Nestle India Ltd. · NSE:NESTLEIND
Nestle India — Investor Presentation (August 2018)
83 slides from Nestle India's investor presentation, Aug 21, 2018
Slide 1: 28th Financial Analysts & Institutional Investors Meet
28th Financial Analysts & Institutional Investors Meet 21st August 2018
Slide 2: Disclaimers
Disclaimers 1. This presentation may contain statements which reflect Management’s current views and estimates and could be construed as forward looking statements. The future involves uncertainties and risks that could cause actual results to differ materially from the current views being expressed
Slide 3: Agenda and speakers
Committed to a Healthier Future (15:30 hrs): Suresh Narayanan Financial Highlights & Nestlé Business Excellence (16:20 hrs): Shobinder Duggal Q&A (17:00 – 17:45 hrs)
Slide 4: Driven by our purpose and values
Driven by our purpose and values Growth plus sustained profits Focus on penetration + volume to drive growth Continued efforts towards innovation and renovation Last Time Commitment towards relevant Nutrition Proposition / NHW Consumer centric initiatives on digital, on ground activation, route to m
Slide 5: Committed to a Healthier Future
Committed to a Healthier Future Healthier Healthier Healthier Healthier Society Business Products Environment
Slide 6: Healthier Business and Healthier Products
Healthier Business and Healthier Products
Slide 7: Where Are We Today?
Where Are We Today?
Slide 8: Largest listed F&B Company in India
Largest listed F&B Company in India
Slide 9: Third Largest FMCG by Market Cap
Third Largest FMCG by Market Cap
Slide 10: Innovation as a strong growth foundation
Innovation As a strong GROWTH foundation
Slide 11: Organizational Stability
Organizational Stability Lowest level of Talent attrition
Slide 12: Market Leadership in Nearly 85% of the Portfolio
Market Leadership In Nearly 85% of the Portfolio
Slide 13: Brand Strength & Market Position
Leadership Brand Strength & Market Position Position In 7 Out Of 9 Categories YTD Nestlé India’s Category Brand (Jan-Jun 2018) MAT (Jul’17-June’18) Position Instant Noodles 59.1 59.7 1 Ketchups & Sauces 21.6 22.3 2 Instant Pasta 66.4 67.6 1 Infant Formula 67.4 68.1 1 (excluding Amul Spray) Infant Ce
Slide 14: The Brands India Loves and Trust
The Brands India LOVES And TRUST 7 NESCAFE 6 21 MAGGI 13 20 POLO 10 Source: ET Brand Equity Survey
Slide 15: Innovations - Fueling The Growth
Innovations - Fueling The Growth 25 sustainable innovations Contribution to Full Year Full Year H1 2017 – H1 2018 – Domestic Sales 2016 – 1.5% 2017 – 2.6 % 2.8% 3.0%
Slide 16: NESPLUS – Entry Into New Category
NESPLUS – Entry Into New Category Grain Pfus Nutrition Plus Taste Pl:us Choice Plus
Slide 17: Laying the Foundation for the Future
Laying the Foundation for the Future Adult Oral Nutrition Supplement Disease Specific Supplements Pediatric Allergy Critical Care Nutrition
Slide 18: Out of Home – Large Opportunity
Out of Home – Large Opportunity Over 350 touch points & 30000 vending machines setup pan - India
Slide 19: Most Recognized FMCG
Most Recognized FMCG Best Initiative for Working Mothers and among India’s Most Admired Employer “Responsible Business Leader” Award Ceregrow wins Product of The Best Supplier Award Year Award 2018! Humbled by 40+ Awards and Recognitions in 2017 and 2018 CSR Leadership Award’ from ET Now
Slide 20: Double Digit Growth
Double Digit Growth . (,) . / SUN ] ::,... MON TUE / - WED 1H CALENDAR " f- - _,_ J I • 2 1. - ·f- 3 I -~ IJ FRI - - - ~ I ~T - I -1 r~ 8 I -1- 4/ I ,j, , - - - '- - - 9 10 I -...;_,t--.l1 _..,. ' ......... I 1 !4-l. 15 I - 1" - - ,, . 12 I L 1 16 I • - 21 I J- 22 - ; .JJ 18 ,g , - 2 31 I 24 1- 25 3
Slide 21: In Step With Our Listed Peers
In Step With Our Listed Peers 16.00% 14.80% 14.00% 13.60% 12.80% 12.00% 11.00% 10.00% 9.20% VALUE GROWTH 8.00% 6.40% 6.00% 4.00% 2.00% 0.00% FULL YEAR 2016 FULL YEAR 2017 H1 2018 Nestlé India Listed Peers Comparable Growth
Slide 22: On The Road To Double Digit Value Growth
