Nestle S A : TRANSCRIPT 224KB

NESTLÉ S.A.

2022 CAGNY PRESENTATION TRANSCRIPT

25th February 2022, 08.00 EST

Speakers:

François-Xavier Roger, Chief Financial Officer, Nestlé S.A.

Marco Settembri, CEO Zone Europe, Nestlé S.A.

This transcript may have been edited for clarity, and the spoken version is the valid record. This document is subject to the same terms and conditions found at http://www.nestle.com/info/tc

Nestlé 2022 CAGNY Presentation

Friday, 25th February 2022

Structurally gearing our portfolio for mid single-digit growth

François-Xavier Roger, Chief Financial Officer, Nestlé S.A.

Slide: Title slide

Good morning everyone.

Slide: Disclaimer

I will take the disclaimer as read.

Slide: Our business is global, balanced and diversified

During my presentation today I will explain how our portfolio is now structurally geared to deliver sustainable mid single-digit organic growth.

I will start with a summary of our business profile and our full-year 2021 results just as a reminder.

Nestlé is the largest Food and Beverage company in the world with annual sales of CHF 87.1 billion last year.

Our portfolio is well diversified in terms of geography, category and channel and our strategy is focused on product differentiation and innovation.

We have a unique geographic footprint, with sales in 186 countries. Marco will cover Zone Europe in more detail later.

We operate in attractive high-growth categories within the Food and Beverage industry, with leading market positions.

We are less labor and capital intensive than we were in 2015, with almost 20% less employees and 82 less factories, on slightly lower sales. We are also the largest investor in R&D in our industry, with annual spending of around CHF 1.7 billion.

Slide: Resilient financial results in 2021

Let me now give a quick overview of the full-year 2021 highlights.

We delivered resilient financial results in the context of the pandemic and inflationary pressures.

Organic growth accelerated to 7.5%, supported by continued momentum in retail sales, steady recovery of out-of-home channels, increased pricing and market share gains.

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Nestlé 2022 CAGNY Presentation

Friday, 25th February 2022

The underlying trading operating profit margin decreased by 30 basis points to 17.4%, reflecting time delays between cost inflation and pricing actions.

Underlying earnings per share increased by 5.8% in constant currency. Sales growth was the main contributor to the increase.

Return on invested capital decreased slightly to 14.2% excluding the Wyeth business impairment.

Free cash flow was CHF 8.7 billion as we increased capex temporarily to support growth.

We returned CHF 13.9 billion to our shareholders through dividends and share buybacks. We also proposed a 27th consecutive increase of our dividend to CHF 2.80.

Slide: Portfolio geared for mid single-digit organic sales growth

Over the last few years, we have done a lot of work to position our portfolio for sustainable mid single-digit growth.

Our organic growth has steadily increased since 2017, with an acceleration in 2021 to 7.5% partly due to higher demand in the context of the pandemic. While we would not expect growth to continue at such exceptional levels, we expect to deliver mid single-digit growth consistently going forward.

The key factors behind our transformation and market share gains have been investments in high growth categories and geographies, the acceleration of innovation and the stepping up of digitalization. In addition, we have made a number of important portfolio changes through acquisitions and divestitures, resulting in a more focused portfolio.

Slide: Playing in the fastest growing categories in Food and Beverage

Within Food & Beverage, we operate in seven of the top ten fastest growing categories. We command leading positions in most of these categories, being the number one or number two player in five of the top ten.

This is the result of deliberate strategic choices over many years to focus on attractive high- growth categories where we can continuously differentiate our offerings and where we have the ability to win.

Slide: Portfolio increasingly focused, premiumized and digital

Our portfolio has evolved significantly over the last ten years and is now more focused on Food, Beverage and Nutritional health.

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Nestlé 2022 CAGNY Presentation

Friday, 25th February 2022

Fast-growing categories such as Coffee, PetCare, Health Science and Plant-based now represent more than half of our sales compared to a third in 2012. These categories represent an even greater proportion of our underlying trading operating profit.

We have also significantly shifted our portfolio towards premium products, where we see faster growth, higher margins and better protection from commoditization. Today, premium products represent 35% of our sales versus 11% in 2012.

Our portfolio has also evolved by channel. Today, 14.3% of our sales are in e-commerce, almost five times more than in 2012.

This portfolio evolution has not happened only through M&A activity, but also through significant developments in our existing businesses from innovation to premiumization.

Slide: Outperforming in our largest categories and future growth platforms

Our portfolio is well-positioned in our largest categories and in segments where we are sowing the seeds for future success.

In our two largest categories, PetCare and Coffee, Nestlé has grown faster than the market over the last five years and we have been gaining or holding market share in more than 70% of our business cells.

We are also investing to build platforms for the future, such as vitamins, minerals and supplements as well as meat alternatives where we have also been growing consistently faster than the market.

Slide: Increasing differentiation across categories, with market share gains

Beyond our largest categories and future platforms, we have done a lot of work to strengthen our market positioning and increase differentiation across all of our categories.

We focus on value-added products in categories such as Confectionery, Infant nutrition, Food and Water. We have been shifting our portfolio away from commoditized offerings to focus on differentiation, through innovation as well as portfolio management.

We are applying our expertise in Nutrition, Health and Wellness to develop breakthrough nutritional solutions. For example, in 2021 we further enhanced our human milk oligosaccharides offering with the launch of an infant formula made with five types of HMOs. In our Dairy business in China, we continue to add new premium formulations to

the Yiyang collection, including products to support mobility and immunity. Yiyang senior nutrition exceeded CHF 100 million of sales and has grown by a factor of thirteen over the past thirteen years.

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Nestlé 2022 CAGNY Presentation

Friday, 25th February 2022

Local relevance is also an important element of differentiation. We ensure products are tailored to local tastes and preferences. Our work to increase affordable offerings is a good example. To make good nutrition affordable and accessible, we adjust processes and recipes, use local raw materials and fortify products with locally relevant micronutrients.

As a result of our focus on differentiation and accelerated innovation, we have seen a step up in market share performance across our business. For the third year in a row, more than 60% of our business cells are gaining or holding share.

We have also been focusing on businesses where we have strong market positions. Today, we have around 80% of our sales where we are the market leader or close follower.

Slide: Rapid innovation to better capture consumer trends

As I mentioned, innovation has been a key driver of our organic growth acceleration and market share gains. There has been a major shift to the way we approach innovation at Nestlé.

We have significantly reduced the time to market to capture consumer trends faster. To translate science into products more quickly, we use enhanced prototyping capabilities in our R&D centres and we fund fast-track projects. In 2021, more than sixty fast-track projects resulted in launches in six to twelve months. We have also been increasing the number of multi-market launches with greater sales impact.

Innovation takes different shapes and form and we are focusing on the following key consumer trends:

Premiumization and offering new benefits to consumers.

Affordable offerings, particularly those that meet nutritional needs in emerging markets.

Plant-based, both in born-pure brands like Garden Gourmet, as well as more broadly across our portfolio with brands such as Stouffer's. We have around CHF 800 million of sales in plant-based food, with strong growth.

Sustainability, with a key focus on carbon reduction and sustainable packaging. We have several brands that achieved the carbon-neutral milestone in 2021, including Garden of Life. Other brands are expected to follow and become carbon neutral by the end of 2022 including Nespresso, Garden Gourmet and San Pellegrino.

Digitalization. As discussed at our recent investor seminar, data and technology are a key driver to accelerate growth. Sales in e-commerce grew by 15.1% in 2021, following a high base of comparison in 2020.

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