Britvic Duration: 01:37:47 Paul Moody: Good afternoon everybody - - PDF document

Britvic

12th March 2009

Duration: 01:37:47

Paul Moody: Good afternoon everybody and welcome to Britvic’s latest seminar for both investors and analysts. A couple of small housekeeping things before we start formally. The first one is, if you could switch off your mobile phones that would be very helpful. The second is, that there will be a full transcript of this afternoon available on the web, I think tomorrow. So if that helps you avoid furiously scribbling every word that is said, maybe that will enable you to focus on the key points. I guess, a formal introduction – I’m Paul Moody, I think I’ve met most people over the last two or three years and during the course of the afternoon you will see two or three other of my colleagues, who will be presenting. So let’s get underway with first of all looking at the Agenda for today. The Agenda will actually follow a theme that’s familiar to many of you. I’ll begin the session with the key headlines from the 2009 Britvic Soft Drinks Report, which was a document published today and in fact in this very room earlier this morning, we presented to the trade, press and media. Following me, John will then update you on our recent organisational changes, as we implement a Group structure and clearly that’s in the context of the acquisition of Britvic Ireland which we made some 18 months ago. As many of you may know, Andrew Richards, who is our Customer Management Director in Great Britain, is taking over as Managing Director

• f Britvic Ireland; and it seemed timely to update you on the progress

we’re making in Ireland, plus to give you some real clarity on our recent restructuring and how this puts us in even better shape we believe, to

• utperform the market and drive real top line growth when more

favourable conditions return. And indeed, Andrew will also give you some comment on the Irish market in totality and the soft drinks market itself, which I’m sure you will find interesting. Simon Stewart, who joined the business just over a year ago as our Marketing Director, will give you a breakdown of our innovation and product launch programme for the year. This is in fact a constant key driver of growth for Britvic, so we want to ensure full understanding of the exciting year that we have ahead. It is also appropriate today for Simon to 1

talk about our core and seed brand plans for 2009, in what, in our view, is

• ne of the busiest years, not only for marketing activity, but also for brand

re-packaging and pack architecture. Again, both of these elements have been key drivers of growth over the last 12 months, but we believe we will be taking them to a new level in 2009. We’ll end the formal presentations in around an hour and half, when John and I will be more than happy to answer any questions you may have. I hope afterwards, you then can join us for some refreshments; further sampling if you’ve not already done so, of our new products. Just generally, a chat around the business; because as I am sure you know, we are quite keen and passionate to talk around our business. So let me move now to the soft drinks report. Our Annual Review of how the soft drinks market performed, in this case in 2008. Now as always the report has been compiled using independent data and insight from leading market researchers – Nielsen. As a reminder, this report is GB specific and therefore, doesn’t give any real detail on the Irish market; but as I’ve mentioned, Andrew will cover some of this in this session. I will outline some of the key findings from the report, a copy of which you all had on your chair, with particular focus on the trends that have emerged as the economy has worsened and how they have impacted soft

• drinks. I would, however, point out that the report is based on the

calendar year 2008 and in the fast changing environment that we are

• perating in, some of these trends are already moving on, so where

appropriate I will comment on more recent developments. So first, let’s take a look at the total market in 2008. Now this time last year, in fact in probably the same room, I presented a slide with a similar headline ‘A resilient performance in a tough year’. That particular tough year having been driven by a very wet summer and in the on-licence part

• f the market, the impacts of the smoking ban. 2008 as we now know

proved to be even tougher. Without sounding like a football manager, it was indeed a year of two halves and our early optimism was washed out by another atrocious summer, coupled with the onset of the economic downturn and the then, later formal recognition that we were in a recession. So while overall sales across the year held up relatively well, with value sales down just 1% against volumes down 2%, the real tend saw a reasonably strong performance in the first half, offset by a much poorer performance in the second half of the year. But as I said, overall a remarkably resilient performance and soft drinks remain a hugely important category in both the Take-home and licensed On-premise sectors. 2

Let me move on and now talk about Take-home in particular. Take-home sales, which account for almost three quarters of the UK soft drinks market volume, held up well, growing 1% in value despite a 2% volume

• decline. This growth in value was driven largely by glucose and stimulant

drinks, or otherwise known as energy drinks and sports drinks; both of which offer consumers unique functional benefits that they are willing to pay a slight premium for. As economic conditions have worsened, traditional favourites such as cola, squash which indeed offers great value at about 6p a glass and juice drinks, have all benefited. Smoothies, which had for so long been a key driver of growth, had a particularly tough year, as consumers were clearly not willing to pay the price premium for what they saw as one of their Five- a-day. Indeed, bottled water also suffered, being particularly weather dependant, but also as the environmental debate heated up and as consumers tighten their purse strings and considered the role of bottled water at home, when tap was available at it were, free. It’s worth noting that we remain confident however in the future prospects of bottled water, when the economy improves, as our consumption levels in GB are still significantly behind other international markets. If we consider the broader Take-home market, the grocery multiples were the main engine of growth, with value up 2% but volume down 1%. The licensed On-premise market had a more difficult year than grocery

• retailers. Whilst soft drinks performed better than alcoholic drinks overall,

both value and volume were down by 4% and 6% respectively. The economy was a clear contributor, as was the summer; and once again, a lack of key sports activity, with for example no UK team making it through to Euro 2008 Championships. The growing emphasis on food and family occasions, continue to favour soft drinks and fruit juice and juice drinks performed better, while traditional pub favourites, cola and lemonade remained just that – key

• staples. Energy drinks interestingly, saw their third year of decline and

bottled water, in common with the Take-home experience, also suffered. However, in the broader On-premise context, the food service sector performed strongest, with 3% growth, driven primarily by workplace

• catering. This may well be a result of the economic downturn as works

shun lunch time eating out and opt for the better value, canteen alternative. Now let’s look at the impact of the economic downturn in a bit more detail. In last year’s report, we highlighted three key trends. The ongoing trend towards health and well being; the growth of the more caring consumer 3

and also a trend towards indulgence, as consumers enjoyed the

• ccasional treat. While these are still relevant, it is fair to say that they’ve

been overshadowed somewhat by the economic downturn. So while health and well being remains a key trend and Government messages such as Five-a-day are certainly getting through to consumers; the cost conscious in 2008 has turned away from smoothies for their fruit fix, to perhaps pure juice or even squash. Interestingly, if we bring this trend up to date, we are now seeing a fall in pure juice sales, which can most likely be attributed to their price point, but we are also seeing a more general shift from stills to carbonates. In our view it is too early to say if the trend will continue, but it may be that consumers are returning to fizzy drinks for the treat factor and as the gradual trend towards diet within fizzy drinks continues, they clearly have a role in the health and well being agenda. Finally, on the health and well being agenda, as I’ve already mentioned, it appears that consumers are still willing to pay for functional benefits and we’ve seen that in the performance of energy and sports drinks. Turning for a moment to the CSR agenda. Again, this is a trend that remains relevant, but not at any price. In 2008 consumers turned to trusted brands, rather than paying necessarily extra for premium priced products with for example, strong organic credentials. But they were prepared to pay for the odd indulgent treat. Perhaps the key for premium soft drinks is that they offered this, but at an affordable price and therefore sales held up pretty well. To carry on the theme of affordability, in this year’s report we commissioned some research to find out how the economic impact is affecting overall grocery spend. As you will see, 50% of those surveyed claim to be cutting down on the amount they spent on groceries, whilst the

• ther 50% either hadn’t or indeed hadn’t made up their minds if they
• would. But what was the impact that that had on soft drink sales. As you

can see, the desire to spend less translated into consumers searching for a bargain, either looking for price promotions or indeed just buying on promotion. The good news for the soft drinks industry is that promotions have always played a significant role in our marketing plans and almost half of soft drinks sold in 2008 were on promotion, and in the case of cola that was more than 70%. And so what of the potential threat from own label. Partly because of the high level of promotional activity, the price differential between own label and branded drinks, in our view isn’t big enough to make a difference in 4

purchase behaviour. While we have seen some trading into own label in commodity items, such as butter and cheese, branded soft drinks have kept their place in their share of the market. Finally, while some consumers were cutting back on indulgent purchases, as we saw before, the fact that soft drinks are a small ticket item, means that they have been relatively unaffected by this more general trend. As consumers appear to put more thought into their shopping, cutting back on monster shops or top-ups, mainstream brands and categories offering good value for money, have held up well; and the good news is that branded soft drinks remain a staple of the mid-size basket. So to summarise, soft drinks have held up well in another tough year. In particular, mainstream brands and popular sub categories perform well, which is good news for us and our portfolio of brands. And as a small ticket item, we remain confident that soft drinks, although not entirely immune from, will remain resilient against the consumer downturn. This concludes my brief review of the 2008 market, you each have a copy