Comparable Growth % Reported Growth % On The Road To Double Digit Value Growth *Reported growth rates are adversely impacted due to lower reported sales by the change in structure of indirect taxes and reduction in realisations to pass on the GST benefits
Slide 23: On The Road To Broad Based Volume Growth
On The Road To Broad Based Volume Growth
Slide 24: On The Road To Deliver What We Promise
On The Road To Deliver What We Promise 25.0 21.4 20.3 20.0 19.1 18.0 18.1 18.5 17.0 15.4 15.0 14.5 13.4 11.3 11.5 9.7 10.0 8.8 8.9 9.1 7.7 6.9 5.0 - Q1 Q2 Q3 Q4 Q1 Q2 2017 2018 Volume Growth (Domestic) Organic Growth - Domestic (Comparable) Operating Profit as % of Sales (Comparable) Comparable numb
Slide 25: Total Shareholder's Return
Total Shareholder’s Return Bar size represents Market Capitalisation (INR Billion) Total Return (%) : 504.8 Annualized Return (%) : 20.7 1,016 756 615 581 562 481 511 366 402 246 140 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 JUL'18 Market Capitalization is calculated on period end closing sh
Slide 26: Encore Once More!
ENCORE ONCE MORE !
Slide 27: Making It Happen
Making It Happen
Slide 28: Essential M's: Mindset of Growth
8 Essential M’s Mindset of GROWTH Method & Plan Meaning & Outcomes Mastery of Execution
Slide 29: Essential M's: Might lies in Detailed Clusters
8 Essential M’s Might lies in Detailed Clusters Managing Infrastructure to match GROWTH Magic of PEOPLE Music of Performance
Slide 30: Consumer Clusters – Our New Approach
Consumer Clusters – Our New Approach Maps not to scale
Slide 31: Context
Context Current Construct We see a Gap We have a Vision To grow by reaching out to consumers more Regional players and Start-ups are showing Branch and State lens efficiently keen consumer connect and high agility Consumer targeting influenced by past By having a sharper understanding of “Many India
Slide 32: Our India in 15 Clusters
Our India in 15 Clusters 3 clusters per geographic branch 3 metro(s) clusters Maps not to scale
Slide 33: Cluster Approach Will Unleash Growth Potential
Cluster Approach Planning Problem Performance Will Unleash Ahead Solving Tracking Growth Potential Resource Empowerment at Local Optimization Levels
Slide 34: Center of Scale and Center of Competence
Center of Center of NiM In-Market Competence Scale(CoS) (Local) (CoC) Shareable Non-Shareable Global Expertise Judgmental or Category / & world-class competence- Business / services driven activities customer focused
Slide 35: People, Passion, Progress Our Way Of Our Life
People, Passion, Progress Our Way Of Our Life Attract Gender Diversity In Hiring Gender Diversity Overall Management Trainees Women Employees (Total) 71% 18.5% Women in Field Force Technical Trainees Women in Managerial Position 17% 63% 14.9% Multiple Touch Points On Campus Enhancing Offline & Onlin
Slide 36: People, Passion, Progress Our Way Of Our Life
People, Passion, Progress Our Way Of Our Life Retention & Key Initiatives A soft skill % High Performer enhancement program for Technical Attrition campuses 7% 6% • 1st of its kind initiative in the 4% 3% industry 2015 2016 2017 2018 • 2 campuses, 85 students % Women Managers Employee Wellness Initi
Slide 37: Healthier Society and Healthier Environment
Healthier Society and Healthier Environment
Slide 38: Enhancing quality of life and contributing to a healthier future
Enhancing quality of life and contributing to a healthier future for individuals & families for our communities for the planet Enabling healthier and happier lives Helping develop thriving, resilient communities Stewarding resources for future generations Encouraging over good nutrition Creating acc
Slide 39: Good Food, Good Life – Means Eat Right
Good Food, Good Life – Means Eat Right • An average 6% reduction Reduced sodium by 10% in relevant product in added sugar categories in recent years • An average 10% Further by 2020, we reduction in salt will reduce in our • An average of about 2.5% relevant product reduction in total fat categories
Slide 40: Plastic Waste Management
Plastic Waste Management Recyclable MLP (mono- material) Around 26,000 tonnes of plastic waste is generated every day in India, 6% of which is multilayered plastic waste.
