USC Marshall Class Project

Vegemite StrategicMarketing Plan2016- 2018

Kit KwanAlexander TollPravish KappakadavathJames KabueNero Sovis

2

Executive Summary

1. Enter Spreads Market

• Add flavor options to spread

• Advertise via traditional marketing channels where competitors advertise

• Communicate health benefits

2. Create partnershi

ps and Leverage Distributio

n

• Get a spokesperson to represent Vegimite and communicate health benefits

• Create parnerships with retailers to gain shelf space and banners

• Coupons to incentivise trial

3. Enter Snacks Market

• Create unique products such as crackers

• Get social media influencers to promote vegimite products

• Appeal to kids with a focus on health and taste

Part 1 - Situation Assessment

4

Steady growth from 2012 to 2014, but projection shows plateau in growth for 2015

Current Financial Measures Summary

Net Revenue($MM)

Volume in Tones (000’s kg)

Operating Income($MM)

Gross Profit ($MM)

2012 2013 2014 2015 Projected9092949698

100102104106108110

97

101.8

105.9107.7

2012 2013 2014 2015 Projected5400

5600

5800

6000

6200

6400

6600

5875

62506190

6500

2012 2013 2014 2015 Projected05

10152025303540

24.527.7

34.1 33.9

2012 2013 2014 2015 Projected02468

1012141618

6.5

9.7

16.6 16.9

5

Vegemite – Australia

Weaknesses

Strengths Opportunities

• Strong national connection, most Australians grew up eating vegemite

• Vegemite with Kraft together holds 31% of the spreads category market share as of 2014 considering that Yeast Based spreads only represents 13% of the spreads category in Australia.

• Long list of recipes suggesting not only history, but multiple usages of product

• 45% of people born in Australia eats Vegemite

• Usage of spreads growing in non-bread related dishes, Vegemite can use its recipe database to tackle this trend

• Evolution of Australia’s café culture• Competitors failed to steal away market

shares to date even after claiming a truer Australian image compared to Vegemite

Threats

• Lack of innovation, only 3 products• Confusing positioning: breakfast vs. multi-

usage• Seen as a complimentary product to bread• 85% of the Vegemite consumption is focussed

on one target population, people born in Australia

• High scrutiny by Australians ties the brand down from taking drastic changes:

• Ex. Anti-halal campaign• Yeast Based spreads had experienced little

growth• Capilano and Nutella are viable threats

with growing market shares and consumer interest.

• Volume consumption has declined for the category overall as well as for Vegemite

• Traditional Vegemite is unappealing to children

6

Vegemite – US

• U.S. is number 1 ($4B) in market size for spreads where as Australia ranks at 12

• Currently yeast based spreads represents 0% of the U.S. spreads market

• Southern states have the highest market size historical and forecasted

• Trending towards niche product• Market size for snacks in U.S. is $35B, making

it a viable source of expansion

• High in sodium content counters the image of the Vegemite as a health y product fill with vitamins

• Strong bitter taste profile does not appeal to Americans

• Lack of brand presence for Vegemite and Kraft

• Established network/relationship with distribution channels

• Strong brand awareness for Kraft products• Established manufacturing facilities• Healthy product with 0 calories

• U.S. consumers prefer sweet spreads• Top 3 brands including Jif takes up 39% of the

spreads industry’s market share• Slow growth in the spreads industry with the

exception of chocolate

Weaknesses

Strengths Opportunities

Threats

7

Australia Competition

• Kraft Foods Ltd remains as largest player in spreads with 32% value share• Chocolate spreads continue to deliver strong value growth at 5% in2014

Yeast spreads is not the fastest growing spread category. Focus on the health benefits, the cultural heritage. Introduce new vegemite based ready to eat snacks in Australian market. Introduce fun packaging, each tube would only produce servings in specific styles eg. Streaker tube, Slapper tube.

Competitive Assessment

Competitor

% SOM Key Brands Competitor’s key P.O.D. vs Kraft

Capilano Honey Ltd

11.53 Capilano , Wescobee 

Honey is one of the fastest growing spread, Capilano’s main product is a honey spread

Ferrero Australia Pty Ltd

10.21 Nutella  Makes the fastest growing spread category and is the market leader in that category

Woolworths Ltd (Australia)

7.17 Woolworths , Macro Organic

Have their own wide network of retail outlets, fast growing private label brand.

