Full Year 2020 Nestle SA Earnings Press Conference

February 18, 2021

Okay.

[music] 'twenty and 'twenty was more than the starts of the meat of Acacia.

[Company Representative] (Nestlé): 2020 was more than the start of a new decade. It introduced us to a new word. Much changed, and we all changed with it. We learned not to take life for granted. We hoped, believed, accepted the things we can't change by focusing on those we can. At times, we were lonely and needed our friends more than ever. We adapted to life in lockdown. We went back to school. We didn't always get it right. Sorry, Mark, I think you're on mute again.

[Video Narrator]: 2020 was more than the start of a new decade. It introduced us to a new word. Much changed, and we all changed with it. We learned not to take life for granted. We hoped, believed, accepted the things we can't change by focusing on those we can. At times, we were lonely and needed our friends more than ever. We adapted to life in lockdown. We went back to school. We didn't always get it right. Sorry, Mark, I think you're on mute again.

Uh huh.

And that's changed.

And we all changed with it.

We learned not to take life of the Bronco.

He hoped.

Believed.

Except of the things we cant change.

By focusing on those we can.

The times, we will learn the.

And needed a friend's more of the Netherlands.

The adapted to life and locked down.

And we went back to school, we didn't always get it right sorry, Mark I think you and Michigan.

Mark Schneider: It'll be the word of the year.

And we of the word of the year.

[Company Representative] (Nestlé): We found reasons to smile and just got on with it. We appreciated what really matters. We mastered the art of cooking and online shopping. We took better care of ourselves, better care of our pets, and our planet. No matter what, we got through it, making a difference where we can. This year has proved that humankind is stronger when we stand as one. After all, sunshine always follows a storm. We'll get through 2021. We'll get through this together.

[Video Narrator]: We found reasons to smile and just got on with it. We appreciated what really matters. We mastered the art of cooking and online shopping. We took better care of ourselves, better care of our pets, and our planet. No matter what, we got through it, making a difference where we can. This year has proved that humankind is stronger when we stand as one. After all, sunshine always follows a storm. We'll get through 2021. We'll get through this together.

For the family reasons to Smile and.

And just get on with it.

[music] the appreciated what really matters.

The master the art of cooking and.

And online shopping.

[music], we took better care of the Marcellus.

And we took care of of all paths.

And how can it.

And that's of what.

We got through.

[music], making of defense language.

The.

This year has proved the human kind of stronger than you stand as one.

And.

After the old son.

Shine and always follows the student debt.

And you'll get through 2020 of them.

And we will get through the ticket.

And.

Good morning, and a warm welcome to our full year 'twenty and 'twenty of press conference participants and as always we appreciate your interest and our company and thank you for joining us today.

Mark Schneider: Good morning, and a warm welcome to our full year 2020 press conference participants. As always, we appreciate your interest in our company, and thank you for joining us today. Things are a little different this year, and my regrets that we can't host you in person. We would have liked to see you and reconnect and to also show you some of our latest innovations. As it happens, we have to hold this press conference in an online format. Of course, we look forward to hosting you again in person in future years. François Roger and I will host you at this press conference. We're totally COVID compliant, so we're hosting you from two separate rooms. I will start off with some general comments. François will give you the detailed financial review, and then we're looking forward to answering your questions.

The things a little different this year and my request that we can tell it to you in person we would've liked to see you and reconnect and to also of show you. Some of our latest innovations as it happens we have to hope his press conference and and online format and of course, we look forward to all of you again in person and future years.

First of all over here and I am well how much do you at this press conference with totally Covid compliance of we're hosting you from two separate rooms, I will start off with some channel comments for us about what gets you, but detailed financial review.

And then we're looking forward to answering your questions and.

Mark Schneider: As you know, we're doing this for the first time. If there's any technical glitches, I would like to apologize ahead of time. I think we've got a good, convincing setup for you, and we hope we can answer all of your questions. With this, let me turn to the key messages for 2020. I think as you've seen from the video, it's been a year like no other. We've taken this pandemic very seriously from the beginning. We stayed focused on three priorities that we laid out very, very early in time: assure the employee safety in our group, ensure business continuity, and provide a helping hand to the communities where we operate around this world. We stayed focused on those.

And as you know we're doing this for the first time, if there's any technical glitches and I would like to apologize ahead of time, but I think we'll quite of good convincing a set up for you and we hope and and sell all of your questions.

With this let me turn to the key messages for 'twenty and 'twenty and I think and she was in front of the video a it's been a year like no other and we've taken this pandemic very seriously from the beginning of we stayed focused on three priorities that we laid out very very early and time.

Sure the employee safety and our group ensure business continuity.

And provide a helping hand and took the communities where we operate them around the world and we stayed focused on Dallas I think and all of modesty early on with taken very decisive steps to meet the challenge posed by all three of these objectives and I think the Coco as well.

Mark Schneider: I think, you know, modestly early on, we've taken very decisive steps to meet the challenge posed by all three of these objectives, and I think we cope with it well. In this context, my heartfelt and deep gratitude to the Nestlé family around the world. This has been such a challenging year, but it's been so fulfilling to see how the Nestlé team has been rising to the challenge and meeting one after another, the challenges posed by this pandemic. Thank you very much. It's been truly motivating to see all of this happen. What's also important is, in addition to mastering the challenge of the pandemic, that we didn't skip a beat when it comes to our ongoing projects. Remember, a year ago when we met, we didn't know this was gonna be turning into a worldwide pandemic.

In this context, my heartfelt and deep crowded shoot to the nurse the family around the World. This has been and as such a challenging year, but it's been self fulfilling to see how the nest. The team that's been rising to the challenge and meeting one after another the challenges posed by this pandemic. So thank you very much it's been rude truly truly motivating to see all of this happen.

What's also important is in addition to mastering the challenge of the pandemic is that we didn't skip a beat when it comes to our ongoing projects and remember a.

The year ago. When we met we didn't know this was going to be turning into a worldwide pandemic. We have plans laid out to you. When it comes to continued progress on organic growth and profitability. When it comes to our portfolio of transformation and also when it comes to innovation and our company and I'm proud to say that except for a few weeks of the inertia and.

