Creating a successful future

Transcription

1 Creating a successful future Peter Brabeck-Letmathe Chairman and Chief Executive Nestlé S.A. 0

2 1 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. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments.

3 2 Creating a successful future Agenda Secure foundations - Financial & social - Structural and cultural Exciting opportunities The right strategy Appropriate business models A successful future

4 The Nestlé Model A secure foundation for value creation 3 1. Sustainable Organic Growth of 5-6% EBIT Margin 2. Continued year after year improvement in EBIT margin 3. Responsible capital management (Working Capital / Business ROIC) focus on F&B, Health, Nutrition & Wellness To deliver an industry outperforming, long-term total shareholder return

5 The Nestlé Model driving organic growth & EBIT margin improvement 100 Sales CHF Bn 2006 Sales CHF 98.5bn Organic growth 11yr av. 5.7% EBIT margin 11yr av. +30bps 2006 EBIT 13.3bn 13.5% 14 EBIT CHF Bn Sales CHF60bn 1996 EBIT CHF 6.2bn 10.2%

6 CHFbn Delivering industry outperforming TSR, and significant cash returned to shareholders Total cash returned to shareholders since 1996 CHF 36bn 3rd buyback CHF 4.5bn in % 400% 350% 300% 250% 200% 150% % 50% 0% Dividend (CHFbn) Share buyback (CHFbn) Cumulative Total Shareholder Return (%)

7 Creating Shared Value - Nestlé's responsibility to shareholders & society 6 CREATE SHARED VALUE Reduce poverty Improve health Empower people SUSTAINABILITY Protect the future COMPLIANCE Laws, Business Principles, codes of conduct Long-term shareholder value creation TSR Sustainable profitable growth Corporate governance CSR is built into Nestlé s strategy & enhances shareholder value

8 7 Creating a successful future Secure foundations - Financial & social - Structural and cultural Exciting opportunities The right strategy Appropriate business models A successful future

9 Creating the right structure and business model... 8 Strategic From transforming commodities to added value food products From added value to Health, Nutrition & Wellness Operational Creating an agile fleet of businesses/markets With increased focus on demand generation And an efficient support structure Market teams focused on customers & consumers Support teams focused on best service at best cost

10 ...Supported by four pillars for sustainable competitiveness 9 Low Cost highly efficient Operations Innovation and Renovation Consumer Communication Product availability Whenever Wherever However

11 ... With an aligned performance focused, entrepreneurial culture 10 Our business needs drive our people development Performance Responsibility for performance down in the organisation Reward and recognition tied to performance The Nestlé Management and Leadership Principles Nestlé Leadership Framework Culture Sustained high performance environment We maintain & evolve our culture based on our Principles

12 11 Creating a successful future Secure foundations - Financial & social - Structural and cultural Exciting opportunities The right strategy Appropriate business models A successful future

13 Population growth over 3 billion more people between The World Billion Developing world Billion North America million Europe - 50 million Eastern Europe* Western Europe In Millions Source: * incl. CIS 12

14 On the Up-Escalator World population by income: '000 People, mn > 28'000 6'000 5'000 4' '000-28'000 PPP$ 13'000-22'000 PPP$ 3' ' '000-13'000 PPP$ PPP$ 1' < 1500 PPP$ Sources: UN WIDER and World Bank (also for outlook on economic growth ); Nestlé

15 14 Creating a successful future Secure foundations - Financial & social - Structural and cultural Exciting opportunities The right strategy Appropriate business models A successful future

16 A $240 billion opportunity Consumption of food manufacturing value-added actual US$, per capita Convenience Sustenance Pleasure and diversity Nestlé per capita sales Nutrition WellBeing US$ 1,500 5,000 13,000 22,000 Sources: UNIDO (value-added), WIDER and World Bank; Nestlé Per-capita income 28,000 15

