32007 Introducing Cereal Toppers FMI 2005 Retailer Choice

3/20/07 Introducing: Cereal Toppers® FMI 2005 Retailer Choice Award About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 What are Cereal Toppers? Strawberries Apples & Raspberries Bananas, Blueberries & Raspberries Bananas & Strawberries 100% NATURAL FREEZE-DRIED FRUIT & FRUIT BLENDS About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 on The Food Channel # 1 show on Food Channel Network There’s few tastes beating cold milk and cereal But here’s something that can top it. They’re Cereal Toppers, bite size pieces of fruit that are very convenient. You have instant fruit that’s sliced and ready … no hassles, no preparation time. These easy eats are simply freeze dried fruit, which are not only good on the go, but good on the body. These toppers come in six fruity flavors, such as banana blueberry raspberry and apples and raspberries, but it’s the sometimes elusive strawberry that’s the biggest seller. It’s a process that takes a full 18 hours. And it’s all done naturally. Your standard dry fruit typically has a preservative in it, of sulfides or other type of preservatives. About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 on The Food Channel # 1 show on Food Channel Network To view the Unwrapped video, click the TV: To skip the video and go to the next page of the presentation, click here: Skip Ahead • Internet connection required • Windows Media Player required • Download (14 MB) can take a few minutes on a high speed connection About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 For the Consumer: The Appeals of Cereal Toppers About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Freeze-Dried Fruit-In-Cereal Has Proven Successful With Consumers Cereals with freeze dried fruits were the fastest growing items in the cereal aisle Consumers apparently liked the idea …what happened next… All the major cereal makers liked the idea, too, and spread it across a lot of line extensions But that didn’t grow the cereal category. It just traded shares, spread across more SKUs. Growth appears to have peaked at about 5% market share About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Barriers to Further Growth • Freeze-dried fruit in cereals declined after their initial trial period…why? • Our experience with consumers reveals dissatisfactions with: – Sugar – Quantity & Value – Quality – Versatility About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Fruit-In-The-Box Cereals Are Not for the Sugar-Conscious Consumer Ingredients labels from fruit-in-cereal products PROBLEM: Every cereal with freeze-dried fruit also comes with something else: • Sugar (lots of it) • Corn Syrup Plus other ingredients health conscious consumers avoid: • Salt • Wheat • Coconut oil • Hydrogenated oil • Artificial color About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Because of Sugar, Fruit-In-The-Box Cereals Never Addressed Most of the Market 5% These cereals all have added sugar and corn syrup (to keep the fruit from staining the cereal) About Cereal Toppers They don’t bring these fruit benefits to the other 95% of the cereal market …they don’t bring these fruit benefits to the 2/3 rds of the market that prefers lower sugar products Consumer Appeals Retailer Benefits SUGAR The Program

3/20/07 Many Consumers Just Don’t Want Sugar The cold cereal market, segmented by sugar content, which roughly align to their target markets Segment Sugar Weight as % of Total Weight Low sugar 0% to 20. 3% Medium sugar 21. 6% to 33. 9% Historically to kids High sugar 26. 4% to 55. 6% Kids/teens Target market Adults Up to age 44, equal numbers of consumers say they consume high, medium and low sugar cold cereals In recent years, schools, parents and even students are showing a backlash against sugar and high fructose corn syrup in children’s diets. The “obesity epidemic” is a major issue with broad impacts…and is unlikely to go away soon Above age 44, consumption skews dramatically toward the low-sugar segments. About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 The Diabetic Market Segment Is Also Getting a Lot of Attention About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Cereal Toppers Has No Added Sugar • Short, natural, simple, understandable ingredients list • No added sugar or corn syrup • No additives, no preservatives About Cereal Toppers Consumer Appeals • Low calories • No fats • Natural fiber • Vitamin C Retailer Benefits The Program

3/20/07 Barriers to Further Growth • Freeze-dried fruit in cereals declined after their initial trial period…why? • Our research with consumers suggests dissatisfactions with: – Sugar – Quantity & Value – Quality – Versatility About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 A Problem with Fruit-In-Cereal: Quantity and Value Perception PROBLEM: Not enough fruit Can’t deliver fruit in every bowl, from the top to the bottom of the box • “My son picks out all the fruit at the top of the box of cereal, so there’s almost none left for me” • “Fruit in the cereal is great, but they don’t give you very much” –consumer e-mail to Cereal Toppers About Cereal Toppers Consumer Appeals 13 oz. (98%) cereal Retailer Benefits 0. 3 oz. (2%) fruit The Program

