2004 Coffee Plan

Prepared by Dave Quinn

October 8, 2004

©2003 A L C A N I N C.
 Coffee Business Plan
Vision

Establish a global identity as a value

enhancing supplier in the coffee market
by exploiting an expanded portfolio and
utilizing technical resources to create
innovation.
©2003 A L C A N I N C.
 ALCAN’S GO-TO-MARKET

> Drive fractional cost line at existing key accounts

> Differentiate in niche areas using our current
technologies and alternate structures
> Exhibit market exposure through sales and
marketing efforts using new expanded Alcan
packaging portfolio
> Use of select targeting of other mid to large roasters

©2003 A L C A N I N C.
 Coffee Business Plan
Mission
> In 2005, Alcan Packaging will grow its coffee business by
– Maintaining Kraft and P&G share
– Successfully launching new Kraft Pod Projects
– Timely Nestle scale-up of bid and new items
> Mid to Long Term
– Create significant presence in 3 and 4 ply value-
added coffee structure
– Grow beyond Kraft, Sara Lee, and Nestle in
fractional business

©2003 A L C A N I N C.
 Coffee Business Plan
Market Analysis
> Coffee Market
– Relatively low growth rate in fractional sector
– Above average growth in Pod packaging
– Conversion from cans to continue
– Ready to drink will increase
– European carry-over will provide increased growth rate
– New package formats, styles provide barrier and above average margins
• Corner seal stand-up bags
• Matte-finish
• Laser score for easy open

©2003 A L C A N I N C.
 Coffee Business Plan
Customer Analysis
Other
41%

Starbucks
13%

Commty Sara Lee

2%
Farmer 9%
3%
Nestle
3% P&G
Royal
4%Gvna Kraft
8%
4% MP's
6% 7%
> Market Size = $158 million
> Customer base is quite fragmented and sometimes regional
> Large roasters attempting to innovate to enjoy Starbucks-style success
> European influence taking hold

©2003 A L C A N I N C.
 Coffee Produce Business Plan
Customer Analysis
Where is the Business?
Co mpany $ Value (MM) S hare
S ta rbucks 20 13%
S a ra Le e 15 9%
P &G 12 8%
Kra ft 11 7%
M P a rke r's 10 6%
Top 5 68 43%
Tota l 158 100%
> Fragmented Market
> Sara Lee and Mother Parker’s gaining fractional share
> Kraft and P&G innovating to gain back share
> Starbucks share and value-add leader

©2003 A L C A N I N C.
 Coffee Business Plan
Competitive Analysis
Total Market size = $158 million

14%
28%
Fres-co
9% Curwood
Alcan
Sonoco
9% Ultraflex
Multipak
19% Others
10%
11%

©2003 A L C A N I N C.
 Coffee Business Plan
Competitive Analysis

To tal Marke t Fre s -c o Curwo o d Alc an

$ MM Qty MM $ MM % $ MM % $ MM %
$158 8,240 $42 27% $30 19% $18 11%
S o no c o Ultrafle x Othe rs
$ MM % $ MM % $ MM %
$ 16 10% $ 15 9% $37 23%

> Fres-co uses machinery to provide system

> Competition possesses focused service programs
> Multipak new low cost threat with capacity

©2003 A L C A N I N C.
 Coffee Business Plan
Strengths
SWOT
Weaknesses
>Full Portfolio >Manufacturing issues
>Strong technical resources >Unprofitable sealant film
>Global presence >Uncompetitive MetPet
>Large size account base >Lack of market penetration
>Kraft dependence
>Pod sector >Multipak in fractional
>Exploitation of new portfolio >Slowing of growth within
current
>Truly global partnering
Alcan arena
>Existing account growth
>Stifff offering
>Pursuit of niche growth –
3ply, 4ply structures
Opportunities Threats
©2003 A L C A N I N C.
 Coffee Business Plan
Objectives

2005 2004 2005 2004

Sales Sales Income Income
Coffee 19,300 18,400 5,404 4,278
> 2004 sales soft at majors
> Planned growth at Sara Lee, Mother Parker’s, Nestle, Kraft
> Manufacturing, efficiency improvements in action
> Mix improvement through 3, 4 ply structures and 2nd tier roasters

