1

2015 KEY TAKEAWAYS

2

The FoodBev Forum Advisory Board

Leon Bruner

Grocery Manufacturers Association

Bob Fisher

Fisher Consulting Partners, LLC

John Kepplinger Kellogg Company

Dave Schmidt

International Food Information Council

George Young

Kalypso

Ken Lee

Ohio State University, Food Innovation

Mark McLellan

Utah State University

Karen Milley

The J.M. Smucker Company

Kevin Waters

The National Food Labs

Judy Zaunbrecher

Welch’s Retired

Phil Perkins Bush Brothers & Company

Skip Rosskam

David Michael & Co.

Ted Nixon

D.D. Williamson

2015 FoodBev Forum: Ponte Vedra, FLThe FoodBev Forum is an event dedicated to transforming how food and beverage science executives and academics influencers lead innovation initiatives within their organization. A carefully crafted mix of industry and academia, facilitated by recognized speakers and thought leaders, allows attendees to learn about and openly discuss the challenges and opportunities facing the food and beverage industry now and into the future.

Attendance of the Food Bev Forum is by invitation only; please contact Amber Lyons (amber.lyons@kalypso.com) if you are interested in being invited to attend the 2016 event.

MissionAn exclusive spirited collaboration of

industry and academic leaders who

seek out learning that inspires action

and ignites positive change on the future

of the food and beverage industry.

VisionPassionate food & beverage industry

professionals working together

successfully and responsibly to provide

wholesome, safe and healthy products

that ultimately sustain ten billion people.

3

4.4 out of 5 attendees found the event useful

4.6 out of 5 attendees likely to attend next year

In Your Words We asked attendees to summarize their FoodBev Forum experience into six words. These words were used most often:

Represented Companies

4

Key Takeaways: PepsiCo R&DDelivering on the Business and Marketing Priorities of Today and the Sustainable Growth Opportunities of Tomorrow with Dr. Mehmood Khan, PepsiCo

Great companies constantly anticipate and evolve to meet consumer demands and needs.

Over seven years, Dr. Khan has been successfully transforming PepsiCo’s Global R&D organization. In fact, it now serves as a catalyst – transforming the company and its portfolio.

Key message: Individuals and companies need to continually re-invent themselves to remain in this marketplace.

Dr. Khan Re-calibrated PepsiCo’s Global R&D Department by:Removing R&D silos and establishing a globally connected and aligned R&D organization

Hiring new talent with diverse science and technology capabilities and experience -- even looking outside of the food and beverage industry

Listening to consumers in order to deliver functionally differentiated innovation across our food and beverage portfolio

Giving teams the space to push the boundaries and take risks

Creating an open culture of listening and recognizing good ideas

Dr. Khan’s 2050 Challenges for the Industry:Resources are becoming more scarce at the same time our consumer base is growing

The world needs to produce 40% more food to feed people. How can innovation play a role in producing the necessary quantity of food?

The continued growth of mega-cities will require industry to rethink supply chains from seed to shelf

5

Food and beverage manufacturers often assume that consumers don’t trust them to provide accurate information about ingredients. However, the International Food Information Council (IFIC) Foundation 2014 Food & Health Survey actually showed that food manufacturers are the second-most trusted source of food ingredient information, at 21%.

The 2014 survey also showed that consumers are less likely to cite food manufacturers as a trusted source when it comes to food safety issues, or the ways that foods and beverages are farmed and produced.

This presents an opportunity for companies to tell their story of the care that goes into each step of their food production from farm to fork.

The IFIC Foundation launched the 2015 Food & Health Survey in May. Go to foodinsight.org for more details.

Key Takeaways: IFIC Foundation’s 2015 Food & Health SurveyA Sneak Peak with Dave Schmidt, IFIC

Food Ingredients

International Food Information Council Foundation 2014 Foods & Healthy Survey

26%

21%

16%

14%

12%

5%

3%

1%

1%

Government agencies

Food manufacturers

Health professionals

Scientific journals

Friends and family

News media

TV personalities

Social media

Health - focused websites

Which of these sources would you trust the most to provide information about the following issues:

6

Key Takeaways: Edible Insights & Inspirations with Justin Shimek, Mattson & Co.