Slide 41: Why Is Plastic Important For The Food Industry?
Why Is Plastic Important For The Food Industry? Increased Food safety, Quality and Shelf life. Better Product Hygiene Reduced Food Waste Innovative Packaging Options for Consumers. Consumer Convenience The properties of plastics that enable 1 Inert, inherent barrier against oxygen and moisture 2 Lig
Slide 42: Why Is Plastic an Environment Issue?
Why Is Plastic an Environment Issue?
Slide 43: What is Nestlé India going to do
What is Nestlé India going to do Change complex Support the development of Reduce the use of Plastics combinations of packaging Collective Action waste management systems materials • Reduced around 1500 MTs • Working with Authorities, • Work in progress to • Special plan of action for of plastic mat
Slide 44: Speed, Sharpness, Sustainability
Speed, Sharpness, Sustainability Innovations at the Core → Improvise but Act ! Growth dimension → Thrive not Survive Manage for “Market Share” → Our growth > Category Growth Clusters, Micro targeting, Resourcing for Action Today Key efficiency enhancement through Nestlé Business Excellence Active en
Slide 45: Agenda
Agenda 1 Nestlé Business Excellence (NBE) 2 Market Dynamics 3 Recap - Impact of GST on financial results 4 Financial Performance: January-June 2018
Slide 46: NBE - One Organization
NBE - One Organization Leveraging Skills and Capabilities of Globe & NCE
Slide 47: Nestlé Business Excellence
~1n~ Business ~~ 1 Nestle Excellence I FUEL FOR GROWTH SIMPLIFY · STANDARDIZE · SHARE Optimize Provide Support Global End-to-End World Class Demand Focused Flows Business Services Organizations ~ Global ~~ Business Nestle Services ~ I '\\~ ~O,~ UO~S)\ NisUi /~EXCEil.ENCE /~ ENABLE THROUGH PEOPLE Ali
Slide 48: Optimizing End-to-End Flows
Optimizing End-to-End Flows From Customer Order to Invoice Payment E2E Owner is Supply Chain, contributors are Marketing & Sales, Finance From Sourcing Materials and Services to paying vendors E2E Owner is Supply Chain (Procurement), contributors are Supply Chain, Finance Processes From attracting t
Slide 49: Provide World Class Business Services
Provide World Class Business Services Center of Competence Shareable Judgmental or Competence-driven activities e.g. Costing, Treasury, Pricing, Order Fulfillment, Customer Exception & (CoC) Solution Management, Talent & Reward Management, Procurement Center of Scale* Shareable Transactional activit
Slide 50: Phases of the NBE Program
Phases of the NBE Program Transparency Engagement Transformation • AS-IS data gathering • AS-IS Vs TO-BE comparison Implement: • Identify Change Impacts • New processes • Shared service coverage • Change management • New solutions • Prepare project plan • Change impacts • New organization design
Slide 51: Market Dynamics
Market Dynamics Market Size Market Growth (YoY) 2017 H1’18 H2’17 FMCG 52.9 Bio 10.9 11.7 F&B 29.7 Bio 12.0 12.1 Market momentum Processed Food continued to (excld Commodities) 17.0 Bio 11.0 11.4 be favourable Nestlé Categories 4.8 Bio 8.3 9.6 Market Size in USD Bio for 2017 (INR 65.08) Note: Infant
Slide 52: Market Dynamics and Product Portfolio
