PK ASSOCIATES -- INTRO April 2015

#6 The Crossing

Purchase, New York 10577

914-886-3771

Fax: 914-694-5678

7575 Pelican Bay Blvd. - Suite 1403

Naples, FL 34108

914-886-3771

Fax: 239-594-9354 www.pkassociates.com

Introduction to PK ASSOCIATES

April 2015

1 www.pkassociates.com

Copyright ©2015 PK Associates LLC. All rights reserved. Material cannot be copied and is is not for publication or use without written

permission from PK Associates. PK Associates is a trademark or registered trademark of PK Associates LLC

Experience

Insight-Driven POV

Action-Oriented

Collaborative

Tailored Approach

Objective

Full-Picture Thinkers

We combine strategic business management and marketing/sales/ business development expertise with rigorous fact-based analytics and disciplined consumer work when appropriate… generating proprietary insights to drive more consistent and predictable growth

We turn insights into actionable implications and recommendations

Proven processes, tools and techniques that can be applied, but we do not believe in cookie-cutter solutions or processes… each client’s situation and issues are unique

Work closely with clients, building support, avoiding surprises, and gaining momentum plus buy-in, ownership throughout the organization

Independent with no vested interest in downstream services… objective in all our outputs, recommendations

Work across a broad range of consumer product sectors, categories… bringing best practices to the table

Average 25-40+ years experience in premier brand/marketing/sales and institutional management consultancies plus senior management line experience in N.A. and global-based consumer products companies… and functional expertise across strategy, planning, marketing, direct marketing, new product development, innovation, digital/social media, sales and customer marketing/development, corporate and general management, including board and operating governance

Summary: Growth Management ResultsStrategy and planning, marketing and execution…

including innovation and new products, growth opportunity identification, acquisition strategy/process/assessment, board & operating governance




PKA is well qualified to help in many types of growth management projects, because of…

Results• Delivers actionable strategies, plans, processes (if needed) and how to's that clients own

PKA Core Competency• Growth management is our core competency

Best Practices Leverage• We are able to leverage to a client's advantage a Dream Team of proven seniors who have

been there and done it on the client side and in consulting… content + chemistry

• We know growth management

Ownership Approach/Process• Retainer and/or Dream Team , on project work, ensures that client's key senior leaders and

managers champion and embrace the outputs

– Carefully collaborate with and leverage key operating and staff managers to assure ownership and buy-in… and avoid wheel-spinning

– Use relevant processes when needed, not ones that may be relevant and proprietary to a consultancy but not to the client!




Our principles guide the way we work

• Over-delivering on content (agreed-upon value-added outputs/deliverables) versus client's expectations… use just enough process to deliver data/facts plus judgment/experience-based solutions that address a client's key issues and opportunities

• Successful strategies and plans begin and end with the consumer and customer; market and consumer demand-driven solutions to profitably grow the business

• Believe in the value of segmentation, targeting and focus on heavy/super-heavy users

• Push beyond the what's to discover the why's, so-what's and actionable to do's

• Clients must understand their consumers and customers benefit hierarchies and brand preference drivers

• Successful brands tap both product and emotional benefits

• A systematic, disciplined approach best integrates analysis, strategy and creativity

• Power of teams… across PKA, client's internal team and valued external partners

• Make challenging work enjoyable

• Aggressive in delivering a point of view

• Bias for action… a passion for resultsWe’re committed to making a difference




• Vision-Based Growth Strategy… delivering a complete Strategic Plan

• Strategic Planning Process (how to's), including a Development Plan

• Total Innovation… what is it, why important; process for achieving across & down

the entire organization via continuous improvement, incremental + big bang ideas

• Marketing: Brand Revitalization, Trademark/Brand Equity including extension

• Strategic Growth Opportunity Area (SGOA) Identification and Qualification

• Internal New Product Development and/or NPD Process

• Acquisition… strategic and financial value, manageability, transition/integration

planning (assess attractiveness, affordability, availability)

• Organizational: Annual + Quarterly Governance, including Objective and Priorities

• Social Media… partnering with Gary Vaynerchuk and his VaynerMedia

• Recruiting… partnering with Alex Klein and his AK Associates

Peter Klein handles all retainer (per diem) and directs and is active on all project

work; he chooses the Dream Team of proven senior professionals customized to

each client for project work…

PKA Dream Team project members are proven seniors only and sign client

confidentiality/non-compete agreements

PKA provides retainer (per diem) and project

consulting services across Growth Management




What makes PKA different

Quality of senior,

knowledgeable people

from premier consulting & client firms

Cost effective solutions

• We worked many years for premier consulting

firms– e.g. Marketing Corp of America, Booz Allen,

McKinsey, The Cambridge Group, etc.

• Only senior, experienced people work from

start to finish… no juniors allowed– They scope out the project and are responsible for

project delivery along with Peter Klein

– We leverage a large network of proven, results-

driven external experts…

pulling them into project teams as required

• Lower overhead and infrastructure costs

versus institutional consultancies – Resources (consultants, admin support) come

together as needed for each project, keeping

PKA's overhead low

– Work usually comes from clients who have

known us in the past and who we want to work

with… no PKA business development and

marketing costs

NET / NETCost-effective way to solve clients’ strategic and operational growth issues, challenges




3 reasons why we believe PKA is a superior

resource for Growth Management projects

Client: “We Made the Best Choice”

Relevant & Differentiated on Content + Chemistry• Proven seniors-only across consumer products, consulting and other industries

• Client-based + consulting experience in executive/senior positions… Board-level profiles