Mark Schneider: We had plans laid out to you when it comes to continued progress on organic growth, on profitability, when it comes to our portfolio transformation, and also when it comes to innovation in our company. I'm proud to say that except for a few weeks of the inevitable delay that comes from moving to online to remote working conditions, except for those very brief delays, we've been living up to these objectives, and I think you're seeing this reflected in today's results. Specifically, we were able, in this context, to improve our organic growth over the 2019 levels, and we were able to improve our underlying trading operating profit by 10 basis points. In fact, if you look at it in constant currency, it's 20 basis points. If you exclude Skin Health, it's 30 basis points over the prior year.

Inevitable delay that comes from moving to online to remote working conditions, except for the there's very brief delays with the living up to achieve these objectives and I think you've seen this reflected in todays for cells. Specifically, we were able in this context to improve our organic growth over the 2019 levels and.

We were able to improve our underlying trading and trading operating profit by 10 basis points. In fact, if you look at it and constant currency, it's 20 basis points at piece of fluids can help it's 30 basis points over the prior year. So I think we've been able to continue to improve and both of these are important metrics at the same time you've seen us.

Mark Schneider: I think we've been able to continue to improve on both of these important metrics. At the same time, you've seen us be very busy on the portfolio transformation front, continued readjusting our portfolio. I'll show more of that later. I'm proud to say in 2020, as opposed to 2019, we've also been busier on the acquisition front, in particular building Nestlé Health Science. In line with these very reassuring results, I'm also very pleased to announce that the board proposes to increase the annual dividend by CHF 0.05 to CHF 2.75. This will be a voting item at the annual general meeting this year.

And be very busy on the portfolio of transformation front continued are readjusting and while portfolio and show more of that later and I'm proud to say in 2020 as opposed to 2019. We've also been busy on the acquisition front in particular building Nestle Health Science.

In line with these very reassuring results I'm also very pleased to announce debt. The board proposes to increase the annual dividend by five Sun team to to Franks, and 70 of Pipestone team.

We'll be voting item at the annual general meeting of this year and.

Mark Schneider: One of the other key achievements that I'll talk about later is that we issued our detailed net zero roadmap in December 2020. This was one of the key objectives we had on the sustainability front for that year. I'm glad to say that in spite of the challenges of the pandemic, we were able to keep the timeline and issue it before the year was out. Now, moving on to the next slide and the key financial metrics, you'll get a more detailed financial review from François later. To me, the key message is that on our two major financial metrics, organic sales growth and underlying trading operating profit, this is now the third consecutive year of continuous improvement. Each year, these two metrics went up.

And then one of the other key achievements and I'll talk about later is that we issued our detailed a net zero roadmap in December of 'twenty and 'twenty. This was one of the key objectives, we had from the sustainability front and flip out here and.

And I'm glad to say that in spite of the challenges of the pandemic, we were able to keep the timeline and issue it before the year was out.

Now moving on to the next slide and the key financial metrics, you'll get a more detailed financial review from folks for later to me. The key message is debt on our two major financial metrics organic sales growth and underlying trading operating.

Getting profit. This is now the third consecutive year of continuous improvement each year a day.

These are two metrics went up and that is important to us because as you think back to the Investor Day, We had in September 2017, and London, one of the key concerns when we laid out our financial plan for the midterm was well are you really able to improve both of these metrics at the same time of casual wear.

Mark Schneider: That is important to us because as you think back to the investor day we had in September 2017 in London, one of the key concerns when we laid out our financial plan for the midterm was, well, are you really able to improve both of these metrics at the same time? A casual way of putting it at the time was, can you walk and chew gum at the same time? Yes, we have proven we can walk and chew gum at the same time. In fact, the balanced pursuit of both of these objectives is a key part of how we look at business and position it for the long term. What's not shown on this slide, but what also improved in that time, is very prudent balance sheet and capital management.

The of putting at the time was can you walk and chew gum at the same time and yes, we have proven and we couldn't walk and chew gum at the same time and in fact, the balance per suite of both of these objectives is a key part of how we look at business and.

Position it for the long term.

What's not shown on the slide but what also improved and that time is very prudent balance sheet and capital management and when you improve all of the string together organic growth of the underlying trading operating profit and prudent capital management, good things happen and for return on invested capital and you see that bounce up significantly in <unk>.

Mark Schneider: When you improve all of these three together, organic growth, the underlying trading operating profit, improving capital management, good things happen for return on invested capital, and you see that bounce up significantly in 2020. We're not quite there yet when it comes to our mid-single digit organic growth. Here you see some of the continued activity that we have underway to ensure we're getting there in the near term. You see the same three buckets that we've talked about in the past. It's about advancing the high growth categories and channels, ongoing portfolio management, and gearing that portfolio towards higher growth, and also fixing underperforming businesses. You see good examples here for each of these buckets that apply to the year 2020.

2020.

Now we're not quite here there yet when it comes to our mid single digit organic growth and here you see some of the continued activity that we have underway to ensure we're getting there and the near term.

At the same three buckets that we've talked about in the past.

So it's about advancing the high growth categories and channels ongoing portfolio management and to gear and debt portfolio towards higher growth and also of fixing underperforming businesses you see good examples here for each of these buckets are that apply to the year 'twenty 'twenty are the.

Mark Schneider: The one area I would like to point your attention to is our plant-based food. You heard us talk a lot about that in 2019 and 2020. To me, it's not only, but it is also about a key product that was getting a lot of attention, and that's the plant-based hamburger patty. I think we have a very successful offering there, both in terms of the taste and the nutritionals. I was also telling you from the beginning that to me, it's about a wide opportunity. It's about a once in a generation opportunity to reinvigorate our CHF 12 billion food category as the population is getting more and more interested in plant-based protein sources.

The one area I would like to point your attention to is our plant based food you heard us talk a lot about that in 2019 and 2020.

To me, it's not only but it is also about a key product that was getting a lot of attention and that's the plant based the Hamburger Patty.

We have a very successful offering and they're both in terms of the.

And the taste and the Nutritionals, but I would also tell you from the beginning that to me it's about a wide opportunity. It's about once in a generation of opportunity to reinvigorate our 12 billion of Swiss franc food category as the population is getting more and more interested and plant based protein sources.

And on that front and very pleased to report that we've made significant progress in 2020 to give you a sense when you take that in the core of plant based alternatives to our meat products, we're talking about roughly a 200 million Swiss franc business for us growing very significantly and.

