Nestlé Investor Seminar

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1 Nestlé Investor Seminar BOB FLAHERTY V.P. of Wal Wal Mart Global Business Nestlé USA Nestlé Investor Seminar - Vevey June 8-9, 2005

2 Disclaimer This presentation contains forward looking statements which reflect Management s current views and estimates. The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments. 2 Nestlé Investor Seminar - Vevey June 8-9, 2005

3 The world s largest food company The world s largest retailer Strong Partners In Profitable Growth! 3 Nestlé Investor Seminar - Vevey June 8-9, 2005

4 A brief history of Wal Mart Who s #1 The Customer ALWAYS!!! All Wal Mart financial information in this presentation has been publicly disclosed by Wal Mart. 4 Nestlé Investor Seminar - Vevey June 8-9, 2005

$300 $285.2 Wal Mart began in 1962 in Rogers, Arkansas and has grown today to a $285 Billion company! $250 $200 $150 $100 $50 $43.8 $55.4 $63.3 $78.3 $89.1 $256.3 $229.6 $204.0 $180.

5 $300 $285.2 Wal Mart began in 1962 in Rogers, Arkansas and has grown today to a $285 Billion company! $250 $200 $150 $100 $50 $43.8 $55.4 $63.3 $78.3 $89.1 $256.3 $229.6 $204.0 $180.8 $156.2 $130.5 $112.0 $99.6 $ ,000,000+ weekly shoppers at Wal Mart 5 Nestlé Investor Seminar - Vevey June 8-9, 2005

Wal Mart Operates Locally In 11 Countries ~ 5,720 Stores USA: 3,720 1,321 Discount 1,761 Supercenter 552 SAM s Club 86 Neighborhood Market Mexico: 683 98 Supercenter 69 SAM s Club 186 Bodega

6 Wal Mart Operates Locally In 11 Countries ~ 5,720 Stores USA: 3,720 1,321 Discount 1,761 Supercenter 552 SAM s Club 86 Neighborhood Market Mexico: Supercenter 69 SAM s Club 186 Bodega (discount chain) 54 Superama (hypermarket) 50 Suburbia (apparel store) 226 VIPs, El Porton, & Ragazzis (restaurant chain) Canada: Discount 6 SAM s Club Puerto Rico: 54 8 Discounts 10 SAM s Club 4 Supercenter 32 Amigo Store Brazil: Supercenter 13 SAM s Club 3 Todo Dias 115 Bompreco United Kingdom: Supercenter 265 ASDA Supermarket China: Supercenter 2 SAM s Club 2 Neighborhood Market S. Korea: 16 Supercenter Germany: 89 Supercenter Japan: 404 * Seiyu, Ltd.: 210 Seiyu 23 Tohoku Seiyu 73 SSV 77 Sunny 7 Riubou 14 Mujirushi Ryohim (* As of , WM owns 42.43% stake w/option to raise stake to 50.1% by end of 2005 and to 61.1% by end of 2007.) Argentina: 11 Supercenter 6 Nestlé Investor Seminar - Vevey June 8-9, 2005

7 TECHNOLOGY Tracking every register transaction for all Wal Mart s outlets. LOGISTICS Approximately 160 Distribution facilities in the U.S. Fleet of 5,000+ trucks. 7 Nestlé Investor Seminar - Vevey June 8-9, 2005

8 2,250 Wal Mart U.S. Store Growth ( ) 2,000 1,750 1,500 # of U.S. Stores 1,250 1, Nestlé Investor Seminar - Vevey June 8-9, * 2005 * 2005 data through May, 2005.

9 2,250 Wal Mart U.S. Store Growth ( ) 2,000 1,750 1,500 # of U.S. Stores 1,250 1, Nestlé Investor Seminar - Vevey June 8-9, * 2005 * 2005 data through May, 2005.

10 2,250 Wal Mart U.S. Store Growth ( ) 2,000 1,750 1,500 # of U.S. Stores 1,250 1, Nestlé Investor Seminar - Vevey June 8-9, * 2005 * 2005 data through May, 2005.

11 2,250 Wal Mart U.S. Store Growth ( ) 2,000 1,750 1,500 # of U.S. Stores 1,250 1, Nestlé Investor Seminar - Vevey June 8-9, * 2005 * 2005 data through May, 2005.

