2006 full year roadshow - home | nestlé global · · 2012-10-052006 full year roadshow -...

Name of chairman2006 full year roadshow - February 2007

2006 full year roadshow

2 Name of chairman2006 full year roadshow - February 2007

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.


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 positioned products


Paul Polman


2006 Highlights – all metrics improve

+ 8.1%+ 6.2%

+ 12%+ 50bps

+ 13.8%+ 40bps

+ 100 bps

+14.4%+ 70 bps

+ 40 bps+ 30 bps

CHF 98.5 bio

CHF 13.3 bio13.5%

CHF 9.2 bio9.3%

6.7%

CHF 11.7 bio

21.2%11.7%

+ CHF 7.3 bio

+ CHF 1.4 bio

+ CHF 1.1 bio

- CHF 1.0 bio

+ CHF 1.5 bio

Sales – totalOrganic growth

EBITEBIT margin

Net profitNet profit margin

Working capital (% of sales)

Operating cash flow

ROIC- before goodwill- after goodwill

FY06 totalImprovements FY 06 v 05


Food and BeveragesDelivering the Nestlé Model

2006

2005*

RIG OG EBIT margin

* Restated to be on comparable basis

Sales

CHF 91.8 bio

CHF 85.1 bio

+ 7.8% +40bp

12.2%

11.8%

Strongon-goinggrowth

4.2%

5.9%

6.0%

3.8%

EBIT

+ 11.2%

CHF 11.2 bio

CHF 10.0 bio


2006 Highlights

� Successful delivery of the Nestlé ModelFood and Beverage the driver of growth and profitabilityPerformance 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 Life

� Nutrition, health and wellness transformationUncle Tobys, Jenny Craig, Novartis Medical Nutrition 60/40+, BABs, Nutritional Compass Divestitures of commoditised low value business

� Organisational transformationLeverage GLOBE, accelerate shared servicesProfit responsibility pushed down the companyStand-alone Nestlé Nutrition and FoodServices


"Billionaire Brands" deliver robust growth

Growth %

BABs

AV market growth


Highlights

• North America share gains driven by Poland Spring, Deer Park, Ozarka and Nestlé Pure Life

• Nestlé Aquarel growth driver Europe• Panna and S.Pellegrino most successful

international brands• Efficiency projects, HOD and growth

contribute to improved EBIT margin

Performance

Sales CHF: 9.6 bio OG: 8.2%Mkt share*:

Nestlé WatersHigh growth and margin improvement

8.1%8.7%

2005 2006

EBIT +60 bps

0.7 bio 0.8 bio

* Billionaire Brands

�


Nestlé WatersGrowth drivers in 2007

� North America

� Middle East & Turkey

� Mexico

� Innovation & renovation in Europe and North America

� Water +

CHF 100biomarket


Powdered & Liquid BeveragesDynamic growth; strong innovation

Highlights

• Mixes & premium drive strong Nescaféperformance

• Succesful launch of Nescafé Dolce Gusto

• Nespresso grows 40% to over CHF 1 bio 35 boutiques opened in ’06

• MILO: continuous good growth

• Ready to drink near double digit growth in Americas Nesquik, Juicy Juice

Performance

Sales CHF: 16.3 bio OG: 7.9%Mkt share*:

22.7%

22.4%

2005 2006

EBIT -30 bps

3.6 bio3.4 bio


�


Powdered & Liquid BeveragesGrowth drivers in 2007

� BRIC

� Dolce Gusto

� Nespresso – boutique openings

� Nescafé 3-1; Cappuccino

� Nesquik / Nescafé RTD

� MILO - continued growth

CHF 60bioMarket*

*Coffee


Highlights

• Growth up by 200 bps in H2

• Innovation in infant formula

& cereals key drivers

• NAN HA & NAN probiotic roll-out at 85%

• Leader in 3 out of BRIC

• Successful Nestlé Nutrition set-up

• Phasing of start-up costs

• Jenny Craig 30% growth but EBIT impact

Nutrition: transition year to global businessMove into Weight Management

EBIT -80 bps

17.7%16.9%

2005 2006

Performance

Sales CHF: 6 bio OG: 6.1%Mkt share:

