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Confidential
January 1, 2007
Business OpportunityBusiness Opportunity사업기획사업기획
Nothing tastes better than…
Confidential
Major Presentation TopicsMajor Presentation Topics
• Company Introduction• Korean Market Overview• Why Pinkberry?
– Consumer Insights– Yogurt Trends– Targeting– Menu– Store Layout– Current Performance
• Organization & Management • Operation Flow• Implementation Milestones• Investment Details
Confidential
History of Pinkberry History of Pinkberry
• Start in West Hollywood, California in USA more than 2 years ago
• Strong growth into a recognizable brand • HQ support may not be strong - “Growing together”
• Pinkberry offers a wide variety of frozen yogurt products as well as fresh yogurt, smoothies, cookies, cakes, coffee, and more
• New additional products for Korean consumers are available
• More than 10 shops in USA and ready to open shops in Asian countries
• Aim is to become the number one brand in yogurt in Asia
Confidential
Lifestyle ChangesLifestyle Changes
• Growth in Yogurt Market– More demand, more makers– Way to increase prices, margin
• Taste Changes– Westernization of palate– Replacement of coffee, tea, juice
• More Leisure Time– 5 work day week– Shorter work hours, more family time
• Well Being Population Growth– All age groups now care for body– Longer life expectancy
• Picky Consumers– Ability to differentiate– Willing to pay more for better quality
Confidential
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2004 2006 2008 2010
Market Transition to YogurtMarket Transition to Yogurt
50% of “cold treat” consumers will50% of “cold treat” consumers willpurchase yogurt based products by 2010purchase yogurt based products by 2010
Confidential
Ice Cream Frozen Yogurt Meal SupplementFresh Yogurt
Shift in 2003~2006Shift in 2003~2006
Market
Our
Product
Comments
Good taste Many flavors Fattening Less expensive
Brand power Not much difference
from competition
Red Mango is the
largest chain of its
kind in Korea but its
frozen yogurt
products do not
have enough
differentiating
factors from the
competition
Less taste One or two flavors Still fattening More expensive
Many flavors More healthy
because no topping
Pinkberry is not a
recognized name in
the Korean frozen
yogurt market with
Red Mango
maintaining leading
market position
Better taste More flavors Non-fattening About the same
Fresh daily Better in non-
summer seasons
The new concept of
Pinkberry has
become a strong
business fad with
very high growth
success and is now
in position to
replace Red Mango
as the newest
sensation
Best taste Even more flavors No fat but nutritious More expensive
Not just healthy Tasty meals
Consumers’ needs and
expectations of healthy
products will evolve to a
new concept of
products which will be
consumed in lieu of
heavy meals for the
health conscious
Strong in 2008Strong in 2008 Strong in 2009Strong in 2009
Market Product RoadmapMarket Product Roadmap
Confidential
Why Pinkberry?Why Pinkberry?
1. Current market is comprised of “one flavor only” competitors – yogurt flavor
2. As result, consumers today pay more - about 30% more than ice cream - to eat “less tasty” products
3. This trend will not continue and some competitors are starting to realize it
4. Pinkberry will offer additional flavors (green tea) which meet Korean tastes without the aid of toppings
5. Therefore, consumers will need to add healthy toppings only to enhance taste – rather than to create flavors
6. Pinkberry concept will also bring to “health conscious” consumers a new line of fresh yogurts made daily and served fresh with other healthy snacks
7. Being the newest phenomenon in the industry means strong name recognition and fuel for continuous growth. Ongoing product development and professional support to help us achieve market leadership within three years and market dominance within six years
Confidential
Consumer Insights
What are consumers thinking?
Confidential
Consumers want healthy optionsConsumers want healthy options
0 20 40 60
What would you like to change about your eating habits?
