Pepsi & Gatorade Regional Market Update May 2011

Regional markets offer the best opportunity to grow Pepsi sales and improve ROI 40% of cola category sales come from regional markets Pepsi in has growth momentum in regional – more popular than in metro for first time Lack of competitive RTV activity gives Pepsi a rare opportunity to gain regional markets share Gatorade – strong regional BDI means it will benefit from category growth

RTM is the marketing bureau for Regional free to air TV

Regional TV covers all areas outside capital cities and reaches 36% of population QLD NNSW SNSW TAS VIC REG. WA DIARY

Regional TV coverage includes large cities and fast growing coastal suburbs Newcastle & Central Coast Gold Coast Wollongong & Illawarra Canberra

Diary markets: A diverse mix of urban and rural Regional WA Port Pirie/ Broken Hill Satellite Griffith Mildura Darwin Loxton/Mt Gambier

Populations of major regional TV markets are comparable with the metros People Source: ATR & OZTAM 2011, Nielsen Media Research 2010 NNSW 2,079 SNSW 1,410

Population Increase: 2001 vs Source: ATR & OZTAM 2011 Australian population moving North and to the coast. Over 30% growth in 10 years in some regional areas National average QLDNSWVICTASMETRO

Urbanisation and high population growth changing the profile of regional Australia Lower cost of living and lifestyle are main attractions Rural populations moving to regional hub towns Less than 4% of households depend on farming

3 % 7 live in Regional TV markets Source: OzTam AGB Nielsen ,573,000 Australian teens age 13-17

3 % 3 live in Regional TV markets Source: OzTam AGB Nielsen ,035,000 Australian youths age 16-24

Seachange… … for baby boomers …for families

“Typical” Seachanger Ryan, 36. Wollongong NSW Made the seachange from the “Shire” to the “Gong”. Owns a small business in building trade Above average income & primary focus is kids and lifestyle. Loves footy, cars and teaching kids surfing.

Source: Roy Morgan Single Source (12mths to Dec 2010) Regional consumers have similar demographic profile to metro

People with HHI $130k+ or Investments $500K+ Doubling in number of wealthy people living in regional Australia in past five years Source: Roy Morgan Single Source (12mths to Sep 2010, 2009, 2008, 2007, 2006, 2005 )

Why has regional spending been more stable and the outlook more positive? Lower cost of living – less debt Huge investment in infrastructure Population growth driving development of local economies Resources growth impacting many parts of regional: NSW, QLD, WA, SA.

3 % 8 of young Cola drinkers live in Regional Source: Roy Morgan Single Source (12mths to December 2010)

37% of regular Pepsi drinkers (14-24) live in regional TV markets: Regional has 3 rd, 5 th and 6 th biggest markets Drank Pepsi P7D: People Source: Roy Morgan Single Source (12mths to December 2010)

People14-24 drink Any Coke or Pepsi variant in the P7D Source: Roy Morgan Single Source (12mths to Dec 2010, June 2010, June 2009, June 2008, June 2007, June 2006, June 2005, June 2004, June 2003) Pepsi has increased consumption in regional markets above metro for first time in past year Dec 2010 Coca-Cola Pepsi

Source: Nielsen Media Research AdEx Jul – Jun year as labelled, except Jan- Dec 2010 Pepsi and Coke increased their TV ad investment in Regional TV until last year – in 2011 Coke spend down Regional TV spend FY since 2004

In 2011 Coca-Cola has spent $1.9m on TV …99% in metro …big opportunity for Pepsi to grab regional market share through increased RTV spend

Pepsi grew YOY in Regional QLD and Reg. VIC Regional NSW has big growth opportunity ahead Drank Pepsi P7D: People %+4.80%-1.50%+6.80%-2.40%+0.60%+0.40%+11.10%+8.80%+0.10%+5.00% Source: Roy Morgan Single Source (12mths to December 2010 vs. 2009)

Pepsi Max grew its consumption in regional markets except for NNSW where it declined Drank Pepsi Max P7D: People %+1.30%-2.60%+6.80%-3.10%-5.30%+4.90%+6.10%+7.60%+2.40%+0.50% Source: Roy Morgan Single Source (12mths to December 2010 vs. 2009)

Coca Cola consumption increased in NNSW and Sydney Drank Coca Cola P7D: People %-3.20%-0.40%+2.50%+0.60%+10.50%-2.50%+14.70%-10.50%-2.70%-10.80% Source: Roy Morgan Single Source (12mths to December 2010 vs. 2009)

Source: ABG NMR Panorama (12mths to Dec 2010) High volume regional sports drinkers skew slightly older and prefer PepsiCo Gatorade

Sports drink consumption is low in regional NSW – big opportunity for brand and category growth Drink sports drinks several times a week: People %+0.10%-0.10%+1.10%-0.50%-1.40%-0.40%-0.50%-0.70%-3.50%-0.60% Source: AGB NMR Panorama 12 months to December 2010 vs. 2009

Regional consumers are heavier viewers of FTA TV but otherwise have same media habits as metro Source: Roy Morgan Single Source 12 months to Dec 2010, *AGB NMR Panorama 12 mths to Dec 2010

Audience share of the new commercial “digital” channels has more than tripled since June 2010 Source: Mediaweek, Metro data from OzTAM and Regional data from Regoional TAM. All People 18: :59 June 2010 Sept 2010 Dec 2010March 2011

Subscription TV audiences are down in all key dayparts for the Survey Year to Date FTA viewing is up & commercial TV even more Source: Regional TAM; Survey 1-2, 2011 vs. 2010; Consolidated Data New commercial channels driving Free to air TV audiences up in 2011 Audience Year on Year % Change; Combined Agg Markets (QLD, NNSW, SNSW, VIC & TAS) Total People; Sun-Sat; Survey 1-2, 2011 vs. 2010

Reg. TV CPM is 45% below metro TV average and delivers double the cost efficiency and ROI Index TV market CPM indices National average CPM P18+ = 100 Source: Regional TV Agency Survey 2010

Share of national population Share of national TV budget Higher cost efficiency of regional TV is opportunity to push growth harder than in metro

The next year is a crucial opportunity for Pepsi to gain ground in the most cost efficient market where 40% of its potential volume is ….Regional Australia …and for only 25% of the national TV budget

33 %+ of Pepsi grocery channel sales are from regional *Pepsi includes – Pepsi, Pepsi Light, Pepsi Light Caffeine Free, Pepsi Max, Pepsi Samba Source: Scan Data (4 W/E 11/05/08 to 31/08/08) Coles /Woolworths/Bi Lo (Excludes NT) 2008 RTM case study showed…

In 2010 Coca-Cola brands continue investment in RTV – in 2011 PowerAde invested 23% in RTV – Coke 0% Source: Nielsen Media Research AdEx Category: Beverages – Non Alcoholic, Aerated Soft Drinks Period: Jan-Dec 2010 Total TV Spend $4.4m $2.4m $1.4m $1.9m $2.2m $15.2m Pepsi Max PowerAde Gatorade