Slide 1: 2008 Half-Year Roadshow
2008 Half-Year Roadshow James Singh CFO 1 2008 Half-Year Roadshow – September 2008
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: Creating Shareholder Value through Profitable Growth
Creating Shareholder Value through Profitable Growth Ø Successful delivery of the Nestlé Model Organic growth above LY and the Company’s long term target EBIT margin above consensus Ø Food & Beverages the driver of growth & profitability Ø Billionaire brands driving growth Ø Corporate & business ini
Slide 4: A strong first half
A strong first half Delivering the Nestlé Model Improvements HY 08 v HY 07 HY 08 Total Group Sales – total + 3.8 % + CHF 2.0 bn CHF 53.1 bn Organic growth + 8.9 % EBIT + 6.1 % + CHF 0.4 bn CHF 7.3 bn EBIT margin + 30 bp 13.8 % Constant currency + 60 bp Net profit + 6.1 % + CHF 0.3 bn CHF 5.2 bn Net
Slide 5: All geographies contribute well
Total Food & Beverages* All geographies contribute well % Organic Growth 16 % Growth % RIG 14.2 14 12 10 9.9 8 6 5.8 5.2 4 3.0 2.0 2 x.x 0 Sales Europe Americas Asia, Oceania, Africa CHF bn 19.0 20.5 9.8 * each region includes sales of Food & Beverages, Nestlé Waters and Nestlé Nutrition businesses,
Slide 6: Secondary Reporting: Progressing in all categories bar Waters
Secondary Reporting: Progressing in all categories bar Waters 14.0 % Organic growth 14 % Growth % RIG 12 12.0 11.1 10.9 10 9.4 9.6 8.5 8 7.7 6 5.5 5.4 5.4 4 2 1.8 1.7 Nestlé 0.9 Waters 0 Powdered Dairy products Nestlé Prepared Confectionery PetCare Pharma & Liquid -1.1 inc. Ice Cream Nutrition Dishe
Slide 7: Key factors of margin improvement
2008 Half-Year Results Key factors of margin improvement GROUP EBIT MARGIN + 30 bp (+ 60 constant currency) F&B EBIT MARGIN + 30 bp (+ 50 constant currency) + Efficiencies + Efficiencies + Mix + 5.4% Pricing + Leverage/Fixed costs + Mix + Pricing - Input costs 13.8 % +30 +70 13.5 % -190 ++60 6.1 % C
Slide 8: High-quality results
High-quality results Ø Strong operational performance Ø High quality – achieved whilst continuing to invest in products & brands, R&D, new distribution channels and business models Ø Unmatched brand strength, R&D and significant presence & competitiveness in the numerous economies of the world Ø Per
Slide 9: The Four Pillar Strategy
The Four Pillar Strategy Ø Operational efficiency Ø Innovation & Renovation Ø Consumer communication Ø Whenever, wherever, however 9 2008 Half-Year Roadshow – September 2008
Slide 10: Efficiencies in Marketing Spend
Efficiencies in Marketing Spend Ø For Nestlé, total Marketing Expenses include: Trade Spending, Media and Consumer Promotions, Sales Force and Marketing Personnel and Administration Ø Consumer Communication – or direct to consumer expenditure is an important part of our marketing spend Ø Careful and
Slide 11: Marketing at Nestlé
Marketing at Nestlé Ø Leveraging central resources Ø Efficiency through leverage: Ø Investment behind Billionaire Brands Ø Development of Communication Platforms Ø Efficient and effective use of all communication channels Ø Increased use of digital media: Ø Engaging consumers in long-term relationsh
Slide 12: Leveraging central resources
Leveraging central resources Ø Global & Strategic Business Units (SBUs) – “The What” Ø Brand owners with the longer term view Ø Creating & managing the global Brand Essences Ø Providing Strategic direction – Innovation – Creative content Ø Strategic Generating Demand Unit (SGDU) – “The How” Ø Functi
Slide 13: Efficiency through leverage
