Presentation to the 2012 Nestlé Investor Seminar, September 25, Shanghai, China

1. Nestlé in Greater China:
Winning in the New Reality
Roland Decorvet Chairman
& CEO
Nestlé Greater China
Nestlé Investor Seminar, Shanghai
September 25th, 2012

2. Agenda
1. China: Favourable yet challenging business environment
2. Nestlé‟s roots in China and recent performance: Accelerating
growth and 2 step-changing partnerships
3. Vision, Objective & Ambition
4. Winning in the new reality: China-relevant portfolio,
Region & channel focus, Success with partners
5. Creating shared value
1 September 25th, 2012 Nestlé Investor Seminar, Shanghai

3. The size of a continent, with provincial GDPs
at the level of developing or developed countries
Source: The Economist Feb 24 ,2011
2 September 25th, 2012 Nestlé Investor Seminar, Shanghai

4. China is still at an early stage in food consumption:
Per capita by 2015 … only half of Mexico today
Annual F&B Consumption per
Capita (2011, USD)
2'500 Japan
+9-10% +6-7% +1-2% Average growth for each
development phase
2'000
France
UK
Global F&B
Consumption & Italy Germany
1'500
Disposable USA
Income Levels
Spain
Brazil
1'000
Portugal
Russia
South
Africa
500 Mexico
240 USD Annual Disposable
+12% Philippines China 2015
China 2011 Income per Capita (2011, USD)
150 Mid-East
Indonesia
- India
- 5'000 10'000 15'000 20'000 25'000 30'000 35'000 40'000
+12%
Sources: Nestlé GCR Analysis, Euromonitor & McKinsey, 2011
3 September 25th, 2012 Nestlé Investor Seminar, Shanghai

5. Nestlé continues to support government efforts to
reinforce food safety
Zero tolerance Stricter legal framework
Higher awareness No preferential treatment
4 September 25th, 2012 Nestlé Investor Seminar, Shanghai

6. Agenda
1. China: Favourable yet challenging business environment
2. Nestlé‟s roots in China and recent performance:
Accelerating growth and 2 step-changing partnerships
3. Vision, Objective & Ambition
4. Winning in the new reality: China-relevant portfolio,
Region & channel focus, Success with partners
5. Creating shared value
5 September 25th, 2012 Nestlé Investor Seminar, Shanghai

7. Nestlé history: long presence in China
but rapid development since the 1990‟s
Nestlé Shuangcheng factory Establishment of Nestlé China
Nestlé sales office HQ in Beijing (relocated to
started production (Heilongjiang
opened in Shanghai new premises in 2010)
Province)
1908 1990 1996
1874 1920 1979 1992 1999
Started trading activities Nestlé Products Initial discussions Hong Kong factory (dairy + 80% partnership with
in HK. First trademark ice cream) through Totole (Shanghai)
Ltd. established in with PRC
(Eagle sweetened HK authorities acquisition of Dairy Farm
condensed milk) concerning
possible
partnerships with
local companies
6 September 25th, 2012 Nestlé Investor Seminar, Shanghai

8. Accelerated investments in the 2000‟s
showing long-term commitment to China
70% partnership 60% partnership with
with Dashan Yinlu Foods Group
Nestlé R&D center Nestlé R&D (Water)
in Shanghai center in Beijing
2001 2008 2010
2002 2009 2011
Totole’s second factory in Shanghai
80% partnership with
Haoji (Sichuan Province) started production (the world’s largest
bouillon factory) 60% partnership
with Hsu Fu Chi
1993 – 2006
16 factories built in China to meet consumer demand
7 September 25th, 2012 Nestlé Investor Seminar, Shanghai