8

US Competition• JM Smucker Co is expected to maintain its lead at 35%• Chocolate spreads expected to record strongest growth at

20% with entry to The Hershey Co

Kraft has complete control of the Yeast based spreads segment. It can highlight health benefits & use innovative packaging to capture customer interest in this

new segment

Competitive Assessment

Competitor

% SOM Key Brands Competitor’s key P.O.D. vs Kraft

JM Smucker Co, The

34.85 Jif, Smucker's, Goober, Knott's Berry Farm

• Stay ahead of competition by introducing new products & flavors

• Smucker’s Simply Fruit sub-brand strengthens the fresh / fruit / healthy / quality association with the brand

Hormel Foods LLC

9.36 Skippy • Hormel’s Our Way - originate, don't imitate

• Implement practices that protect natural resources and the environment

Ferrero USA Inc 

6.29 Nutella, Hershey's, Reese's

• Chocolate spreads are the fastest growing spread category

9

Yeast spreads have cultural heritage and historic association with the Australian customer

Kraft has to re-connect with cultural and historical heritage of the true product

Handle the backlash on Halal and Kosher certification by launching separate products for these, retain the original vegemite as is

Build on the health benefits of yeast spreads

Introduce engaging packaging & new ready to eat products

Advertise environmentally responsible production process

Highlight the indigenous nature of ingredients

“Category” performance

Issues and observationsIssues and observations ImplicationsImplications

Customer, Consumer behavior and attitudes

“Category” Cost /Margin improvement

Marketing Tactics and Strategy

Customers have cultural and historic association

Losing customers due to drop in breakfast consumption, entry of other spreads Engage customers with ready to eat vegemite products & interesting packaging

Reduction of overheads and A&C costs will improve the margins

Competitive dynamics

Market leader in spreads category

Competitors are players in the chocolate and honey spreads, which are the fastest growing sub-segments

Australia Situation Assessment Summary

10

New sub-category within US spreads market. Spreads category in general expected to grow 11%

Kraft has a clean slate to start with in the yeast based spreads sub-category

Kraft has to invest significantly to create customer awareness about this sub-category

If it can establish this sub-category it can sustain a market leader position for the short term before other major players get into this spreads sub-segment.

Highlight environmentally responsible production process

Follow clear labelling process, specially important in US market

“Category” performance

Issues and observationsIssues and observations ImplicationsImplications

Customer, Consumer behavior and attitudes

“Category” Cost /Margin improvement

Marketing Tactics and Strategy

Customer love Chocolate spreads, this sub category expected to grow at 20%

Customers are new to yeast based spreads

Engage customers, create awareness by direct marketing, influencer endorsement, retailer partnerships

Initial period high cost due to the launch strategy, after that target economies of scale, reduce A&C to target margin improvement

Competitive dynamics None of the major

competitors play in the yeast spreads subcategory

US Situation Assessment Summary

11

Situation Assessment Summary

Declining spreads usage in Australia and growing competitors suggest that Vegemite should expand to new customers

Strategic Priorities

• Maintain competitiveness in Australia through awareness of non-breakfast usage, market price of spreads continue to increase. Vegemite needs to cut operational cost to maintain spreads consumption.

• Growth opportunity in U.S. as the first yeast based spreads, but needs focus heavily on consumer awareness.

• Innovations in product flavor or category is needed to grow into U.S. and other new markets, be careful of the affects on Vegemite’s origin

• Create different product mix through flavors sell specialty flavors in U.S. , such as honey or spicy at a higher price point while maintaining a low price point for traditional products

Part 2 - Marketing Plan 2016-18

13

US Marketing Plan

Take market share from other spread competitors via traditional marketing channels (tv, radio)

Add flavor options to spread (honey, chocolate, spicy)…

Market to families, moms, focus on health benefits…

Enter the US market and hit profit of 10% net revenue by year 3 and $35 million in yeast based spreads by 2018

Enter Spreads market.

Enter snack market.

Create partnerships

and leverage

distribution network.

1 2 3

2016-18 Marketing Plan

Objective

Strategies(linked to Strategic Priorities in situation summary)

Key Initiatives

Create unique products- crackers with different flavors

Focus groups to get feedback and experiment

Get social media influencers to promote the products.

Appeal to kids and teens, focus on taste.

Get a spokesperson to represent the brand in a healthy way.