3/20/07 Quantity and Value Perception SOLUTION: One bag of Cereal Toppers equals the fruit in three boxes of cereal freeze-dried fruit = + + • Add as much or as little as they like • Every bowl is their own “right” mix • All the way to the bottom of the cereal box, so no disappointments and no “plain” leftovers to delay the next purchase of cereal About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Quantity and Value Perception = = The retail bag delivers 2 cups (1 pint) of fruit = 11 oz. of fresh strawberries produce 1 oz. of stemmed, sliced, freeze-dried = = Removing waste and water leaves 10% of the fresh weight equivalent…but has all the fruit as the fresh weight equivalent…only the stems, the peels, the bruised fruit and the rotten fruit (and the water) have been removed About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Barriers to Further Growth • Freeze-dried fruit in cereals declined after their initial trial period…why? • Our research with consumers suggests dissatisfactions with: – Sugar – Quantity & Value – Quality – Versatility About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Quality and Shelf Life PROBLEM: Goes soggy SOLUTION: resealable bag Bag not resealable Resealable zip lock bag 5 -layer foil walls After opening: stays crisp 1 day at most…even less with humidity The result? • Chewy, gummy fruit that seems less than fresh • Cereal doesn’t get consumed as quickly…doesn’t get repurchased as often About Cereal Toppers Consumer Appeals After opening (resealed): stays crisp 2 to 4 weeks (Before opening: 2 to 4 years) Retailer Benefits The Program

3/20/07 Barriers to Further Growth • Freeze-dried fruit in cereals declined after their initial trial period…why? • Our research with consumers suggests dissatisfactions with: – Sugar – Quantity & Value – Quality – Versatility About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Only Cereal Toppers Gives Consumers a Choice The only way consumers can get the simple, natural ingredients they insist on—with no added sugar or corn syrup—is to buy their favorite cereal and add Cereal Toppers Post Grape Nuts + = Arrowhead Shredded Wheat About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 HOW DO OTHERS SEE CEREAL TOPPERS? About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 What Consumers Say About Cereal Toppers • They are delicious! Thank you for making something that tastes great and is also good for you! » • • Joe B • » • Elizabeth G My mom and I love your strawberries. Breakfast is boring without your fruit. » Susan P Christy H • My husband also enjoys putting your fruits in his cereals which do not come with fruit. » shawnee It was all I could do not to down the entire bag on my own. Fortunately, they’re healthy enough that I could do it and not feel guilty! My two small children LOVE them. » • im a picky little girl. i hardly eat fruit but my mom encouraged me to try your cereal toppers and so i did and they were so good i thought i died and went to heaven. » Sherry G I put it on hot cereal and have to say it was great. I tried them right out of the package. Great also. » • Joanne H My grandsons choose to eat them with cereal as an after school snack instead of having candy or cookies » • I LOVE fruit in my cereal, but fresh always goes bad before I can use it. I think this is a terrific product, that I plan to keep on hand from now on. » Kimberly S Leah H From e-mails to Cereal Toppers About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 What Food Editors Say About Cereal Toppers “Give your body the nutrition it’s been missing” --Runner’s World Instant Fruit Give your cornflakes a healthy kick: Add Cereal Toppers from Field Fresh Farms. These freezedried fruits plump up to almostfresh form when splashed with milk. And dry, they’re a good crunchy snack. Choose from sliced strawberries and four kinds of mixes. About Cereal Toppers Consumer Appeals “A healthy kick” --Good Housekeeping Retailer Benefits The Program

3/20/07 What Food Editors Say About Cereal Toppers Freeze Dried Fruit Cereal Toppers has bagged some of your child’s favorite fruits, like strawberries, raspberries, blueberries, and bananas. These freeze-dried morsels are perfect for topping cereals, yogurt, salads, and smoothies—and they’re tasty enough to eat right out of the resealable bag. They’re available as supermarkets and discount super stores in 5. 5 -ounce bas for about $6 or 2 -ounce bags for about $4. For more information, go to cerealtoppers. com “bagged some of your child’s favorite fruits” --Parents Magazine MSNBC Supermarket Guru Product Hit/Miss “Hit Product” “Like magic… returns to a natural juicy state” About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 What Food Authorities Say About Cereal Toppers “Right Stuff” --Center for Science in the Public Interest About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 What Retailers Say: FMI Retailer Choice Award About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 For the Retailer: The Benefits of Cereal Toppers About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 The Situation Today • Cereal category is mature and stable – Add a SKU, subtract a SKU…it won’t change the size of the category – Consumers will just trade brands • SKU glut has attempted to deliver consumer choice and variety… which doesn’t help the retailer • Retailers want strategies and products that multiply the power of shelf space, rather than just add SKUs that only trade market share About Cereal Toppers Consumer Appeals Cereal SKU Cereal Category $ Size Retailer Benefits Trading Shares: adding or subtracting a few SKUs doesn’t grow or shrink the category The Program