• f the report, which you will notice contains a wealth of data and further

analysis, which I would encourage you to refer to, if not now then later. I’ll now hand over to John, who will give you an update on the organisation of the Britvic Group. John Gibney: Thank you Paul. Good afternoon everybody. I’m going to spend a few minutes as Paul said, talking to you about the current implementation of

• ur new Group structure. What that’s going to do is hopefully give you a

bit more colour behind some of the announcements we also made in January and where the cost savings are coming from. This will also dovetail neatly with Andrew’s presentation, which will follow shortly, specifically about the strategic review in Ireland; but it also shows how these cost initiatives are going to put us in better shape to cope with the challenges that we are seeing in that marketplace at the moment. I’m just going to start with a reminder of what we said in our interim management statement on 28th January. As you know, we continue to focus on controlling our costs within the business; and despite the fact that the GB and international business has performed well, despite the challenging market conditions, then we’re continuing to focus on costs in that part of the business as well. As a result of the focus there, then we’ve talked about a further saving within the GB and international business, worth around £2-3 million in the full year and in 2009 you’ll see around £1- 1.5 million of that saving come through. 5

The trading in Ireland as you know is much more challenging. The economy has suffered more in Ireland and soft drinks have suffered more as a result of that. Therefore, we have taken more aggressive action to underpin the performance of our business in Ireland. As a result of that, the initiatives that we’ve announced, will take around €7 million out of our cost base in a full year from 2010 onwards; that’s an incremental of 6 million to that what we previously announced, that 7 million actually does include some of the numbers we talked about before; and around a €1-1.5 million of that will come through in the current financial year. Exceptional costs associated with both of those initiatives will be around £10 million this year, so roughly equivalent to one year’s full saving. As I say, that brings the total synergy now in Ireland to €27 million, which will be fully realised we believe by the end of the 2011 financial year. You will see that we’ve also in the January Interim Management Statement, reduced our guidance on raw material costs down by 1% to around 4-4.5% and that’s really reflecting the fact that we’ve now pretty much signed up all the major contracts on our raw materials, the most recent one being the signing of the PET deal. Our Q1 trading update which highlighted the difficult conditions in Ireland, with an underlying Euro revenue decline of something like 17%. With that level of trading and the fact that the Irish recession didn’t really hit until March last year, then in retrospect the first half year of comps for last year now look particularly challenging. Despite that, we also highlighted in our trading update that we remain confident about the outcome for the year, but obviously bearing in mind that the majority of those cost savings that we’ve talked about, will actually be reflected in the GB and international numbers for the 2009 year. Let’s move on to talk about the key elements of the additional synergies in

• Ireland. Two key areas. Firstly, supply chain, which Andrew will elaborate

further on during his presentation and the impact of the implementation of the Group structure. I’ve captured two main examples here for you. Firstly, the establishment

• f Group IT means that we can leverage the expertise we’ve developed in

SAP within our GB business, against both GB and Ireland. For example, system support, IT help desk and project management, can all now be sourced centrally by the Group; and we believe this will result in a net reduction of headcount of somewhere like eight people. We also have transaction services in both markets at the moment and that’s covering areas like supplier payment, cash reconciliation and

• expenses. There’s a headcount [coup de grace] of 36 in GB and

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something like 27 in Ireland, combining that into one facility, obviously

• ffers us the opportunity to take cost out of that process and we believe

will reduce headcount by at least 10%. We’re very well placed to take further advantage of this infrastructure in the future. The release of SAP into Ireland has been designed as a single incidence group template. What that means, that it enables us to drive common processes across both markets and clearly any further upgrades

• r enhancements only need to be done once, as opposed to in each

market place. Equally worthwhile bearing in mind, that we now have a capability, that of course we didn’t have when we acquired Ireland. What that means, is that any further future potential acquisitions, we now have the capability to integrate them much more quickly and then clearly obviously drive out synergies at a faster pace. This platform also allows us to make further structural changes to enable us to drive best practice and cost efficiencies across the current and future potential organisation. Our new structure is the output of a substantial amount of work, done both internally and with consultants experienced in group structuring. We’ve reviewed our organisational design, to ensure that we have the optimum structure in place to deliver against our strategy. This has resulted in a number of changes at both a group and a business unit level and the introduction of further group roles. The key changes will start to be implemented over the coming months, starting with supply chain, procurement, new product development, technical and IT, all becoming group functions with centralised reporting. As you can see from the chart, marketing, finance and HR will operate with some group responsibilities and also a number of local dimensions, with a dotted line back into group. Broadly what that means is that the business unit is focussed on key commercial aspects of the business, whilst group functions provide processes and systems to leverage both our scale and efficiency and support, but also the implementation of best practice. If I can just give you a couple of examples of this. Starting with procurement, the obvious area is the application of our scale in negotiations around raw material and other contracts. But what it also allows us to do is to capture those smaller elements which we refer to as indirect spend centrally, allowing consolidation and supply for driving out better terms, both in terms of cost and also in payment terms. 7

To give you an example of that; prior to the implementation of SAP in GB, we had 4,500 suppliers, we now have 2,000 suppliers. Contrast that with Britvic Ireland, a business which is about 30% the size of GB, which has around 1,700 suppliers, so you can see the scope we have. Within production, the opportunity we have now is to leverage our production capacity across both geographies in the most efficient way. So we can utilise capacity effectively and that also means that we will defer capital expenditure in either territory until we really need to do so. Within innovation, this will deliver the centralisation of expertise and consumer insight, across all markets and categories; and clearly we also now have the opportunity to launch products in more than just one marketplace. Within marketing, the alignment of marketing of common brands across markets and the delivery of best practice benefits, in promotional efficiency, pack and price architecture and agency management will deliver clear benefits for us. You will see that we have been very clear about our ability to add value in acquisition scenarios and this is amply demonstrated by the delivery of €27 million of synergies in Ireland. This new organisation structure positions us more powerfully to continue to drive that agenda in both GB and Ireland and has established an effective platform to take advantage of any further M&A opportunities should they arise. So just to summarise. Firstly, the cost savings that we’ve talked about from the additional synergies will depend on the Group’s performance this year, against the challenges of a very difficult market within Ireland and as a result the Board remains confident to deliver on our expectations. We believe consensus at the moment is 100 million at EBIT level. The additional synergies in Ireland are a further demonstration of our ability to add value through M&A. Finally, our new Group structure enables the business for future ongoing growth. At this point, I’ll now hand over to Andrew, who will talk to you about the conditions in Ireland and the progress we are making on the synergy case

• there. Thank you.

Andrew Richards: Thanks John. Good afternoon everyone. My name is Andrew Richards and some of you present may well know me from my previous role as Britvic’s Customer Management Director. As I’m now transitioning into the 8

role of Managing Director for Britvic Ireland, we felt that this session is an appropriate forum to give you some further understanding and clarity on the progress of the Britvic Ireland business; as well as a better understanding of the well documented and somewhat challenging trading conditions within Ireland at present. But before I move into that, I thought it would be useful to share with you some of my career credentials to date and provide some context around my leadership of the new Britvic Ireland team. What you see here is an experience over a number of years, which is entirely commercial across a number of blue chip international FMCG businesses. I’ve spent 10 year at the Britvic Plc or Britvic business and the last five years on the Executive team, as part of the group that led the business from private to public

• wnership, to the Plc status it now has.

I now that many of you were with us in Dublin last September, to understand more about the Irish business. It felt appropriate therefore today, to briefly recap on why we believe this business has real long term value potential, that is undiminished by the short term conditions. I’ll spend a short time recapping the value case and following on from Paul’s UK soft drinks market summary, I’ll give you a sense of…a very brief sense of what’s happening in Ireland. I’ll then finish off by providing some insights to what our plans are to grow the Britvic Ireland business through top line growth, cost reduction, smarter working and optimising the shape

• f the business.

