Nestlé Investor Seminar Nestlé Purina PetCare Europe - John Harris 1 Nestlé Investor Seminar - Vevey June 8-9, 2005
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
NPPE recent performance headlines 3 Nestlé Investor Seminar - Vevey June 8-9, 2005
ONE/VB Bakers Felix single serve Dog Chow Gourmet Pro Plan Friskies dry cat ONE/VB Bakers Felix single serve Dog Chow Gourmet Pro Plan Friskies dry c a t We are delivering double digit growth on strategic focus brands (% increase in sales) 2003 vs. 2002 2004 vs. 2003 ONE Bakers Felix single serve Dog Chow Gourmet ProPlan Friskies Dry Cat 0% 10% 20% 30% 40% 50% 60% 0% 10% 20% 30% 40% 50% 60% 4 Nestlé Investor Seminar - Vevey June 8-9, 2005
Sales % increase 2005 through April 2005 vs. 2004 YTD ONE ONE/VB Bakers Bakers Felix single serve Felix single serve Dog Chow Dog Chow Gourmet Gourmet ProPlan Pro Plan Friskies Dry Cat Friskies dry cat 0% 10% 20% 30% 40% 50% 60% 5 Nestlé Investor Seminar - Vevey June 8-9, 2005
Amid private label expansion, NPPE is delivering better market share performance than the market leader Mars YTD 2002 2003 2004 Mar 05 Mars 42.4% 41.3% 40.1% 38.9% NPP Europe 24.7% 24.5% 24.5% 25.2% Private Label 21.2% 22.3% 23.5% 23.9% Source: AC Nielsen Grocery 18 markets 6 Nestlé Investor Seminar - Vevey June 8-9, 2005
We are pressuring Mars in Europe s two biggest markets UK and France UK Value Market Share 100% Total Cat & Dog incl. Snacks France Value Market Share 100% Total Cat & Dog incl. Snacks 50% 50% 45% 45% 40% 40% 35% 35% 30% 30% 25% 25% 20% MAT MAT MAT ON 02ON 03ON 04 FM 04 AM 04 JJ 04 AS 04 ON 04 DJ 05 FM 05 20% MAT MAT MAT ON 02ON 03ON 04 FM 04 AM 04 JJ 04 AS 04 ON 04 DJ 04 FM 05 Mars NPPE Mars NPPE Source: AC Nielsen Grocery 7 Nestlé Investor Seminar - Vevey June 8-9, 2005
We have seized leadership from P&G/Iams in premium dry cat food sold through grocery stores Value market share 14.0% Total Europe Dry Cat food 12.0% 10.0% 8.0% 6.0% Purina ONE Iams 4.0% 2.0% 0.0% MAT AN-2 MAT AN-1 MAT AN DJ04 FM04 AM04 8 Nestlé Investor Seminar - Vevey June 8-9, 2005 JJ04 AS04 ON04 Source: AC Nielsen Grocery DJ05 FM05
We are succeeding everywhere with Purina ONE dry cat food 30 Value market share of dry cat food 25 20 15 10 5 Italy Holland Germany Portugal France UK Switzerland 0 MAT AN-2 MAT AN-1 MAT AN DJ 04 FM 04 AM 04 9 Nestlé Investor Seminar - Vevey June 8-9, 2005 JJ 04 AS04 ON04 DJ04 FM05 Note: Vital Balance in France & part of Switzerland Source: AC Nielsen Grocery
We have launched Beneful dry dog food in Holland with encouraging initial results 7.0% TV Campaign Valueshare Dry Dog (%) 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% Beneful Value share 5.5% 0.0% Wk 38 Wk 36 Wk 42 Wk 40 Wk 46 WK 44 Wk 50 Wk 48 Wk 1 Wk 52 Wk 3 Wk 5 Wk 7 Wk 9 Wk 11 Aided awareness of Beneful improved drastically to 25% amongst total population, amongst IN s it increased to 40% 10 Nestlé Investor Seminar - Vevey June 8-9, 2005
9 Factory disposals since 2001 Factory Project Date of disposal or date of impact Cornard (UK) Closure 2002 Hetton (UK) Closure 2002 Southall (UK) Closure 2002 Northwich (UK) Closure 2002 Veghel (NL) Closure 2003 Guingamp (Fr) Sale of factory 2003 Leuth (Ger) Sale of factory 2003 Barrhead (UK) Closure 2004 Worksop (UK) Closure 2005 11 Nestlé Investor Seminar - Vevey June 8-9, 2005
