Privileged and Confidential

Frito Lay eCommerce

Eric Meyer, PepsiCo Frito Lay Director Packaging

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Online Grocery Sales: $25B in 2015… expected to triple by 2020

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Today, Frito Lay products are not designed to support National-Ship e-Commerce

National Ship eCommerce

• Today, National Ship Online is the dominate model vs. other home delivery models and click & collect

• The National Ship model is the gateway experience to online grocery shopping

Frito Lay Products

• FL products are optimized for DSD

• But are a challenge for National Ship Online Grocers:

- Require manual re-packing that challenges customer profit margins and creates Trade pressure on Frito Lay

- OTR Elevation and Overnight shipping

- Selling by the case reduces cost-to-serve but forces the shopper to buy more product than can be consumed

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Frito Lay must evolve as we navigate the E-Commerce Category

eCommerce Friendly Assortment

National Ship Customer Volume

The Knowledge Gap

• We do not have enough eCommerce shopper Insights

• National Shippers do not know our brands well enough to advise us

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So what do we do?

Must engage now to test & learn with eCommerce category to determine viable share of revenue and profit.

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Execution and Product Protection for Snack Products is variable and challenging

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Third Party Fulfillment adds more variability

And potentially more care to protect their ratings

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Multiple Providers w different pedigrees… all fighting in the exploding channel

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What is selling on Amazon?

PRODUCT SALES 4 WEEK

1 FRITO-LAY CHIPS CLASSIC MIX MULTIPACK, 20 COUNT 123,697

2 POPCHIPS CLASSIC SINGLE SERVE VARIETY PACK, 0.8 OUNCE (PACK OF 24) 74,815

3 KETTLE VARIETY PACK, SEA SALT AND VINEGAR, SALT AND PEPPER, BACKYARD BARBEQUE AND JALAPENO, 30 COUNT 28,117

4 MEDORA SNACKS POPCORNERS POPPED CORN CHIPS, KETTLE, 1.1-OUNCE (PACK OF 40) 27,391

5 STACY'S PITA CHIPS, SIMPLY NAKED, 1.5-OUNCE BAGS (PACK OF 24) 18,407

6 DORITOS TORTILLA CHIPS, PARTY SIZE NACHO CHEESE, 16 OZ 18,100

7 GARDEN OF EATIN' SESAME BLUES CHIPS, 7.5 OZ 14,451

8 POPCHIPS POTATO CHIPS BBQ, SINGLE SERVE 0.8 OUNCE (PACK OF 24) 12,077

9 STACY'S PITA CHIPS, CINNAMON SUGAR, 1.5-OUNCE BAGS (PACK OF 24) 11,287

10 TERRA BLUES POTATO CHIPS, 1 OUNCE BAGS (PACK OF 24) 10,787

11 FRITO-LAY CHIPS FLAVOR MIX MULTIPACK, 20 COUNT 9,736

12 POPCHIPS POTATO CHIPS, SWEET POTATO, 0.8-OUNCE SINGLE SERVE BAGS (PACK OF 24) 8,959

13 LAY'S KETTLE CHIPS VARIETY PACK, 1.375 OZ BAGS, 30 COUNT 8,700

14 LAY'S POTATO CHIPS, PARTY SIZE CLASSIC, 13.75 OZ 8,672

15 KETTLE CHIPS, SEA SALT, 8.5 OZ 7,728

16 KETTLE CHIPS, JALAPENO, 8.5 OZ 7,690

17 KETTLE CHIPS, BACKYARD BBQ, 8.5 OZ 7,494

18 LAY'S WAVY POTATO CHIPS DIPPED IN MILK CHOCOLATE, 5 OUNCE 7,014

19 KETTLE CHIPS, SALT & FRESH GROUND PEPPER, 13 OZ 7,014

20 STACY'S PITA CHIP, SIMPLY NAKED, 8 OZ 6,959

21 GOOD HEALTH KETTLE STYLE OLIVE OIL POTATO CHIPS, SEA SALT, 5-OUNCE BAGS (PACK OF 12) 6,609

22 TERRA ORIGINAL, SEA SALT, 1 OUNCE (PACK OF 24) 6,601

23 FRITO LAY FLAVOR VARIETY PACK, 32 OUNCE 6,526

24 KETTLE CHIPS SEA SALT, 1-OUNCE (PACK OF 72) 6,217

25 STACY'S PITA CHIPS, PARMESAN GARLIC & HERB, 1.5-OUNCE BAGS (PACK OF 24) 6,189

Top 25 Salty Snack SKUs on Amazon (.com/Pantry) by Sales (last 4 weeks)

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Multipacks are driver of purchase on Amazon platforms

Multipacks:

• 16 of top 25 SKUS

• 81% total sales

Source: Pepsico-OCR-Dash_2015_02_15

Variety Packs:

• Top 3 SKUs (6 of top 25)

• 55% total sales

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Are unique VP bundles viable???

??

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DUAF Bundles exclusive to E Commerce

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What we have learned and what is concerning …

• “Long” shelf life provides critical flexibility (60+ days) • Need consistent supply chain…OOS drops you to bottom of search

• Branded box unnecessary—Amazon will typically put in their box - SIOC: Ship in Own Container

• As in retail, variety packs command a premium • Targeting > $15 ring allows all parties to win…cover shipping $$

• Pricing is competitive and dynamic based on supply/demand - CPG company does not control e-com market pricing - Should CPG promote or discourage comparison shopping to Brick&Mortar?

• In growing segment, Revenue seems to be higher priority than profit - As Revenue increases, expect priority to change

• Large variability with fulfillment execution - Should CPG companies invest/design to protect the tail or the norm?