Brand Trust increasing
*Instant Noodle Retail Track
-AC Nielsen Market size estimate
Accelerated Market Share Recovery
98
3
79 81 83
Pre Crisis Crisis Jan 16 Mar 16 Apr 16
0%
11%
35%
44%
48%
Pre Crisis
Apr 15Crisis Nov 15
Launch
Dec 15 Jan 16 Feb 16 Mar 16 Apr 16
19,2
00
5,5
00
8,7
00
10,6
00
11,1
00
13,0
00
12,8
00
Nestlé India: MAGGI progressing ahead of expectations1
51%53%
79%
34
35
36
Nestlé India: MAGGI progressing ahead of expectations1
37
China: Reigniting growth by meeting consumer needs 2
Slow down, but still a great
consumer story
Evolving consumer needs
Channel dynamics
Implications for Nestlé
China New Normal
38
CHINA’S “NEW NORMAL” IMPACT TO FUTURE BUSINESS
Topline
impact
Cost
impact
Source: Chinese Government Report at NPC & CPPCC 2015; APEC CEO Summit 2014; Bain
Speed (速度)
• Slower GDP growth rate
Structure (结构)
• Consumption as key lever
to replace export
Steering (动力)
• Innovation-driven to replace
resource/ investment-driven
• Lower FMCG growth caused by softer economy
• Traditional channels facing competition from eComm
•Manage cost inflation (logistics, labor, etc)
• Embrace new technologies to improve efficiency
• Building talent and organization capabilities required
for this new business environment
Overall FMCG growth continues to slow down
39
Note: Data covers 106 FMCG categories (includes ambient and chilled food and beverages, and personal care and household products; excludes
fresh food, white goods and electronics); Q1, Q2 and Q3 are always 12 weeks; Q4 is 16 weeks Source: Kantar Worldpanel; Bain
Personal and home careFood and beverageTotal FMCG
40
Source: Euromonitor; Global Demographics; Lit Research; Bain Analysis Source: CEIC, Euromonitor, Bain
Inflation
One of the best consumer stories in the world ..
Fast growth of middle class and
upper middle class
Disposable income growth still
growing well above inflation
12.6
7.7
9.08.2
0
2
4
6
8
10
12
14
2011-12 2012-13 2013-14 2014-15
Growth of China’s per capita disposable income
(2011-2015)
2.6% 2.6%2.0%
1.4%
>$65K $25K-65K $10K-25K $5K-10K <$5K
Household distribution
By annual disposable income
China remains one of the best consumer stories in the world
41Source: Bain
Price transparency
and sensitivity
A new generation of Chinese consumers
Premiumization
Lifestyle categories vs.
daily necessities
Overseas purchase & cross-border
Digital /
ecommerce
Chinese urban shoppers affected by multiple factors
SHARE
~80% of shoppers give reviews online
42
DISCOVER
Source: Bain
>75% of customers use
internet for browse or purchase
PURCHASE
>12T RMB of online / mobile payment
(total of transactions)
ENGAGE
2Xmore satisfied on
e-channel vs. offline channels
DISCUSS
>700M usersactive monthly users
combined on WeChat = Weibo
SELECT
>50%of purchase decisions
are made online
Consumers in China are embracing digital much faster
43 Note: *Independent players refers to startups which didn’t receive equity investment from “BAT”
Source: Capital IQ; CV Source; Lit search; Bain
Independent
players*
Online travel Online “hypermarket” Online “category killer” Cross-border e-commerce
Customer engagement
Feedback
E-transaction
Decide & Transact
Lead generation
Discover & Research
1 2 3
Search engine Map
Shopping platform directing traffic to
E-commerce sites Social forum
Video streaming Travel-bookingPayment
processingcross-border e-commerce
cross-border e-commerce App download
Group-buying Rise-sharing
Travel bookingC2C
E-commerceB2C
E-commercePayment
processingDirect salesE-commerce Instant messaging Group buying
WiFimarketing
Videostreaming
Travelbooking
MapWeb browserDepartment
store
Electronics
retailer
Micro-
blogging Taxi hauling
Instant
messaging
Web portalInstant
messagingInstant
messaging C2C E-commerce App storeSocial
network Taxi hauling
Classified site Travel-booking B2C Ecommerce Mobile E-commerceC2C
E-commerceLocal deals /shop reviews
Group-buying
O2O laundryservice
Se
lf-
ow
n
Bu
yS
elf
-ow
n
Bu
yS
elf
-ow
n
Bu
y
