27nestl India7122006

INDIA
The Land of Opportunities………
Nestlé India
December 7, 2006
Nestlé India Presentation, Dec 7, 2006

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.

Nestlé India
Martial Rolland
3 Nestlé India Presentation, Dec 7, 2006

India and Nestlé
Large, diverse, complex Region with v. low /skewed incomes
(2/3rd people < 2$/day)

however
Great opportunities “unleashing 100%
( middle class, spending power,
OOH, changing lifestyles, health…) + Potential” approach
Sharpen current Integrate new opportunities

strategies Stronger consumer (few but big I+R)
/customer insights
The respected and trustworthy leading Food,

Nutrition, Health and Wellness company in India,
ensuring long term sustainable growth
Nestlé India
A Balanced Portfolio
Contr. (%) Contr. (%)
Milk Products 44.8 45.4

and Nutrition
Prep. Dishes &

Cooking Aids 20.0 18.7
Beverages
19.7 21.3
Chocolate and
Confectionary 15.5 14.6
Jan-Sep 06 Jan-Sep 05
Turnover INR 21.8 bio INR 19.8 bio
The Milk District Model, driving a
competitive advantage and a CSR
Nestlé Milk District Model

45 years of a progressive
partnership with farmers

Nestlé Milk District Model
1 Nestlé India – The Business Vision
2 Evolution of the Nestlé Milk Districts
3 Nestlé processing units in India
Nestlé presence in Rural India and Milk

4 Districts
5 Environment and the Community
6 Summary and Conclusions

Nestlé India
1 The Business Vision
To rapidly build Nestlé India as the Respected

and Trustworthy leading Food, Nutrition,
Health and Wellness Company ensuring long
term sustainable and profitable growth

2 Evolution of Nestlé Milk Districts
Nestlé Corporate Business Principles: Agricultural raw materials,

principally milk, coffee, cocoa, cereals, vegetables, fruit, herbs, sugar and
spices, are vital factors affecting the quality and costs of Nestlé
manufactured food products and, as a consequence, the Company’s
business performance. In this context Nestlé:
1) … provides agricultural assistance to farmers

2) Procures Agricultural raw materials either through trade channels or
directly from farmers
3) Supports farming practices and agricultural production systems that
are sustainable; that is those practices and systems that satisfy long-
term economic, ecological and social requirements;
4) Supports mechanisms that contribute to a more regular income for
farmers;
5) Is not engaged itself in its own commercial farming activities;
1866: Nestlé and the Anglo-Swiss Condensed Milk Company started

the milk district development around the towns of Vevey and Cham
in Switzerland
1872: With demand outstripping production, the Anglo-Swiss

Condensed Milk Company set up two milk districts in the Swiss
cantons of Fribourg and St. Gallen
1872-1881: Upon expanding its operations, more milk districts were

started in England
1905: Nestlé and the Anglo-Swiss Condensed Milk Company had

merged and by then milk districts were set-up in six countries –
Switzerland, United Kingdom, Germany, Norway, Spain and
United States
1906: Started manufacturing operations in Australia, its second

largest export market for Nestlé products
1912: Acquired the Dutch company – Galak Condensed Milk

Company of Rotterdam, Holland and also established a
skimmed milk powder company entirely for export market
1920: Entered South America by establishing a milk districts

in Brazil, in Argentina in 1922, and in Peru in 1940
1961: Started to replicate its successful milk district models

in Asian countries with Moga in India, followed by Sri Lanka
in 1982, Indonesia 1986, Pakistan 1988, China 1990,
Thailand 1991, Morocco 1993 and Uzbekistan 2001
China, India and Pakistan each collect over 1,000,000

Kg/day
On an average Nestlé milk districts are growing 2% - 5%

annually, and in some cases as high as 10%
Given the ever-increasing consumer demand, it is

an ongoing priority and challenge to:
¾ Secure a plentiful supply of fresh milk

¾ Find areas to produce high quality milk
¾ Find cost-effective ways to meet projected demand