Efficiency through leverage Ø Billionaire brands have stronger consumer equity across multiple product categories and formats Ø Communication Platforms enable more efficient and effective use or resources Ø Three examples, now being replicated in numerous markets – leveraging best practice 13 2008 H
Slide 14: Nescafé “Savour Every Moment”
Nescafé “Savour Every Moment” Scope: Worldwide, led by Coffee & Beverages SBU Brand & Country: Nescafé, Mexico Campaign: “Savour Every Moment”, 2007 – 2008 Objective: To build Nescafé’s Brand equity while reinforcing the concept of a special cup of coffee for every moment RELAX- 14 2008 Half-Year Ro
Slide 15: Leveraging Billionaire Brands: Nescafé
Leveraging Billionaire Brands: Nescafé Execution in Bus Shelters 15 2008 Half-Year Roadshow – September 2008
Slide 16: Leveraging Billionaire Brands: Nescafé
Leveraging Billionaire Brands: Nescafé Consistent communication out-of-store, in-store and on-line Results: Ø 7% RIG across the range Ø 11% OG increase across the range Ø Media efficiencies of 6% Ø Overall Nescafé Brand Health KPI « Favourite Brand » increased from 2% to 32% vs previous year. Top of
Slide 17: Build Communication Platforms: Maggi
Build Communication Platforms: Maggi Scope: Regional Brand & Country: Maggi, Middle East Campaign: “Go Create”, 2008 Objective: To attract/remind consumers to cook with Maggi through Ramadan (peak season for the category), through a emotionally engaging, 360 degree campaign 17 2008 Half-Year Roadsho
Slide 18: Build Communication Platforms: Maggi
Build Communication Platforms: Maggi Personal involvement, simple, versatile, convenient: leveraging an important moment in life 18 2008 Half-Year Roadshow – September 2008
Slide 19: Build Communication Platforms: Maggi
Build Communication Platforms: Maggi Delivery Trucks Print Internet Cooking Club Outdoor POS Nutritional Compass Results: Ø 8% RIG Ø Maggi overall Brand Health KPIs improved by 10%, including 95% Brand Recognition and 72% Confirmed Purchase Intention 19 2008 Half-Year Roadshow – September 2008
Slide 20: Digital Media: increased share in adspend
Digital Media: increased share in adspend Global adspend share by medium Ø Media evolving - highly US$ mio, current prices dynamic: reaching the 100% consumer any time, any where 80% Internet Outdoor Ø Television still dominant but 60% Radio rapid expansion of Television 40% internet/new media is Ma
Slide 21: Digital Media: Multi-brand initiatives
Digital Media: Multi-brand initiatives Scope: Local Brand & Country: Multi-brand, corporate Campaign: “Croquons la Vie”, France Objective: To maintain long-term relationships with most valuable Nestlé consumers, leveraging digital as the key two-way communication medium 21 2008 Half-Year Roadshow –
Slide 22: Leveraging Digital & off-line: Croquons la Vie
Leveraging Digital & off-line : Croquons la Vie Cooking sessions Magazine Website Tasting sessions Consumer Services Call Center Nutritional Compass e-Newsletter 22 2008 Half-Year Roadshow – September 2008
Slide 23: Digital Media: Croquons la Vie
Digital Media: Croquons la Vie +9% Results +20% +25% Spend Spend Additional per Offline per Online Sales household household For Nestlé X 2X Control Gp Members Control Gp Members 2007 2008 23 2008 Half-Year Roadshow – September 2008
Slide 24: Measuring Progress
Measuring Progress Key Partners ROI Tracker 24 2008 Half-Year Roadshow – September 2008
Slide 25: Measuring the Message
