than 2 years ago

• Strong growth into a recognizable brand • HQ support may not be strong - “Growing together”

• Pinkberry offers a wide variety of frozen yogurt products as well as fresh yogurt, smoothies, cookies, cakes, coffee, and more

• New additional products for Korean consumers are available

• More than 10 shops in USA and ready to open shops in Asian countries

• Aim is to become the number one brand in yogurt in Asia

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Lifestyle ChangesLifestyle Changes

• Growth in Yogurt Market– More demand, more makers– Way to increase prices, margin

• Taste Changes– Westernization of palate– Replacement of coffee, tea, juice

• More Leisure Time– 5 work day week– Shorter work hours, more family time

• Well Being Population Growth– All age groups now care for body– Longer life expectancy

• Picky Consumers– Ability to differentiate– Willing to pay more for better quality

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2004 2006 2008 2010

Market Transition to YogurtMarket Transition to Yogurt

50% of “cold treat” consumers will50% of “cold treat” consumers willpurchase yogurt based products by 2010purchase yogurt based products by 2010

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Ice Cream Frozen Yogurt Meal SupplementFresh Yogurt

Shift in 2003~2006Shift in 2003~2006

Market

Our

Product

Comments

Good taste Many flavors Fattening Less expensive

Brand power Not much difference

from competition

Red Mango is the

largest chain of its

kind in Korea but its

frozen yogurt

products do not

have enough

differentiating

factors from the

competition

Less taste One or two flavors Still fattening More expensive

Many flavors More healthy

because no topping

Pinkberry is not a

recognized name in

the Korean frozen

yogurt market with

Red Mango

maintaining leading

market position

Better taste More flavors Non-fattening About the same

Fresh daily Better in non-

summer seasons

The new concept of

Pinkberry has

become a strong

business fad with

very high growth

success and is now

in position to

replace Red Mango

as the newest

sensation

Best taste Even more flavors No fat but nutritious More expensive

Not just healthy Tasty meals

Consumers’ needs and

expectations of healthy

products will evolve to a

new concept of

products which will be

consumed in lieu of

heavy meals for the

health conscious

Strong in 2008Strong in 2008 Strong in 2009Strong in 2009

Market Product RoadmapMarket Product Roadmap

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Why Pinkberry?Why Pinkberry?

1. Current market is comprised of “one flavor only” competitors – yogurt flavor

2. As result, consumers today pay more - about 30% more than ice cream - to eat “less tasty” products

3. This trend will not continue and some competitors are starting to realize it

4. Pinkberry will offer additional flavors (green tea) which meet Korean tastes without the aid of toppings

5. Therefore, consumers will need to add healthy toppings only to enhance taste – rather than to create flavors

6. Pinkberry concept will also bring to “health conscious” consumers a new line of fresh yogurts made daily and served fresh with other healthy snacks

7. Being the newest phenomenon in the industry means strong name recognition and fuel for continuous growth. Ongoing product development and professional support to help us achieve market leadership within three years and market dominance within six years

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Consumer Insights

What are consumers thinking?

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Consumers want healthy optionsConsumers want healthy options

0 20 40 60

What would you like to change about your eating habits?

Eat more low fat foods

Cook more meals from scratch at home

Eat more freshly prepared foods

Cook at home with freshly prepared ingredients

Eat more organic foods

Source: SupermarketGuru.com

53%

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Fat and sugar continue to be big Fat and sugar continue to be big concernsconcerns

0 20 40 60 80

Carbs

Sugar

Fat

Source: Gallup 2003

% population “Interested in reducing”

74%

66%

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Consumers plan on eating more low Consumers plan on eating more low fat and high in protein foodsfat and high in protein foods

0 20 40 60

Organic

Raw foods

Vegetarian

High protein

Fat free

Low carb

Low fat

Source: Sloan Trends/ FMI 2004

% population “Planning to eat more of”

49%

26%

41%

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Fortified foods are also growing Fortified foods are also growing rapidlyrapidly

0

5

10

15

20

25

1999 2000 2001 2002 2003 2004

Source: Sloan Trends

Historical & projected sales of fortified foods

$B+8.5% CAGR

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37% of the population are also 37% of the population are also actively managing their weightactively managing their weight

0

5

10

15

20

25

30

35

40

2000 2001 2002 2003

Source: Sloan Trends

% population managing weight loss for health

37%

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With weight loss products being a With weight loss products being a big businessbig business

SLOAN TRENDS & SOLUTIONS, INC.

