Creating a Service Vision Molly VandenHeuvel

Sr. Director Customer Value Stream

Kraft Foods

7 Brands with Annual Retail Sales Over $1bn

Kraft Overview

2 Source: Company filings and Nielsen.

98% Household Penetration in North America

#1 or #2 Position in 17 Top Categories (80% of Sales)

Products Average >2x the Share of the Nearest Branded Competitor

• Kraft has leading brands across 17 diverse core categories

Selected Kraft Brands Kraft Brand Development

Cheese (22% of Sales)

Meals & Desserts

(12% of Sales)

Refrigerated Meals

(19% of Sales)

Beverages (14% of Sales)

Enhancers & Snack Nuts

(11% of Sales)

Canada (11% of Sales)

Unmatched North America Brand Portfolio

Source: Company filings and Nielsen. Note: Foodservice and Exports together comprise 11% of Sales. 3

98% 10 43 or $107

% HouseholdPenetration

# Brands perHousehold

Purchases of KraftBrands per

Household (perYear)

$37.2

$27.9

$21.5

$17.9

$13.7

$9.5 $6.9 $6.4 $5.6 $5.5

$4.2 $2.4

4

Source: Company filings and Nielsen. Note: North America beverages reflects non-alcoholic beverages. (a) Nestlé sales data reflects 2014 financials converted from CHF to USD at average 2014 exchange rate. (b) Campbell’s and McCormick sales data reflect U.S. sales only.

Leading Player in North American Food & Beverage

Last Fiscal Year North American Food & Beverage Sales ($bn)

(b)

(a)

(b)

We Manage a $15 billion Value Chain

~$15B

Plant Conversion

Other Manufacturing

Indirect Transportation

& Warehousing

Commodities Ingredients

& Packaging

Scrap & Waste

Total Value Chain

$Billions

Cost of Goods Sold ~$12.5B

Win Together We’re one team wearing the same jersey … with Kraft on the front. We share the same competitive spirit. We win when the company performs. So share freely with, and steal shamelessly from, one another. Be individuals, yet remain indivisible.

Keep it Simple Make smart decisions quickly and move on. Do it well, once. Don’t let perfect be the enemy of good. Streamline cumbersome processes. Keep things loose and have fun.

Inspire Trust Be transparent, be open, be real. Listen hard, talk less. Combine honesty with empathy. Have each other’s backs. Make certain our actions match our words. When they don’t, say so. Always do the right thing – integrity matters.

Make Tough Choices We own the results. No one else, just us. Be candid and accountable. Prioritize resources well. Treat our money like it’s our very own. Make lean a competitive advantage.

The Values We Share

Creating a Service Vision Aspirational Case Study – Inditex / Zara

• Inditex – HQ in Spain

– Largest global clothing retailer with over 6,200 stores worldwide

– Stock + 450% over 10 years; Net Income ~2X in 5 years

• Zara – Inditex subsidiary

– 1,770 stores in 86 countries

– Supply Chain as strategic advantage and fuel for growth

• Zara Video

Aspirational Case Study – Inditex / Zara

• Critical differentiators – Constant change in part of the model vs. disruptor

– Original supply / order to forecast • Zara = ~50% Competitors = ~80%

– Local production cost offset by higher revenue % and lower unsold merchandise

• % of Full Revenue: Zara = ~85% Competitors = ~60%

• % Unsold: Zara = <10% Competitors = ~20%

– Zara Video

– Audience Observations

Aspirational Case Study – Inditex / Zara

• What does Zara have to do with CPG?

– Waste associated with aged inventory, packaging conversions, etc…

– Excess inventory associated with inaccurate forecasts

– Inventory discounted or donated due to age / shelf life

– Constant innovation and complex Product Lifecycle Management

• Similarities with your businesses?

Setting the Service Vision

Gather Input from Internal and External Key Stakeholders

Customer Interviews

Kraft Leadership Team Interviews:

Chief Operating Officer Chief Customer Officer

Chief Supply Chain Officer Division Presidents

Customer Service & Logistics Team on-line survey:

~350 respondents:

– 13 questions + 1 for general feedback

– 69% in CS&L >5 years

– 81% at Kraft >5 years

Customer Feedback

Priorities What we heard

Performance vs.

peers: None was

highlighted as a "gold

standard," as many

do some things well,

and some poorly

● "I want to buy in pallets or

layers because they fit my

shelf/backroom"

Pallet/Case

Configuration

● "I pass all my savings on

landed cost along to the price

in my stores."