Britvic Ireland is the second largest soft drinks business in Ireland by volume with a great portfolio of brands. Some of these will of course be familiar to you, for example 7up, Pepsi and Robinson’s. But in addition, we have our own unique heritage brands in Ireland, such as MiWadi, Ballygowan and Club Orange, which are household names in Ireland. Those of you, who joined us in Dublin back in September, may recall the unique position 7up plays in Ireland, where volume consumption of the brand in Ireland, is ten times the European average. Likewise MiWadi is at the heart of family life in Ireland, in the same way as you would expect and recognise the role that Robinson’s plays in GB. In addition, the route to market structure is very different for us, particularly for the licence On-premise channel, where there are no major retail pub groups and this presents some challenges. To enable our success therefore in the Irish market, we operate a wholesale business as part of Britvic Ireland, where we distribute not only our own soft drinks brands, but also those of our competitors and also alcohol brands across beer, cider and spirits. 9

Again, this slide will be familiar to those of you who were with us in

• September. As we said then and it remains true today, that we believe

there is great potential to be unlocked from this acquisition. As a Pepsi bottler in both countries, with a strong growth orientated relationship with PepsiCo, we believe there are real opportunities to leverage that relationship and to drive scale benefits in both Ireland and GB. There was an existing presence for our brands prior to the acquisition, but we are now well placed and in a much better position to drive the performance of those brands. Likewise, there are opportunities to introduce elements of the GB brand portfolio to the Irish market; as indeed we have done recently with J2O. This will ultimately add to our top line revenue growth. The combined portfolio offers far greater strength to achieve this, than the previous separate business could ever have achieved individually. As John has already mentioned, the enablement of the Group structure creates an opportunity to share best practice across both territories. As John has just mentioned, we have put in place a number of initiatives that we believe will unlock value in Ireland beyond the short term horizon. In a few minutes, I will share with you the market position in Ireland; but before that, I’d like to take a minute or two to remind you of what we said we would set out to achieve in year one. The progress we have made against these objectives and to remind you of the key activities that therefore we are looking to achieve in 2009. We identified four key initiatives to be achieved in 2008 and I’m pleased to report, as the chart shows that we have successfully delivered on all of

• them. Firstly, the integration of processes and budgets has been
• completed. Secondly, we delivered the first instalment of the synergies

case with the €5 million achieved as benefit in 2008. We have closed the Cork factory and transferred production to Dublin, improving manufacturing productivity. Finally, we launched Fruit Shoot, J2O and integrated the Robinson’s brand into the Britvic Ireland business. For 2009, we have three key initiatives which will continue to transform the

• business. Firstly, the implementation of SAP that commences in May this
• year. This is a key enabler, not only in terms of systems consolidation, but

also for embedding best in class processes and ways of working. Secondly, the significant organisational restructure is already underway. Finally, we continue to focus on the delivery of the synergy benefits. So at this point, I’d like to summarise the total synergies plan. In January we announced that as a result of the organisational review, we were in a position to increase our guidance on synergies and cost savings, to nearly €27 million by 2011. In full year 2008, we have delivered the €5 million of 10

synergies, as guided; and we are on track to deliver the cumulative €15 million this financial year. The key driver of this year’s savings are the implementation of SAP that is currently underway. The reconfiguration of our production facilities, economies of scale driven from the benefits of being part of the Britvic Group and the recent strategic review that puts us in great shape to weather the current storm and to ensure we are well placed to take advantage of the eventual return to growth in the Irish soft drinks market. So to recap on what those major achievements, major investment initiatives are. We've been working hard to deliver the implementation of SAP, the in-house knowledge we have within GB following its world class implementation in 2005, allows us to be confident of a successful launch with minimal disruption to our suppliers, our customers and our consumers. Secondly we quickly identified the need to invest in operational facilities. As a result, both Dublin Kylemore plants and Newcastle West facility have seen substantial investment. This is an accelerated programme of investment to bring the facilities up to the required Group standards and will ensure that we are well-positioned for the future demands on these

• perations.

Finally the organisational restructure is a key driver of change both for the Group and for Ireland. We have reviewed the structure and processes across the organisation and are implementing aligned processes and structures as a result. The Customer Management team is now in a position to align on the key profitable trading opportunities, and we will invest behind areas such as Food Service where we believe great opportunities for future growth exist. The Marketing team will restructure with investment and category resource, and strengthening the relationships across the Commercial team and our customers. Supply Chain and Logistics will see a move to a centralised operation, resulting in the closure of some local depots, and areas such as Finance will see transactional support transferred to Group with an increased investment locally in commercial decision support. The requirement to right-size the organisation and the development of a Group structure was always part of our planning. We are putting in place a business that is in great shape for when growth returns. 11

At this point it’s worth taking a moment to remind ourselves of the challenges currently being faced in the Irish market. You will be very aware, well aware no doubt of the many facts and figures quoted regarding of the state of the Irish economy and, as ever, the landscape is constantly changes and today’s fact is tomorrow’s fiction. However, notwithstanding that it’s fairly apparent that both on a broader macro level and at the consumer level we are facing into uncharted economic conditions. As you can see from this slide, unemployment is rising with some analysts forecasting a peak of 14% this year. Property prices continue to decline and the standard of living in Ireland is under significant pressure. At a category level, I've highlighted just a sample of four categories that give you an indication of the pressure that brand owners and businesses in Ireland are facing. In the retail environment we are seeing shifts in consumer buying patterns and, as previously mentioned, the license channel is down 13%, with a record number of pub closures in 2008 and the price differential on alcohol between the on and off-trade widening as major grocers offer value deals to encourage footfall – a dynamic that echoes the GB trend. The rise of the Celtic Tiger saw in the boom times for convenience stores as construction workers who were on the move drove the breakfast and lunchtime on-the-go occasions, but off the back of rising unemployment more recently the convenience channel has suffered and seen a 10% decline with forecourts equally suffering. The shift in consumer behaviour has been a positive for the discounters and also the large multiple grocers, with sales up 15 and 5% respectively. Finally the strength of the Euro versus Sterling has seen the Republic of Ireland shoppers flock to the north of the island to take advantage of the currency benefit. To put this into context, Sainsbury’s and ASDA – who had no retail fascias in the Republic of Ireland – now account for a 2.5% share of grocery value of sales in Ireland in the Republic. Looking at the soft drinks market for 2008, therefore there has been an

• verall volume decline of 1.7%. As you can see from the graph, that

decline has been driven by water and carbonates with the exception of the

• Cola. What this chart does not show is the deterioration that we've seen

in Half 2. Categories such as Water and Sports Drinks had seen a marked decline in the second half of the year; likewise the position in Licensed On-Premise is equally challenging with the – as I have already

• utlined – latest market data indicating an MAT volume decline of 13%.

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Looking at the latest position to 25th January, the MAT volumes have continued to decline. The decline in Water, Lemon & Lime and Sports has worsened and the growth in Cola has now been eroded. Indeed only Energy Drinks remain in MAT volume growth at +1.1%. As difficult as trading conditions are, we have a broad resilient portfolio of brands in Britvic Ireland. As you can see from this slide, we have a major presence and scale in key categories. We are a leading player in the Squash category through our dual offering of the MiWadi and now Robinson’s brands, and of course with 7up we lead the Lemon & Lime category, as well as complete significantly in carbonates overall; and with Ballygowan we have the number one Water brand in the Irish market. Against this challenging backdrop we remain committed to driving our brands and investing significantly behind them. So to summarise, ladies and gentlemen, we believe we have acquired a great business with great potential. We believe that the synergy benefits are clearly on track for delivery and we are already investing in the fabric

• f the Britvic Ireland business. We are restructuring our organisation to

meet the current challenges and future growth that lies before us. That brings me to conclusion. Thank you very much ladies and

• gentlemen. I would like to now hand over to Britvic Plc’s Marketing

Director, Simon Stewart. Simon Stewart: Good afternoon, my name is Simon Stewart. I'm the Marketing Director of Britvic. This afternoon I would like to share with you our key brand plans for 2009, covering both our Core and Seed brands. As this is one of our most exciting and intense years for competition, it would certainly help to give you an understanding of how we’re going to keep our business growing through 2009. I will end the session by revealing our innovation and product launches for 2009 and, as Paul mentioned earlier, this is a consistent key driver for both top-line growth and margin improvement. We've already given a heads-up a little in Dublin, but today we’re in the position to reveal the full details of the programme that has already been greeted with great excitement from the trade. To us at Britvic innovation means more than just new product launches; it is equally as important to 13

innovate in packaging that drives the brands’ footprints into meeting a range of consumer needs and occasions. Before we get into the detailed plans of the new launches I would like to spend a few minutes just to take you through our strategic approach to marketing and share a little detail of how we will take our category approach to retailers. Many of you will have seen this chart in Dublin and overall what we do in Marketing now is to provide superior shareholder value through value growth of Core brands and focused innovation. There are five key platforms for that. The first one is clear and long-term trademark strategies, which outline the strategic intent with innovation and channel mix. The second one is to provide superior consumer, customer and category insight that we’ll work with our customers for mutually profitable businesses. The third one is to service our Customer Management team and by dong so significantly improving and continue to improve our in-market execution; a focused innovation strategy which we’ll speak about later; and a marketing culture that not only drives brand equity but also drives value. We quite often get asked question really if our growth that we’re having at the moment is sustainable, and we would say resolutely, absolutely it is – yes it is sustainable – and the reason being is that we are really getting back to basics in terms of marketing. We are getting stronger consumer insight which gives our brands differentiation; we are getting great proactive delivery from agency partners, but I think most importantly is that we’re getting the right pack with the right price and we are following that through with excellent market execution. If you look at the feature and display that we’re achieving with things like Max Kicks and our other activities this year, the forward stock that we’re putting in front of the consumer is significantly growing and will continue to grow this year. A large part of this is really about category vision and as a company we've invested a significant amount of resource, some £4 million incremental, to ensure that we move towards the category leaders in thinking. The category vision is really driven by category segmentation against consumer needs and shopper needs, but most importantly we’re taking a partnership strategy with our customers. Not only are we looking at ways in which we grow our own business but we’re working with our customers 14

to ensure that we grow their business as well. We’re working with them to understand their strategies, understand their challenges and we’re providing solutions through our brand portfolio to our customers to ensure that we sustain growth together. We’re inspiring our customers with plans for sustainable category growth. We've spent a lot of time really – almost from September to December –