©2003 A L C A N I N C.
 Coffee Business Plan
Critical Issues Analysis
> Significant competitive threat on Kraft fractional bid
> Underperforming sales volume at Kraft and P&G
> Excessive waste on singles – laser, print
> Unacceptable brickpack margin
> Lack of education and motivation within marketplace of our expanded
portfolio
> Internal sealant unprofitable
> Lack of reliable alternate MetPet supply
> Nestle margin recovery
> Misalignment of development activity for favorable coffee market
– Machinery suppliers, European dialogue

©2003 A L C A N I N C.
 Coffee Business Plan

ACTION PLAN SUMMARY

Project Name Category Potential Sales/ Savings Owner(s) Plant
Nestle Canada - complete profitable scale-up of business award G $1.8MM Brewer/ Quinn Minneapolis
Qualify and scale-up 3-ply brickpack in Shelbyville C $.4MM Savings Willis/ Shah/Quinn Shelbyville
Sara Lee Coffee-qualification of Neenah sealant, Kolon MetPet C $.5MM Savings Brewer/ Hannon/Quinn Bellwood
Kraft - Project cushion coffee pods - win bid G, I $1-3MM Willis/Dolgin/Quinn Shelbyville
Penetrate 2nd tier roasters G $2MM Quinn/Stacey SLP, Shelbyville
Use CI approach to solve Menasha waste on singles C $260M income Quinn/Kitzis Menasha
Sara Lee Senseo mult-use pod package bid G $1MM Quinn/Brewer Shelbyville/Toronto
Kraft - individual pod packaging G $500K Quinn/Dolgin/Willis Shelbyville
Kraft Foods - Fractional package laser score G, I $300K Quinn/Cichelli/Willis Menasha, SLP

©2003 A L C A N I N C.
 Coffee Business Plan
Action Plan
NESTLE SCALE-UP

Action Item Start Date Completion Owners

Date

WIN BID AUG ’03 MAY ’04 DUNCAN,

WELMON,QUINN
TRIAL MATERIALS JUNE ’04 SEP ’04 MRG., DEVELOP.

ATTAIN GRAPHICS AND PRINT SCALE-UPS SEP ’04 OCT ‘4 GRAPHICS,

PLANT, DEVEL.

SCALE-UP OCT ’04 ONGOING MFG

SERVICE BUSINESS, NEW PROJECTS SEP ’04 ONGOING SALES,

DEVELOP, CSR

©2003 A L C A N I N C.
 Coffee Business Plan
Action Plan
QUALIFY AND SCALE-UP 3 PLY BRICKPACK - SHELBYVILLE
Action Item Start Date Completion Owners
Date

CONVERT UNPRINTED IN SHL JUN ’04 AUG ’04 DEV, MFG

RUN TRIALS AT KRAFT JACKSONVILLE JULY/AUG SEP ’04 SALES,

’04 DEV

COMPLETE LEAKER TESTS SEP ’04 SEP ’04 DEV,

KRAFT

CONVERT PRINTED ORDERS/RUN AT KRAFT SEP ’04 NOV ’04 SHL, DEV

SCALE-UP PRINTED ORDERS NOV ’04 JAN ’05 SALES,

DEV, MFG

LAST PRINTED ORDER RUN IN NEENAH DEC ’04 FEB ’05 DEV, MFG

©2003 A L C A N I N C.
 Coffee Business Plan
Action Plan
SARA LEE – QUALIFY NEENAH SEALANT, KOLON METPET
Action Item Start Date Completion Owners
Date

Acquire raw materials May ’04 June ’04 Dev, Mfg,

Purch

Set up and run customer trials July ’04 Sep ’04 Dev, CTS

Produce scale-up trials Sep ’04 Oct ’04 Mfg, Dev

Run customer trials Oct ’04 Nov ’04 Dev, CTS

Full scale-up Nov ‘04 Dec ’04 Dev, CTS

©2003 A L C A N I N C.
 Coffee Business Plan
Action Plan
Kraft Project Cushion – multi-use pod