9. Nestlé is perceived as the tastiest, healthiest and most
trustworthy F&B brand in China
Nestlé vs. 2nd Best (2012)
They are socially responsible 17%
Ahead of other companies in developing nutritionally advanced products 16%
A company I feel I can trust 14%
Offer the tastiest and healthiest choice 12%
Committed to continuous product improvement 11%
Product range contributes to balanced diet 11%
Invest heavily in scientific nutritional research and development 11%
Provide great tasting products 11%
9%
Their on-pack information makes choosing healthier products easier
6%
I would recommend their products
Made advancements in improving products healthiness 3%
Deliver the best quality products 3%
Encourage an active lifestyle 1%
Their products are part of my everyday life 1%
Source: Millward Brown, 2012, survey on the top 22 F&B companies in China
8 September 25th, 2012 Nestlé Investor Seminar, Shanghai

10. 31 factories and 2 R&D centers all across China
 35 million products
sold every day
 ~90% of Nestlé products
sold in China are locally
manufactured
3
Regional & local headquarters
R&D Centers
4
Factories ( under construction)
9 September 25th, 2012 Nestlé Investor Seminar, Shanghai

11. Our partnerships have enhanced Nestlé‟s capabilities
 Large portfolio:
6 China famous brands,
1 strong regional brand, Hsu Fu Chi
leadership in 11 categories Da Shan Water
 Nestlé Dry Grocery → Key accounts, few key distributors
 3 focused platforms with clear  Yinlu / Ready-to-drink coffee → Ready-to-drink beverage distributors,
strengths and expertise high point of sales coverage, lower-tier cities
 Hsu Fu Chi → Direct distribution, pick & mix, impulse model
 Multinational company vs. Chinese entrepreneurs
 2 different “cultures”,  Structured approach vs. speed / planning vs. hyperactivity
same values  Team-minded vs. great leader
 Different focus and KPIs – percentages vs. absolute amounts
 Support & develop
 Need to respect what makes
 Listen and change only if all partners:
our partners unique 1. understand why 2. agree 3. see clear benefits
10 September 25th, 2012 Nestlé Investor Seminar, Shanghai

12. The 2 latest partnerships have drastically
changed the capabilities of Nestlé
Nestlé F&B
Actual 2011 Sales 2012E Sales Dairy, Ice-Cream,
CHF 2.5 bn CHF 5 bn Coffee & beverages,
Infant nutrition,
21% Hong Kong, Taiwan
16% Partnerships
Yinlu + RTD Coffee
5% 9%
HFC + Nestlé Confect.
9% 28% Food
47% (Totole, Haoji, Maggi)
Globally/Regionally
23% Managed Businesses
Nestlé F&B
Nestlé Professional,
GCR division
28% Nestlé Waters, CPW,
Nestlé F&B Nestlé Purina Petcare,
GCR division 14% Nespresso,
Nestlé Health Science
Note: Yinlu sales only 1 month in Actual 2011, Hsu Fu Chi sales in 2012E figures, not in Actual 2011; Nestlé F&B GCR includes Infant nutrition
11 September 25th, 2012 Nestlé Investor Seminar, Shanghai

13. Greater China Region is on track
to become Nestlé‟s #2 largest market
2011R Market 2011 Sales
ank (CHF bn)
1 USA 21.5
2 France 5.6 Greater China 2012
3 Brazil 5.4 Sales est.: CHF 5 bn
4 Germany 3.4 Rank: ?
5 Mexico 3.0
6 UK 2.7
7 China 2.5
Nestlé Greater China
Region‟s sales
(excluding Yinlu & Hsu Fu Chi)
2008 2009 2010 2011
12 September 25th, 2012 Nestlé Investor Seminar, Shanghai

14. 2011 has seen significant investments
to support our fast growth
Trading net working capital* Capital expenditures*
as a percentage of sales as a percentage of sales
1.5
Index Index
(ref. 2008) 1 (ref. 2008) 1
0.9
2008 2009 2010 2011 2008 2009 2010 2011
*Excluding Yinlu & Hsu Fu Chi
13 September 25th, 2012 Nestlé Investor Seminar, Shanghai

