Insert image here

Cost and Capital Discipline

François-Xavier RogerEVP, Chief Financial Officer

Nestlé Investor Seminar24 – 25 May, 2016

2

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.

Disclaimer

Agenda

Flexibility in a changing world

3

Cost discipline to drive growth and margins

Driving Cash Flow and Return on Capital

Agenda

Flexibility in a changing world

4

Cost discipline to drive growth and margins

Driving Cash Flow and Return on Capital

Nestlé is delivering superior growth both in OG

5

5.04.4 4.2 4.0

3.73.2

1.0-1.6

(Pro forma)

OG Full Year 2015

F&B Co. 1 F&B Co. 2 F&B Co. 5F&B Co. 3 F&B Co. 4 F&B Co. 6 F&B Co. 7

And even more in RIG

6

2.2 2.0

1.1 1.0 0.90.5 -2.6

(Pro Forma)-3.1

RIG Full Year 2015

F&B Co. 6 F&B Co. 2 F&B Co. 1 F&B Co. 7 F&B Co. 4F&B Co. 3 F&B Co. 5

Although growth is lower

7

5.9

4.6 4.54.2

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2012 2013 2014 2015

Nestlé OG 2012-15

Inflation has decreased in the developed world

8

-1

0

1

2

3

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

European Union

USA

2012 2013 2014 2015

Resilient Pricing

Source: IMF, internal data9

-

1.0

2.0

3.0

4.0

5.0

2011 2012 2013 2014 2015

IMF World Consumer price Index Nestlé Pricing

World CPI: -3.5 ppt.

Nestlé Pricing: -1.6 ppt.

5.0%

1.5%

2.0%

3.6%

Commodity prices down to a low point

10

50

60

70

80

90

100

Nestlé weighted commodity

price index

-40% since

2011 peak

Evolving competitive landscape

11

5149

Retailer brands & small, local players

International players

2015 Share53

47 2012 Share

+200 bps

Fast reshaping of retail through e-Commerce

12

AOA*

EMENA

AMS

e-Com Examples:

• 20% sales growth in

2015

• Size of e-Com

corresponds to Top 5

Market of the Group

• % of Sales:

Nespresso > 50%

IF China > 10%

UK & China > 5%

e-Com growth contribution to 2015

Nestlé OG

e-Com channel

All other channels

* AOA total OG adjusted for Noodles impact

Changing consumer expectation towards food

GLUTEN-FREE

ORGANIC

13

Market size (CHF bn) Market Growth

• CAGR 10-19: 13.2%

Nestlé today ~ CHF 0.1bn

10.619.8

39.8

0.0

20.0

40.0

60.0

2010 2014 2019

• CAGR 10-19: 15.8%

Nestlé today ~ CHF 0.7bn

52.769.4

94.2

-40.0

10.0

60.0

110.0

2010 2014 2019

4.0

7.4

12.2

0.0

5.0

10.0

15.0

2010 2014 2019

• CAGR 10-19: 6.7%

Nestlé today ~ CHF 0.7bn

PLANT PROTEIN

Examples

Consistent I&R contribution supporting growth

14

70% 69%

30% 31%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2015

Innovation & Renovation % of Sales*

Baseline

Business

Innovation &

Renovation

*: Current year’s sales of new and renovated products launched in the last 3 years

Growth requires higher investment behind brands

15

49%(2013)

56%(2015)

Category/Country

gaining/maintaining

share

2013 – 2015

Consumer facing

Marketing Spend

> +10%

Organic

Growth (CAGR)

+4.4%

>

2 x OG

Agenda

Flexibility in a changing world

16

Cost discipline to drive growth and margins

Driving Cash Flow and Return on Capital

Nestlé CONTINUOUS Excellence

17

Scope• Lean Office

• Lean Value Stream

• Total Performance

Management in

manufacturing

• Lean Innovation

Cost Culture• Zero Waste, Zero

Incidents, Zero

Accidents, etc.

• Visibility on approx.

25.000 annual

improvement

activities

Target Setting• Annual Group NCE

savings targets 2-4%

of total delivered

costs

Methodology• Compliance

• Leadership

Development

• Goal alignment

• Continuous

Improvement

NCE journey of success initiated in 2008 –

close to 100% of Group Sales covered

Operational opportunities driving performance

18

Example: Zone AMS Value Chain review

64 Initiatives concluded in 2015/16

Top common opportunities identified:

• Route to Market improvement

• Adapt portfolio to regions/channels

• Harmonization / simplification of

portfolio

• Sourcing optimization from farmers

• Other cost optimization of value chain

Business opportunities 2015-17:

• Over CHF 230 m

in incremental sales

• About CHF 50 m

in Cost Reduction

Significant operational cost base improvement

1.4

1.6 1.6

1.4

1.4

1.5

1.5

1.6

1.6

2013 2014 2015

in CHF bn

19

NCE Cost Reduction

Cost efficiencies supporting growth and margins

Redeployment of NCE efficiency gains 2013-15 (in %):

25

60

15

Reinvestment in

competitiveness

Reinvestment in

brands

Margin

improvement

20

Continuous margin-improvement over time

0

0

0

0

0

1

1

1

1

1

1

2012 2013 2014 2015

TOP improvement in bps 2012-15

(constant currency)

+27 bps / year

21

Leveraging scale offers further opportunities

22

Scale

Complexity

SG&A %

of Sales

Sales in

CHF bn

Source: Thomson Reuters, 2014 figures

120

100

80

60

40

20

0

15% 20% 25% 30% 35% 40%

23

…delivering

structural savings

on top of

operational ones

Achieving both sales and margin growth by…

Identified structural savings beyond NCE

Estimated structural savings by

2019/20

1 Operations Raise our asset intensity by 10

percentage points

2 ProcurementLeverage on scale through global

sourcing (from 40% today to 60%)

3 G&A Expenses

Consolidate Nestlé in the markets,

delayer functions, improve facility

management and increase shared

services

>200bps

24

Use of structural savings

25

Brand Support (Marketing spend and R&D)

Competitiveness

Trading Operating Profit

Broad based investment for growth

26

Five Focus Areas:

• Portfolio strengthening

• Premiumization

• Global brand expansion

• Innovation roll-out acceleration

• Digital and e-Com

Portfolio Strengthening

27

Example Purina EMENA

2012Focus on

Snacks

2010

Roll Out

Felix

2008

Exit of

Private Label

2003

Move from Multi Serve

to Single Serve

& Grill TechnologyReduction in Eco Dry

and Focus on SP Dry

2000

Clean up

Spillers

Portfolio

2001 2015

2000-2005 2005-2010 2010-2015

3.1% OG CAGR

6.4% OG CAGR

100 129Marketing Investment Index 100

1.7% OG CAGR

28

Les Recettes de

L'Atelier (France)

6

170%

7

167%

2%

WYETHIlluma

NESCAFÉ

Dolce Gusto

84

>200%

23% 4% Premium

Tablets*

MAGGI

Juicy Chicken

57

256%

18%

NESCAFÉ

Azera UK

5

170%

49%

Index vs. mainstream

Value Share

Premiumization

* 18% in the Gourmand segment

# of Countries

Global brand expansion - Felix

29

2010 2015

17 Countries 45 Countries28+

+Sales: 86%*: at constant currency 2010

Innovation roll-out acceleration – Milo Activ-Go

30

2013-15 Countries covered: 29+

0% 12%2013-15 Milo Active-Go % of sales

of Cocoa Malted Beverages:From To

Digital and eCom – delivering growth

31

+

Example: Purina Germany with eCom pure play Zooplus

2009-15 eCom sales share growth:

Digital marketing spend vs group average: Index 130

0% 13%From To

Agenda

Flexibility in a changing world

32

Cost discipline to drive growth and margins

Driving Cash Flow and Return on Capital

Consistent Free Cash Flow track record

33

11.0

10.2

10.911.2

8.6

10.3

8.5

9.9

2012 2013 2014 2015

Nestle

Main Competitors

* ***

Free Cash Flow % of Sales

**

* Adjusted for exceptional income due to Givaudan and L’Oreal transaction

** Average FCF of main competitors, Source: company websites

Working capital strongly supported performance

34

8.5

6.5

5.3

4.7

2012 2013 2014 2015

Working Capital % of Sales

Discipline in CAPEX

35

5.9

5.3

4.3 4.4

2012 2013 2014 2015

Capital Investment % of Sales

* Restated following implementation of IFRS 11 and IAS 19

*

Delivering attractive ROIC

36

29.7

30.1

30.4

29.9

2012 2013 2014 2015

ROIC before Goodwill %

Goodwill affecting ROIC in the short term

37

14.1

12.7

10.8 10.9

2012 2013 2014 2015

ROIC after Goodwill %

We will use all levers to improve ROIC

38

Improving on all operating levers: • Sales growth

• Margin growth

• Working capital efficiency

• CAPEX discipline

• Sustainable ETR improvement

Strict M&A criteria• Strategic, cultural and financial fit

• ROIC > WACC within 5 years

In summary

39

Nestlé is delivering superior growth

And demonstrating resilience in Pricing

Structural savings, beyond operational ones, to

support growth and margins

Acting on operational levers / M&A discipline to drive

ROIC up

40

Thank you !