Nestlé Autumn Press Conference Presentation, Vevey, Switzerland, 22 October Paul Bulcke, CEO. Slide

Transcription

1 Nestlé Autumn Press Conference Presentation, Vevey, Switzerland, 22 October 2009 Paul Bulcke, CEO Good morning Ladies and Gentlemen, and welcome to our autumn press conference of I d like to thank you for your interest and your presence today, and I also extend a warm welcome to all of your colleagues and investors who are following this press conference through the webcast. You will have seen the figures for the 9 months sales of 2009 that went out this morning and you can find full details in the press release in your folder and online. I will comment on our business in a moment, with my colleagues from the Executive Board. But first, let me, in good tradition, introduce them to you. To my right, Jim Singh, Chief Financial Officer. On his right Frits van Dijk, who is running Zone AOA. Next to him Luis Cantarell, Head of Zone Americas and on his right, Laurent Freixe, Head of Zone Europe. Then you have John Harris, in charge of Nestlé Waters. Next to him is Richard Laube, who leads the global Nestlé Nutrition business. To my left, Robin Tickle, Head of Corporate Media Relations. Next to him Francisco Castañer, in charge of Pharma & Cosmetics and Human Resources. On his left, Werner Bauer, our Chief Technology Officer, then José Lopez, in charge of Operations. Next to José is Petraea Heynike, Head of Marketing and Sales. And on Petraea s left is Marc Caira, who runs Nestlé Professional. So, before I start my comments, I give the floor to Jim Singh, who will take you through the progress for the first 9 months of Jim **************

2 Jim Singh, CFO Thank you Paul. Once again, I am pleased to report on another period of solid broad based sales performance with increasing momentum in Real Internal Growth, driven mainly by our Food and Beverage businesses. For the Total Group, 9 months year to date, Organic Growth was 3.6%, with Real Internal Growth now up to 1%. Price growth was 2.6% with acquisitions net of divestitures at negative 0.6%. Therefore in constant currency, total sales growth for the 9 months was 3.0%. However, the negative currency effect remained significant at 5.2% reflecting the weakness of several major currencies against the Swiss Franc. With respect to Food and Beverages, for the first 9 months, Organic Growth was 3.5%, with Real Internal Growth at 0.7%, acquisitions net of divestitures was negative 0.7%, resulting in growth of 2.8% in constant currency. The exchange effects were negative 5.5%. Nestlé s growth performance reflects the successful outcomes of actions coherent with our strategy and build on our growth drivers as set out in our Strategic and Performance Framework. This performance must be considered in the context of a decade of achievement of an annual average Organic Growth and Real Internal Growth of 6.1% and 3.6% respectively therefore the Company is achieving growth this year on top of consistent growth performance in the past. Real Internal Growth is gathering momentum. The Total Growth is driven primarily by the acceleration in real internal growth as the effects of pricing taken in 2008 gradually phases. The upper line on this chart shows Real Internal Growth for the Group reached 1% for the first 9 months influenced by Q3 Real Internal Growth of 2%; for Food and Beverage, 3rd Quarter Real Internal Growth of 1.6% enabled the achievement of year-to-date 9 months performance of 0.7%. The 3rd quarter figures are disclosed primarily to demonstrate the acceleration in Real Internal Growth, as promised at the half year.

3 Looking at our large brands, we have about 30 Brands each with annualized sales in excess of 1 billion Swiss Francs, representing 75% of our total F&B business; virtually all are delivering improvement in performance as the year progresses, with 63% growing above the total F&B average year-to-date performance. Programs are in place to improve the performance of all brands and, in particular, those in slower growth mode. In general, our brands, global and local, continue to win with consumers around the world. The majority of our Brands are gaining shares in their respective markets. With respect to Nutrition, Health and Wellness, several of our larger brands benefit from an elaborate program of incorporating Branded Active Benefits, building on 8 benefit platforms. Brands which incorporate these benefits are growing at a rate above the Group s performance. Our Popularly Positioned Product business model is now firmly established in the emerging markets, and continues to be expanded to the developed world. This model will be discussed further this morning, but I am pleased to report that the PPP activities that are being monitored have experienced 12% Organic Growth for the 9 months year to date. Looking now at Premiumization, our single portion luxury coffee execution, Nespresso, continues its impressive growth trajectory, with year to date at 28%. The business continues to drive growth with innovative technologies and design, and the roll-out to new markets. Nespresso sales in 2008 reached 2.2 billion Swiss Francs. With the current growth momentum, it will soon be approaching another milestone performance of 3 billion Swiss Francs.