“BAT” ecosystem affecting both consumer & trade dynamics
44
Demand creation pull
model for the future
In-store
executionBrand power
Successful channel push model for the last
20 years
Coverage Penetration
Product
portfolio
Trade model shifting from “Push” to “Pull”
Source: Company data
Nestlé GCR: Competing across ~10 major categories
Nestlé GCR Sales (CHF 7.1Bn)
45
Number 1 or number 2 position in most categories
Nestlé F&B
Globally
Managed
Businesses
58%
42%
Nestlé GCR: Majority of F&B businesses are stabilizing
46 Source: Company data
OG Trend
Coffee
Confectionery
Culinary
Dairy & Ice Cream
OG Trend
Peanut Milk
Congee
RTD Coffee
Nestlé F&B 2015 Sales CHF 4.1 billion
Other
Categories
47
Reconnecting with consumers through premiumization
Nescafé Dolce Gusto Confectionery
• 85% growth in 2015• Thick cut shortcake grew >10% Q1 2016
• KitKat launched prior to Chinese New Year
Premium Sachima
Candy
Kit Kat
Thick cut shortcake
Premium shopping experience
48
Winning back consumers with new and renovated products
NESCAFE
• #1 with 74% market share in 2015
• 100% - 60/40 win
Shark
Target young
people
Target mid-aged
people
NHWSachimaCaomijuan
SHARK & Hsu Fu Chi
• Shark #1 with 32% market share in
2015
TOTOLE
• 50% Market Share
Chicken Bouillon Halal Bouillon
Cooking Sauce Oil and Herbs
49
Deeper penetration and wider coverage across various channels
NESCAFE TOTOLE
• #1 with 47% market share in 2015
• 10% increase in Numeric Dist. in 2015• Growing presence in out-of-home
• Penetrate lower tier markets
50
eCommerce: Nestlé China eComm sales more than doubled in 2015
Leverage strategic partnerships, global brands and capabilities
+289% vs LY Chocolate
+68% vs LY Coffee
+67% vs LY Adult Milk Powder
+20% vs LY Biscuit
Note: online category growth is the sales growth rate of all Nestlé products sold online
2015 ZAOA online sales NiM scope
e-Commerce: Celebrating Nestlé’s 150th Anniversary with Alibaba
June 2016 kick-off Planet of Wonder campaign to delight
Chinese consumers with more than
150local and global products
51
YINLU: Main area of challenge
52 Source: Company data
OG Trend OG Trend
Coffee
Confectionery
Culinary
Dairy & Ice Cream
Peanut Milk
Congee
RTD Coffee
Nestlé F&B 2015 Sales CHF 4.1 billion
53
Yinlu had a winning,
traditional model
• Track record of strong, profitable growth
• #1 in Plant Protein Drink
• Nationwide distribution with ~2K Tier 1
distributors
• Extensive store coverage through a
multi-layer, push model
… but in turbulence
under “New Normal”
• Yinlu Core Range declining
• Consumers shifting rapidly to more
premium products
• Strong dairy competition due to low prices
• Deteriorating distribution quality, coverage
and in-store execution.
Yinlu: business in transition
54
Upgrade existing
products
Accelerate new
product
development
Move towards
“pull model”
Ensure strong
execution
• Upgrade existing products to meet the trend of premiumization and provide healthier choices to consumers
• Focus on successful launch of Shakissimo and Milo in 2016
• Explore opportunities in new RTD products
• Improve brand building and POS execution by leveraging Nestle expertise and working closely with distributors
• Empower turnaround taskforces with
best-of-class experts to ensure fast and practical execution for results
Yinlu turnaround will TAKE TIME but we will BRING YINLU BACK ON TRACK
Steering Committee
Project Management Office
TF1 TF2 TF3 TF4 TF5 TF6 TF7 TF8 TF9
HQ Frontline Consumers
A comprehensive turnaround plan is in place
1
ACCELERATE DIGITAL AND COMMERCE
2
CHINA STILL A GREAT CONSUMER STORY
3
PRODUCT PORTFOLIO HAS TO BE RELEVANT TO FAST EVOLVING
CHINESE CONSUMERS
55
4 Key Takeaways
YINLU TURNAROUND:GET IT RIGHT4
56
Reigniting Growth: Market Presentations
Japan:
• Innovation beyond
products
• Premiumization
Kohzoh Takaoka
CEO Nestlé Japan
5
3
Vietnam:
• Establishing Brands
• Building Capabilities
Ganesan R Ampalavanar
CEO Nestlé Vietnam
4
Nigeria:
• PPP
• RTM
Dharnesh Gordhon
CEO Nestlé Nigeria
5