Landed Cost

● "I want to hold less inventory, but

I can’t get best pricing if I order

in less than a full truck/pallet"

Inventory Levels

● "I have product availability

issues because I have a broad

set of products"

Fill Rates

● “Products don’t arrive with

enough shelf life remaining –

especially slow movers"

Code life

● "Many of my suppliers perform

well – but those that stand out

collaborate with me on an

ongoing bases"

Collaboration

Kraft Leadership Team Interview Feedback

Role and Purpose of Customer Service & Logistics:

End-to-End, seamless, continuous flow of demand and supply

Perfect orders to our customers

Effective, efficient, preferred supplier

Enable cost and cash

Ideal Vision for Customer Service & Logistics: Customer-facing resources have a toolbox that enables development of

customer-specific programs Best-in-class cost and service By taking time out of the supply chain, enable speed to market as a competitive

advantage Faster Route-to-Market enables freshness

Desired Behaviors from Customer Service & Logistics: Envisioning: Inspire the team AND internal and external customers Enabling: Build capability Execution: Daily, weekly and monthly

Customer Service & Logistics Team Member Feedback

What are you most proud of?

People Working as a team Leadership Customer Service (internally and externally) Delivering results

What do you see as CS&L’s strengths?

People Leadership Technical mastery within the members of the team Teamwork Customer Service

What do you see as CS&L’s opportunities?

On boarding, training and development systems Better communication, both internally and externally Integration with the Divisions Streamlining and simplification Clarity of goals and vision

Customer Service & Logistics Team Member Feedback

How do you think CS&L should be leveraged to maximize Kraft’s business results? Partnering with the Divisions to maximize gains in productivity and simplification Strong linkage with sales and commercial disciplines to deliver winning customer

solutions Laser focus on delivering cash and service improvements Leverage systems and optimized business processes Involve CS&L early into project feasibility calculations to maximize return on

investment

What behaviors do you want to see in the future?

Aligned objectives/one team Clear accountabilities Openness/trust Positive attitude/esprit de corps Effective communications (two-way) Learning, coaching, development Collaboration Servant leadership

Creating exceptional speed, value and growth through integrated partnerships from farm to family

REDUCING CYCLE TIME TO IMPROVE CASH FLOW, COST PROFILE AND FRESHNESS

RIGHT PRODUCT, PLACE, TIME, QUANTITY, QUALITY, PRICE

EMERGING ROUTES TO MARKET

SPEED VALUE GROWTH

Customer Service & Logistics Vision

99+% Service Level

6% Productivity

CS&L

5 DIOH

One team (integrated

partnerships)

Bringing it to Life and Driving Business Outcomes

Leverage the Organization Performance Model (OPM)* to Achieve Required Outcomes

Establish Clear Business

Goals and Communicate Broadly & Frequently

Cascade Goals to Every Team Member

*Task, Information, Decision Making, People, Structure, Rewards

Deliver Service to Drive Top Line Growth

Deliver Fuel for Growth

Drive Cash Conversion Cycle

Drive Supply Chain Fundamentals

Business & Culture Transformation

People Strategies & Talent Development

Strategic Priorities

Key Objectives

● Deliver service to drive top-line growth:

− Improve customer In Stocks, migrate towards On Shelf Availability − Fill rate improvement − Improve on-time delivery

● Deliver fuel for growth:

− Build productivity pipeline to 120% of target − Deliver net productivity target − Drive focus and process metrics to consistently limit waste − Drive overhead cost accountability

● Drive Cash Conversion Cycle: − Deliver AR objective − Deliver Inventory objectives while delivering service

● Drive Supply Chain fundamentals:

− Strict compliance with traceability and recall − Optimize Route to Market while balancing service − Improve inventory accuracy − Optimize Module/Shipper execution

● Business and culture transformation: − Implement Systems / Business Process improvements flawlessly − VSMs and Loss Analysis as way of working − Evolve supplier integration

● People strategies and talent development: − Drive a high performing & ownership culture − Build employee capabilities − Build talent pipeline and succession planning − Drive organization effectiveness & employee engagement

CS&L GOAL-SETTING - 2015

Strategic Priorities Specific Goal Metric/Target Key personal milestone to support the goal

Deliver Service to Drive Top Line Growth

Deliver Fuel for Growth

Drive Cash Conversion Cycle

Drive Supply Chain Fundamentals

Business & Culture Transformation

People Strategies & Talen Development

Write down one* goal and metric for each strategic priority that you will personally help deliver from the 2015 CSL Goals document

* Intended to be a simple first step in developing individual and team goals for 2015.