Slide 1: 2006 full year roadshow
2006 full year roadshow 2006 full year roadshow - February 2007 Name of chairman
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: Agenda
Agenda Paul Polman – 2006 update € 2006 Financial highlights € Strategic and operational transformation as drivers of 2006 performance Peter Brabeck – longer term perspective € Strategic and operational transformation as drivers of longer term performance € The demographic opportunity € Popularly po
Slide 4: Paul Polman
Paul Polman 2006 full year roadshow - February 2007 Name of chairman
Slide 5: 2006 Highlights – all metrics improve
2006 Highlights – all metrics improve FY06 total Improvements FY 06 v 05 Sales – total + 8.1% + CHF 7.3 bio CHF 98.5 bio Organic growth + 6.2% EBIT + 12% + CHF 1.4 bio CHF 13.3 bio EBIT margin + 50bps 13.5% Net profit + 13.8% + CHF 1.1 bio CHF 9.2 bio Net profit margin + 40bps 9.3% Working capital +
Slide 6: Food and Beverages: Delivering the Nestlé Model
Food and Beverages Delivering the Nestlé Model CHF 91.8 bio 5.9% CHF 11.2 bio 12.2% 4.2% 2006 Strong + 7.8% on-going + 11.2% +40bp growth CHF 85.1 bio 6.0% CHF 10.0 bio 11.8% 3.8% 2005* Sales RIG OG EBIT EBIT margin * Restated to be on comparable basis 6 2006 full year roadshow - February 2007 Name
Slide 7: 2006 Highlights
2006 Highlights € Successful delivery of the Nestlé Model Food and Beverage the driver of growth and profitability Performance improves across all key metrics € Strategic brands drive growth "Billionaire" brands over 70% of F&B sales, with new members Nespresso, Dog Chow, Poland Spring, Nestlé Pure
Slide 8: "Billionaire Brands" deliver robust growth
"Billionaire Brands" deliver robust growth Growth % BABs AV market growth 8 2006 full year roadshow - February 2007 Name of chairman
Slide 9: Nestlé Waters: High growth and margin improvement
Nestlé Waters High growth and margin improvement Performance Highlights Sales CHF: 9.6 bio • North America share gains driven by Poland Spring, Deer Park, Ozarka and OG: 8.2% Nestlé Pure Life Mkt share*: € • Nestlé Aquarel growth driver Europe • Panna and S.Pellegrino most successful international b
Slide 10: Nestlé Waters: Growth drivers in 2007
Nestlé Waters Growth drivers in 2007 € North America CHF 100bio € Middle East & Turkey market € Mexico € Innovation & renovation in Europe and North America € Water + 10 2006 full year roadshow - February 2007 Name of chairman
Slide 11: Powdered & Liquid Beverages: Dynamic growth; strong innovation
Powdered & Liquid Beverages Dynamic growth; strong innovation Performance Highlights Sales CHF: 16.3 bio • Mixes & premium drive strong Nescafé performance OG: 7.9% • Succesful launch of Nescafé Dolce Gusto Mkt share*: € • Nespresso grows 40% to over CHF 1 bio 35 boutiques opened in ’06 EBIT -30 bps
Slide 12: Powdered & Liquid Beverages: Growth drivers in 2007
Powdered & Liquid Beverages Growth drivers in 2007 € BRIC CHF 60bio € Dolce Gusto Market* € Nespresso – boutique openings € Nescafé 3-1; Cappuccino € Nesquik / Nescafé RTD € MILO - continued growth *Coffee 12 2006 full year roadshow - February 2007 Name of chairman
Slide 13: Nutrition: transition year to global business
Nutrition: transition year to global business Move into Weight Management Performance Highlights Sales CHF: 6 bio • Growth up by 200 bps in H2 OG: 6.1% • Innovation in infant formula Mkt share: & cereals key drivers • NAN HA & NAN probiotic roll-out at 85% EBIT -80 bps • Leader in 3 out of BRIC • Su
Slide 14: Nutrition: Growth drivers for 2007
Nutrition Growth drivers for 2007 € Further roll-out of NAN HA & NAN probiotic to 95% € Innovation across Infant Formula Boost ReSource Optifast € PowerBar relaunch € Jenny Craig € Medical Nutrition integration NovaSource IsoSource Vivonex Peptinex Impact Compleat CHF 100bio Market 14 2006 full year
Slide 15: Dairy: Milk products build on success; Ice cream improves