4 Nescafé Dolce Gusto continues its growth momentum, having only been introduced in selective markets three years ago. At growth rates in excess of 50%, now in 20 markets, with close to 3 million machines sold, Nescafé Dolce Gusto is on track to achieve close to 300 million Swiss Francs in Although Nestlé businesses are in growth around the world, our performance in the emerging markets - 33% of total F+B - has accelerated to 7.5% organic growth for the first 9 months. Within these markets, the BRIC markets which represent 10% of our F+B sales, are experiencing growth of 9.9%, year-todate September. Let me now go through each of our Zones. Zone AMS has delivered solid growth throughout the year with excellent performances in both North America and Latin America and the Caribbean. In the USA, all divisions delivered both positive Real Internal Growth and Organic Growth with outstanding achievements in PetCare and Beverages. In Latin America and the Caribbean, strong performances in the larger markets of Mexico and Brazil more than compensated for weakness in the Bolivarian Region and the Caribbean. All categories performed well particularly Petcare, Beverages and Ambient Dairy. In Zone Europe, business conditions and the environment in general, remain very challenging. In spite of these conditions, UK, France, Poland and the Ukraine continue to deliver good performance. Product categories such as Petcare, Soluble Coffee, Chilled Culinary and Powdered Beverages also delivered strong growth. However, there is evidence of an improving trend across the region as the general economic conditions stabilize.

5 Zone AOA organic growth remained consistent during the year at 5.8% but Real Internal Growth momentum accelerates from 0.8% in Q1 to 3.0% year-to-date September; all key product categories are contributing positively. The large emerging markets of China, India and Africa - Central West Africa and the Equatorial Africa - have experienced strong growth sufficient to over compensate for weaker growth in Oceania, Japan and Malaysia. We expect the Zone to accelerate Real Internal Growth, especially in Dairy, based on comparison to last year when the melamine crisis in China had a significant impact on growth in this product category. With respect to Nestlé Waters, the story on water is about sustained improvement, especially during the last quarter enabled by excellent growth in the emerging markets - approximately 13% Organic Growth -, and in France and Belgium resulting from several initiatives around key brands. Nestlé Waters have improved market shares in its major markets in Western Europe, and also in the United States where the beverage category remains weak. In Nestlé Nutrition, good improvement in Real Internal Growth and Organic Growth based on acceleration in Infant Nutrition and Healthcare in all three Zones driven by several innovations; NaturNes recently launched in France continues to gain momentum there and the product range is being introduced in key Western European markets with good success. Healthcare Nutrition is now on a growth trajectory which has had to overcome the effects of nearly 20% of SKU rationalization and the termination of several less profitable supply contracts. Jenny Craig is beginning to reflect some improvement but the business continues to be affected by lower demand influenced by the absence of any improvement in the level of discretionary spending. Performance Nutrition continues to enjoy high single digit RIG after refocusing the business to satisfy the needs of its growing its base of athletic consumers. When we talk about Other Food and Beverage, this category includes Nestlé Professional, Nespresso, Cereal Partners Worldwide (with General Mills) and Beverage Partners Worldwide - with Coca-Cola. These businesses achieved acceleration in both Real Internal Growth and Organic Growth for the first 9 months. Nestlé Professional operates in the Out-of-Home industry, which has been severely affected by the economic down turn symbolised by factory closures, high unemployment, significant reduction in Out-of-Home consumption and travel. In spite of the current business environment, we have seen sustained improvement during the last few months resulting in a year-to-date positive Organic Growth. CPW continues to deliver mid single digit organic growth while BPW is positive, but slightly lower.