• utlining a much longer presentation that you'll see today about what we

do with our brands this year and how that fits in with their plans and how we can work together to grow the soft drink category and also the Britvic plans. Four key need states which are identified really by the Pepsi 6-W segmentation study are really going to dominate what it is that we do going forward. The first one is hydration which is relatively self-explanatory; people drink beverages because they're thirsty, and an example of that, really, would be the Drench brand that you'll see a little later on. The second one is nourishment and that would be the type of…that’s the really the beverages people consume for the five-a-day types of things, so a smoothie would fit into that; to a lesser extent something like a V Water could get into that as well. Enjoyment is the traditional area of CSDs, so Pepsi is a very strong competitor in the enjoyment needs state. Transformation which is, really in beverage terms, dominated by alcohol but there are some obviously soft drinks brands that fit into that, and brands that do that in soft drinks are V Water because it does transform you – there are energy formulations – and brands like Red Bull that people will drink very much for a functional benefit. We will develop further thinking in terms of how we enter into these segments going forward. We will just move onto…marketing will take much more of a commercial bias and I think there are four pillars culturally that we’re developing within marketing in Britvic. The first one is much more focused on P&L management by brand and the Brand Managers and the Brand Directors are very much, if you like, General Managers of their brands so they have to understand input costs and that, as well as top-line growth. They're managing the brands for long-term NPV and not necessarily just a short- term volume growth. 15

The second thing is growth focus and we have identified four things that will actually underpin our growth. The first one is really pricing strategy, which is more than just grocery pricing strategy, is ensuring that we have the right price for the occasion for the consumer, so it will be consumer based pricing. The second is quality distribution to ensure that we’re in the right place when consumers are looking for different drinks for different

• ccasions. The third one is pack architecture and that is that we make

sure that we offer a variety of packs to consumers that not only reflect the consumer occasions but also reflect the consumers needs as to when they want to drink. The final one is brand equity which is traditionally very, very important and remains to be very important. So we want consumers to really love our brands and to make them laugh and create enjoyment for them. The third one is really understanding and developing strategy based on the financial performance of the brand, and what we mean by that in a marketing sense is that we are looking for how do we maximise profitability of SKUs, and how do we actually maximise the marketing activity behind the SKUs that we make significant money on. The final one is cost focus where we will take PVL opportunities that are consistent with brand strategy; we won't compromise brand equity for cost but there are a number of things that we can do still that can actually support brand equity in that way. Also we’ll be looking for SKU rationalisation for manufacturing efficiency going forward. I'm going to kick off now and actually reveal some of the brand plans for this year and we’re very proud of the work that’s been done to get us to this point and we’re very confident going into summer that we have very, very strong programmes for our brands. I’ll cover off our Core brands which are Pepsi, 7up, Tango, Robinson’s, J2O, and Fruit Shoot. The Core brands are the key profit drivers for our company, and we’ll allocate or greatest resource against these brands. I’ll talk about our Seed brands; they're the brands that we believe have big futures for Britvic in the portfolio, and they Gatorade, Drench, Pepsi Raw, V Water and Lipton Iced Tea. Seed brands are small but they have good consumer market potential. They could become the core brands in the future but equally if they don’t meet our expectations within the portfolio we’ll deemphasise them and bring something else in that we believe will be successful. This is certainly one of our biggest years and we’re showing confidence in

• ur brands by keeping our spend how. In a sense we are really putting
• ur money where our mouth is. We are do absolutely believe that we

16

have a portfolio that will come out much stronger and in the economic times and the recession that we’re currently gripped by, and therefore the marketing activity that you'll see is something that we are absolutely committed to, to ensure that our portfolio grows through difficult times. Initially I really would like to spend some time talking about our core brands that we believe will drive our top-line growth this year. Pepsi really has had a fantastic year. We had our market share for five years; we have brought in a million extra households into Pepsi, so there are a million extra households this year that didn’t have Pepsi that have it in their house this year; we've added value through renovation and we've set the ground for this year for a second year of strong renovation with Pepsi Xtra Cold that has revolutionised the way that the dispense market works from a quality perspective, and also Pepsi Raw which we’ll talk about later that is probably one of the most exciting innovations for Cola really since Pepsi Max. We’ll drive further growth in 2009 by leveraging

• ur sporting credentials – Pepsi is a great brand with great sporting

credentials – but also really importantly again going back to Pepsi’s roots, and we’ll have a very significant music programme which is the new interpretation of how Pepsi will enhance music and the music world for our consumers. It’s very important that we’re not complacent about our growth in Cola. It is a highly competitive market but we really do believe that with the programming, with the feature and display that we can drive, and the additional equity we can drive with Pepsi this year we’ll have a very strong year. The first thing is Twenty20 cricket and I’d just like to quickly point out this isn't the Stanford Twenty20 cricket; this is the ICC Twenty20 cricket. Fortunately we weren’t involved in the Stanford one. Pepsi across the world but particularly in Asia are synonymous with

• cricket. If you watched the TV when in India the drink carts are Pepsi or

Gatorade or whatever it may be, and what Pepsi are now doing is they're really expanding the footprint of what it means to be part of the cricket

• world. Traditional test cricket is really not Pepsi’s area; it’s a bit slow, it’s a

bit traditional, but Twenty20 cricket really is Pepsi’s area. It’s different; it’s exciting and really involves the spectators. It is the emerging form of

• cricket. There are strong synergies between Twenty20 cricket, which is

revolutionising the way people go and watch cricket, and Pepsi, which is a very progressive Cola brand. It’s the headline sponsor this year for the Twenty20 World Cup in June with the final that’s going to be on 21st June, and we’ll have a major on-pack promotion with this, which is called ‘Max it for £1 million’. Essentially when somebody hits a six in Twenty20 cricket, 17

which does happen a lot, people will win money and there's about £10,000 a day but then there's a pool that will go on until there's £1 million; and there's an 8-year deal with the ICC, so Pepsi’s commitment to this is absolutely huge and we’ll see this as a growing part of the Pepsi activity. Twenty20 cricket is really fast, it’s colourful and it fits perfectly with how consumers see Pepsi, so this will be a very big piece of our activity coming in, which will start around about the April/May period of time and you’ll start to see the promotions coming through, and we’ll drive feature and display through the market with this property. The second main thing, which will happen in July/August, is Pepsi is joining forces with Nokia. Nokia is one of the biggest brands in the world now for the youth, and ‘Pepsi with Music’ is Nokia’s big launch of music this year as well, so we’re combing our resources for this. Essentially what will happen is that Nokia want to get into the download music area and they want to compete against iTunes. What this would do is be a big focal point for both Pepsi and Nokia to actually become part of the download music industry. They’re launching a phone which is…new handsets and music downloads and effectively this will give consumers the opportunity to have free downloads for a period of time. It will be on- pack this year throughout summer July/August. We’ve never really promoted during July/August with Pepsi so it’s the first time and we’re very excited by the fact that we’ve got a very extended Pepsi programme this year. It’s a major on-pack promotion and will drive significant feature and display through our in-store execution programme that will take what we’ve learnt from Max Kicks last year and make that even better this year. But it isn’t just all about promotions, it isn’t just all about feature and display, we have to continue to build the brand equity of