Dairy: Milk products build on success Ice cream improves Performance Highlights Sales CHF: 19.5 bio Milk products OG: 5.1% • Americas & AOA grew 8%+ on shelf stable Mkt share* (MP): € • Key drivers: Nido, Ninho, Bear Brand, Focus on segmentation / value-add Mkt share* (IC): € • CoffeMate grew double
Slide 16: Dairy and Ice cream: Growth drivers 2007
Dairy and Ice cream Growth drivers 2007 Dairy € BRIC opportunity € Children 1-5 – Nido € Adult nutrition – Nesvita € CoffeeMate Ice cream € Super premium in Europe € Continued roll-out of LTF & extensions € Innovation in Impulse CHF 70bio Market* *CHF 30 bio Core Shelf Stable; CHF 40 bio Ice cream 1
Slide 17: Prepared dishes and cooking aids
Prepared dishes and cooking aids AOA and Americas deliver high growth Performance Highlights Sales CHF: 17.6 bio • Good growth in Frozen in North America and France (Davigel) OG: 4.8% • Stouffer’s and Lean Cuisine star in US, Mkt share*: € Panini launch exceeds $100mio • Hot Pockets US growth poor b
Slide 18: Prepared dishes and cooking aids: Growth drivers in 2007
Prepared dishes and cooking aids Growth drivers in 2007 € Stouffer's, Lean Cuisine € Buitoni Chilled Culinary US € Maggi AOA € Wagner Germany € Hot Pockets acceleration 18 2006 full year roadshow - February 2007 Name of chairman
Slide 19: Chocolate, confectionery and biscuits
Chocolate, confectionery and biscuits Success in many markets undone by two Performance Highlights Sales CHF: 11.4 bio • Kit Kat* grew 7% - trend to lighter snacks OG: 2.6% • Latin America, AOA & Eastern Europe strong Mkt share: • Western Europe focused on margins • UK “Magnificent 7” brands achieve
Slide 20: Chocolate, confectionery and biscuits: Growth drivers in 2007
Chocolate, confectionery and biscuits Growth drivers in 2007 € BRIC opportunity CHF 80bio € KitKat Market € Key local brands € Improvement in the UK 20 2006 full year roadshow - February 2007 Name of chairman
Slide 21: PetCare: Good growth and margin improvement
PetCare Good growth and margin improvement Performance Highlights Sales CHF: 11.4 bio • Innovation in strategic premium and super premium brands drives profitable growth OG: 7.1 • Beneful sales up 44%: “Healthy” lines, Mkt share: € expansion in Europe & launch of prepared meals EBIT +60 bps • North
Slide 22: PetCare: Growth drivers in 2007
PetCare Growth drivers in 2007 € Premium and super premium brands € European roll-outs of successful CHF 50bio Market US initiatives € ONE into new markets € Hyper premium wet cat, Perle, Diamante € Continued development of ProPlan 22 2006 full year roadshow - February 2007 Name of chairman
Slide 23: Improving performance of Nestlé F&B: Finance Focus areas
Improving performance of Nestlé F&B Finance Focus areas € Drive simplicity to capture scale € Tackle underperformers € Improve capital efficiency € All with discipline in execution 23 2006 full year roadshow - February 2007 Name of chairman
Slide 24: Driving Simplicity, scale and Tackling underperformers
Driving Simplicity, scale and Tackling underperformers Simplicity 2006 2007 SKU optimisation -7% -10% Legal Structures 20% of project target -10% Scale GLOBE 80% leverage Shared Services 30% 50% Operational Excellence CHF 1.2 bio CHF 1.2 bio Underperformers Reduce Value Destroyers sales over ongoing
Slide 25: Drive simplicity across the business: SKU optimisation - Russia
Drive simplicity across the business SKU optimisation - Russia Actions Results 140 131 • Cross-functional team 130 • Action plan against each 120 underperforming SKU 118 Index • Defined responsibilities & timing 110 • Hurdles rates for new SKUs 100 • Tracking results 90 • Enabled by GLOBE 85 80 Curr
Slide 26: Shared Services: Achieve critical mass and sustainability