• Growth management across strategy, planning and implementation

• Large and medium size company experience

• Collaborative process and people to assure client buy-in, ownership of outputs

Relevant Industry, Channels & Functional Experience• Consumer Products and other industries plus multiple categories

• Multiple channels

• Client-based corporate and general management, marketing, sales, finance, HR, new product

development, operations, internal & external business development… and consulting experience

Principles, Processes and Tools If/When Needed for Time Saving

and Value-Added Content Delivery• Across growth management




Important things to know about our project

Dream Team people

• We’re successful, proven, senior consultants with diverse, practical line

management and consulting backgrounds

• We have a passion for helping clients build profitable business, deliver RESULTS

Senior, proven PKA Dream Team people, working against an agreed-upon work plan, will over-deliver against deliverables and client expectations

Good People

Results

+

PK Associates• Experienced, proven, senior consultants• Line, staff & consulting industry experience• Team support… work collaboratively…

we wear well (people chemistry-wise) with the clients who have to approve and implement the deliverables

Reverence for facts and disciplineDiligent approach and work planReady to re-plan project if conditions warrant

Unique implementable solutionsOwned by senior and middle management

Working a Plan with

Management

=




Our relevant, proven and seniors-only PKA Dream Teams provide the ideal combination of expertise and experience for client growth needs• All are successful, proven veterans with diverse senior line and staff management

plus consulting experience…

who work collaboratively and have outstanding people chemistry skills (Bio’s available)

– Extensive experience across:

Growth management (opportunity identification, planning and implementation)

Organic growth and new product development (organic and external: licensing, JV's)

External business development… acquisitions & divestitures, including assessing and developing

strategic value, financial value, manageability and integration plans/implementation

Integrating multiple SBU businesses post-acquisition

Analytics, fact-based analysis… e.g., situation assessment, financial valuation, etc.

• Our PKA dream teams have the right values and people chemistry for critically

important projects

– Team players, focused on the client winning over time…

mature, objective, with no political axes to grind

– Hands-on, roll-up-the-sleeves, collaborative, yet experienced leaders…

attending (and leading when appropriate) informal and formal worksessions (led by

Cavas Gobhai or Bob Taraschi, Bio’s available)

– Diligence, persistence, reverence for facts, analytics/analyses…

balanced by innovative thinking, creativity and operationally sound business judgment

• References provided on Page 23




Additional PKA qualifications

• Because any project-related effort PKA works on is critical to your long-term success, you need a partnering firm that will commit senior resources on a day-to-day basis (on-premise when needed for informal and formal meetings, discussions, fact gathering, etc.)

– Our approach always includes active senior involvement, not just to attend presentation output meetings but to be fully involved in the development and delivery of that work… PKA teams have no juniors on your projects!

• Because this effort must help you broaden your thinking about new ways to profitably grow, you need an external resource that specializes in understanding the marketplace and helping clients profitably grow

– All of our work is focused on addressing growth strategy/implementation and assuring a client organization that supports the Plan… since they must implement it

• Clients need a resource that is experienced and comfortable working with senior management in architecting a growth strategy and an operational/execution plan… and working through the growth management planning issues and process if needed

– We do this for a living… we focus on growth management… and we have senior management client-based and Board level experience

• Tight project timing requires the quick understanding of external market forces and the experience to enable timely expertise and insights

– PKA Dream Teams are recognized as consumer products industry experts, with significant experience across an array of relevant industries and business issues… we also draw on our network of external ‘experts’ on an in/out basis

• Because project success demands the involvement and ownership of key senior managers, you need a resource experienced in working collaboratively with your teams and in being effective operating in the background

– PKA‘s Dream Team approach/ is that a project is never “a PKA project’ per se…we support our client team members in taking ownership of, and receiving recognition for, the effort




NOTE: In the spirit of transparency, Gary is Peter Klein's son-in-law


PKA has a strategic alliance with Gary Vaynerchuk and his VaynerMedia Agency… founded 5+ years ago, 475+ full-time employees (NYC, LA, San Francisco and

Chattanooga TN office opening 6-1-15), Ad Age in February 2014: “VaynerMedia is the #2 agency to watch in 2014” and it was named in March 2015 as large Digital/Social Media Agency of the Year ((http://industry.shortyawards.com/category/7th_annual/large-agency)

Gary is a leading social media/networking industry icon… his CRUSH IT book (2009), The Thank You Economy book (2011) and Jab, Jab, Jab, Right Hook book were all #1-2 on the Nielsen, NY Times, WSJ and Amazon best seller lists; FORTUNE Magazine named Gary in October ‘14 to their “Top 40 Under 40” list of US business leaders as did Crain in March 2015• Gary has 1.13+MM Twitter followers (April 2015), appears on many TV and radio shows, and is the

featured speaker at many global conferences on social media and digital (CAA represents him) where he usually wins best speaker of the conference; he was an early investor in Facebook, Twitter, UBER, Meerkat and others to the benefit of VaynerMedia's clients… Gary was a judge for the 2014 Miss America Contest, was featured in the lead NY Times Business Section article on November 3, 2013, on the November 2013 cover of INC. Magazine, and on the cover of the February 2014 issue of SUCCESS magazine

• Gary and VaynerMedia work with clients such as Unilever, Anheuser-Busch InBev, PepsiCo, GE, Toyota, FOX, MasterCard, L’Oreal, Big Heart Pet, Mondelez, Johnson & Johnson, Ruby Tuesday, Coach, Bravo, Sonic, Levi’s, Remy Martin and others

• He is also the largest New Jersey wine retailer (WineLibrary, 39k square foot store in Springfield, NJ) and #1 or #2 in U.S. internet wine sales: www.winelibrary.com

