Brock Leach Foundation for American Health Care Leadership December 7, 2004

1. PepsiCo Health & WellnessCapturing Growth at the Intersection Brock Leach Foundation for American Health Care Leadership December 7, 2004

2. 1. Big Demographic Shifts Both older and younger Increasing ethnicity Income level bifurcation Major New Growth Opportunities • Life-stage Tailored Products • More Taste / Experience Variety + • Improved Convenience • Re-Defined Meals: “Snack Meals” + • Growing Demand for Wellness • Better-For-You choices • Good-For-You nutrition Wellness will be the Next Big Consumer Driver Major Trends 2. Increasing Time Pressure • Dual income families • Increasing work time 3. Increasing Health Concerns • Emerging obesity epidemic • Increasing age-related • Behavioral shift to prevention

3. Big Idea in Wellness: Energy Balance Low Fat Meats Refined Sugars Fats Endurance Living Simple Carbs Low Fat Dairy Veggies Beans Strength Whole Grains Fruits Flexibility Percentages of Calories In Percentages of Calories Out Calories In Calories Out The Energy Balance

4. Biggest Consumer Opportunities • Easier ways to manage energy balance • Easier ways to replace simple carbs with complex carbs, low fat proteins and healthier fats. • Easier ways to get micro-nutrients through a mix of whole foods & appropriate fortification The Big Idea In Nutrition: Making it Easier and More Enjoyable Consumer Knowledge Needs • Calories In • Calories Out Energy Balance • Simple carbs • Complex carbs • Proteins • Fats Macro-Nutrient Balance • Vitamins & Minerals • Phytochemicals • Fiber Micro-Nutrient Needs Specific Functional Benefits • e.g. Glucosamine & Joint Health

5. Creating an Appropriate Environment Motivating Individual Action Implementing Better Marketing Practices Providing Healthy Product Choices Promoting Healthy Lifestyle Habits Restricting, Taxing Food WELLNESS The Big Idea in Lifestyle Change: Individual Motivation Proposed Solutions

6. 2004 YTD Q2 Net Sales Growth vs. YAG 10.3% 9.5% 4.5% Fun-For- You Better- For-You Good- For-You 38% +1.2 Pts. vs. YA +10% vs. YA 56% of Total Growth Wellness is Driving Our North American Growth 2004 YTD Revenue — PepsiCo North America “Smart Choices” Standards Fun-For-You 62% 30% 8% Good- For-You Better- For-You

7. Fun- For-You Better- For-You Good- For-You 13% 11% 11% 10% 9% 5% 4.5% 4% 3% 2002 2003 2004 YTD 2002 2003 2004 YTD 2002 2003 2004 YTD . . . And It’s Accelerating

8. We're Starting From A Very Strong Position + The Leading Brands in all Healthy Segments Most Respected Brands in Health % Consumers Consider Brand Very or Extremely Healthy 76% Quaker 72% Dole 71% Tropicana 68% Dannon 57% Minute Maid 54% Kellogg's 44% Gatorade 34% Powerade 34% Snackwell's 32% Kraft 32% Nabisco 17% Nestle 9% Frito-Lay 6% Coca-Cola 5% Pepsi-Cola Source: Morgan Stanley Consumer Research

9. Healthy Product Choices + • HealthyLifestyle Habits Making it Easier and More Enjoyable for Mainstream Consumers PepsiCo Strategy: Real Action Focus Our Efforts at the Intersection of Business Interest and Public Interest . . . Business Interest: Public Interest: Capture Growth Opportunity Promote Real Solutions

10. Choices Habits 1 2 3 4 Accelerate BFY / GFY Product Development Improve Healthfulness of Existing Products Deliver Healthy Food & Bev Solutions to Schools Improve Healthfulness of Existing Products Accelerate BFY / GFY Product Development Promote Healthy Kids Lifestyles U.S. Health & Wellness Progress Report • 70%+ of 3-Year New Product Revenues • Major New Product Launches in Every Division • New Platform Teams Operational • Value-added Proteins • Fruits and Vegetables • Whole Grains • Eliminated Trans Fats at Frito-Lay • Establishing “smart choices” Standards • Successful New Portion-Controlled Offerings • 12/24 Sacks • 8 oz. cans/12 oz. bottles • Total Calorie Labeling on Single Serve • Introducing New BFY / GFY Choices • 30+ new SKUs • New school-specific products • Promoting Them in Schools • Bevs: 17,000 Aquafina & Gatorade vending • Foods: BFY / GFY bids +36% • New Schools Marketing Policies • Promoting Youth Sport • Supporting Behavioral R&D • Motivating Lifestyle Change: America On The Move™ • Curriculum for 2.5 Million Kids • Supporting School Decision-Makers: “Health Is Power™”