Shared Services Achieve critical mass and sustainability 2006 2007 2008 GNBS (Shared Services) implementation Approx. Cumulative % F&B Sales supported by Nestlé Business Services; Financial and Employee Services approx. (insourced and outsourced) 80% 50%+ 30% Capturing our potential 26 2006 full yea
Slide 27: Tackle underperformers to strengthen core: UK Confectionery
Tackle underperformers to strengthen core UK Confectionery Total UK Confectionery SKUs Market share EBIT margin 40% -0.6% Magnificent Seven Media spend Share Gain 10% 0.5% 27 2006 full year roadshow - February 2007 Name of chairman
Slide 28: Increase discipline/execution in all we do: Working capital
Increase discipline/execution in all we do Working capital - Group Key Actions... ...driving results • Establish common KPIs Cash Conversion Cycle* • Set reduction target Days • Track monthly & benchmark 50 47 40 • Share best practices & tools on 40 website 30 • Improve demand planning 20 • Optimise
Slide 29: Improving performance of Nestlé F&B: Finance Focus areas
Improving performance of Nestlé F&B Finance Focus areas € Drive simplicity to capture scale € Tackle underperformers € Improve capital efficiency € All with discipline in execution Growth & efficiencies were the foundation of 2006 performance Raw material costs mean more to do in 2007 29 2006 full y
Slide 30: Peter Brabeck-Letmathe
Peter Brabeck-Letmathe 2006 full year roadshow - February 2007 Name of chairman
Slide 31: Drives longer term structural performance
Management changes aligned with strategic & organisational transformation Strategic Organisational Transformation Transformation To Nutrition, Health To flexible agile organisation, and Wellness leveraging scale Drives longer term Drives shorter term structural operational performance performance 31
Slide 32: Management changes aligned with strategic & organisational transformation
Management changes aligned with strategic & organisational transformation Strategic Organisational Transformation Transformation To Nutrition, Health To flexible agile organisation, and Wellness leveraging scale Werner Bauer José Lopez Chief Technology Officer Head of Operations Organisation R&D, In
Slide 33: Demographics: $240 billion opportunity
Demographics Focusing on the low and high ends Consumption of food manufacturing value-added actual US$, per capita $240 billion opportunity Growth scenario Convenience (2005-15) + US$ 170bn Pleasure and 5.9% p.a. Sustenance diversity Nestlé per Growth scenario capita (2005-15) sales + US$ 70bn 6.9%
Slide 34: An additional 1.5 billion people moving up the income bracket
Moving up the income bracket An additional 1.5 billion people 7,000 People, mn > 28'000 + 355 849 + 199 494 286 6,000 235 443 22'000-28'000 295 522 175 + 133 PPP$ 5,000 389 940 + 885 1825 710 + 230 13'000-22'000 4,000 PPP$ 3,000 2153 + 448 5'000-13'000 2601 2354 PPP$ 2,000 1500-5000 PPP$ 1,000 1970
Slide 35: Nutrition: High-value, high-growth
Nutrition: High-value, high-growth CHF 100 billion market Market Nestlé Product category Estimated size Growth (%) presence (CHF bio) 1. Products for specific needs – Infant Nutrition 21 4-5 Yes – HealthCare Nutrition 12 6-7 Yes – Performance Nutrition 11 5-6 Yes – Weight Management * 54 8-10 Yes Di
Slide 36: Nestlé Nutrition
Nestlé Nutrition Infant Weight Nutrition Management HealthCare Performance Nutrition Nutrition 36 2006 full year roadshow - February 2007 Name of chairman
Slide 37: Jenny Craig: Strong brand in weight management
Jenny Craig Strong brand in weight management • Established brand – launched in 1983 by founder Jenny Craig – key player in weight management • One-to-one solutions – products & services – 600+ branded centres – 2600 consultants • Regional presence – US, Canada & Puerto Rico – Australia & New Zealan
Slide 38: Nestlé Nutrition + Novartis Medical Nutrition: A Winning Combination