Market Dynamics and Product Portfolio Market Share 96.1 59.5 66.4 50.7 61.3* 45.2 >70.0 # % YTD June ‘18 40.6 67.7 Without Amulspray Leadership position in ~85% of the product portfolio Products scoring higher on NHW grow faster and are more profitable Source: AC Nielsen - June 2018 *In whites and w
Slide 53: Recap - Impact of GST on Financial results (H1'18)
Recap - Impact of GST on Financial results (H1’18) Pre GST Post GST a. Gross of Excise duty a. Excise duty subsumed in GST Sales Excise duty - Separate cost line b. VAT not recognised as part of b. GST not recognised as part of Sales Sales c. Reduction in realisations to pass on GST benefits Impact
Slide 54: Recap - Impact of GST on Financial results (H1'18)
Recap - Impact of GST on Financial results (H1’18) Pre GST Post GST Reported Reported inclusive of Taxes Reported net of GST Expenses when not Cenvatable where ITC available Comparability Accordingly, Sales, Absolute expenses, Elements of Working of Results Capital and Ratios in percentage of Sales
Slide 55: Highlights: January - June
Highlights : January - June Amount in INR billion unless otherwise stated Total Sales RIG (%) OG (%) Profit from Operations Reported Growth* + 7.3 % Reported Margin* +590 bps Comparable Growth +13.6 % Effective Margin +470 bps 9.9 15.0 14.5 14.0 22.1 /20.9 8.1 8.9 13.5 13.0 12.5 12.0 11.5 20.0 7.3 /
Slide 56: Evolution of Quarterly results
Evolution of Quarterly results Q1 Q2 Q3 Q4 Total Sales 7.7*/ 11.0 7.3*/ 13.6 % YoY Growth 9.1 7.3 3.6*/ 8.6 10.9*/ 17.7 6.3*/ 12.9 8.5*/ 14.6 INR Billion 25.8 24.7 25.0 25.9 27.4 26.8 2017 2018 Profit from Operations 18.1*/ 17.5 22.1*/ 20.9 % of Net Sales 17.0 15.4 20.1*/ 19.1 19.6*/ 18.5 22.7*/ 21.
Slide 57: Sales Performance
Sales Performance Value Volume (INR Billion) (in ‘000 Tons) 7.1/13.8% 9.2% Domestic 47.3 50.7 Contribution: 94% 188.7 206.1* 10.7% 16.7% Exports 3.1 3.5 Contribution: 6% 9.9 11.6 H1’17 H1’18 (a) Figures in maroon colour represents comparable growth on estimated basis (b) *Includes extra grammage to
Slide 58: Domestic Sales - Growth
Domestic Sales - Growth Reported Growth (%) 7.1 Of Which: RIG (Volume/Mix) 9.8 Net Pricing -2.7 Broad Based Growth supported by increase in volumes offset by negative pricing due to GST (a) Reported growth rates are adversely impacted due to lower reported sales by the change in structure of indirec
Slide 59: Region-wise Sales and E-Commerce
Region-wise Sales H1’18 Growth% Reported Comparable North 27 North 7.9 14.6 West East % Cont to 18 East 9.4 16.2 Domestic Sales 31 South South 3.9 10.4 24 West 6.9 13.6 Total 7.1 13.8 E-Commerce % Cont. to domestic Sales 900 .00 800 .00 0.7 1.1 2 1.8 1.6 700 .00 1.4 600 .00 1.2 500 .00 1 400 .00 0.8
Slide 60: Categorywise Contribution
Categorywise Contribution Product Contribution H1’18 Growth% Products Groups (%) Reported Comparable Milk Products & 48.1 6.3 10.8 Nutrition Prepared Dishes 28.0 8.9 15.0 & Cooking Aids Confectionery 12.7 4.6 15.3 Powdered & 11.2 9.2 23.6 Liquid Beverages Domestic Growth 7.1 13.8 Domestic Sales: INR
Slide 61: Milk Products & Nutrition - Domestic
Milk Products & Nutrition - Domestic 48.1% Value (INR Bio) Volume (000’ Tons) 6.3/10.8% 4.6% 22.9 24.4 62.5 65.4 H1’17 H1’18 Broad based Growth in Key Brands Good response to new launches like CEREGROW, NAN Excella Pro Figures in maroon colour represents comparable growth on estimated basis