Mark Schneider: On that front, very pleased to report that we made significant progress in 2020. To give you a sense, when you take that inner core of plant-based alternatives to meat products, we're talking about roughly a CHF 200 million business for us, growing very significantly in spite of the fact that out-of-home channels were impacted by the pandemic. When you talk about all the downstream opportunities where we use these ingredients to reinvigorate, for example, our frozen food, our prepared dishes, then we're talking about a CHF 700 million business opportunity in 2020 numbers. That is increasing also at double-digit. That, of course, makes it much, much more material to the group and to the food category overall.

Despite of the fact that out of home channels were impacted by the pandemic, but when you talk about all of the downstream opportunities where we use these ingredients to reinvigorate for example, our frozen food are prepared dishes and then we're talking about a 700 million Swiss franc business opportunity in 'twenty and 'twenty numbers that is.

Increasing also of double digit and that of course makes it much much more material to the group and to the food category overall and so this gives you a sense of what we're working on is not only about the key ingredient. It's also about the follow on products that really get renewed consumer attention.

Mark Schneider: This gives you a sense of what we're working on is not only about the key ingredient, it's also about the follow-on products that really get renewed consumer attention. Moving on to portfolio management. You see here a wrap-up of the deal-making activity over the past three to four years. In total, more than 75 transactions. You're seeing a portfolio turnover, including now the latest water transaction, which we announced yesterday, of about 18% of the group sales. You're seeing that it is a contributor to our organic growth, adding about 60 basis points of organic growth in 2020. Next, I would like to talk about the net zero roadmap. I won't go through all the detail.

Yes.

Moving on to portfolio management, you see here, a a wrap up of the deal making activity over the past the three to four years in total more than 75 transactions and you are seeing a portfolio of turnover, including now of the latest the water transaction, which we.

And just yesterday of about 18% of the crude sales and you're seeing that it is a contributor to our organic growth, adding about 60 basis points of organic growth in 'twenty and 'twenty.

Okay.

Next I would like to talk about the net zero roadmap I won't go through all the detail. If you of particular interest, particularly interested and this roadmap and would like to ask you to look at our December of three 2020 announcement and as.

Mark Schneider: If you're particularly interested in this roadmap, I would like to ask you to look at our 3 December 2020 announcement. In addition to the summary slide, there's about 20 pages of backup information where we lay out in a very detailed way how we expect to get to net zero by 2050. I think in all modesty, what happened here is this is one of the first detailed roadmaps out there. Lots of companies have taken the United Nations pledge in 2019. United Nations rules give you about two years to actually come up with a roadmap. We were one of the first companies to be out there with this detailed roadmap.

And to the summary, slide there's about 20 pages of backup of information, where we lay out in the very detailed the way how we expect to get to the net zero by 2050.

I think the N O a modest see what happens here is and this is one of the first detailed road maps out there lots of companies have taken the United Nations' pledge for in 2019 and United.

And the United Nations and rules gave you about two years to actually come up with the roadmap. We were one of the first companies to be out there and what this detailed road map and I think as the result will be key amount of detail that's and now it has fast become a benchmark now, especially in the food and beverage industry for how to make this happen.

Mark Schneider: I think as a result of the key amount of detail that's in there, it has fast become a benchmark now, especially in the food and beverage industry, for how to make this happen. In this context, it's also important for me to point your attention to what kind of category are people talking about when they talk about net zero. Is it a Scope 1, 2, or 3? This is a full Scope 3, so this includes all the upstream materials, agricultural supplies that go into our products.

In this context, it's also important for me to point your attention to.

What kind of category of people talking about when they talk about net zero is that a category. One two of three scope and this is a full category of three scopes of this includes all of the upstream materials agricultural supplies that go into our products.

Mark Schneider: That's different from some of the Scope 2 ambition levels that other companies have announced, where it's really only about the company operations and its logistics. This also explains why we need until the year 2050 to make this happen, because as you can imagine, when you look at all the agricultural supplies around the world, it's a major challenge to work with our suppliers, get them to upgrade their activities as we move towards a carbon neutral world. In this context, I would also like to point your attention to today's press release, where under the business as a force for good section, we're talking specifically about our activities in the dairy field, which of course is a high greenhouse gas emission area, and what we do there to reduce greenhouse gas emissions.

That's different from some of the scope to ambition levels that other companies have announced were certainly only about the company operations and its logistics and this also explains why would need until the year 2050 to make this happen because as you can imagine when you look at all of the agricultural supply and so around the world. It's a major challenge.

And to work with our suppliers and get them to upgrade day.

The activities as we move towards a carbon neutral world.

And in this context I would also like to point your attention to today's press release, where under the business as a force for good section, we're talking specifically about our activities and the day every field, which of course is of high greenhouse gas emission and alea and what we do vantage will reduce greenhouse gas emissions.

Mark Schneider: This leads me to a wider thought on sustainability. As you look back over the past two or three years and some of our new commitments and initiatives in the sustainability area, whether it's net zero or whether it's our plastic waste reduction activities, you're seeing significant spending coming up and spending that we're facing over the next few years. To me, it's important to confirm to you that we don't see this as a giveaway. We don't see this as corporate philanthropy. To us, this is part of value creation. In a world where consumers are more and more discerning, they expect the business practices and the operations of the companies they buy from to be first rate when it comes to environmental solutions.

This leads me to a wider a thought on sustainability and.

As you look back over the past two of three years and some of our new commitments and initiatives and the sustainability area, whether it's net zero of whether it's our plastic waste reduction activities, you're seeing significant spending coming up and spending that we are facing over the next few years and to me it's <unk>.

Important to confirm to you that we don't see this as the give away we don't see this as corporate philanthropy to US. This is part of the value creation and in the world where consumers are more and more discerning takes.

And they expect the business practices and the operations of the companies they buy for them to be first rate when it comes to environmental solutions.

Mark Schneider: There's also increased regulation with the United States now joining the Paris Agreement. You basically have the expectation of regulatory convergence between the major economies in North America, in Europe, and in Asia towards 2050. That means that climate laggards will certainly face increased regulation and also taxation and fines. You have certainly an employee base that's very sensitive to this. There's lots of reasons why moving towards a carbon neutral footprint will get reward in the future, and we intend to lead this space. We believe that especially with consumers, it'll support competitive advantage, it'll support underlying organic growth performance.

