Nothing tastes better than…

Business Opportunity
사업기획

January 1, 2007
Confidential
 Major Presentation Topics

• Company Introduction
• Korean Market Overview
• Why Pinkberry?
– Consumer Insights
– Yogurt Trends
– Targeting
– Menu
– Store Layout
– Current Performance
• Organization & Management
• Operation Flow
• Implementation Milestones
• Investment Details

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 History of Pinkberry

• Start in West Hollywood, California in USA more than 2

years ago
• Strong growth into a recognizable brand
• HQ support may not be strong - “Growing together”

• Pinkberry offers a wide variety of frozen yogurt products

as well as fresh yogurt, smoothies, cookies, cakes,
coffee, and more
• New additional products for Korean consumers are
available
• More than 10 shops in USA and ready to open shops in
Asian countries
• Aim is to become the number one brand in yogurt in Asia
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 Lifestyle Changes

• Growth in Yogurt Market

– More demand, more makers
– Way to increase prices, margin
• Taste Changes
– Westernization of palate
– Replacement of coffee, tea, juice
• More Leisure Time
– 5 work day week
– Shorter work hours, more family time
• Well Being Population Growth
– All age groups now care for body
– Longer life expectancy
• Picky Consumers
– Ability to differentiate
– Willing to pay more for better quality

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 Market Transition to Yogurt

100%
90%
80%
70% 50% of “cold treat” consumers will
purchase yogurt based products by 2010
60%
50%
40%
30%
20%
10%
0%
2004 2006 2008 2010

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 Market Product Roadmap

Shift in 2003~2006
Strong in 2008 Strong in 2009

Ice Cream Frozen Yogurt Fresh Yogurt Meal Supplement

 Good taste  Less taste  Better taste  Best taste

Market  Many flavors  One or two flavors  More flavors  Even more flavors
 Fattening  Still fattening  Non-fattening  No fat but nutritious
 Less expensive  More expensive  About the same  More expensive

Our  Brand power  Many flavors  Fresh daily  Not just healthy
 Not much difference  More healthy  Better in non-  Tasty meals
Product
from competition because no topping summer seasons

Comments  Red Mango is the  Pinkberry is not a  The new concept of  Consumers’ needs and
largest chain of its recognized name in Pinkberry has expectations of healthy
kind in Korea but its the Korean frozen become a strong products will evolve to a
frozen yogurt yogurt market with business fad with new concept of
products do not Red Mango very high growth products which will be
have enough maintaining leading success and is now consumed in lieu of
differentiating market position in position to heavy meals for the
factors from the replace Red Mango health conscious
competition as the newest
sensation

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 Why Pinkberry?

1. Current market is comprised of “one flavor only” competitors – yogurt flavor

2. As result, consumers today pay more - about 30% more than ice cream -
to eat “less tasty” products
3. This trend will not continue and some competitors are starting to realize it
4. Pinkberry will offer additional flavors (green tea) which meet Korean tastes
without the aid of toppings
5. Therefore, consumers will need to add healthy toppings only to enhance
taste – rather than to create flavors
6. Pinkberry concept will also bring to “health conscious” consumers a new
line of fresh yogurts made daily and served fresh with other healthy snacks

7. Being the newest phenomenon in the industry means strong name

recognition and fuel for continuous growth. Ongoing product development
and professional support to help us achieve market leadership within three
years and market dominance within six years
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 Consumer Insights

What are consumers thinking?

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Consumers want healthy options

What would you like to change about your eating habits?

Eat more low fat foods
53%
Cook more meals from
scratch at home

Eat more freshly

prepared foods

Cook at home with freshly

prepared ingredients

Eat more organic foods

0 20 40 60

Confidential Source: SupermarketGuru.com

Fat and sugar continue to be big
concerns

% population “Interested in reducing”

Fat 74%

Sugar
66%

Carbs

0 20 40 60 80
Source: Gallup 2003

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 Consumers plan on eating more low
fat and high in protein foods

% population “Planning to eat more of”

Low fat 49%

Low carb
41%

Fat free
26%

High protein

Vegetarian

Raw foods

Organic

0 20 40 60
Source: Sloan Trends/
FMI 2004
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 Fortified foods are also growing
rapidly

Historical & projected sales of fortified foods

$B 25
+8.5% CAGR
20

15

10

0
1999 2000 2001 2002 2003 2004

Source: Sloan Trends

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 37% of the population are also
actively managing their weight
% population managing weight loss for health
40
37%
35
30
25
20
15
10
5
0
2000 2001 2002 2003

Source: Sloan Trends

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With weight loss products being a
big business

% of US Population buying weight loss products

50
44%
45

40

35

30

25

20
1999
S LOAN T RENDS & S OLUTIONS, INC. 2000 2001 2002 2003

Confidential Source: Sloan Trends

 Consumer Summary

• Consumers are concerned about what they eat

• Eating healthy is on trend and desired by

consumers

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 Yogurt Trends

What are the fresh yogurt

consumption trends?

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 Yogurt is seen as very healthy

Consumer perceptions of selected foods

Fruits & vegetables

Whole grains

Yogurt

Pasta

Chicken

Red meat

Margarine

Dressing

Butter

0 1 2 3 4
Source: Sloan trends
4=very healthy
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 Fruits are also seen as very healthy

Consumer perceptions of selected foods

Fruits & vegetables

Whole grains

Yogurt

Pasta

Chicken

Red meat

Margarine

Dressing

Butter

0 1 2 3 4
Source: Sloan trends
4=very healthy
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 Fresh yogurt is a $3.9 Billion category
in grocery

Supermarket Category Sales

16
14
12
$3.9 Billion
10 Category
8
6
4
2
0
Milk Bread Natural Cheese Refridg. Juices Luncheon Meats
Refridg. Salads Brekafast Meats Yogurt Processed Cheese Eggs

Confidential IRI 52 weeks ending 7/10/05, adjusted to include Wal-Mart

 … is a growth leader

IRI 52 week sales growth

Grocery average 2%

Refrigerated yogurt 9%

0% 2% 4% 6% 8% 10%
Yogurt is one of the fastest growing categories in the supermarket
Source: IRI
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and is driving consumption that has
now reached an all-time high
Pts/yr
Per capita consumption
16
All-time high!
14
12
10
8
6
4
2
0

Source: USDA Consumers love their yogurt!

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 Targeting

Who is the target?

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 The main consumer target is women

• Primary Target: Women

• 35% eat yogurt 1X or more per week (vs. 21% men)
• Ages 25- 49 years old
• “Trying to eat more yogurt for health reasons”
• 45% of adult women

• Secondary Target: Families (Men & Kids)

• “Trying to eat more yogurt for health reasons”
• 26% of adult men
• Children under age 6 index 130 on yogurt consumption

Source: Health Focus, 2002

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 Menu
What is the Menu?

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 Menu focuses on fresh

FRESHNESS IS KEY POINT OF DIFFERENCE

• Fresh Yogurt – 96% Fat Free and Fat Free/NSA, Pinkberry
is the only yogurt that is
“Prepared Fresh Everyday”
• Fresh Fruit is provided to support fresh, healthy eating
• Smoothies and drinkable yogurts provide portability
• Freshly Baked Breads complete meals for one stop eating
• Coffee and espresso drinks add to the breakfast day-part,
with iced coffee’s providing support to snack occasions
• Frozen yogurts expand the snack and treat day-part to
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maximize store sales
 Store Layout
The store is contemporary, exciting and
a place consumers want to visit.

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 Store Layout & Interior

 The store front provides stopping power

 Fresh, contemporary colors make Pinkberry exciting

 The yogurt and fruits are fresh and appetizing

 Organic granolas and treat toppings provide broad appeal

 Fresh breads, coffee’s and tea’s round out the menu

 The store design delights consumers

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 Current Performance

Consumer feedback is exciting!

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 Total Fresh already approaches 50%
of the product mix

Category % of Sales Plan COGS*

• Fresh Pinkberry 27.5% 30.0% 25%

• Pinkberry Smoothies 16.8% 22.5% 10%

• Pinkberry Blends 1.6% 7.5% 19%
• Total Smoothies/Blends 18.4% 30.0% 15%
• TOTAL FRESH 45.9% 60.0% 20%

• TOTAL FROZEN 40.2% 30.0% 24%

• Other 13.9% 10.0% 28%

• GRAND TOTAL 100.0% 100.0% 22%
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* Estimated
 Current day-part mix drives strong
morning and lunch support

Day-part % of Sales
• 6:30-11am 12%

• 11am-3pm 32%

• 3pm-10pm 56%

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 Performance to date is exciting

• Very positive consumer feedback to date:

– Store design working for consumers

– Product quality is exceeding consumers expectations

– Repeat is strong

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 Great business opportunity

• Pinkberry is growing well…

• Performance is exceeding expectations…
• Concept is strong…

The growth concept of the decade

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 Pinkberry Principles

• We endlessly strive to be the number one company in

our industry.

