CAGNY 2020 Managing our portfolio for growth François-Xavier Roger: EVP, Chief Financial Officer
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. 2 | February 21, 2020 | CAGNY
Global, balanced and diversified business 2019 Sales: CHF 92.6 bn Where we sell What we sell EMENA Beverages Nutrition & PetCare Milk products 28% (incl. coffee) Health Science & ice cream 25% 16% 15% 14% Prepared dishes Confectionery Water & cooking aids AOA AMS 26% 46% 13% 9% 8% Number of employees R&D spend Factories 291 000 CHF 1.7 bn 403 3 | February 21, 2020 | CAGNY
Iconic global and local brands | February 21, 2020 | CAGNY 4
Strong 2019 financial results Underlying trading Organic growth Underlying EPS operating profit margin (in CHF) + 11.1% % 17.6% in constant currency 17.0% 3.5% 3.0% 4.41 4.02 2018 2019 2018 2019 2018 2019 Return on Free cash flow Cash returned to shareholders invested capital (CHF bn) (CHF bn) 16.9 12.3% 13.9 12.1% 11.9 10.8 2018 2019 2018 2019 2018 2019 5 | February 21, 2020 | CAGNY
Key growth platforms United States PetCare E-commerce Premium products 18.5% 18% 7.4% 7.0% 6.5% 4.5% 4.1% 2.6% 2018 2019 2018 2019 2018 2019 2018 2019 All figures relate to organic growth 6 | February 21, 2020 | CAGNY
Delivering strong total shareholder returns Consistent TSR * performance CHF 109.3 bn returned to shareholders since 2010 2010 – 2019 10 year 5 year 3 year 1 year Nestlé 290% 84% 55% 40% CHF 42.9 bn CHF 66.4 bn Share buybacks Dividend payments 218% 60% 26% 27% STOXX F&B * Total Shareholder Returns (TSR): Share price appreciation plus dividend reinvestment. Both Nestlé and peer median STOXX 1800 Global Food and Beverage are calculated in EUR. All data is gross except STOXX 10-year where net data is used as gross values are unavailable. Source Bloomberg Data as of 31.12.2019 7 | February 21, 2020 | CAGNY
Top and bottom line sequentially improving Organic growth Underlying trading operating profit (% of sales) (%) 17.6 3.5 3.2 3.0 17.0 16.5 2.4 16.0 2016 2017 2018 2019 2020 2017 2019 2020 2016 2018 Restated 8 | February 21, 2020 | CAGNY
Creating value through portfolio management Current portfolio M&A 9 | February 21, 2020 | CAGNY
Driving profitable growth through our portfolio 7.4% 4.7% 4.1% 3.5% FY 2019 Organic growth Group High-growth Emerging Premium categories markets products FY 2019 Underlying 17.6% > 18.5% TOP margin | February 21, 2020 | CAGNY 10
Mix is driving our organic growth Organic growth composition 2017-2019 * RIG = Mix + Volume Pricing Mix Volume * Excludes water and Nestlé Skin Health 11 | February 21, 2020 | CAGNY
Mix is driving our organic growth Organic growth composition 2017-2019 * ~ 20% Pricing Offsetting foreign exchange and commodity inflation Mix Volume * Excludes water and Nestlé Skin Health 11 | February 21, 2020 | CAGNY
Mix is driving our organic growth Organic growth composition 2017-2019 * Pricing Mix Volume Share of stomach and shelf space ~ 15% * Excludes water and Nestlé Skin Health 11 | February 21, 2020 | CAGNY
Mix is driving our organic growth Organic growth composition 2017-2019 * Pricing Category, geography and Mix Volume product (premiumization) ~ 65% * Excludes water and Nestlé Skin Health 11 | February 21, 2020 | CAGNY
Mix and volume are gaining traction over time 2.2 Mix increasing 1.8 1.7 Pricing stable 0.5 0.5 0.9 0.7 0.9 Volume increasing 0.9 0.7 0.5 0.5 -0.3 2017 2018 2019 * Excludes water and Nestlé Skin Health 12 | February 21, 2020 | CAGNY
Our portfolio is becoming more premium over time Premium products as % of sales 26% 11% 2019 2012 13 | February 21, 2020 | CAGNY
Key consumer trends support premiumization Naturalization Vegan / Plant-based food Coffee mate Natural Bliss with double-digit growth Double-digit growth Mainstream Natural Plant Premium Organic Sustainability Garden of Life with double-digit growth (2018-2019) Leading in packaging innovation and responsible sourcing Plastics commitment Responsible sourcing Product innovation 14 | February 21, 2020 | CAGNY