3/20/07 Another Approach: a “Toppings” Or “Additive” Strategy • More variety for consumers, but fewer SKUs for the retailer • Entirely incremental business…no share trading • Increases shelf space available to highest volume cereals…to reduce out-of-stocks • Potentially: increases consumption and repurchase rates for cereals as a result of a better flavor experience, particularly for low-sugar brands which means About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Cereal Toppers and cereal…a lot like ketchup and hamburger: + = • Sells more ketchup • Sells more hamburger because of a better hamburger “experience” + = • Sells more Cereal Toppers • Sells more cereal because of a better cereal “experience” Cereal Toppers can sell more cereal by meeting the desires of consumers who: • • • About Cereal Toppers Don’t want sugar and corn syrup Want more flavor in their low sugar cereals Want fruit that’s fast, convenient and available all the time…never spoils Don’t want to switch cereal brands to get real fruit, real fast Want fruit in every bowl, as much or as little as they like Consumer Appeals Retailer Benefits The Program

3/20/07 One Industry Expert’s Take on “Additive” Strategies built their businesses as parasites—the good kind! lets you customize any cereal you wish make it your own About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Cereal Toppers builds transactions throughout the store Consumers tell us about new uses they’re discovering: • Topping for yogurt and ice cream • Homemade ice cream ingredient • Baking ingredient, especially for pancakes and waffles • Quick, healthy snack for lunchbox, hiking and biking • Ingredient for smoothies and protein shakes • A surprising salad topping…crunchy real fruit instead of starchy oily croutons By creating new uses, and usage combinations, Cereal Toppers adds volume to other categories, and brings new sales to the cereal section from outside the cereal section Dairy Add-in for yogurt and cottage cheese Cereal Section Baking Healthy snacks Ice cream topping Frozen Cupcakes Pancakes Waffles Snacks Salad topping Produce About Cereal Toppers Pudding add-in Dessert Consumer Appeals Example of Snacks: Gerber Graduates Mini Fruits freezedried ¼” diced fruit at DOUBLE THE PRICE PER OUNCE of Cereal Toppers Retailer Benefits The Program

3/20/07 The “Additives” Strategy Is All Incremental…Not Trading Shares Cereal Toppers Cereal SKU Cereal Category $ Size About Cereal Toppers Trading Shares: adding or subtracting a few cereal SKUs doesn’t grow or shrink the category Consumer Appeals All Incremental: adding Cereal Toppers is all net increase…doesn’t subtract from cereal volume, and may even add to it Retailer Benefits The Program

3/20/07 Switching one cereal brand to another adds no volume Cereal Toppers ADDS INCREMENTAL DOLLARS cereal cereal cereal cereal Vs. cereal cereal cereal cereal cereal Add or subtract a cereal SKU or two, and the total market size won’t grow or decline About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Cereal Toppers leverages retail shelf space by delivering far more variety to consumers in less shelf space and fewer total SKUs A separate SKU for every variety Vs. cereal cereal cereal cereal Consumers can create their own varieties, including low sugar options cereal cereal cereal cereal cereal cereal multiplied by: = 32 varieties “addition” About Cereal Toppers Consumer Appeals “multiplication” Retailer Benefits The Program

3/20/07 As a result: more facings can be committed to high volume cereal SKUs to reduce out-of-stocks cereal cereal cereal cereal …without reducing the variety made available to consumers cereal cereal cereal cereal About Cereal Toppers Consumer Appeals = 60 varieties, with the “multiplier” effect Retailer Benefits The Program

3/20/07 The Cereal Toppers Program To Deliver About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Merchandising Power and Flexibility Color Coded, Line Priced Flat gussetbottom bag for free-standing on shelf Prepunched for peg hanging About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Display Units 60 -count floorstanding displays About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 4 -Facing Wire Rack: Shelf Space Leverage 2 bags high, 2 bags wide Channel for tags Durable powder coated construction 12” of shelf space About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 ~15” cereal cereal cereal cereal cereal ~11” ~8” 12” All incremental volume…in about a facing and a half of big-box cereal About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Doing the math…cereal SKU calculator: Reminder: this is if Cereal Toppers replaces the revenue of that cereal SKU. In reality, that cereal SKU revenue will share-swap to another cereal SKU, and the Cereal Toppers volume will be 100% incremental About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Looking at one area of your top shelf 2 of 2 brry Mrng 1 of 2 2 of 2 Cran Alm Crnch 1 of 2 2 of 2 Rsn Date Pecan 1 of 2 Crnchy Pecan What makes sense About Cereal Toppers Consumer Appeals 2 of 2 Crnchy Pecan 1 of 2 Ban Nut Crnch 2 of 2 Ban Nut Crnch 1 of 2 Oat Hny Rsn 2 of 2 Oat Hny Rsn ? Retailer Benefits The Program

