Pepsi & Gatorade

Regional Market Update

May 2011

Regional markets offer the best opportunity to grow Pepsi sales and improve ROI

• 40% of cola category sales come from regional markets

• Pepsi in has growth momentum in regional – more popular than in metro for first time

• Lack of competitive RTV activity gives Pepsi a rare opportunity to gain regional markets share

• Gatorade – strong regional BDI means it will benefit from category growth

www.regionaltvmarketing.com.au

RTM is the marketing bureau for Regional free to air TV

Regional TV covers all areas outside capital

cities and reaches 36% of

populationQLD

NNSW

SNSW

TAS

VIC

REG. WA

DIARY

Regional TV coverage

includes large cities and fast

growing coastal suburbs

Newcastle & Central Coast

Gold Coast

Wollongong & Illawarra

Canberra

Diary markets: A diverse mix of urban and rural

Regional WA

Port Pirie/ Broken

Hill

Satellite

Griffith

Mildura

Darwin

Loxton/Mt Gambier

Populations of major regional TV markets are comparable with the metros

SydneyMelbourne

Reg NSWBrisbane

PerthReg QLDAdelaideReg VIC

DiaryWATAS

0m 1m 2m 3m 4m 5m

4,6354,528

3,4892,982

1,8561,764

1,4081,171

969585

510

People

Source: ATR & OZTAM 2011, Nielsen Media Research 2010

NNSW 2,079 SNSW 1,410

Population Increase: 2001 vs. 2011

Source: ATR & OZTAM 2011

Australian population moving North and to the coast. Over 30% growth in 10 years in some regional areas

MARYB

MACKA

YBRIS

NOR RIV

CAIRNS

TOW

NS

PERTH

ROCK

TOOW

CANB

GIPPS M

EL

TAM/T

AR

ALBURY

WOLL

BALLSY

DADEL

NEWC

HOBART

BEND

LAUNCE

SHEP

P

O/D/W

0%5%

10%15%20%25%30%35%40%45%

National average

QLD NSW VIC TAS METRO

Urbanisation and high population growth changing the profile of regional Australia

• Lower cost of living and lifestyle are main attractions

• Rural populations moving to regional hub towns

• Less than 4% of households depend on farming

3 %7live in Regional TV markets

Source: OzTam AGB Nielsen 2011

1,573,000

Australian teens age 13-17

3 %3live in Regional TV markets

Source: OzTam AGB Nielsen 2011

3,035,000

Australian youths age 16-24

Seachange…

… for baby boomers

…for families

“Typical” Seachanger

Ryan, 36. Wollongong NSW

Made the seachange from the “Shire” to the “Gong”. Owns a small business in building trade

Above average income & primary focus is kids and lifestyle.

Loves footy , cars and teaching kids surfing.

Source: Roy Morgan Single Source (12mths to Dec 2010)

% of people 25-54 Metro Regional

Employed Full Time 56% 53%

Employed Part Time 23% 22%

Household Income $80K+ 41% 42%

More than one income in household 64% 58%

Children in household 50% 52%

Own or Paying Off Home 59% 61%

Regional consumers have similar

demographic profile to metro

Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-100%

5%

10%

15%

20%

25%Metro Regional

People 18-54 with HHI $130k+ or Investments $500K+

Doubling in number of wealthy people living in regional Australia in past five years

Source: Roy Morgan Single Source (12mths to Sep 2010, 2009, 2008, 2007, 2006, 2005 )

Why has regional spending been more stable and the outlook more

positive?

• Lower cost of living – less debt• Huge investment in infrastructure • Population growth driving development

of local economies• Resources growth impacting many parts

of regional: NSW, QLD, WA, SA.

People 14-24 Metro Reg

Employed FT/PT 49% 51%

In education 72% 61%

Watch FTA TV 91% 93%

Consumed Coca-Cola P7D 46% 50%

Consumed Pepsi P7D 17% 20%

3 %8of young Cola drinkers

live in Regional

Source: Roy Morgan Single Source (12mths to December 2010)

SYD

MEL

BRI

ADE

PER

NSW

VIC

QLD

TAS

Diary

0k 20k 40k 60k 80k 100k 120k 140k

133

124

61

36

44

97

45

48

10

38

37% of regular Pepsi drinkers (14-24) live in regional TV markets: Regional has 3rd, 5th and 6th biggest markets

Drank Pepsi P7D: People 14-24Source: Roy Morgan Single Source (12mths to December 2010)

Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-100%

10%

20%

30%

40%

50%

60%

70%

Any Coke Met Any Coke Reg Any Pepsi Met Any Pepsi Reg

People14-24 drink Any Coke or Pepsi variant in the P7D

Source: Roy Morgan Single Source (12mths to Dec 2010, June 2010, June 2009, June 2008, June 2007, June 2006, June 2005, June 2004, June 2003)

Pepsi has increased consumption in regional markets above metro for first time in past year

Dec 2010

Coca-Cola

Pepsi

FY 04/05 FY 05/06 FY 06/07 FY 07/08 FY 08/09 J-D 2010$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

445

819

541

1200

13851450

0104

972

552

931

496

RTV$ Coke RTV$ Pepsi

Source: Nielsen Media Research AdEx Jul – Jun year as labelled, except Jan- Dec 2010

Pepsi and Coke increased their TV ad investment in Regional TV until last year – in 2011 Coke spend down

Regional TV spend FY since 2004

In 2011 Coca-Cola has spent $1.9m on TV …

99% in metro

…big opportunity for Pepsi to grab regional market share through increased RTV spend

Pepsi grew YOY in Regional QLD and Reg. VICRegional NSW has big growth opportunity ahead