Eat more low fat foods
Cook more meals from scratch at home
Eat more freshly prepared foods
Cook at home with freshly prepared ingredients
Eat more organic foods
Source: SupermarketGuru.com
53%
Confidential
Fat and sugar continue to be big Fat and sugar continue to be big concernsconcerns
0 20 40 60 80
Carbs
Sugar
Fat
Source: Gallup 2003
% population “Interested in reducing”
74%
66%
Confidential
Consumers plan on eating more low Consumers plan on eating more low fat and high in protein foodsfat and high in protein foods
0 20 40 60
Organic
Raw foods
Vegetarian
High protein
Fat free
Low carb
Low fat
Source: Sloan Trends/ FMI 2004
% population “Planning to eat more of”
49%
26%
41%
Confidential
Fortified foods are also growing Fortified foods are also growing rapidlyrapidly
0
5
10
15
20
25
1999 2000 2001 2002 2003 2004
Source: Sloan Trends
Historical & projected sales of fortified foods
$B+8.5% CAGR
Confidential
37% of the population are also 37% of the population are also actively managing their weightactively managing their weight
0
5
10
15
20
25
30
35
40
2000 2001 2002 2003
Source: Sloan Trends
% population managing weight loss for health
37%
Confidential
With weight loss products being a With weight loss products being a big businessbig business
SLOAN TRENDS & SOLUTIONS, INC.
Source: Sloan Trends
20
25
30
35
40
45
50
1999 2000 2001 2002 2003
% of US Population buying weight loss products
44%
Confidential
Consumer SummaryConsumer Summary
• Consumers are concerned about what they eat
• Eating healthy is on trend and desired by consumers
Confidential
Yogurt Trends
What are the fresh yogurt consumption trends?
Confidential
Yogurt is seen as very healthyYogurt is seen as very healthy
0 1 2 3 4
Butter
Dressing
Margarine
Red meat
Chicken
Pasta
Yogurt
Whole grains
Fruits & vegetables
Source: Sloan trends4=very healthy
Consumer perceptions of selected foods
Confidential
Fruits are also seen as very healthyFruits are also seen as very healthy
0 1 2 3 4
Butter
Dressing
Margarine
Red meat
Chicken
Pasta
Yogurt
Whole grains
Fruits & vegetables
Source: Sloan trends4=very healthy
Consumer perceptions of selected foods
Confidential
Fresh yogurt is a $3.9 Billion category Fresh yogurt is a $3.9 Billion category in groceryin grocery
Supermarket Category Sales
0
2
4
6
8
10
12
14
16
Milk Bread Natural Cheese Refridg. Juices Luncheon Meats
Refridg. Salads Brekafast Meats Yogurt Processed Cheese Eggs
IRI 52 weeks ending 7/10/05, adjusted to include Wal-Mart
$3.9 Billion Category
Confidential
… … is a growth leaderis a growth leader
Yogurt is one of the fastest growing categories in the supermarket
9%
2%
0% 2% 4% 6% 8% 10%
Refrigerated yogurt
Grocery average
Source: IRI
IRI 52 week sales growth
Confidential
0
2
4
6
8
10
12
14
16
and is driving consumption that hasand is driving consumption that hasnow reached an all-time highnow reached an all-time high
All-time high!
Per capita consumption
Source: USDA
Pts/yr
Consumers love their yogurt!
Confidential
Targeting
Who is the target?
Confidential
The main consumer target is womenThe main consumer target is women
• Primary Target: Women • 35% eat yogurt 1X or more per week (vs. 21% men)
• Ages 25- 49 years old
• “Trying to eat more yogurt for health reasons”
• 45% of adult women
• Secondary Target: Families (Men & Kids)• “Trying to eat more yogurt for health reasons”
• 26% of adult men
• Children under age 6 index 130 on yogurt consumption
Source: Health Focus, 2002
Confidential
MenuMenu
What is the Menu?What is the Menu?