• Gary's personal website for links to his talks, TV appearances, etc.: www.garyvaynerchuk.com




PKA also has a strategic alliance with Alex Klein and his AK Associates,

a recruiter focused in the NY, NJ and CT area providing recruitment

services for entry-level candidates through senior executives

• AKA’s search process consistently provides clients with superior candidates –

a proven track record of delivering candidates who are productive from Day 1

• AKA operates as an extension of your company – paying attention to the nuances so they

discover candidates that best fit your openings and job specifications

• Through years of successful searches AKA has developed an innovative, intensive

approach to interviewing and screening potential hires so every AKA recommended

candidate carries AKA's full confidence

• See: www.alexkleinassociates.com

NOTE: In the spirit of transparency, Alex is Peter Klein's son





Retainers for Peter Klein exclusively… i.e., 2 per diems per month

PKA Dream Team ProjectsPeter Klein directs all project teams and has an active role; consulting fees for a PKA seniors-only Dream Team project are about 60-80+% below institutional consultancy monthly fees and with no juniors on PKA project teams… project fees and expenses are detailed in a Project Proposal, that includes:

• Key Messages

• Client's Current Situation and Key Questions/Issues to Address

• Project Objectives and Benefits the Client Will Receive

• Project Outputs / Deliverables

• Project Approach and Scope… Including Workplan, Key Timing/Dates and Milestone Meetings, Outputs

• Methods to Achieve the Project Objectives

• For Each Phase/Step: Major Objective(s), Key Activities/Timing, Output / Deliverables

• Project Team: Including Individual Titles, Qualifications, Project Role

• PKA Qualifications and References

• Project Costs & Invoicing

… Consulting and Admin* fees plus estimated expenses if any (i.e., travel at coach airfare + direct costs if

needed for any primary market/consumer/customer )

… Timing of invoicing of fees and expenses, and payment terms

* Includes all costs for phone, fax, courier, secondary business research, administrative team support, etc.





Not All-Inclusive – Example past and current clients

Example PKA Clients




SHULTON

Example PKA Clients - Cont’d





Example PKA Clients - Cont’d





As you might expect, we sometimes struggle a

bit initially with a consulting task/project…

We always want to be very clear and careful with how we phrase things, since we really don’t know upfront a client's real culture, business issues & opportunities

… however, we ultimately always come up with a great thinking and need-to-do analysis plus solutions that work, are executable and manageable!




Our deliverables, outputs work!




Now the hard part:Ask us to rehearse for a role and write a Proposalfor a key growth management issue you have




Peter Klein

PK Associates is an informed, insightful and results-driven growth management consulting firm that holds itself to higher standards of added-value and client satisfaction for meaningfully improved client results... because, at the end of the day, that's what it is all about, RESULTS

Peter Klein – Founder

• I am a balanced brain and live at the intersection of fact-based, information-driven insights, disciplined

learning, and proven, experience-driven sound judgment… to deliver solutions, big ideas and

implementable management processes, across: growth management strategy and planning, including

innovation/new product development, external development including acquisition (strategic and financial

value assessment and integration planning), strategic planning, including a process that works, marketing

strategy and solutions, and organizational structure, governance and motivation

• I work seamlessly providing direction, guidance and input from insight to ideation to strategy to ‘Monday

morning’ action plans... with facts and experience, good-seasoned judgment guiding creativity at every step

• I have a fierce client ROI orientation... I live by metrics and measurably improved results

• I will not accept an engagement role unless I am certain I/we can add meaningful value

• I will not accept an engagement unless it is clearly important to the client

• If my counsel, advice and content (deliverables) don’t yield significant added-value and client satisfaction,

I/we have not done our job!

• Humor is not an elective course!

See Pages 94 – 101 for Article on Peter Klein; see website for Advertising Age article / 1 of Top 10 Innovators




From March, 2001 through September, 2005, Peter Klein was Senior Vice President and Corporate Officer of The Gillette Company,responsible for Strategy and Business Development and reporting to the Chairman/CEO. Mr. Klein was asked to stay for up to a one yeartransition period, but decided to leave Gillette following change-in-control to P&G on October 1, 2005; and returned to operate from hisWestchester, NY and Naples, FL offices. Previously he was Executive Vice President and Corporate Officer of Corporate Strategy, BusinessDevelopment, Marketing Services and Global e-Business at Nabisco Holdings Corp. from January 1998 through December, 2000, departingNabisco along with other senior executives following Nabisco's acquisition by Phillip Morris/Kraft Foods in late December, 2000

Peter directed Nabisco's long-term strategy, assured the alignment of corporate strategies with operating unit and functional group plans,

developed and implemented cross-company internal and external business development (acquisitions, divestitures, licensing, JV's), anddirected integrated marketing intelligence, marketing services (i.e. market research, consumer promotions, media buying) and global e-Business. He also directed the Nabisco acquisition of United Biscuit (voted 'European deal of the year' in 2000) and the auction of Nabisco(largest auction of a U.S.-based public company and voted 'U.S. deal of the year' in 2000)

Peter joined Nabisco from The Cambridge Group, where he was a Partner / Managing Director of its east coast office, which he opened in1991. Mr. Klein came to Nabisco with 17 years of management consulting experience. Prior to joining The Cambridge Group, he was asenior partner at Marketing Corporation of America, where he led the Consumer Products management consulting practice… over hisconsulting career Peter has worked with over 40 major Consumer Product companies and in almost every category across Food andBeverages (including alcoholic beverages), OTC Drugs, Household Products, Toiletries & Personal/Beauty Care Products, etc.

