Nestle S A : Transcript 250KB
NESTLÉ S.A. DEUTSCHE BANK GLOBAL CONSUMER CONFERENCE PARIS 2023 PRESENTATION TRANSCRIPT Leveraging emerging... Nestlé CEO Remy Ejel will present the company's annual presentation this morning, discussing the global business, diversification, and growth. The company is the largest food and beverage company in the world, with 94.4 billion of sales, trading operating margin of 17.1%. It is operating in 186 countries, with a strong presence in North America and 23 different R&D locations. It is also looking at its track record in terms of growth over the last couple of years, and its strong footprint in emerging markets. Finally, it will look at the impact of a big surge in sales in China in the year 2021.
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Welcome to the Nestlé presentation this morning. It's my great pleasure to welcome on to stage François Roger, Chief Financial Officer; and also Remy Ejel, EVP for the AOA Zone. Thank you, Tom. Good morning to all of you. I'm here today with Remy Ejel, who is the CEO of our AOA region: Asia, Oceania and Africa. We will do a specific presentation on emerging markets for Nestlé. I will cover the emerging markets for Nestlé, and Remy will deep dive into AOA. I take the disclaimer as read. Slide: Our business is global, balanced and diversified Just as a quick reminder where we are today at Nestlé. The largest food and beverage company in the world, as you know, CHF 94.4 billion of sales, trading operating margin of 17.1%. We're operating in about 186 countries, so a very wide presence across the globe with very strong presence in the U.S., which -- North America, which accounts for 35% of our total sales. We are playing in many different categories as well. We are very diversified by geography but by category as well in Coffee, in PetCare, in Dairy, Culinary, Water and some other categories as well. We employ about 275 000 associates. We have about 344 plants. We have also 23 different R&D locations, and we are the largest spender of R&D in our industry with CHF 1.7 billion spent last year. We are, by the way, far less capital-intensive and labor-intensive than we used to be 10 years ago. We have about 80 000 less employees today, largely as a consequence of portfolio management and we have about 100 less industrial units than we had 10 years ago as well. If we have the same look at emerging markets. Quite interesting, emerging markets account for 42% of our total sales. It was close last year to CHF 40 billion, with a trading operating margin, which is actually higher than the average of the Group on a comparable basis, at north
of 18%. The strongest presence that we have is precisely with Remy in AOA, and Remy will go into the details of it. Then we have a very strong presence as well in Latin America, in China and in Eastern Europe. Category-wise, when we look at emerging markets, we have relatively similar footprint. So we are present in the same categories, more or less. But we are clearly over-indexed in Dairy, which is the second largest category that we have. And we are under-indexed versus our portfolio in PetCare. By the way, this one is clearly a very good opportunity for us in terms of future growth, and I'll come back to that. Interesting to see that we have about 60% of our employees working in emerging markets, 165 000 associates. And 55% of our industrial base is in emerging markets as well. We have five dedicated R&D locations for R&D. I will cover a little bit more of that in details later in my presentation. But very strong footprint in emerging markets. We look at our track record in terms of growth over the last couple of years, quite attractive. It's actually OG, 6.6% on average over the last 10 years. It's better than the average of the Group. It's about 1.5x higher. We were at 4.5% for the group. And this is quality growth as well. So it's a good combination of pricing and RIG, so which is interesting. Even you can see the RIG is above the average of Nestlé at 3% on average over the last 3 years. You can see that we don't have necessarily any specific worries about the fact that our RIG went down a bit last year. This is not so much a consequence of pricing, but much more the consequence of a big surge in the year 2021. If you look at the average of '20, '21, '22, if you normalize it, we were in line with what we experienced in the past, which is around 3%. So really strong growth and quality growth and higher growth than the average of the Group. So, it's really a growth engine, emerging markets for us. We're operating in basically all countries in emerging markets, but I just wanted to provide you a little bit more color on the top six: China, Brazil, Mexico, Philippines, India, Chile. Quite amazing when you see the level of sales we have, it's really material and significant with a good profile in terms of growth. In most of these countries, we have experienced over the last couple of years, mid- to high single-digit growth with the exception of China. But the issue that we had in China, as you know, was really more focused on Infant Nutrition, which has started to really turn around and rebound last year.