3/20/07 One possibility: 2 of 2 brry Mrng 1 of 2 Cran Alm Crnch 2 of 2 Cran Alm Crnch 1 of 2 2 of 2 Rsn Date Pecan 1 of 2 Crnchy Pecan 2 of 2 Crnchy Pecan 1 of 2 2 of 2 Ban Nut Crnch 1 of 2 2 of 2 Oat Hny Rsn 1 of 2 2 of 2 Revised set: 2 of 2 1 of 1 Blbrry Mrng Cran Alm Crnch 1 of 2 2 of 2 Rsn Date Pecan 1 of 1 Crnchy Pecan 1 of 2 2 of 2 Ban Nut Crnch Oat Hny Rsn Gains: • Ring +$5. 7 million (+91%), Margin +$1. 5 million (+107%) if all incremental • Ring +$2. 5 million (+41%), Margin +$0. 8 million (+57%) if lose 50% from reduced facings About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Detailing the Math: 2 of 2 brry Mrng 1 of 2 Cran Alm Crnch 2 of 2 Blbrry Mrng 2 of 2 Cran Alm Crnch 1 of 1 Cran Alm Crnch 1 of 2 Rsn Date Pecan 2 of 2 Rsn Date Pecan About Cereal Toppers 2 of 2 1 of 1 Crnchy Pecan 1 of 2 Crnchy Pecan 2 of 2 Crnchy Pecan 1 of 2 2 of 2 Ban Nut Crnch Consumer Appeals 1 of 2 2 of 2 Ban Nut Crnch Retailer Benefits 1 of 2 2 of 2 Oat Hny Rsn The Program

3/20/07 Another possibility: of 2 1 of 2 brry Mrng Cran Alm Crnch 2 of 2 Cran Alm Crnch 1 of 2 2 of 2 Rsn Date Pecan 1 of 2 Crnchy Pecan 2 of 2 Crnchy Pecan 1 of 2 Ban Nut Crnch 2 of 2 Ban Nut Crnch 1 of 2 Oat Hny Rsn 2 of 2 Oat Hny Rsn Revised set: 2 of 2 Blbrry Mrng 1 of 2 Cran Alm Crnch 2 of 2 Cran Alm Crnch 1 of 2 2 of 2 Rsn Date Pecan 1 of 1 1 of 2 Crnchy Pecan Ban Nut Crnch 2 of 2 1 of 1 Ban Nut Crnch Oat Hny Rsn Gains: • Ring +$5. 7 million (+91%), Margin +$1. 5 million (+107%) if all incremental • Ring +$2. 6 million (+41%), Margin +$0. 8 million (+57%) if lose 50% from reduced facings About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 Detailing the Math: of 2 brry Mrng 1 of 2 Cran Alm Crnch 2 of 2 Blbrry Mrng 2 of 2 Cran Alm Crnch 1 of 2 Rsn Date Pecan 2 of 2 Cran Alm Crnch About Cereal Toppers 2 of 2 1 of 2 Crnchy Pecan 2 of 2 Rsn Date Pecan 2 of 2 Crnchy Pecan 1 of 1 Ban Nut Crnch 1 of 2 Crnchy Pecan Consumer Appeals 1 of 2 Ban Nut Crnch 2 of 2 Ban Nut Crnch Retailer Benefits 1 of 2 Oat Hny Rsn 2 of 2 Oat Hny Rsn 1 of 1 Oat Hny Rsn The Program

3/20/07 Woman: Great run, Dad: Good distance, too. Woman: I’m ready for some cereal. Dad: How ‘bout some fruit on that? . Woman: Try these Dad: Cereal Toppers… Dad: Woah! Hundred percent natural! Woman: Cereal Toppers is real fruit Woman: Strawberries and bananas, raspberries and blueberries. Woman: Always ready to eat. Cindy takes ‘em to school. Cindy: Grampa! Those are my Cereal Toppers! Dad: Not my Cereal Toppers? Announcer: Top off your morning with Cereal Toppers. Announcer: Real fruit, real fast. Go to cerealtoppers. com for the store nearest you. About Cereal Toppers Consumer Appeals Retailer Benefits TV Copy The Program

3/20/07 To view the TV commercial, click the TV: To skip the video and go to the next page of the presentation, click here: Skip Ahead • Internet connection required • Windows Media Player required • Download (7 MB) can take a few minutes on a high speed connection About Cereal Toppers Consumer Appeals Retailer Benefits The Program

3/20/07 It all adds up to: