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Name of chairman
Beating the benchmark
Bellevue meets management seminar – January 2007
Peter BrabeckChairman &
Chief Executive Officer
11 January 2007
Peter BrabeckChairman &
Chief Executive Officer
11 January 2007
2 Name of chairmanBellevue meets management seminar – January 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 chairmanBellevue meets management seminar – January 2007
Agenda
� Introduction – strategy and the Nestlé Model
� 2006 in review and 2007 previewed
� Nutrition, Health and Wellness – no longer a vision; becoming a reality
� Conclusion
4 Name of chairmanBellevue meets management seminar – January 2007
Organisational Transformation
• Create an agile fleet of businesses/markets
• Focus on profitable growth• Leverage scale• Tackle under-performers
From traditional businesses into a
Nutrition, Health and Wellness company
Strategic Transformation
Nestlé's transformational strategy
5 Name of chairmanBellevue meets management seminar – January 2007
The delivery of 5-6% organic growth, combined with sustainable increase in EBIT margin, driving an improving
Return on Invested Capital
The Nestlé Model
6 Name of chairmanBellevue meets management seminar – January 2007
2006 in review and 2007 previewed
7 Name of chairmanBellevue meets management seminar – January 2007
2006 in review
• To be another year of record results, achieving the Nestlé Model, led by Food and Beverage
• 39% increase in cash returned to shareholders
• Savings programmes on track – CHF 1.2 billion
• Focus on profitable growth - GLOBE and shared services
• Accelerating transformation to Nutrition, Health and Wellness – Uncle Toby's, Jenny Craig, Novartis Healthcare Nutrition
• Addressing underperformers – divestitures
8 Name of chairmanBellevue meets management seminar – January 2007
Divestitures
Disposal of Perrier bottle making (2006)
Disposal of Japanese vending (2006)
Agreement with Lactalis for the Chilled dairy activities in Europe (2005 / 2006)
Disposal of Vlachas in Greece (Dairy in 2006)
Disposal of Trinks in Germany (2004)
Disposal of Eismann in Europe (2004)
Disposal of Schöller Private Label business in Germany (announced Sep 2006)
9 Name of chairmanBellevue meets management seminar – January 2007
2007 previewed - strategic
• Accelerating transformation to Nutrition, Health and Wellness - Integrating Novartis Healthcare Nutrition- Driving 60/40+, Branded Active Benefits- The Nutritional Compass
• Bigger, better bolder innovation
10 Name of chairmanBellevue meets management seminar – January 2007
2007 previewed - organisation
• Reorganisation of R&D, operations & supply chain –now under separate leadership
• New FoodServices structure in place – increased focus
• GLOBE focus now on leveraging the benefits:- Business benefits through best practices- Decision Support as a competitive advantage- Organisational Transformation to manage
complexity with efficiency
• Shared services to accelerate – first benefits
11 Name of chairmanBellevue meets management seminar – January 2007
2007 previewed - financial
Expecting to deliver the Nestlé Model, led by F&B
- Drive simplicity across the F&B businessesE.g. SKUs, structures, reporting
- Leverage scale for competitive advantageE.g. GLOBE, GNBS, shared services, procurement
- Tackle underperformers: Invest phase, core, non-core
- Increase discipline/ execution in all we doE.g. Working capital, dynamic forecast, real time data, project tracking
12 Name of chairmanBellevue meets management seminar – January 2007
-10%
-5%
0%
5%
10%
15%% Growth
20051996 1997 1998 1999 2000 2001 2002 2003 2004
RIG Pricing & Other Acquisitions/Divestitures FX ImpactNot restated; in 2001: including TTS effect
10 yearsaverage
OG5.7%
OG: OrganicGrowth
3.4%
2.3%
-1.4%
1.0%
The Four Factors of Group Sales 1996-2005
Consistent track record to continue
13 Name of chairmanBellevue meets management seminar – January 2007
10.2% 10.3% 10.3%
11.8% 11.8%12.3% 12.5%
12.7%13.0%
11.1%
01'0002'0003'0004'0005'0006'0007'0008'0009'000
10'00011'00012'00013'00014'000
mio
CH
F
9.0%
9.5%
10.0%
10.5%
11.0%
11.5%
12.0%
12.5%
13.0%
13.5%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
% of SalesEBIT (mio CHF)
2005 & 2004 restated - New NPS definition in 2001
Sustainable improvement in EBIT
Consistent track record to continue
14 Name of chairmanBellevue meets management seminar – January 2007
Nutrition, Health and Wellness
15 Name of chairmanBellevue meets management seminar – January 2007
Pleasure anddiversityPleasure anddiversity
ConvenienceConvenience NutritionNutrition
Health andwellnessHealth andwellness
WellBeingWellBeing
US$ 4,000 US$ 13,000 US$ 22,000
Per-capita income (PPP)
Manufacturing value-added in food purchased
actual US$, per capita$ 500
$ 100
US$ 28,000
$ 300
SustenanceSustenance
NestlNestlééper capita per capita
salessales
Attractive food market dynamics
16 Name of chairmanBellevue meets management seminar – January 2007
An opportunity for enhanced value creation
0
100
200
300
400
500
600
700
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
10-year TSR08/95 = 100 )
Source: MA Analysis
Health
Wellness
Food & Beverages
Attractive market – Health & wellness
17 Name of chairmanBellevue meets management seminar – January 2007
Drive the Nutrition, Health & Wellness orientation across
Food & Beverage
Strengthen our leadership position in the core nutrition
business
Nestlé Nutrition CompanyCorporate Wellness Unit
Health, Nutrition & Wellness at Nestlé
18 Name of chairmanBellevue meets management seminar – January 2007
Infant Infant NutritionNutrition
HealthCare HealthCare NutritionNutrition
Performance Performance NutritionNutrition
WeightWeightManagementManagement
2005 Sales (CHF billion) 5.2 10% OG
2005 EBIT margin 17.6% 20%
Nestlé Nutrition
2005 Objectives
19 Name of chairmanBellevue meets management seminar – January 2007
Nestlé Nutrition – transformed in 2006
20 Name of chairmanBellevue meets management seminar – January 2007
Nestlé Nutrition – transformed in 2006
Novartis Medical Nutrition
Boost ReSource
NovaSource IsoSource Vivonex
Peptinex Impact Compleat
Optifast
21 Name of chairmanBellevue meets management seminar – January 2007
Creates No. 2 global player in Healthcare Nutrition• Strengthens our position in the U.S. and Europe• Creates a stronger foothold in Rest of World• Larger organization, broader product range,
faster speed to market• Strong and experienced management team
Increased R&D capability • Complementary core competencies (Nestlé
nutrition science and food technology, Novartis Pharma heritage)
• Increased access to Key Opinion Leaders (KOLs) and medical organisations
A Winning Combination
22 Name of chairmanBellevue meets management seminar – January 2007
A Winning Combination
Significant step up in scale delivering benefits across R&D, product portfolio, commercial organisation
and access to distribution channels
Broader product portfolio of strong brands supported by clinical data • Full range of general and disease-specific
products: Diabetes, Oncology, Critical care / Gastro-intestinal, Geriatric care
Increased presence in attractive retail channels • U.S. retail with Boost brand• Europe and Rest of World – Retail pharmacies
23 Name of chairmanBellevue meets management seminar – January 2007
Enhanced R&D Profile
Complementary competencies will result in better innovations, brought to market faster, globally
• Nutrition science• Food technology excellence
(taste, texture, sensory)• Consumer-centric approach
Pipeline
• Pharma heritage• Health economics data• Regulatory competences• Clinical trial design• Access to Key Opinion
Leaders
24 Name of chairmanBellevue meets management seminar – January 2007
Nestlé acquisition criteria
• To be category No.1 or strong No.2
• Generate value for shareholders
• Focused approach on value-added growth categories
• Strong brands in leadership positions
• RIG, cash flow and earnings enhancing
• High degree of certainty of successful integration
• Maintain strong credit ratings and financial flexibility
Novartis MN acquisition meets these criteria
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Conclusion
26 Name of chairmanBellevue meets management seminar – January 2007
Over 10-year period, Nestlé's TSR position # 2.
Source: Bloomberg
Nestlé has delivered in the past ...
n.a.18.020.230.5Kraft
8.514.52.623.1Coca Cola
28.047.455.433.4Campbell
94.444.236.037.9Heinz
134.712.635.012.7Unilever
137.425.637.519.9General Mills
172.161.236.4-8.1Hershey
187.480.436.513.4Procter & Gamble
193.844.344.52.1Cadbury Schweppes
260.736.750.212.8Nestlé
399.283.387.132.4Danone
10 Years5 Years3 Years1 Year
27 Name of chairmanBellevue meets management seminar – January 2007
... and remains rich with opportunity
Brands & Innovation
� Generating sales growth � Growing market shares� Enhancing mix� Improving F&B margin
� Driving focus & discipline� Tackling underperformers� Improving F&B margin � Improving working cap/fixed asset turns� Increasing capital efficiencies & returns
Scale & Structure
Strategic transformation
Organisational transformation
28 Name of chairmanBellevue meets management seminar – January 2007
• Transformation to Nutrition, Health and Wellness is accelerating
• Organisational transformation is freeing up our markets to focus on profitable growth
• Nestlé Food, Beverage & Nutrition will be the key drivers of the Nestlé Model
• Nestlé is opportunity-rich: innovation for growth and mix; scale for growth and efficiencies
Conclusion
Name of chairman
Beating the benchmark
Bellevue meets management seminar – January 2007
Peter BrabeckChairman &
Chief Executive Officer
11 January 2007
Peter BrabeckChairman &
Chief Executive Officer
11 January 2007