• We create and serve the freshest and best products

using the finest ingredients available.

• We never compromise quality for price.

• We always maintain the highest standards from concept

to delivery to the customer.                        

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 History of Hylife Products

• Leadership of Mr. YN Won with more than 30 years experience in

the food industry
• Small organization – trade experts and professionals
• Vast experience in dealing with foreign companies
• Initial contact with Pinkberry more than 2 years ago
• Grand vision of providing healthy treats to Korea
• First leg of this project – cool treats for health seekers
• Pinkberry initially sought larger business partners
• Hylife-Pinkberry Partnership – marketing knowledge

• Vision is now realized !!!

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 Hylife Management Structure

이사회
Board of Directors

CEO

Marketing & Sales Real Estate Procurement Shop Mgmt

Market Survey Sales Promotions Contracts Store Training

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 Hylife Management Personnel

• YN Won ( 원용남 ) – Chairman

– More than 30 years in food industry
– CEO & sales director in Unilever
– VP of Aekyung
– Executive Managing Director of Ottoogi Foods
– Executive Managing Director of Dongwon F&B

• Gichol “Andy” Lee ( 이기철 ) - President

– President of Gavin’s Sausages
– Owner of London Grill restaurant chain
– Chief Operating Officer in Ceratech
– VP of Finance & Business Services in Motorola
– More than 20 years in food and semiconductor industries
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 Silent Partners & Shareholders

• JY Yoo
– 30 years in food industry
– CEO of OB-Seagram
– CEO of Campbell Soup Korea
– CEO of Bestfoods Shanghai
– Professor in marketing management

• JM Roh
– 30 years in retail indsutry
– CEO of Korea Distribution Research
– CEO of Newcore Department Store
– GM, Midopa supermarket chains

• SS Han
– 30 years in service industry
– CEO of Unico Search
– VP of LG Trading & Advertising

• YY Choi
– 20 years experience in sales & distribution
– President of Yongho Foods
– Sales Director in Sampyo Foods
– Sales Manager in Ottoogi Foods

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 Infrastructure for Success

• Experienced Marketing Team

• - 50 year experience in growing food businesses
• - Proven international best practices
• - Clear strategy to overcome current market players

• First Shop Location Selection

• - Rodeo Drive – AGJ in Gangnam Area
• - Tentative agreement in place for store rental

• Fully Trained Work Force in Stores

•     - HQ trained personnel in direct-managed shops
•     - Month long training for franchisee personnel

• Grand Opening Day – Beginning of May

•     - Dignitaries and celebrities
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 Market Entry Strategy

• Form a professional management team (5 personnel)

• Obtain adequate training from HQ on store management, brand
marketing, corporate philosophies, and result expectations
• Select the right flavors
• Start in attractive locations – this is most important
• Define the key target consumers – college students and females
(late 20’s to early 40’s)
• Increase brand awareness via promotional campaigns
• Differentiate from competition – concentrate on strengths
• Realize that sub-franchising is hard work
• Achieve success store by store – better to have small number of
successful stores rather than high number of stores with some
successful and some doing poorly
• Be aware of the competition and market trends
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 Marketing Tools & Venues

• Free Taste Sampling Events in Shops

• In-Store Give-aways (free products, caps, t-shirts, jackets)
• Internet
• Celebrity Signing Events
– JO Insung
– WON Bin
• Movies & TV Programs
– “in movie” shop displays
• Promotional Events
– Shopping Malls
– Arcades
• Women’s Magazines
• Sports Event Sponsorships

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 SWOT Analysis

• Strengths
– Two flavor strategy – flavor development necessary
– Image of “large” international brand – Hollywood origin
– Strong financing from MK investment group
– Vast marketing experience to outrun the competition
– Everyday freshness – “24 hour fresh” concept

• Weaknesses
– Low recognition brand in the Korean market
– No shops – “start from scratch” strategy takes time
– Need to duplicate USA shop appearance
– Franchising strategy will mean less direct-managed shops
– Small organization in place

