1 Nestlé India: MAGGI progressing ahead of expectations
Brand Trust increasing Accelerated Market Share Recovery
79%
53% 51% 98 48% 44% 79 81 83 35%
3 11% 0%
Pre Crisis Crisis Jan 16 Mar 16 Apr 16
5,500 8,700
11,100
10,600 13,000 12,800 19,200 Pre Crisis Crisis Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 Apr 15 Launch
*Instant Noodle Retail Track -AC Nielsen Market size estimate
34 35 1 Nestlé India: MAGGI progressing ahead of expectations
36 2 China: Reigniting growth by meeting consumer needs
Slow down, but still a great consumer story
Evolving consumer needs
Channel dynamics
Implications for Nestlé
37 CHINA’S “NEW NORMAL” IMPACT TO FUTURE BUSINESS
China New Normal
Speed (速度) • Lower FMCG growth caused by softer economy • Slower GDP growth rate Topline impact • Traditional channels facing competition from eComm
Structure (结构)
• Consumption as key lever to replace export • Manage cost inflation (logistics, labor, etc)
Cost • Embrace new technologies to improve efficiency Steering (动力) impact • Building talent and organization capabilities required • Innovation-driven to replace resource/ investment-driven for this new business environment
Source: Chinese Government Report at NPC & CPPCC 2015; APEC CEO Summit 2014; Bain
38 Overall FMCG growth continues to slow down
Total FMCG Food and beverage Personal and home care
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
39 ChinaOne of remains the best one consumer of the best stories consumer in the world stories .. in the world
Fast growth of middle class and Disposable income growth still upper middle class growing well above inflation
Household distribution Growth of China’s per capita disposable income By annual disposable income (2011-2015) 14 12.6 12 Inflation
10 9.0 8.2 8 7.7
6
4 2.6% 2.6% 2 2.0% 1.4% 0 2011-12 2012-13 2013-14 2014-15 >$65K $25K-65K $10K-25K $5K-10K <$5K
Source: Euromonitor; Global Demographics; Lit Research; Bain Analysis Source: CEIC, Euromonitor, Bain
40 Chinese urban shoppers affected by multiple factors
A new generation Digital / of Chinese ecommerce consumers
Premiumization Price transparency and sensitivity
Lifestyle categories vs. Overseas purchase & daily necessities cross-border
41 Source: Bain Consumers in China are embracing digital much faster
DISCOVER DISCUSS >75% >700M users of customers use active monthly users internet for browse or combined on purchase WeChat = Weibo
SHARE ENGAGE ~80% 2X of shoppers give more satisfied on reviews online e-channel vs. offline channels
PURCHASE SELECT >12T RMB >50% of online / mobile payment of purchase decisions (total of transactions) are made online
42 Source: Bain “BAT” ecosystem affecting both consumer & trade dynamics
Discover & Research Decide & Transact Feedback 1 Lead generation 2 E-transaction 3 Customer engagement
- Shopping platform directing traffic to
own own E-commerce sites Self Search engine Map Social forum
Payment cross-border cross-border Group-
Buy Video streaming Travel-booking processing e-commerce e-commerce App download buying Rise-sharing own own - C2C B2C Payment Direct sales
Travel booking E-commerce E-commerce processing E-commerce Instant messaging Group buying Self
WiFi Travel marketing booking
Buy Department Electronics Micro- Instant Web browser Map Video
streaming store retailer blogging Taxi hauling messaging
own own - Instant Instant Social
Web portal messaging messaging C2C E-commerce App store network Taxi hauling Self
Buy C2C Local deals / Group- O2O laundry Classified site Travel-booking B2C Ecommerce Mobile E-commerce E-commerce shop reviews buying service
Independent Online travel Online “hypermarket” Online “category killer” Cross-border e-commerce players*
43 Note: *Independent players refers to startups which didn’t receive equity investment from “BAT” Source: Capital IQ; CV Source; Lit search; Bain Trade model shifting from “Push” to “Pull”