6 As was noted before, acceleration in Real Internal Growth in Q3 was broad based with appreciable improvements in Nestlé Waters, Zone AOA and Nestlé Nutrition laying the foundation for further improvements in the last quarter of the year. I d like to now take you through our product segments In Powdered and Liquid Beverages, Nescafé, Nespresso, Nesquik, Nestea and Milo - all large brands - account for 80% of segment sales and essentially driving performance of Organic Growth of nearly 10% with 5.3% Real Internal Growth. It is important to observe that the principal brands are performing well on a global basis with good support from several product innovations and the acceleration in the roll-out of Nescafé Dolce Gusto and Nespresso. In Milk Products and Ice Cream, Real Internal Growth improved by 110 basis points in Q3 and now points to a positive outcome for the year especially when you consider the negative impact of the melamine crisis on Ambient Dairy late last year. Key brands such as Coffee Mate, Nestlé family cereals and NIDO, all contributed to improving performance. There was good performance in Ice Cream in Zone AMS and Zone AOA but on going product and market rationalization in Zone Europe offset gains in the other areas. In the Prepared Dishes and Cooking Aids segment, business slowed in Q3 primarily related to lower growth in frozen prepared meals, both in the United States and Western Europe. Our experience is that frozen snacks - Hot Pockets -, Pizza and family prepared meals are performing well relative to single serve products such as Lean Cuisine. Plans are now in place to return these key segments to growth in Q4. Confectionery, at 4% Organic Growth for the year, so far is a good performance. The slight slow down in the 3rd Quarter reflected some weakness in Biscuits in Latin America and in Sugar Confectionery; our Chocolate Confectionery business remained unchanged.

7 Our Petcare business continues its growth performance with Real Internal Growth up 50 basis points in Q3. Overall performance is driven by an active innovation program providing pet owners multiple choices of premium products incorporating a variety of benefit platforms. Like many of our key Brands, Pet Care performance is solid on a global basis. The Pharma business which includes Alcon, Galderma and Inneov continue to perform at mid single digit organic growth and Real Internal Growth. We expect this performance to be maintained for the balance of the year. With respect to our key initiatives, they are on track to achieve target improvements. Nestlé Continuous Excellence aimed at driving out waste and improve productivity by doing the right things right the first time will likely exceed this year s objective of 1 billion Swiss Francs. Our efforts to simplify our product offerings will result in SKU rationalization of another 8 to 10% this year, in addition to the 15% already reduced in 2007 and As demonstrated at the Half Year, we intend to operate with lower levels of Working Capital while at the same time targeting a higher level of customer service. Regarding our outlook, the expected growth performance and the success of our efforts in pursuit of key initiatives allow us to continue to invest in our brands through a variety of programs. We expect that our consumer facing brand support and R+D will increase from last year s level. We confirm that our total input cost will increase by about 2% this year, down from the 3% experienced in the 1st Half Year. Our capital expenditure will be approximately 4.5% of sales; net financing cost will be equal to or slightly below 1 billion Swiss Francs. As previously guided, the underlying tax rate for the Group will be approximately 27%.

8 Looking at Capital Efficiency, based on very good overall performance so far, the Board of Directors has agreed to accelerate the 2009 Share Buyback Program to 7 billion Swiss Francs from previously 4 billion. This change will allow for the early completion of the current 25 Swiss Franc Share Buyback Program announced in August of The progress made in the business allowed the Company to deliver a very competitive return to shareholders through a combination of dividends, and share buyback. Including 2009, for a 4 year period, Nestlé would have returned 40 billion Swiss Francs to its shareholders, or approximately 25% of its current equity value. Our priority must be to invest for growth, driving our Nutrition, Health and Wellness strategic agenda and through excellent business performance, provide excellent returns to shareholders. It is in the pursuit of our strategies and the strong results achieved in doing so, that have allowed Nestlé to achieve a gold standard credit quality and the Board of Directors has reconfirmed its intention to maintain this credit rating. So, to summarise the key points for the year-to-date: Real Internal Growth accelerated, driving Organic Growth, as promised. Our full year guidance is unchanged, that is to say volume driven Organic Growth to further accelerate with full Year EBIT margin improvement in constant currency Our 2009 Share Buyback accelerated to 7 billion Swiss Francs from 4 billion Swiss Francs. I now hand you back to our CEO *****************

9 Paul Bulcke, CEO Thank you Jim. Ladies and gentlemen, As Jim explained, we have increased momentum of our real internal growth in the third quarter of This comes on top of high growth in 2008, and once again proves the strength of our strategy. We have been streamlining our structures and product portfolio and, at the same time, we have continued to invest in innovative technologies and expand our R&D capabilities around the world. In addition, we have increased spending in product innovation and consumer-facing marketing support. Let me begin my comments this morning by putting these 9 month sales figures into context: they come on top of many years of strong performance which delivered profitable growth, period after period, year after year. Let us just look at the past three years, for example. For the period 2006 to 2008, our sales in constant currencies went up 27% and our EBIT increased 43%, with significant improvements in the EBIT margin and the return on invested capital. We invested 29 billion Swiss Francs in growing our business - 14 billion Swiss Francs in capital expenditure and 15 billion Swiss Francs in acquisitions. At the same time we returned a total of 28 billion Swiss Francs to our shareholders: 12 billion from dividends, which increased 55% over the period, and 16 billion from our share buyback programme. We have maintained our strategic direction, executing efficiently and effectively, and we have delivered total performance.