12 The world s largest food company Nestlé. The world s largest retailer Wal Mart. Strong Partners in Profitable Growth! 12 Nestlé Investor Seminar - Vevey June 8-9, 2005

13 ALIGNMENT of our mutual priorities. 13 Nestlé Investor Seminar - Vevey June 8-9, 2005

14 Alignment the Nestlé Four Pillars a Blueprint for Success with Wal Mart RENOVATION / INNOVATION PRODUCT AVAILABILITY CONSUMER COMMUNICATION LOW COST / HIGHLY EFFICIENT OPERATIONS Focused on product innovation. Continuously renovate the way we work together. Brand focused. Demand creation focused. Multiple store formats. Multiple placements in the store. The Consumer Always. Consumer data. KPIs focused on sales, profits, market share, and service. 14 Nestlé Investor Seminar - Vevey June 8-9, 2005

15 NESTLÉ BRANDS drive consumer demand in Wal Mart stores. 15 Nestlé Investor Seminar - Vevey June 8-9, 2005

16 Nestlé s Brands reaching Wal Mart shoppers... Wherever, Whenever, However With innovative Good Food, Good Life products throughout their lives. 16 Nestlé Investor Seminar - Vevey June 8-9, 2005

Nestlé s direct sales to Wal Mart in the U.S. are growing at approximately twice Nestlé s total U.S. sales! % Increase 2003-2004 Total Nestlé Sales in the U.S. 7.2% Nestlé Sales to Wal Mart 13.

17 Nestlé s direct sales to Wal Mart in the U.S. are growing at approximately twice Nestlé s total U.S. sales! % Increase Total Nestlé Sales in the U.S. 7.2% Nestlé Sales to Wal Mart 13.8% Nestlé Sales to other U.S. Customers 6.3% Note: Results include Nestlé Brands Co., Nestlé Prepared Foods Co., Nestlé Purina PetCare Co., Nestlé Waters North America, and Dreyer s / Edy s Grand Ice Cream Co. 17 Nestlé Investor Seminar - Vevey June 8-9, 2005

18 ORGANIZATIONAL ALIGNMENT 18 Nestlé Investor Seminar - Vevey June 8-9, 2005

19 Organizational Alignment with a multi-functional business team approach. Nestlé Capabilities Category Management Modular / Retail Solutions Order Revenue Management Sales Rep Marketing Supply Chain Retail Execution Wal Mart Needs Retail Merchandising POS / Shopper Demand Accounting Buyer Marketing Supply Chain Retail Operations 19 Nestlé Investor Seminar - Vevey June 8-9, 2005

SOUTH KOREA PUERTO RICO CHINA BRAZIL ARGENTINA While capitalizing

20 Organizational Alignment conducting business Locally GERMANY UNITED KINGDOM CANADA JAPAN MÉXICO BENTONVILLE, ARKANSAS USA SOUTH KOREA PUERTO RICO CHINA BRAZIL ARGENTINA While capitalizing on opportunities Globally. 20 Nestlé Investor Seminar - Vevey June 8-9, 2005

21 Organizational Alignment Organizational Alignment Nestlé is a global resource as Wal Mart considers new market opportunities. Nestlé Poland Nestlé Russia Nestlé Philippines Nestlé Turkey Nestlé India 21 Nestlé Investor Seminar - Vevey June 8-9, 2005

22 COLLABORATIVE JOINT BUSINESS PLANNING 22 Nestlé Investor Seminar - Vevey June 8-9, 2005

23 Collaborative Joint Business Planning Consumer Purchase Data Nestlé Expertise POS Data Inventory Price Management Market Basket + Trust Consumer Trends Category Insight Product Knowledge Global to Local Expertise The outcome Strategies for our Competitive Advantage! 23 Nestlé Investor Seminar - Vevey June 8-9, 2005

24 Collaborative Joint Business Planning Collaborative Joint Business Planning considering all aspects of Modular Plan ~ Distribution New Listings Pricing & Promotions Co- Development; Merchandising & Packaging Category Advisor Every Day Low Cost / Every Day Low Price Supply Chain / Replenishment Budgeting 24 Nestlé Investor Seminar - Vevey June 8-9, 2005

25 RETAIL EXECUTION 25 Nestlé Investor Seminar - Vevey June 8-9, 2005

26 Retail Execution a collaborative joint business plan is only as good as our mutual ability to execute. The average Wal Mart shopper takes eight seconds to make a purchase decision and greater than 94% of your total business is sold off of the shelf. - Wal Mart Executive Our Nestlé team s passion is to have the Right Product Right Place Right Time Right Price 26 Nestlé Investor Seminar - Vevey June 8-9, 2005

Retail Execution executing the plan. 100 90 99% of all Wal Mart Stores in four weeks!

Incremental $250,000 in sales. 27% of all other Retail stores!