Measuring the Message Ø Effectiveness of advertising message / content: Pre-testing PERSUASION Risky Risky IMPACT Source: Millward Brown Inc. 25 2008 Half-Year Roadshow – September 2008
Slide 26: Measuring the Media
Measuring the Media Ø Efficiency of media planning and buying Cost of Media Index, Russia example Avg. market Top advertisers Nestlé 120 100 GRPs 100 GRPs 100 100.0 100.0 80 89.2 90.8 80.7 81.3 60 40 20 0 2007 2008 Nestlé achieved a better media cost vs industry 26 2008 Half-Year Roadshow – Septembe
Slide 27: Measuring the Media
Measuring the Media Ø Effectiveness of media planning and buying Cost of Media Index 2007 Avg. Top Advertisers Nestlé 140 Cost Index Better programming Overall rating 120 100 113.0 117.0 100.0 95.7 100.0 100.0 80 60 40 20 0 Cost Quality Overall Nestlé achieved a better performance both in terms of e
Slide 28: KPI Measurement: Return on Investment
KPI Measurement: Return on Investment Ø Market Share Ø Measures overall ROI Ø Brand Health Ø Diagnosis: What are the drivers of Market Share? Ø Longer term vision vs Market Share Base: Product Category Users & Shoppers Nestlé Brand A N estlé Brand B Nestlé Brand C Nestlé Brand D Sample=42000 Ø Retai
Slide 29: KPI Measurement: Brand performance
KPI Measurement: Brand performance 29 2008 Half-Year Roadshow – September 2008
Slide 30: Beyond 2008: Nestlé is opportunity-rich
Beyond 2008: Nestlé is opportunity-rich Ø Four competitive advantages Ø Four growth accelerators Ø Four Pillar strategy 30 2008 Half-Year Roadshow – September 2008
Slide 31: Beyond 2008: Four competitive advantages
Beyond 2008: Four competitive advantages Ø Product and brand portfolio Billionaire brands Fast-growing, added-value categories Ø The industry's leading R&D capability CHF1.9 billion spend Open innovation; 8 benefit platforms Local presence – Access to local top talent, increased awareness in local t
Slide 32: Beyond 2008: Four growth accelerators
Beyond 2008: Four growth accelerators Ø Nutrition, Health & Wellness Nestlé Nutrition – world leader In Home Applicable to all product groups Out of Home Ø Leadership in "out of home" $400 billion market Nestlé Professional: No.1 branded player Ø Premiumisation Applicable to all product groups Premi
Slide 33: Beyond 2008: Four Pillar Strategy
Beyond 2008: Four Pillar Strategy Cumulative Cumulative cost cost 0.6 improvements 1.3 improvements Ø Operational efficiency 2.2 3.1 4.0 51.8% Total performance management COGS COGS in in 5.2 6.4 7.6 8.7 9.8 10.8 Nestlé Continuous Excellence % % of of NPS NPS 41.9% 41.4% Ø Innovation & Renovation Co
Slide 34: The Nestlé Investment Proposition
The Nestlé Investment Proposition “The Nestlé Model” – for the next 10 years 1. Long-Term Organic Growth Target 5 - 6% Sales 2. Continued year after year improvement of EBIT margin EBIT 3. Improving Capital efficiency / Business ROIC / Cash returns to shareholders Resulting in an industry outperform
Slide 35: James Singh, CFO
2008 Half-Year Roadshow James Singh CFO 35 2008 Half-Year Roadshow – September 2008
Slide 36: Zone Europe
Zone Europe Luis Cantarell Executive Vice President Nestlé S.A. - Zone Europe 36 2008 Half-Year Roadshow – September 2008
Slide 37: Europe at a Glance
Europe at a Glance Nestlé in Europe H1 2008 Performance 2008-2011: Sustainable Profitable Growth 37 2008 Half-Year Roadshow – September 2008
Slide 38: Nestlé Europe: sustainable and profitable growth
Zone Europe In summary... Ø Europe: a growth opportunity Ø Performance is on track Ø Potential for continued growth is promising Ø Aligned organisation and portfolio with a vision and a plan Ø Strong management with local expertise Nestlé Europe: sustainable and profitable growth 38 2008 Half-Year R