10 Total performance focuses on both the top and the bottom lines and on capital efficiency. It requires operational discipline in all areas. It means meeting these targets and, at the same time, investing in the platforms and structures for long-term and profitable growth. We do this in a responsible and sustainable way. Last time we met I spoke about the Nestlé Roadmap. 280 thousand Nestlé people in every country of the world are aligned behind this roadmap. They are passionate about what we do and focused on achieving our ambition. The roadmap clearly defines what we want to be: the world s recognized leader in nutrition, health and wellness, and the reference for financial performance in our industry. It defines what we want to leverage to succeed: our broad product and brand portfolio, backed by strong R&D capabilities, our unmatched global presence and our people, values and culture.

11 It defines where we see opportunities for particularly accelerated growth: in Nutrition, Health and Wellness; with emerging consumers and our popularly positioned product initiatives; in out-ofhome consumption; and in premiumisation. It also defines how we will deliver efficiently and effectively: through consumer relevant innovation and renovation across our brand and product portfolio; through continuous improvement of our operational efficiency; by having our products wherever the consumer looks for them; and by communicating and connecting better with our consumers. That is what the roadmap is all about: a clear and straightforward framework outlining our strategic direction, which everyone at our Company is aligned with and implements on a daily basis. Coming back to our investments for future growth: we continue to invest in production capacity, in new technologies and in R&D capabilities. We have also increased our spend in innovation, renovation and consumer-facing brand support. Let me illustrate, with examples, some of our bigger projects.

12 In March, we opened our largest aseptic factory for ready-todrink beverages, in Anderson, in the United States. This state-ofthe-art factory and distribution centre will allow us to create new and innovative products for brands such as Nesquik and Nestlé Coffee-Mate. But it will also create a new technology platform that we can leverage and rollout for other brands in different parts of the world. In June, we opened the Nespresso Production and Distribution Centre in Avenches, Switzerland, catering to the growing demand for Nespresso. The success of Nespresso is one expression of the importance of premiumisation as a strong growth driver. In September, in China, we opened what will become the world s largest bouillon factory, which will produce more than tons of Totole, China s leading bouillon brand. Also in Asia, we have made important extensions to facilities in Thailand, Vietnam, Malaysia and Indonesia. Moving to investments in R&D, in April we opened our R&D Centre in Abidjan, Côte d Ivoire. This centre will focus on improving the quality of locally-sourced materials, like cocoa, coffee and cassava, and on adapting products to the specific nutritional needs and tastes of West African consumers.

13 In May, we opened our first Japan-based research unit for fundamental scientific research, in partnership with the University of Tokyo. The unit will explore emerging research topics in health and nutrition for the 21st century, such as healthy ageing, with a special focus on mobility and cognitive performance. In early September, we opened the Chocolate Centre of Excellence in Broc, Switzerland. This Centre builds on our Company s heritage and will spearhead our drive in the premium and luxury chocolate segment. In late September, Cereal Partners Worldwide, our joint venture with General Mills, announced the creation of a new cereal Innovation Centre in Orbe, Switzerland, on our beverages centre campus. The new centre will help accelerate the development of nutritious breakfast cereals. So, we are constantly investing in research and development because innovation and renovation is what drives our success on the journey to Nutrition, Health and Wellness. Innovating and renovating our products and brands is both an on-going and a long-term process at Nestlé. Let me therefore now say a few words about recent product and brand innovations.