SYD MEL BRI ADE PER NNSW SNSW VIC QLD TAS Diary0%

5%

10%

15%

20%

25%

30%

35% 2010 2009

Drank Pepsi P7D: People 14-24

+2.50% +4.80% -1.50% +6.80% -2.40% +0.60% +0.40%+11.10

%+8.80% +0.10% +5.00%

Source: Roy Morgan Single Source (12mths to December 2010 vs. 2009)

Pepsi Max grew its consumption in regional markets except for NNSW where it declined

SYD MEL BRI ADE PER NNSW SNSW VIC QLD TAS Diary0%

5%

10%

15%

20% 2010 2009

Drank Pepsi Max P7D: People 14-24

-1.40% +1.30% -2.60% +6.80% -3.10% -5.30% +4.90% +6.10% +7.60% +2.40% +0.50%

Source: Roy Morgan Single Source (12mths to December 2010 vs. 2009)

Coca Cola consumption increased in NNSW and Sydney

SYD MEL BRI ADE PER NNSW SNSW VIC QLD TAS Diary0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Drank Coca Cola P7D: People 14-24

+6.60% -3.20% -0.40% +2.50% +0.60%+10.50

%-2.50%

+14.70%

-10.50%

-2.70%-

10.80%

Source: Roy Morgan Single Source (12mths to December 2010 vs. 2009)

Source: ABG NMR Panorama (12mths to Dec 2010)

Drink sports drinks several times a week Metro Reg

Male 77% 77%

18-39 55% 44%

25-54 58% 65%

Play sports P12M 80% 83%

Watch sport on TV 91% 95%

Drank Gatorade P7D 40% 39%

Drank Powerade P7D 45% 36%

High volume regional sports drinkers skew slightly older

and prefer PepsiCo Gatorade

Sports drink consumption is low in regional NSW – big opportunity for brand and category growth

SYD MEL BRI ADE PER NNSW SNSW VIC QLD S/W/NT

TAS0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Drink sports drinks several times a week: People 18-39

-0.30%+0.10

%-0.10%

+1.10%

-0.50%-1.40%-0.40%-0.50%-0.70%-3.50%-0.60%

Source: AGB NMR Panorama 12 months to December 2010 vs. 2009

Regional consumers are heavier viewers of FTA TV but otherwise have same media habits as metro

Women aged 18-39 Metro Reg

Watch 2hrs+ TV per day 49% 60%

Watch daytime TV 71% 74%

Own digital TV at home 85% 90%

Whether subscribe to Pay TV* 24% 23%Listened to any commercial radio

weekday 65% 66%

Accessed the internet 85% 86%

Source: Roy Morgan Single Source 12 months to Dec 2010, *AGB NMR Panorama 12 mths to Dec 2010

13/06/2010

27/06/2010

11/07/2010

25/07/2010

8/08/2010

22/08/2010

5/09/2010

19/09/2010

3/10/2010

17/10/2010

31/10/2010

14/11/2010

28/11/2010

12/12/2010

26/12/2010

9/01/2011

23/01/2011

6/02/2011

20/02/2011

6/03/2011

20/03/20110%

5%

10%

15%

20%

25%

Metro Regional

Launch week of 7mate &

Gem

Launch week of Eleven

Audience share of the new commercial “digital” channels has more than tripled since June 2010

Source: Mediaweek, Metro data from OzTAM and Regional data from Regoional TAM. All People 18:00 - 23:59

June 2010 Sept 2010 Dec 2010 March 2011

• Subscription TV audiences are down in all key dayparts for the Survey Year to Date• FTA viewing is up & commercial TV even more

Source: Regional TAM; Survey 1-2, 2011 vs. 2010; Consolidated Data

New commercial channels driving Free to air TV audiences up in 2011

Audience Year on Year % Change; Combined Agg Markets (QLD, NNSW, SNSW, VIC & TAS)

Total People; Sun-Sat; Survey 1-2, 2011 vs. 2010

Reg. TV CPM is 45% below metro TV average and delivers double the cost efficiency and ROI

SYD MEL BRI ADE PER NNSWSNSW VIC QLD TAS40

60

80

100

120

140

160

180164

104

98

7989

71 70

5361

70

Ind

ex

TV market CPM indicesNational average CPM P18+ = 100

Source: Regional TV Agency Survey 2010

SYD19%

MEL19%

BRI12%

ADE6%

PER8%

Reg36%

SYD34%

MEL21%

BRI12%

ADE5%

PER7%

Reg23%

Share of national population

Share of national TV budget

Higher cost efficiency of regional TV is opportunity to push growth harder than in metro

The next year is a crucial opportunity for Pepsi to gain ground in the most cost efficient market where 40% of its potential volume is ….Regional Australia

…and for only 25% of the national TV budget

33%+of Pepsi grocery

channel sales are from regional

*Pepsi includes – Pepsi, Pepsi Light, Pepsi Light Caffeine Free, Pepsi Max, Pepsi SambaSource: Scan Data (4 W/E 11/05/08 to 31/08/08) Coles /Woolworths/Bi Lo (Excludes NT)

2008 RTM case study showed…

Coca Cola

Coca Cola Zero

Diet Coke

PowerAde

Gatorade

Pepsi Max

Grand Total

19%

11%

18%

16%

3%

1%

12%

Metro Regional

In 2010 Coca-Cola brands continue investment in RTV – in 2011 PowerAde invested 23% in RTV – Coke 0%

In 2010 Coca-Cola brands continue investment in RTV – in 2011 PowerAde invested 23% in RTV – Coke 0%

Source: Nielsen Media Research AdExCategory: Beverages – Non Alcoholic, Aerated Soft Drinks

Period: Jan-Dec 2010

Total TV Spend

$4.4m

$2.4m

$1.4m

$1.9m

$1.9m

$2.2m

$15.2m

Pepsi Max

PowerAde

Gatorade