Create partnerships with retailers for shelf space and/or promotional materials like signage (TV shows as well).

Coupons/ trials for people to try the product offerings

14

US Strategy

2016 Q1

Traditional marketing to heads of households/ families (awareness)

- Focus on health benefits in the spread market advertising on radio and tv

Key InitiativesKey InitiativesResources Required

(A&C/Capital/Sales)Resources Required

(A&C/Capital/Sales)Timing

(2016 Qtr, ’17,’18)

Timing (2016 Qtr, ’17,’18)

2016 Q2

2017 Q1

2017 Q2

Social Media influencers and advertising (awareness)

- Target kids in the snack market through social media and online influencers/ bloggers. Focus groups to trial most popular productsPartnerships and promotions (distribution)

- Work with retailers to get signage, coupons, free samples, and shelf space. Also get a spokesperson for brand, health centered but hip.New product/ flavor innovation launch (distribution)

- mix the spread with chocolate, honey, or a hot sauce. Also create bags of crisps that are based on the vegemite flavor with slight variations.

Consumer promotions - $1.1M 2017 - 2018

Advertising - $4M 2016 - 2018

Trade spending - $7M 2016 - 2018

Advertising- $4M 2016 - 2018

15

2016

Q1 Q2 Q3 Q4

New Innovation

New spread types and flavors – testing via focus groups

A&C, Packaging Program

Vegemite branding on spread and feature flavors/ ingredients

Establish spokesperson/ celebrity who can relate to families and kids and being healthy

Trade Promotion Window

Partnerships, free trials, and promotions

Discounts & promotions

Discounts & promotions

US MARKETING PLAN FLOW CHART - 2016

Category expansion testing: innovation into snacks

Category expansion testing: innovation into snacks

16

20172018

1H 2H

New Innovation

Focus groups of kids for snack category

Launch new snack products

A&C, Packaging Program

Coupon program Packaging for “on the go” targeted towards kids and teens, focusing on taste and sub branding Vegemite

Coupon program

Continue spreads and unique flavors with Vegemite branding

Continue snacks for kids with Vegemite and sub brands

Trade Promotion Window

Hire social media influencers and bloggers to report on new products and promote them

In store promotions, discounts

Social media influencers and spokesperson

In store promotions, discounts

Focus spread on health benefits and snacks on taste. Continue leveraging spokesperson and social media influencers. Stop the least effective campaigns

US MARKETING PLAN FLOW CHART – 2017-2018

Part 3 - P&L Optimization Plan 2016-18

18

VEGEMITE AUSTRALIA PROXY P&L 2012-2018 LE

Highlights• Forecasted top line

growth of 3% per year. Marginal price increase taken in 2017; +$1M

• Trade spending in absolute $ held flat 2015-2018 with focus on increasing trade ROI

• A&C spend increasing to support TV, print & social media campaigns. Coupon program retained with increasing support each year.

• Target 2.5% reduction in direct COGS each year & 1% reduction in SG&A.

• Net revenue/kg flat due to reallocation of trade $ to A&C.

• Gross/Profit /Kg is increasing because of price & reduction in COGS & overheads

2012 2013 2014 2015 LE 2016 LE 2017 LE 2018 LE

Tonnes (1 tonne = 1,000 kg) 5,875 6,250 6,190 6,500 6,686 6,949 7,166Gross Revenue $000's $113.30 $118.80 $122.50 $125.00 $128.75 $133.61 $137.62

Trade Spending $12.00 $12.00 $11.50 $11.00 $11.00 $11.00 $11.00 Advertising $3.80 $4.40 $4.40 $5.30 $5.92 $6.12 $6.29 Consumer Promotions $0.50 $0.60 $0.70 $1.00 $1.05 $1.36 $1.59 Total A,C,&T $16.30 $17.00 $16.60 $17.30 $17.97 $18.48 $18.88

Net Revenue (GR less A,C,T) $97.00 $101.80 $105.90 $107.70 $110.78 $115.13 $118.74

Direct COGS $52.50 $53.60 $51.30 $52.80 $53.01 $55.06 $56.70 Transportation $15.00 $15.50 $15.50 $16.00 $16.48 $17.10 $17.62 Other COGS $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 Total COGS $72.50 $74.10 $71.80 $73.80 $74.49 $77.16 $79.32