Confidential
Menu focuses on freshMenu focuses on fresh
FRESHNESS IS KEY POINT OF DIFFERENCE
• Fresh Yogurt – 96% Fat Free and Fat Free/NSA, Pinkberry is the only yogurt that is
“Prepared Fresh Everyday”
• Fresh Fruit is provided to support fresh, healthy eating
• Smoothies and drinkable yogurts provide portability
• Freshly Baked Breads complete meals for one stop eating
• Coffee and espresso drinks add to the breakfast day-part, with iced coffee’s providing support to snack occasions
• Frozen yogurts expand the snack and treat day-part to maximize store sales
Confidential
Store LayoutStore Layout
The store is contemporary, exciting and The store is contemporary, exciting and a place consumers want to visit.a place consumers want to visit.
Confidential
Store Layout & InteriorStore Layout & Interior
The store front provides stopping power
Fresh, contemporary colors make Pinkberry exciting
The yogurt and fruits are fresh and appetizing
Organic granolas and treat toppings provide broad appeal
Fresh breads, coffee’s and tea’s round out the menu
The store design delights consumers
Confidential
Current PerformanceCurrent Performance
Consumer feedback is exciting!Consumer feedback is exciting!
Confidential
Total Fresh already approaches 50% Total Fresh already approaches 50% of the product mixof the product mix
Category % of Sales Plan COGS*• Fresh Pinkberry 27.5% 30.0% 25%
• Pinkberry Smoothies 16.8% 22.5% 10%• Pinkberry Blends 1.6% 7.5% 19%• Total Smoothies/Blends 18.4% 30.0% 15%• TOTAL FRESH 45.9% 60.0% 20%
• TOTAL FROZEN 40.2% 30.0% 24%
• Other 13.9% 10.0% 28%• GRAND TOTAL 100.0% 100.0% 22%
* Estimated
Confidential
Current day-part mix drives strong Current day-part mix drives strong morning and lunch supportmorning and lunch support
Day-part % of Sales• 6:30-11am 12%
• 11am-3pm 32%
• 3pm-10pm 56%
Confidential
Performance to date is excitingPerformance to date is exciting
• Very positive consumer feedback to date:
– Store design working for consumers
– Product quality is exceeding consumers expectations
– Repeat is strong
Confidential
Great business opportunityGreat business opportunity
• Pinkberry is growing well…• Performance is exceeding expectations…• Concept is strong…
The growth concept of the decade
Confidential
Pinkberry PrinciplesPinkberry Principles
• We endlessly strive to be the number one company in our industry.
• We create and serve the freshest and best products using the finest ingredients available.
• We never compromise quality for price.
• We always maintain the highest standards from concept to delivery to the customer.
Confidential
History of Hylife ProductsHistory of Hylife Products
• Leadership of Mr. YN Won with more than 30 years experience in the food industry
• Small organization – trade experts and professionals• Vast experience in dealing with foreign companies• Initial contact with Pinkberry more than 2 years ago• Grand vision of providing healthy treats to Korea• First leg of this project – cool treats for health seekers• Pinkberry initially sought larger business partners• Hylife-Pinkberry Partnership – marketing knowledge
• Vision is now realized !!!
Confidential
Hylife Management StructureHylife Management Structure
이사회Board of Directors
CEO
Marketing & Sales Real Estate Procurement Shop Mgmt
Contracts Store TrainingMarket Survey Sales Promotions
Confidential
Hylife Management PersonnelHylife Management Personnel
• YN Won ( 원용남 ) – Chairman– More than 30 years in food industry– CEO & sales director in Unilever– VP of Aekyung– Executive Managing Director of Ottoogi Foods– Executive Managing Director of Dongwon F&B
• Gichol “Andy” Lee ( 이기철 ) - President– President of Gavin’s Sausages– Owner of London Grill restaurant chain– Chief Operating Officer in Ceratech – VP of Finance & Business Services in Motorola– More than 20 years in food and semiconductor industries
Confidential
Silent Partners & ShareholdersSilent Partners & Shareholders
• JY Yoo– 30 years in food industry– CEO of OB-Seagram– CEO of Campbell Soup Korea– CEO of Bestfoods Shanghai– Professor in marketing management
• JM Roh– 30 years in retail indsutry– CEO of Korea Distribution Research– CEO of Newcore Department Store– GM, Midopa supermarket chains
• SS Han– 30 years in service industry– CEO of Unico Search– VP of LG Trading & Advertising
• YY Choi– 20 years experience in sales & distribution– President of Yongho Foods– Sales Director in Sampyo Foods– Sales Manager in Ottoogi Foods
Confidential
Infrastructure for Success
• Experienced Marketing Team• - 50 year experience in growing food businesses• - Proven international best practices • - Clear strategy to overcome current market players
• First Shop Location Selection• - Rodeo Drive – AGJ in Gangnam Area• - Tentative agreement in place for store rental
• Fully Trained Work Force in Stores• - HQ trained personnel in direct-managed shops• - Month long training for franchisee personnel
• Grand Opening Day – Beginning of May• - Dignitaries and celebrities
Confidential
Market Entry StrategyMarket Entry Strategy
• Form a professional management team (5 personnel)• Obtain adequate training from HQ on store management, brand
marketing, corporate philosophies, and result expectations• Select the right flavors• Start in attractive locations – this is most important• Define the key target consumers – college students and females
(late 20’s to early 40’s)• Increase brand awareness via promotional campaigns• Differentiate from competition – concentrate on strengths• Realize that sub-franchising is hard work • Achieve success store by store – better to have small number of
successful stores rather than high number of stores with some successful and some doing poorly
• Be aware of the competition and market trends
Confidential
Marketing Tools & VenuesMarketing Tools & Venues
• Free Taste Sampling Events in Shops• In-Store Give-aways (free products, caps, t-shirts, jackets) • Internet• Celebrity Signing Events
– JO Insung
– WON Bin
• Movies & TV Programs– “in movie” shop displays
• Promotional Events– Shopping Malls
– Arcades
• Women’s Magazines• Sports Event Sponsorships
Confidential
SWOT AnalysisSWOT Analysis
• Strengths– Two flavor strategy – flavor development necessary– Image of “large” international brand – Hollywood origin– Strong financing from MK investment group– Vast marketing experience to outrun the competition– Everyday freshness – “24 hour fresh” concept
• Weaknesses– Low recognition brand in the Korean market– No shops – “start from scratch” strategy takes time– Need to duplicate USA shop appearance – Franchising strategy will mean less direct-managed shops– Small organization in place
Confidential
• Opportunities– Fastest aging population among OECD nations– Rapidly changing food taste and lifestyle– Health & “well-being” fad is IN– New brand will mean more choices to consumers– Growing markets for yogurt and yogurt based products
• Threats– Longer cold climate will necessitate winter strategy– Competition may “retaliate” with counter-measures– Anti-American sentiment– Growth in number of “lesser” known brands– Unknown strategy of clear number one competitor
SWOT AnalysisSWOT Analysis
Confidential
2007 2008 2009 2010 2011
healthy toppings
2 flavors to start
fresh yogurt
frozen yogurt
fruit based meal supplementssmoothies
MFFB brand coffeecoffee
Korean additions
soft pretzelsnew fad
fresh baked cookies
snack bars and set menu items for the health conscious
Current
Crushed Ice w/ bean
cheese cakes and “zero-fat” cookies and winter favorites
Product PortfolioProduct Portfolio
cookies/cakes
healthy additions
Future
Treats
Yogurt
Confidential
Specializing in Yogurt and Yogurt-Based Products
- Fresh Yogurt (Pudding)- Frozen Yogurt (Ice Cream)- Fruit Smoothies - Meal Supplements
Healthy Snacks
- Cookies - Cakes- Pretzels- Coffee- Fruit Juice
World LeadingCompany for Fresh &
Frozen Yogurt Products
Product FocusProduct Focus
Confidential
Sourcing & PurchasingSourcing & Purchasing
• Import from USA– Certain yogurt base materials – initial stages
– Certain treat materials
– Roasted coffee beans
– Fresh tea leaves
• Local Sourcing– Equipments
– Signs & Billboards
– Dishes & Plates
– Fresh fruits
– Straws
– Napkins
– Disposable Cups
– Uniforms
Confidential
MaterialPurchaseMaterial
PurchaseCold
StorageCold
StorageStore
DeliveryStore
DeliveryFresh
ProductsFresh
ProductsConsumer
SalesConsumer
Sales
LocalSourcing
LocalSourcing
WarehouseStorage
WarehouseStorage
StoreDelivery
StoreDelivery
FinalPreparation
FinalPreparation
ConsumerSales
ConsumerSales
DailyDelivery
RTEP
DailyDelivery
RTEP
- Yogurt Based Products
- Treats
Product FlowProduct Flow
Confidential
- Auto calculate necessary quantity based
- Generate P/O sheet and auto sending
- Calculate order size and create lot number
- Generate import order sheet and auto send
SalesForecast
- Inventory summary at warehouse/store
- Lead Time checking
- Monitoring yield at each location
- Lot Tracking
QuantityCalculation
Purchase PlanConfirmation
MaterialOrder
MaterialShipment
MaterialPlan
PurchaseOrder
Warehouse
FreshProducts
Sale to Customers
- Show available quantity for sales
- Auto replenishment system in place
Production System SummaryProduction System Summary
Confidential
Direct Managed Stores
Difficult to ManageHigher Returns
Franchises
Easier to MaintainLow Returns
Employees
More LoyaltyCareer Growth
Non-Employees
Less ProfessionalLower Wages
Striking the BalanceStriking the Balance
Difficult to maintain same level of service everywhere
HylifeProducts
Confidential
Revenue GenerationRevenue Generation
• Profits of Direct Managed Stores
• Franchise Fees
• Interior Work Margin
• Shop Management Training
• Sales Commission
• Marketing Fee Difference
• Raw Material Sourcing
Confidential
Store Development ScheduleStore Development Schedule
• 1st year– 4 direct managed stores or franchises (total 5 stores)
• 2nd year– 15 franchises (total 20 stores)
• 3rd year– 40 franchises (total 60 stores)
• 4th year– 60 franchises (total 120 stores)
• 5th year– 80 franchise (total 200 stores)
1 direct managed store for the initial 12 months
Confidential
Store DevelopmentStore Development
015
54
108
180
5
5
6
12
20
0
50
100
150
200
250
Year 1 Year 2 Year 3 Year 4 Year 5
Confidential
Yearly Sales ExpectationsYearly Sales Expectations
0 0
3600
12960
25920
480
2400 2400 2880
5760
0
5000
10000
15000
20000
25000
30000
Year 1 Year 2 Year 3 Year 4 Year 5
0
50
100
150
200
250
Confidential
40+
20~30
Teens
Mal
Fem
Sales Portion by Gender
- Male Customers 41%
- Female Customers 59%
- Female population more likely to consume
non-traditional treats in groups
Sales Portion by Age Group
- Teenager Customers 25%
- Age 20~30 Customers 48%
- Age 40 + Customers 27%
- Teenage population more likely to enjoy
our product but lacks purchasing power
Customer BreakdownCustomer Breakdown
Confidential
Yogurt
Coffee
Others
Seoul
VicinityOther
s
Sales Portion by Area