17 PPP = Popularly Positioned Products A $240 billion opportunity PPP Nutrition - Professionals Growth scenario ( ) + US$ 170bn 5.9% p.a. "Premiumisation" Consumption of food manufacturing value-added actual US$, per capita Convenience Sustenance Growth scenario ( ) + US$ 70bn 6.9% p.a. Pleasure and diversity Nestlé per capita sales Nutrition WellBeing PPP US$ 1,500 5,000 13,000 22,000 Sources: UNIDO (value-added), WIDER and World Bank; Nestlé Per-capita income 28,000 16

18 Nestlé Nutrition: The global leader in specialised nutrition 17 Approx. CHF12bn annualised sales

19 18 The Patient Journey

20 Key Influencers during the Patient Journey 19 Oncologists Surgeon / Anaesthesist Specialists Oncologists Surgeons Specialists Oncologists GPs Oncology Nurses GPs Oncology Nurses Nurses (surgery unit) GPs Oncology Nurses Dieticians Pharmacists Caregivers Dieticians Pharmacists Caregivers Dieticians Pharmacists Caregivers

21 Patients' segmentation based on attitude and belief 20 "Doctors Orders" "Resignators" Follow HCPs recommendations and do not go outside of medical advice Less likely to consider nutrition as important part of treatment 26% 38% "I can not beat it because it is cancer" Believe that nutritional supplements do not have positive effect and use only product they consider to be medicine 36% "Fighters" Like to feel actively involved in their treatment Believe that nutrition is an important part of their treatment and might help their ability to fight cancer Source: Quantitative market research 2006 (USA, Germany, Spain)

22 Deterioration of nutritional status starts early at pretreatment phase Emotional stress & anxiety Anorexia and early satiety Tumor-derived catabolic factors Inflammatory response leading to hypercatabolism Operative stress Side effects of therapy Diarrhea Pain Nausea & Vomiting Mouth sores Resolution of acute side effects Chronic effects of therapy Radiation enteritis Dysphagia Remaining tumors Anorexia and early satiety Tumour-induced hypercatabolism

23 22 Consumer Technical Model - Oncology Text deleted due to its proprietary nature.

24 Nestlé R&D: beyond P&L investment to open innovation & Corporate VC 23 Business Key Suppliers Focus Venture Capital Universities, Start-ups -Ups Benefit areas The The wider Wider Nestlé é Early Development Stage Mature

25 Transforming portfolio towards healthier nutrition is driving growth Sales CHF 81.4 bn BAB Nutrition enhanced F&B Everyday F&B Occasional F&B CAGR '04-'06 + 6% +27% + 7% + 6% + 5% Sales CHF 91.8 bn BAB Nutrition enhanced F&B Everyday F&B Occasional F&B Optimising Nutrition: Adding/enhancing '05-07: Whole Grains: 700m additional servings in Europe Health benefits: BABs Micronutrients: vitamins, minerals, trace elements... Reducing '03-'06: TFAs: 34,000 metric tons removed '05-'06: Salt: 5,000 metric tons removed '03-'06: Sugar: 240,000 metric tons removed

26 ...and enhancing premium pricing & EBIT margin potential Consumer Pricing F&B portfolio Build Deliver Protect Nurture HNW Portfolio Nutritional Benefits HNW Premium Clinical studies Patents Claims... Brand Brand Value Added Manufacturing Value Added Raw Materials Quality, Taste, Freshness, Convenience,... Value Added Manufacturing Value Added Raw Materials Each step value-add, branding, nutritional benefit - creates greater differentiation from peers 25

27 Nestlé is uniquely positioned in nutrition, health and wellness 26 Nestlé is uniquely positioned - to contribute to healthy lifestyles and balanced nutrition - to transform from the respected and trustworthy food company that we are known as today - to create the leading Nutrition, Health and Wellness Company, by size and performance