Before consulting, Peter worked in line sales, marketing and business development at Sterling Drug (Vice President, BusinessDevelopment), The Gillette Company (Director of Marketing & Sales for Braun North America and Group Marketing Manager in PersonalCare), Johnson & Johnson (Consumer Trade Promotion and Marketing), and Richardson-Merrell (Field & Headquarter Sales); and he hassignificant experience in line marketing and innovation/new products (e.g., Oscar Mayer Lunchables, many others)

Peter was educated at Syracuse University (B.S. in Marketing & Finance, 1968) and Harvard Business School (MBA 1971), holds two U.S.patents, and has published articles and given speeches on: growth, innovation, cross-functional business teams, acquisition, new productdevelopment, private label, business success factors, etc. He is on Syracuse University's Whitman School of Management and CenterviewCapital Advisory Boards, Jefferson Awards Foundation’s Board of Selectors, a Director on the Ole Smoky Distillery Board, and was aDirector on the Braun Board and is a private investor in start-ups (e.g., Culinary Health Innovations; Suavecito Tequila; others)

He currently provides ‘of counsel, advisory’ consultative services to CEO's and senior executives, directs PKA project teams, and speaks onmany business management and process topics based on his strategic and hands-on experience working for blue chip public companiesplus management consultancies. Advertising Age recognized Peter as one of 10 Innovators (2 page article) and THE DEAL.COM did a 4page article on Peter on their online website and in their magazine (see website under Biography: www.pkassociates.com)… see Page 100for one article on Peter; Peter and his wife Anne live in Naples, FL and have a home in Purchase, NY

Peter Klein – Cont'd

See Pages 94 – 101 for Article on Peter Klein; see website for Advertising Age article / 1 of Top 10 Innovators




Companies/DivisionsMerck Global Consumer HealthCare to Bayer AGDel Monte FoodsInBev / Anheuser-Busch ****Gillette Company* (2005 Sale to Procter & Gamble)Nabisco** (2000 Auction/Sale to Phillip Morris/Kraft Foods)Rembrandt (Acquisition; also a Gillette Divestiture)Nanfu (Battery Company in China)Zooth (Children's Toothbrush CompanySpectrum BrandsFavorite Brands (Nabisco Acquisition from BankruptcyCanale (Argentina; Nabisco Acquisition)United Biscuits*** (2000 Acquisition by Nabisco)Nabisco Canada Grocery Products (Divestiture)Richardson-Vicks (AcquisitionLife Savers Company (Squibb Divestiture to Nabisco BrandsKraft Foods (Phillip Morris Acquisition)Kraft Foods + General Foods (Merger within Phillip Morris)Tropicana (Acquisition)Ocean Spray (Acquisition; JV)Tree Top (Acquisition)Austin Foods (AcquisitionHunt-Wesson (Acquisition)Mennen (Acquisition)Neutrogena (AcquisitionSpice Island (Acquisition)Ole Smokey MoonshineStokley-Van Camp (Acquisition; Gatorade, etc.)Progresso (Ogden Corp Divestiture to Pet Foods)Lender's Bagels (Kraft Foods Divestiture)Delimex Frozen Foods (Acquisition by Fenway Partners)

Brands/LinesBreath Savers/Ice Breakers Mints +

Ice Breakers/Carefree/Bubble Yum Gums + Royal Gelatin(Nabisco Divestitures to Hershey & other firm)

Fleischmanns/Parkay Margarine (Nabisco Divestiture)College Inn (Regional Broth; Nabisco Divestiture)Best Foods’ Bakery Business (Entenmanns, etc.; Divestiture)Mitchum (Anti-Perspirant; Acquisition)Choco-Milk (Milk Additive/Mexico; Acquisition)Chun King (Chinese Foods; Acquisition)Pine Sol & Combat (Household Products; Acquisitions)Gatorade & Snapple (Quaker Oats Divestiture)Black Diamond (Cheese/Canada; Acquisition)Ortega (Mexican Foods; Acquisition)Saffola (Margarine, Oils; Acquisition)Sunny Delight (Doric Foods)Maalox (Antacid; Acquisition)OTC Drugs + HH Products + Rx-To-OTC Switch (Miles Labs)OTC Drugs + Rx-To-OTC Switch (Marion-Dow)

* Largest global CP Industry deal in 2005; voted deal of the Year in the U.S. and Europe** Voted Deal of the Year in U.S. in 2000; largest auction ever at that time of a U.S.-based public company*** Voted Deal of the Year in Europe in 2000**** Largest global CP Industry Deal of 2008

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StrategicValue

FinancialValue

TransitionPlan

Organization Dev.

Acquisitions & Divestitures – Personal Experience

Not All-Inclusive List

Peter Klein – Cont'd




Example references for Peter Klein (and PKA) follow…kindly inform Peter in advance of contacting anyone so he can call and assure folks respond quickly

• Jim Kilts (Managing Director, Centerview Capital; Non-Exec Chairman of Big Heart Pet Foods, Director at Nielsen/ex-Chairman, Director at MetLife and Pfizer; ex-Chairman/CEO: Gillette Company and Nabisco Foods; ex-Global CEO, Kraft Foods)

• Sandra Peterson (Group Worldwide Chairwoman and CEO, Johnson & Johnson IT, Supply Chain and Consumer Healthcare Sector; ex-President, Bayer Global Agriculture Group; ex-President, Bayer Diabetes Care & Devices GBUs; ex-Whirlpool; ex-McKinsey Consultant)