NPPE Profit % (indexed to 2001 = 100) 170 160 150 140 140 149 170 Supply Chain savings Volume/Mix Overhead reduction 130 120 110 100 100 90 80 70 60 50 2001 2002 2004 2007 objective 12 Nestlé Investor Seminar - Vevey June 8-9, 2005
The European Pet Care Market 13 Nestlé Investor Seminar - Vevey June 8-9, 2005
European cat and dog food market vs. other regions Cat and dog food 2004 retail sales All channels and markets 20 18 17.4 18.7 16 14 Sales '000 CHF 12 10 8 6 7.4 4 3.6 2 0 North America Europe AOA Latin America Source: Euromonitor Feb 2005 14 Nestlé Investor Seminar - Vevey June 8-9, 2005
European cat and dog food market vs. other Nestlé categories in Europe European 2004 category sales Grocery only, Western Europe (7 countries) 16,000 14,000 12,000 13,978 12,575 Value sales m 10,000 8,000 6,000 4,000 2,000 5,572 4,517 3,710 3,015 2,761 2,165 720 0 Chilled Dairy Chocolate Pet food Frozen food Ice cream Infant N utrition Chilled culinary Soluble coffee Milk modifie r Source: AC Nielsen Grocery 15 Nestlé Investor Seminar - Vevey June 8-9, 2005
Europe has more cats and dogs than North America Europe North America Cats 86.3 million 85.3 million Dogs 77.2 million 65.9 million 16 Nestlé Investor Seminar - Vevey June 8-9, 2005
Opportunities to increase commercial pet food usage in Europe are substantial 80% 70% 60% Commercial food penetration 50% 40% 80% 50% 30% 20% 32% 10% 0% 5% USA Western Europe Southern Europe Central/Eastern Europe Source: Euromonitor estimates 17 Nestlé Investor Seminar - Vevey June 8-9, 2005
Industrial food coverage continues to grow even in developed markets UK - Industrial food coverage France - Industrial food coverage 80% 70% 70% 60% 61.0% 64.5% 69.0% 70.5% 60% 50% 59.3% 51.4% 60.0% 52.0% 60.2% 52.5% 61.0% 53.2% 50% 44.0% 45.0% 47.5% 51.0% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 2001 2002 2003 2004 2001 2002 2003 2004 Cat Dog Source: Euromonitor, Feb 2005 18 Nestlé Investor Seminar - Vevey June 8-9, 2005 Cat Dog
and can increase rapidly in emerging markets Russia - Industrial food coverage 10% 40% Czech Republic - Industrial food coverage 9% 8% 7% 7.0% 8.1% 8.9% 35% 30% 26.0% 29.0% 33.0% 38.0% 6% 6.0% 25% 5% 20% 4% 3% 2.5% 3.0% 3.5% 4.0% 15% 10% 11.5% 12.5% 13.5% 15.0% 2% 1% 5% 0% 2001 2002 2003 2004 0% 2001 2002 2003 2004 Cat Dog Cat Dog Source: Euromonitor, Feb 2005 19 Nestlé Investor Seminar - Vevey June 8-9, 2005
The European cat and dog food market profile is evolving in two important respects Dry food is growing faster than wet food Superpremium food is growing faster than non-superpremium food 120 Value sales index to Oct/Nov 01 20.0% Value sales % change vs. YAG 115 110 15.0% 105 10.0% 100 95 90 ON01 FM02 JJ02 ON02 FM03 JJ03 Wet ON03 Dry FM04 JJ04 ON04 FM05 Source: AC Nielsen Grocery 18 markets 20 Nestlé Investor Seminar - Vevey June 8-9, 2005 5.0% 0.0% -5.0% ON01 FM02 JJ02 ON02 FM03 Superpremium JJ03 ON03 Non Superpremium FM04 JJ04 ON04 FM05
NPPE portfolio well positioned for future growth 100% 90% 80% 70% 60% 50% Snacks Multiserve wet Premium added value 40% 30% 20% 10% 0% 2003 2004 2005* 2006* 2007* 2008* Premium value added Multiserve wet cat + wet dog Snacks & Accessories *Estimates 21 Nestlé Investor Seminar - Vevey June 8-9, 2005