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 SWOT Analysis

• Opportunities
– Fastest aging population among OECD nations
– Rapidly changing food taste and lifestyle
– Health & “well-being” fad is IN
– New brand will mean more choices to consumers
– Growing markets for yogurt and yogurt based products

• Threats
– Longer cold climate will necessitate winter strategy
– Competition may “retaliate” with counter-measures
– Anti-American sentiment
– Growth in number of “lesser” known brands
– Unknown strategy of clear number one competitor
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 Product Portfolio

2007 2008 2009 2010 2011

fresh yogurt healthy toppings

Current

frozen yogurt 2 flavors to start

smoothies fruit based meal supplements

Treats
coffee MFFB brand coffee Yogurt
Korean additions Crushed Ice w/ bean
cheese cakes and “zero-fat” cookies and winter favorites

Future
new fad soft pretzels

cookies/cakes fresh baked cookies

healthy additions snack bars and set menu items for the health conscious

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 Product Focus

 Specializing in Yogurt and Yogurt-Based Products

- Fresh Yogurt (Pudding)

- Frozen Yogurt (Ice Cream)
- Fruit Smoothies
- Meal Supplements
World Leading
Company for Fresh &
 Healthy Snacks Frozen Yogurt Products

- Cookies
- Cakes
- Pretzels
- Coffee
- Fruit Juice

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 Sourcing & Purchasing

• Import from USA

– Certain yogurt base materials – initial stages
– Certain treat materials
– Roasted coffee beans
– Fresh tea leaves

• Local Sourcing
– Equipments
– Signs & Billboards
– Dishes & Plates
– Fresh fruits
– Straws
– Napkins
– Disposable Cups
– Uniforms
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 Product Flow

- Yogurt Based Products

Material Cold Store Fresh Consumer

Purchase Storage Delivery Products Sales

- Treats

Local Warehouse Store Final Consumer

Sourcing Storage Delivery Preparation Sales

Daily
Delivery
RTEP

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 Production System Summary
- Inventory summary at warehouse/store
Sales - Lead Time checking
Forecast - Monitoring yield at each location
- Lot Tracking

Quantity Purchase Plan Material Material

Calculation Confirmation Order Shipment

Material
Plan - Calculate order size and create lot number
- Generate import order sheet and auto send

Purchase
Warehouse
Order
- Show available quantity for sales
- Auto replenishment system in place

- Auto calculate necessary quantity based

- Generate P/O sheet and auto sending
Fresh
Sale to Customers
Products

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 Striking the Balance

Difficult to maintain same level of service everywhere

Direct Managed Stores Franchises

Difficult to Manage Easier to Maintain

Higher Returns Low Returns

Hylife
Products
Employees Non-Employees

More Loyalty Less Professional

Career Growth Lower Wages

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 Revenue Generation

• Profits of Direct Managed Stores

• Franchise Fees

• Interior Work Margin

• Shop Management Training

• Sales Commission

• Marketing Fee Difference

• Raw Material Sourcing

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 Store Development Schedule

1 direct managed store for the initial 12 months

• 1st year
– 4 direct managed stores or franchises (total 5 stores)

• 2nd year
– 15 franchises (total 20 stores)

• 3rd year
– 40 franchises (total 60 stores)

• 4th year
– 60 franchises (total 120 stores)

• 5th year
– 80 franchise (total 200 stores)
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 Store Development

250

200
20

150

12
100
180

6 108
50

54
5
15
0 5
0
Year 1 Year 2 Year 3 Year 4 Year 5

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 Yearly Sales Expectations

30000 250

25920
25000
200

20000

150

15000
12960

100

10000

5760
50
5000 3600
2880
2400 2400

0 480 0
0 0
Year 1 Year 2 Year 3 Year 4 Year 5

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 Customer Breakdown
 Sales Portion by Gender
- Male Customers 41% Mal
- Female Customers 59%

- Female population more likely to consume

Fem
non-traditional treats in groups

20~30  Sales Portion by Age Group

- Teenager Customers 25%
- Age 20~30 Customers 48%
Teens
- Age 40 + Customers 27%

40+
- Teenage population more likely to enjoy
our product but lacks purchasing power

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 Sales Breakdown
 Sales Portion by Area
Seoul
- Seoul accounts for 81%
- Boondang, Ilsan, Suwon take 12%
- Busan, Daegu account for 7%