There’s a seismic shift happening in the way consumers source meals. They’re shopping at more retail locations than ever before, but they are also using other food services, from restaurant curbside pickup to meal kit delivery.

Interspersed amongst these seismic industry challenges are culinary trends, food form and packaging trends. What does this mean for manufacturers, retailers, co-packers and consumers?

The 10 Trends Experienced During the Interactive Meal and Discussion:

1 –er eating [deeper, darker, more bitter flavors, sour beverages getting sourer, vinegar drinks]

2 Subscription food

3 Direct-to-consumer prepared food

4 Direct-to-consumer groceries

5 Trigeminal experiences [the move for more spicy, heat in foods, Sriracha]

6 A vegetable in meat’s clothing

7 The new scratch cooking

8 Mindful eating

9 Brazilian food influence

10 Food waste awareness

7

Key Takeaways: Why is Innovation Difficult in this Industrywith George Young, Kalypso

Innovation in the food and beverage industry is hard. 85% of new products fail. Food and beverage (F&B) manufacturers struggle to introduce truly innovative, new-to-the-world products, and those that do rarely sustain their success.

One of the first challenges for the food and beverage industry is structural. Most large companies are public (96% of F&B companies over $5B) and have outside pressure for near term returns, which disincentivizes innovation. Shareholders want investment to drive returns now, not for the long term.

And in recent years, when large companies invest in the long term, they have been targeted by private equity.

To drive their innovation activity and enable lasting change in consumer behavior, food and beverage companies need to tune into macro trends such as eating healthy, sourcing locally, ultra-convenience, subscription foods, and sustainability. To break the incremental innovation cycle, food and beverage companies must realize that investing in innovation drives long term financial results.

8

Key Takeaways: Using Foresight to Fill & Manage and Innovation Portfoliowith Christian Crews, AndSpace Consulting

Foresight is a collaborative, ongoing and systematic process of questioning our assumptions about the future so we can recognize change, act together and shape the future as it evolves.

The future cannot be predicted, yet each of us has assumptions about it that we use to make decisions. This mental model often prevents us from seeing new developments in the industry, or discounting their impact. The foresight process can help manage innovation portfolios by adapting our mental models so that our investment decisions sync to the pace of change in the food and beverage industry and take advantage of new opportunities.

AndSpace’s Approach: The Foresight Process and How to Think About the Future Discovery: Looking in to understand the strategic need. Looking out to uncover sources of change

Exploration: Forecasting trend impacts to stretch our inquiry into the future

Integration: Moving from single forecasts to multiple scenarios of emergent change

Planning: Linking thinking about the future to potential action

With a simple portfolio planning exercise, innovation teams can work together to create a shared strategic context for novel ideas and trigger points for making decisions.

9

Key Takeaways: Peering Inside the Food Mind with Howard Moskowitz, Mind Genomics Associates, Inc.

The food industry is often blamed for making foods addictive, for obesity, and for a host of ills which beset people, and the typical reaction is to do more of what’s comfortable – search for the “magic” solution and hire PR firms to communicate to the masses. But what if we could abandon this approach and instead, focus on finding the right message, not the right ingredient, which can really make a difference for the target consumer. How do we find the right thing to communicate to the right person to change their behavior?

Messaging is not new. It’s been used since the beginning of recorded history as a means to influence people. Advertising is a push – and people do not like being pushed. So it’s about finding their hot buttons.

Mind Genomics is a Way of Looking at the World from the Bottom Up; • Discover the right messages to

convince the right people

• Use the right messages, increase desired behavior

• Avoid wrong messages, further increase desired behavior

Mind Genomics has been used to successfully reduce hospital readmissions for patients with congestive heart failure. Food and beverage manufacturers can use mind genomics to drive healthy eating – and profits.