Gross Profit (NR less COGS) $24.50 $27.70 $34.10 $33.90 $36.29 $37.97 $39.42

SG&A $18.00 $18.00 $17.50 $17.00 $17.56 $18.25 $18.82

Operating Income $6.50 $9.70 $16.60 $16.90 $18.73 $19.73 $20.61

DPC % Gross 46.30% 45.10% 41.90% 42.20% 41.17% 41.21% 41.20%Trade Spend % Gross 10.59% 10.10% 9.39% 8.80% 8.54% 8.23% 7.99%A&C % Gross 3.80% 4.20% 4.20% 5.00% 5.41% 5.60% 5.73%Gross Margin % (GP/NR) 25% 27% 32% 31% 33% 33% 33%SG&A % of NR 19% 18% 17% 16% 16% 16% 16%Operating Income % of NR 7% 10% 16% 16% 17% 17% 17%

Net Revenue / Kg $16.51 $16.29 $17.11 $16.57 $16.57 $16.57 $16.57 Gross Profit/Kg $4.17 $4.43 $5.51 $5.22 $5.43 $5.46 $5.50

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P&L Optimization Roadmap

Operating Income

1. Challenge supply chain to deliver 2.5% reduction in prior year direct COGS each year

2. Optimize S,G&A by reducing overtime, travel and reducing layers3. Take pricing in 20174. Optimize portfolio mix through trade enhancement and increased A&C

spend

($344 MM)

+$4

+$0.5

+$1

+$0.5

$350

2015-17 P&L Optimization Roadmap

2015 ACCOGS•Supplier diversification•Hybrid ingredients•Plastic vs glass jars

Pricing• Take price

SG&A•Cut OT•Cut travel•Reduce layers

Incremental•Portfolio/Mix optimization•Improved trade ROI

Goal

Highlights• 2016 limited national launch in the U.S

targeting 45% distribution in grocery for first three years. Also aim to be in 45% of WMT's 4177 stores. Launch 1 sku size- 220 grams priced at $8.8 USD. Target 100% CAGR for first 3 years.

• Assume $1M in listing fees in 2016 in addition to 8.8% trade rate. Maintain 8.8% trade rate 2017 & 2018

• Significant advertising support 2016-2018 with TV, Radio and Social Media campaign. Reduce spending to match Vegemite Australia thresholds in 2018

• No consumer promotion in 2016. Promote significantly in 2017 to compensate for reduced advertising that year. Promote 2018 at Vegemite hurdle rates

• No COGS improvements in first 3 years. Costs at Vegemite hurdle rates

• Assume 16% logistics costs due to importation of product from Australia

• S,G&A at Vegemite hurdle rates • Operating income lower than thresholds and

company average in 2018 primarily due to logistics costs

20

VEGEMITE US PROXY P&L 2016-2018 2016 LE 2017 LE 2018 LE

Tonnes (1 tonne = 1,000 kg) 220 660 880Gross Revenue $000's $8.80 $26.40 $35.20

Trade Spending $1.77 $2.32 $3.10 Advertising $1.50 $1.00 $1.41 Consumer Promotions $0.00 $0.70 $0.35 Total A,C,&T $3.27 $4.02 $4.86

Net Revenue (GR less A,C,T) $5.53 $22.38 $30.34

Direct COGS $3.71 $11.14 $14.85 Transportation $1.41 $4.22 $5.63 Other COGS $0.33 $0.98 $1.30 Total COGS $5.45 $16.34 $21.79

Gross Profit (NR less COGS) $0.08 $6.04 $8.55

SG&A $1.41 $4.22 $5.63

Operating Income ($1.33) $1.81 $2.92

DPC % Gross 42.20% 42.20% 42.20%Trade Spend % Gross 20.16% 8.80% 8.80%A&C % Gross 17.05% 6.44% 5.00%Gross Margin % (GP/NR) 1% 27% 28%SG&A % of NR 25% 19% 19%Operating Income % of NR -24% 8% 10%

Net Revenue / Kg $25.12 $33.90 $34.48 Gross Profit/Kg $0.36 $9.14 $9.72

Part 4 - Summary of Recommendations / Contingency Plan

22

Summary of Recommendations

1. Enter Spreads Market

2. Create Partnerships and

Leverage Distribution Networks

3. Enter Snacks Market

ENTER US

23

Contingency Plan

Met Strategic Goals in 3

years?