3 Nestlé’s Processing Units in India
Moga
z
Pant Nagar
z
z
Moga (Punjab) 1961 Samalkha Choladi (Tamilnadu) 1967
DELHI
Sreepur
Samalkha (Haryana) 1993 Ponda (Goa) 1995

z
z
Bicholim
Ponda
z Nanjangud
z
Choladi
Nanjangud (Karnataka) 1989
Bicholim (Goa) 1997 Pantnagar (Uttaranchal) 2006

4 Nestlé’s Milk Processing Units in India
Over Four decades of sustained growth
¾ Starting in 1961, Nestlé set up its

first milk processing facility at Moga
in the State of Punjab
¾ Built in 1991, today Samalkha

factory in Haryana along with
Moga produces over 100,000 tons
of milk products annually
4 Nestlé Milk Districts
Starting in Moga with 511 kg of milk on the
first day of collection (15th Nov 1961), today
TOTAL AREA :
Nestlé procures over 1,100,000 kg of milk per
50,362 SQ. KMS day during the peak season in the states of
Punjab and Haryana.
MOGA
FACTORY 14,000 square kilometers area

TOTAL AREA :
50,362 SQ. KMS
98,000 dairy farmers
FACTORY
2240 milk agencies
SAMALKHA
TOTAL AREA :
44,212 SQ. KMS
698 milk cooling tanks
Dec, 2006 data
DELHI
Nestlé adds value at each step of the milk supply chain…
The
The Milk
Milk District
District is
is an
an integral
integral part
part of
of
delivering
delivering high
high quality
quality nutritional
nutritional milk
milk
products
products toto our
our consumers
consumers
Dairy
Dairy Fresh
Freshmilk
milk Milk
Milk Marketing
Marketing&&
Farmers
Farmers procurement
procurement Processing
Processing distribution
distribution Consumers
Consumers
••Technical
Technical assistance
assistance toto
farmers
farmers ••Milk
MilkQuality
QualityPolicy
Policy
••Farmer
Farmereducation
education--Good
Good ••Expertise,
Expertise,Know
Knowhow
how
dairying practices, etc
dairying practices, etc
Bringing worldwide
competence of Nestlé at the
doorstep of the farmers…
…to help them improve milk

productivity and quality

Setting up an efficient Milk

Collection system
¾ On-going technical assistance to farmers for
improved milk productivity and quality
¾ Maintenance of sustainable farming practices
¾ Establishing milk collection points and

arranging milk collection
¾ Installing chilling centers
¾ Installing farm cooling tanks
¾ Arranging transportation to the factory

Technical Assistance to Farmers

…to help them improve milk productivity and
quality
¾ Training and development on good farm
practices
¾ Regular audits of farmers to ensure that good
farm practices are implemented & maintained
¾ Testing of milk at collection and cooling
centers
¾ The financial well-being of producers


¾ Veterinary & field staff offering round
the clock technical services
¾ Veterinary medicines are provided to
farmers
¾ Artificial insemination centers

¾ highly pedigreed bulls are provided

¾ Good quality fodder seed is provided to
farmers
¾ High quality balanced cattle feed
distributed annually
¾ Subsidized milking machines have been
provided
¾ Technical support is extended for:
- Silage making techniques,
- Bio-Gas generation & vermiculture
compost from animal waste

4 Technical Assistance to Farmers
Silage making
Bio-Gas
Generators and
Vermicompost
production

Farmers Education Programs

¾ Establishes herd demonstration farms
¾ Conducts field camps to impart education
on good dairy practices
¾ Organizes factory visits and special
educational tours for dairy farmers
¾ Offers prizes to farmers in the Nestlé milk
competition
¾ Sensitize farmers to water issues like
water conservation, depleting water
tables and water management at farms

Farmers Education Programs
Helping village women learn
¾ Nestlé recognizes the role played by women in

the dairy farm and has specially developed an
education program.
¾ Through posters, demos and talks, village
women are taught good dairying practices
Over 12,000 women have been covered by this
program in 155 villages

98000
2240
2006
Dec, 2006 data
Helping Farmer improve Milk Productivity

…to help farmers
achieve higher milk
yields over longer
lactation periods, in 1982
Nestlé introduced the
milk cows to the benefit
of its farmers
…from a mere 0.5 %

cow milk in 1982, today
50% of the milk procured
is cow milk

Nestlé – The Milk Maximizer
Milk density
TOTAL AREA :
50,362 SQ. KMS
In Moga Milk
Collection area,
milk available for
processing to
MOGA FACTORY
TOTAL AREA : Milk Plants, has risen
50,362 SQ. KMS
to twice that of rest of
Punjab