Slide 62: Prepared Dishes & Cooking Aids - Domestic
Prepared Dishes & Cooking Aids - Domestic 28.0% Value (INR Bio) Volume (000’ Tons) 8.9/15.0% 12.8% 13.0 14.2 98.7 111.3 * H1’17 H1’18 Continued to rebuild MAGGI Noodles Strong growth in Masala-e-Magic (a) Figures in maroon colour represents comparable growth on estimated basis (b) *Includes extra gr
Slide 63: Confectionery - Domestic
Confectionery - Domestic 12.7% Value (INR Bio) Volume (000’ Tons) 4.6/15.3% 6.1% 6.2 6.4 18.4 19.5 * H1’17 H1’18 Strong Growth in KitKat. Good response to New launches Focus on Value Up and Mainstream (a) Figures in maroon colour represents comparable growth on estimated basis (b) *Includes extra gr
Slide 64: Powdered & Liquid Beverages - Domestic
Powdered & Liquid Beverages - Domestic 11.2% Value (INR Bio) Volume (000’ Tons) 9.2/23.6% 9.2% 5.2 5.7 9.1 10.0 * H1’17 H1’18 Strong Growth in NESCAFE Classic & NESCAFE Sunrise Volume Growth positively influenced by liquid beverages Regained No. 1 Market Position* in Instant Coffee*Source: AC Nielse
Slide 65: Movement of Profit from Operations
Movement of Profit from Operations Movement in Bps 120 60 30 50 410 20 16.2% 20.9% 22.1% H1’17 Materials Employee Depreciation Other Adv. & Sales H1’18 Denominator H1’18 Reported benefits Expenses Promotion Comparable impact Reported (Reported sales being lower than comparable)* Improvement in Margi
Slide 66: Marketing Spends
Marketing Spends* % of Domestic 7.8 Sales 7.8 INR Billion 3.7 4.2 H1' 17 H1' 18 Direct Marketing spends grew faster Maintained Investment behind Innovations Digital Media spends growing at CAGR of over 40% for past 3 years (a)*Marketing Spends include: Advertisement & Sales Promotion, Marketing & Se
Slide 67: Tax Expense and Effective Tax Rate
Tax Expense and Effective Tax Rate 6.0 5.5 5.0 34.6 34.8 35.0 4.5 33.7 4.0 32.5 3.5 30.0 3.0 2.5 2.0 25.0 1.5 1.0 Tax Expense 0.5 2.7 4.2 (INR Billion) - 20.0 H1' 17 H1' 18 Marginal Tax Rate (%) Effective Tax Rate (%) Effective Tax rate Impacted by End of first 5 years of tax holiday @ 100% of pro
Slide 68: Net Profit after Tax
Net Profit after Tax Movement in Bps 80 INR 8.19 Bio 310 30 40 INR 5.70 Bio 11.3% 14.3% 15.1% H1’17 Profit from Financial Effective Tax H1’18 Denominator H1’18 Reported Operations Income Rate Comparable impact Reported (Reported sales being lower than comparable)* Net Profit supported by increase in
Slide 69: Cash generation from Operating activities
Cash generation from Operating activities Amount in INR billion 0.7 0.6 18.7*/17.6% 0.6 3.7 11.4% 5.7 10.1 H1 ‘17 Profit from Trade Net Other Taxes H1‘18 Operations Working elements of Capital Working Capital Strong Cash generation from operations (a) Percentages are with reference to sales (b) *Pos
Slide 70: Dividend Payout Increased
Dividend Payout Increased Includes additional 86.0 Interim dividend of INR 10 Per Share 63.0 63.0 48.5 40.0 30.0 2014 2015 2016 2017 H1 '17 H1 '18 Dividend Per Share (INR)
Slide 71: Capital Efficiency & Value Creation Improves