The shift from wet to dry food is global 3000 EUR 1200 AOA 2500 1000 2000 800 Tons 000 1500 Tons 000 600 1000 400 500 200 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 0 1998 1999 2000 2001 2002 2003 8 0 0 0 7 0 0 0 AMERICAS 6 0 0 0 Tons 000 5 0 0 0 4 0 0 0 3 0 0 0 D ry W e t 2 0 0 0 1 0 0 0 0 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 Source: Euromonitor, Nielsen Grocery 22 Nestlé Investor Seminar - Vevey June 8-9, 2005
Our objectives and strategies 23 Nestlé Investor Seminar - Vevey June 8-9, 2005
Our objectives 1. To strengthen our number two overall position to Mars 2. To build upon or establish leading positions where it matters most In dry food In premium food 3. To improve our operating margins to the average of Nestlé Europe 24 Nestlé Investor Seminar - Vevey June 8-9, 2005
Our strategies 1. Leverage Nestlé Purina know-how to deliver superior performing dog and cat foods More pleasing to pets More appealing to pet owners Healthier, for better and longer lives 2. Commercialise this performance via strong range brands targeted to unique consumer segments Pro Plan Gourmet ONE Felix Beneful Friskies Bakers 3. Serve priority consumers where they shop, and adapt selling approaches to key sales channels 4. Build trust in the entire range via the Purina corporate brand 25 Nestlé Investor Seminar - Vevey June 8-9, 2005
Our know how in pleasing pets is world class 26 Nestlé Investor Seminar - Vevey June 8-9, 2005
And the results show Food consumption ratios 100% 25 27 24 Sheba 75% 50% 75 73 76 Gourmet Perle 25% 0% C hicken Lamb T una 100 80 24 16 17 Royal Canin Adult 100% 75% 28 28 21 Pedigree 60 40 20 76 84 83 Pro Plan dry dog food 50% 25% 72 72 79 Beneful 0 Test 1 Test 2 Test 3 0% Oct-04 Nov-04 Dec-04 27 Nestlé Investor Seminar - Vevey June 8-9, 2005
Pet owner food appeal strongly influences brand choice, and NPPE is leading the way 28 Nestlé Investor Seminar - Vevey June 8-9, 2005
NPPE is helping pets live longer, healthier lives. and we ve proved it 29 Nestlé Investor Seminar - Vevey June 8-9, 2005
The success of Gourmet wet cat food 450,000 400,000 350,000 +9.7% +15.5% 300,000 Sales (CHF '000) 250,000 200,000 150,000 100,000 50,000 0 2002 2003 2004 Source: AC Nielsen Grocery 30 Nestlé Investor Seminar - Vevey June 8-9, 2005
Gourmet Diamante and Etoile: stretching the potential for premium pricing Average price / 85g can Italy 1.00 0.90 0.80 0.70 0.98 Price 0.60 0.50 0.40 0.30 0.20 0.10 0.54 0.00 Average Gourmet Gold Average Gourmet Diamante/Etoile Source: AC Nielsen, internal auditing 31 Nestlé Investor Seminar - Vevey June 8-9, 2005
Gourmet Etoile: encouraging launch results 6.0% Value share of Wet Cat food single serve, Italy 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 15/02/2004 07/03/2004 28/03/2004 18/04/2004 09/05/2004 30/05/2004 20/06/2004 11/07/2004 01/08/2004 Source: AC Nielsen 22/08/2004 12/09/2004 03/10/2004 24/10/2004 14/11/2004 05/12/2004 26/12/2004 16/01/2005 06/02/2005 27/02/2005 20/03/2005 32 Nestlé Investor Seminar - Vevey June 8-9, 2005
Felix As Good As It Looks : encouraging launch results in the UK 9.0% Value share of Wet Cat food single serve 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 07/08/2004 21/08/2004 04/09/2004 18/09/2004 02/10/2004 16/10/2004 30/10/2004 13/11/2004 27/11/2004 11/12/2004 25/12/2004 08/01/2005 22/01/2005 05/02/2005 19/02/2005 05/03/2005 19/03/2005 02/04/2005 16/04/2005 Source: AC Nielsen UK 33 Nestlé Investor Seminar - Vevey June 8-9, 2005