Sustainable Agriculture
5 Key to long-term sustainable growth

Solar heaters at
Nestlé milk collection
Centres save energy
Rain Water
And help create Silencers on Harvesting help in
awareness amongst generator exhausts better water
communities at Nestlé milk management at Dairy
collection Centres farms
Many of our
factories are
ZERO WASTE
DISCHARGE – In Moga factory part
treated waste of the Waste Water
water is is treated and
recovered for in- supplied to farmers
house irrigation for crop irrigation.
5 Community Projects
Providing access to Clean Drinking

Water in Village schools
• Creating awareness in the communities around its factories

• Children in local village schools are the key beneficiaries
5 Community Projects
Water Education Program
Posters, Demonstrations are used as a

medium to teach students water
basics like the water cycle, ground
water table, uses of water, water
resources, ground water depletion etc.
A Win-Win situation for all…

…benefits the Farmer
¾ Results in steady incremental income for the farmers
¾ Generates Employment for rural residents
¾ Significant improvements in the standards of living

of rural communities
¾ Affords a profitable alternative to traditional farming

practices

A Win-Win situation for all…

…benefits the milk processor
¾ Nestlé does not own any agricultural land or farms, but
is committed to develop long-term credible
relationships with dairy farmers based on mutual
trust
¾ This makes mutual economic sense and ensures long-
term sustainability
¾ Stimulating production of good quality fresh milk
¾ Collecting fresh milk in the best possible conditions
¾ Processing to ensure high quality products for its
consumers
The Summary
Large, diverse, complex Region with v. low /skewed incomes
(2/3rd people < 2$/day)

however
Great opportunities “unleashing 100%
( middle class, spending power,
OOH, changing lifestyles, health…) + Potential” approach
Sharpen current Integrate new opportunities

strategies Stronger consumer (few but big I+R)
/customer insights
The respected and trustworthy leading Food,

Nutrition, Health and Wellness company in India,
ensuring long term sustainable growth
Nestlé India
Financials
Vidur Mathur

FINANCIALS
Financials

Total Shareholder’s Return
• 140% over the last 19 quarters. (Bloomberg)
• Market Capitalization has doubled over this period

from INR 49 Bio. to INR 101 Bio.
Some Rankings:
• Return on Capital Employed: No 1 (Source: Latest
Business India)
• Return on Equity: No 2 in BSE FMCG Index & BSE

SENSEX companies (Source: Reuters)

Driving Total Shareholders Return
The Value Drivers
1. Sales Growth
2. Profit Margin
3. Working Capital Intensity
4. Fixed Capital Intensity
5. Income Tax Rate
6. Cost Of Capital
7. Value Growth Duration

SALES GROWTH (1)

Sales Evolution
Gross Sales INR Bio Real Internal Growth (%) Organic Growth (%)
30.0 13
12.1
11.5 11.6 11.7 12
11.4
11.3 10.4 11
9.5 10
25.0
8.5 9
7.9
8
7
20.0
6.3 6
4.4 4
20.6 22.9 23.9 26.7 19.9 22.0
15.0 3
2002 2003 2004 2005 Jan-Sep 05 Jan-Sep 06
Aff. Exports 1.7 1.8 1.5 1.7 1.3 1.2

INR Bio Basis International Accounting Standards
Channel-wise Sales
Volume (000’ Tons)– Jan-Sep Value@ (INR Bio) – Jan-Sep

2006 2005 Var% 2006 2005 Var%
Domestic 162.3 149.1 8.8 19.7 17.7 11.3 #
Exports 12.3 13.8 (10.1) 2.0 2.0 (0.0)
Total 174.6 162.9 7.2 21.8 19.8 10.1
@ Gross Sales including excise duty
Mix of Domestic to Exports remains stable at around 90:10
# Net Domestic Sales up 13.7%
All calculations are based on non-rounded figures

Balancing Export Portfolio
INR Bio 2.4 2.6 2.4 2.6 2.0 2.0
28
33
52 56 54
Contr. 69
(%)
72
67
48 46
44
31
2002 2003 2004 2005 Jan-Sep 05 Jan-Sep 06
Exports to Russia Others

