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Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
Nestlé in Greater China   winning in the new reality
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Nestlé in Greater China winning in the new reality

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

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

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  • 1. Nestlé in Greater China:Winning in the New RealityRoland Decorvet Chairman& CEONestlé Greater ChinaNestlé Investor Seminar, ShanghaiSeptember 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 value1 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  • 3. The size of a continent, with provincial GDPsat the level of developing or developed countries Source: The Economist Feb 24 ,20112 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) 2500 Japan +9-10% +6-7% +1-2% Average growth for each development phase 2000 France UK Global F&BConsumption & Italy Germany 1500 Disposable USAIncome Levels Spain Brazil 1000 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 - 5000 10000 15000 20000 25000 30000 35000 40000 +12% Sources: Nestlé GCR Analysis, Euromonitor & McKinsey, 20113 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  • 5. Nestlé continues to support government efforts toreinforce food safety Zero tolerance Stricter legal framework Higher awareness No preferential treatment4 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 value5 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 1999Started trading activities Nestlé Products Initial discussions Hong Kong factory (dairy + 80% partnership within HK. First trademark ice cream) through Totole (Shanghai) Ltd. established in with PRC(Eagle sweetened HK authorities acquisition of Dairy Farmcondensed 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 Chi1993 – 200616 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 benefits10 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 ScienceNote: 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 201112 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 1.5Index Index(ref. 2008) 1 (ref. 2008) 1 0.9 2008 2009 2010 2011 2008 2009 2010 2011 *Excluding Yinlu & Hsu Fu Chi13 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 BusinessesGCR division 18% Nestlé Professional, Nestlé Waters, CPW, Nestlé F&B 16% Nestlé Purina Petcare, GCR division 6% Nespresso, Nestlé Health ScienceNote: 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 value15 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 development16 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  • 18. Our ambition is to grow double-digits whilecreating shared value17 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 value18 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  • 20. The Nestlé Strategic Roadmapto win in the new reality19 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  • 21. Comprehensive product offer matching all income levelsChinese Urban Household Dairy & Coffee Beverage Culinary Confection. Ice cream Hsu Fu Chi Yinlu Waters CerealsAnnual Income (’000 RMB) Nutrition Pet foodGlobal 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 20 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  • 22. Adapting product tastes & formats to local preferences21 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  • 23. PPP: Crispy Shark chocolate waferThe 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 China22 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 seniorsSource: 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 productsThe 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 Contribution24 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 & solutions25 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 growthSource: 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 growthSource: 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 factory1988 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 STB29 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 bouillon30 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  • 32. Totole: A proven track recordof 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, 201131 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  • 33. Yinlu is an ideal platform to become a major playerin 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 covered32 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  • 34. …with a range of leading healthy & nutritious products Peanut milk range Red date peanut milk Milk peanut ‘Eight Treasure‟ congee „Hao Zhou Dao‟ congee33 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  • 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 value34 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  • 36. Quality, food safety and compliance areour 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 technology35 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  • 37. Long-term cooperation benefiting thousands of farmers1. 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 201136 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  • 38. Long-term cooperation benefiting thousands of farmers2. 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 organization38 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  • 40. Greater China Region: a strong growth engine forNestlé 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 Reality39 September 25th, 2012 Nestlé Investor Seminar, Shanghai
  • 41. Thank You !谢谢!

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