• Gary Rodkin (CEO, ConAgra; ex-President, PepsiCo Beverages)• Robert Sharpe (ex-General Counsel, ConAgra Foods; ex-General Counsel, PepsiCo and RJR-Nabisco)• Irene Rosenfeld (CEO, Mondelez; ex-CEO, Kraft Foods; ex-CEO, Frito-Lay)• Ian Cook (CEO, Colgate-Palmolive)• Gary Cohen (ex-CEO, Timex USA; ex-General Manager Playtex, ex-SVP Marketing Gillette Oral-B Global Business Unit)• Roger Deromedi (Chairman, Pinnacle Foods; ex-CEO, Kraft Foods)• Carlos Brito (CEO, Anheuser-Busch InBev)• Bridgette Heller (Ex-President, Merck Global Consumer Healthcare: ex-J&J and ex-Kraft Foods Senior Executive)• David Peacock (ex-President, Anheuser-Busch InBev – US)• Dave West (CEO, Big Heart Pet Food/ex-Del Monte Foods; ex-CEO & CFO, Hershey Foods; ex-Nabisco Biscuit VP Finance)• David Rickard (ex-CFO, CVS; ex-CFO, RJR-Nabisco; ex-SVP Finance, GrandMet/Pillsbury and Kraft Foods)• Ed Lonergan (ex-CEO, Chiquita Brands; ex-CEO, Diversey; ex-President, Gillette Europe; ex-VP, P&G)• Rick Lenny (ex-CEO, Hershey Foods; Director, ConAgra & McDonalds; ex-President, Nabisco Biscuit-US; ex-Kraft Foods SVP)• Doug Conant (ex-CEO, Campbell Soup Company; ex-President Nabisco US Foods; ex-VP, Kraft Foods)• Denise Morrison (CEO, Campbell Soup; ex-Nabisco US Foods SVP Sales, ex-Nestle Executive)• Ed Shirley (ex-CEO, Bacardi; ex-Vice-Chairman & President, P&G Beauty/Personal Care GBU; ex-President, Gillette International• Claudio Garcia (SVP Human Resources, Anheuser-Busch InBev)• Bob Gamgort (CEO, Pinnacle Foods; ex-Mars President NA; ex-MLB General Manger; ex-President, Kraft Foods’ Lenders Bagels Division)• Jim Holbrook (EVP, Post Foods; ex-CEO EMAK Marketing Services)• Lou Gentine and Louie Gentine (ex-CEO and current CEO, Sargento Foods)• Michael Pellegrino (President, Consumer Group, Sargento Foods; ex-Marketing & Sales Executive, Kraft Foods)• John Bowlin (ex-Chairman, Spectrum Brands; ex-President, Oscar Mayer, Miller Beer and Kraft Foods NA)• Neil DeFeo (ex-Chairman/CEO, Sun Products Corp; ex-CEO at Playtex Products and Remington Products; ex-P&G, Clorox Executive)• Carl Johnson (EVP Pet & Growth Officer, Big Heart Pet Foods/ex-Del Monte Foods; Non-Exec Chairman, Nautilus Equipment; ex-SVP

Strategy/Planning, Business Development, Quality and R&D, Campbell Soup Company; ex-EVP Kraft Foods U.S. Meals & Enhancers Div)• Paul Sturman (ex-President, Pfizer Global Consumer Health Care; ex-SVP, Johnson & Johnson; ex-Warner-Lambert Mktg)• Jeff Ansell (CEO, Sun Products; ex-CEO, Pinnacle Foods; ex-President, P&G's Iams SBU)• Tony Milikin (Global Procurement Head, Anheuser-Busch InBev)• James White (CEO, Jamba Juice; ex-President, Safeway's Consumer Division; ex-Gillette and Ralston-Purina executive)• Jim Cataldi (SVP N.A. Strategy & Planning, GsK)• Joe Schena (CFO C&S Wholesale; ex-CFO Bacardi; ex-Partner Centerview Capital, ex-Sr Finance at Gillette, Nabisco, GF)




THEDEAL.COMMay 11, 2007 On-Line Article & July 2007 The Deal Magazine

The Tonto Files

Peter Klein

"I began my career," says Peter Klein, "selling drugs on the corner of Haight and Ashbury in the 1960s."

True enough: The drugs in question were over-the-counter medications like Vicks and Nyquil, and Klein

was selling them to pharmacies (including one at that famous location) as a management trainee for

Richardson-Merrell Inc. It was a good beginning for an ambitious young man with no flowers in his hair,

though not for the reasons he thought. For just as the Age of Aquarius was dawning, the sun was setting

on the last great period of growth for the consumer-products industry. Industry leaders would take time to

react, but by the early 1980s, they were battling for market share — and Wall Street's approval — with

countless turnaround plans, re-engineering schemes, adjacent expansion strategies and, above all,

acquisitions. The wave of transactions, which continues to this day, involved many of the biggest and best-

known companies in the world. Richardson-Merrell, for example, became Richardson-Vicks Inc. and then

a part of Procter & Gamble Co., which won it in 1985 after Unilever put it in play with a hostile bid.