Yes Continue to Invest

No

Exit Category

Change Formulation

Franchise to a 3rd party

APPENDIX

Note: Financial data is directional and not necessarily indicative of actuals. Use intended for USC MKTG 560 case study only

25

VEGEMITE BRAND

TOTAL COMPANY

2020 COMPANY

KEY MEASURES 2015 LE AVERAGE TARGET

Direct Product Cost % Gross 42.2% 44% 40%

Trade Spend % Gross 8.8% 10.2% 8%

A&C % Gross 5.0% 4.9% NA

Gross Margin % (GP/NR) 31% 28% NA

SG&A % of NR 16% 15% NA

Operating Income % of NR 16% 15% 19%

26

OTHER TRADITIONAL A&C ASSUMPTIONS

Note: Financial data is directional and not necessarily indicative of actuals. Use intended for USC MKTG 560 case study only

12 Million Households (AU/NZ) 34 Million Population

Coupon Costs FSI/Print Digital

Average Circulation / Flight 1.5 Million 3 Milliion

Average Redemption Rate 3% 12%

Handling Cost/Coupon 10 cents per coupon

6 cents per coupon

Fixed Insertion Costs per 000 circ

$ 34 $ 9

AU SPREADS CATEGORY RETAIL SHARES(NOTE: SYNDICATED DATA BASED ON RETAIL SCAN)

27

(Figures in $000’s and 000’s Tonnes)

Category/Sub/Brand 2012 2013 2014 2015 Est.Current 3-yr

CAGR

Projected 2016-2018

CAGR   

Total Food Spreads $$ 500.0 530.0 541.0 564.0    % Chg vs. Prior 6.0% 2.1% 4.3% 4.1% 3.3%Total Food Spreads Tonnage 54.7 55.5 55.9 58.9    % Chg vs. Prior 1.5% 0.7% 5.4% 2.5% 2.1%             Yeast Based Spreads $$ 123.9 133.0 129.2 133.5    % Chg vs. Prior 7.3% -2.9% 3.3% 2.6% 2.2%Yeast Based Spreads Tonnage 5.8 6.2 5.9 6.1    % Chg vs. Prior 6.8% -4.8% 3.3% 1.7% Flat             Vegemite Total Brand $$ 103.0 108.0 110.0 114.0    % Chg vs. Prior 5.3% 1.9% 3.7% 3.7% 3.0%Vegemite Total Brand Tonnage 4.7 5.0 5.0 5.2    % Chg vs. Prior   6.4% Flat 4.0% 3.5% 1.0%             

VEGEMITE SHARE OF YEAST BASED SPREDS 83.1 81.2 85.1 85.4

Average 83.9

2018 Goal 87.0

VEGEMITE SALES BY REGION

AU/NZ (85%)UK/IRELAND (10%)OTHER EUROPE (3%)USA (< 2%)ASIA (< 2%)

Source: ROY Morgan Research

THERE ARE 8.8 MILLION VEGEMITE USERS (1X OR MORE PER WK.)

