This document summarizes a presentation given by Kohzoh Takaoka, the President and CEO of Nestlé Japan, at a Nestlé investor seminar in Shanghai on September 25th, 2012. It outlines the challenges and opportunities facing Nestlé in Japan, including a saturated market with limited growth due to a declining and aging population. It also discusses Japan's changing household profiles, with an increasing number of one-person households. The presentation analyzes Japan's food and beverage market and consumer demand for new products, and provides sales data for Nestlé Japan's product categories and its contribution to Nestlé's Asia, Oceania, and Africa region.

1. Nestlé in Japan:
Winning in the
New Reality
Kohzoh Takaoka
President and CEO
Nestlé Japan
Nestlé Investor Seminar, Shanghai
September 25th, 2012

2. Agenda
1. Introducing Nestlé Japan
2. Winning in The New Reality
3. Performance
1 September 25th, 2012 Nestlé Investor Seminar, Shanghai

3. Sales by category of Nestle in Japan 2011
2%
14% Powdered and Liquid Beverages
Confectionery
Milk products
10%
Prepared dished and cooking aids
1% 58% PetCare
4%
Nestlé Professional / Nestlé
Health Science / Nespresso
11% Nestlé Waters
2 September 25th, 2012 Nestlé Investor Seminar, Shanghai

4. Sales Contribution in total AOA
2011
Japan
9%
3 September 25th, 2012 Nestlé Investor Seminar, Shanghai

5. Japan Overview
Population (2011) : 128 million 23% ≧65 yrs old
Population (2050 Proj.) : 97 million 39% ≧65 yrs old
No. of Households (2011) : 52 million 32% “1 Person”
GDP (2011) : 508 trillion yen
GDP / Capita (2011) : 4.0 million yen
Unemployment (2011) : 4.6%
Life Expectancy (2010): 85.9 years (Female)
79.3 years (Male)
Main Area Populations
Kanto 43.5 million
Kansai 20.9 million
4 September 25th, 2012 Nestlé Investor Seminar, Shanghai

6. Japan‟s Food and Beverage Market
GDP
508 Trillion yen
Living
Expenditure
58%
F&B 14%
Out of home In home
32 Trillion yen 40Trillion yen
Data: Real GDP (expenditure basis) in 2011
5 September 25th, 2012 Nestlé Investor Seminar, Shanghai

7. The New Reality – Challenges
No More Overall Growth / Saturated Market
Population (M) Today GDP Growth
Population
130 15%
125
10%
120
GDP Growth
5%
115
0%
110
-5%
105 Declining population &
limited GDP growth
100 -10%
1980 1990 2000 2010
Sources: National Institute of Population and Social Security Research; UN; IMF
6 September 25th, 2012 Nestlé Investor Seminar, Shanghai

8. The New Reality – Challenges & Opportunities:
Ageing Population trend in Japan
The elderly
% of elderly
% of elderly (≥65y.o.) 32% by countries
in 2010
30 29%
25
23% 23 Japan
Germany
20 20 Italy Developed
17 France Countries
UK
15
13 US
Russia
10
8 China Developing
7 Brazil Countries
5 5 India
0
1970 1980 1990 2000 2010 2020 2030
Sources: UN (Estimated with: Developing countries-high variant / Developed countries-Low variant)
7 September 25th, 2012 Nestlé Investor Seminar, Shanghai

9. The New Reality – Challenges & Opportunities:
Changing Household Profiles
Family Size 3.22 2.99
(Av # persons) 2.67 2.46
50.9
46.8
4.2 (8%)
# Household (million) 40.7 5.4 (12%) 7.6 (15%)
(# persons) 35.8
6.8 (17%) 7.9 (17%)
7.2 9.4
5+ (20%)
8.8 (22%) 8.8 (19%)
4 9.1 (25%)
(19%)
13.8
7.4 (18%)
11.7 (27%)
6.5
3
6.0
(18%)
8.4
(21%)
(25%)
58％
2 (17%)
37％ 9.4 12.9 15.9
1 7.1 (20%)
(23%)
(28%)
(31%)
1980 1990 2000 2010
8 September 25th, 2012 Nestlé Investor Seminar, Shanghai

10. The New Reality – Challenges & Opportunities:
Consumers Demand a lot of New Products
Very large # of SKUs:
~40% of SKUs are replaced every year
Beverage1) Chocolate2)
New 42% 1,348 39%
116
98% of them are
gone
2,082 one year after the
Existing 157 launch
Total 273 3,430
1) 2011 for Canned Liquid Coffee
2) 2011 for Chocolate
Sources: 1)ASD 2)Intage SRI
9 September 25th, 2012 Nestlé Investor Seminar, Shanghai

11. The New Reality – Challenges & Opportunities:
Consumers shopping smarter & looking for lower prices
Consumer shopping style % of Consumer who buy Private Brands
(% of Shoppers)
2009 2008 2009
+9%
Multi-store
Shoppers 89 74
68
Single Store
Shoppers 11
Total (%) 100
Sources: METI; Fuji Keizai
10 September 25th, 2012 Nestlé Investor Seminar, Shanghai