28 Winning the emerging consumer Popularly Positioned Products 27

29 28 The PPP strategy Not cheap products or commoditisation Not price fighters, but business opportunities More than just affordable pack formats Products with nutritional content Innovative concepts with relevant products, pack sizes, price points, distribution & comms to target the emerging consumer 1.5 to 2.8 RMB Low unit price packs Innovation Different offering 100 Price Index 30 1 RMB

30 29 The global leader in branded hot and cold non-carbonated Beverage solutions The local andregional leader in strategic food product solutions

31 30 Estimated Global Sales Out of home (OOH) A Growing Trend CHF 400 billion market Due to shifts in demographics and socioeconomic factors foodservice represents an increasingly important consumer option Total = % of OOH Global Manufacturer Market Consumer demand for convenience, taste & nutrition is driving foodservice growth in all markets In mature economies, OOH spend today accounts for 30-50% of consumer food & beverage purchases The trend is for further long term growth in OOH consumption

32 31 Premium / Super-Premium Consumers willing to pay a relatively higher price for the product. Premiumisation An opportunity for Nestlé 2. Strong Emotional Affiliation Luxury Consumers willing to pay a several times the average price for the product 1. True Product Differentiation 4. Own the Expert Client Community 3. Own retail outlets Boutiques & Bars Gift boxes

33 32 Premium / Super-Premium Consumers willing to pay a relatively higher price for the product. Premiumisation An opportunity for Nestlé 2. Strong Emotional Affiliation Luxury Consumers willing to pay a several times the average price for the product 1. True Product Differentiation 4. Own the Expert Client Community 3. Own retail outlets Boutiques & Bars Gift boxes

34 33 Creating a successful future Secure foundations - Financial & social - Structural and cultural Exciting opportunities The right strategy Appropriate business models A successful future

35 34 Combining complexity with efficiency Complexity equals inefficiency and Focus equals efficiency But... The solution is to create a new paradigm "combining complexity with operational efficiency

36 Business models designed according to each business's needs 35 From to... An agile fleet of businesses Independent businesses, each independently strong and flexible, following its own rules, with business-specific knowledgeable management and a specific structure so that it can be competitive and successful.

37 Enhancing the organisation structure Specific business models for increased competitiveness Dynamic, entrepreneurial market teams Linked R&D and open innovation Leveraging Group scale manufacturing & services the efficient support structure Increased transparency to drive flawless execution Enabled by GLOBE Fast, nimble Market teams able to focus on demand generation profitable growth 36

38 Increasing our demand generating capabilities 37 A "close to consumer" organisation Leveraging strong brands & positions 27 Billionaire brands Innovation: bigger, bolder, better Renovation: 60/40+; time-pacing Increasingly enhanced by "service" element A "growth" mindset, enhanced by excellence in execution

39 38 GLOBE The enabler 1 Leverage business benefits through Business Excellence Best Practices - Continuous improvement 2 3 Leverage Decision Support as a competitive advantage - Flat, networked organisation Leverage Organisational Transformation to manage complexity with efficiency - Multi-focus approach with efficient support structure

40 CHF102 0 Share price and GLOBE timetable Preparing to implement GLOBE Implementing GLOBE Leveraging GLOBE Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul-07

41 40 Creating a successful future Secure foundations - Financial & social - Strategic and cultural Exciting opportunities The right strategy Appropriate business models A successful future

42 41 Key drivers of Nestlé's future Values and principles Nutrition, health and wellness value-add Popularly positioned products the lower end Premiumisation & FoodService the higher end Consumer-centric R&D & open innovation differentiation Organisational flexibility and efficiency demand generation

43 The Nestlé Model another 10 years Driven by Food & Beverage Nutrition, Health & Wellness Unique Organisation Structure 5-6% organic growth + Annual improvement in EBIT margin + Improved capital management / ROIC Sustainable Business Model achievable over at least the next ten years 42

44 43 Flawless Execution The course of the company has been set Now our people must see the journey through

45 Nestlé: Enhancing the quality of life through Nutrition everywhere 44