INNOVATION SUCCESS RECIPES Anton Borisyuk, Senior Insights Director, East Europe Region

Breakthrough Innovation Business Breakfast

February 1st, 2017.

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PepsiCo: the Largest Food and Beverage Company in Russia*

* According to the RAEX-600-2015 ranking of the largest companies by sales volume by the ranking agency “Expert RA”

** in 2015. Source: PepsiCo 2015 10-K

$2,797 bn

In annual sales**

>20 000 employees

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Innovation is an important contributor to long term success

Innovations could contribute ~10-20%

of category sales

Innovations enabled key market

players to keep / gain share in

challenging economic realities

Affordable innovations offset price

issue and drive incremental sales

Innovations maintain consumer

interest and motivate consumers to

pay premium

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We have robust process for identifying, developing and launching projects that enables to bring successful projects to Market

Idea

refinement

Initial

feasibility Development Scale up

Launch &

learn

Ideas

filter

Gate 3 Gate 4

Doing the

Right Projects

Doing the

Right Projects

Doing the

Projects Right

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We start innovation development by identifying Consumer / Shopper / Market trends, Consumption moments, unmet Consumer needs

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Strong product innovation. Fruktovy Sad Kompot

• Compote is a widely spread traditional home made drink to accompany meals

• Homemade compote is currently consumed in 4% of all beverages occasions

• Unmet need: no ready-to-drink convenient compote solution in the market –

consumers cook it at home, which is not always convenient

LAUNCH RESULTS:

+10% incremental volume

+0.7pp in value share

Fruktovy Sad packaged compote

with taste “from the childhood”

2015

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Strong packaging innovation. Agusha fruit puree in Doypacks

• Mother often spends time with her child out of home: i.e. going for a walk. She

takes some food / snack for the child with her.

• Unmet need: no easy to consume on the go products for children

LAUNCH RESULTS:

Agusha fruit puree sales almost tripled in 2 years

+10pp in segment value share and challenged successfully segment leader

Agusha was the first on the market to offer

fruit puree in Doypacks -

“NEPROLIVAYKA”

2012

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We responded to challenging economic reality via offering value formats to Domik v Derevne consumers in Dairy

UHT milk in TFA

900g Pasteurized milk

1,4L Sour cream

400g330g

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We select projects based on Size, Fit with brand and BASES Probability of long term success

RELAUNCH POTENTIAL SCORE

Good to

Proceed

SNAPSHOT

Good to

Proceed

SNAPSHOT

Good to

Proceed

• Keep current users

• Attract new consumers

“Size of the prize”

Strategy & brand fit

Long term success probability

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Long term innovation success requires consistent support

To “launch and love” From “launch and leave”

Range development Consistent communication

Q4 2012 2014 2016 2013 2014 2015-16

33% in brand

portfolio

+10pp incremental

value share in

segment

Imunele Kids successful growth

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Thank you!