0.9 bio 1.0 bio


� Further roll-out of NAN HA & NAN probiotic to 95%

� Innovation across Infant Formula� PowerBar relaunch� Jenny Craig � Medical Nutrition integration

Nutrition Growth drivers for 2007

Boost ReSource

NovaSource IsoSource Vivonex

Peptinex Impact Compleat

Optifast

CHF 100bioMarket


Dairy: Milk products build on successIce cream improves

Highlights

Milk products

• Americas & AOA grew 8%+ on shelf stable

• Key drivers: Nido, Ninho, Bear Brand,Focus on segmentation / value-add

• CoffeMate grew double digit - good consumer understanding and interaction

Ice cream

• Dreyer’s “Quality of sales” strategy improved margin

• Eskimo pie to strengthen impulse position

• Successful product launches in Western Europe building on low fat and Dibsinnovation

• Balanced top and bottom line growth for ‘07

Performance

Sales CHF: 19.5 bio OG: 5.1%Mkt share* (MP):Mkt share* (IC):

2005 2006

EBIT +100 bps

9.3%

10.3%

2.0 bio1.7 bio


��


Dairy and Ice creamGrowth 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 70bioMarket*

*CHF 30 bio Core Shelf Stable; CHF 40 bio Ice cream


Prepared dishes and cooking aidsAOA and Americas deliver high growth

Highlights

• Good growth in Frozen in North America and France (Davigel)

• Stouffer’s and Lean Cuisine star in US, Panini launch exceeds $100mio

• Hot Pockets US growth poor but good margin

• Double digit growth in Culinary from Maggiand local brands in AOA

• Buitoni performs well in Chilled in US and frozen pizza performs well in Europe

Performance

Sales CHF: 17.6 bioOG: 4.8%Mkt share*:

EBIT +10 bps

13.1%13.2%

2005 2006

2.2 bio 2.3 bio


�


Prepared dishes and cooking aidsGrowth drivers in 2007

� Stouffer's, Lean Cuisine

� Buitoni Chilled Culinary US

� Maggi AOA

� Wagner Germany

� Hot Pockets acceleration


Chocolate, confectionery and biscuitsSuccess in many markets undone by two

Highlights

• Kit Kat* grew 7% - trend to lighter snacks• Latin America, AOA & Eastern Europe

strong• Western Europe focused on margins • UK “Magnificent 7” brands achieve share

gains• US market declined in '06• Strong growth in Japan• Acquisition of Uncle Tobys and move into

“Healthy snacking”• Nestlé #1 player in branded dark chocolate,

high in antioxidants

Performance

Sales CHF: 11.4 bio OG: 2.6%Mkt share:

EBIT -10 bps

11.6% 11.5%

2005 2006

1.3 bio 1.3 bio



Chocolate, confectionery and biscuitsGrowth drivers in 2007

� BRIC opportunity� KitKat

� Key local brands� Improvement in the UK

CHF 80bioMarket


PetCareGood growth and margin improvement

Highlights

• Innovation in strategic premium and super premium brands drives profitable growth

• Beneful sales up 44%: “Healthy” lines, expansion in Europe & launch of prepared meals

• North America: Successful launch of “natural” and “fully organic” lines: ONE Naturals, Dog & Cat Chow Naturals and Pro Plan Selects

• Europe: successful focus on super premium and premium products

• High growth on Gourmet, ProPlan, ONE, Darling and Beneful driven by innovation and growth in speciality and grocery channels

Performance

Sales CHF: 11.4 bioOG: 7.1Mkt share:

EBIT +60 bps

14.5%

15.1%

2005 2006

1.5 bio 1.7 bio


�


PetCareGrowth drivers in 2007

� Premium and super premium brands

� European roll-outs of successful US initiatives

� ONE into new markets

� Hyper premium wet cat, Perle, Diamante

� Continued development of ProPlan

CHF 50bioMarket


� Drive simplicity to capture scale

� Tackle underperformers

� Improve capital efficiency

� All with discipline in execution

Improving performance of Nestlé F&BFinance Focus areas


Driving Simplicity, scale and Tackling underperformers

Simplicity 2006

SKU optimisation -7%

Legal Structures 20% of project target

Scale

GLOBE 80%

Shared Services 30%

Operational Excellence CHF 1.2 bio

Underperformers

Reduce Value Destroyers sales over CHF 2 bio

Capital efficiency

Working capital -100bps

2007

-10%

-10%

leverage

50%

CHF 1.2 bio

ongoing

further improvement


• Cross-functional team• Action plan against each

underperforming SKU• Defined responsibilities & timing• Hurdles rates for new SKUs• Tracking results• Enabled by GLOBE

Actions Results

Focus on core SKUs drives financial performance

Drive simplicity across the businessSKU optimisation - Russia

131

118

85

80

90

100

110

120

130

140

Current Portfolio New Portfolio (excluding natural Market growth)

Inde

x

EBIT Margin NPS/Sales # SKUs


GNBS (Shared Services) implementation

30%

approx. 80%

200820072006

Shared ServicesAchieve critical mass and sustainability

50%+

Approx. Cumulative % F&B Sales supported by Nestlé Business Services;

Financial and Employee Services (insourced and outsourced)

Capturing our potential


Tackle underperformers to strengthen coreUK Confectionery

SKUs

40% -0.6%Market share EBIT margin

Total UK Confectionery

10% 0.5%

Media spend Share Gain

Magnificent Seven


Increase discipline/execution in all we doWorking capital - Group

• Establish common KPIs• Set reduction target • Track monthly & benchmark• Share best practices & tools on

website• Improve demand planning• Optimise SKUs• Enabled by GLOBE

Key Actions... ...driving results

*Cash conversion cycle = (AVG trade receivables/sales) x 365 + (AVG inventory/ COGS) x 365 - (AVG trade payables/ COGS) x 365

*SCORE = Supply Chain Optimisation Review End-to-End

4740

0

10

20

30

40

50

2005 2006D

ays

Cash Conversion Cycle*

Focus and transparency drive results


Improving performance of Nestlé F&BFinance Focus areas

Growth & efficiencies were the foundation of 2006 performanceRaw material costs mean more to do in 2007

� Drive simplicity to capture scale

� Tackle underperformers

� Improve capital efficiency

� All with discipline in execution


Peter Brabeck-Letmathe


To Nutrition, Health and Wellness

To flexible agile organisation,leveraging scale

Organisational Transformation

Strategic Transformation

Management changes aligned with strategic & organisational transformation

Drives longer termstructural

performance

Drives shorter termoperational

performance


To Nutrition, Health and Wellness

Werner BauerChief Technology Officer

R&D, Innovation Acceleration Teams,

Innovation Partnership Management,

Packaging & design...

To flexible agile organisation,leveraging scale

José LopezHead of Operations Organisation

Sourcing, Manufacturing & Supply Chain, Quality Management,

Safety, Health & Environment, Engineering & Operations Performance...

Organisational Transformation

Strategic Transformation

Management changes aligned with strategic & organisational transformation


SustenancePleasure andPleasure anddiversitydiversity

ConvenienceConvenience

5,000 13,000 22,000

Per-capita income (PPP)

Consumption of food manufacturing value-added

actual US$, per capita

28,000

Nestlé per capita sales

Sources: UNIDO (value-added), WIDER and World Bank; Nestlé F&C; analysis EIR

Growth scenario (2005-15)

+ US$ 170bn5.9% p.a.

Growth scenario (2005-15)

+ US$ 70bn6.9% p.a.

