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
AMS AOA
46% 26%
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
4 | February 21, 2020 | CAGNY
Strong 2019 financial results
Organic growth Underlying trading 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
12.1% 12.3% 11.9 13.9
10.8
2018 2019 2018 2019 2018 2019
5 | February 21, 2020 | CAGNY
Key growth platforms
United States PetCare E-commerce Premium products
18% 18.5%
7.4%
7.0% 6.5%
4.1% 4.5%
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
STOXX F&B 218% 60% 26% 27%
* 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)
3.5 17.6
3.2 3.0 17.0
2.4 16.5
16.0
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
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
TOP margin 17.6% > 18.5%
10 | February 21, 2020 | CAGNY
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*
Pricing ~ 20%
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
0.7 0.9
0.9 0.7 0.9 Volume increasing
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%
2012 2019
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
Research and development Personalization
Hypoallergenic infant formula with high single-digit growth Tails.com with > 50% growth in 2019
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)
2018 OG Fixing Portfolio High-growth 2019 OG
underperforming management categories
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
0.7 bn 0.8 bn
2015 2016 2017 2018 2019 2020
19 | February 21, 2020 | CAGNY
Positioning our portfolio for growth
> 50 transactions
Divesting / reviewing
under-performing closed or announced
or non-core businesses
since 2017, equivalent to
~ 12% of Group sales
Market attractiveness
US
Confectionery
OG contribution in 2019
Acquiring / investing
in high-growth +35 bps
and core segments
Ability to win
20 | February 21, 2020 | CAGNY
We have three main criteria for assessing acquisitions
Strategic fit Financial return Cultural fit
• Food, beverages and nutrition • Growth and / or margin accretive • People
• High-growth categories • ROIC > WACC within 5-7 years • Fit with Nestlé
• New trends and e-business • Integration
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
23 | February 21, 2020 | CAGNY
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
Accelerated Significantly improved Increased
sales growth EBITDA market share
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%
2017 2019 2017 2019 2016 2019
26 | February 21, 2020 | CAGNY
Creating a global pure-play leader with the addition of Nestlé
U.S. ice cream
Froneri Enlarged Froneri
pro forma
€ 4.3 bn
+
€ 2.8 bn Nestlé U.S. ice cream
€ 0.8 bn
€ 0.5 bn
2019 2019 2019 2019
Sales EBITDA Sales EBITDA
27 | February 21, 2020 | CAGNY
We completed a creative deal with Starbucks
Annual sales: > CHF 10 billion Annual sales: > CHF 5 billion Annual sales: > CHF 2 billion
• Mainstream brand, • Stylish, coffee connoisseur • Iconic coffee shop brand,
universal appeal brand, European flair, American lifestyle
undisputed superior quality
• World’s preferred • Leadership in North American
coffee brand • Leading premium portioned premium R&G and portioned
coffee brand coffee categories
28 | February 21, 2020 | CAGNY
Global Starbucks roll-out at speed: new formats and markets
• Rolled out in > 40 markets in the first 12 months
• > CHF 300 m incremental sales in 2019
2019 2020
Roast & ground Starbucks by Starbucks by Coffee Cold brews, blends
coffee Nespresso Dolce Gusto creamers with vitamins
Launched Launched Launched Launched Launched
March 2019 March 2019 March 2019 July 2019 February 2020
29 | February 21, 2020 | CAGNY
Access to innovation through venture funds
Early stage food, nutrition science Creates, resources, and builds Emerging plant-based food and
and food-tech life sciences companies beverage and foodservice companies
Butternut Box Evelo Ripple
Algorithm-driven, Clinical stage biotechnology company Pea-protein based dairy alternatives
D2C pet wellness company focused on the small intestine with natural plant ingredients
30 | February 21, 2020 | CAGNY
Business as a force for good
Creating a market for food-grade Boosting packaging innovation
recycled plastics
• Allocating more than CHF 1.5 bn to incentivize supply • Institute of Packaging Sciences
• Sourcing up to 2 m metric tons (2020-25) • CHF 250 m venture fund focusing on start-up companies
• Looking at all options: reuse/refill, recycling, new materials
31 | February 21, 2020 | CAGNY
Key takeaways
• Sharpened focus on food, beverage and nutritional health products
• M&A is an important tool to strengthen our portfolio and accelerate growth
• Three main criteria when assessing acquisitions: strategic fit, financial return, cultural fit
• Disciplined, flexible and creative approach to maximize value creation
• Improved governance for acquisitions, solid integration plans, precise accountability and targets
• M&A will continue to be an integral part of our value creation model
• We expect 2020 to be another busy year, for both acquisitions and divestments
32 | February 21, 2020 | CAGNY