11. 2004 New Product Highlights Reducing Fat Reducing Sugar Bevs: Adding Positives Foods:

12. Tropicana Fruit Integrity —Nothing but Fruit Latest Estimates of Fruit Servings Strips Bars Nibblers Squeezers Drinkable Fruit = = = = = 1 serving 3 servings 3 servings 1 serving 2 servings

13. Key Lifestyle Programs: Making It Easier Supporting School Decision-Makers Promoting Healthy Lifestyles • National movement to help people get started • Private / public partnership • Our Partnership Includes: • “Power of One” Marketing Property for Smart Spot™ at Point-of-Purchase • Development of Healthy Kids Lifestyle Programs in Schools • American School Food Service Association Partnership • Health Is Power™School Resource Guide • Interactive Wellness System

14. Energy Balance Education for 2.5mm Elementary School Children Lesson Plans 1-2 Grades 3-5 Grades

15. Dr. Kenneth Cooper Blue Ribbon Advisory Board on Health & Wellness Dr. Jim Hill Dr. Dean Ornish Gatorade Partnership YMCA American School Food Service Assoc. Enlisting the Best Support Forming Enabling Partnerships . . . . . . And Broadening Our View Gro Brundtland, M.D. W. Casscells, III, M.D. Ken Cooper, M.D., M.P.H. Antonia Demas, Ph.D. Amb. Thomas Foley Kenneth Gladish, Ph.D. George Graham, Ph.D. David Heber, M.D., Ph.D. James Hill, Ph.D. Gov. James B. Hunt, Jr. David Kessler, M.D., J.D. Susan Love, M.D. Mario Maranhao, M.D. Dean Ornish, M.D. Pamela Peeke, M.D. Janet Taylor, M.D. Fernando Trevino, Ph.D. Former Director General, WHO Professor of Cardiology, University of Texas Founder, The Cooper Aerobics Center Director, Food Studies Institute Partner, Akin Gump National Executive Director, YMCA of the U.S.A. Professor of Kinesiology, PA Univ. Professor of Medicine & Public Health, UCLA Professor of Pediatrics & Medicine, Univ. of CO Former Governor of North Carolina Dean, School of Medicine, U.C. - San Francisco Co-Founder & Senior Partner, Lluminari Former president, World Heart Federation Founder, Preventive Medicine Research Institute Assistant Professor of Medicine, Univ. of MD Pediatric Psychiatrist, Harlem Columbia Hospital Dean, School of Public Health, Univ. of N. Texas

16. An Integrated Consumer Identity that . . . . . . delivers a compelling benefit: making it easier . . . unifies the BFY / GFY products and links them to programs and to retail . . . derives credibility from real PepsiCo products, programs and actions, secondarily from endorsements Helping Consumers Make Smarter Choices — Communication Objectives Key Objective: Build Consumer Loyalty to PepsiCo’s Portfolio of BFY / GFY Products by Making It Easier for Consumers.

17. Consumer Communication: Smart Spot™

18. The green dot symbol. “Smart choices made easy” language. Our Consumer Learning Has Been Clear and Consistent Keep it . . . Simple: • Encouraging, “positive choices” message. Optimistic: • Mandatory product benefit linkage on-package: e.g. “Tropicana Light & Healthy is a smart choice because it has half the sugar of regular orange juice.” • Line-breadth: One of over 100 smart choices from PepsiCo. Real: • Referral to SmartSpot.com for: • more nutrition information • healthy lifestyle programs I can use • more information about PepsiCo and the SmartSpot™ Program. Transparent:

19. We’ll Advertise It In the Context of Our Brands

20. Smart Spot™ will make it Easier at Retail. . . National Fast Start Event

21. . . . And Unify Our Products & Programs in Schools

22. Smart Spot™ Impact on Purchase Intent Gatorade Users Baked Lay’s Users Diet Pepsi Users Oatmeal Users OJ Users (450) (280) (512) (450) (450) % % % % % Much more likely 24 23 28 30 27 A little more likely 26 35 22 29 32 50 58 50 59 59 Neither more nor less likely 48 41 50 40 38 A little less likely 1 1 0 1 1 Much less likely 1 1 0 0 1 2 2 0 1 2