Source: Sloan Trends

20

25

30

35

40

45

50

1999 2000 2001 2002 2003

% of US Population buying weight loss products

44%

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Consumer SummaryConsumer Summary

• Consumers are concerned about what they eat

• Eating healthy is on trend and desired by consumers

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Yogurt Trends

What are the fresh yogurt consumption trends?

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Yogurt is seen as very healthyYogurt is seen as very healthy

0 1 2 3 4

Butter

Dressing

Margarine

Red meat

Chicken

Pasta

Yogurt

Whole grains

Fruits & vegetables

Source: Sloan trends4=very healthy

Consumer perceptions of selected foods

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Fruits are also seen as very healthyFruits are also seen as very healthy

0 1 2 3 4

Butter

Dressing

Margarine

Red meat

Chicken

Pasta

Yogurt

Whole grains

Fruits & vegetables

Source: Sloan trends4=very healthy

Consumer perceptions of selected foods

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Fresh yogurt is a $3.9 Billion category Fresh yogurt is a $3.9 Billion category in groceryin grocery

Supermarket Category Sales

0

2

4

6

8

10

12

14

16

Milk Bread Natural Cheese Refridg. Juices Luncheon Meats

Refridg. Salads Brekafast Meats Yogurt Processed Cheese Eggs

IRI 52 weeks ending 7/10/05, adjusted to include Wal-Mart

$3.9 Billion Category

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… … is a growth leaderis a growth leader

Yogurt is one of the fastest growing categories in the supermarket

9%

2%

0% 2% 4% 6% 8% 10%

Refrigerated yogurt

Grocery average

Source: IRI

IRI 52 week sales growth

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0

2

4

6

8

10

12

14

16

and is driving consumption that hasand is driving consumption that hasnow reached an all-time highnow reached an all-time high

All-time high!

Per capita consumption

Source: USDA

Pts/yr

Consumers love their yogurt!

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Targeting

Who is the target?

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The main consumer target is womenThe main consumer target is women

• Primary Target: Women • 35% eat yogurt 1X or more per week (vs. 21% men)

• Ages 25- 49 years old

• “Trying to eat more yogurt for health reasons”

• 45% of adult women

• Secondary Target: Families (Men & Kids)• “Trying to eat more yogurt for health reasons”

• 26% of adult men

• Children under age 6 index 130 on yogurt consumption

Source: Health Focus, 2002

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MenuMenu

What is the Menu?What is the Menu?

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Menu focuses on freshMenu focuses on fresh

FRESHNESS IS KEY POINT OF DIFFERENCE

• Fresh Yogurt – 96% Fat Free and Fat Free/NSA, Pinkberry is the only yogurt that is

“Prepared Fresh Everyday”

• Fresh Fruit is provided to support fresh, healthy eating

• Smoothies and drinkable yogurts provide portability

• Freshly Baked Breads complete meals for one stop eating

• Coffee and espresso drinks add to the breakfast day-part, with iced coffee’s providing support to snack occasions

• Frozen yogurts expand the snack and treat day-part to maximize store sales

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Store LayoutStore Layout

The store is contemporary, exciting and The store is contemporary, exciting and a place consumers want to visit.a place consumers want to visit.

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Store Layout & InteriorStore Layout & Interior

The store front provides stopping power

Fresh, contemporary colors make Pinkberry exciting

The yogurt and fruits are fresh and appetizing

Organic granolas and treat toppings provide broad appeal

Fresh breads, coffee’s and tea’s round out the menu

The store design delights consumers

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Current PerformanceCurrent Performance

Consumer feedback is exciting!Consumer feedback is exciting!

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Total Fresh already approaches 50% Total Fresh already approaches 50% of the product mixof the product mix

Category % of Sales Plan COGS*• Fresh Pinkberry 27.5% 30.0% 25%

• Pinkberry Smoothies 16.8% 22.5% 10%• Pinkberry Blends 1.6% 7.5% 19%• Total Smoothies/Blends 18.4% 30.0% 15%• TOTAL FRESH 45.9% 60.0% 20%

• TOTAL FROZEN 40.2% 30.0% 24%

• Other 13.9% 10.0% 28%• GRAND TOTAL 100.0% 100.0% 22%

* Estimated

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Current day-part mix drives strong Current day-part mix drives strong morning and lunch supportmorning and lunch support

Day-part % of Sales• 6:30-11am 12%

• 11am-3pm 32%

• 3pm-10pm 56%

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Performance to date is excitingPerformance to date is exciting

• Very positive consumer feedback to date:

– Store design working for consumers

– Product quality is exceeding consumers expectations

– Repeat is strong

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Great business opportunityGreat business opportunity

• Pinkberry is growing well…• Performance is exceeding expectations…• Concept is strong…

The growth concept of the decade

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Pinkberry PrinciplesPinkberry Principles

• We endlessly strive to be the number one company in our industry.

