Wellness… the next frontier

Overview  Artful Philosophy and Approach  Evolving Consumer Landscape (wellness in the sweet-spot)  Application to Beverages

Artful Enterprises, Inc.

Overview  Artful Philosophy and Approach  Evolving Consumer Landscape - wellness in the sweet-spot  Application to Beverages

P C M Perform, Counsel, Mentor

The Traditional Choice in New Business Creation vs. In-house new product development Strategic acquisition of brands and businesses BuildBuy

A New Choice in New Business Creation  New business focus  New business expertise  Variable cost structure  Superior results BuildBuy Early Life-stage Outsourcing vs.

Artful Enterprises, Inc.  Specialists in new business creation  Serving the beverage and food industries since 1989  Vertically integrated new business creation/management Artful SodasArtful SpiritsArtful Edibles.. Conception Validation Market Preparation & Incubation Transfer

New Business Conception  The Artful difference:  Practicing the “art” of new business creation –Marketing “science” alone is not enough  Designing brands as “wholes” –“Virtual reality” products vs. disembodied concepts  Aiming ahead rather than sideways (or behind) –“What’s next” vs. “me too”

Aiming Ahead  Artful Enterprises aims to create beverage and food businesses just slightly ahead of the curve.  Leapfrogging rather that matching competitors.  To do so, we make it our practice to “stay in touch with the future”  The marketplace is dynamic; the future can be glimpsed by looking in the right places and at the right people right now....this represents Artful Enterprises’ R&D “Some skate where the puck is … I skate where it’s going to be.” -Wayne Gretzky

Anticipating the Future Gourmet and specialty stores Health food stores Restaurants International Supermarkets Convenience stores Vending Mass Merchandising Consumer Type: Early Majority Late Majority Laggards Many incremental new products appear in “niche” venues and are tried by innovators and early adopters; over time mainstream consumers become aware, intrigued and eventually try those with “staying power.” Retail Venues: Innovators/Early Adopters Phase: IncubationEarly AcceptanceMainstream Acceptance Perimeter locations in select supermarkets Delis Middle Majority Focus here for products Bracket Consumer Reactions Over Time

Designing Brands as “Wholes”  The common practice of separating “core concept” from “execution” in new product development is not just flawed but dangerous.  Consumer behavior is based on fully-formed brands.  “Core concepts” make poor proxies for final products.  “Execution” merits more than window dressing treatment.  Brands that are “born whole” have a head start on life.  They provide a more accurate stimulus for consumer response.  “Core concept” and “execution” are more apt to be integrated.

The Integrated Brand Model  Artful Enterprises designs every brand as a system of mutually reinforcing elements.  This discipline governs all facets of Artful Enterprises brand development: branding, product formulation, packaging, etc. “What it is”“What it does”“What it means”“Who it is” AttributesBenefitsValues Personality Traits

Haagen Dazs “What it is” “What it does” “What it means”“Who it is” (Original Ice Creams) High butterfat ice creams made from premium quality ingredients Tastes exceptionally rich & creamy Hedonistic pleasure Discriminating Sophisticated Self-Indulgent

Examples of “Dis-integrated” Brands  Red Dog Beer  Crystal Pepsi  V-8 Splash  Smartfood Popcorn

New Business Validation  The Artful difference:  The right stimulus: –“Virtual reality” products: branded, packaged and (usually) formulated vs. more abstract/disaggregated product stimuli  The right respondents: –Selective use of 1 st round chef input –Rigorous selection of target consumers based on 1) relevant category experience/commitment and 2) culinary fluency Heavy users to optimize; typical users to quantify –Optional use of bracketing product behavior and attitudes methodology as appropriate “Category innovators” to gauge future vitality; “category mainstreamers” to gauge closeness of opportunity  The right questions: –Preference for competitive as well as stand alone (monadic) measures –Emphasis on behavior (simulated purchase) over speculation (purchase intent) –“Real-time” approach to depth of repeat when ever possible

The Artful Process  Informal consumer reactions  Initial taste panel assessment  Quali-Quant Phase  Chef screening / assessment  Consumer interviews; product concept fit  Further chef / taste panel assessment as needed  Quantitative Phase  Competitive and monadic measures  Real-time depth of repeat  Broker/trade reactions  Lead market performance  Qualitative consumer research (trier-acceptors, trier-rejecters, aware non-triers) TRANSFER VALIDATION MARKET PREPARATION CONCEPTION “Whole” concepts: name, packaging, formulation Nature of Feedback INCUBATION Depth of Repeat Assessment Trial Assessment Optimization