There's also increased regulation with the United Nations with the United States now are joining the Paris agreement and you basically have the expectation of of regulatory convergence between the major economies in North America, and Europe and in Asia towards 'twenty, and 50 and that means that the climate lack of scale.

And the face increased regulation and also taxation and fines and you have certainly the employee base that is very sensitive to this so there's lots of reasons why and moving towards a carbon neutral footprint and we'll get rewarded for the future and we intend to lead the space.

We believe that especially with consumers it'll support competitive advantage it'll support underlying our organic growth performance and.

Mark Schneider: To us, it's one major plank in addition to the other key plank, of course, which is to have the best and tastiest and most nutritious food out there. We summarize these two planks with what we call good for you, good for the planet. Good for you is essentially all the things we do to give you the best food and beverage offerings. Good for the planet is to minimize the environmental footprint of our activities and make them the best possible way. In this context, I would also like to underline that we feel there is a way to make this earnings neutral.

To us it's one major plank. In addition to the other key plank of course, which is to have the best and tasty and most nutritious food out there.

So we summarize these two planks with or what we call. Good for you good for the planet. Good for you is essentially all of the things we do to give you the best food and beverage offerings and good for the planet is to minimize the environmental footprint of our activities and and and and make them the best possible way.

In this context I would also like to underline that we feel there was a way to make this earnings neutral we have a sufficient savings of up but you know what he's coming especially from digitalization and the improvement of our structural cost and growth leverage. So that we can make this path, a smooth and pulled down and financials.

Mark Schneider: We have sufficient savings opportunities coming, especially from digitalization and the improvement of our structural cost and growth leverage so that we can make this path smooth and without financial surprises for the next years to come as we ramp up and scale up these activities. I would also like to update you on one item that we published today, and that is the creation of a designated sustainability committee on our board of directors. Before we had a combined nomination and sustainability committee, we're now splitting this into two committees, a nomination committee, and a sustainability committee.

Prizes flow.

For the next years to come as we ramp up and scale up of these activities.

I would also like to update you on one item that we published today and that is the creation of the designated sustainability Committee on our board of directors.

Before we had a combined nomination and sustainability committee, where now of splitting of us into two committees and nomination committee and the sustainability Committee and here again as this becomes a major spending items, but also as you see a major source of growth. We wanted to be sure that sustainability matters are fully reflected and our board of directors and our governance.

Mark Schneider: Here again, as this becomes a major spending item, but also as you see a major source of growth, we want to be sure that sustainability matters are fully reflected in our board of directors, in our governance, and get the proper attention that they deserve. I would also like to proactively comment in this context on some of the recent say on climate activities, and movements, that you've seen in Europe, for example, but also in other economies around the world. This is about giving shareholders a say at the annual general meeting about climate protection activity. I would like to say and confirm that we are strongly in support of a shareholder say on ESG related matters.

And get the proper attention that they deserve.

I would also like to proactively comment in this context on some of the recent say on climate Act.

The activities and and movements that you've seen in Europe. For example, but also in the other economies around the world. So this is about giving shareholders, let's say at the annual general meeting of.

And climate protection and activity I would like to say and confirmed that we are strongly in support of the shareholders say on ESG and related matters. We have not moved yet for this annual general meeting as the simple result of the fact that there's ongoing legislation and Switzerland that will move towards.

Mark Schneider: We have not moved yet for this annual general meeting as a simple result of the fact that there's ongoing legislation in Switzerland that will move towards some sort of increased transparency and shareholder say on ESG related matters. We wanted to be sure that we don't duplicate here. We wanted to be sure we have clarity on the legal landscape. Then over time, of course, we will give you that full transparency and also a shareholder say on ESG related matters. This brings me to the guidance for the year 2021, and then also to a new midterm outlook. When it comes to the guidance here for 2021, please take in the fact that we're providing guidance at all because you're still seeing some companies out there that refrain from doing this in light of the pandemic.

And some sort of increased transparency and shareholders say on ESG related matters. We wanted to be sure that we don't duplicate here. We wanted to be sure. We have clarity on the legal landscape and then over time of course, we will give you that for transparency and also of shareholder say on ESG related matters.

Yeah.

This brings me to the guidance for the year 'twenty, one and then also to a new midterm outlook and to them. When it comes to the guidance here for 'twenty. One. Please taken the fact that we're providing guidance at all because you're still seeing some companies out there that refrained from doing for us in light of the pandemic asking no ear.

Mark Schneider: As you know, even the darkest months of the pandemic last year, we were upholding our guidance and giving you regular updates, and we intend to do this this year and going forward as well. That's part of our dependability promise, and we expect to live up to that. What you're seeing here, especially on the organic growth, is the expectation of a continued improvement over last year's level. In simple terms, greater than 3.6%. We're seeing an opportunity to potentially cross over the 4% mark, which is of course important because that defines the entry point to the mid-single-digit rate that we have been talking about for several years. This is a possibility. We can't firmly promise yet because we don't know how exactly the pandemic is going to shape this year.

And the Doncaster amongst other the pandemic last year, we were upholding our guidance and giving you regular updates and we intend to do this this year and going forward as well that's part of our dependability promise and we expect to live up to that what.

And what you're seeing here are especially on the organic growth is the expectation of a continued improvement over last year's level. So in simple terms creative and three 6% and.

And we're seeing an opportunity to potentially cross over the 4% Mark which is of course important because that defines the entry point to the mid single digit rate debt. We had been talking about for several years. So this is a possibility we can firmly promised yet because we don't know how exactly of the pandemic is going to shape. This year, but definitely we're seeing and all.

Mark Schneider: Definitely we're seeing an opportunity to be above the 3.6% that we posted in 2020. You're seeing, then, all the elements of the past Nestlé model, a continued improvement in underlying trading operating profit margin. Also when it comes to our other key financial metrics, you see continued improvement. That also carries forward into the midterm outlook. No surprises here. To me, the key word when it comes to the midterm financial outlook is the very first one, sustained mid-single-digit organic growth. From 2022 onwards, what we're seeing here is we have the elements together to give you a sustained performance in that range. That, of course, is important because hitting it once and then sliding back is not helping anyone.

The team already to be above the 3.6 per cent that we posted in 'twenty and 'twenty.