85% LIVE IN AU/NZ 98% OF TOTAL WORLD USERS ARE OF

AUSTRALIAN DESCENT

28

2012 2018 Proj0

20

40

60

80

100

120

e-tailer/OnlineDrug/MassClubC-StoreSupermarkets/Hypermarkets

SUPERMARKETS/HYPERMARKETS WILL CONTINUE TO COMPRISE THE MAJORITY OF SALES IN AU/NZ

Source: Australia 2013 Distribution Study – Canadean Research

% Spreads Sales by Channel

29

13

12

1817

35

AU/NZ Spreads Category Splits

Yeast Based ChocolateHoneyNut&Seed SpreadsJams/Preserves

Source: Euromonitor syndicate data

YEAST BASED SPREADS IN AU/NZ ARE 13% OF TOTAL SPREADS CATEGORY RETAIL SALES

30

31

                                                                    Market Sizes | Historic/Forecast | Retail Value RSP | US$ mn | Constant 2014 PricesCategories Rank Geographies 2014 2015 2016 2017 2018 2019Spreads 1USA 4,046.00 4,138.80 4,229.40 4,303.50 4,394.60 4,470.10Spreads 2Germany 1,986.30 2,007.30 2,024.00 2,036.40 2,045.10 2,050.90Spreads 3France 1,919.70 1,965.70 1,998.40 2,022.50 2,038.20 2,049.90Spreads 4Italy 1,404.40 1,490.20 1,580.30 1,666.90 1,751.00 1,833.90Spreads 5Brazil 1,123.70 1,173.40 1,221.80 1,265.90 1,312.30 1,356.40Spreads 6Iran 736.50 831.10 939.30 1,052.00 1,172.00 1,302.00Spreads 7China 1,024.30 1,058.50 1,087.80 1,117.60 1,146.70 1,173.50Spreads 8United Kingdom 977.60 996.40 1,008.90 1,024.40 1,032.00 1,034.10Spreads 9Russia 641.70 670.20 694.60 718.30 743.20 763.70Spreads 10Turkey 614.00 644.30 671.50 695.80 716.20 733.70Spreads 11Japan 647.00 641.60 639.70 639.00 638.40 639.20Spreads 12Australia 566.40 579.60 591.90 604.50 617.20 630.20Spreads 13Mexico 523.40 538.90 555.10 573.20 592.50 612.60Spreads 14Canada 536.60 541.40 547.10 553.40 559.60 565.60Spreads 15Spain 478.40 495.50 508.70 519.50 526.60 533.10Spreads 16Saudi Arabia 336.20 357.60 382.70 411.20 442.10 476.50Spreads 17Sweden 363.40 363.50 363.40 364.70 366.90 369.80Spreads 18Uzbekistan 283.10 297.70 309.80 320.90 331.40 341.80Spreads 19Belgium 304.00 310.70 317.00 322.50 327.50 332.90Spreads 20Norway 257.00 267.70 279.90 293.30 308.80 316.00

RANKING OF SPREADS CONSUMPTION BY COUNTRIES

Research Sources:Packaged Food: Euromonitor from trade sources/national statisticsDate Exported (GMT): 5/4/2015 6:27:57 AM© Euromonitor International

32

                                                                            Market Sizes | Historic/Forecast | Retail Value RSP | US$ mn | Current Prices | Fixed 2014 Exchange RatesCategories Geographies 2012 2013 2014 2015 2016 2017 2018 2019Spreads Australia 528.10 543.70 566.40 595.30 623.70 653.50 684.60 717.30Spreads USA 3,914.80 3,997.90 4,046.00 4,225.90 4,413.10 4,589.30 4,789.50 4,978.90Spreads West 994.00 1,003.90 1,016.80 1,063.20 1,113.00 1,159.20 1,211.30 1,260.70Spreads Midwest 853.30 867.50 859.40 889.10 922.80 956.40 994.80 1,032.10Spreads Northeast 727.20 737.40 753.40 787.30 821.30 853.60 888.90 922.60Spreads South 1,340.30 1,389.00 1,416.30 1,486.20 1,556.10 1,620.00 1,694.50 1,763.50

Research Sources:Packaged Food: Euromonitor from trade sources/national statistics

Date Exported (GMT): 5/4/2015 6:48:31 AM© Euromonitor International

MARKET SIZE HISTORICAL AND FORECAST COMPARISON FOR AUSTRALIA AND U.S.

33

RANKING OF SPREADS CONSUMPTION BY COUNTRIES

Western Europe is another great market and taken as one combined market it is even bigger than US, but entering Europe requires an entry plan specific to each country which would involve more capital outlays and intensive marketing. So compared to that US is the best new market to enter at this point in time

34

RANKING OF SPREADS BY BRANDS FOR AUSTRALIA AND U.S.

                                                                            Brand Shares (Umbrella – Historical Owner) | Historic | Retail Value RSP | % breakdownCategories Geographies Brand Company name (GBO) 2009 2010 2011 2012 2013 2014Spreads Australia Vegemite Mondelez International Inc - - - 20.00 18.60 17.50Spreads Australia Kraft Mondelez International Inc - - - 13.10 13.90 14.00Spreads Australia Capilano Capilano Honey Ltd 7.70 8.00 8.20 8.60 9.40 10.50Spreads Australia Nutella Ferrero Group 8.80 9.20 9.30 9.30 10.20 10.20Spreads Australia IXL Coca-Cola Amatil Ltd 5.50 5.50 5.30 5.20 5.10 4.80Spreads Australia Cottee's Heinz Co, HJ 5.30 5.00 4.40 3.70 3.30 3.00Spreads Australia Dick Smith's Dick Smith Foods Pty Ltd 1.50 1.30 1.30 1.70 2.50 2.80Spreads Australia Beechworth Beechworth Honey Pty Ltd 1.90 2.80 2.80 2.30 2.10 2.10Spreads Australia St Dalfour St Dalfour Frères 3.00 3.40 3.60 2.90 2.30 2.00Spreads Australia Sanitarium Australasian Conference Association Ltd 2.10 2.20 1.70 1.70 1.70 1.90Spreads Australia Bonne Maman Andros SAS - 0.10 0.30 0.80 1.10 1.40Spreads Australia Anathoth Barker Fruit Processors Ltd - 0.60 1.10 1.10 1.10 1.10Spreads Australia Promite Mars Inc 1.40 1.40 1.30 1.20 1.10 1.00