• Pepsi. Pepsi Max is the one that we will be using though this year. It’s

had incredible growth this year I think it’s up around plus 20. It’s fit in with consumer’s lifestyle and the perception of the brand. Moving onto Tango now, I think some of you would have seen the ‘Save Tango’ campaign which was a campaign which is illustrative in the type of marketing we’re going to be doing in Britvic going forward. There was no TV on this at all and TV is getting less important, particularly for the Tango style of consumer. It was really driven by PR, it was driven by viral and it was driven by word-of-mouth. The ‘Save Tango’ campaign was between really 24th November and Christmas time and we had over 200 million consumer touch points with this campaign. We’re achieving growth now with the orange variant in On-the-Go and we have a very entertaining summer campaign that’s really aimed fair and square at teenage boys. The vision is really to make Tango a great teenage icon again. Tango’s a very famous brand and it’s a brand that really deserves to be invested and 18

it’s a brand that really deserves, in a sense, to be controversial and to be discussed. The brand measures to ‘Save Tango’ are responding very well and currently 40% of current non-Tango consumers said they would now buy the brand so there’s been quite a big shift from a consumer perception point of view from what was a relatively inexpensive marketing campaign. Grocery rate of sale has increased and the convenience channel is back in growth. The important message for this, in a sense, is the changing media habits and not just the theory. There is no such thing really as new media now, there is just media and television is going to become less important for some of our products. But you need to be able to innovate in your media choices and ‘Save Tango’ has achieved relatively huge exposure for a very, very modest marketing cost. Getting onto 7up, 7up has had a great year as well. It’s 9.3% value growth, which is very strong in the Lemon & Lime. It’s a strong player in GB and Ireland, as Andrew said it’s the second-largest soft drink in Ireland so it’s very important to us as a group. We have new packs launching in Spring, which are talking about the clearness of the product and the packs themselves are clear now, and there’s a whole design refresh in April for

• 7up. The 7up Natural Wonders of the World platform for summer, which is

allowing consumers to go and see the natural wonders of the world, think importantly as well and what you’ll see more of is that that is running both in GB and Ireland so we’re actually starting to get marketing synergies across as well. Again, this is another brand where I think we had delivered very strong value growth and will continue this year to do the same. Moving onto J2O and in the soft drinks report this morning, we spoke about J2O’s now the No. 1 packaged drink and overtaking Magners in the licensed channel, so it’s not just a soft drink in a sense. One J2O is drunk every 6 seconds so this is a brand of real scale and really important to the retailers; £300 million for the retail trade altogether. This year we’re investing £6 million in a marketing programme that will drive consumer engagement and get consumers to re-evaluate and bring lapsed users of J2O back into the brand. What are we doing? Well, we’ve got a very modern and impactful new pack launch. The J2O pack has been great but when you look at it in this competitive set now, it’s just looking a bit tired because it was designed a number of years ago. We’ll keep the brand equity parts and we’ll keep what’s important to J2O but there will be a new look for J2O. There’s a limited edition flavour coming out, one with [berries] to J2O in terms of consumption is quite thick is also one of the strengths but we’ll be bringing

• ut a version which is just a little bit lighter this year in terms of taste which

19

is a grape and kiwi. We will have new pack formats which will actually access broader occasions. The new pack formats that we’ll be adding to

• ur range is a 250ml PET for On-the-Go and we’ll also be introducing a

750ml for at home entertaining occasions like barbeques and that type of thing. We’ll have a very heavyweight TV campaign, which unfortunately I don’t have to show you today because we’re still shooting it but that will be on air next month. The whole idea of it, which is really hard to say as “it’s metter to bix things up”; the concept is that it’s about two things coming

• together. The way the campaign works is two different things coming

together to make something that’s tastes great, so we’re really excited in terms of the integration of J2O and how we’re going to get lapsed users and new users coming into it and still reinforcing the current users base. We come onto Fruit Shoot and I think a little known fact about Fruit Shoot, is that it is UK’s No. 1 kids brand and it has a value over £100 million at

• retail. We’re adding value through innovation and juice in water, so we

have H2O, we have the core brand and then we have Fruit Shoot 100%. Through that we’re really covering up a lot of kids’ needs states. We’re re- launching a programme to broaden the appeal with both mums and kids. Fruit Shoot is traditionally marketed itself to mums but we’ll also be marketing to kids obviously in a very responsible way because the 8-year-

• lds are the core consumers of this brand. We’ll be working with our

customers to work with both the mothers and also the kids directly. What we’re going to be doing? There’s a new pack design across the whole range and really importantly this pack has been done not just in isolation from our consumer but the kids and the mothers themselves have helped us design the pack. It’s quite a different type of looking base pack, although obviously the Fruit Shoot iconic look will still remain. We have flavour reformulation taste change over time. The reality is that

• rganoleptically people do change and as you go through we have to be

able to reformulate something like Fruit Shoot to make sure it is still remaining to be the best tasting kids drink and that’s what we have with

• this. Really importantly, is that we all have 16 hours of prime time

television this Summer, which is talking about the sponsorship of the ‘Fruit Shoot Skills Academy’ programme with ITV and CITV. The insight behind Fruit Shoot is kids just want to get better at things. What does an 8-year-old want to do? Well and 8-year-old boy and girl want to learn new tricks. They want to be able to go to school after the Summer holidays and say, “Look I’ve learnt how to do magic, I’ve learnt how to do this,” and actually show off in the playground when they go

• back. What we will be doing is, we’ll be taking ‘The Fruit Shoot Skills

Academy’ out on the road so where kids are, Fruit Shoot will appear and 20

they’ll be learning new tricks and they’ll be learning new skills to take to school, so that they can have some bragging rights in the playground that they can actually make a card disappear or something like that. On this slide as well, it says well let’s get an example of our great in-market execution at the moment, which is driving a lot of growth. The amount of time and the effort we’re spending to make sure that our brands are absolutely as well presented as they can at the point of purchase is going to continue. That’s the type of thing that you’ll see with Fruit Shoot and you have seen in the last year or so, or before that as well. A really exciting thing that we’re looking which is traditionally out of one of

• ur non-core business, if you like, is the opportunity to franchise Fruit
• Shoot. Fruit Shoot is a really unique brand almost on a global basis and

as you probably can tell that I’m Australian and I was down there this January and it was really clear that there’s just a massive whole in different markets around the world for this type of product. We really believe that there is some opportunity for us to explore different franchising opportunities with it, and it is exploratory at the moment and it is new but we’ve started to do that. What we’ve done is, is Fruit Shoot is now in the southern states of the US and it is already listed in Walmart, Winn Dixie and Brunos. It has been successfully trialled to January 2008, so what we are looking at doing is particularly looking for overseas

• pportunities. Not just for Fruit Shoot because, I think some of our other

brands also had some opportunities for franchising so it’s a Britvic thing, but a partnership approach as a model for the future in many ways for

• that. A real example of that licensing is what’s happening in Licensing &

Franchise opportunity is what’s happening in the southern USA at the

• moment. Again, it’s very new and we’re only just starting down this

journey but we think there could be something in this going forward. We then move onto Robinson’s and Robinson’s is…they are a typical English brand. It is in 95% of English and British households, and I think when you look at a brand of that scale…and this year what we’ve been able to do is its drunk by 1.2 million more households than this time last

• year. We’re very happy that we’ve actually got this additional penetration

into the house because we know that squash is an expandable category. You get into people’s houses and they drink more of them, so we’re very proud and very pleased with that. That’s resulted in 4.1% value growth against flat squash category. It’s the seventh most valuable grocery brand in the UK, so therefore it has real scale and our customers are very interested in the growth of this brand. We’re driving long-term value growth through year round activity and some innovation. There are two major pushes this year, the first one is what we traditionally do with Robinson’s, as I said this is the 74th year that we’ve been associated with Wimbledon and we will continue that. But real importantly 21

we’re going to make more of Wimbledon this year. Wimbledon has been really successful for us and we haven’t got the message out of Robinson’s and Wimbledon as quickly as we’d like over the promotional period. This year what we’re doing is that after three years we’re going back on TV to talk about Robinson’s’ association with Wimbledon, there’ll be the on-pack to win tickets. We’re looking at a new player sponsorship which we’re still negotiating so it will be premature but we’re excited that we will have some new players who will be working with Robinson’s by the time Wimbledon comes. I think the second thin that we’re doing, which is really new and different is that we’ll have Robinson’s in a Pantomime programme. The important thing with that is Robinson’s is about family, it’s about people being together and what Pantomime is as well is a great family moment. There’s a natural strategic dip between Pantomime and Robinson’s. From a business point of view, what’s really important though of this is that there’s more squash consumed at Christmas than there is cola, so it’s a very big opportunity for us to get a branded offering in there. We have a sponsorship deal with one of the largest UK Pantomime providers, so Robinson’s and Pantomime will be there together. Robinson’s will be in the show and will be part of the experience. There’ll be radio and programme advertising around this programme. There’ll on-pack promotions that will allow people to win tickets, about 12 million people a year go to Pantomime. It’s one of the biggest, if you like, cultural events that happens in the UK every year and we will be with those 12 million