Slide 39: 770 mio Consumers, 12% of World Population
770 mio Consumers 12% of World Population Central and Eastern Western Europe: Europe: 395 million 375 million Consumers Consumers Over 40 States / 50 Languages 39 2008 Half-Year Roadshow – September 2008
Slide 40: Consumer needs driven by socio-demographic changes
Consumer needs driven by socio-demographic changes Category specific trends Premium Chocolate Consumer Needs Origin, Fair Trade Dark & Gifting Convenience / Add value / Nature/ Coffee on Nibbling & demand New routes to consumer Freshness/Organic/ small bite Origin sizes 5 1 “My Cup” Socio-Demographi
Slide 41: Trade concentration to continue
Trade concentration to continue Channel Growth 2007-2013 (%) 8 7.19 7 6.69 6.38 5.74 5.86 6 Percentage 5 4.03 4 3 2 Forecourts Hypers Supers C-stores Cash & Carries Discounters CAGR 2007 - 2013 Source: Planet Retail Ltd – www.planetretail.net The Zone has been achieving above average growth with key
Slide 42: Europe at a Glance
Europe at a Glance Nestlé in Europe H1 2008 Performance 2008-2011: Sustainable Profitable Growth 42 2008 Half-Year Roadshow – September 2008
Slide 43: Nestlé in Europe: Operating Model
Nestlé in Europe: Operating Model Nestlé in Europe Zone Europe Globally Managed European Businesses Markets/countries businesses Locally Regionally Globally managed managed managed Ø Beverages Ø Petcare Ø Nestlé Waters Ø Confectionery Ø Nestlé Professional Ø Culinary Ø Nestlé Nutrition Ø (Food Servi
Slide 44: Nestlé Food & Beverages in Europe
Nestlé Food & Beverages in Europe - CHF 39 bio in 2007 - JV(CPW/BPW) 3% Nespresso 4% Nestlé Nutrition 6% Nestlé Waters 12% Zone EUR 74% 44 2008 Half-Year Roadshow – September 2008
Slide 45: Zone Europe Sales by Categories 2007
Zone Europe Sales by Categories 2007 Shelf stable Dairy 2% R&G Coffees 2% Powdered Beverages 2% Culinary Chilled 7% Confectionery 20% Frozen Food 11% SolubleCoffees 17% Ice Cream 10% Petcare 14% Culinary 15% (All Channels) 45 2008 Half-Year Roadshow – September 2008
Slide 46: All regions driving growth and profitability
All regions driving growth and profitability Organic 2007 Sales RIG Growth EBIT Western Europe 24'476 1.2% 1.6% 11.7% Germany 4'900 1.8% France 4'500 1.7% Petcare Europe 3'900 2.7% GB Region 3'200 0.4% Central & Eastern Europe 3'988 7.5% 12.4% 13.9% Russia and Eurasia Region 1'600 6.9% Poland 700 11
Slide 47: H1 2008 Performance
Europe at a Glance Nestlé in Europe H1 2008 Performance 2008-2011: Sustainable Profitable Growth 47 2008 Half-Year Roadshow – September 2008
Slide 48: Continuous growth…
Continuous growth… RIG OG 6.0 5.8 5.0 4.0 3.0 3.0 2.0 2.3 2.0 2.3 2.0 1.4 1.0 0.1 0.0 -0.2 -1.0 -1.2 -2.0 2004 2005 2006 2007 H1 2008 Growth in Key markets driven by: Ø The strength of the Nestlé Brands Ø Clear priorities for innovations Ø Above average growth with top customers & Discounters 48 200
Slide 49: Strong performance with our key customers and discounters
Strong performance with our key customers and discounters Growth at constant exchange rates H1/08 vs H1/07 Z-EUR Organic Growth 5.8% Z-EUR with 6.4% top customers* Z-EUR with 13.7% key discounters** * Z-EUR top 10 customers ** NPS with key discounters Lidl, ED/Dia, Mercadona, Netto/Edeka, Denner, Ne
Slide 50: Improving profitability