Capital Efficiency & Value Creation Improves ROIC % 35.6 18.9 38.5 46.4 65.4 Economic Profit% 21.1 5.0 24.6 34.2 52.6 Asset Turns 40 3.0 2.7 3.4 3.9 4.5 35 30 25 20 15 10 Invested Capital5 33.7 30.4 27.5 26.0 24.0 (INR Billion) 0 2014 2015 2016 2017 H1'18 Invested capital : Basis average of 5 quarte
Slide 72: Key Messages
Key Messages Market Momentum continued to be favorable Market Leadership in 85% of portfolio. Retained focus on NHW & Innovations Sales Growth broad based Margin improvement aided by softer commodity prices & lower base Strong Cash Generation from operations Dividend Payout increased S
Slide 73: Rebuild of MAGGI Noodles
Rebuild of MAGGI Noodles 154 160 6.50 121 124 132 143 142 138 100 115 108 140 6.00 120 5.50 100 5.00 80 4.50 60 4.00 40 3.50 20 INR Bio 3.00 - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 29 2016 2017 2018 Bar size represents Sales Value Sales Indexed with Q1’16 Figures in maroon colour represents comparable numbe
Slide 74: Commodity Price Movement
Commodity Price Movement H1’18 Vs H1’17 Milks -12% Wheat -0.4% Coffee -8% Palm Oil 23% Sugar -14% DWP 10% MSK -6% Palm Kernel -21% Nestlé India’s Commodity basket Price Index 122 122 119 115 0.3% 115 112 107 100 2011 2012 2013 2014 2015 2016 2017 H1'18 Indexed with base year 2011
Slide 75: Movement in price index of commodity basket
Movement in price index of commodity basket 105 104 103 102 + 1.0% + 1.6% - 1.4% 100 + 2.3% 99 - 4.6% 98 - 0.8% Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 Indexed with base Q4-16
Slide 76: Milks Consumption Price Index
Milks Consumption Price Index Milks 37% 118 116 113 112 107 106 102 99 101 Current Price 100 98 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 Indexed with base Q1-16
Slide 77: Wheat Flour Consumption Price Index
Wheat Flour Consumption Price Index Wheat Flour 12% 107 108 108 Current Price 106 102 103 103 100 101 98 99 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 Indexed with base Q1-16
Slide 78: Green Coffee Consumption Price Index
Green Coffee Consumption Price Index Green Coffee 10% 115 113 106 103 101 100 Current Price 99 94 93 89 89 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 Indexed with base Q1-16
Slide 79: Palm Oil Consumption Price Index
Palm Oil Consumption Price Index Palm Oil 7% 125 Current Price 125 116 100 100 100 99 97 97 98 96 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 Indexed with base Q1-16
Slide 80: Sugar Consumption Price Index
Sugar Consumption Price Index Sugar 6% 123 121 120 119 115 116 112 109 Current Price 105 100 95 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 Indexed with base Q1-16
Slide 81: DWP Consumption Price Index
DWP Consumption Price Index DWP 4% 101 102 100 99 98 96 93 93 94 89 102 Current Price Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 Indexed with base Q1-16
Slide 82: MSK Consumption Price Index
MSK Consumption Price Index MSK 4% 128 118 114 111 109 106 100 101 100 98 Current Price 97 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 Indexed with base Q1-16
Slide 83: Palm Kernel Oil Consumption Price Index
Palm Kernel Oil Consumption Price Index Palm Kernel Oil 3% 168 163 153 135 136 Current Price 121 116 114 107 100 102 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 Indexed with base Q1-16