Food Safety and Brand Protection through Technology November 2011 Process Expo

1. Food Safety andBrand Protection through Technology November 2011Process Expo

2. “Will the defendant please rise…” CEO’s from Con Agra Foods, Bumble Bee Foods, Dole Foods, Butterball and Westland Hallmark Meat Co. in front of the House Energy and Commerce committee hearing, titled: “Contaminated Food: Private Sector Accountability”. 2/26/2008

3. A new level of Executive accountability?

4. A new level of Executive accountability…Round II

5. Food Safety in China, and the Risk to the U.S. • From the FDA’s “special report” Pathway to Global Product Safety and Quality (June 2011) • Imports from China = • *10-15% of all food eaten in US households • *60% of fruits and vegetables • *80% of seafood • *50% of medical devices • *80% of active pharma ingredients in medications • The FDA cannot keep up:

6. The new instances of Brand imagery… Peter Hurley comforts his son Jacob at the House Energy and Commerce Committee hearing on the salmonella outbreak. (Mark Wilson/Getty Images) Associated Press / February 12, 2009

8. Risk communication and control are now key elements of Brand Protection Risk = Hazard + Outrage problems are worse than they actually are…reputation problems are better than they actually are…L/T damage problems blamed on others… “a plague on both your houses!” “A brand promise can be unmasked as a shallow boast at almost any point during a customer experience…” Making Every Employee a Brand Manager, Heaton & Guzzo “Brand damage is one of the major business risks of the 21st. Century” Lloyds of North America  Actionable info is needed, especially to leverage “Ownable Elements” that consumers can see & hear as well as taste…

10. ththti Food Safety Has Become A Serious Public Health Issue That Isn’t Going Away • Statistics at-a-glance • Food recalls have increased • 76 million Americans get sick per year • 5,000 deaths per year • 89% of voters support food safety legislation More government attention than ever before: FDA Office of Foods – enhancing ability to address food and feed safety. Federal Trade Commission – increased enforcement and monitoring of Quality claims. Better cooperation between federal, state, and local governments and agencies.

11. ththti One Incident Can Be Crippling • The Numbers Speak For Themselves • Average cost of one recall is $10 million • There are immediate and long-term impacts on share price • One bad apple spoils the whole bunch • After the spinach recall, consumers stopped eating all bagged spinach, not just the impacted brand. • Lag effect: Some consumers never return to the category. Spinach eaters: 5% said "never again"* • Many consumers stopped all bagged salad items.^ • 1,470 reported illnesses • actual cases probably higher • 500 million eggs recalled • 3 law suits Aug 2010Nationwide Egg Recall Salmonella Enteritidis Sources: * DailyFinance.Com August 20, 2010. ^ Food Institute Policy Report 2007.

12. Detect, assess and respond to demand and supply altering events: Process shift or upset Quality issue or material shortage Customer preference or pricing concerns New customer or supplier Emerging market opportunities New product introduction Relative Impact Delay in response time Speed with Confidence The longer it takes to respond to such an event, the greater the magnitude of impact of that event on the business

13. ththti Time is a Critical Factor in Every Recall • The Time-Value Factor • On Day 1 after recall announcement: 2.3% decline in share price compared to sector index • On Day 14 after poor handling of recall: 22% decline compared to sector index

14. ththti New Food Safety Legislation is here • Hurry Up and Wait • Broad agreement in Congress that food and feed supply must be safer. • Opinions differ on best approach and right timing.

15. ththti New Food Safety Legislation is here • Hurry Up and Wait • Broad agreement in Congress that food and feed supply must be safer. • Opinions differ on best approach and right timing. Areas addressed by existing Siemens technology

16. “Un-Common” Food Supply Security Challenges Employee Violence Tracking of contractors & visitors within the facility Disaster response Identifying and protecting Sensitive areas of the facility Protecting the employee, vendors, contractors and visitors to the facility Protecting the assets of the company Protecting the brand Etc.

17. Additional Questions for Establishing a Food Defense Program • How do we Control of Facility and Personnel (establish a secure perimeter) • Have we Checked the background and character of those who work in the facility • Have we taken the steps required to identify and control additional potential vulnerabilities • Do we have the tools required to investigate, report and mitigate security breaches • Have we developed plans, policies, procedures and training to support these goals • Are our mitigation strategies consistent across our organization

18. Food Defense: Levels of Integration Organizations balance their risks, their impact and the cost to mitigate Level 4 Integration • Security systems integrated with business systems (e.g., Human resources, production) • Managed centrally from Command & Control Level 3 Integration Solution Complexity • Multiple brands and technologies • Systems managed from one location Level 2 Integration Level 1 Integration • May include multiple standalone security systems Level 1 Installation Level 0 Integration • Limited physical security • May include burglar alarm • Limited or no physical security • Keyed entry Level of Integration

19. Food Defense: Business Impact ROI Results: TraditionalSecurity & Risk Mitigation Result: Business ProductivityImprovement Level 4 Integration • Security systems integrated with business systems (e.g., Human resources, production) • Managed centrally from Command & Control Level 3 Integration Solution Complexity • Multiple brands and technologies • Systems managed from one location Level 2 Integration Level 1 Integration • May include multiple standalone security systems Level 0 Integration • Limited physical security • May include burglar alarm • Limited or no physical security • Keyed entry Level of Integration

20. ththti Call to Action: Call to Action: Focus on Protecting the Franchise • Taking Food Safety to the Next Level • Speed: Reduction in time to root cause • Transparency: All points in the supply chain • Integration: All plant operations can be rapidly and accurately associated with production events Siemens brings intelligence to the food and beverage manufacturing process to help make food production safer to begin with and help customers solve problems more quickly and save precious resources in the event of contamination.

21. Appendix

22. Food Safety: The “Mandate” Conundrum “We will mandate!” Election year Hearings & Publicity “Will the defendant please rise…” Congress Industry must step up We don’t want to mandate, but we will if necessary! 3 4 3 A.Regulatory 5 Industry GMA B.Secy’s: FDA Agr. 3A 3 Brand Mgt. approach “Don’t mandate to me!” More than compliance is needed It’s going to cost you! 2 3 2 5 Consumers Do Something: Eroded confidence “I won’t buy” is a mandate!  when self-regulation ≠ successful 1 1 3A

23. Key Requirements of Each Component