• people. We’ll do a search for a star campaign that will allow children to

actually audition and then they can be in Pantomime shows so we’ll get them to access something they want which is fame and also there’ll be a charity element where we’ll be supporting the Great Ormond Street Hospital Charity going forward. That’s a very quick outline of what we’re doing with the core brands, there’s clearly a lot more under that but they’re the highlights from a marketing perspective of what we’re doing. So what I’d like to now do is turn to the five seed brands. The first one is Gatorade, now we launched Gatorade last year and I think the really important thing is that innovation is not just for one year. Most innovations that go under the beverage market actually fail in their second year because people get very excited about the first year and forget to support it in the second year. What’s happening now though is that we’re very conscious of that and so we’ll be improving our and up-weighting our support for Gatorade this year. Some

• f you will be familiar with the ‘points of sweat’. It’s very important that we

actually get to the point of really having athletic credentials. It’s the oldest sports drink the world, it has more science behind it than sending a man to the moon, its incredible the amount of resource that’s put into this drink. 22

We’re already in 70% of ‘points of sweat’ so we really started that strategy and our efforts are really paying dividends now because since Christmas and we had a promotion in January in terms of Gatorade gear. We now achieved a value share of 5.6% which is very strong after really the first

• year. Importantly, again for the sporting credentials we’re associated with

the Guinness Rugby Premiership and key endurance events that reinforces our credentials as serious athletes. We’re reformulating – sorry we’re bringing out a new formula which is blackcurrant. There’s no other blackcurrant Gatorade in the world. Blackcurrant is a very UK centric drink, so what we’re doing is we’re tailoring the formulas to the UK consumer taste which is very important. We’ll also continue to push about

• ur natural credentials, we are still the only natural sports drink in the

marketplace and we intend to actually keep that going as a point of differentiation. We’ll move onto Drench now because Drench is, we’re really proud and really excited about what happened with Drench this year. Currently the Brains advert you saw is the most awarded ad of 2008, in fact we won two more quite prestigious ones last night which is great for a marketing perspective but does it drive business? Well we’re the only water brand driving penetration in the category at the moment and from our perspective, the category is going to decline but what we have to do is just to take share within a declining category. What we will be doing is very much just try to chip away and take market share. Drench has added over 700,000 new households in the category this year and it has really captured the imagination of a certain consumer. The Brains ad enjoyed the highest standout of any ad in any category for the last five years and got well over 2 million hits on YouTube and caused about 40,000 blogs. We’re very excited by the level of word-of-mouth that happened with that. This year, what we’re going to do is quite an innovative promotion where we’re going to have a major on-pack promotion and you can win Smart cars and iPhones and other great prizes. How that will work is we will actually submerge prizes in places like the Manchester Canal and the Thames in different bits of pieces. We’ll give clues and the person who actually finds where that submerged prize is will win so it’s a hydrated treasure hunt in a way. It’s really a different type of promotion which is really interactive and will actually be very much driven online, looking for clues and different bits and pieces so that should be quite fun. It’s in triple digit growth and we hope to be able to able to sustain that. I guess the real important thing with this is that innovation is really quite difficult and there are really a handful of innovations over the last few years that has got to 10 million litres in the first year. Although this wasn’t a brand new brand, we did re-launch it and it’s now within the handful that’s actually approaching to that 10 million litre number. So when we achieve that, it 23

will be in the most successful four or five innovations over the past few years should that occur. The other things that we’re doing is RAW, the campaign is going to be around the Natural born cola. Again, I think both ourselves and Pepsi are really excited about this in the sense that it is really a true cola innovation because it is a natural product. It’s been available in about 15,000 managed bars at the moment. We have but it into Boots in terms of the range of view and the early results are encouraging but they are very early and there’s a long way to go. Where it’s actually achieving around about 40% of the rate of sale of Pepsi Max, so we’re quite happy with that at the moment, and we’re now available in Waitrose and in front of store for WH Smith Travel. We are building the availability, what you’ll see this year is RAW will go out into other channels so it will be in supermarkets in

• multipacks. We have very different type of multipacks which look almost

like hessian designs, has a very natural design and there’ll be multipacks

• f 250ml cans not 330ml cans. In a sense we’re disrupting the value

equation for the consumer with having smaller size multipacks and actually then adds to our ARP as well. We’ll continue to really build the brand’s credentials this year and talk about RAW and its new pack formats which I just spoke about in terms of multipacks for supermarkets with that. With V Water we’ve now brought production in-house of V Water. We were contract packing it but now that’s come in. We now have listings in the major multiples. Again this, we believe, will be a relatively slow burn category but it’s a really important category to be in for the long-term. There are really two brands that have got a ‘V’ here with that, that’s

• urselves and Vitamin Water from CCE and we’re showing some very

good growth with that. We had new packaging coming out, we had new advertising coming out and what we’ll do is this is a very much a London footprint at the moment and we’ll move outside of the London footprint and spread more around to the total UK. Lipton is our latest EBA and we’re just really absorbing that into our systems now. It’s a great portfolio again for us, as we get into more service and leisure and to the on-the-go occasion Lipton is an important portfolio brand. It’s available in 500ml and 1.5l and it’s available in four

• flavours. We are continuing with our healthy credentials, there are no

artificial ingredients in Lipton and it’s a lower sugar alternative. This year really is about consolidation of Lipton though, it’s about bringing into the Britvic system and it’s about rebasing the brand and particularly moving it much more in the more profitable on-the-go occasions for us. We’ll have production in-house in 2010 and we’ll focus on convenience and food service and leisure with this brand this year. 24

I’ll quickly talk about innovation. Innovation really is at the heart of Britvic and it’s something that we’re consistently proud of over a long period of

• time. Innovation is a balance between consumer pull and technical push

and in some of the stuff that’s happening is technically might not have been possible a few years ago. We’ll focus on scale opportunities; the consumer is not looking for brand new brands in many ways at the

• moment. What they are looking for is brands that actually get to the point

that they’re coming from a tried and true brand. They’re coming from a brand that they know; they’re coming from a brand that they trust, they’re not really looking to experiment. Our innovation will be brand extensions this year rather than new brand launches. We have a portfolio gap in terms of our on-the-go and there’s a big category opportunity that we’re not competing in at the moment and we’ll plug that portfolio gap and we’ll have an extension of our natural credential this year. Squash is a huge category, there’s 3.4 billion litres annual consumed in the UK and most meets shopper and consumer needs. Most of the brands that are available, and particularly Robinson’s, does fit the needs but there is a consumer out there who is looking for something natural that doesn’t want to pay the money for it. What’s really important is that people will say, “I want natural, I want all these things but if they aren’t

• rganic.” But at the moment if you ask them to pay a significant premium

for it then they’re not going to do it. What Robinson’s is ideally placed to do is to actually give them natural credential but at an affordable price because of this squash and Squash is, as Paul said is, 6p per serving it’s a very affordable thing for consumers to do. The importance of natural ingredients is growing and again, the people aren’t really necessarily prepared to pay for all of that. There is…Squash is not completely satisfying that need so what we have is an opportunity to understand a consumer need and satisfy it going forward. The result is some consumers are buying more natural alternative than buying Squash at the moment. As a result of that need, what we’re doing is that we’re introducing Robinson’s’ ‘Be Natural’. This is the first Squash that is from naturally sourced ingredients. There are no preservatives in it for instance so therefore when you open this it has to go into the fridge which of a consumption occasion is very important. If things go into the fridge they’re likely to be consumed quicker. It’s in a 600ml plastic bottle, so it’s a smaller side than the average Squash purchase and it makes 17 servings. What that means it’s actually very good value for money because it’s about 10p per serving. There’s only naturally sourced ingredients there, 90% of consumers when we’ve tested it, see this as a really great fit for the Robinson’s brand. Seven out of ten consumers who drink Squash say that they will try it, so the research is very, very positive on that. We have 25

it in three flavours, Orange & Passion Fruit, Blackcurrant & Pear and Apple & Strawberry. Again, this is a very important and strong launch for us and there’ll be a large scale TV ad which is currently being made by BBH. It will be maximising visibility in-store and we’ll be looking for a strong feature in display and it will be quite an innovative, press and digital partnership throughout this. One of the key ones is the Netmums.com where we will be communicating directly with the target market through that. The second piece is really a portfolio opportunity and a brand opportunity. Currently the hydration market is a very large market and its split in many different ways in the UK. There’s a part about delivering guilt-free hydration that tastes good. Water is, if you like is, guilt-free hydration because it doesn’t have any calories and that sort of thing but frankly people get a little bit sick of just drinking water. What they want is something that hydrates them as effectively as water but actually has a little bit of taste. Currently there are no real brand offerings meeting an adult consumer for this. There are a few that are younger and different bits and pieces but there’s nothing that is really an adult tasting product. It is a £700 million category opportunity for us to compete in that we’re not really effectively competing in now. The category exists and there’s an

• pportunity for us to go into that category.