You're seeing and then all the elements of the past Nestle model. So a continued improvement and underlying trading operating profit margin and also when it comes to our of the key financial metrics, you'll see continued improvement.

That also carries forward into the midterm outlook no surprises here to me the key word when it comes to the midterm financial outlook is the very first one sustained mid single digit organic growth. So from 'twenty. Two onwards, what we're seeing here is we have the elements together to give you a sustained perform.

<unk> in that range and that of course is important because hitting at once and then sliding back is not helping anyone the value creation comes through regular compounding and that means the sustained performance with organic growth and this area organic growth is the lifeblood of the company. It provides the opportunity its chose consume.

Mark Schneider: The value creation comes through regular compounding, and that means a sustained performance with organic growth in this area. Organic growth is the lifeblood of the company. It provides opportunity, it shows consumer acceptance, and it gives growth leverage. A lot of good things happen with the company financials when you hit it right on organic growth. With this, I would like to turn it over to our Chief Financial Officer, François-Xavier Roger, for a more detailed financial review. Then François-Xavier Roger and I will be back to answer your questions. Thank you.

And the acceptance and it gives cross leverage.

So a lot of good things happen with the company financials, when you hit it right on organic growth.

With this I would like to turn it over to our Chief Financial Officer Francois for Ray for more detailed financial review and then Francois and I will be back to answer your questions. Thank you.

Thank you Mark good morning, or good afternoon to you all.

François-Xavier Roger: Thank you, Mark. Good morning or good afternoon to you all. I will start with some further details on our financial performance in 2020. Our organic growth increased to 3.6%. The most significant contributor to growth was RIG, which accelerated to 3.2%, the highest level in the last nine years. Our strong RIG is largely made of positive product mix, which is a good illustration of our capacity to innovate and premiumize our offering. Pricing was 0.4% and improved during the year, particularly in emerging markets. Foreign exchange reduced sales by 7.9%, reflecting the continued appreciation of the Swiss franc versus most other currencies. Divested sales had a negative impact of 4.6%, largely related to the divestment of Nestlé Skin Health, the US ice cream business, and Herta.

I will start with some further details on our financial performance in 'twenty and 'twenty.

Organic growth increased to 3.6 boats and the most significant contributor to growth was rig which accelerated to three two per cent the highest level in the last nine years of.

One rig is largely made of positive product mix, which is of good nutrition and of our capacity to innovate on premium is the offering.

Pricing was zero point for persons unimproved during the year, particularly in emerging markets.

Foreign exchange would you send the by seven 9%, reflecting the continued appreciation of the Swiss francs, the existence of most other currencies.

Divestitures had the negative impact of four 6% largely related to the divestment of and this risky nails the U S ice cream business on the auto.

François-Xavier Roger: As a result, reported sales decreased by 8.9% to CHF 84.3 billion. This slide illustrates the development of our sales by geography. It includes both our zones as well as our globally managed businesses. The Americas represented 45% of total sales in 2020, while EMEA and AoA each accounted for more than a quarter of our sales. Our organic growth was positive in all geographies, led by sustained momentum in the Americas and robust sales development in EMEA. AoA was impacted by a sales decrease in China due to the timing of Chinese New Year, declines in out-of-home channels, and limited consumer stockpiling during lockdowns. Excluding China, AoA posted mid-single-digit growth. Now turning to growth dynamics in developed and emerging markets. In 2020, developed markets accounted for the majority of our sales, with organic growth accelerating to 3.8%.

As a result reported sales decreased by eight 9% to 84 points from billions of these fronts.

And he slides illustrate the development of our sales by geography.

Both of those zones as windows of globally managed businesses.

The Americas represented 45 per cent of total sales in 'twenty and 'twenty, while immuno and theory, each accounted for more than a quarter of our sales.

And I'll get in the girls was supposedly TV all geographies led by sustained momentum in the Americas on the robust sensitive of months in the many of them.

Anyway. It was impacted by your sales decrease in China due to the timing of Chinese new year declines in out of home channels unlimited consumer stockpiling during lockdowns.

Excluding China the wafer.

We'll see the mid single digit growth.

Now turning to growth dynamics in developed and emerging markets in 'twenty and 'twenty developed markets of counties for the majority of our sales without getting the growth accelerating to three point the eight persons.

François-Xavier Roger: Emerging markets represented 41% of sales, with organic growth improving during the year to reach 3.4%. We are positive on emerging markets as key growth platforms for the years to come. The effects of COVID-19 on organic growth varied materially by sales channel. Organic growth for retail sales doubled to 7%, reflecting sustained strong demand for at-home consumption. Out-of-home sales declined sharply as a consequence of movement restrictions and the closure of many offices, restaurants, and hotels, to name just a few. Before COVID-19, the out-of-home channel accounted for around 10% of group sales. If we include on-the-go and impulse products, then our total exposure to this channel is closer to 15% of sales. Overall, 2020 demonstrates the resilience of our business. Our diversified portfolio is well geared for fast-changing trading conditions.

Emerging markets represented 41 per cent of sales without getting the growth improving during the year to reach three points for persons.

We are positive and the military market as a key growth platforms photo gifts to come.

The effects of COVID-19 on organic growth varied meta you'll need by sales channel.

And the growth for retail sales and doable, two 7%, reflecting sustained strong demand for at home consumption.

And out of home sales declined sharply as a consequence of movement restrictions and the closure of many offices restaurants and hotels to name just a few.

Before COVID-19, and the out of home channel accounted for around 10% of group sales.

If we include the answer go on imports of products Zen of total exposure of two of these channel is closer to 15% of sense.

Overall 2020 demonstrates the resilience of our business of diversified portfolio is well geared for fast changing trading conditions.

François-Xavier Roger: The clear contrast between category growth partly reflects their level of exposure to out-of-home channels. Our largest category is powder and liquid beverages, accounting for around a quarter of our total sales. Coffee, the largest component, posted around 5% growth. Sales declines in the out-of-home channel were more than offset by strong development in at-home consumption, which grew at a double-digit rate. Starbucks products, Nespresso, and Nescafé continued to gain market share. Sales of Starbucks products reached CHF 2.7 billion, generating incremental sales of over CHF 400 million in 2020. The sales of the total Nespresso system, including Starbucks by Nespresso, grew at a double-digit rate. Pet care, our second-largest category, saw outstanding growth supported by e-commerce, premiumization, and science-based offerings. Most segments grew at a double-digit rate with market share gains.

