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General Foods Corporation General Foods Corporation made good progress in 1985. Though overall volume rose in line with the industry growth rate, we were able to win higher market share for many of our major brands.. More than 75% of 1985 sales came from brands that hold the number-one market position. During the last two months of 1985, General Foods had operating revenues of $1.6 billion and operating income of $116 million. New product activity during the year was strong, with nearly all of our businesses introducing or expanding sig- nificant new entries in the faster growing segments of their markets. U.S. Grocery Products This business, which accounts for just over half of General Foods' operating income, improved its earnings, particu- larly in powdered beverages and bakery products. Though the powdered soft drink market was down modestly, we gained share for our Kool-Aid, Crystal Light, and Country Time brands. At nearly 75%, our share is at a 12-year high. The Crystal Light brand gained further consumer acceptance in its second year of national distribution and became the leading sugar-free powdered soft drink. Con- venient ready-to-drink Kool-Aid Koolers with 20% juice were expanded to 25% of the United States. The product has already reached the number-two position in the fast- growing aseptic juice drink market. 1976-1984 data are for 1977-1985 fiscal years, 1976-1984 data are for 1977.1985 fiscal years, ended approximately March 31. ended approximately March 31. General Foods Corporation General Feeds Corporation Op®rating Revenues Operating Income Billions of Dollars Millions of Dollars 10.5 700 10 Our bakery business posted significant increases in vol- ume, sales, and earnings. Entenmann's, the leading U.S. producer of fresh baked sweet goods, continued its successful expansion to the western United States and plans to expand further this year. Entenmann's improved its position in the Northeast by introducing premium chocolate chip cookies and several new Danish pastry products. Croweat, which is the largest producer of specialty breads in the western United States, also had higher volumes, largely due to new products and quality improvement. General Foods' dessert business continued to build on the Jell-0 trademark for new products, Jell-0 Gelatin Pops, for example, scored outstanding results in a nation- wide rollout. This product and Jell-O Pudding Pops have strengthened our leadership of the fast-growing frozen novelty market. The Jell-0 brand of refrigerated Ready-To- Eat Puddings entered test market in 1985 with encourag- ing early results. We have maintained our premier positions in the Jell-O brand's original markets-gelatin and pudding desserts. We recently introduced sugar-free products in both seg- ments. Our 1985 share rose to nearly 78% of the gelatin market and nearly 74% of puddings. Our Birds Eye trademark is helping us to enter another dynamic market segment-prepared convenience meals. At the end of 1985, we began shipping into test market Fresh Creations frozen dinners from Birds Eye. They fea- ture high-quality ingredients and a unique cooking system that preserves fresh taste. Post cereals achieved significantly higher earnings for the year. Our key brands gained market share, even though our total share of the highly competitive cereal market declined. Two new varieties were added to our successful Fruit & Fibre line. New advertising and improved quality have revi- talized the growth of Grape-Nuts and Natural Raisin Bran. And in late 1985, Post introduced nationally Horizon Trail Mix, a new cereal for active young adults.

Worldwide Coffee & International Products Last year was difficult for this business, which contributes about one-third of our operating income. We were able to hold earnings stable despite the strong U.S. dollar and a fundamental shift in the way we market coffee. To increase the importance of product quality and con- sumer marketing, Maxwell House cut the list prices of regular ground coffees and reduced trade promotion spending. Coffee volumes declined temporarily as the grocery trade reduced inventories that had been built to take advantage of prior price deals. The cost of green coffee jumped at year-end due to a severe drought in Brazil, and retail prices have followed upward. As a result, 1986 is likely to show unusual coffee consumption patterns. Maxwell House quality improvements have helped to keep us the number-one U.S. coffee company. A major improvement in 1985 was Fresh Lock, a small packet inserted to protecttaste by removing oxygen and moisture. Our coffee business outside the United States had a good year. Kaffee HAG in Germany continued its leader- ship as Europe's best-selling brand of decaffeinated cof- fee. Our Saimaza brand in Spain lengthened its lead of the roast coffee market to a 23% share. In Canada, we began a major drive into premium coffee, including Heri- tage, the first instant to contain fresh ground coffee. Coffee continues to be a major growth business in the populous Asia/Pacific region. Our joint venture in Korea with Dong Suh Foods posted its fifth straight year of growth exceeding 30%. In Japan, our Ajinomoto-General Foods joint venture opened its fourth freeze-dried coffee plant. Construction began in India on a soluble coffee and powdered beverage plant, the first facility of our Kothari-General Foods joint venture. We also entered two joint ventures in the People's Republic of China in 1985 and introduced Maxwell House instant coffee there. Nearly all of our non-coffee businesses outside the United States are market leaders, and most held or increased share in 1985. Through our Hostess brand, we consolidated our posi- tion as Canada's number-one producer of potato chips and other snack foods. Hostess now has a 34% share of market, more than twice that of our nearest competitor. Other important national franchises include Hollywood, which has more than 80% of the chewing gum market in France; Simmenthal, Italy's leading brand of canned meats; Kibon, the best-selling ice cream in Brazil; and Bird's, a leader in dessert products in Britain. Our growing food service business markets coffee and grocery products in the United States and internationally to restaurants, airlines, schools, and other institutions. Volumes, revenues, and earnings increased substantially in 1985. Crystal Light drink mix did particularly well in its first full year of national food service distribution. Processed Meats Contributing about 15% of General Foods' operating income, our processed meats business benefited from good volume growth and improved margins in 1985, raising earnings significantly. Both the Oscar Mayer and Louis Rich brands maintained strong share leadership of every major category in which they compete. Oscar Mayer strengthened its top position in sliced luncheon meat with the national introduction of Select Slices, a new premium line. The company increased its share of the overall bacon market and successfully test marketed Center Cut Bacon, a leaner premium brand. Louis Rich processed turkey products registered higher income on a 12% volume gain, the 15th straight year of double-digit growth. Louis Rich luncheon meats are now the number-two national brand behind only Oscar Mayer. Turkey's appeal as a low-fat source of protein continues to stimulate consumer demand. The year 1985 was one of accomplishment for General Foods-and even more confidence in our strategies and people. Our commitment to quality and convenience continues in 1986. We expect to have another good year. James L. Ferguson Chairman and Chief Executive Officer General Foods Corporation 11 8