The Consumer Landscape: A Putative Mapping of Based Perceptions of Foods and Beverages Today

Two Powerful Dimensions NUTRITIONAL VALUES AN AFTERTHOUGHT NUTRITIONAL VALUES A PRIORITY Consumers’ perceptual orientation to food, reflecting their knowledge and actual choices based on its nutritional content Consumers’ experiential orientation to food, reflecting their actual behaviors based on physical needs or desires FOOD FOR SUSTENANCE FOOD FOR PLEASURE

Four Distinct Consumer Types Based on Attitudes and Behavior FOOD FOR SUSTENANCE FOOD FOR PLEASURE NUTRITIONAL VALUES AN AFTERTHOUGHT NUTRITIONAL VALUES A PRIORITY 14 23

The “HEDONISTIC” Consumer  May have nutritional awareness; actual behavior is driven by the pleasure principle  Span the socioeconomic gamut from Junk Food Junkies to upscale Epicureans  Shop across channels: traditional grocery, Gourmet Specialty, Natural Foods, Club, and C-stores Food for Sustenance FOOD FOR PLEASURE NUTRITIONAL VALUES AN AFTERTHOUGHT Nutritional Values a Priority “Live For Today! ”

The “INDISCRIMINANT” Consumer  “Indiscriminant” consumers are most likely single and male  Span a broad socioeconomic range, from street people to frat boys  “ Infrequent and impulse shoppers”; C-stores, fast food, “where ever” Food for Pleasure NUTRITIONAL VALUES AN AFTERTHOUGHT Nutritional Values a Priority “Whatever” FOOD FOR SUSTENANCE

The “CONTROLLING” Consumer  Variety of subtypes: bodybuilders/ athletes, dieters, medically restricted and the alternative lifestyle crowd…vegans, macrobiotics, etc.  Often first to adopt new nutritional approaches, ingredients, and products  “Mom and Pop” health food stores / natural food stores, organic markets, grow-their-own, wellness practitioners, GNC’s, etc. Food for Pleasure Nutritional Values an Afterthought NUTRITIONAL VALUES A PRIORITY “No pain, No gain!” FOOD FOR SUSTENANCE

The “QUALITY OF LIFE” Consumer  “Good to themselves,” in all senses, seek: good taste, good nutrition, good energy and the good feelings they all impart  Choose balance over sacrifice, and naturally delicious wholesome foods over modified or engineered “health foods”  Represents the center of “wellness” FOOD FOR PLEASURE Nutritional Values an Afterthought NUTRITIONAL VALUES A PRIORITY “Live well, be well.” Food for Sustenance

 Shop across channels  Natural Food –especially for produce, breads, home meal replacement, unique items, supplements  Gourmet Specialty –imported items, unique items, home meal replacement  High End Supermarkets –general shopping needs, some unique items  Club Stores –staples / bulk, also new items  Traditional Grocery –location driven The “QUALITY OF LIFE” Consumer

“Live well, be well.” The Expanding “Quality of Life” Sector and … The Sweet Spot for Wellness Foods FOOD FOR PLEASURE Nutritional Values an Afterthought NUTRITIONAL VALUES A PRIORITY Food for Sustenance Education Economic Improvements Adverse experience with modified foods “Hedonistic” “Quality of Life” “Controlling”“Indiscriminant”

Adoption of Nutritionally Based Food Trends FOOD FOR SUSTENANCE FOOD FOR PLEASURE NUTRITIONAL VALUES AN AFTERTHOUGHT NUTRITIONAL VALUES A PRIORITY Passive Receptives Active Seekers

The World of Wellness Nutrition & Hydration Emotional Fulfillment* Exercise Sleep Stress Reduction Body Spirit Wellness is well-rounded; traditional “health” is more one-sided True Wellness foods and beverages nourish the spirit as well as the body *Includes personal relationships, job satisfaction, spiritual life, etc.

Wellness is well-rounded; traditional “health” is more one-sided True Wellness foods and beverages nourish the spirit as well as the body Body Spirit The World of Wellness *Includes personal relationships, job satisfaction, spiritual life, etc.