27 Retail Execution executing the plan % of all Wal Mart Stores in four weeks! % of Stores Selling Ultimates Week 1 Week 2 Week 3 Week 4 Incremental $250,000 in sales. 27% of all other Retail stores! Wal-Mart Grocery Accounts Source: A.C. Nielsen, Total U.S. over $2M 27 Nestlé Investor Seminar - Vevey June 8-9, 2005

28 Nestlé / Wal Mart Global VPIs Retail Execution Volume Producing Items 28 Nestlé Investor Seminar - Vevey June 8-9, 2005

Wal Mart represents 18% of Nestlé s total U.S. sales in 2004 2002 16% Wal Mart s worldwide sales in 2004 grew at 11.

29 Wal Mart represents 18% of Nestlé s total U.S. sales in % Wal Mart s worldwide sales in 2004 grew at 11.3% % 18% While Nestlé s sales to Wal Mart worldwide grew to $4.4B; +15%! 29 Nestlé Investor Seminar - Vevey June 8-9, 2005

30 SUMMARY: Why the world s largest food company ~ Nestlé and the world s largest retailer ~ Wal Mart are today Partners in Growth Alignment ~ Nestlé Pillars a Blueprint for Success at Wal Mart Nestlé Brands / Wal Mart Customers Parallel Organizations Collaborative Joint Business Planning Ability to Execute 30 Nestlé Investor Seminar - Vevey June 8-9, 2005

31 Leveraging our Nestlé / Wal Mart Global Relationship with Bigger Stronger Break-through ideas 31 Nestlé Investor Seminar - Vevey June 8-9, 2005

32 Nestlé / Wal Mart Executive Workshop Nestlé S.A. Vevey, Switzerland 32 Nestlé Investor Seminar - Vevey June 8-9, 2005

33 Wal Mart, like Nestlé,, sees Wellness as a Trend not a Fad. Wal Mart Values Nestlé s Wellness Expertise and Products. Resulting in Wal Mart appointing Nestlé as a Strategic Wellness Partner. 33 Nestlé Investor Seminar - Vevey June 8-9, 2005

34 Breakthrough Ideas benefits of pursuing Wellness opportunities... Benefits to Nestlé: Access to a growing number of wellnessconscious consumers and their wellness insights. Opportunity to accelerate the availability and sale of new, attractive margin, wellness- oriented Nestlé products. Benefits to Wal Mart: Opportunity to attract consumers to purchase attractively priced wellness products and services in their stores. Wal Mart, a Health and Wellness destination. 34 Nestlé Investor Seminar - Vevey June 8-9, 2005

35 Low Growth / High Profit Breakthrough Ideas High Growth / High Profit Low Growth / Low Profit High Growth / Low Profit 35 Nestlé Investor Seminar - Vevey June 8-9, 2005

36 Brazil Strong Partners in Profitable Growth! Breakthrough Ideas Wellness USA China Germany 36 Nestlé Investor Seminar - Vevey June 8-9, 2005

37 Big Ideas Big Ideas launch Nestlé s innovations in various Wal Mart markets. Nestlé USA Nestlé Germany # of Stores Selling Hot Pockets Week With a disciplined speed-to-shelf execution Hot Pockets in Germany is selling at 90% the rate of the U.S. market. 37 Nestlé Investor Seminar - Vevey June 8-9, 2005

38 Big Ideas Merchandising solutions... BRAZIL USA 38 Nestlé Investor Seminar - Vevey June 8-9, 2005

39 Big Ideas International Products and Packaging SPAIN USA 39 Nestlé Investor Seminar - Vevey June 8-9, 2005

40 Future Potential $500,000,000,000 $400,000,000,000 $300,000,000,000 Wal Mart growing at 10% per year! $500B $200,000,000,000 $285B $100,000,000,000 $0 Implications to Nestlé Potential to more than double our international sales with Wal Mart and increase our total worldwide Wal Mart sales by more than half. 40 Nestlé Investor Seminar - Vevey June 8-9, 2005

41 The Customer ALWAYS!!! Nestlé & Wal Mart Two Great Companies Strong Partners Aligned strategically; culturally and operationally. Attuned to the Consumer s changing needs. Collaborate in international markets. Successfully partnering for profitable growth. - Double digit growth the past five years. - Over 50% growth in the next five years. A win/win for both Nestlé and Wal Mart. 41 Nestlé Investor Seminar - Vevey June 8-9, 2005

42 Nestlé Investor Seminar BOB FLAHERTY V.P. of Wal Wal Mart Global Business Nestlé USA Nestlé Investor Seminar - Vevey June 8-9, 2005

Strategic Trends in Global Retailing What it means for Latin America s retailers

Strategic Trends in Global Retailing What it means for Latin America s retailers ALAS 2003 Acapulco, Nov 2003 Ira Kalish Global Director What about the business environment? Expect slow growth in developed