Better-for-you Foods It’s Just Good Business Hank Cardello Senior Fellow & Director Obesity Solutions Initiative October 9, 2013

Mission Drive win-win market solutions to obesity

The Issue: High Obesity Rates Persist and Are Impacting Business Practices

Is There a Business Case for Selling Better-for-you Foods & Beverages?

BFY Items Drove a Disproportionate Share of 5-Year Sales Growth Source: Nielsen Food, Drug and Mass Merchandiser sales tracking ( )

Companies Growing Their BFY Products Faster Than Traditional Ones Exhibited Greater Overall Sales Gains Source: Nielsen Food, Drug and Mass Merchandiser sales tracking ( )

These Same Companies Demonstrated Superior Operating Profit Growth % Growth in Operating Profit Source: Nielsen Data & Company Annual Reports ( )

Lower-calorie Products Drove HWCF Company Sales Growth 50.5% 82.0% Source: Nielsen Food, Drug and Mass Merchandiser sales tracking ( )

Lower-calorie Products Accounted for 2/3 of New Products Achieving Sales of $50 + Million Source: Nielsen Food, Drug and Mass Merchandiser sales tracking ( )

The Restaurant Case for Lower-calorie Products

Lower Calorie Items Were the Key Growth Engine Across Both Foods & Beverages Total Food & BeveragesFood OnlyBeverages Only Source: NPD Group/Crest -1.6% +2.5% -4.2%-2.3% +1.8% -4.9% +0.1% +4.5% -2.3%

Lower Calorie Items Outperformed Traditional Ones in Overwhelming Majority of Chains Source: NPD Group/Crest

Critical Same Store Sales (“SSS”) Metric Superior for Chains Growing Their Lower Calorie Servings Total 21 Chains Chains With Lower Calorie Servings Growth Chains With Lower Calorie Servings Declines Sources: Nations Restaurant News, Trinity Capital, Company Annual Reports

Better-for-you Case Studies

Cumulative* Achievement of GMI Sales Improved FY05-FY11 & F12-F16 Projection Health Improvement Model Key Drivers Nutritional Improvement FY05-FY11 Increasing Positives 34%Decreasing Limiters 66% Focused on doing the right thing to make our products nutritionally better 16 *includes: serving veg/fruit, antioxidants, probiotic, protein, omega-3, GMI Better-for-You *On a cumulative basis: products that have been nutritionally improved more than once are counted only one time

KEY 2007 Sugar level 2008 Sugar level 2009 Sugar level 2010 Sugar leve l Goal Sugar leve l 13g 07 12g 08 11g 09 ≤9g Goal 10 10g Commitment to further reduce sugar levels Reducing Sugar in Cereal 17

Fiber One a $400 + million Brand

Company Leads Peers in Operating Profits Source: Better-for-you Foods: It’s Just Good Business, Hudson Institute, 2011

Corporate Social Responsibility Done Right

Leading the Way with CSR Metrics

Company Reaping Benefits from Strategic Shifts Source: Better-for-you Foods: It’s Just Good Business, Hudson Institute, 2011

Iconic Products Under Assault

Soda Consumption in Decline

French Fries Declining Source: NPD Group/Crest – QSR chains ˃ $3 billion; Fries ˃20% of chain servings 24.1% 24.8% - 1.9% +1.2% French Fry Trends (2006 to 2011) Fries Share of Total Foods% Change in Servings French Fries Total Food

Baked Goods Under Fire

Mandate for Healthier Kid’s Products

Traditional “Offenders” Heavily Targeted

What Can You Do?

31 © 2012, NMI 31 © 2012, Natural Marketing Institute 1. Understand where your Better-for-you growth will come from

32 © Natural Marketing Institute (NMI), All Rights Reserved.Source: NMI’s 2011 Health and Wellness Trends Database (HWTD)® WELL BEINGS®: 17% Most health pro-active Most health pro-active Market leaders & Influencers Highest organic usage Use some supplements Use many health modalities Most Green FOOD ACTIVES®: 15% Mainstream healthy Mainstream healthy Basics, balance and control Desire inherently healthy foods Most influenced by physicians Least eco-friendly Price sensitive MAGIC BULLETS®: 23% Conveniently healthy Conveniently healthy Heavy pill usage – supplements OTC, Rx Health managers vs. preventers Weight managers Least likely to cook at home Least likely to exercise FENCE SITTERS®: 20% ‘Wannabe’ healthy ‘Wannabe’ healthy Most likely to have kids Stressed out, want help and control More health kicks but no clear goals Receptive to eco-friendly Active weight loss High social media usage EAT, DRINK & BE MERRYS®: 25% Least health active Least health active Unconcerned about prevention Focused on taste Most price driven Younger “One-size-fits-all” Approach Doesn’t Work

33 © Natural Marketing Institute (NMI), All Rights Reserved.Source: NMI’s 2011 Health and Wellness Trends Database (HWTD)® WELL BEINGS®: 17% Most health pro-active Market leaders & Influencers Highest organic usage Use some supplements Use many health modalities Most Green FOOD ACTIVES®: 15% Mainstream healthy Mainstream healthy Basics, balance and control Desire inherently healthy foods Most influenced by physicians Least eco-friendly Price sensitive Price sensitive MAGIC BULLETS®: 23% Conveniently healthy Heavy pill usage – supplements OTC, Rx Health managers vs. preventers Weight managers Least likely to cook at home Least likely to exercise FENCE SITTERS®: 20% ‘Wannabe’ healthy ‘Wannabe’ healthy Most likely to have kids Most likely to have kids Stressed out, want help and control More health kicks but no clear goals Receptive to eco-friendly Active weight loss High social media usage EAT, DRINK & BE MERRYS®: 25% Least health active Unconcerned about prevention Focused on taste Most price driven Younger Growth Opportunity Segments

Example: Burger King “Satisfries”  20% fewer calories  25% less fat  Kept “Classic” fries

2. Incorporate Healthier Oils

Consumers Want Healthier Oils

3. Make Changes to Your Mainstays Quietly (“Stealth Health”)

Thank You!