Improving profitability EBIT % - June 2008 11.8 11.7 11.6 11.4 11.4 11.2 11.0 10.9 10.8 10.6 10.4 H1 2006 H1 2007 H1 2008 Growth and efficiencies – key drivers of improved performance 50 2008 Half-Year Roadshow – September 2008
Slide 51: H1 2008 Key factors of margin improvement
H1 2008 Key factors of margin improvement EBIT MARGIN + 30 bps (+ 40 bps at constant currency): Margin improvement driven primarily by growth and reduction of structural costs Admin / Structural costs Ø Operation Excellence Media % up + 90 bps Ø Mix 30 bps Ø Input costs 11.4% +30 bps 11.7% - 40 bps
Slide 52: Adapting our structures to business environment
Adapting our structures to business environment 2003 – 2007 Ø 42 factories closed / sold (3 in 2007) Ø CHF 1.2 Bio spent in restructuring (CHF 180 mio over the last 18 months) 2008 Ø Focus on growing business Ø Focus on delivering return on investment Our commitment is to focus on profitable growth
Slide 53: Discipline in Working Capital management
Discipline in Working Capital management Average Trade Net Working Capital (in % of Sales) 14.0 12.9% 12.5% 12.5 +30 bps 11.2% Improvement 10.9% 11.0 9.5 8.0 2005 2006 2007 H1 2008 Average Trade Net Working Capital (TNWC) consists of Trade receivables, Inventories and Trade payables. Calculation is
Slide 54: Portfolio performance
Portfolio performance Profit Pool 2007 Above Average Below Average • Soluble Coffee-NESCAFÉ System • Chocolate • Powdered Beverages • Petcare • Ambient Culinary • Chilled Culinary • R&G Coffee • Frozen Food • Ambient Dairy • Ice Cream Ø Support & grow value drivers Ø Tackle underperformers & value d
Slide 55: Portfolio quality is improving
Portfolio quality is improving 2005 2006 2007 2008 Acquisitions Bystroff - Russia Makan Greece Chilled Dairy Divestitures Private Label Ice Cream Dry Pasta Germany 55 2008 Half-Year Roadshow – September 2008
Slide 56: 2008-2011: Sustainable Profitable Growth
Europe at a Glance Nestlé in Europe H1 2008 Performance 2008-2011: Sustainable Profitable Growth 56 2008 Half-Year Roadshow – September 2008
Slide 57: Our Ambition
Our Ambition “... to be the best Food, Nutrition, Health and Wellness Company in Europe.” By… - having the best people - leveraging brands, products and communication (60/40+) * - building proactive, collaborative relationships with customers & channels - anticipating new brand & business opportunit
Slide 58: Market attractiveness
Systematic yearly screening of consumer trends 5.0 Market size RU 1800 IT 1600 ES RU PL 1400 Market size (2007, in M CHF) DE 1200 Others IT Soups Market attractiveness PL 1000 Pasta Flavour solutions ES CZ 800 Mashed potatoes GB UA Recipe mixes PL 600 Hot & cold sauces 400 RO 200 4.0 ES FR RU FR FR
Slide 59: Nestlé's four strategic pillars
Nestlé's four strategic pillars GROWTH EBITA MARKET SHARE Innovation Consumer Operational Product & Communic- Efficiency Availability Renovation ation ACCELERATE 59 2008 Half-Year Roadshow – September 2008
Slide 60: Focus on Super Premium and brand premiumisation
Focus on Super Premium and brand premiumisation Luxury Super Premium Premium Mainstream Value 60 2008 Half-Year Roadshow – September 2008
Slide 61: Strong innovation pipeline of premium and luxury products
Strong innovation pipeline of premium and luxury products Chocolate Research Center, Broc, Switzerland Partnership with Pierre Marcolini Harbouring over 100 years of experience in chocolate Nestlé has launched over 200 dark chocolate products in the last 2 years Largest user of fine Cocoa beans 61 2
Slide 62: Strong innovation pipeline of premium and luxury products