Health & Wellness Associations  Wellness  General  Body, mind, spirit (holistic)  Physiological and psychological  A subjective idea (personally defined)  An ongoing process  Lifestyle (all facets)  Balanced  Experiential  Contemporary  Proactive  Achieving well-being  Health  Specific  Body-based (localized)  Physiological  An objective state (standard measures)  An attainable goal  Regimens (diet, exercise)  Controlled  Functional  Traditional  Reactive  Avoiding disease

“Sweet Spot” for growth and “Wellness” is the same Nutritionally Empty “Wow” “Yawn” Grainy Breads Wraps Pasta Premium Indulgences (Steaks,Premium Ice Cream, Chocolate, Desserts, Coffees, Gourmet Pizza) (Doritos, Twinkies, Oreos, Big Mac, Slurpee) Health Modified Foods (Low Fat, Low Cal, Low Taste) Fringe Foods/ “Health” Foods (soy / tofu, wheat gluten wheat grass, protein powder) Nutritionally Valuable Sushi Smoothies Juice Bar Juices Cup Yogurt Oatmeal Tropical/Exotics Fruits/ Veggies Gourmet Salads Juice drinks Staples (Milk, processed bread, rice, ordinary fruits and veggies: apples, carrots, juice, chicken, cheese, eggs, etc. ) Proprietary Commodity Junk Food and Fast Food (Taco Bell, Jack –in-the-Box, frozen pizza, private label, etc.) Junk Food and Fast Food Green Teas

Application to Beverages: Mainstream Emerging

Beyond “Nutritionally Valuable”  Wellness Promoting Beverages–two key defining dimensions related to:  The nature of the drinking experience (implicitly usage-driven) Substantial /Light / SatiatingRefreshing  The nature of the perceived “goodness” (implicitly user-driven) “Natural State” /Enhanced via Absence of NegativesFortification

Defining Ingredients / Attributes of Wellness Promoting Beverages Could include individually or in combination: Substantial /Light / SatiatingRefreshing Protein Dairy Soy Vegetable juice Slow-burn complex carbs et cetera Water Tea Juice Light carbonation et cetera

Defining Ingredients / Attributes of Wellness Promoting Beverages Could include individually or in combination: “Natural State”/Enhanced via Absence of NegativesFortification Organic No GMO’s Freshness Dated (refrigerated or produce) 100% juice--not from concentrate No sugar added Probiotic et cetera Vitamins Minerals Phytonutrients Isoflavins Energy/Perform. herbs Nutriceuticals et cetera

Examples: Wellness Promoting Beverage Brands Substantial “Natural State” Fortified Light Ito En, Honest Tea Knudsen After the Fall Crystal Geyser Juice Squeeze Glaceau Sobe Fuze Red Bull, et al Odwella, Naked Bolthouse Farms Silk Dannon, Stoneyfield Farms Select Odwella items Juice Bar Power Shakes Protein Powders / Liquid meal

Wellness Promoting Beverages: Opportunity Areas  Based upon:  Product Gaps –“Better” juice ·cider ·fruit and vegetable blends –“Wow” vegetable juices, going beyond “red” ·the “Odwella of vegetable juice” –More pleasurable – “Wow” water ·with “natural state” sensory complexity

Wellness Promoting Beverages: Opportunity Areas  Based upon:  Platform Opportunities –Target to the sensory and nutritional wants and needs of Women –Fully leverage the product and experiential benefits of tea ·The “Starbucks of Tea” –Pioneer Phytonutrients –Pioneer Probiotic beverages and foods

Wellness Promoting Beverages: Opportunity Areas  Based upon:  Intriguing Idea Starters: –Mental Gatorade –Liquid Power Bar –Sunrise Smoothies –Green Tea Smoothie –et cetera  Brands to Watch: –ITO EN –Bolthouse Farms –Naked

Ways to Work with Artful Enterprises  Source of new business idea  From the Artful Enterprises, Inc. portfolio of brands  From scratch to client specifications  Scope and tenure of Artful Enterprises involvement  Short term (1 year maximum) –Conception only –Conception, Optimization, Validation –Optimization, Validation –Conception, Optimization, Validation, Market Prep  Medium - long term (2-3 years) –Conception, Optimization, Validation, Market Prep, Incubation, Transfer

Seize the Artful Advantage  New business-building brands that are:  Strategically Sound  Executionally Exciting  Born Whole  Consumer Validated  Professionally Nurtured  Portfolio Compatible