12. The New Reality – Challenges & Opportunities:
From Traditional to Digital in Consumer Communication
Traditional Media Digital Media
(%) Declining access trend (%) Growing access trend
70 Read Newspaper Ad usually 70 Collect necessary information
from Web usually
60 60
Watch TVCM usually
50 50
Ever clicked Banner Ad on Web
40 40
Read Magazine Ad usually
30 30
Watch Web Ad usually
20 20
Listen Radio CM usually
Read Mail Ad usually
10 10
0 0
2006 2007 2008 2009 2010 2006 2007 2008 2009 2010
Source : Hakuhodo HABIT2011
11 September 25th, 2012 Nestlé Investor Seminar, Shanghai

13. The New Reality – Challenges & Opportunities:
Channel Structure Change
Index 3,168
(1999 = 100)
E- commerce
Alternative
channel
200
Drug store 181
150
Convenience store 127
Supermarket 101
100 Traditional
channel
50 Department store 67
0
1999 2005 2010
Source: METI / Fuji keizai
12 September 25th, 2012 Nestlé Investor Seminar, Shanghai

14. The New Reality – Challenges & Opportunities:
Complex Traditional Trade Still a Reality 15% AEON
TOP VALUE
85%
Investment Rate HASEGAWA
15% AEON GLOBAL 85%
14.7% MERCHANDING
AEON GLOBAL 85%
NIHONBASHI SCM
KABO About 10billion Yen 15% 1.82% MAXVALUE
CHUBU
51%
TOHO 5% MARUHISA DAIEI 28.41% MARUETSU 1.53% JOIS
2.2%
TOBU STORE LAWSON 32.4%
3.61% 28.79 4.8%
1.56% 30.01%
YAMABOSHIYA % LIFE CORP.
SHUREN 73.8% MITSUBISHI
KOKUBU KOKUBU MARUBENI 83.5% NACS 20%FINE LIFE 80%FOOD SERVICE SHOKUHIN
Shosha
26.3% SUPER NAKAMURA NETWORK 19.53%
YAMAE DAIEI 2.14% 100%
KANSAI SUPER
HISANO 2.3% ALBIS 1.96% KUZE
3.55% MARUICHI
60.6%
SANSHO 3.2%
0.39%
2.22% 0.2% OK
NIPPOON JAPAN Wholesaler
2%
4.71% SAKE OROSHI
ACCESS INFOREX 5.05% AEON
UNION<SOU> MITSUBISHI
4.25%
5.07%
NIHON SHURUI MARUDAI6.66% ALLIANCE
HANBAI NAGANOKEN TAKEDA HORIUCHI 91.9% 1.5%
SEICO SHURUI FOODS NETWORK TOHKAN
FRESH FOODS HANBAI SANESU
KANAKAN 6.66% 6.66%
2.3%
98% FUJITOKU
4.69%
SEICO MART
Retailer
BUSSAN
ITOCHU UNIVERSAL SATOH ASAHI FOODS 2.08% AEON
FOOD
SHOWA 51.7% HOKKAIDO
KATO SANGYO
MITSUI 8.26%
BUSSAN
KAGOSHIMA 11.1%
31.58% ITOCHU FOODS
FAMILY MART DOLCE 8.57% MAMMY MART
MITSUI FOODS
1.83%
3% 34% SUMITOMO SUMMIT
2% SEVEN&I HOLDINGS
IZUMIYA 3% 100%
KONFEX YUASA ITO-YOKADO
UNY FUNASHOKU SEVEN ELEVEN JAPAN
13 September 25th, 2012 Nestlé Investor Seminar, Shanghai

15. Challenges & Opportunities in The New Reality
Declining total population, increasing single households and
elderly population
Increasing polarization of wealth and consumption
High demands for quality, innovation, freshness and customization
High "nutrition awareness"
Highly developed alternative communication
Shifting from traditional channels to emerging new channels
Highly complex traditional trade still a reality
14 September 25th, 2012 Nestlé Investor Seminar, Shanghai

16. Agenda
1. Introducing Zone AOA
2. Winning in The New Reality
3. Performance
15 September 25th, 2012 Nestlé Investor Seminar, Shanghai

17. The Nestlé Strategic Roadmap to
Win in The New Reality
16 September 25th, 2012 Nestlé Investor Seminar, Shanghai

18. Strategic Enablers to Achieve Nestlé-in-Japan Mission
Nestlé B to C /
Continuous Direct
Excellence Model
Bigger
Bolder From Mass
Better Ad
(B3) to P2P
I &R
17 September 25th, 2012 Nestlé Investor Seminar, Shanghai