Driving premiumization through differentiation Direct-to-consumer Solutions / functional benefits Premium waters and Nespresso with mid single-digit growth Strong double-digit growth for PetCare products Personalization Research and development Tails.com with > 50% growth in 2019 Hypoallergenic infant formula with high single-digit growth 15 | February 21, 2020 | CAGNY
Creating value through portfolio management Current portfolio M&A 16 | February 21, 2020 | CAGNY
Discipline and creativity in portfolio management Sanjay Bahadur Deputy EVP, Head of Group Strategy and Business Development
Portfolio management is an important driver of growth 3.5% 3.0% (+x) High-growth 2018 OG Fixing Portfolio 2019 OG underperforming categories management businesses (M&A) 18 | February 21, 2020 | CAGNY
There has been a step-change in our level of M&A activity CHF value of transactions (acquisitions and divestments) 13.8 bn 10.4 bn Herta charcuterie U.S. ice cream Zenpep 2.1 bn 0.8 bn 0.7 bn 2015 2016 2017 2018 2019 2020 19 | February 21, 2020 | CAGNY
Positioning our portfolio for growth > 50 transactions Divesting / reviewing closed or announced under-performing or non-core businesses since 2017, equivalent to ~ 12% of Group sales Market attractiveness OG contribution in 2019 US Confectionery Acquiring / investing +35 bps in high-growth and core segments Ability to win 20 | February 21, 2020 | CAGNY
We have three main criteria for assessing acquisitions Cultural fit Strategic fit Financial return • Growth and / or margin accretive • People • Food, beverages and nutrition • ROIC > WACC within 5-7 years • Fit with Nestlé • High-growth categories • Integration • New trends and e-business 21 | February 21, 2020 | CAGNY
Assets are expensive and we have been disciplined Deal EV/EBITDA transaction multiples before synergies >30x 25.1x 21.2x 17.4x 15.0x 15.0x 2016 2016 2017 2018 2018 2019 $ 13.9 bn $12.5 bn $ 17.9 bn $ 8.0 bn $ 7.2 bn $ 3.8 bn Coffee Plant based Infant formula Pet food Coffee Beverages Nestlé Starbucks CGP 22 | February 21, 2020 | CAGNY
Disciplined M&A is crucial to protect ROIC Five consecutive years of ROIC improvement 12.3% 10.8% 2014 2015 2016 2017 * 2018 2019 * 2017 restated and excluding Nestlé Skin Health impairment | February 21, 2020 | CAGNY 23
Innovative business models and deal structures have enabled us to create value Joint Venture Brand license New channels Partnership JV Associate License acquisition Full ownership Minority shareholding Ice cream pure-play Creation of a global New categories and channels Accessing a network manufacturer coffee alliance in consumer health of 1100 vet clinics Unlocking value through Consolidating leadership Building a nutritional Building a PetCare a business combination, in coffee, entering new health portfolio, including ecosystem to strengthen creating a market leader sub-categories personalization leadership 24 | February 21, 2020 | CAGNY
Froneri presented a unique opportunity Created in 2016 through the merger of Nestlé’s European ice cream business with R&R • Unique ownership structure with private equity partners • Pure-play ice cream leader with category captaincy • Complete portfolio combining owned and licensed brands, as well as private label • Agile and entrepreneurial management team with specialized industry expertise • Created a leaner, fitter and faster business 25 | February 21, 2020 | CAGNY
Froneri has a strong track record of operating excellence Increased Accelerated Significantly improved market share sales growth EBITDA CAGR 6% CAGR 28% +130 bps Margin 18.5% + 580 bps € 2.8 bn 12.7% € 0.5 bn 23.5% € 2.5 bn € 0.3 bn 22.2% 2019 2017 2019 2016 2019 2017 26 | February 21, 2020 | CAGNY
Creating a global pure-play leader with the addition of Nestlé U.S. ice cream Enlarged Froneri Froneri pro forma € 4.3 bn + Nestlé U.S. ice cream € 2.8 bn € 0.8 bn € 0.5 bn 2019 2019 2019 2019 Sales Sales EBITDA EBITDA 27 | February 21, 2020 | CAGNY
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