• We create and serve the freshest and best products using the finest ingredients available.

• We never compromise quality for price.

• We always maintain the highest standards from concept to delivery to the customer.                        

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History of Hylife ProductsHistory of Hylife Products

• Leadership of Mr. YN Won with more than 30 years experience in the food industry

• Small organization – trade experts and professionals• Vast experience in dealing with foreign companies• Initial contact with Pinkberry more than 2 years ago• Grand vision of providing healthy treats to Korea• First leg of this project – cool treats for health seekers• Pinkberry initially sought larger business partners• Hylife-Pinkberry Partnership – marketing knowledge

• Vision is now realized !!!

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Hylife Management StructureHylife Management Structure

이사회Board of Directors

CEO

Marketing & Sales Real Estate Procurement Shop Mgmt

Contracts Store TrainingMarket Survey Sales Promotions

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Hylife Management PersonnelHylife Management Personnel

• YN Won ( 원용남 ) – Chairman– More than 30 years in food industry– CEO & sales director in Unilever– VP of Aekyung– Executive Managing Director of Ottoogi Foods– Executive Managing Director of Dongwon F&B

• Gichol “Andy” Lee ( 이기철 ) - President– President of Gavin’s Sausages– Owner of London Grill restaurant chain– Chief Operating Officer in Ceratech – VP of Finance & Business Services in Motorola– More than 20 years in food and semiconductor industries

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Silent Partners & ShareholdersSilent Partners & Shareholders

• JY Yoo– 30 years in food industry– CEO of OB-Seagram– CEO of Campbell Soup Korea– CEO of Bestfoods Shanghai– Professor in marketing management

• JM Roh– 30 years in retail indsutry– CEO of Korea Distribution Research– CEO of Newcore Department Store– GM, Midopa supermarket chains

• SS Han– 30 years in service industry– CEO of Unico Search– VP of LG Trading & Advertising

• YY Choi– 20 years experience in sales & distribution– President of Yongho Foods– Sales Director in Sampyo Foods– Sales Manager in Ottoogi Foods

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Infrastructure for Success

• Experienced Marketing Team• - 50 year experience in growing food businesses• - Proven international best practices • - Clear strategy to overcome current market players

• First Shop Location Selection• - Rodeo Drive – AGJ in Gangnam Area• - Tentative agreement in place for store rental

• Fully Trained Work Force in Stores•     - HQ trained personnel in direct-managed shops•     - Month long training for franchisee personnel

• Grand Opening Day – Beginning of May•     - Dignitaries and celebrities

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Market Entry StrategyMarket Entry Strategy

• Form a professional management team (5 personnel)• Obtain adequate training from HQ on store management, brand

marketing, corporate philosophies, and result expectations• Select the right flavors• Start in attractive locations – this is most important• Define the key target consumers – college students and females

(late 20’s to early 40’s)• Increase brand awareness via promotional campaigns• Differentiate from competition – concentrate on strengths• Realize that sub-franchising is hard work • Achieve success store by store – better to have small number of

successful stores rather than high number of stores with some successful and some doing poorly

• Be aware of the competition and market trends

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Marketing Tools & VenuesMarketing Tools & Venues

• Free Taste Sampling Events in Shops• In-Store Give-aways (free products, caps, t-shirts, jackets) • Internet• Celebrity Signing Events

– JO Insung

– WON Bin

• Movies & TV Programs– “in movie” shop displays

• Promotional Events– Shopping Malls

– Arcades

• Women’s Magazines• Sports Event Sponsorships

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SWOT AnalysisSWOT Analysis

• Strengths– Two flavor strategy – flavor development necessary– Image of “large” international brand – Hollywood origin– Strong financing from MK investment group– Vast marketing experience to outrun the competition– Everyday freshness – “24 hour fresh” concept

• Weaknesses– Low recognition brand in the Korean market– No shops – “start from scratch” strategy takes time– Need to duplicate USA shop appearance – Franchising strategy will mean less direct-managed shops– Small organization in place

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• Opportunities– Fastest aging population among OECD nations– Rapidly changing food taste and lifestyle– Health & “well-being” fad is IN– New brand will mean more choices to consumers– Growing markets for yogurt and yogurt based products