Vicinit
Other y
s
 Sales Portion by Product Type
- Yogurt – 87% of sales
Yogur
t - Coffee – 9% of sales
- Others – 4% of sales
Coffe
e
Other
s
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 Pinkberry Franchisee Investment

• Franchisee Fee
– KW 15,000,000
• Equipment Rental
– KW 25,000,000
• Raw Material Inventory
– KW 5,000,000
• Interior Work (2,500,000 Wons/pyung, 20 pyungs)
– KW 50,000,000
• Total Initial Investment
– KW 85,000,000
– Excluding the store premium and key money
• Advertising & Promotion
– 3% of Sales to cover ongoing marketing

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 Main Menu Items

• Fresh yogurt in the form of pudding

– 3500 WPS
• Frozen yogurt in the form of ice cream – mainly summer
– 4000 WPS
• Fruit-based smoothies & meal supplements
– 4500 WPS
• Cookies – fresh baked
– 1500 WPS
• Cakes – fruit cheesecakes
– 5000 WPS
• Coffee – Samba coffee
– 4000 WPS

• Pretzels – 2500~3000 WPS

• Fresh fruit juices – 4000~6000 WPS

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 Typical Store Sales

• Market Size: approximately 3000 bw

• Market Segment Size: approximately 1000 bw and growing
• Spending Pattern – “eating out” of home:
– Teens – 70000 Wons/month
– Twenties – 200000 Wons/month
– Active Adults – 320000 Wons/month
• Customers per transaction: 2.4
• Average sales level per transaction: 9600 Wons/transaction
• Number of transactions per day: 72
• Number of days in a month: 30

• Monthly sales amount per shop: 2073600 Wons

• Annual sales amount per shop: 250 million Wons

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 Future Expectations

Service
Devotion

Hylife
Products Dividend

Returns

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 Investment Needs

• Initial Investment
– 2 billion Wons
– Exclusive license fee
– First direct-managed store in Apgoojung-dong
– Marketing expense for 1st two years
– Labor costs for 1st two years

• Additional Investment
– 5 billion Wons + 5 billion Wons
– Opening of 11 more direct-managed stores in key locations
– Two additional personnel
– Investment at diluted share prices (250%)
– Franchising can begin after five stores
– Continuous marketing and operating expenses for more stores

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 Investment Breakdown

• Company Establishment
 Office & Equipments – 20 mw
 Company Vehicle – 30 mw

• First Store Opening

 Premium & Key Money – 500 mw
 Interior Work – 150 mw
 Equipment – 150 mw
 Contingency – 50 mw

• Marketing Promotion Expenses

 – 240 mw (Y1) – 490 (Y2) – 845 (Y3) – 2300 (Y4) – 4020 (Y5)

• Operating Funds
 Contingency – 50 mw

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 Shareholdings Scenario
 Initial Shareholdings
- 200 mw out of 2 bw means 10% Max
- 500 mw out of 2 bw means 25%

- Investment opportunity offers 10%

Min
minimum and 25% maximum holdings Rest

2nd
 Additional Funding, if necessary
- If agreed by shareholders
- Base capital can grow by 5 bw

1st 3rd - Number of DMS can increase by 10

- Same marketing cost, more impact
- More difficulty requires more prudence

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 Investment Value

• NPV
 24 bw after 10 years 45000
 About 8 bw after 5 years 40000
 Very conservative estimate 35000
30000
• Size
 50 bw in the 5th year 25000
 Annual growth rate 10% after 20000
 Market leadership 15000
10000
• Organization
5000
 4 in the 1st year
 6 in the 2nd year 0
2007 2008 2009 2010 2011
 10 in the 5th year

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 Company Milestones
Milestone to Opening

2007.4
1st
Funding
성인 브랜드 런칭
Store Open
2007.2
Contract
Signing

2012.3 2006.4 2007.5 2008.1

Practice Material 2nd
IPO Order
preparation Funding

HPC
2007.8 2007.6
Employee Shop
Hiring Training

2011.12 2007.7 2010.9

Market Interior
Leadership Work 10 billion

2011.10
30 billion

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 Vision & Goals

Introduce new products & first concepts

into the market
and
Dictate market movements and trends within
the industry

Become the most profitable frozen yogurt

franchise chain
before the end of year 2011
(within five years)
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