Miles Eddowes Open Innovation Champion Kraft Foods October 22, 2010 OPEN INNOVATION CASE STUDIES

2 Impressive global reach World’s second-largest food company Approximately $48 billion in revenues Sales in approximately 170 countries 25%+ of revenue from emerging markets 50%+ of revenue from biscuits & confectionery,

Portfolio of Iconic Brands Eleven $1 billion+ brands 70+ $100 million+ brands 80% revenue from #1 share positions

More than half of our business is now outside North America* *2009 Pro Forma net revenues $48billion are based on the acquisition of Cadbury plc and the divestiture of the Pizza business

5 Building a Global Powerhouse… in Snacks and Quick Meals

#1 in Global Confectionery

Confectionery and Snacks now make up the majority of the portfolio* *2009 Pro Forma net revenues $48billion are based on the acquisition of Cadbury plc and the divestiture of the Pizza business

Inventing Delicious Framework Strengthens How we innovate by integrating the competencies and best practices of Knowledge Management, Open Innovation and Intellectual Property into the technology development process

FDIN Eddowes Kraft 22_10_10 (Rev 17/09/10) PAGE 9 The Inventing Delicious Framework Helping you deliver better … faster. Ask three high-level questions: What do we know? 1 What do others know? 2 What is our IP strategy? 3 Corporate/ Business Unit Strategy Technical Challenges/Needs Intelligence Gathering IP & Technology Sourcing Strategy Development & Commercialization The “What”The “How”

Hub & Spoke Organization: Candy & Gum Research Centers (US & UK) Regional Centers RefreshmentBeverages Cheese & Dairy Coffee Biscuits Chocolate Kraft OI Corporate Hub Hub ► HUB Tools, Process, Culture – Build organizational capabilities and networks – Scouts for game changers and new business partnerships – Governance and metrics – Lead OI Community of Practice ► SPOKE Scout, Content, Collaborate – Identifies key business unit priorities – Scouts for opportunities (suppliers, innovation brokers, licensing, game-changers) – OI champion/change agent

FDIN Eddowes Kraft 22_10_10 (Rev 17/09/10) PAGE 11 What neither could do alone Joint Research Venture New products for new consumers

Game Changers Challenge: Identify Breakthrough Innovation to drive growth Lessons Learned Serendipity in open innovation Scouting non-food/beverage networks to identify breakthrough innovation Co-development agreement ensures success will be based on levering strengths of both partners

FDIN Eddowes Kraft 22_10_10 (Rev 17/09/10) PAGE 13 What neither could do alone Joint Research Venture New products for new consumers Problem solving Improved execution Fresh Ideas X

Supplier Challenge NPD Challenge: Identify Breakthrough Ideas to leapfrog the competition Lessons Learned: By leveraging the supplier challenge process, new products & packaging can be developed quickly while taking advantage of “end-to-end” thinking The business can access supplier creativity and optimize the design and commercialization efforts

FDIN Eddowes Kraft 22_10_10 (Rev 17/09/10) PAGE 15 What neither could do alone Joint Research Venture New products for new consumers Problem solving Improved execution Fresh Ideas X

FDIN Eddowes Kraft 22_10_10 (Rev 17/09/10) PAGE 16 Joint Development An answer today Accelerated Innovation New products for existing consumers

Joint Development Challenge: Create a platform technology Lessons Learned: Getting the right partner gets us to market first The right relationship and contract allows relationship to mature and diversify into other value creating opportunities

FDIN Eddowes Kraft 22_10_10 (Rev 17/09/10) PAGE 18 Joint Development An answer today Accelerated Innovation New products for existing consumers Near-Market Licensing Bolt-on benefit Product variants

Challenge: respond to competitive threat & key consumer dissatisfier Lessons Learned: Can turn a consumer dissatisfier into a growth enabler Proactive scouting for external technology enabled a get-to-market faster solution Can build off the licensed patent to deliver additional IP & value for Kraft Near Market Licensing

FDIN Eddowes Kraft 22_10_10 (Rev 17/09/10) PAGE 20 Joint Development An answer today Accelerated Innovation New products for existing consumers Near-Market Licensing Bolt-on benefit Product variants

FDIN Eddowes Kraft 22_10_10 (Rev 17/09/10) PAGE 21

FDIN Eddowes Kraft 22_10_10 (Rev 17/09/10) PAGE 22

Open Innovation Driving Value Creation VALUE CREATION Supplier & Coman Challenges Supplier Co - development Licensing In - Trademark Licensing In - Trademark Alliances / Partnerships DIFFICULTY & TIME Product In-bounding Licensing In - Technology Licensing In - Technology Searching inside your network Scouting for New Solutions

FDIN Eddowes Kraft 22_10_10 (Rev 17/09/10) PAGE 24

Business Process – Embed open innovation into strategy Cross-Functional BU Team Operations (Internal & Ext) OI Lead Consumer Needs 1. ~~~~~ 2. ~~~~~ 3. ~~~~~ Marketing NPD ProcurementLegal Sales R&D Possible Solutions ►Open innovation considered at onset of project ►Shared ownership & alignment ►One set of goals: BU owned; OI enables ►Created an Innovation Framework incorporating OI

FDIN Eddowes Kraft 22_10_10 (Rev 17/09/10) PAGE 26