TOBACCO Philip Morris U._ S A. and Philip Morris International pr flue-cured and burley tobacco leaf into Marlboro and quality cigarettes for U.S and world markets. ~

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General Foods sells its products under more than 60 major brand names, in Maxwell House coffee, Post cereals, and Entenmann's baked good

~ MILLER BREWIN With its Lite and Miller High Life brands, Miller Brewing has the second- and third-largest-selling beers in the United States.

In January 1986, an agreement was reached to sell the Seven-Up brand to PepsiCo, Inc. With General Foods' brands, however, Philip Morris has a strong position in the drink mixes segment of the soft drink industry_ .

MiSSiON VIEJ Mission Viejo Realty Group's activities extend from developing res--Tc e communities to business properties such as Centennial Otfice Park at Highlands Ranch, Co%rado.

Product Listing Philip Morris Incorporated Philip Morris U.S.A. Miller Brewing Company Marlboro, Benson & Hedges 100's, Merit, Virginia Slims, Miller High Life, Miller High Life Genuine Draft, Lite, Parliament Lights, Players, Cambridge, Saratoga, Philip Lowenbrau, Meister Brau, Milwaukee's Best, and Plank Morris Commander, and English Ovals cigarettes. Road beers, Magnum malt liquor. Philip Morris International The Seven-Up Company Asia: Marlboro, Lark, Parliament, Philip Morris 100's, 7UP and Diet 7UP lemon-lime and Like cola carbonated Virginia Slims, Philip Morris Lights, Chesterfield, Four soft drinks, JuiceUp frozen juice concentrates, Nouvelle Square, Red & White, K-2, Cavanders, Select, Monterey, soups, Mountain House freeze-dried food products, other and Shelton cigarettes. food and beverage products. Australia: Peter Jackson, Alpine, Marlboro, Black & White, Chesterfield, and Viscount cigarettes, Lindemans, Rouge Homme, and Leo Buring wines. Canada: Benson & Hedges, Mark Ten, Belvedere, and Viscount cigarettes. European Economic Community Countries: Marlboro, Muratti Ambassador, L&M, Merit, Raffles, Philip Morris Light American, Philip Morris Super Lights, Diana, and Multifilter 1 00's cigarettes. EFTA, Eastern Europe, Middle East & Africa: Marlboro, Muratti Ambassador, Philip Morris Extra, Brunette, Bel- mont, Bond Street, Merit, L&M, and Link cigarettes. Latin America/Iberia: Marlboro, Galaxy, Lider, L&M, Rubios, Derby, Colorado, Nacional, Merit, Chesterfield, Fortuna, Baronet, and Delicados cigarettes, La Aurora cigars, Bohemia and Presidente beers, Castillo rums, Larios spirits. 20 W

General Foods Corporation U.S. Grocery Products Post cereals, Log Cabin syrups, Entenmann's baked goods, Oroweat specialty breads and rolls. Kool-Aid and Crystal Light soft drink mixes, Country Time lemonade flavor drink mix, Tang instant breakfast drink, Instant Postum cereal beverage. Jell-0 brand dessert products and frozen novelties, D-Zerta brand desserts and topping mix, Cool Whip whipped toppings, Dream Whip whipped topping mix, Minute brand tapioca, Baker's chocolate and coconut products, Calumet baking powder, Certo and Sure-Jell brand fruit pectins. Birds Eye quick-frozen vegetables and fruits, Minute rice, Stove Top stuffing mix, Shake 'n Bake seasoned coating mix, Good Seasons salad dressing mix, Open Pit barbecue sauce, Ronzoni pasta. Worldwide Coffee & International Products Maxwell House, Maxwell House Master Blend, Yuban, Sanka, Brim, and General Foods International coffees. General Foods brand name coffees, cold beverages, des- serts, and other food products for the food service industry. Canada: Maxwell House, Sanka, and Chase and Sanborn coffees, Jell-O desserts, Baker's chocolate, Hostess potato chips and snacks, Kool-Aid drink mix, Tang flavor crystals, other food and beverage products. Europe: Maxwell House, Gevalia, HAG, ONKO, Bird's and Saimaza coffees, Bird's desserts, Tang beverage mix, Hollywood chewing gum, Krema candies, Simmenthal processed meat, Mareblu fish, other products. Latin America: Maxwell House and Cafe Oro coffees, Kool-Aid and Tang beverage mixes, Kibon ice cream, Jell-O desserts, Rosa Blanca soups, other food products. Asia/Pacific: Maxwell House and Maxim instant coffees, non-dairy creamer, Tang and Kool-Aid beverage mixes, other food products. Processed Meats Oscar Mayer and Louis Rich luncheon meats, franks and wieners, Oscar Mayer bacon, sausage, and ham, Louis Rich fresh turkey cuts, Claussen refrigerated pickles. Oscar Mayer, Louis Rich, and Chef's Pantry meat and turkey products and Claussen pickles for food service anc deli customers. 21