Part of the reason why we are so strong in emerging markets is also coming from the fact that we have been operating in these countries for very long time. In most of these countries, we have been present for more than 100 years. We are very much often perceived as a local company in many of these markets. If you look in countries like Mexico, the Philippines, people in the street, they believe that Nestlé is a local company, not necessarily a Swiss company. Slide: Complementary portfolio of both global and regional brands So we have as well very strong brands. 75% of our sales are with the global brands like Nescafé, KitKat, Nido, Maggi and so forth. But we have a strong presence as well through local brands. Some good examples Remy will cover, for example, in the Philippines, Bear Brand, or in Indonesia as well, very strong brand in an Indonesian context. The second one, probably most of you can't read it, but it's Totole in China, which is a very strong local brand. But we have other brands like Carnation in Latin America, Nescau, Garoto, Ninho in Brazil that are very well positioned in their own markets -- in emerging markets. Not only do we have strong brands, but we have strong market positions, Quite amazing when you see our position. We are often better positioned than local players. So there is a perception that in emerging markets, local players can really make a difference. No, we do. Look at that #1 position in Chile, in the Philippines, in Malaysia, in Thailand; #2 in Brazil, Indonesia, Nigeria; #4 in India and Mexico. So even where India, we are probably a little bit under-indexed, I think that probably Remy will talk about that, and #5 in China. So we are significant players in this market, and we don't really feel bad at all when looking at our business against local players. We have strong brands. We have strong market position, and you can see that as well through the fact that more than 80% of our sales are with #1, #2 position in this market. So we are very strong by choice and by design. We are not playing in all categories. But wherever we play, we lead. And I think Remy will cover some of the examples in this specific regio. Quite amazing. Strong brand, strong market position, a leading position but also strong reputation and strong trust. Quite amazing, it's an independent study that is done in emerging markets. In 52% of the countries covered by this study, which is a very large sample, in 52% of the cases in these emerging markets we are #1 in terms of trust and reputation in our industry. Even if we look at it in 100% of the cases, we are within the top three companies in terms of trust and reputation in these emerging markets, which is really impressive, what we have built in these markets.
Slide: Significant opportunity to increase share of stomach in large markets And we have a significant share of stomach, which is often better than what we see in developed markets. If you look in developed markets, we have about 0.5% share of stomach of the entire food and beverage industry. The figure can look low. But this is over the total universe of food and beverage. As you can see on the slide, in many markets, we have actually a better position than in the developed world in countries like Brazil, Chile, Malaysia, the Philippines, Mexico. We are even really leading the show there. But we have a big opportunity as well in countries like in India, in China, Nigeria or Indonesia, just to name a few. We clearly have an opportunity to grow faster and to grow in these countries, which is great for the coming years. We are very local, as I said, and we have been there for a long time. Another illustration of the fact that we are local, we have specific dedicated R&D center in emerging markets. We have five of them. We just opened a new one in Santiago de Chile. But we are present in Africa, in India, in China and in Singapore as well, where we develop local products. We are really close to consumers in these markets. So products that meet and that are tailored for consumer needs in emerging markets. And just a few examples there. I just put a couple of examples. I will just cover the one on the bottom right-hand side, Huevo Más, which is a plant-based product, which is an alternative to egg, which has a protein content, which is as good as egg, but it is a price point that is actually lower than egg. So it can be either a substitute or a complement to egg, that we have developed for Central America. We sell that under the Malher brand, for example, in Central America, and the product is doing very well. So that's one of the examples of locally tailored innovation that is coming out of these specific R&D centers that we have in emerging markets. We do even, in some instances, launch products initially in emerging markets. You have the example on the top there of this Neo packaging. This is paper packaging for our Nescafé Dolce Gusto pods that we launched initially, I think, in Latin America. Or you have some cold coffee products as well that have been launched in emerging markets before they have been launched even in the developed world. So really very strong presence and very strong innovation as well.
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