14 Nescafé is continuously being reinvigorated and renovated. We have re-launched Super Premium Nescafé in Europe, with a better product offering, new variations of in-cup taste and aroma, and improved convenience. Other variations of Nescafé, like Nescafé Protect, provide additional specific health benefits. Through innovation and renovation, our Nescafé brand is achieving high single digit organic growth in The Purina brand continues to record strong results in 2009, with 10.1 % organic growth. The continued success of our petcare business is driven by strong brands, by innovation and renovation, and by proactive R&D, combined with deep consumer insight. In single portion coffee, Nescafé Dolce Gusto has proven to be a game-changing success that has enabled rapid expansion in Western Europe. It is now being rolled out on other continents. The brand has enjoyed organic growth of over 50% in Close to 3 million Nescafé Dolce Gusto machines have been sold, with new versions being launched this year. New recipes have been added to the Nescafé Dolce Gusto collection, providing more choice and responding to specific consumption needs. In the brand s top ten markets, Nescafé Dolce Gusto machines now hold more that a 10 % market share. Our Popularly Positioned Product initiatives have also benefited from significant innovation, helping them register organic growth of 12% in PPP is a successful business model. It s a model that adapts the whole marketing mix - be it product, nutritional benefit, distribution, or communication - to the specific needs and possibilities of the emerging consumer. In fact, it allows emerging market consumers to buy Nestlé products for the first time. It also allows consumers to trade up and down through our product offerings, rather than trading out of them.

15 This successful business model has now been introduced in more mature economies, where many targeted PPP initiatives have already been rolled out. A long time before others, our PPP strategic initiatives were integrated into our marketing mix to emerging consumers, via appropriate distribution channels. Consumers also benefit from our scientific expertise and nutrition know-how, incorporated into our PPPs. Ladies and gentlemen, Since our early days in the 19th century, in an age when malnutrition was prevalent in Europe, we have been linked up with the PPP business model. Julius Maggi, for example, started his business by making affordable, nutritious soups for industrial workers. Today, at the beginning of the 21st century, malnutrition remains one of the most serious problems facing humanity. It is an underlying cause of around 35% of deaths in children under 5 years old, mainly in the developing countries. Micronutrient deficiencies exist in iron, iodine, vitamin A and zinc, for both adults and children. These deficiencies are especially common in Africa, South Asia and South-East Asia. Overall, one third of the world s population is deficient in iron, iodine, vitamin A or zinc, or a combination of them. Severe Iron Deficiency exists in Africa, and parts of Asia and South America, causing delay in mental development in children and reduced physical performance. Vitamin A deficiency is particularly severe in South Asia and Sub-Saharan Africa, resulting in blindness and increased susceptibility to infections. Iodine deficiency is more scattered across the globe, and is also responsible for impaired mental development. And widespread Zinc deficiency leads to poor growth and reduced immunity.

16 Over one billion Nestlé products are purchased every day around the world, which are, or could be carriers of micronutrients. We are now mapping out our product fortification efforts against the known micronutrient deficiencies across the globe. Working with local health and experts, we are analysing local nutrition landscapes, including the nutritional status, intakes and dietary habits of different populations in order to best target consumer needs. Our Company has been fortifying food and beverage products for many years now. The best-known of these is our iodine-enriched Maggi cubes, sold in many countries around the world, as you see in this slide. Milk is also a good source of nutrition and an excellent carrier of micronutrients. We can fortify dairy products with micronutrients at a relatively low cost, that keeps the price down for the consumer, while better targeting the specific local nutritional needs. Nestlé s global rollout of fortified growing up milks is focused on local needs and consumer preferences. In Central and West Africa we have launched Nido Essential; in Brazil we have Ideal; in Mexico we have Nido Rindes Diario; and in Malaysia we have Nespray. By the end of 2010 our affordable milks will reach millions of consumers in over 70 countries world-wide, mainly emerging countries. These are only a few examples. It is our hope that our strategy in product fortification will, over time, contribute significantly to the eradication of malnutrition and of micronutrient deficiencies around the world.

17 This mapping activity is a good example of how our business activities link up with society in a responsible and sustainable way. We call this Creating Shared Value. In this particular case, we are contributing to the solution of a public health problem with products that address the nutritional needs of specific parts of the population. In doing so, we serve both society and our shareholders at the same time. Ladies and gentlemen, Petraea Heynike will now show you how we go about our chocolate and confectionery business and, at the same time, how we positively link up with cocoa and coffee producing communities in a responsible and sustainable way. Chocolate and confectionery are important businesses for our Company. We have a strong and diverse portfolio, and our intention is to strengthen this even further. ******************** Petraea. Petraea Heynike, Executive Vice President, Marketing and Sales Thank you Paul. Ladies and Gentlemen, good morning. It s once again a great pleasure for me to be with you here today and to spend a few minutes discussing our chocolate and confectionery businesses and our activities in cocoa and coffee sustainability. Our chocolate and confectionery sector continues to benefit from solid organic growth and from a streamlining and refocus of brands and products. Our 9-month sales were up 4%. This continues a trend of good organic growth, with 8% last year, achieved at the same time as a significant improvement in the EBIT margin. So, to confirm what Paul stated earlier, we are focusing on disciplined, total performance, improving both the top and bottom lines of our chocolate and confectionery businesses.