• Threats– Longer cold climate will necessitate winter strategy– Competition may “retaliate” with counter-measures– Anti-American sentiment– Growth in number of “lesser” known brands– Unknown strategy of clear number one competitor

SWOT AnalysisSWOT Analysis

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2007 2008 2009 2010 2011

healthy toppings

2 flavors to start

fresh yogurt

frozen yogurt

fruit based meal supplementssmoothies

MFFB brand coffeecoffee

Korean additions

soft pretzelsnew fad

fresh baked cookies

snack bars and set menu items for the health conscious

Current

Crushed Ice w/ bean

cheese cakes and “zero-fat” cookies and winter favorites

Product PortfolioProduct Portfolio

cookies/cakes

healthy additions

Future

Treats

Yogurt

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Specializing in Yogurt and Yogurt-Based Products

- Fresh Yogurt (Pudding)- Frozen Yogurt (Ice Cream)- Fruit Smoothies - Meal Supplements

Healthy Snacks

- Cookies - Cakes- Pretzels- Coffee- Fruit Juice

World LeadingCompany for Fresh &

Frozen Yogurt Products

Product FocusProduct Focus

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Sourcing & PurchasingSourcing & Purchasing

• Import from USA– Certain yogurt base materials – initial stages

– Certain treat materials

– Roasted coffee beans

– Fresh tea leaves

• Local Sourcing– Equipments

– Signs & Billboards

– Dishes & Plates

– Fresh fruits

– Straws

– Napkins

– Disposable Cups

– Uniforms

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MaterialPurchaseMaterial

PurchaseCold

StorageCold

StorageStore

DeliveryStore

DeliveryFresh

ProductsFresh

ProductsConsumer

SalesConsumer

Sales

LocalSourcing

LocalSourcing

WarehouseStorage

WarehouseStorage

StoreDelivery

StoreDelivery

FinalPreparation

FinalPreparation

ConsumerSales

ConsumerSales

DailyDelivery

RTEP

DailyDelivery

RTEP

- Yogurt Based Products

- Treats

Product FlowProduct Flow

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- Auto calculate necessary quantity based

- Generate P/O sheet and auto sending

- Calculate order size and create lot number

- Generate import order sheet and auto send

SalesForecast

- Inventory summary at warehouse/store

- Lead Time checking

- Monitoring yield at each location

- Lot Tracking

QuantityCalculation

Purchase PlanConfirmation

MaterialOrder

MaterialShipment

MaterialPlan

PurchaseOrder

Warehouse

FreshProducts

Sale to Customers

- Show available quantity for sales

- Auto replenishment system in place

Production System SummaryProduction System Summary

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Direct Managed Stores

Difficult to ManageHigher Returns

Franchises

Easier to MaintainLow Returns

Employees

More LoyaltyCareer Growth

Non-Employees

Less ProfessionalLower Wages

Striking the BalanceStriking the Balance

Difficult to maintain same level of service everywhere

HylifeProducts

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Revenue GenerationRevenue Generation

• Profits of Direct Managed Stores

• Franchise Fees

• Interior Work Margin

• Shop Management Training

• Sales Commission

• Marketing Fee Difference

• Raw Material Sourcing

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Store Development ScheduleStore Development Schedule

• 1st year– 4 direct managed stores or franchises (total 5 stores)

• 2nd year– 15 franchises (total 20 stores)

• 3rd year– 40 franchises (total 60 stores)

• 4th year– 60 franchises (total 120 stores)

• 5th year– 80 franchise (total 200 stores)

1 direct managed store for the initial 12 months

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Store DevelopmentStore Development

015

54

108

180

5

5

6

12

20

0

50

100

150

200

250

Year 1 Year 2 Year 3 Year 4 Year 5

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Yearly Sales ExpectationsYearly Sales Expectations

0 0

3600

12960

25920

480

2400 2400 2880

5760

0

5000

10000

15000

20000

25000

30000

Year 1 Year 2 Year 3 Year 4 Year 5

0

50

100

150

200

250

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40+

20~30

Teens

Mal

Fem

Sales Portion by Gender

- Male Customers 41%

- Female Customers 59%

- Female population more likely to consume

non-traditional treats in groups

Sales Portion by Age Group

- Teenager Customers 25%

- Age 20~30 Customers 48%

- Age 40 + Customers 27%

- Teenage population more likely to enjoy

our product but lacks purchasing power

Customer BreakdownCustomer Breakdown

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Yogurt

Coffee

Others

Seoul

VicinityOther

s

Sales Portion by Area

- Seoul accounts for 81%

- Boondang, Ilsan, Suwon take 12%

- Busan, Daegu account for 7%

Sales Portion by Product Type

- Yogurt – 87% of sales

- Coffee – 9% of sales

- Others – 4% of sales

Sales BreakdownSales Breakdown

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Pinkberry Franchisee InvestmentPinkberry Franchisee Investment