Demographics Focusing on the low and high ends

US$ 1,500

PPP

$240 billion opportunity


People, mn

Sources: UN WIDER and World Bank (also for outlook on economic growth 2005-2015); analysis EIR

+ 885+ 133

+ 230

+ 448

+ 199

Moving up the income bracket

1970 1653 1429

2153 26012354

710940 1825

389522

443175

235286

295

494

849

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1995 2005 2015

> 28'000

22'000-28'000PPP$

13'000-22'000PPP$

5'000-13'000PPP$

1500-5000 PPP$

< 1500 PPP$

+ 355

An additional 1.5 billion people


Limited421Dietary supplements

Yes2-3871Food & beverages (value-added)

Yes8-1054 – Weight Management *Yes5-611– Performance NutritionYes6-712– HealthCare NutritionYes4-521– Infant Nutrition

1. Products for specific needs

Growth (%)Estimated size (CHF bio)

Nestlépresence

MarketProduct category

* including non-foods such as fitness clubs

Nutrition: High-value, high-growth

CHF 100 billion market


Infant Infant NutritionNutrition

HealthCare HealthCare NutritionNutrition

Performance Performance NutritionNutrition

WeightWeightManagementManagement

Nestlé Nutrition


Jenny CraigStrong 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 Zealand


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

Nestlé Nutrition + Novartis Medical Nutrition A Winning Combination

Significant step up in scale delivering benefits across R&D, product portfolio, commercial organisation

and access to distribution channels


The Food Service market: CHF 400 billion

Estimated Global Sales

(CHF bio. 2004)

4.0

3.7

1.9

3.7

6.5

�3% of OOH Global

Manufacturer Market

• Big and growing opportunity

• Relevant market CHF 400 bio

• Consumer trends drive growth

• Customer consolidation

CHF 2 trillion global consumer spend5-7% growth in major operator segments

80% in Food, 20% in Beverages

50% of US consumer F&B spend is out of home

Common menus and processes drive manufacturer relevant customised solutions

Total = 19.8

CHF 400 billion market


Popularly Positioned Products:

winning the emerging consumer

A $70 billion opportunity


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 isover 50% of households


Affordable at Php 6.5 per serving, or 0.15 CHF

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.

Proprietary manufacturing technology for lower capital requirementsAn active milk solid sourcing strategy for most cost effective ingredientsA low cost, highly efficient operation to enable an affordable pricewhile still being margin enhancing

Widely available in traditional neighborhood stores85% coverage - about 475,000 stores

A consistent BEAR BRAND strategy over 30 years has enabled penetration to 9.5 million Filipino households among lower socioeconomic classes

Nestlé BEAR BRAND in the Philippines since 1976

�

�

�

�

�

��

�

�


Maggi BouillonCentral West Africa

Individual cubes to meet daily affordability level

Addresses micronutrient deficiencies with Iodine fortification and offers a tastier alternative to salt

65 million bouillon cubes sold per day with45% penetration of rural areas

Local neighborhood women for direct marketing

�

�

�

�


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


Group EBIT Margin over last 10 yearsAcceleration fuelled thanks to F&B improvements

Figures correspond to published figures - not restated for accounting changes

10.2% 10.3% 10.3%

11.1%

11.8%11.8%

12.3%12.5%

12.6%12.9%

13.5%

0

2'000

4'000

6'000

8'000

10'000

12'000

14'000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

EBIT (in mio CHF)EBIT (in % Sales)


-10%

-5%

0%

5%

10%

15%

% Growth

10 yearsaverage

Acquisitions

DivestituresForex

OG: OrganicGrowth

3.6%

2.2%

2.5%

-1.4%

OG5.8%

-1.5%

RIG Pricing & Other Acquisitions Divestitures FX Impact

Consistent Top-Line Organic Growthfor the past 10 Years

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006


0

50

100

150

200

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Inde

x

Water consumption

Waste water generationGreenhouse gasesProduction volume

Energy consumption

Production volume doubled in 10 yearsEnvironmental impacts down: waste water


Nestlé highly rated in sustainability indices

AAA rating (1st out of 47) from

Climate Leadership Index : 75


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


2006 full year roadshow

2006 full year roadshow - home | nestlé global · · 2012-10-052006 full year roadshow -...

Documents