23. Health Perception Benefits Indulgent Products with Health Improvements Diet-Specific Offerings Demonstrable Nutrition Benefits Natural & Organic Trans Fats Good- For-You Better- For-You Low-Carb Quaker Oats Tropicana PP Gatorade Aquafina Baked Lays Diet Pepsi Pepsi Edge A Credible Consumer Identity Requires Demonstrable Nutrition Benefits. • Consumers want a short-cut to better nutrition they can trust • GFY / BFY are scientifically supportable • Build lasting consumer identity that transcends diet fads • Focus ourselves on providing real benefits We Will Limit Smart Spot™ to Demonstrable GFY/BFY Benefits FFY GFY PepsiCo Nutritional Varieties

24. Smart Spot™ Criteria Nutrition Standards Are Based Upon Authoritative Statements from FDA and NAS FDA Criteria NAS Dietary Recommendations Beverages Foods Snacks 20- 35% of kcal low low <25% of kcal 30% of kcal <1 g 0 60 mg 480 mg 10% < 25% of kcal or 10% fiber 35% of kcal < 7% of kcal 0 60 mg 270 mg Not applicable < 25% of kcal or 10% fiber Fat Saturated Fat Trans Fat Cholesterol Sodium Vitamin A, C, Fe, Fiber or protein Add sugar < 3g < 1g No Std 60 mg 480 mg 10% No std 3 g <1 g 0 60 mg 480 mg 10% < 25% of kcal or 10% fiber OR A Functional Benefit having Significant Scientific Agreement OR Reduced: Calories, Sugar, Fat, Sodium < 25% Not defined < 25% < 25% < 25% Source: LiveWire Mom’s Internet Screen, April 2004, N=300

25. The Smart Spot™ Healthy Lifestyles Healthy Kids Commitment to Health Tools for Professionals Energy Balance Tool Product Page SmartSpot.comWill Be A Consumer Lifestyle Portal

26. September October November December January February Consumer Advertising Starts 10/1 Influencer Print National Dailies Consumer Spreads Spreads Print - Weeklies NOV Issues FEB Issues Print - Monthlies Spreads Spreads Online Trade Print On-Line 88% Reach 9.2 Frequency 75% 3+ Mom’s:

27. Smart Spot™ Media Partnership with Discovery Communications + FitTV • Health Eating PSA’s in “Roadblocks” across all six channels • Healthy Snacking Reminders at 3:00PM • Prime time Healthy Breakfast reminders with Sharon Mann of FitTV. • Sponsorships of the National Body Challenge– on Discovery Health and at Discovery Stores • Sponsorship of FitTV’s “Fit Family Week”– March 21-26, ’05 • Delivery of Balance First curriculum to all middle schools through Discovery Schools • Quaker Sponsorship of Animal Planet’s Family Showcase

28. The Smart Spot™ Unifies Our Health & Wellness Efforts Health Professionals Consumers • Shortcut to “smart choices made easy.” • SmartSpot.com provides portal to: • Nutrition information • Lifestyle programming like America On The Move™ • American Dietetic Association • American Academy of Family Physicians • American Academy of Pediatrics www.SmartSpot.com Employees Customers • Accelerated Growth Opportunity • Fresh Merchandising Ideas • Link to Lifestyle Programming • Health Roads™ Program • Healthy Lifestyle Incentives. • Wellness Website Powered by WebMD.

29. Making Healthy Living Easier: A Wish for Scale • Make the communication consistent, simple, encouraging and UNAVOIDABLE • Smart Spot-type labeling program industry-wide (e.g. ADA, AHA, ACS) • Common energy balance messaging re: getting started with simple steps. • Make simple “Get Started” interventions available everywhere • Example: America on the Move • Build consensus around implementation of a comprehensive Healthy Schools Policy everywhere, consistently. • Example: Convene a national summit with school constituencies on implementing IOM recommendations in schools. • Pilot comprehensive healthy lifestyle solutions for African American and Latino Consumers in urban environments– interventions and food marketing.

30. PepsiCo Health & WellnessCapturing Growth at the Intersection Brock Leach Foundation for American Health Care Leadership December 7, 2004