Product Categories: Jan - Sep 2006
Organic Growth (%)
Prepared Dishes &
20 Cooking Aids
4.4
Beverages 3.5 3.4

Milk Products &
15 Nutrition Chocolate &
Confectionery
9.4
10 21.8
9.7
Milk Products & Total

Nutrition
5
Beverages
4.3
0
-14 -9 -4 1 6 11 16
Volume Growth (%) Bubble size represents Gross Sales (INR Bio)
Milk Products & Nutrition
• Market Leader in Baby Foods,

Infant Formula, Sweetened
Condensed Milk
• Strong No 2 in Dairy Whitener
• Growing presence in Fresh Dairy
Sales Volume (000’ tons) Sales (INR Bio) Contribution to Total Sales
80
10.0
78 U 2.8% 15.5
U 8.7%
76
78.2 9.0 44.8

74 9.7 20.0
76.0
72 9.0
19.7
70 8.0
Jan-Sep 05 Jan-Sep 06 Jan-Sep 05 Jan-Sep 06
Jan-Sep 2006
Beverages
• Market Leader in Instant Coffee
19 4.6
U (12.1)%
18 15.5
4.4
44.8
17 18.7 U 1.8%
20.0
4.2
16 4.3
16.5 4.2 19.7
15 4.0
Jan-Sep 2006
Prepared Dishes & Cooking Aids
• Market Leader in instant Noodles

& Ketchups
• Strong No 2 in Healthy Soups
60 4.5
U 18.2%
55 4.0
15.5
U 18.0%
44.8
57.0
4.4 20.0
50 3.5
3.7
48.3
19.7
45 3.0
Jan-Sep 2006
Chocolate & Confectionery
• Market Leader in Wafers and

white chocolates
• Strong No 2 in Chocolates
• Market Leader in Eclairs
Sales Volumes (000’ tons) Sales (INR Bio) Contribution to Total Sales
23 3.6
3.4 15.5
21 U 15.7% 22.9 3.2
U 16.3% 44.8
3.4 20.0
3.0
19.8
19
19.7
2.9
Jan-Sep 05 Jan-Sep 06 2.8
Jan-Sep 05 Jan-Sep 06
Jan-Sep 2006
PROFIT MARGINS (2)

Evolution of Operating Margins
INR Bio.
20.5
6.0 19.5 19.5 19.7 21
19.0 19.2
18.3
17.5 17.6
17.1 16.9 17.0 18
5.0
15
4.0 12
9
3.0
6
4.0 3.5 4.4 3.9 4.5 4.0 5.2 4.6 4.0 3.6 4.2 3.7
2.0 3
2002 2003 2004 2005 Jan-Sep 05 Jan-Sep 06
EBITD-INR.Bio EBIT-INR.Bio EBITD % of Gross Sales EBIT % of Gross Sales

Evolution – Milk Solid Prices
120
Current
111
110
Indexed price Per Kg
106
103 2006
100
100 97 97 97
95 2005
94
91
88 95
90 2004
80
Q1 Q2 Q3 Q4
Period
Indexed with base Q1-04

Evolution – Green Coffee Prices
230
229 Current
210
Indexed price per KG
190
174 170
158
2006
170
152 153
150 2005
130 114 121
110 100 100 101 101

2004
90
Q1 Q2 Q3 Q4
Period
Indexed with base Q1-04

WORKING CAPITAL INTENSITY (3)

Rotation of Average Operating
Working Capital
Times
36 34.8
31.4
32 30.8
27.7
29.0
28 28.0
25.2
Adjusted
24
21.8
20
2002 2003 2004 2005 Jan-Sep 05 Jan-Sep 06
Basis International Accounting Standards
FIXED CAPITAL INTENSITY (4)

Rotation of Average Tangible
Fixed Assets
6.8 6.7
6.8 Times
6.5
6.3
6.4 6.2
6.0
5.6 5.4
5.2
4.8
4.4
4.0
2002 2003 2004 2005 Jan-Sep 05 Jan-Sep 06
INCOME TAX RATE (5)

