NIS 2011 Supply chain competitive gaps Hans Joehr

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Hans Joehr, global head of agriculture, presents Nestlé's approach to creating cometitive gaps in the upstream supply chain

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NIS 2011 Supply chain competitive gaps Hans Joehr

  1. 1. CreatingCompetitiveGaps inupstreamsupply chainsfMr. Hans JöhrHead of CorporateAgriculture June 7, 2011 Nestlé Investor Seminar
  2. 2. DisclaimerThis presentation contains forward lookingstatements which reflect Management’s currentviews and estimates. The forward lookingstatements involve certain risks and uncertaintiesthat could cause actual results to differ materiallyfrom those contained in the forward lookingstatements. Potential risks and uncertaintiesinclude such factors as general economicconditions, foreign exchange fluctuations,competitive product and pricing pressures andregulatory developments.1 June 7, 2011 Nestlé Investor Seminar
  3. 3. Agenda Threats and opportunities to feed 9-10bi people Sourcing objectives How do we create competitive gaps – different cases Sustainable Agricultural Initiative at Nestlé “Farmer Connect” presence and impact Conclusion2 June 7, 2011 Nestlé Investor Seminar
  4. 4. Threats and opportunities to feed 9-10bi people Soil fertility Breeding Energy pricing Water Management Technical Assistance Policy interventions3 June 7, 2011 Nestlé Investor Seminar
  5. 5. Sourcing objectivesEnsure long-term supply of safe, quality assured, regulatory compliant andprice competitive agricultural materials to serve our brands to delightconsumersHow do we operate? With lean upstream supply chains from farm gate to factory gate, called “Farmer Connect”What is “Farmer Connect”? Traceability up to farmers’ level by buying either directly from farmers, cooperatives or selective traders, applying Nestlé good agricultural standards, principles and practices with engagement in capacity building and training.Why and where? 46% of Nestlé factories are located in emerging countries – the fast developing world and 74% of those Nestlé factories are located in rural areas4 June 7, 2011 Nestlé Investor Seminar
  6. 6. Sourcing at Nestlé Corporate Agriculture / Procurement Nestlé Responsible Sourcing Traceability Programme For high risk spend categories Direct engagement with 556,000 farmers Audit E.g. coffee, cocoa, milk, Programme vegetables, vs. NSC fruits,… 2010/2011: 1735 3rd party audits of key suppliers5 June 7, 2011 Nestlé Investor Seminar
  7. 7. How do we create competitive gaps in the upstreamsupply chain?With “Farmer Connect”, where we have direct contacts with producers to: Ensure traceability up to farmers’ level Assure quality, safety and volume growth of raw materials Mitigate price volatility exposure Reduce transaction costs and serving our brands guaranteeing access to specific raw materials Optimise Value Stream Operations Management System Consumer Marketing & Customer & Sales Supply Chain Manufacturing Procurement Agriculture O TPM + LEAN6 June 7, 2011 Nestlé Investor Seminar
  8. 8. Creating competitive gaps in the upstream supplychain (1/3)Quality Assurance and volume growth by managing milk districts (China)7 June 7, 2011 Nestlé Investor Seminar
  9. 9. Creating competitive gaps in the upstream supply chain (1/3) Video showCopyright: Financial Times Ltd8 June 7, 2011 Nestlé Investor Seminar
  10. 10. Case “end-to-end”: Sourcing grains in Australia Communication of needs (Consumer) varieties agricultural specs. on plant practices safety & protection quality & quality fertilizing safety quantity Farm Mill Farmer Transport Input Storage seed sustainable CustomerSAIN breeding cereal e.g. soil & water conservation Consumer programs farming optimized use of inputs practices Functional & Communication of activities Emotional Benefits9 June 7, 2011 Nestlé Investor Seminar
  11. 11. Creating competitive gaps in the upstream supplychain (2/3)Ensure supply, farmers’ loyalty and consumer benefits in thecase of oat sourcing for breakfast cereals (Australia)10 June 7, 2011 Nestlé Investor Seminar
  12. 12. Creating competitive gaps in the upstream supplychain (2/3) Video show11 June 7, 2011 Nestlé Investor Seminar