The clear contrast between your category growth, partly reflect the level of exposure to outperform channels.

Our largest category you spelled out the liquid beverages accounting for around the cost of off of total sales.

Coffee the largest component posted the wrong phosphorus and girls.

Sales because sales declines in the outer from channel were more than offset by strength development in at home consumption, which grew at a double digit rate.

Starbucks products and this principle undisc, if the continued to gain market share.

Sales of Starbucks products reached $2 7 billion and Swiss francs generating incremental sales of over 400 million in 'twenty and 'twenty.

The sales of the total and the sportswear system, including Starbucks by net pursue grew at the double digit rate.

Petcare of signaling at all just category. So outstanding role supported by equaled mills premium musician and science based offerings and.

Most segments grew at the double digit rate with market share gains.

Demand for products with health and nutritional benefits Western Union and benefited categories, such as and this way of science 45 minutes unclaimed based products.

François-Xavier Roger: Demand for products with health and nutritional benefits was strong and benefited categories such as Nestlé Health Science, fortified milks, and plant-based products. Higher levels of at-home consumption led to strong growth for culinary and home baking products. Meanwhile, confectionery and water were impacted by their significant exposure to out-of-home channels and on-the-go consumption. Let's now move to the performance of some of our key growth platforms. E-commerce sales grew by almost 50%, reaching 12.8% of total group sales. Growth was broad-based with strong contribution from coffee, pet care, and Nestlé Health Science. Sales in e-commerce exceeded CHF 10 billion with further market share gains online. We continue to see strong demand for premium products with organic growth accelerating to almost 10%. Premium products now account for 30% of sales versus 11% in 2012.

Hydro levels of at home consumption led to strong rules for culinary and the home baking products.

Meanwhile, the confectionery and what the were impacted by the significant exposure to out of home channels unknowns of go consumption.

Let's now move to the performance of some of our key growth platforms.

Total sales grew by almost 50%, reaching 12, 8% of total group sales.

Growth was broad based with strong contribution from coffee Petcare unnecessary health science.

Sales and the eco mills exceed the 10 billion and Swiss francs, we felt out of market share gains on line.

We continued to see strong demand for premium products without getting the growth accelerating to almost 10 per cent.

Premium products now account for 30% of sales versus 11% in 2012.

François-Xavier Roger: Premiumization is a key component of our portfolio transformation as consumers are looking for differentiated products offering nutrition, taste, quality, and functional benefits. Affordable offerings have also seen encouraging results led by affordable nutrition, particularly for dairy and food. Examples of products include Bear Brand milk in the Philippines, Ninho milk in Brazil, and Maggi bouillon cubes in West Africa. Now turning to profitability. Excluding Nestlé Skin Health, our underlying trading operating profit margin increased by 30 basis points in constant currency. Our gross margin continued to improve as our portfolio evolves toward more value-added products. Margin expansion was supported by structural cost reductions, portfolio management, and slightly lower consumer-facing marketing expenses, which more than offset commodity inflation and COVID-19-related costs. During the H2 of the year, marketing expenses returned to a normalized level and even increased versus the same period of 2019.

Premium musician ease of key component of our portfolio transformation as consumers are looking for differentiated products offering and nutrition taste quality and functional benefits.

The affordable offerings have also seen encouraging results led by a full day for nutrition, particularly for the REIT and food.

Examples of products include bedroom, and milk and the Philippine Nestle, Mark Hamilton, and Brazil, and Maggie Buena and cubes in West Africa.

Now turning to profitability, excluding the stickiness of underlying trading operating profit margin increased by 60 basis points in constant currency.

Our gross margin continued to improve as our portfolio of advanced of world more value added products.

Margin expansion, what's reported by structural cost reductions portfolio management, and slightly lower consumer facing marketing expenses, which more than offset commodity inflation and COVID-19 related cost.

During the second half of the year marketing expense. He has returned to normalized level and even the increase versus the same period of 2019, we are increasing our media investments, particularly in digital channels, which now accounts for 47 per cent of total media spend.

François-Xavier Roger: We are increasing our media investments, particularly in digital channels, which now accounts for 47% of total media spend. Free cash flow was CHF 10.2 billion, or 12.1% of sales. The slight reduction as a percentage of sales was mainly due to one-off items in 2020. We expect our free cash flow margin to remain around 12% as we work on all drivers of cash generation, such as sales growth, margin improvement, and working capital reduction. The group's return on invested capital increased to 14.7% as a result of improved operating performance and disciplined capital allocation. This is the sixth consecutive year of improvement. We are pulling all levers to improve ROIC, including sales growth, margin improvement, working capital reduction, as well as disciplined CapEx and portfolio management. I now hand over to Mark for the Q&A session.

Free cash flow was $10 2 billion Swiss francs of $12 one per cent of since the.

The slight reduction as opposed to the digital sales was mainly due to one of items in 'twenty and 'twenty.

We expect of free cash flow margin to remain around 12 per cent as we work on the old drug sales of cash generation, such as set of rules margin improvement and working capital reduction.

The group's return on invested capital and it increased to 14.7 persons as a result of improved the operating performance and disciplined capital allocation.

This is the sixth consecutive year of improvement we are pulling all levers to improve our IC, including sales gross margin improvement working capital reduction as well as disciplined capex and portfolio management.

And I hand over to Mark for the Q&A session.

Yeah.

Of course of thank you. So this starts of the Q&A part of our press conference and I would read out the questions to you and then either answer the myself or hand, it over to Francois to give you you of our reply. The first question is from Johan and Rita at the Frankfurter Allgemeine net.

Mark Schneider: François, thank you. This starts the Q&A part of our press conference. I will read out the questions to you, and then either answer them myself or hand it over to François to give you our reply. The first question is from Johannes Ritter at Frankfurter Allgemeine Zeitung. His question is: the dog and cat food business is becoming the star in your portfolio. How big is Nestlé's global market share in this business? What are your further plans here? Are there opportunities for big acquisitions, or is the focus more on organic growth? Johannes, thank you for the question, and yes, you're right. It's been another stellar year for our pet food business. This was not only happening in the pandemic environment of 2020. I think this has been shaping up for several years now.

