Slide 1: Managing our portfolio for growth
CAGNY 2020 Managing our portfolio for growth François-Xavier Roger: EVP, Chief Financial Officer
Slide 2: Disclaimer
Disclaimer This presentation contains forward looking statements which reflect Management’s current views and estimates. The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements.
Slide 3: Global, balanced and diversified business
Global, balanced and diversified business 2019 Sales: CHF 92.6 bn Where we sell What we sell EMENA Beverages Nutrition & PetCare Milk products 28% (incl. coffee) Health Science & ice cream 25% 16% 15% 14% Prepared dishes Confectionery Water & cooking aids AMS AOA 46% 26% 13% 9% 8% Number of employee
Slide 4: Iconic global and local brands
Iconic global and local brands 4 | February 21, 2020 | CAGNY
Slide 5: Strong 2019 financial results
Strong 2019 financial results Organic growth Underlying trading Underlying EPS operating profit margin (in CHF) +11.1% % 17.6% in constant currency 17.0% 3.5% 3.0% 4.41 4.02 2018 2019 2018 2019 2018 2019 Return on Free cash flow Cash returned to shareholders invested capital (CHF bn) (CHF bn) 16.9 1
Slide 6: Key growth platforms
Key growth platforms United States PetCare E-commerce Premium products 18% 18.5% 7.4% 7.0% 6.5% 4.1% 4.5% 2.6% 2018 2019 2018 2019 2018 2019 2018 2019 All figures relate to organic growth 6 | February 21, 2020 | CAGNY
Slide 7: Delivering strong total shareholder returns
Delivering strong total shareholder returns Consistent TSR* performance CHF 109.3 bn returned to shareholders since 2010 2010 – 2019 10 year 5 year 3 year 1 year Nestlé 290% 84% 55% 40% CHF 42.9 bn CHF 66.4 bn Share buybacks Dividend payments STOXX F&B 218% 60% 26% 27% * Total Shareholder Returns (T
Slide 8: Top and bottom line sequentially improving
Top and bottom line sequentially improving Organic growth Underlying trading operating profit (%) (% of sales) 3.5 17.6 3.2 3.0 17.0 2.4 16.5 16.0 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Restated 8 | February 21, 2020 | CAGNY
Slide 9: Creating value through portfolio management
Creating value through portfolio management Current portfolio M&A 9 | February 21, 2020 | CAGNY
Slide 10: Driving profitable growth through our portfolio
Driving profitable growth through our portfolio 7.4% 4.7% 4.1% 3.5% FY 2019 Organic growth Group High-growth Emerging Premium categories markets products FY 2019 Underlying TOP margin 17.6% > 18.5% 10 | February 21, 2020 | CAGNY
Slide 11: Mix is driving our organic growth
Mix is driving our organic growth Organic growth composition 2017-2019* RIG = Mix + Volume Pricing Mix Volume * Excludes water and Nestlé Skin Health 11 | February 21, 2020 | CAGNY
Slide 12: Mix is driving our organic growth
Mix is driving our organic growth Organic growth composition 2017-2019* Pricing ~ 20% Offsetting foreign exchange and commodity inflation Mix Volume * Excludes water and Nestlé Skin Health 11 | February 21, 2020 | CAGNY
Slide 13: Mix is driving our organic growth
Mix is driving our organic growth Organic growth composition 2017-2019* Pricing Mix Volume Share of stomach and shelf space ~ 15% * Excludes water and Nestlé Skin Health 11 | February 21, 2020 | CAGNY
Slide 14: Mix is driving our organic growth
Mix is driving our organic growth Organic growth composition 2017-2019* Pricing Category, geography and Mix Volume product (premiumization) ~ 65% * Excludes water and Nestlé Skin Health 11 | February 21, 2020 | CAGNY
Slide 15: Mix and volume are gaining traction over time
Mix and volume are gaining traction over time 2.2 Mix increasing 1.8 1.7 Pricing stable 0.5 0.5 0.7 0.9 0.9 0.7 0.9 Volume increasing 0.5 0.5 -0.3 2017 2018 2019 * Excludes water and Nestlé Skin Health 12 | February 21, 2020 | CAGNY
Slide 16: Our portfolio is becoming more premium over time
Our portfolio is becoming more premium over time Premium products as % of sales 26% 11% 2012 2019 13 | February 21, 2020 | CAGNY
Slide 17: Key consumer trends support premiumization
Key consumer trends support premiumization Naturalization Vegan / Plant-based food Coffee mate Natural Bliss with double-digit growth Double-digit growth Mainstream Natural Plant Premium Organic Sustainability Garden of Life with double-digit growth (2018-2019) Leading in packaging innovation and re
Slide 18: Driving premiumization through differentiation
Driving premiumization through differentiation Direct-to-consumer Solutions / functional benefits Premium waters and Nespresso with mid single-digit growth Strong double-digit growth for PetCare products Research and development Personalization Hypoallergenic infant formula with high single-digit gr
Slide 19: Creating value through portfolio management
Creating value through portfolio management Current portfolio M&A 16 | February 21, 2020 | CAGNY
Slide 20: Discipline and creativity in portfolio management
Discipline and creativity in portfolio management Sanjay Bahadur Deputy EVP, Head of Group Strategy and Business Development
Slide 21: Portfolio management is an important driver of growth