18 In chocolate and confectionery it is important to be the consumer s favourite local brand something that we understand very well at Nestlé. Looking at the figures, over 70% of our chocolate and confectionery sales are from local products and brands. In all we have 45 brands with 110 chocolate count line top 10 positions. What s more, 152 products, representing 77 brands, are number one or number two in their markets. Kit Kat is our biggest-selling chocolate brand, a global top 3 brand, with annual sales of almost 2 billion Swiss Francs globally. But it is important to realise that Kit Kat is also perceived as a very local brand and our sales and marketing activities reflect this. Nestlé Confectionery Japan, for example, created an e-shop, hosted by Rakuten Ichiba, the largest internet shopping mall in the country with 40 million members and sales of 660 billion Yen, around 7.6 billion Swiss Francs. A range of special Kit Kat souvenir gift packs featuring local speciality flavours, including green tea, was the first item to be sold in the e-shop at its launch a year ago. The next initiative was a Kit Kat lucky bag. Kitto Katsu in Japanese means surely win and is used as a good luck wish for students during the exam period.

19 The growth of our chocolate business was driven in part, but not all, by our mainstream and volume brands such as Kit Kat. We have also been successful in launching new brands in markets where we have been less present, traditionally. Ten years ago we launched Nestlé Munch, a chocolate wafer bar, in southern India. Following its immediate success Munch was rapidly rolled out nationally. In under than 10 years it has become the number 2 brand in India, reaching well over a million outlets in the market. Today it has 11.5% market share in the overall confectionery segment in India. Munch, made with chocolate which melts at a higher temperature, has succeeded by consistently targeting the right consumer price points. It is priced at 5 Rupees. Chotu Munch, the mini, PPP version of the brand, retails at 2 Rupees, which is less than 5 Swiss centimes. And this year we launched the Guru Munch at 10 Rupees, which is continuing to drive brand growth. As Paul explained, with the creation of our new Chocolate Centre of Excellence, we have also made substantial investments to reinforce our expertise in chocolate-making and our presence in the premium and luxury chocolate segments. The growth of dark, premium chocolate is the most visible sign of premiumisation in chocolate. And Nestlé is the world s leading manufacturer of dark chocolate. Over the past two years we have launched over 200 dark chocolate products. For Nespresso we have developed a new range of luxury chocolates. In association with Belgian chocolatier Pierre Marcolini, we have specially formulated them to harmonise with each Nespresso Grand Cru coffee. Over the coming months we will be launching a number of additional initiatives in both the premium and luxury chocolate segment and in other areas of our chocolate and confectionery businesses.

20 In the last 20 years, worldwide chocolate consumption has doubled. Over the last five years alone, global consumption has increased 14%. But, for the fourth consecutive year, there has been a worldwide shortage of cocoa beans versus consumption, which is forcing cocoa prices up to 29-year highs. Our Company requires the highest-quality cocoa beans to make our chocolate and confectionery products. With our experimental cocoa farms and with our re-opened R&D Centre in Abidjan in Côte d Ivoire, we are working at all stages of the cocoa cycle to enhance quality, productivity and sustainability. As a leading private sector research organisation in the field, we have pioneered advanced technology in coffee and cocoa. Over the last 30 years, at our research centre in Tours, France, we have developed the expertise to propagate higher-quality cocoa and coffee plantlets on a broad scale. These plantlets help farmers rejuvenate their crops and increase productivity by replacing old, low-yield, disease-prone trees. Cocoa is vital to the livelihoods of 40 to 50 million people worldwide, including 5 million farmers, essentially smallholders, often living on low incomes. The most effective way for cocoa farmers to increase their income is by increasing quality and productivity. With higher and more stable incomes, they can then invest in better farm management, additional productivity capacity, good environmental management and in education.