The title. His question is the dog and Cat food business is becoming of the star and your portfolio. How big is Nestle is filled with market share of this business. What are your offer of our plants here are the opportunities for big acquisitions or is the focus more on organic growth.

So the honest. Thank you for the question and yes, you're right. It's been another stellar year for our pet food business. This was not only and happening and the pandemic and environment of 'twenty and 'twenty I think this has been shaping up for several years now.

Mark Schneider: To me, the key story behind pet food is not so much individual actions that change things very much. It's the consistent gaining of market share in major pet food markets around the world over the past 20 years. It's been a wonderful success story. A global market share is misleading because there's some economies where we are underrepresented, and there's also economies where people still feed pets a lot with household waste. In most markets where market share measurements make sense, our market share is in the 20% to 30% range, and we're either number one or number two in most of the advanced markets. To me, it's an opportunity that really ticks all the boxes of what we want to work on. It's a significant premiumization opportunity.

So to me the key story behind Pet food is not so much individual actions that are change things very much is the consistent gaining of market share and major pet food markets around the world over the past 20 years. So it's been a wonderful of success story.

Our global market share is misleading because there are some economies, where we are underrepresented and there's also economies where people still feed pets, a lot with a household waste.

So in most markets, where our market share of measurements makes sense all of market share is and the 20 to 30 per cent range and where are the number one one of the two and most of the advanced markets and to me.

It's an opportunity that really takes all of the boxes of what we want to work on it as a significant premium amortization of opportunity. It's a significant opportunity where we can bring nutrition science to the forefront and it's a significant opportunity on digital because building digital ecosystems and make pet ownership.

Mark Schneider: It's a significant opportunity where we can bring nutrition science to the forefront. It's a significant opportunity on digital because building digital ecosystems that make pet ownership easier is a key area. All of these are initiatives that are very strategic to us and that we intend to work on in the future. I expect continued advancement in this area, not so much with major acquisitions. As you've seen us act in the past, we've done small tuck under acquisitions. Lily's Kitchen, one example from 2020, or the majority stake in Tails.com a few years ago to give us some lead here in the digital space.

<unk> is a key area.

So all of these are initiatives that are very strategic to us and that we intend to work on and the future. So I expect continued advancement in this area not so much with major acquisitions and you've seen US Act and the past we've done small tuck under acquisitions are the least kitchen and one example from 'twenty and 'twenty.

<unk> or the majority stake and the Tailstock com a few years ago to give us.

Some lead here and but digital space. So expect solid organic performance solid investments in capacity to the liver and then also the occasional and tuck under acquisition here and there to advance our market position and that's our game plan and this area.

Mark Schneider: Expect solid organic performance, solid investment and capacity to deliver, and then, also the occasional tuck under acquisition here and there, to advance our market position. That's our game plan in this area. The next question is from Assis Moreira from Valor Econômico. Could you elaborate on the results in Brazil, and how do you see the prospects for 2021 in the biggest Latin American economy? Higher prices in the country? Question. Less investments? Question. I'll pass it to François, Aziz, who will answer your question.

The next question is from our six more of ore from below economical.

Could you elaborate on the results and Brazil, and how do you see of the prospects for 'twenty and 'twenty, one and the biggest Latin American economy higher prices and the country question.

The investments question. So I'll pass the two folks want M. A c's who will answer your question.

Yeah.

François-Xavier Roger: Brazil is a very important market for us. It is our sixth largest market worldwide and the largest market in Latin America by far. We did very well in 2020 because we grew in the double-digit pace. Across categories actually, there is no category that lagged more than any other one. It is largely the result of innovation and improved execution, and we gain market share across categories with the exception of one or two, but most categories we gain market share, so we are very happy with it. The growth came as a combination of pricing, mix, and volume.

Brazil is a very important market for us it is the fifth largest market worldwide and the largest market in Latin America by fall, we did very well in 'twenty and 'twenty, because we grew and the double digit the space across categories of trees of reason the one category that led more than any other one it is largely the result of innovation and the improved execution and we.

And market share across categories with the exception of one of two but most categories. We gained market share. So we are very happy with it the growth came as a combination of pricing mix and volume pricing started to pick up a little bit and the later part of 'twenty and 'twenty and will most probably etcetera. It in 'twenty and 'twenty one other consequence of the currency depreciation.

François-Xavier Roger: Pricing started to pick up a little bit in the later part of 2020 and will most probably accelerate in 2021 as a consequence of the currency depreciation, as we have to reflect the impact of currency depreciation for whatever we import and that hits our P&L.

You have to reflect the impact of currency depreciation for whatever we import and debt heats up the onion.

And.

Mark Schneider: Thank you, François. The next question is from Pearly Neo from FoodNavigator. Does Nestlé expect plant-based products to become a major driver in APAC markets in the coming year, especially with the establishment of your plant-based manufacturing facilities in China and Malaysia? Pearly, the short answer to that is yes. We are very committed to Asia Pacific markets and rolling out plant-based options in the Asia Pacific markets. We have the product innovation, we have, as you see, the plant investments and manufacturing investments in place. We are also, of course, tailoring this very much to local Asian needs. This is not about just copy-paste some of the Western products, but we're also gearing this very much towards local Asian tastes.

Thank you for homes from the next question is from currently of nail from food navigator.

It does nestle expect plant based products to become a major tribe and the APAC markets in the coming year and.

Especially with the establishment of your plant based manufacturing facilities in China and Malaysia.

And probably the short answer to that is yes, we are very committed to Asia Pacific markets and are rolling out a plant based the options and the Asia Pacific markets. So we have the product innovation. We have S. You see are the planned investments and manufacturing investments and <unk>.

Place. We're also of course Taylor and that's very much a two local Asian needs. So this is not about just copy paste.

One of the western products, but we also get and there's very much towards local Asian tastes and Tim This.

Mark Schneider: This is part of our local commitment and local structure. We have a global effort underway. Asia Pacific is a key part of that, just as much as Europe and North America. Next question is from Corinne Gretler at Bloomberg. A year into the pandemic, what long-term changes to the industry do you see? Obviously, people have been consuming more at home, but vaccines are being rolled out. What do you think will really stick? Corinne, very fair question. Obviously, we've seen at-home demand spike in 2020. I do think we have reason to believe that even once vaccines are fully rolled out and applied, that some of this is here to stay.