Click here to view more about Mind Genomics

Key Takeaways: New Product Pacesetters: Driving Lasting Disruptive Innovation with Larry Levin, IRI

New Product Pacesetters identifies the year’s top 100 new products in the food and beverage industry. The appetite for new products in the marketplace is strong, but the reality is, breakthrough innovation is tough. The average launch in this year’s Pacesetters only reached $35M on average and 75% of the Pacesetters stopped at under $50M.

7 Reasons New Items Fail: • Forecast mistakes not based

on realistic expectations

• Assortment mistakes (i.e. no reinvention or differentiation)

• Incremental mistakes (i.e. “me-too” products)

• Languish mistakes where new products are not disruptive to the industry, inconsequential or replaceable

• Unclear mistakes due to lack of differentiation or lack simplicity

• Retread mistakes by introducing products that are too similar to what has been done

• Elusive mistakes that don’t motivate adoption or don’t serve multiple needs

Innovation that Worked Delivered on 3 Key Trends: • Simplicity

• Wellness

• Exploration

Key Things Pacesetters Do: • Continue to promote their products

in the second year. IRI stats show that 30% of products lose 30 points of distribution in the second year

• Talk to millennials who want unique flavors as opposed to “me too” flavors

• Listen to consumers unmet needs; they are identifying the whitespace

• Play into the health and wellness area

11

Key Takeaways: Engaging Strategic Thinking When Navigating Trends with Suzy Badaracco, Culinary Tides Inc.

New trends are born every day, and they change even faster. Through these three steps, companies can develop a strategy around shifting trends, adapt to the changing landscape and preserve their position in the marketplace. These tactics offer adept navigation during the birth of a new trend and help companies adapt to shifts in an existing trend’s lifecycle.

How to Apply the Methodology in Your Own Organization: Step 1: Identify the PhenomenonMorph: Occurs when cousin to a current trend steals the spotlight

Ricochet: Trend jumps tracts

Courier: Shuttle trends in from neighboring industries/focuses

Fusion: Trend with multiple parents

Step 2: Conduct AnalysisLink Analysis & Diagram: Review both positive and negative research relating to the new trend and organize the chaos used to identify a trend before it is born

Time Line Analysis & Timeline: Review changes in the industry related to the event/topic and map the directional movement on a timeline

Quadrant Analysis Adversarial Groups: Identify adversarial groups to the trend and pattern the groups by the players in he chart to reveal clusters

Step 3: Build the Strategy by Answering the Questions Below:1. Is the trend a threat or opportunity

to your product line?

2. What do the models reveal to help you decide how to track / navigate / anticipate?

3. Are there any allies to align with?

4. What market changes does it trigger? Consumer behavior?

5. What information are you missing?

6. What is the entrance strategy your company plans to use?

Is there a particular demographic/target market you are pursuing?

How do you plan on overcoming the obstacle(s)?

How will current product lines be affected, if at all or do you anticipate new product lines/directions?

Marketing ideas for communicating entrance strategy to consumers

12 Photos by Ken Lee with permission

13 Photos by Ken Lee with permission

Kalypso was created in 2004 to address the need for industry-specific innovation expertise in the professional services marketplace. We have been on a mission to help our clients deliver better results from innovation ever since.

Our approach is unlike traditional consulting firms. It’s the Kalypso Difference:

Exclusive focus on innovationComprehensive capability throughout the Innovation Results Transformation journeyFlexible delivery models to ensure clients get exactly the support and service they needInformed opinions to provide clients with innovative solutions that turn challenges into success storiesSustained results that deliver growth and profitability

Our Food & Beverage team understands the industry’s most critical challenges, including:

Maximizing the value of product portfoliosDriving share growth through collaborative innovation with strategic partnersReducing time-to-market and time-to-profitEnsuring consumer safety and compliance

Kalypso helps food & beverage organizations execute strategies and achieve measurable, sustainable results with a depth of capabilities and expertise tailored for each client. Our industry leaders help improve innovation ROI with current strategies specific to the consumer goods industry.