Portfolio management is an important driver of growth 3.5% 3.0% (+x) 2018 OG Fixing Portfolio High-growth 2019 OG underperforming management categories businesses (M&A) 18 | February 21, 2020 | CAGNY
Slide 22: There has been a step-change in our level of M&A activity
There has been a step-change in our level of M&A activity CHF value of transactions (acquisitions and divestments) 13.8 bn 10.4 bn Herta charcuterie U.S. ice cream Zenpep 2.1 bn 0.7 bn 0.8 bn 2015 2016 2017 2018 2019 2020 19 | February 21, 2020 | CAGNY
Slide 23: Positioning our portfolio for growth
Positioning our portfolio for growth > 50 transactions Divesting / reviewing under-performing closed or announced or non-core businesses since 2017, equivalent to ~ 12% of Group sales Market attractiveness US Confectionery OG contribution in 2019 Acquiring / investing in high-growth +35 bps and core
Slide 24: We have three main criteria for assessing acquisitions
We have three main criteria for assessing acquisitions Strategic fit Financial return Cultural fit • Food, beverages and nutrition • Growth and / or margin accretive • People • High-growth categories • ROIC > WACC within 5-7 years • Fit with Nestlé • New trends and e-business • Integration 21 | Febr
Slide 25: Assets are expensive and we have been disciplined
Assets are expensive and we have been disciplined Deal EV/EBITDA transaction multiples before synergies >30x 25.1x 21.2x 17.4x 15.0x 15.0x 2016 2016 2017 2018 2018 2019 $ 13.9 bn $12.5 bn $ 17.9 bn $ 8.0 bn $ 7.2 bn $ 3.8 bn Coffee Plant based Infant formula Pet food Coffee Beverages Nestlé Starbuck
Slide 26: Disciplined M&A is crucial to protect ROIC
Disciplined M&A is crucial to protect ROIC Five consecutive years of ROIC improvement 12.3% 10.8% 2014 2015 2016 2017 * 2018 2019 * 2017 restated and excluding Nestlé Skin Health impairment 23 | February 21, 2020 | CAGNY
Slide 27: Innovative business models and deal structures have enabled us to create value
Innovative business models and deal structures have enabled us to create value Joint Venture Brand license New channels Partnership JV Associate License acquisition Full ownership Minority shareholding Ice cream pure-play Creation of a global New categories and channels Accessing a network manufactu
Slide 28: Froneri presented a unique opportunity
Froneri presented a unique opportunity Created in 2016 through the merger of Nestlé’s European ice cream business with R&R • Unique ownership structure with private equity partners • Pure-play ice cream leader with category captaincy • Complete portfolio combining owned and licensed brands, as well
Slide 29: Froneri has a strong track record of operating excellence
Froneri has a strong track record of operating excellence Accelerated Significantly improved Increased sales growth EBITDA market share CAGR 6% CAGR 28% +130 bps Margin 18.5% + 580 bps € 2.8 bn 12.7% € 0.5 bn 23.5% € 2.5 bn € 0.3 bn 22.2% 2017 2019 2017 2019 2016 2019 26 | February 21, 2020 | CAGNY
Slide 30: Creating a global pure-play leader with the addition of Nestlé U.S. ice cream
Creating a global pure-play leader with the addition of Nestlé U.S. ice cream Froneri Enlarged Froneri pro forma € 4.3 bn + € 2.8 bn Nestlé U.S. ice cream € 0.8 bn € 0.5 bn 2019 2019 2019 2019 Sales EBITDA Sales EBITDA 27 | February 21, 2020 | CAGNY
Slide 31: We completed a creative deal with Starbucks
We completed a creative deal with Starbucks Annual sales: > CHF 10 billion Annual sales: > CHF 5 billion Annual sales: > CHF 2 billion • Mainstream brand, • Stylish, coffee connoisseur • Iconic coffee shop brand, universal appeal brand, European flair, American lifestyle undisputed superior quality
Slide 32: Global Starbucks roll-out at speed: new formats and markets
Global Starbucks roll-out at speed: new formats and markets • Rolled out in > 40 markets in the first 12 months • > CHF 300 m incremental sales in 2019 2019 2020 Roast & ground Starbucks by Starbucks by Coffee Cold brews, blends coffee Nespresso Dolce Gusto creamers with vitamins Launched Launched L
Slide 33: Access to innovation through venture funds
Access to innovation through venture funds Early stage food, nutrition science Creates, resources, and builds Emerging plant-based food and and food-tech life sciences companies beverage and foodservice companies Butternut Box Evelo Ripple Algorithm-driven, Clinical stage biotechnology company Pea-p
Slide 34: Business as a force for good
Business as a force for good Creating a market for food-grade Boosting packaging innovation recycled plastics • Allocating more than CHF 1.5 bn to incentivize supply • Institute of Packaging Sciences • Sourcing up to 2 m metric tons (2020-25) • CHF 250 m venture fund focusing on start-up companies •
Slide 35: Key takeaways
Key takeaways • Sharpened focus on food, beverage and nutritional health products • M&A is an important tool to strengthen our portfolio and accelerate growth • Three main criteria when assessing acquisitions: strategic fit, financial return, cultural fit • Disciplined, flexible and creative approac