15. The new Nestlé China: 47‟000+ employees
Nestlé F&B
Jan. 2011 Jan. 2012 Dairy, Ice-Cream,
14‟100 employees 47‟000 employees Coffee & beverages,
Infant nutrition,
38% Hong Kong, Taiwan
Partnerships
26% Yinlu + RTD Coffee
HFC + Nestlé Confect.
51% Food
32% (Totole, Haoji, Maggi)
4%
0% 7% Globally/Regionally
Nestlé F&B
Managed Businesses
GCR division 18%
Nestlé Professional,
Nestlé Waters, CPW,
Nestlé F&B 16% Nestlé Purina Petcare,
GCR division 6%
Nespresso,
Nestlé Health Science
Note: Yinlu & Hsu Fu Chi employees are accounted starting from Jan. 2012; Nestlé F&B GCR includes Infant nutrition
14 September 25th, 2012 Nestlé Investor Seminar, Shanghai

16. Agenda
1. China: Favourable yet challenging business environment
2. Nestlé‟s roots in China and recent performance: Accelerating
growth and 2 step-changing partnerships
3. Vision, Objective & Ambition
4. Winning in the new reality: China-relevant portfolio,
Region & channel focus, Success with partners
5. Creating shared value
15 September 25th, 2012 Nestlé Investor Seminar, Shanghai

17. Our Nestlé Greater China Vision
Be the recognized leading NHW
F&B Company by helping to build
healthier and happier generations
at every stage of life
 Delivering innovative, safe, tasty, trusted and good
value-for-money products
 Building partnerships with all stakeholders from
farm to chopsticks
 Creating shared value and sustained development
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18. Our ambition is to grow double-digits while
creating shared value
17 September 25th, 2012 Nestlé Investor Seminar, Shanghai

19. Agenda
1. China: Favourable yet challenging business environment
2. Nestlé‟s roots in China and recent performance: Accelerating
growth and 2 step-changing partnerships
3. Vision, Objective & Ambition
4. Winning in the new reality: China-relevant portfolio,
Region & channel focus, Success with partners
5. Creating shared value
18 September 25th, 2012 Nestlé Investor Seminar, Shanghai

20. The Nestlé Strategic Roadmap
to win in the new reality
19 September 25th, 2012 Nestlé Investor Seminar, Shanghai

21. Comprehensive product offer matching all income levels
Chinese Urban Household Dairy & Coffee Beverage Culinary Confection. Ice cream Hsu Fu Chi Yinlu Waters Cereals
Annual Income (’000 RMB) Nutrition Pet food
Global Affluent
>250
(6% of population)
Mass
Affluent
125-250
(12% of pop.)
Upper
Middle Class
50-125
(39% of pop.)
Lower
Middle Class
30-50
(22% of pop.)
Poor
<30
(21% of pop.) Source: Nestlé GCR analysis, selected units from Nestlé Greater China portfolio, sizes non representative
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22. Adapting product tastes & formats to local preferences
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23. PPP: Crispy Shark chocolate wafer
The right consumer insights
 Right recipe 2011 Continued innovation and growth
 Right brand & price positioning
2009 Re-launch “Crispy Shark” brand
 Right communication campaign
 Right in-store promotion 2008 1st Above-the-line communication
2006 Reach 10,000 tonnes
2005 Explore Pick & Mix opportunity
1998 Launch Nestlé Wafer in China
22 September 25th, 2012 Nestlé Investor Seminar, Shanghai

24. R&D: Senior Nutrition, Addressing the needs of the ageing
population
Price
Senior milk powder
Ageing society Product offering High
 Chinese aged 55+ will reach 335 million
by 2015
 They allocate half of their expenditure Specific health
concerns
to food: RMB 5000 per year & per capita
Omega senior HiCal
Heart Health Bone Health
Digestion- Essential
nutrition
HEART and BONE are top 2 health concerns
for Chinese Senior Consumers
Strong R&D to build up expertise in nutrition for seniors
Source: National Statistics Bureau 2010/Kantar consumer panel/McKinsey insight China
23 September 25th, 2012 Nestlé Investor Seminar, Shanghai