Peter Klein - The Deal Magazine Article

Separate article on Peter Klein from Advertising Age available on request: 1 of Top 10 Innovators




Klein had long since moved on by then, preferring to climb the ranks at Johnson & Johnson, Gillette and Sterling Drug Inc.before becoming a consultant in the early 1980s. But throughout his long career — and especially in the last decade, when heheld the top strategy and business development jobs at Nabisco and then Gillette — he has been involved in one way or anotherin much of the action as this huge, mature sector has tried to reconfigure itself in a changing world. Klein's role has never been ahighly public one; that's for CEOs. Instead he has stayed in the background, in that vital spot where strategy meets execution."So," he says, beginning an interview with typical humor, "this is Tonto, coming out of the tent.“

If Klein is Tonto, the Lone Ranger would have to be Jim Kilts, the disciplined, analytical consumer-products executive creditedwith turning around dozens of brands over the years, from Kool-Aid to Post Cereal. The relationship dates back to 1982, whenKilts was at General Foods Corp. and hired Klein as a consultant. Kilts went on to work at Kraft Inc., ultimately becomingexecutive vice president of worldwide food operations at Kraft's then-parent, Philip Morris Co's. But what he (and, by extension,Klein) is best known for are two consecutive home runs: fixing up Nabisco and selling it to Philip Morris for $14.9 billion in 2000,and then fixing up Gillette and selling it to P&G for $54 billion in 2005.

Gillette's sale to P&G was the largest-ever consumer-products transaction, making P&G the world's biggest consumer-productscompany, with combined annual revenue of more than $63 billion. It's also a giant test case of the ability of an acquirer tocombine seemingly complementary businesses, take advantage of diverse geographic strengths and make huge scale pay off.

The Nabisco sale was a coda to the over-reaching $31 billion leveraged buyout of RJR Nabisco Inc. by Kohlberg, Kravis Roberts& Co. in 1989. Because Nabisco was combined with Kraft, recently spun out of Altria Group Inc. (as Philip Morris is now known),it was also a big step in the unwinding of the 20-year strategic tie-up between food and tobacco.

At both Gillette and Nabisco, Kilts was hired as the chief executive officer and quickly brought in Klein as one of his key recruits.Klein's job was nearly identical at both companies: He was in charge of drawing up the strategic plan, which defined thecompany's goals and documented how to achieve them. Dealmaking for him has always been part of a bigger picture. Now aconsultant again (his Rye, N.Y., firm is called PK Associates LLC) he regularly tells his clients to be wary of the "zeal to deal." Bythat he means making key M&A decisions in the heat of the moment, instead of taking a longer-term approach and seeing dealsas an extension of a plan.

It's the kind of common sense that executives in an industry under pressure often manage to forget — and Klein's industry offersmany a case in point. Take, for example, Kellogg's acquisition of Lender's Bagels for $455 million in November 1996. Threeyears later, the attempt to move into the broader breakfast market was deemed a failure. Kellogg sold Lenders to Aurora FoodsInc. for $275 million, 60% of its original price, and the company took a $170 million hit to its earnings.

Peter Klein - Article, Cont'd





The desperation to deal comes from the simple fact that the industry is not growing. For the past 25 years consumer-productscompanies have struggled to keep pace with the overall economy and have grown at less than 1%, simply tracking populationgrowth in developed countries.

As a consultant at Marketing Corp. of America in the early 1980s, Klein saw the transition unfold. Companies shifted attentionaway from product development and focused on grabbing market share, usually through more advertising and moreacquisitions. Consolidation, Klein believes, exacerbated this shift and created a vicious circle. Senior managers departed astheir companies were acquired, leaving fewer executives with experience in product development. Meanwhile, companieswere having trouble recruiting young talent; many of the best and brightest went into the roaring financial services sector.

And the best-known brands in the supermarket weren't getting any younger. Saltines date back to 1876, Coca-Cola to 1886,Juicy Fruit gum to 1893, Kellogg's Corn Flakes to 1906, Hellmann's mayonnaise to 1912, Land O'Lakes butter to 1921, BirdsEye frozen foods to 1930, Ragu pasta sauce to 1946, Häagen-Dazs ice cream to 1959 and Gatorade to 1965.

To be sure, consumer-products companies in the 1980s were trying to innovate, just as they are today. In 1984 Klein was hiredby Oscar Mayer Foods Corp., where Kilts had recently become a general manager, to evaluate one of its new products —stuffed frozen hamburgers. Klein suggested scrapping the frozen burger idea since Oscar Mayer was spending money to learnthings about the frozen-food business that industry leaders had known for decades. Instead, he suggested extending OscarMayer's brands of deli meats and cheeses. The result was "Lunchables," packaged school lunches consisting of crackers,cheese, deli meats and desserts, which soon became a billion-dollar business.

But Lunchables was an exception — the more so, since most innovations come from outside the big companies. "More than80% of new products fail," says Klein, who studied marketing and finance at Syracuse University, earned an M.B.A. at Harvardand has no doubt that stuffed frozen burgers would have failed too.

Klein continued his consulting career at the Cambridge Group, which he joined in 1991. And he continued to work on thebuying and selling of several supermarket aisles' worth of brands, divisions and companies, including Pine Sol, Gatorade,Tropicana and Mennen. Jim Kilts was a big client, but not his only one.

That changed in 1998, when Kilts was hired as the CEO of Nabisco. It was almost 10 years after the "Barbarians at the Gate"buyout. KKR had exited in 1994, but the separation of Nabisco from RJR, one of the original objectives of the deal, was stillhung up in the world of tobacco litigation. Nabisco itself was struggling. A heavy debt load limited financial flexibility, itsdistribution system had been damaged by cost cuts and it lacked an international division, which KKR had divested to pay offdebt. "This put the company at a major disadvantage because it was operating in a global market," says Klein.





Kilts hired Klein as vice president of strategy, corporate planning, e-business and marketing services. Klein drew up astrategic plan and then got to work on item No. 1: turning around the biscuit division, whose profits were falling fast, despitepopular brands like Ritz crackers, Wheat Thins, Fig Newtons and Oreo cookies.