Successful channel push model for the last 20 years
Coverage Penetration
Demand creation pull model for the future
Product In-store Brand power portfolio execution
44 Nestlé GCR: Competing across ~10 major categories
Nestlé GCR Sales (CHF 7.1Bn)
Globally Managed Businesses 42%
58% Nestlé F&B
Number 1 or number 2 position in most categories
45 Source: Company data Nestlé GCR: Majority of F&B businesses are stabilizing
Nestlé F&B 2015 Sales CHF 4.1 billion
OG Trend OG Trend
Coffee Peanut Milk Confectionery Other Categories Congee Culinary RTD Coffee Dairy & Ice Cream
46 Source: Company data Reconnecting with consumers through premiumization
Nescafé Dolce Gusto Confectionery
Kit Kat Premium Sachima
Candy Thick cut Premium shopping shortcake experience
• Thick cut shortcake grew >10% Q1 2016 • 85% growth in 2015 • KitKat launched prior to Chinese New Year
47 Winning back consumers with new and renovated products
NESCAFE SHARK & Hsu Fu Chi TOTOLE
NHW Chicken Bouillon Halal Bouillon Shark Caomijuan Sachima
Cooking Sauce Oil and Herbs
Target young Target mid-aged people people
• #1 with 74% market share in 2015 • Shark #1 with 32% market share in • 50% Market Share • 100% - 60/40 win 2015
48 Deeper penetration and wider coverage across various channels
NESCAFE TOTOLE
• #1 with 47% market share in 2015 • Growing presence in out-of-home • 10% increase in Numeric Dist. in 2015 • Penetrate lower tier markets
49 eCommerce: Nestlé China eComm sales more than doubled in 2015
Leverage strategic partnerships, global brands and capabilities
+289% vs LY +68% vs LY +67% vs LY +20% vs LY Chocolate Coffee Adult Milk Powder Biscuit
50 Note: online category growth is the sales growth rate of all Nestlé products sold online e-Commerce: Celebrating Nestlé’s 150th Anniversary with Alibaba
June 2016 kick-off Planet of Wonder campaign to delight Chinese consumers with more than 150 local and global products
2015 ZAOA online sales NiM scope
51 YINLU: Main area of challenge
Nestlé F&B 2015 Sales CHF 4.1 billion
OG Trend OG Trend
Coffee Peanut Milk Confectionery Congee Culinary RTD Coffee Dairy & Ice Cream
52 Source: Company data Yinlu: business in transition
Yinlu had a winning, … but in turbulence traditional model under “New Normal”
• Track record of strong, profitable growth • Yinlu Core Range declining
• #1 in Plant Protein Drink • Consumers shifting rapidly to more premium products • Nationwide distribution with ~2K Tier 1 distributors • Strong dairy competition due to low prices
• Extensive store coverage through a • Deteriorating distribution quality, coverage multi-layer, push model and in-store execution.
53 A comprehensive turnaround plan is in place
• Upgrade existing products to meet the trend of Upgrade existing premiumization and provide healthier products choices to consumers
Accelerate new • Focus on successful launch of Shakissimo and product Milo in 2016 development • Explore opportunities in new RTD products
• Improve Move towards brand building and POS execution by leveraging Nestle expertise and working closely “pull model” with distributors HQ Frontline Consumers
• Empower turnaround taskforces with Steering Committee Ensure strong best-of-class experts to ensure fast and Project Management Office execution practical execution for results TF1 TF2 TF3 TF4 TF5 TF6 TF7 TF8 TF9
Yinlu turnaround will TAKE TIME but we will BRING YINLU BACK ON TRACK
54 4 Key Takeaways
1 CHINA STILL A GREAT CONSUMER STORY
PRODUCT PORTFOLIO HAS TO BE RELEVANT TO FAST EVOLVING 2 CHINESE CONSUMERS
3 ACCELERATE DIGITAL AND COMMERCE
4 YINLU TURNAROUND:GET IT RIGHT
55 Reigniting Growth: Market Presentations
3 4 5
Japan: Vietnam: 5 Nigeria: • Innovation beyond • Establishing Brands • PPP products • Building Capabilities • RTM • Premiumization
Kohzoh Takaoka Ganesan R Ampalavanar Dharnesh Gordhon CEO Nestlé Japan CEO Nestlé Vietnam CEO Nestlé Nigeria
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