25. I&R: Focus on winning regions with winning products
The Ice Cream success story
Focus on regions Portfolio optimization
with strong ability to win More selective & better innovations
Concentrate on North
& South Regions
Close East Region Out: 46 SKUs In: 14 SKUs
YTD growth 45% like for like More competitive portfolio
Improvement of Trading Operating Profit Increase of Marginal Contribution
24 September 25th, 2012 Nestlé Investor Seminar, Shanghai

26. Out-of-home: Nestlé Professional, helping operators win!
Dedicated organization with
strong channel & customer
intimacy
Inspiring Partners‟ Growth by Providing
Branded, Creative and Profitable
Food & Beverage Solutions The widest F&B portfolio
that are Making More Possible in the out-of-home market
for our Customers
Nestlé Group expertise
& capabilities
Ability to customize products
& solutions
25 September 25th, 2012 Nestlé Investor Seminar, Shanghai

27. We will keep on developing the professional channels
as out-of-home consumption increases in China
2,900
Out-of-home Spending / Capita
Japan
2,400
1,900 United States
Singapore
(CHF)
Hong Kong
1,400 Taiwan
France
Brazil South Korea
900 Germany
China
Portugal
400 India
Indonesia Russia
-100
- 10,000 20,000 30,000 40,000 50,000
GDP / Capita (USD)
 US: largest out-of-home market, followed by Japan and China
 US/Japan: size driven by spending; high out-of-home spending/capita but low growth
 China: size driven by population; low out-of-home spending/capita (RMB 1‟800) but high growth
Source: Euromonitor , Nestlé Professional Global Food service Industry Channel Quantification Report 2012
26 September 25th, 2012 Nestlé Investor Seminar, Shanghai

28. We will keep on developing the professional channels
as out-of-home consumption increases in China
2,900
Out-of-home Spending / Capita
Japan With increasing
2,400
disposable income and
1,900 United States changing socio-economic
Singapore
demographics,
(CHF)
Hong Kong
1,400 Taiwan out-of-home consumption
France increases
Brazil South Korea
900 Germany
China
Portugal
400 India
Indonesia Russia
-100
- 10,000 20,000 30,000 40,000 50,000
GDP / Capita (USD)
 US: largest out-of-home market, followed by Japan and China
 US/Japan: size driven by spending; high out-of-home spending/capita but low growth
 China: size driven by population; low out-of-home spending/capita (RMB 1‟800) but high growth
Source: Euromonitor , Nestlé Professional Global Food service Industry Channel Quantification Report 2012
27 September 25th, 2012 Nestlé Investor Seminar, Shanghai

29. Totole: A successful partnership in culinary products
Mr. Rong Yaozhong, founder of Totole,
is still General Manager of the company
2012 after 13 years of successful partnership
2009 Opening of Totole„s second factory
2001
Opening of Nestlé R&D center
1999 Nestlé acquires 80% of Totole
1997 Opening of Totole factory
1988 Start manufacturing chicken bouillon
28 September 25th, 2012 Nestlé Investor Seminar, Shanghai

30. Totole local insights + Nestlé technology = Winning recipes
Totole local insights Nestlé technology Winning recipes
Overall
2
1
After 0 Aroma
-1
Taste -2
-3
-4
-5
Taste Flavor
Nestlé
Proprietary
technology
MHT STB
29 September 25th, 2012 Nestlé Investor Seminar, Shanghai

31. … leading to a relevant portfolio for Chinese consumers
MSG range 3 „Xian‟ granulated chicken bouillon Dehydrated bouillon
Paste and recipe mixes Premium soya sauce & premium oil Gel & liquid concentrated bouillon
30 September 25th, 2012 Nestlé Investor Seminar, Shanghai

