Innovation Success West to EastMy 5 thoughts working in Food and Beverages

PRIVILEGED&CONFIDENTIALMarch25th 2019

Arnold Veraart35 years experience

in Global FMCG

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My “East” Experiences

1991-1993FirstInternationalPostinginViennaasGMAustria&Switzerland,workedoutoftheEasternEuropeOffice

1997-2003ResponsibleforPepsiCoBeveragesinEuropeincludingCentralEurope,RussiaandBaltics

2014GMChinaPepsiCo

2009-2019SVPCommercialforPepsiCoAMENAincludingChinaandAsia

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My 5 Thoughts on innovating for and in the East

1. DedicatedProjectmanagementdelivers“fewerbigger,betterandFaster”Innovations

2. “Glocal”Innovationteamsdeliversolutionswithhigherchanceofsuccess

3. Designteamplaysanintegralroleinmanyinnovationsuccesses

4. Speedisoftheessence,Notallinnovationsarecreatedorshouldbemanagedequal

5. Don’tgiveuptooearly,someofthebiggestinnovationstooktimeandtweaks

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Lesson 1: Most businesses have a big opportunity to declutter and focus the agenda

25%$2%Projects 25%$

4%Projects 25%$14%Projects 25%$

80%Projects

GlobalScale

Large

Medium

ManySmallinnovationsarepursued,tailisnottimelycut,resourceswasted

Small

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• MarketeersarenotgoodProjectManagers

• AdedicatedCommercializationfunctiondrivesresults

Lesson 1: Using dedicated project management delivers “fewerbigger and better and faster” Innovations

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Lesson 2: “Glocal” Innovation solutions have higher chance ofSuccess

ARussiaExample:Combiningalocalfoodhabitwithaglobaltechnologyadvantagecreatesanewsnackbrand

AChinaExample:AmericanPotatoChipwithlocalandsurprisingflavours

GoodLocalInnovationandR&DteamsareneededtoaugmenttheGlobalTechnology

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Glass designs for restaurants

Nongfu Spring Website

Water for Infants

Sports Cap

Lesson 3: Design plays an integral role in many innovation successes

• ConsumerCentricDesigndrivesdemandandPricingPower• Adesignfunctioniscriticalforthistosucceed

Base Range

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Lesson 4: Speed to Market is more and more of the Essence

• LocalPlayersarenolongerB-brands.Haveaccesstosametechnologyandoperatefast

• TheynotonlyplaythevaluegamebutalsoplayPremiumend

• TheyareFastandagile,lessbureaucracyandrules

• Localisnolongerlowqualityitisauthenticandisin

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• Leverageexistingcapability• Reduceconsumertestingtoabsoluteminimum

Refresh

• Leverageexistingcapability&minimizecapexinvestments• Developcontinuouspipelinetodeliverscalenewsevery2years

Scale&Replace

• TheseareBigBets,Requirestechnologyunlocks,sizeablecapex,• Managetightly:ring-fenceresources&govern,IPprotection

Scale&Grow

• Outsourcemanufacturingtodriverapidprototyping• Simultaneousvssequentialthinking,launch&learnmindset

StartSmall,WinBig

Lesson 4: Innovation Approach and investment needs to vary by type

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Lesson 4: Some ways to add to speed to market

CreateseparateIncubationteams

LeverageVentureCapitalInvestmentsinstartups

EmployInnovationandTechnologyScouts

UtilizeRapidPrototypingteams

SourceExternalInnovationIdeationthroughCompetitions

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China French Fries Sales Vol. in Past 6 Years

Jän.13

Feb.13

Mär.13

Apr.1

3

Mai.13

Jun.13

Jul.13

Aug.13

Sep.13

Okt.13

Nov.13

Dez.13

Jän.14

Feb.14

Mär.14

Apr.1

4

Mai.14

Jun.14

Jul.14

Aug.14

Sep.14

Okt.14

Nov.14

Dez.14

Jän.15

Feb.15

Mär.15

Apr.1

5

Mai.15

Jun.15

Jul.15

Aug.15

Sep.15

Okt.15

Nov.15

Dez.15

Jän.16

Feb.16

Mär.16

Apr.1

6

Mai.16

Jun.16

Jul.16

Aug.16

Sep.16

Okt.16

Nov.16

Dez.16

Jän.17

Feb.17

Mär.17

Apr.1

7

Mai.17

Jun.17

Jul.17

Aug.17

Sep.17

Okt.17

Nov.17

Dez.17

Jän.18

Feb.18

Mär.18

Apr.1

8

Mai.18

Jun.18

Jul.18

Aug.18

Sep.18

Okt.18

Nov.18

Dez.18

2013 2014 2015 2016 2017 2018

Source:Internalshipmentvol.FY2013- FY2018

Volume (Tons)

Lay’slaunchesfirst– 1SKU

CompetitionfromJapan3Flavors

LiddifficulttoopenOilleakchallenges,short

shelflife.

Competitionlaunchesbox&bonuspack.

CNY

CNY

Lesson 5: Don’t give up too early, some successful innovationstook time and tweaks

GO/NOGO

DECISION

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In summary

1. DedicatedProjectmanagementdelivers“fewerbigger,betterandFaster”Innovations

2. “Glocal”Innovationteamsdeliversolutionswithhigherchanceofsuccess

3. Designteamplaysanintegralroleinmanyinnovationsuccesses

4. Speedisoftheessence,Notallinnovationsarecreatedorshouldbemanagedequal

5. Don’tgiveuptooearly,someofthebiggestinnovationstooktimeandtweaks

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Thank You