Strong innovation pipeline of premium and luxury products Komilfo Brand - Acquired in Nov 2007 62 2008 Half-Year Roadshow – September 2008
Slide 63: Premiumisation at Nestlé…
Premiumisation at Nestlé… Good market growth and future potential Highly attractive economics The right brand position and product quality Strong pipeline for tomorrow European approach …driving growth and creating value 63 2008 Half-Year Roadshow – September 2008
Slide 64: R&D Driven innovation: NESCAFÉ Dolce Gusto Europe
R&D Driven innovation: NESCAFÉ Dolce Gusto Europe Ø 1.3 million machines sold Ø Over 600 million capsules sold Ø No.1 or 2 market position in 7 out of 10 markets Ø 300 bps accretive to European Soluble coffee RIG (H1 2008) 64 2008 Half-Year Roadshow – September 2008
Slide 65: The emerging consumer opportunity in Central & Eastern Europe
The emerging consumer opportunity in Central & Eastern Europe Popularly Positioned Products in Russia: A great market opportunity PPP Sales in Russia : 2006, 2007, 2008 (Forecast) 4000 15 PPP Sales 3501 = € 100 mio 3500 % of total sales 13 In mio of Roubles +30% 3000 11 +38% 2693 2500 9 9.1% 1953 8.
Slide 66: A similar opportunity exists in developed countries (e.g. France)
A similar opportunity exists in developed countries (e.g. France) Suburbs of Paris Immigrants with low income represent an opportunity: Route to market uses wholesalers Halal food for Muslim Maggi cube specialised in imported products imported from Ivory immigrants who want for immigrants. No stock:
Slide 67: Coffee leadership
Coffee leadership 67 2008 Half-Year Roadshow – September 2008
Slide 68: Nutrition Health & Wellness innovation: PROPLAN
Nutrition Health & Wellness innovation: PROPLAN Ø Driven by consumer segmentation and insight Ø Proven to enhance immune response in puppies by 50% Ø H1 2008 Sales CHF 50 Mio Ø Launch in all European markets Launched in April 2007 68 2008 Half-Year Roadshow – September 2008
Slide 69: Accelerate growth in CEE: untapped opportunities
Accelerate growth in CEE: untapped opportunities: CHF 1 Bio+ initiative We are committed to significantly accelerate our growth in CEE Ø Over 150 new business opportunities Ø Nutrition, Health & Wellness, Emerging consumers, Premiumisation are key Ø Additional growth of CHF 1 Billion targeted by 201
Slide 70: Nestlé Europe: sustainable and profitable growth
Zone Europe In summary... Ø Europe: growth opportunity Ø Performance is on track Ø Potential for continued growth is promising Ø Aligned organisation and portfolio with a vision and a plan Ø Strong management with local expertise Nestlé Europe: sustainable and profitable growth 70 2008 Half-Year Roa
Slide 71: Zone Europe
Zone Europe Luis Cantarell Executive Vice President Nestlé S.A. - Zone Europe 71 2008 Half-Year Roadshow – September 2008
Slide 72: 2008: Management priorities driving financial performance
2008: Management priorities driving financial performance Ø Organic growth Ø Increased EBIT margin The Nestlé Model Ø Improve ROIC Ø Reduce working capital Ø Improve returns on trade spend Ø Operational efficiency Ø Reduced overheads 72 2008 Half-Year Roadshow – September 2008
Slide 73: Outlook & improved guidance
Outlook & improved guidance Ø First half 2008 organic growth above 2007 – good momentum in our business Ø EBIT margin improving performance Ø Accelerated share buyback Ø The Nestlé Model to be achieved: Organic growth at least at 2007 level Ø Ø Increased EBIT margin (reported & constant currency) Ø