I think what’s really important as well in terms of also the real demonstration of our long-term commitment to brand strategy, is that you’ll remember the original strategy for Drench was to establish a hydration brand and then to leverage that trademark into a higher ARP or higher value segment. The idea was we’ll establish Drench; we’ll then use that trademark to go into a higher margin segment than just pure water. Being true to that strategy what we’d like to do now is to introduce to you Juicy Drench which is, does exactly what it says on the can: its drench with

• juice. It’s an 8% juice product, it’s a crisp and clean high taste appeal; its

affordable everyday pricing so again it’s a higher ARP than water so it’s a higher margin than water but it is still very affordable to the consumer. There are modern familiar combinations of fruit which you’ll be able to try afterwards if you haven’t tried it before. There are no artificial colorants, flavours or sweeteners in there and we really do believe that this is a major opportunity for us because it is competing into such a large segment where Britvic doesn’t have an effective entry at this point in time. In many ways this will be one of our big innovation pushes this year. Again, what are we doing with that? In the first 3-4 weeks of the campaign we believe we’ll hit about 42 million consumers. We’re really the focus of this launch is impulse and foodservice. We are looking at how we get the single serve of this trialled by consumers. How do we get it into 26

consumer’s hands so they try it? Once they try it because we believe the formulation is superior to anything out there and then we believe that they will come back and drink it again. Impact and outlet visibility and presence is currently, if you happen to go passed a Spar store some of those stores

• r a number of those stores you can actually, it’s almost been turned into

Juicy Drench world. You can actually look them and just see the impact of how much forward stock that we’re going to put out on this and we believe that that will help us a lot. We’ll drive awareness through continuing the Drench approach is very innovative and breakthrough style communications. There’ll be a very large TV campaign that will also be followed up through a fairly significant internet campaign and sampling campaign as well. That will be happening in late May and will go through all of the Summer. We’ll just go in terms now in terms of…here’s a snapshot of our innovation. Both from a brand extension point of view, the new flavours and packaging initiatives. There’ll be some examples in the appendix of our packaging initiatives, brand equity programmes and in-store feature and display. Just to go across that what we have is the Be Natural products, you have the Lipton products, the J2O packs, there’s a pack which we’re calling Tango Without a Tango and this gives you an idea what the RAW pack and the Fruit Shoot pack will look like. I guess in summary what we tried to get across is that we have a marketing team that is really focused on driving value through brand equity and financial performance. It’s no longer just…it hasn’t necessarily been that it’s no longer good enough to volume just without any value equation to it and we’ll be protecting value over volume going forward. Core and seed brand focus in 2009 that will deliver really exciting marketing activity, I think we had very strong activity this year. Probably the feedback, not from ourselves but from our customers is that they are the strongest plans that Britvic has had for a number of years. A target innovation plan that addresses both consumer needs in terms of the natural area but also portfolio gaps in terms of Juicy Drench but importantly leveraging and establishing a trademark like Drench into a higher ARP segment. That’ basically is the market presentation, I’ll hand back now to Paul and you can move to your Q&A with Paul and John. Thank you very much. Paul Moody: Thanks Simon. Thanks everybody for your attention and focus, I appreciate that was a pretty lengthy session; you don’t know this, but on my time sheet we’re spot on time, so that in itself is extraordinary, 27

particularly when you have the Marketing Director standing up uncontrolled. Clearly the ambition that we had today was to give you some further insight around how the overall soft drinks category is performing. I know a number of you have been speaking with Craig and Steve asking questions around the impact of the consumer recession on soft drinks, hopefully we’ve given you some confidence and reassurance that the category is resilient, as I’ve said to a number of people, I’m much happier selling soft drinks than I might be trying to sell a car, just at the moment. The second thing was to give you a bit more insight around Ireland and I think there’s a great opportunity for Andrew to bring some real life experience of the Irish market; none of you I’m sure needed to be told that the economy is somewhat challenged in Ireland, but I thought it was important that you had a really good perspective around how our business plan was playing

• ut and hopefully we did that with a degree of candour.

Clearly what we then wanted to do was give you a sense around Britvic’s ambition for the current year. I think many of you will remember that we talk consistently about innovation as being two big things in a range of smaller things. I think we have demonstrated ably this afternoon, that we have got two big things we are bringing into the market. But more importantly, we’ve got a very strong programme of activity around our brands; and as I think we’ve demonstrated ably in the past, but more so even today, is that consumers are, if anything, kind of hurrying towards those brands that they know and they trust and they can rely upon, and whether that’s Pepsi or Robinson or J2O or Fruit Shoot, I think we’ve demonstrated that we’ve got a huge plan to execute. I hope equally you will have noticed that at no point and I’m now going to break that, did we mention the weather. So our plan is not predicated on any kind of summer and that’s fine, because we’ve not had any kind of summer for the last two or three years. But we’re pretty confident that with the combination of the brands of our own, the brands that we work with on Pepsi and also the overall execution in market, that we’re in a great place. The plan now I think is to take any questions from the floor. As we’ve done in previous years, I’ll act in a kind of quasi Chairman role and as I’ve said before, if the questions are very straightforward and easy, then I’ll pick those up, otherwise I’ll be handing them out to other people in the

• room. There is a mike around, so as this is being captured, if you could

raise your hand and then Steve will give you a mike and either I’ll answer

• r John or indeed anyone else in the Britvic team. This is being really

rude and I’m pointing down. Just your name and business and then the question will be great. 28

Jason Duress: Hi it’s Jason DeRise at UBS. I guess two questions. Could you remind us what the volume impact of the innovation this year is going to be; what it was last year? Then maybe could you also talk about the profitability impact of it this year and what you expect the contribution from last year’s innovation to be, in terms of profitability? But I guess what I’m getting at is, I’m sure costs a lot to do all this, you’re probably not going to make a profit off of it yet; when do you expect to get that? Paul Moody: Last question, I think I’ll ask John to answer. Actually if you want to grab the mike John. John Gibney: I guess to start with last year’s NPD programme that we gave, was that we thought it would add around 1% to our total year revenue in 2008, which was going to be about 7 million in GB and I can confirm we did do that. Obviously as we go into 2009, then we’d expect to be able to build on that as well, most of the products we launched around the half year last year, so we’d expect to lap that obviously in the first half and then see further growth going into the second half. In terms of this year’s innovation programme, we don’t expect the impact on top line to be very different to that, so again the guidance will be somewhere in the region of 1% of our revenue. Again, as Simon has outlined, most of these are going into market sometime around the half year. In terms of your question around profitability; obviously whilst we don’t disclose individual brand profitability, I think we’ve reference before our overall approach to innovation is, that in essence it doesn’t really require us to generate new advertising and promotional spend behind it; what we effectively do is, we allocate our advertising and promotional spend behind those brands that we think is going to give us the biggest return. As we did last year with both Gatorade’s and Drench, then we’ll do the same this year with Juicy Drench and Robinson’s Be Natural; effectively what we’ll be doing is taking that money and driving it behind those new brands to establish themselves in the marketplace. Without giving you any indication of profit numbers, I think what we would say is that we expect both Robinson’s Be Natural and Juicy Drench to actually be long term margin enhancing. Simon’s point about moving Drench into a higher ARP a better margin category; and also Robinson’s which will be more of a premium price product in the squash category, 29

albeit still very affordable, again will give us the opportunity to drive further enhanced margin on the back of that. Jason DeRise:

• Thanks. The second question I want to ask about getting pricing into the

market this year; a different story about how the big retailers are handling pricing and obviously the consumers weaker. How receptive are the large retailers to price increases this year? Also what ends up happening at the point of sale, does it just end up going back in terms of a greater promotional activity, so maybe list prices are up, but promo activities are also up? Paul Moody: I’ll take that one on. I suppose the customer reaction to price increase is no different this year than every other year, which is they don’t like them. We have been very clear as we talk to them over pretty much a two year horizon; if you remember last year we had some pretty aggressive raw material price increasing that we had to manage and we also signalled that there would be some pretty tough pressure in the current year; although as you’ll know we’ve guided down over the last couple of times, primarily due to two aspects. One, we’ve locked some of the contracts, which at the time we initially indicated we’d not locked and secondly, clearly fuel has been coming down, so we’ve reflected that in our guidance. From a customer perspective, we wouldn’t normally and I won’t start now discussing how well or badly those conversations have gone. But certainly we have had a constructive conversation with a retailer around cost price pressure and the need to pass that on to the retailer. The retailer then determines how he reflects that in his retail price; clearly it’s not an issue that we get involved in. In terms of the second part of the question around, is that then reflected in more aggressive promotional activity? If you take the current quarter, we would say and have said already at the end of January that we were seeing evidence of a relatively normalised promotional programme. So whilst you will see from time to time some spiking or whatever the downward version of spiking is, in some activity; if I can interpret question – are we seeing extraordinary promotional activity within the market, either from the retailer or indeed from other brands? No we aren’t. So I would describe the market as relatively responsible and the behaviour of the competition and the retailer is relatively responsible. John Fell: 30

Hi, it’s John Fell from Deutsche. Just wondering how much of what we heard from Simon, might be relevant to Ireland in the year that’s coming

• up. Is the marketing and promotional architecture in Ireland yet at the

stage where you can be focussed on innovation and new launches as you clearly are in GB; does the economic situation in Ireland relative to the UK, maybe make things even tougher on that score? Paul Moody: I think I’ll give an answer and then maybe Simon will want to give a view. If you take the overall plan that we look at in Ireland, I think as Andrew has described and indeed you’ve referred to, the economy is pretty

• challenged. So I think it would be fair to say that our approach overall is

about consolidating our very strong brand presence. We’ve already brought into market in a more aggressive way, Robinson’s squash, Fruit Shoot and J2O. So at a very macro level, the focus is around managing what’s a difficult market and driving hard with our brands. But I think what Simon can do, is give you a perspective on how the work is already developing very rapidly around, how do we leverage the strength of GB into Ireland. So maybe Simon can answer that. Simon Stewart: I think there are two areas with that. The first one is the category figure we’re talking about, which I think we will work with the Irish team in terms

• f developing real category thinking and developing what potentially is

quite cutting edge category execution in Ireland. The second thing is as well, it is quite difficult and what the good thing about being a group is, that the group in a sense absorbs all the creation costs. If Andrew and his team decide that these are appropriate and there’s no reason why they wouldn’t be appropriate for Ireland, then non of the creation costs are there and it is purely just about execution. So the market and synergies as we’re doing with 7up, between the two are actually quite strong. So Ireland will avoid creation costs if you like, which can be expensive and can be a substantial part of the AMP and we’ll just be able to pick up what it is that they think suits their consumer. The Irish consumer isn’t vastly different in this area to the English consumer. So that stuff is relatively transferable to Ireland should the conditions be right for it and should the consumer desire it. Nicholas Midgley: It’s Nicholas Midgley from Schroeder’s. On Pepsi Raw, I’m quite a big fan

• f the product, but I imagine it’s going to be a pretty sale to sell a premium

cola in this environment. I am wondering about the momentum there, 31

because I know anecdotally I know a pub that used to sell Raw and recently withdrew it, for lack of interest. Just in the Take-home segment; I was just wondering whether exclusive availability in Boots, Smiths and Waitrose is necessarily consistent with the brand name Raw. Paul Moody: I think that Simon touched on; inevitably with any piece of innovation, it doesn’t always win everywhere and I’m sure there are, there’s more than

• ne pub that would have stocked Raw and then taken it out. I think in

terms of the roll-out programme, what we have confidence is, that the Boots was a piece of exclusivity for a short period of time, which is around trying to demonstrate it; and the view that we took was actually the Boots consumer on the go, was a perfect match for Raw, because there was a very high health and well being component within Boots beverage offer, as you’ll know from their positioning as an overall retailer. So that worked pretty well. Waitrose is next, because that was the next one that was able to take it in the range review. The other guys, I think Simon referred to, the other retailers will be coming on stream, both in single unit but also multi pack, so a 4-pack of 250ml. So I think at the moment, there is a relatively narrow base, but the listing and the agreement we’ve got with the retailers is a much wider base. I think that the challenge around Raw is about communication and I think Simon and the guys would recognise, how do you communicate the nature of the product. But what we know is, that when people drink it and you would be hopefully a good example, people would then go back to it. Not everybody will enjoy it, but lots of people will. So the programme around Raw, around new packages, around new advertising and support; around new points of distribution, will build the momentum. Of course, although it doesn’t directly have the association, as you’ve seen, I hope you would agree was a pretty strong Pepsi Max ad. The brand Pepsi and the halo effect, will also play through to Raw, albeit a very different product and a very different occasion. But we’re still pretty confident, in fact very confident that the new packages and the new distribution will drive momentum and certainly by contrast, there are a number of outlets that we know in terms of Raw, where it’s actually the biggest selling cola packaged product and it’s about the nature. One of the things we learned pretty early on with Raw, is that we probably did put it in some outlets that weren’t quite appropriate for it, because it is premium, it’s about alcohol mixing primarily; it’s about people that are interested enough in the brand proposition; if all you want is a cola then you’d probably be better off with an Xtra Cold Pepsi than you would a Raw. 32

Wayne Brown: Hi guys, Wayne Brown from Altium. Just one quick question with regards to marketing spend. I suppose the last two wet summers have seen quite a reduction in the marketing spend, I think it’s about 5 million reduction in 07 and 08. Today’s discussions with regards to Robinson’s and the Wimbledon TV advertising and all the other launches, seems to be more

• f a robust return to marketing. Could we see an increased back to

normalised levels or should we expect to see on the same level as last year, or continued reduction, or is that really open for discussion, as how the economy and trading is determined throughout this year? Paul Moody: So the approach we take to the AMP leads to the entire budgeting of the business, assumes a certain level of economic vibrancy and market

• performance. I think we’ve been very clear in the past, when we’ve talked

about AMP, it is one of the more obvious discretionary spends, that when the market is very difficult or challenged, that we are able then to flex that

• around. So if you take last year, I think we’ve said consistently, that in the

midst of that shocking summer, then our overall performance was under pressure, therefore we looked at ways of mitigating the top line pressure due to the market performance and AMP was one element of that and we talked about other components. I think you should look at this programme this year that Simon has talked about. You’re right, it is a robust programme, but it does reflect again a degree of opportunity should we need to take it, around reducing the spend. The ambition around certainly the Pepsi, the Robinson, Juicy Drench, they’re very strong programmes that we would continue to support. But I think within the overall AMP spend, there are always elements of a flex and discretion. So our intention is, we will certainly drive that, because we want to drive the top line growth; and clearly as you’ve seen, certainly in the case and John explained it earlier on, in the case of diverting some of our investment behind our new activities, so Be Natural and particularly Juicy Drench, will continue to drive that. We’ve got a great programme around Gatorade and around Pepsi, which as I’m sure you’ll remember, is co-funded by Pepsi, so that big programme, whether it’s around Raw or 20/20 cricket or Nokia, will all be co-funded by Pepsi. So the ambition is absolutely to continue spending at that level. Wayne Brown: Just from the forecasting perspective. Aiming for 6.3% of turnover or 6.7 at historic levels, I’m not too sure where we should be probably looking at,

• r should we revisit that come the interim stage?

33

34 Paul Moody: I’m looking at John and he’s nodding. So yes, in terms of guidance, then 6.3 is kind of the broad area that we would guide on. Wayne Brown: Just looking to one of the slides in the pack John, with regards to the €45 million of costs for integration with regards to Ireland, it doesn’t have a number so I can’t point you to that. But I’m just wondering if that includes the redundancy costs and the cash exceptional costs which have recently been announced and those incurred last year? John Gibney: Yes, so effectively we talked about if you remember on the acquisition, when we talked about €25 million of spend to get to the 40 million original synergies and that was 15 million of revenue spend, 10 million of capital catch up. We then last September talked about the move from 14 to 21, there was a further 10 million associated with that, so an extra 35 and then the final piece we talked about here to get you to 27, has that final 10 on it as well, so actually 45. Paul Moody: Any further questions. Clearly, there is an opportunity when we go next door to kind of chat through, but I don’t want to kind of guillotine it, but if there are no further questions, then again, on behalf of the whole Britvic team, thanks very much for coming along this afternoon, I hope that we’ve given you some helpful insight to the business and I guess the next time we’ll be speaking to the market in a more formal way, will be after the half year, so that will be probably in fact I can say specifically, it will be on 20 May. So thank you very much and see you maybe next door for a tasty beverage.