32. Totole: A proven track record
of managing sino-foreign partnerships
2nd factory opened
Nestlé-Totole
way to success:
Common values,
Mutual learning, JV established
Respect of
differences
Nestlé R&D opened
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: CNCS, 2011
31 September 25th, 2012 Nestlé Investor Seminar, Shanghai

33. Yinlu is an ideal platform to become a major player
in healthy dairy-based beverages and nutritious congees
Chinese relevant products
 Leader in ready-to-eat
congee and ready-to-
60/40 partnership with drink peanut milk
founding families
Headquartered in Xiamen
Traditional trade High operational efficiency
& Deep penetration & Aseptic experience
 8‟000 sales people  3 large-scale factories
 >700‟000 outlets
covered
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34. …with a range of leading healthy & nutritious products
Peanut milk range Red date peanut milk Milk peanut
‘Eight Treasure‟ congee „Hao Zhou Dao‟ congee
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35. Agenda
1. China: Favourable yet challenging business environment
2. Nestlé‟s roots in China and recent performance: Accelerating
growth and 2 step-changing partnerships
3. Vision, Objective & Ambition
4. Winning in the new reality: China-relevant portfolio,
Region & channel focus, Success with partners
5. Creating shared value
34 September 25th, 2012 Nestlé Investor Seminar, Shanghai

36. Quality, food safety and compliance are
our non-negotiable priorities
 Quality is our Making it the cornerstone of our operation, we never
biggest boss… compromise with food safety and compliance
…a consistent Continuous consultation and cooperation with authorities,
engagement academics and trade associations
…across the whole Long-term partnerships with farmers and very stringent
value chain selection and control of raw and packing materials
…in each of our Strict implementation of the Nestlé Quality Systems with
comprehensive quality controls at each manufacturing
factories
step and full compliance with regulation
…with the most
Investment in state-of-the-art equipment and best-in-class
advanced
analytical capabilities
technology
35 September 25th, 2012 Nestlé Investor Seminar, Shanghai

37. Long-term cooperation benefiting thousands of farmers
1. Fresh milk collection
 Local fresh milk collected and processed
every day
• Daily fresh milk payments to farmers
• With multiplying direct/indirect effect on local
communities: ~ 200,000 people 800 Volume - ’000 tonnes/year
700
 In 2011, Nestlé agronomists trained ~17,000 600
farmers 500
 World-Class Dairy Farming Institute 400
300
under construction in Shuangcheng, to
200
support the sustainable development and
100
the modernization of the dairy industry in
0
China 1994 2011
36 September 25th, 2012 Nestlé Investor Seminar, Shanghai

38. Long-term cooperation benefiting thousands of farmers
2. Coffee culture Volume - tonnes/year
12000
 Nestlé has helped pioneer coffee growing 10000
in Yunnan province
8000
• Nestlé Agriculture Technical Assistance: world
6000
class support to coffee growers
4000
• Experimental training and demonstration
coffee farm: model of best practices 2000
• Trusted, reliable buyer of coffee beans at 0
1998 Full Year 2012 YTD
stable and competitive price
 June 2012, Rio, Brazil: Received the
World Business and Development
Award for "Innovative & productive
business practices that benefited Chinese
society"
37 September 25th, 2012 Nestlé Investor Seminar, Shanghai

39. Key Enablers
 Human Resources  Research & Development
 Attract, develop & retain  Transfer & build expertise and
local talents know-how with strong Chinese
insights
 Sales & Distribution  Technical
 Expand distribution depth,  Anticipate growth with best-in-
strengthen effectiveness & class production capacity &
expertise organization
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40. Greater China Region: a strong growth engine for
Nestlé
Double-digit sales & profit
Positive 2012 outlook
growth “the Nestlé way”
A quantum size leap: Proven track record of
2 new partners in 2011 winning with local partners
Comprehensive portfolio Creating shared value
& deep Chinese insights from farm to chopsticks
Winning in the New Reality
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41. Thank You !
谢谢！