Seeking to increase productivity, the previous executives had restructured the biscuit division sales force. Originally, onesales person drove the trucks, stocked the shelves, set up displays and maintained a relationship with the store manager.Under the new system, a different person was assigned each function. The system was rolled out nationally before it wastested on a much smaller scale. Many senior people in the sales force responded to the change by quitting.

"They changed their distribution system and got it all wrong," says Klein. After studying what went wrong, Klein and Kiltsbrought back the original structure and rehired some of the senior sales people who had quit.

The marketing plan also suffered from mismanagement and neglect. In the five years before Klein joined Nabisco, the unit'sadvertising budget had fallen to historical lows. Klein discovered that several viable brands, including Snackwells, Ritzcrackers and Fig Newtons, had been all but ignored. Nabisco then decided to invest $50 million in marketing, increasing theadvertising-to-sales ratio by 50%.

Shrewd acquisitions played a big role in the turnaround plan. Klein's team identified gaps in the product line, and inSeptember 1999, Nabisco bought Favorite Brands International Inc. out of bankruptcy for $475 million — a deal that waswithin the company's limited means. Favorite brands had been a hodgepodge of companies thrown together, but never fullyintegrated. Its brands included Jet-Puffed marshmallows, Trolli Gummi candies and the Sathers & Farley's candies. "Wesaw hidden value in Favorite Brands," says Klein, explaining that the brands, especially Trolli, complemented Nabisco's LifeSavers unit. Previously undermarketed, the brands could be sold through the stronger Life Savers distribution system. Thedeal also made possible the introduction of Gummi Savers, now a significant product in the $700 million chewy-candy sector.

Nabisco was also eyeing United Biscuits, but here it lacked the financial firepower to proceed alone. After initially competingagainst a team consisting of French food company Groupe Dannone and financial partners Paribas Affaires Industrielles, orPAI, Cinven Ltd. and DB Capital Partners, it teamed up with them and bought United Biscuits in a joint venture. Along with astake in the JV, Nabisco was able to buy outright some of United Biscuits' holdings in China, Hong Kong and Taiwan.(Danone, meanwhile, bought its operations in Malaysia, Singapore, Scandinavia, Finland, Poland and Hungary.) The dealturned out to be a cost-effective way to restore some of Nabisco's international reach, since most of United Biscuitsoperations were in Europe.





The turnaround was progressing, but Nabisco's stock remained depressed because of its relationship to parent RJ Reynolds(still its majority owner), which was facing billions of dollars in potential tobacco liabilities. Raider Carl Icahn had alreadymade several attempts to buy Nabisco before Kilts and Klein joined the company. In 2000 he made another, offering a hefty40% premium to the company's stock price. The board of directors put Nabisco on the auction block. Klein becameimmersed in the process, facilitating the development of the prospectus, working closely with the investment bankers on thedeal and working on the management presentations to prospective buyers.

In June 2000, Nabisco was sold in a complex deal. Philip Morris bought Nabisco Holdings, the food unit, for $14.9 billion.Nabisco's parent company RJ Reynolds, meanwhile, assumed any tobacco liabilities associated with the deal along with$11.8 billion in cash that was on Nabisco's balance sheet.

Philip Morris wanted Nabisco to combine with its Kraft unit, which it had captured in a hostile deal in 1988 as a bulwarkagainst its tobacco liabilities. For Kilts and Klein, this was familiar territory. As senior vice president of strategy anddevelopment at Kraft in the late 1980s, Kilts was in charge of defending Kraft from Philip Morris' original tender offer, helpingto get the price up from $90 a share to the $106 a share Kraft eventually fetched. After the deal was done Kilts was incharge of integrating Kraft with Philip Morris' existing food business — his former company, General Foods, which PhilipMorris had captured in 1985. Klein worked on that integration as well, helping to combine the two North American salesforces.

In 2000 the task would be to integrate Nabisco with Kraft. Klein stayed on to help, working with Irene Rosenfeld, then arising star at Kraft and now chairman and chief executive officer of the company. Klein oversaw a Nabisco steeringcommittee, which suggested ideas for integration, but Kraft was responsible for the ultimate plan. The hardest part for Kleinwas watching Life Savers, a unit he helped build, be dismantled. To get regulatory approval for the Nabisco deal, eitherAltoids or Life Savers' breath mints unit needed to be divested. Philip Morris decided to sell the Life Savers unit."It was a difficult decision, hard to comprehend," says Klein, who recalls being told that Altoids was a global brand withsignificant growth opportunities. Klein disagreed. Less than 10% of its sales were outside the U.S., he says. And while Kleinwas unsure whether Altoids had any new products it its pipeline, he knew that Life Savers sure did. Also by selling almosthalf of the Life Savers unit, which had been bigger than Altoids to begin with, it would become smaller and lose some of thebenefits of scale.

After Nabisco, Klein planned to get back into consulting. But Kilts, who had been hired in 2001 as CEO of Gillette, onceagain knocked on his door.





Gillette, like Nabisco, was a major turnaround play. The company had missed analyst's forecasts for 14 straight quarters.The way Klein saw it, the biggest problem was that the company had become very insular and inefficient. It would pay billsin 15 days but take 120 days to collect debt. Sales meetings were held 10 to 15 days after the books closed each month,not daily. There were few staff meetings or quarterly reviews. Managers were not held accountable and didn't strive to meetperformance objectives; few even knew what exactly was expected of them. The board of directors only paid out between20% and 40% of its bonus pool each year.