19. NESCAFÉ Barista enjoys great popularity B3
Innovation
Now the Best selling coffee machine in Japan
Launched in March 2010,
„Drink instant coffee machine style‟ is catching on.
Enjoy a cup of Café
Latte for 25 yen !
5 kinds of café
10% of machine menu with one
purchasers are button
R&G coffee
drinkers Machine price
reasonable
18 September 25th, 2012 Nestlé Investor Seminar, Shanghai

20. NESCAFÉ Dolce Gusto B3
Creating new segment in coffee machine market Innovation
Enjoy fresh taste & aroma and varieties anytime using capsule for
„NESCAFÉ Dolce Gusto‟, completely new and different from traditional
electric coffee maker.
19 September 25th, 2012 Nestlé Investor Seminar, Shanghai

21. Kit Kat “Sweetness for Adults” B3
Reinforces Kit Kat brand Innovation
• Differentiated brand image from original Kit Kat
• Gained market share.
⇒Real 2nd pillar to the brand!
Crushed dark biscuits mixed
into chocolate mass
・Unique texture
・Enhanced lightness
・Less sweet
20 September 25th, 2012 Nestlé Investor Seminar, Shanghai

22. Move to Digital accelerates Owned/Earned Mass
Media Value Ad
to P2P
2001 2011 2011
21 September 25th, 2012 Nestlé Investor Seminar, Shanghai

23. KIT KAT strengthens brand value by PR exposure Mass
5 times more PR exposure than TV every year Ad
to P2P
„KIT KAT Juken Campaign
 Campaign born from consumers‟ word-of-mouth
KIT KAT sounds like Kyushu‟s dialect „Kitto Kattoh (Surely win !)‟ and has become a lucky charm for Juken among
students since around 2002.
 Sending message through „third party‟ makes the news more public and sympathetic
 Students bring it to test room, or teachers, family, or friends send it to students to cheer them up
KIT KAT X Japan Railway KIT KAT X Japan Post
22 September 25th, 2012 Nestlé Investor Seminar, Shanghai

24. Our PR activities are on the right track Mass
Ad
Brand PR Investment vs. Exposure to P2P
x 9.6
Investment Exposure
2011
23 September 25th, 2012 Nestlé Investor Seminar, Shanghai

25. Nestlé Consumer Site contains E-commerce, Brand communication,
Membership programme, Entertainment for wider access and CRM
Registered members： 2.5 million (as of the end of July, 2012)
The number of page views: 270 million （2011 in total）
Brand contents nestle.jp Entertainment contents
Online shopping
24 September 25th, 2012 Nestlé Investor Seminar, Shanghai

26. Channel Development
Direct
Established Direct Selling as growth driver Model
‟Nestlé On-line shopping‟
25 September 25th, 2012 Nestlé Investor Seminar, Shanghai

27. NESCAFÉ Barista
Direct
Innovations beyond products Model
New Innovative business model exploration - NESCAFÉ BARISTA office
 Unique opportunity : 5.3m small offices
 New business model idea:
• Installation of free NESCAFÉ BARISTA machine
• NESCAFÉ ambassadors engagement
• Direct sales of coffee
 Test sales (Jun.-Jul. 2012) successfully done
in Hokkaido region
 Exploring national roll out.
TV infomercial
26 September 25th, 2012 Nestlé Investor Seminar, Shanghai

28. Evolution of Nestlé Health Science in Japan
Current Businesses
120
Ageing Care
111
Critical Care
100
Paediatric
Future Opportunities
Metabolic Health
Gastrointestinal
Brain Health
2009 2010 2011
Sales (2009 = 100) Market Share
27 September 25th, 2012 Nestlé Investor Seminar, Shanghai

29. Agenda
1. Introducing Zone AOA
2. Winning in The New Reality
3. Performance
28 September 25th, 2012 Nestlé Investor Seminar, Shanghai

30. Return to Sales Growth
Nestlé in Japan
100
91
85
2003 2007 2011
Organic Sales Index (Year 2003 = 100)
29 September 25th, 2012 Nestlé Investor Seminar, Shanghai

31. Acceleration of Working Capital Improvement
Nestlé in Japan
2007 2008 2009 2010 2011 2012 H1
TNWC as % of sales
30 September 25th, 2012 Nestlé Investor Seminar, Shanghai

32. Winning in the New Reality in Japan
The New Reality Nestlé Japan‟s Response
 Unfavorable demographic trends – Return to Sales Growth
shrinking and ageing population
Accelerated Profit Margin improvement
 Consumers becoming more demanding
and value conscious Increased Capital Efficiency
 Traditional Media giving way to Digital With emphasis on:
Media
B3 innovations
 Sales channel structure evolving from
“Traditional” to “Alternative” Direct business model
From Mass Ad to P2P communication
 Complex and expensive trade structure
still remains relevant
Nestle Continuous Excellence
31 September 25th, 2012 Nestlé Investor Seminar, Shanghai

33. Thank you!
32 September 25th, 2012 Nestlé Investor Seminar, Shanghai

34. Q&A
33 September 25th, 2012 Nestlé Investor Seminar, Shanghai