New Product and Service Development DG 10/23/05

Table of Content  Objective  Company Background  Vision, Mission & Goal  New Product Proposition  Funnel Model  Stage Gate  Conclusion

Objective  Create a new product for PepsiCo - to be marketed initially in Brazil - using the concepts and tools learned during the course New Product and Service Development.

Company Background PepsiCo is the 4 th largest company in the food and beverage industry  Revenue: about US$27 Billion/year  Employees: over 143,000  Products: Frito-lay, Pepsi-cola, Gatorade, Tropicana and Quaker foods  International Marketing: PepsiCo brands are available in nearly 200 countries and territories

PepsiCo - Brazil  Since 1953  Franchising agreement with Brahma (Ambev) to produce and market Pepsi products (1999)  8 plants  81 distribution centers  6,500 employees  Revenue US$ 500MM (2004)

Vision, Mission & Goal  Vision: become the leader company in convenient foods and beverages in the world  Mission: provide quality and nutritional products to our customers at a competitive price  Goal: Duplicate revenue of 2004 (US$ 500 MM) in 5 years

Strategy Goal US$ 1 Billion (revenue) in 5 years Strategy Invest in new plants Develop new products Enter new markets

New Product - Gatorade Objective:  Expand the Gatorade product line by developing a new product that incorporates the overall PepsiCo strategy of increasing revenue and market share in Brazil by 2010.

Funnel Model Selection of Ideas compatible with: - mission / image - budget (senior exec.) 4- Expertise/Tech. analyze need for: - new technology - outsourcing 6- Product Line - flexibility to expand 7- International Marketing - ability to export 10-Implementation / Follow-up - production - follow-up budget 5-Value Chain - supply availability - distribution 9- Approval (senior exec.) - present plan - review budget 8- Action Plan - time - responsibilities - training 11- Launch - analyze results - make adjustments 1- Ideation - create internal campaign for ideas - External search 2- Marketing Research (needs / opportunities) - survey / focus group - customers / vendors

New Product/Service Process Stage Gate Process

Gate 4 Stage 1 Post Launch Review Discovery Stage Gate Process Stage 5Stage 2Stage 3Stage 4 Gate 5 Gate 2 Gate 1 Gate 3 Ideation Create Idea Bank Assign a team member to manage Idea Screen against broad criteria Scoping Preliminary Assessment: Market Technical Financial Second Screen Technical Legal Sales/Mktg involved Payback period Business Case (Detailed Inves) Product Concept Competition Technical Evaluation Project Plan Third Screen Decision to spend Confirm Case Development Quality execution Product development Prototype Testing Customer feedback Forth Screen Review execution Revised financials go to test Testing Extensive validation In-house tests Customer acceptance Revised financials Fifth Screen Testing properly executed Financial return Implement approval Launch

Ideation Idea Generation  Promote internal campaign for ideas  Create a “bank Idea”  Assign a team member to manage ideas generated Brainstorming  Build in voice-of-customer through surveys & focus group  Atend trade shows - new trends/opportunities  Research Web/Library  Look at existing products for improvements  Analyse competitors to offer better value Gate 1 Idea Screen  Is the idea aligned with the company’s mission and goals?  Is the market attractive?  Does the idea offer competitive advantage over competitors?  Is the idea part of the product portfolio of the company?  Does the company have expertise to manufacture the product (technical feasibility)?  Does the product fit with company’s policies?  Are there any killer variable (environment issue / legislative action)?

Scoping  Preliminary Market Assessment: (size, potencial, acceptance, competitors) - Internet/library search - Focus group - Concept test - User test  Preliminary Technical Assessment - Define product requirements/specifications - Assess technical feasibility and determine whether the product can be produce internally - Determine time/cost to execute - Analyse technical, regulatory risks  Preliminary Financial Assessment - Budget review Gate 2 Second Screen Reevaluate the project (Gate 1 Initial Screen) with the new information provided by Stage 1  Does the product respond to a customer need?  Is the competition moving to the same direction?  Is the company capable of manufacturing the product? If so, are time and investment worth it? If not, is there any strategic partnership that could be considered?  Can the product be manufactured with the proposed time line and budget?  When would be the payback period? Stage 1 Scoping

Business Case  Define product concept and positioning - Target market - Benefits to be delivered / value proposition - Desired features, attributes, requirements and especifications  Competitive Analysis - Determine strength and weakeness  Customers Feedback (in-depth research) - Present proposed new product, gauge reactions and determine acceptance  Detailed Technical Appraisal - Manufacturability / cost to manufacture - Detailed legal, patent, and regulatory assessment. - Investment review  Create a detailed Project Plan Gate 3 Decision to expand  Is the marketing still attractive to justify the investment?  Can the customer’s inputs be translated into technically and economically feasible solution?  Is the company responding to a competitor’s weakness? P.S. This is a important decision point to evaluate if the company should invest heavier on the next stage: Development Stage 2 Building Business Case - Detailed Investigation

Development  Quality Execution - Create a procedure of the new product development and include it in the Quality System; train employees on the new procedure - Create a periodically “checkpoint” system to ensure the product meets requirements  Product development in parallel with corporate marketing & technical product development - Rapid prototype, working model, or first prototype are taking to the customer for feedback / assess. - Continue market analysis - Map out a market launch plan involving corporate marketing and technical area.  Undertake lab tests, in-house tests and alpha tests  Revise financial analysis with update information  Assess legal issues (approval patents, regulations) Gate 4 Go to Testing  Is the developed product consistent with the original quality definition specified at Gate 3?  Does the product continue to be attractive to the market?  Is the product ready to move forward to Testing?  Are revised financials still with Budget?  Are the marketing and operation plans reviewed for probable future execution? Stage 3 Development

Testing & Validation  Carry out an extensive validation of the entire project  Implement in-house product tests  Customer acceptance - Realize field trials of the product - pretest market, test market, or trial sell  Reviewed business and financial analysis to check on the continued business and economic viability of the project Gate 5 Go to Launch  Was the testing & validation activities properly executed?  Were required improvements implemented in the product?  Is the expected financial return according to the plan?  Are the operations and marketing plans reviewed and approved for implementation? Stage 4 Testing & Validation

Launch  Implement marketing launch plan - Distribuiton - Promotion - Sponsorship  Evaluate customer acceptance  Revise financial review (sales volume x plan, profit)  Continue analysing customer feedbacks and turn it into plans for improvements  Evaluate strengths & weaknesses  Identifty successful and unsuccessful actions  Create corrective and preventive action to avoid same mistakes in the future Stage 5 Launch Post-Launch Review

Conclusion What have I learned? Expanded my concept of New Product and the importance of:  Create a Idea Bank  Allocate Human Resource and Time at the beginning (homework)  Increase investment as risk decreases  Avoid “me too” product  Include senior executives from the beginning  Check acceptance with customer during the whole process  Create a team that dedicates “exclusively”  Take risks!