We serve three unique sales channels Grocery Specialist Discount <To be added> Hypermarkets Supermarkets Small grocery/convenience stores Pet shops Garden Centres Agri-stores Veterinary clinics Hard discount Soft discount 34 Nestlé Investor Seminar - Vevey June 8-9, 2005
Our selling approach varies based on channel dynamics Veterinary clinics High Degree of in-store information and support Pet shops Pet Superstores Proposed assortment Narrow Hypermarkets Broad Supermarkets Discount stores Low 35 Nestlé Investor Seminar - Vevey June 8-9, 2005
Each channel serves a specific role for NPPE Grocery Specialist Discount <To be added> Access to a broad shopper base for the majority of our brands and products Information and personal selling for more specialised and sophisticated products and ranges Access to convenience and cost-minded shoppers for our most popular products 36 Nestlé Investor Seminar - Vevey June 8-9, 2005
To consumers, Purina is the company behind everything we do Product endorsement Print tag ` ` Consumer relationship panel ` TV tag ` ` Events & sponsorship ` Websites 37 Nestlé Investor Seminar - Vevey June 8-9, 2005
NPPE upcoming innovations 38 Nestlé Investor Seminar - Vevey June 8-9, 2005
Beneful Healthy Weight Indulgent Nutritionists dogs tend to be overweight because of their indulgent behaviour Beneful Healthy Weight offers: Perfect balance of healthful ingredients Calorie smart nutrition Excellent taste Healthy Weight will increase penetration and shelf space for the brand March 05 on shelf in Europe 39 Nestlé Investor Seminar - Vevey June 8-9, 2005
New snacks & treats Dental Fresh Proven to reduce tartar build-up by 45%. Helps to freshen breath. Ideal for daily usage Funtastix Tasty meaty treat with ham and cheese flavour Megabone Chewy, long-lasting treat with a meaty filling - Superior palatability to competitors - Low in fat - Unique shape 40 Nestlé Investor Seminar - Vevey June 8-9, 2005
Pro Plan Dog: Sensitive range launch July 05 Consumer insight / opportunity Allergies are a top health concern for Expert Driven Providers Sensitive category already represents 12% of super premium dog sales Leverage Nestle R&D knowledge The first pet specialty product with restricted protein source to reduce risk of allergic reaction 41 Nestlé Investor Seminar - Vevey June 8-9, 2005
ONE cat: Sensitive formula March 05 For sensitive digestion & palate Superior digestibility (>90%) Optimal faecal consistency Higher palatability than adult Unique product within the channel With TURKEY 42 Nestlé Investor Seminar - Vevey June 8-9, 2005
Friskies dry dog food with fresh meaty chunks New: with chunks made with fresh meat Consumers associate freshness with high quality Significant increase in palatability 43 Nestlé Investor Seminar - Vevey June 8-9, 2005
Summary Pet care in Europe a large category with good growth potential Consumer purchase and feeding behaviour evolving in our favour NPPE closing the market share gap to Mars while improving operating margin Strong innovation track record and pipeline Clear potential for continued profit improvement 44 Nestlé Investor Seminar - Vevey June 8-9, 2005
Nestlé Investor Seminar Nestlé Purina PetCare Europe - John Harris 45 Nestlé Investor Seminar - Vevey June 8-9, 2005