Dairy Beverage Reinvented

1. Dairy Beverage Reinvented Reinventing Milk to Increase its Relevance To Millennial Consumers

2. Dairy Beverage Reinvented:Understanding the Millennial • Goal: Grow milk/dairy consumption among the Millennial generation – influencers as individuals, parents and future leaders • Research Objective: Understand current beverage habits and mindset of Millennials in order to develop new compelling beverage concepts that utilize milk and dairy ingredients

3. Why Reinvent Milk? Slow, continuous shift downward in per capita fluid milk consumption Source: USDA ERS • Flat fluid milk sales • Declining per capita consumption • Milk falls short between meals • Milk under-indexes on key needs • Aggressive beverage competition

4. Why Millennials? Large Dip in Milk Consumption as Individuals Transition from Youth to Young Adulthood Source: Kantar Beverage Panel • Millennials less likely to drink milk • Large dip in milk consumption as individuals transition from youth to young adulthood (“age effect”) • Erosion in milk consumption vs previous generations (“cohort effect”) • Millennials more adventurous in food and beverage choices; many new products target this age group • Definition of healthful beverages shifting

5. Who are Millennials? • No clear definition, most sources place in early adulthood • Racially/ethnically diverse • 21% Hispanic; 15% Black; 6% Asian; 3% 2+ Races • 1 in 3 immigrants is age 20-34 • Broad mix of life stages • 26% 18-32 year olds married • Compared to 48% Boomers at same age and 65% of Silent Generation MILLENNIALS Age 18-33 22% of Population 70 Million People

6. What Defines Millennials? • Grew up during economic prosperity • Yet many entered work force during recession • Many cannot get a job in their chosen field • Don’t expect to stay as long in a given job as previous generations • Rapid advance of technology during their life • Social media is an everyday part of life • Fiercely independent • Feel powerful • More liberal in views than older generations • Information hungry • Receptive to new ideas – often seek peer feedback • Don’t have much to spend but will pay more for products

7. Food and Beverage Habits Embraced by Millennials • Food is form of self expression • Food as source of entertainment • Value authenticity • Interested in how food is grown/produced • Less is more philosophy – clean labels, readable ingredients • More natural, organic foods • Appreciate reusable, recyclable, resealable • Embrace flavor variety, multicultural foods • Seek healthy options • Blurring of meals and snacks • Less brand loyal; willing to seek new outlets for food

8. The Millennial Weekly Beverage Diary Source: Kantar US Panel – Millennials approximated by age 19-34; self-reported beverage only consumption that is nationally projectable

9. Products Gaining and Losing in Penetration and Occasions Among Millennials Beverages growing in penetration and share reflect food values embraced Tap Water WHOLE Milk Non-Dairy Smoothies Total Coffee & Specialty Fruit/Vegetable Blends Drink Mixes Protein Drinks A number of Millennials exiting the Dairy Milk, CSDS and Fruit Juice Categories DAIRY Milk Carbonated Soft Drinks Fruit Juice Primarily Orange Juice

10. What Drives Millennial Beverage Consumption • Over-index on these Needs • Mix with alcohol • New/different • Was sick/ill • Purifying/clean • Before/during/after exercise • Quick energy • Provide lasting energy • Top Beverage Needs • Thirst • Go with my food • Like taste • Replenish fluids • Goes well with food/snack • Wake up • Treat • Cool off • Healthier choice • Fun • Relax • Needs Gaining Most Share Help me relax Cool off Replenish fluids Quick energy Treat Be sociable Fun Before/during/ after exercise Warm up Green highlight indicates these needs gaining more than population overall

11. 8 Innovation Platforms that Address Millennial Beverage Needs Balanced and Real Weight Management/ Curb Hunger Recovery/Restore Health and Wellness Need States: Burning Problem: “When I start feeling a little hungry, my willpower goes out the window and I end up snacking…and then feel guilty. I wish there was a simple, nutrient-rich beverage to tide me over and help me avoid eating things I may regret later. Give me something to curb my cravings and leave me feeling satisfied.” Frame of reference: Food snacks Burning Problem: “Sometimes I feel run down or depleted after physical exertion and need a beverage to reinvigorate my body and help build me back up. I’m not a professional bodybuilder, so I don’t want anything too macho or extreme. Give me a beverage that provides all the nutritional benefits my body needs so I can recover quickly and feel great.” Frame of reference: Protein drinks Burning Problem: “Sometimes it’s hard to get all the nutrients I need in a busy day. I want a tasty beverage that packs it all in. I want balanced nutrition from fruits, veggies, dairy, even nuts and seeds. I can’t always eat right, but I know I’m covered when I drink right.” Frame of reference: Smoothies Burning Problem: “When I start feeling a little hungry, my willpower goes out the window and I end up snacking…and then feel guilty. I wish there was a simple, nutrient-rich beverage to tide me over and help me avoid eating things I may regret later. Give me something to curb my cravings and leave me feeling satisfied.” Frame of reference: Food snacks 11

12. 8 Innovation Platforms that Address Millennial Beverage Needs • Tasty Pick-Me-Up • Refresh Tasty Treat/Fun Need State: • Burning Problem: • “Sometimes the real craving is a break from my routine…a special ‘me’ time to sit back and get away from it all. Give me a beverage that is oh, so indulgent and fun to drink, that transports me to my happy place and gives me a multi-sensory experience – all without leaving my seat.” • Frame of reference: Espresso drinks (e.g., lattes, macchiato, coffee concoctions) Burning Problem: “When I’m thirsty, I want an ice cold beverage. Soft drinks, iced tea and juice drinks are refreshing thirst quenchers, but they can be full of sugar and empty calories. Give me a fun, exciting beverage that cools me down, but doesn’t weigh me down with unnecessary ingredients or calories.” Frame of reference: Carbonated soft drinks and iced teas 12

13. 8 Innovation Platforms that Address Millennial Beverage Needs Long-Lasting/Sustained Energy Sweet Dreams Milk Energy Need State: Relax Need State: Thirst/Hydration Need State: Multi-Purpose Super Waters Burning Problem: “Sometimes the day is like a race to the finish line. When I start feeling sluggish, I don’t know if I’ll ever make it through. I need a beverage that gives me an energy boost to sustain me through my day. Current energy drinks are too intense for me. I want a nutritionally balanced drink that provides long-lasting energy, through real ingredients, that gets me to the finish line.” Frame of reference: Energy drinks, protein-rich foods and beverages Burning Problem: “At the end of the day all I want is to relax and unwind. After all the hustle and bustle of the day, it’s time to slow things down when I get home. Give me a beverage made with simple, natural ingredients that prepares me for a good night’s rest.” Frame of reference: Warm drink choices (e.g., tea and coffee); milk and cookies Burning Problem: “Everyday my body needs hydrating and water does the job of quenching my thirst. But, I’m always looking for beverages that multi-task, like a water that hydrates AND replenishes my body, by delivering essential nutrients - like vitamins, electrolytes, and protein. I want a refreshing beverage that can do it all.” Frame of reference: Water and sports drinks 13

14. MILLENNIALS will be a powerful force in transforming the food industry Appeal to their sense of adventure