Categories Geographies Brand Company name (GBO) 2009 2010 2011 2012 2013 2014Spreads USA Jif JM Smucker Co, The 19.50 19.40 19.60 21.20 20.40 19.90Spreads USA Smucker's JM Smucker Co, The 12.00 11.70 11.30 10.40 10.00 9.80Spreads USA Skippy Hormel Foods Corp - - - - 9.30 9.40Spreads USA Nutella Ferrero Group 1.80 2.90 4.50 5.60 6.10 6.30Spreads USA Peter Pan ConAgra Foods Inc 4.60 4.30 4.50 5.50 5.30 4.80

Research Sources:Packaged Food: Euromonitor from trade sources/national statistics

Date Exported (GMT): 5/4/2015 6:54:39 AM© Euromonitor International

35

YEAST BASED SPREADS IN U.S. IS 0%OF TOTAL SPREADS CATEGORY RETAIL SALES

Src: Euromonitor International: Spreads in the U.S.

36

SPREAD CONSUMPTIONS BY BIRTH COUNTRY

Src: http://www.dailymail.co.uk/news/article-2866513/Spreading-love-83-cent-vegemite-eaters-born-Australia-30-cent-people-born-UK-eat-it.html

37

SNACK MARKET OPPORTUNITY

Research Sources:Packaged Food: Euromonitor from trade sources/national statistics

Date Exported (GMT): 5/4/2015 6:54:39 AM© Euromonitor International

38

AUSTRALIAN POPULATION IN USA

Source : http://www.asiamattersforamerica.org/australia/data/population

39

KRAFT’S COMPETITIVE POSITION

Source: Euromonitor International from company reports, company research, trade press, trade sources, trade interviews

40

Vegemite Value Chain

Support

Primary

CompetitiveAdvantage

Keep packaging and flavor consistent in Australia, leverage historical usage

Take new spreads to US market, focus on families and product health benefits

Innovate new flavors into spread

Innovate new products for snack and chip market competition

Focus groups in key markets to test new products

Create partnerships in the US to get shelf space in convenience stores and markets

Increase awareness through social media and influencers

Heavy promo and discounts to encourage people to try products for the first time

41

Snack or Chip product-Vegemite taste blended with another flavor-Likely a dry/ crunchy texture-Variety of flavors and forms-Tested in focus groups, constant feedback and product tweaking

Upper end pricing- Will be premium

products- Focusing on health

benefits as well as taste- Differentiated through

Vegemite branding or sub-branding

Convenience Store/ Market- Grocery stores,

convenience stores, gas stations

- Sold online as well- Eventually move to bigger

volume dealers and clubs- Big social media and

influencer presence

Free trials and Discounts-Partnerships to get prime shelf space-Limited time free samples-Discounts via coupons-Negotiate for product display stands and signage-Promo events

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Phase I. – Spreads Target Customer 1: Mother, 1-5 children, house wife, husband works, age 25-45 with no real budget, health minded.Target Customer 2: Head of household, feeds family of 2-6, health conscious, limited budget, pays attention to news, very busy, full time job.Target Customer 3: Australian citizens, living in the US currently, from Australia originally, looking for comfort foods.

Phase II. – Snacks/ ChipsTarget Customer 1: 8-16 year old boys and girls, go to school, regular snacker both during and after school, get some choice of food but still supervised from parent or guardian.Target Customer 2: 15-25 year old boys and girls, high school or college student, have full choice in food, focused on taste first, limited budget, prefers convenient food that you can eat on the run.Target Customer 3: 20-40 year old men and women, working a job or in school, limited budget, health minded, on the run or very busy.

Target Markets

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US SPREADS PERCEPUTAL MAP