As vice president of strategy and business development, Klein once again developed a three-year strategic plan for theentire company. Gillette hadn't created such a plan since 1992. "No one was planning for more than one year in advance,"says Klein. The problem, he says, "was more or less self-inflicted.“

Klein and Kilts began by redefining the company's organizational structure, laying out clearly defined rules andresponsibilities. They didn't replace most executives, though there were some musical chairs. Weekly staff meetings createda venue where managers could be held accountable to each other, not just to Kilts and Klein. Reorganizing made a bigdifference. By 2005 the board of directors doled out about 95% of the bonus pool to employees.

With the organization functioning, Kilts and Klein turned their attention to revamping the business. A major challenge wasrecovering from a badly bungled acquisition. Gillette had paid KKR close to $8 billion, including assumed debt, for batterymaker Duracell International Inc. in September, 1996. But according to Klein, key people from Duracell were lost after theacquisition, and Gillette focused on selling its high-end Ultra brand to the exclusion of some of its better-known, more mid-market brands, like CopperTop and Duracell Plus.

Under the new plan, Duracell would focus on all three brands and look to grow the business' margin faster than the batterybusiness as a whole. To do this, executives were given quarterly and annual goals, which Klein and Kilts ensured were met.The other objectives outlined under Klein's three-year plan included: to expand the company's market share in the razorbusiness, to grow Oral- B's manual toothbrush business and to improve its electric razor business. Across the board, Kleinand Kilts found that Gillette executives had focused on high-end products to the exclusion of its bread-and-butterbusinesses.

The three-year plan helped improve the company's business and its stock performance. Nevertheless, Gillette was stilloverly dependent on razors and blades. And with about $10.5 billion in 2004 sales, it was dwarfed by consumer-productsgiants such as Unilever and Procter and Gamble.




Klein believes that larger companies have many competitive advantages. They have more power when it comes toprocurement and research and development. They also can invest in areas that are out of reach for smaller competitors.Frito-Lay's extensive distribution system and Anheuser-Busch's advertising campaigns are examples. Larger companies canalso exert more pressure against retailers, especially behemoths like Wal-Mart Stores Inc., for shelf space but can also workwith them as a global partner.

In one of the many presentations Klein uses in his consulting work, he puts the advantages of scale this way: "It's the abilityto invest in building capabilities which are distinguishable from competitors, like: assessing and integrating acquisitions,managing investor relations and specific areas of technical expertise." Big firms can make investments, adds Klein, "whilesmaller firms go broke with one idea.“

When Gillette decided to look for a big merger, Klein's role once again was to advise the board of directors and work withmanagement and investment bankers. This was not the first time the company had considered a merger. Two years earlier,Kilts approached his counterpart at Colgate-Palmolive Co., Reuben Mark, to discuss a possible "merger of equals," but thesides couldn't agree on a valuation and who would run the combined company. In 2004, Gillette approached Colgate againand the results were pretty much the same. But four months later, Gillette began talks with Procter & Gamble, which boughtthe company in February 2006 for $54 billion.

For Gillette, selling to P&G would reward shareholders and solve the size problem. For P&G, committed by chairman A.G.Lafley to look outside the company for growth, the deal was an attempt to build out its portfolio. One area that P&G wasparticularly interested in was Gillette's toothbrush business. P&G's toothpaste brand, Crest, has been trying to gain marketshare from the industry leader, Colgate, for years, and P&G hoped the deal would help it gain a competitive edge in thedental isle. The idea is to pair Gillette's number one toothbrush, Oral-B, with Crest toothpaste, similar to the way shampooand conditioner are packaged as an extension of a single product. According to a recent Wall Street Journal article, the ideahas yet to pay off. One hurdle: getting Oral-B staff to move from Boston to P&G headquarters in Cincinnati, where a Gillettemanager decided the operation needed to be.

Another big driver for the deal was that the two companies could help each other expand internationally. Over the years,P&G has developed top-notch distribution systems in such fast-growing markets as China, Russia, Poland and thePhilippines, and the chance to move Gillette's products through them was an important reason for the deal. Gillette has itsown strengths in such countries as India and Brazil and could help P&G in those markets.





On the international fronts, things seem to be going well. P&G cited strong growth in developing markets when it announced

earlier this month that net income was up 14% (to $2.51 billion) in its fiscal third quarter. Overall, P&G's businesses and

stock have performed well since the deal, though in a bond prospectus filed in May, it noted that the integration of Gillette

continues.

While Klein believes that P&G's scale will help it compete in the years ahead, he sees three key challenges for all the

consumer-products companies. The first is intensifying competition. Retailers are growing steadily more powerful, and their

growing lineups of private-label products pose a serious threat to manufacturers.

The next challenge for consumer-products companies will be figuring out how to become more efficient. "A lot of the low-

hanging fruit has already been picked off," he says, adding that companies would be well advised to rethink what their core

businesses are and what functions, beyond the back office, can be outsourced.

The last challenge may be the toughest of all: It's the shortage of good people going into product development and

marketing in this now-mature industry. Yes, Kilts has earned spectacular rewards for his work in the field: a total payout of

$77 million after the sale of Nabisco and as much as $165 million from the sale of Gillette. Klein, too, has presumably done

well in these deals, though he declines to say how well.

But those prizes were years in the making, and they won't be easily duplicated. These days, the young Peter Kleins of the

world are much less likely to go into consumer products. As they make their way, though, they'll still do well to consider the

lessons Klein and his colleagues have learned over the years.

Visit Peter Klein's website for additional background and his consulting/counsel services offered: www.pkassociates.com


Separate article on Peter Klein from Advertising Age available on request: 1 of Top 10 Innovators




Peter Klein - Advertising Age Article

PK ASSOCIATES -- INTRO April 2015

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