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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.
3 Name of chairman2006 full year roadshow - February 2007
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
Name of chairman2006 full year roadshow - February 2007
Paul Polman
5 Name of chairman2006 full year roadshow - February 2007
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
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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
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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
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"Billionaire Brands" deliver robust growth
Growth %
BABs
AV market growth
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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
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10 Name of chairman2006 full year roadshow - February 2007
Nestlé WatersGrowth drivers in 2007
� North America
� Middle East & Turkey
� Mexico
� Innovation & renovation in Europe and North America
� Water +
CHF 100biomarket
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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
* Billionaire Brands
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12 Name of chairman2006 full year roadshow - February 2007
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
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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
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� 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
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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
* Billionaire Brands
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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
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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
* Billionaire Brands
�
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Prepared dishes and cooking aidsGrowth drivers in 2007
� Stouffer's, Lean Cuisine
� Buitoni Chilled Culinary US
� Maggi AOA
� Wagner Germany
� Hot Pockets acceleration
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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
* Billionaire Brands
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Chocolate, confectionery and biscuitsGrowth drivers in 2007
� BRIC opportunity� KitKat
� Key local brands� Improvement in the UK
CHF 80bioMarket
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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
* Billionaire Brands
�
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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
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� Drive simplicity to capture scale
� Tackle underperformers
� Improve capital efficiency
� All with discipline in execution
Improving performance of Nestlé F&BFinance Focus areas
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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
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• 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
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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
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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
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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
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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
Name of chairman2006 full year roadshow - February 2007
Peter Brabeck-Letmathe
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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
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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
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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
$240 billion opportunity
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People, mn
Sources: UN WIDER and World Bank (also for outlook on economic growth 2005-2015); analysis EIR
+ 885+ 133
+ 230
+ 448
+ 199
Moving up the income bracket
1970 1653 1429
2153 26012354
710940 1825
389522
443175
235286
295
494
849
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1995 2005 2015
> 28'000
22'000-28'000PPP$
13'000-22'000PPP$
5'000-13'000PPP$
1500-5000 PPP$
< 1500 PPP$
+ 355
An additional 1.5 billion people
35 Name of chairman2006 full year roadshow - February 2007
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
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Infant Infant NutritionNutrition
HealthCare HealthCare NutritionNutrition
Performance Performance NutritionNutrition
WeightWeightManagementManagement
Nestlé Nutrition
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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
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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
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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
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Popularly Positioned Products:
winning the emerging consumer
A $70 billion opportunity
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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
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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
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43 Name of chairman2006 full year roadshow - February 2007
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
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44 Name of chairman2006 full year roadshow - February 2007
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
45 Name of chairman2006 full year roadshow - February 2007
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)
46 Name of chairman2006 full year roadshow - February 2007
-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
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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
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Nestlé highly rated in sustainability indices
AAA rating (1st out of 47) from
Climate Leadership Index : 75
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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
Name of chairman2006 full year roadshow - February 2007
2006 full year roadshow