Evolution of Tax
%
38
36.8
36.6
35.9
36
35.0 34.9
34.7
34.4 34.5
34.2
34 33.3 34.7
33.7
32
30
2002 2003 2004 2005 Jan-Sep 05 Jan-Sep 06
Marginal Rate % Effective Rate %

( rates are a % of pre-tax profit excluding FBT)
COST OF CAPITAL (6)

Evolution – Cost of Capital
WACC Risk Free Bond Rate

15.0 14.2
12.0 10.5 10.8

9.4 9.7 9.7
9.0
9.0
7.2 7.2
6.6 6.6
5.3
6.0
3.0
0.0
2002 2003 2004 2005 Jan-Sep 05 Jan-Sep 06

VALUE GROWTH DURATION (7)

Creation of Economic Value
12.2 2003
12.0
2.3
11.8 60% Jan-Sep
2002 2005 2006
11.6
Return on Sales (%)
11.4 1.8 2.7 2.2

49% 61% 62%
11.2
11.0
2004
10.8
10.6 2.2
54%
10.4
10.2
5.5 5.7 5.9 6.1 6.3 6.5
Asset Turns Bubble size represents
Basis International Accounting Standards Economic Profit (INR Bio)
Strategic Pillars for Value Growth
Nutrition, Health & Wellness Innovation and Renovation
Availability
for all ages
Effective & Efficient Operations
Consumer Communications
People / Structure GLOBE

INDIA
The Land of Opportunities………
Nestlé India
December 7, 2006

27nestl India7122006

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INDIA

The Land of Opportunities………

Nestlé India Presentation, Dec 7, 2006

This presentation contains forward looking

Nestlé India Presentation, Dec 7, 2006

3 Nestlé India Presentation, Dec 7, 2006

(2/3rd people < 2$/day)

Sharpen current Integrate new opportunities

The respected and trustworthy leading Food,

Milk Products 44.8 45.4

Prep. Dishes &

Nestlé Milk District Model

6 Nestlé India Presentation, Dec 7, 2006

1 Nestlé India – The Business Vision

2 Evolution of the Nestlé Milk Districts

3 Nestlé processing units in India

Nestlé presence in Rural India and Milk

6 Summary and Conclusions

To rapidly build Nestlé India as the Respected

Nestlé India Presentation, Dec 7, 2006

Nestlé Corporate Business Principles: Agricultural raw materials,

1) … provides agricultural assistance to farmers

1866: Nestlé and the Anglo-Swiss Condensed Milk Company started

1872: With demand outstripping production, the Anglo-Swiss

1872-1881: Upon expanding its operations, more milk districts were

1905: Nestlé and the Anglo-Swiss Condensed Milk Company had

1906: Started manufacturing operations in Australia, its second

1912: Acquired the Dutch company – Galak Condensed Milk

1920: Entered South America by establishing a milk districts

1961: Started to replicate its successful milk district models

China, India and Pakistan each collect over 1,000,000

On an average Nestlé milk districts are growing 2% - 5%

Given the ever-increasing consumer demand, it is

¾ Secure a plentiful supply of fresh milk

Nestlé India Presentation, Dec 7, 2006

Samalkha (Haryana) 1993 Ponda (Goa) 1995

Nanjangud (Karnataka) 1989

Bicholim (Goa) 1997 Pantnagar (Uttaranchal) 2006

Over Four decades of sustained growth

¾ Starting in 1961, Nestlé set up its

¾ Built in 1991, today Samalkha

FACTORY 14,000 square kilometers area

98,000 dairy farmers

Nestlé adds value at each step of the milk supply chain…

…to help them improve milk

Nestlé India Presentation, Dec 7, 2006

Setting up an efficient Milk

¾ Maintenance of sustainable farming practices

¾ Establishing milk collection points and

¾ Installing chilling centers

¾ Installing farm cooling tanks

¾ Arranging transportation to the factory

Technical Assistance to Farmers

Nestlé India Presentation, Dec 7, 2006

Technical Assistance to Farmers

¾ Artificial insemination centers

Technical Assistance to Farmers

Nestlé India Presentation, Dec 7, 2006

Nestlé India Presentation, Dec 7, 2006

Farmers Education Programs

Nestlé India Presentation, Dec 7, 2006

Farmers Education Programs