• Franchisee Fee– KW 15,000,000

• Equipment Rental– KW 25,000,000

• Raw Material Inventory– KW 5,000,000

• Interior Work (2,500,000 Wons/pyung, 20 pyungs)– KW 50,000,000

• Total Initial Investment– KW 85,000,000 – Excluding the store premium and key money

• Advertising & Promotion– 3% of Sales to cover ongoing marketing

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Main Menu ItemsMain Menu Items

• Fresh yogurt in the form of pudding– 3500 WPS

• Frozen yogurt in the form of ice cream – mainly summer– 4000 WPS

• Fruit-based smoothies & meal supplements– 4500 WPS

• Cookies – fresh baked– 1500 WPS

• Cakes – fruit cheesecakes– 5000 WPS

• Coffee – Samba coffee– 4000 WPS

• Pretzels – 2500~3000 WPS• Fresh fruit juices – 4000~6000 WPS

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Typical Store SalesTypical Store Sales

• Market Size: approximately 3000 bw• Market Segment Size: approximately 1000 bw and growing• Spending Pattern – “eating out” of home:

– Teens – 70000 Wons/month

– Twenties – 200000 Wons/month

– Active Adults – 320000 Wons/month

• Customers per transaction: 2.4• Average sales level per transaction: 9600 Wons/transaction• Number of transactions per day: 72• Number of days in a month: 30

• Monthly sales amount per shop: 2073600 Wons• Annual sales amount per shop: 250 million Wons

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Future ExpectationsFuture Expectations

Returns

DevotionService

Dividend

HylifeProducts

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Investment NeedsInvestment Needs

• Initial Investment– 2 billion Wons – Exclusive license fee– First direct-managed store in Apgoojung-dong– Marketing expense for 1st two years– Labor costs for 1st two years

• Additional Investment– 5 billion Wons + 5 billion Wons– Opening of 11 more direct-managed stores in key locations– Two additional personnel– Investment at diluted share prices (250%)– Franchising can begin after five stores– Continuous marketing and operating expenses for more stores

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Investment BreakdownInvestment Breakdown

• Company Establishment Office & Equipments – 20 mw Company Vehicle – 30 mw

• First Store Opening Premium & Key Money – 500 mw Interior Work – 150 mw Equipment – 150 mw Contingency – 50 mw

• Marketing Promotion Expenses – 240 mw (Y1) – 490 (Y2) – 845 (Y3) – 2300 (Y4) – 4020 (Y5)

• Operating Funds Contingency – 50 mw

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1st

2nd

3rd

Min

Max

Rest

Initial Shareholdings

- 200 mw out of 2 bw means 10%

- 500 mw out of 2 bw means 25%

- Investment opportunity offers 10%

minimum and 25% maximum holdings

Additional Funding, if necessary

- If agreed by shareholders

- Base capital can grow by 5 bw

- Number of DMS can increase by 10

- Same marketing cost, more impact

- More difficulty requires more prudence

Shareholdings ScenarioShareholdings Scenario

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Investment ValueInvestment Value

• NPV 24 bw after 10 years About 8 bw after 5 years Very conservative estimate

• Size 50 bw in the 5th year Annual growth rate 10% after Market leadership

• Organization 4 in the 1st year 6 in the 2nd year 10 in the 5th year

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

2007 2008 2009 2010 2011

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HPC

ContractSigning

InteriorWork

MaterialOrder

ShopTraining

EmployeeHiring

Practicepreparation

2007.2

2007.5

2007.6

2007.7

2007.8

2006.4

Store Open

Milestone to Opening

1st

Funding

2007.4

2nd

Funding

2008.1

10 billion

2010.9

30 billion

2011.10

MarketLeadership

2011.12

IPO

2012.3

성인 브랜드 런칭

Company MilestonesCompany Milestones

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Vision & GoalsVision & Goals

Introduce new products & first conceptsinto the market

andDictate market movements and trends within

the industry

Become the most profitable frozen yogurt franchise chain

before the end of year 2011(within five years)