Nestlé Nutrition + Novartis Medical Nutrition A Winning Combination 1. Creates No. 2 global player in Healthcare Nutrition 2. Increased R&D capability 3. Broader product portfolio of strong brands supported by clinical data 4. Increased presence in attractive retail channels Significant step up in s
Slide 39: The Food Service market: CHF 400 billion
The Food Service market: CHF 400 billion Estimated Global Sales CHF 400 billion market (CHF bio. 2004) 6.5 • Big and growing opportunity CHF 2 trillion global consumer spend 4.0 5-7% growth in major operator segments 3.7 • Relevant market CHF 400 bio 3.7 80% in Food, 20% in Beverages 1.9 • Consumer
Slide 40: Popularly Positioned Products: winning the emerging consumer
Popularly Positioned Products: winning the emerging consumer A $70 billion opportunity 40 2006 full year roadshow - February 2007 Name of chairman
Slide 41: Popularly Positioned Products: USD 1,500 – USD 5,000
USD 1,500 – USD 5,000 Popularly Positioned Products Providing basic energy and nutrition needs and addressing significant micronutrient deficiencies Build brand loyalty early and enhance it as incomes rise In many countries, the opportunity is over 50% of households 41 2006 full year roadshow - Febr
Slide 42: Nestlé BEAR BRAND in the Philippines since 1976
Nestlé BEAR BRAND in the Philippines since 1976 The only affordable milk brand to address Filipino mothers’ no. 1 € health concern to strengthen the child’s resistance against illness through Vitamin C and Zinc fortification. € Affordable at Php 6.5 per serving, or 0.15 CHF Widely available in tradi
Slide 43: Maggi Bouillon Central West Africa
Maggi Bouillon Central West Africa Addresses micronutrient deficiencies with Iodine € fortification and offers a tastier alternative to salt € Individual cubes to meet daily affordability level € Local neighborhood women for direct marketing 65 million bouillon cubes sold per day with € 45% penetrat
Slide 44: New factory in Feira de Santana
New factory in Feira de Santana "Nestlé’s initiative is a concrete example of how to generate jobs and income to make this country a fairer place, a place where people have the right to work, study and buy affordable products.” President of Brazil, Luiz Inácio Lula da Silva 44 2006 full year roadsho
Slide 45: Group EBIT Margin over last 10 years
Group EBIT Margin over last 10 years Acceleration fuelled thanks to F&B improvements 14'000 EBIT (in mio CHF) EBIT (in % Sales) 12'000 13.5% 10'000 12.9% 12.6% 12.5% 12.3% 8'000 11.8% 11.8% 6'000 11.1% 4'000 10.2% 10.3% 10.3% 2'000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Figures cor
Slide 46: Consistent Top-Line Organic Growth for the past 10 Years
Consistent Top-Line Organic Growth for the past 10 Years % Growth 15% 10 years average 10% 2.5% Acquisitions 5% 2.2% OG 3.6% 5.8% 0% -1.5% Divestitures -1.4% Forex -5% OG: Organic Growth -10% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 RIG Pricing & Other Acquisitions Divestitures FX Impact 46
Slide 47: Production volume doubled; environmental impacts down
Production volume doubled in 10 years Environmental impacts down: waste water 200 150 Index 100 50 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Year Production volume Greenhouse gases Waste water generation Energy consumption Water consumption 47 2006 full year roadshow - February 2007 Name o
Slide 48: Nestlé highly rated in sustainability indices
Nestlé highly rated in sustainability indices AAA rating (1st out of 47) from Climate Leadership Index : 75 48 2006 full year roadshow - February 2007 Name of chairman
Slide 49: We plan to deliver the Nestlé Model annually over the next 10 years
We plan to deliver the Nestlé Model annually over the next 10 years 5-6% organic growth Sustainable improvement in EBIT Improving trend in Return on Invested Capital 49 2006 full year roadshow - February 2007 Name of chairman
Slide 50: 2006 full year roadshow
2006 full year roadshow 2006 full year roadshow - February 2007 Name of chairman