21 Increasing productivity and sustainability is the focus of our extensive tree plantlet programme. Combined with the funding of farmer training schemes, we provide farmers with high-yield, disease-resistant plants, giving them the best and most effective means to better their livelihoods. Over the past 15 years we have provided 17 million coffee and cocoa tree plantlets to producer countries. Over the next 10 years, we will provide a minimum of 38 million more plantlets. In addition, we contribute important knowledge transfer of our expertise to specific producer countries and projects. This morning we are launching a major initiative called The Nestlé Cocoa Plan. It explains our commitment to cocoa sustainability. Building on the 60 million Swiss Francs that we have invested over the past 15 years, we expect to invest 110 million Swiss Francs in this area over the next 10 years. We will communicate the Cocoa Plan on Nestlé confectionery packaging around the world, and a dedicated website has been launched to provide information to consumers. The consumer website also includes information about our partners in these initiatives, which include UTZ, the cocoa certification organisation, the Centre National de Recherche Agronomique in Abidjan, the World Cocoa Foundation, the Sustainable Tree Crops Programme and the International Cocoa Initiative, which our Company helped found in For coffee, we have similar activities in sustainability training and coffee plantlet provision. These began many years ago. Our Company will invest 350 million Swiss Francs on coffee sustainability initiatives over the next 10 years, building on the 200 million Swiss Francs that we have invested over the past 15 years.

22 Why are we saying so much now, you may ask, about our activities in cocoa and coffee sustainability? Firstly, we would like the general public to have a clearer understanding of our investments in sustainability across our supply chain as well as our long-term intentions. And secondly, in the context of how we integrate creating shared value into our business, it is important to outline the benefits we have been delivering, and will continue to deliver to our farming partners around the world, especially in cocoa and coffee. More information on both these initiatives is available at our website and in your press folder. Thank you. ********************* Paul Bulcke, CEO Thank you Petraea. These cocoa and coffee sustainability programmes are part of our commitment to carry out our business in a responsible and sustainable manner, in line with our values and our principles. Over the 10 years since we created our Sustainable Agriculture Initiative millions of farmers have benefited from our free technical assistance. This is a strong, holistic programme with our agricultural suppliers. It aims to improve efficiency and risk management in the supply chain and supports sustainable development in agriculture. Today, our Company provides free technical assistance to over 600 thousand farmers, many of whom are dairy farmers supplying us with our biggest single raw material: milk.

23 This morning we have spent quite some time explaining our coffee, cocoa, milk and other rural development programmes, as these are vital to our business. They represent hundreds of millions of Swiss Francs investment. In addition to this, we have invested 250 million Swiss Francs this year alone in sustainability projects in our own factories and operations. These include renewable energies, reducing water usage and the improvement of our overall carbon footprint. Bottle light-weighting is just one project among many of the recent capital investments we have made in sustainability. Nestlé Waters continues to be the leader in PET bottle light-weighting. Since its launch in 2007, the Eco-Shape bottle in the United States alone has saved around 100 thousand tonnes of resin. In energy savings, this is equivalent to taking 78 thousand cars off the road for a year. This year we launched an ultra lightweight 1.5 litre bottle in Spain for Nestlé Pure Life which is the world s lightest bottle of its kind. The bottle is being rolled out now into other countries. We believe that it is important that our shareholders, consumers, customers, suppliers, other stakeholders and the public at large understand how we positively link up with society in a responsible and sustainable way. This is what we mean by creating shared value, and the role it plays in the convergence of growth, sustainability and nutrition. In fact, this is the key to creating and maintaining trust with society in general. Ladies and gentlemen, we have gone through many aspects of our business this morning. Our way of doing business is based on the principles of creating shared value, for our shareholders and for society in general. Our roadmap aligns the organisation behind our strategy and

24 drives our disciplined focus on total performance. The increased momentum of real internal growth in the third quarter, coming on top of high growth in 2008, once again proves the strength of Nestlé s strategy. In these challenging times, we have been streamlining our structures and product portfolio and, at the same time, we continue to invest in innovative technologies and expand our R&D capabilities around the world. Now, we are even leaner, fitter and stronger for the future. In addition, we have increased spending in product innovation and consumer-facing brand support. And all this allows me to confirm my expectation that volume-driven organic growth will further accelerate and that the EBIT margin in constant currencies will improve for the full year. Ladies and gentlemen, on this positive note, I come to the end of my presentation this morning. Thank you very much for your attention. I now pass you over to Robin, for questions.