Action Item Start Date Completion Owners

Date

Win Bid June ’04 Aug ’04 Dolgin,

Quinn

Determine logistics/specs Aug ’04 Oct ’04 Dolgin,

Dev,
Techpack
Produce trials Oct ’04 Dec ’04 Dev, SHL,
Techpack

First production order Dec ’04 Jan ’05 Dev, SHL,

Techpack

Scale-up Jan ’05 March ’05 Dev, SHL,

Techpack

©2003 A L C A N I N C.
 Coffee Business Plan
Action Plan
Penetrate 2nd tier roasters

Action Item Start Date Completion Owners

Date

Equip sales with tools – brochures, education Nov ’04 Ongoing Mktg, Sales

Make targeted contacts – Gavina, Winn Dixie, Nov ’04 Ongoing Sales, Mktg
Reilly Foods, Pod Pak, Farmer Brothers, El
Dorado, Eight O’ Clock
Gather competitive and customer data to Nov ’04 Ongoing Sales
determine need

Gain first price qualification Ongoing Sales, Mktg

Determine Starbucks coverage plan Oct ’04 Nov ’04 Sales, Mktg

©2003 A L C A N I N C.
 Coffee Business Plan
Action Plan
Use CI approach to solve Menasha waste on singles

Action Item Start Date Completion Owners

Date

Set up CI teams in Menasha Oct ’04 Oct ’04 Mfg

Use tools to find root cause, actions, solution Oct ’04 Nov ’04 Mfg

Implement solution Nov ’04 Dec ’04 Mfg

Return margins to or beyond original leves Jan ’05 March ’05 Mfg

©2003 A L C A N I N C.
 Coffee Business Plan
Action Plan
Sara Lee Senseo multi-use pod package bid

Action Item Start Date Completion Owners

Date

Attain specifications, details of bid from Alcan July ’04 Oct ’04 JMS, Mktg
Europe

Develop Page 3 Oct ’04 Oct ’04 Dev, Purch,

Mktg

Complete cost and price, compare to European Oct ’04 Oct ’04 JMS, Mktg
submission for consistancy

Develop submission strategy Oct ’04 Nov ’04 JMS, Sales,

Mktg, Dev

Attempt pre- emptive offer, or participate in Nov ’04 ??? JMS, Sales,
general bid Mktg

©2003 A L C A N I N C.
 Coffee Business Plan
Action Plan
Kraft - individual pod packaging

Action Item Start Date Completion Owners

Date

Follow PCP – normal project guidelines – July ’04 Oct ’04 Dev, SHL
Shelbyville

Go commercial Oct ’04 Dec ’04 Dev, Sales

©2003 A L C A N I N C.
 Coffee Business Plan
Action Plan
Kraft Foods - Fractional package laser score

Action Item Start Date Completion Owners

Date

Follow PCP July ’04 Ongoing Dev, Mfg

Start production in Menasha ??? ??? Dev, Mfg

Transfer to St. Louis Park as available assets ??? ??? Dev, Mfg
and project commitment allow

Margin analysis – meet original assumptions? ??? ??? Mktg

©2003 A L C A N I N C.
(BACK –UP) Coffee Business Plan
Competitor Profile – Fres-co
• Historical:
• Leveraged European Technology and History to establish presence in
US
• Developed early major share at Starbucks other 3, 4ply users
• Used machinery offering to create barrier
• Highly leveraged in coffee market

• Technology:
• Patent holder on several machine innovations - Golio
• Machine settings require special structure, sealants
• Own corner-seal bag format

• Tactics
• Present as expert in industry
• High presence at industry functions
• Dominant in valve bag and brickpack structures

• Reaction to Alcan share growth?

• Would attempt to downplay our ability to qualify
• Will not chase price

©2003 A L C A N I N C.
(BACK-UP) Coffee Business Plan
Competitor Profile – Curwood
• Historical:
• Strong technology base
• Blow own film
• Metallize in house
• Long standing relationship at Sara Lee
• Full service provider

• Technology:
• 36 gauge PET
• Offer stock pre-made bags

• Tactics exhibited in Coffee Market:

• Use of full portfolio
• Not much presence in brickpack
• Active in trade events

• Reaction to Alcan share growth?

• Near term attack at one of our major accounts
• Attempt to attack laser score

©2003 A L C A N I N C.