  13. 13. Creating competitive gaps in the upstream supplychain (3/3): Local sourcing of grains in West Africa* More than 10’000 farmers trained in Western Africa on “Good Agricultural Practices & Good Storage Practices” Farmers produce now grains with mycotoxins levels within Nestlé norms (4ppb) Farmers achieve a price premium Market access created for locally produced grains in West Africa with a farm base value of > USD 20 mio * In Partnership with the International Institute for Tropical Agriculture12 June 7, 2011 Nestlé Investor Seminar
  14. 14. Creating competitive gaps in the upstream supplychain (3/3): Local sourcing of grains in West Africa Video show13 June 7, 2011 Nestlé Investor Seminar
  15. 15. Serving our brands: Nescafé Plan THE NESCAFE PLAN: USD 380 Mio Making the difference from farmer to consumer • A 3 pillar plan: Responsible production Responsible Responsible farming and supply consumption •Farmers: Farmer Connect: •Soluble: 180 000T -20% energy / ton 170 000 farmers •Promote consumption  -30% water / ton 100% 4C compliant •Educate consumer on 90 000 T of SAN •Systems issue coffee is facing Training (Nescafé Dolce Gusto) •Help consumer to •Plantlets :220 mio plantlets •Nestlé Professional reduce its footprint distributed by 2020 •Develop socio Better yield Better Quality economic impact Disease resistant Promote bio-diversity To fuel the growth and give a competitive advantage 3 Making the difference from farmer to you14 June 7, 2011 Nestlé Investor Seminar
  16. 16. The Nescafe Plan in action: Mexico Plant science Supporting farmers CommunicationVarieties selected according strategy for local and Successful verification to agronomic performance and granting of the first international market 4C License to Nestle Mexico AND consumer taste profiles to be developed Partnerships Plantlet distribution Farmer training Working relationship with Started coffee plantlet Training according to 4C local partners and distribution to farmers requirements communities formalised15 June 7, 2011 Nestlé Investor Seminar
  17. 17. Nespresso AAA: Differentiated supply ofspeciality beans16 June 7, 2011 Nestlé Investor Seminar
  18. 18. Nespresso AAA: Differentiated supply ofspeciality beans17 June 7, 2011 Nestlé Investor Seminar
  19. 19. Serving our brands:The Cocoa Plan Ecuador in action Winning consumer preferences on 60/40+ Managing the Purchasing beans supply chain / with Arriba taste monitoring critical control pointsSupporting farmers “Farmer Connect” Linking back to producer through claims towards health, origin, and purity18 June 7, 2011 Nestlé Investor Seminar
  20. 20. The Sustainable Agricultural Initiative at Nestlé“SAIN” is the enabler to “Farmer Connect ” Food safety Quality assurance Regulatory compliance Farm income generation Crop and yield improvements Animal health issues Logistic support / Transport Water management & irrigation Farm management guidance Technical training Etc.  Rural Development & Water and Agriculture19 June 7, 2011 Nestlé Investor Seminar
  21. 21. “Farmer Connect ” presence and impact Markets with “Farmer Connect” activities # direct sourcing staff: 1,014 # supply chain support staff: 17,273 # farmers supplying directly to Nestlé: 556,600 # farmers received training: 144,900 # collection centers: 10,847 # experimental farm sites: 128 # crop demonstration plots: 165 # farmers benefitting from financial assistance: 32,036 Budget for financial assistance: CHF 45,4 Mio Source: CSV Report 201020 June 7, 2011 Nestlé Investor Seminar
  22. 22. To conclude:“Farmers Connect” sourcing model contribute to… Replicable and consistent quality and food safety Predictable timing and volume • Develop farmers Increased price stability & suppliers… Sustainable production • Building capacity for growth… Farmer loyalty=> Long-term access Secure availability of to raw materials adequate agricultural Sustainability raw materials at competitive prices and Compliance Ensure safety & quality specific of raw materials quality All daily Sourcing Activities21 June 7, 2011 Nestlé Investor Seminar
  23. 23. Thank you! Hans Jöhr Corporate Agriculture22 June 7, 2011 Nestlé Investor Seminar

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