- Seoul accounts for 81%
- Boondang, Ilsan, Suwon take 12%
- Busan, Daegu account for 7%
Sales Portion by Product Type
- Yogurt – 87% of sales
- Coffee – 9% of sales
- Others – 4% of sales
Sales BreakdownSales Breakdown
Confidential
Pinkberry Franchisee InvestmentPinkberry Franchisee Investment
• Franchisee Fee– KW 15,000,000
• Equipment Rental– KW 25,000,000
• Raw Material Inventory– KW 5,000,000
• Interior Work (2,500,000 Wons/pyung, 20 pyungs)– KW 50,000,000
• Total Initial Investment– KW 85,000,000 – Excluding the store premium and key money
• Advertising & Promotion– 3% of Sales to cover ongoing marketing
Confidential
Main Menu ItemsMain Menu Items
• Fresh yogurt in the form of pudding– 3500 WPS
• Frozen yogurt in the form of ice cream – mainly summer– 4000 WPS
• Fruit-based smoothies & meal supplements– 4500 WPS
• Cookies – fresh baked– 1500 WPS
• Cakes – fruit cheesecakes– 5000 WPS
• Coffee – Samba coffee– 4000 WPS
• Pretzels – 2500~3000 WPS• Fresh fruit juices – 4000~6000 WPS
Confidential
Typical Store SalesTypical Store Sales
• Market Size: approximately 3000 bw• Market Segment Size: approximately 1000 bw and growing• Spending Pattern – “eating out” of home:
– Teens – 70000 Wons/month
– Twenties – 200000 Wons/month
– Active Adults – 320000 Wons/month
• Customers per transaction: 2.4• Average sales level per transaction: 9600 Wons/transaction• Number of transactions per day: 72• Number of days in a month: 30
• Monthly sales amount per shop: 2073600 Wons• Annual sales amount per shop: 250 million Wons
Confidential
Future ExpectationsFuture Expectations
Returns
DevotionService
Dividend
HylifeProducts
Confidential
Investment NeedsInvestment Needs
• Initial Investment– 2 billion Wons – Exclusive license fee– First direct-managed store in Apgoojung-dong– Marketing expense for 1st two years– Labor costs for 1st two years
• Additional Investment– 5 billion Wons + 5 billion Wons– Opening of 11 more direct-managed stores in key locations– Two additional personnel– Investment at diluted share prices (250%)– Franchising can begin after five stores– Continuous marketing and operating expenses for more stores
Confidential
Investment BreakdownInvestment Breakdown
• Company Establishment Office & Equipments – 20 mw Company Vehicle – 30 mw
• First Store Opening Premium & Key Money – 500 mw Interior Work – 150 mw Equipment – 150 mw Contingency – 50 mw
• Marketing Promotion Expenses – 240 mw (Y1) – 490 (Y2) – 845 (Y3) – 2300 (Y4) – 4020 (Y5)
• Operating Funds Contingency – 50 mw
Confidential
1st
2nd
3rd
Min
Max
Rest
Initial Shareholdings
- 200 mw out of 2 bw means 10%
- 500 mw out of 2 bw means 25%
- Investment opportunity offers 10%
minimum and 25% maximum holdings
Additional Funding, if necessary
- If agreed by shareholders
- Base capital can grow by 5 bw
- Number of DMS can increase by 10
- Same marketing cost, more impact
- More difficulty requires more prudence
Shareholdings ScenarioShareholdings Scenario
Confidential
Investment ValueInvestment Value
• NPV 24 bw after 10 years About 8 bw after 5 years Very conservative estimate
• Size 50 bw in the 5th year Annual growth rate 10% after Market leadership
• Organization 4 in the 1st year 6 in the 2nd year 10 in the 5th year
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
2007 2008 2009 2010 2011
Confidential
HPC
ContractSigning
InteriorWork
MaterialOrder
ShopTraining
EmployeeHiring
Practicepreparation
2007.2
2007.5
2007.6
2007.7
2007.8
2006.4
Store Open
Milestone to Opening
1st
Funding
2007.4
2nd
Funding
2008.1
10 billion
2010.9
30 billion
2011.10
MarketLeadership
2011.12
IPO
2012.3
성인 브랜드 런칭
Company MilestonesCompany Milestones
Confidential
Vision & GoalsVision & Goals
Introduce new products & first conceptsinto the market
andDictate market movements and trends within
the industry
Become the most profitable frozen yogurt franchise chain
before the end of year 2011(within five years)