VIACTIV Business Challenge Team 2 Liana Camacho Alissa

VIACTIV Business Challenge Team 2 Liana Camacho Alissa Hsu Lynch Javier Vazquez Max Wolf Marcelo Yarmaian

Background: Ø Calcium supplementation is key to reduce risk of osteoporosis. Ø VIACTIV® is a brand of Calcium Soft Chew Supplements. o Soft chews represent 10% of the market (Pills: 80%), VIACTIV®: 60% share. o Calcium market is declining Ø VIACTIV® is positioned as an enjoyable alternative to pills that helps women to feel good from inside out. o Key calcium supplement drivers: makes me feel good about myself when I take it, brand, format & taste. Problem Statement: Ø Sales declining steeply (>50% decline in 5 years ) Ø VIACTIV® position in soft chews has been threatened since the introduction of Caltrate Ø Brand is restricted on resources: o BME is restricted (Caltrate invests x 11 vs Viactiv in mass media). o Limited resources for product innovation

Alternative Solutions Considered � � � Recommendation: Ø Part 1: Fine-tune current model within current resources Ø Part 2: Exploring New Business Models

Fine-tune current model within current resources

Fine-tune current model within current resources Viactiv Consumer: - women, self aware, healthy lifestyle, enjoys life, not regimented, treats her self/indulges, 45+ Strategic approach: - Differentiate with superior proposition (taste, efficacy, emotional connection) - Focus on HHP growth - Highly targeted communication/no mass media Enhance Positioning: -Strategic angle: 1) Best Taste 2) More Efficacy (improved absorption due to unique vitamin D and K nutrients) 3) Strongest Emotional Connection - Real benefit: - Emotionally: I feel I am doing the best to treat my self well & healthy – every day (life-improving) - Rationally: building my bone strength in efficient & great tasting way - RTBs: - More bone building nutrients than any other chew (storey: Calcium, Vit. D, Vit. K together ensure maximum absorption of calcium in the bone) - Endorsed by XYZ (celebrity or model/actress, strong women – equity stake to pay her) to deliver RTB in credible way Improve Product Taste: -Some taste improvement (if possible): flavor, flavor name, packaging look/feel Raise Retail Price: - Increase price to 20% above Caltrate (only once product and positioning has been improved), 60% above PL

Fine-tune current model within current resources Change communication strategy from mass media to highly targeted channels: - Principles: Celebrity endorsement -> awareness, relevance, credibility Focus on 3 viral/WOM channels to build awareness & trial - Channel 1: Endorsement/PR on efficacy and taste (incl. blogging, search, social etc. ) - Word of Mouth campaign (efficacy message, highly targeted) -Channel 2: Sampling at passion-points (tasting is believing) - fashion shows - up-scale concerts - flower-shows - Pilates /yoga-classes, gyms - new-born in hospital sampling - Cross sample with SPLENDA: put chew samples into SPLENDA boxes - Channel 3: Healthcare providers -> efficacy - together with SPLENDA - reach orthopedists together with J&J medical division - reach gynecologists - Link channels via digital (search, bloggers, social networks, babycenter. com) Distribution Channel: - Focus more on food & drug (trade-spend) - Try to maintain maximum distribution

Options Assumptions Test Residual Risks Risk Mitigation Plan Fine tune positioning • New positioning works better. • Test positioning, storey, & endorsement options via moodboards • Other competitors moving towards same positioning • Speed to market to be first. • Continue evolving. Improve taste • Taste can be meaningfully improved and will increase usage • Quick PD • Caltrate improves assessment on ease taste too. of improving taste (“kitchen samples”). • No success with • Taste tests. improving taste • Own best taste first and continue improving it. • Switch to phase 2 Increase price • Proposition is price • Test price-increase inelastic (once product once we have & positioning has been improved product improved) & positioning • Caltrate & PL further reduce price -> gap increases • Caltrate increases price • Factor competitive price moves into assessment of option Leverage sampling and WOM to drive House Hold Penetration • Sampling & WOM is more cost effective in driving HHP than mass -media • Competition can copy quickly if it works. • Focus on most effective vehicle and “own” it. • Run small scale WOM campaign & sampling events -> measure efficacy • Identify high affinity events via digital analytics

Exploring New Business Models

Alternative #1: Licensing & Joint Ventures Rationale - High Brand Awareness: 83% Brand Image Strengths (vs. category): Tastes Great; Not Mediciney; Is a Treat; Easy to Chew License the Viactiv Trademark - Viactiv as a bone strengthening ingredient - Food & Beverage: liquid breakfasts, milk for growing kids/adolescents (chocolate? ) Partner with premium treats to strengthen their health appeal - Premium Chocolates - Cookies - Baked Goods Joint Venture Opportunities - Explore Internal J&J Options: partner with drug that may diminish bone density, heart & breast health as a side effect (i. e. Orthotricyclin) and/or a drug linked to these health areas

Alternative #2: Solely “Direct To Consumer” QVC/Home Shopping Network - Infomercial to educate - Credible spokesperson to endorse products (HCP and/or celebrity) - Test with New Premium Platform - Unique to channels - This will help determine if we meet acceptable hurdle rates - Leverage learning from Neutrogena for QVC E*Commerce/Social Websites - Drugstore. com - Amazon. com - Facebook. com - Benefit: ability to focus BME’s J&J owned site

Exploring New Business Models: Assumptions & Risks Options Assumption Test Option Risk Mitigation DTC: shopping networks • QVC will accept becoming a distribution channel • Share unique proposition • Higher priced product does not meet hurdle rates • Identify alternate channels DTC: e*commerce (third party or J&J site) • e*commerce is viable for Viactiv • Execute a scalable digital initiative with one e-tailer • Loss of space at FDM; J&J’s lack of expertise • Transition channels after on-line proves successful License Viactiv TM • Licensing is a growth opportunity & brands are interested • Concept testing with potential brands (ex. Haagan Daz; Godiva; Carnation; Pedia. Sure) • Loss of Marketing/Product Control • Negotiate equity approval in contract; develop licensing manual Joint Ventures (internal) • Partnerships are viable and profitable • Approach internal & • HCP’s reject external proposition to stakeholders to recommend product explore combinations; opportunities negative PR linked to side effects • Clinicals re: benefits for patients; meet with advisory boards; educate HCP’s

Executive Summary • Short term recommendation: Fine-tune model with current resources a. Pursue “Best” differentiation strategy (taste/efficacy/emotional b. c. d. e. connection) Improve product taste Increase price Shift communication from mass media to highly targeted media Shift trade spending to Food & Drug • Long term recommendation: Test and roll out new business models (begin testing as soon as ST strategy is executed) a. Map out and develop joint ventures / licensing agreements with b. strategic partners Design and test new distribution models: DTC / QVC

Thanks!