And this is part of our local commitment and and local structure. So we have of global effort underway Asia Pacific is a key part of that just as much as Europe and North America.

Next question is from current credit like Bloomberg a year into the pandemic, what long term changes to the industry do you see obviously people that happened consuming more at home, but vaccines have been rolled out so what do you think for really stick.

Career, and very fair question, and obviously, we've seen at home demand Spike in 'twenty and 'twenty.

I do think we have reason to believe that even one spec scenes of fully rolled out and the blind that some of this is here to stay and I think this is directly related to the switch towards digital and more flexible and remote work and formats and so.

Mark Schneider: I think this is directly related to the switch towards digital and more flexible and remote working formats that so many companies are embracing now. I think all of us in the future will enjoy a more flexible work lifestyle, and that includes spending more time remotely. Remote for most people means working from home. I do believe that some of this is gonna be here to stay. We've also seen in some major economies in this time of the pandemic a renewed interest in major brands, you know, trusted key brands, when it comes to the quality promise, when it comes to the attention from retailers, and we also expect to retain some of that going forward. It's something that we have to defend with first-rate reliability as a supplier and of course convincing innovation.

So many companies and pricing now I think all of us and the future.

I will enjoy a more flexible work lifestyle and that includes spending more time of remotely and remote for most people. It means working from home and so I do believe that some of this is going to be here to stay. We've also seen in some major economies and at this time of the pandemic of renewed interest in major of prep.

And you know trusted key prints when it comes to the quality of promise when it comes to the attention from retailers and we also expect to retain some of that going for what it's something that we have to defend with first rate reliability as the supplier and of course convincing our innovation.

The next question is from Tina toward AWP, how much of your E Commerce revenues, a trip and by your own platforms and how much by third party platforms.

Mark Schneider: The next question is from Tina Tür at AWP. How much of your e-commerce revenues are driven by your own platforms, and how much by third-party platforms? How does the accelerated shift to online affect partnerships with retailers? Are intermediaries increasingly cut out? Tina, very important question. To me, in a true omni-channel world, it is not about an either/or. Where it makes sense to be in direct contact with the consumer, think about Nespresso, think about Tails.com, we're very much in favor of doing that. Where clearly from a consumer convenience point of view, it's better to be part of a general purpose e-commerce platform. It makes sense to be part of that because you don't wanna go for each and every product you buy to a different website.

How does the accelerated shift to online effect partnerships with retailers and.

Intermediaries increasingly cut out.

Patina of very important question and to me and a true omni channel World are it is not about and either or.

So where it makes sense to be in direct contact with the consumer think about and espresso Ah think about <unk> dot com, we're very much in favor of doing that we're clearly from the consumer convenience point of view, it's better to be part of the general purpose E Commerce platform. It makes sense to be part of that because.

You don't want to go for each and every product you buy two of different website and sometimes you know the convenience of having it all in one basket and one shipment is a key and then of course you know this is not against retailers because many of retailers and I'll have their own online platforms or half of their own.

Mark Schneider: Sometimes, you know, the convenience of having it all in one basket, in one shipment, is key. Then, of course, you know, this is not against retailers because many retailers now have their own online platforms or have their own combined models, like the click-and-pick models where you order online and then you pick up without ever entering the store. I think all of these are very strongly on the rise, and I think all of this has been powering our significant organic growth rate of almost 50% in digital last year. To me, the year 2020 has been sort of a coming of age when it comes to digital opportunities in food and beverage. We don't see that sliding back going forward.

The combined models like the the click and pick models, where you order online and then you pick up without ever entering the store. So I think all of these are very strongly on the rise and I think all of this has been powering our significant organic growth rate of almost 50% and digital last year and to me for you.

The 'twenty and 'twenty has been sort of the coming of age when it comes to a digital opportunities in food and beverage and so we don't see them at sliding back for them for what I think we see it if anything and advance overtime people have discovered at the people who haven't been interdigital before and have now gotten to it and then they accept it and.

Mark Schneider: I think we see it, if anything, advance over time. People have discovered it. The people who haven't been into digital before have now gotten to it, and they accept it and have seen the convenience that digital can offer. I think this is here to stay. It's a major initiative that we're working on. Next question comes from Johannes Ritter at Frankfurter Allgemeine Zeitung. Do confectionery and chocolate really still fit into the strategy of a group that wants to stand for healthy food? Are you open to a sale of this division in the long term? Johannes, I appreciate the question, but I think we've been very clear in our commitment to the confectionery and chocolate business going forward.

I've seen the convenience that digital can offer and and I think this is here to stay so it's a major initiative that we are working on.

Next question comes from hundreds of good type of Frankfurter Allgemeine Zeitung.

And do confectionery and chocolate and really still fit into the strategy of of crude that wants to stand for healthy food.

Ah you're open for sale at this division and the long term.

And the honest and appreciate the question, but I think we've been very clear in our commitment to the confectionery and chocolate business going forward.

Mark Schneider: When we divested our US operations a few years ago, we made it very clear that we see significant opportunities in the rest of the world, and we're committed to working on that. You see us bring innovation, meaningful innovation to the space. Some of you may have seen just a few weeks ago that we announced the launch of vegan KitKat products. This is a product group that is geared towards enjoyment. We know that. We made it clear from the beginning that we're not only about food that's to advance health, we're also about the enjoyment when it comes to food and beverage. The vegan KitKat shows you that you can still work on improving the nutritional footprint of these products and provide enjoyment, but provide it with better nutritionals.

When we divested of our U S operations, a few years ago, we made it very clear that we see significant opportunities and the rest of the world and and we.

And we're committed to working on that you see us and praying innovation meaningful innovation to the space. Some of you may have seen just a few weeks days ago that we announced the launch of the Beacon Kitkat products and so this is the product group that is geared towards enjoyment. We know that we made it clear from the beginning.

And that will not only about food that's sort of advance health will also about being drawn up kind of of food and beverage.

But the Beacon and Kitkat shows you that you can still work on improving the nutrition of footprint of these products and provide enjoyment, but provided a work better and nutritionals and so this is one of several areas that we intend to work on our premium amortization as the other one has been a very promising and rewarding path.

Mark Schneider: This is one of several areas that we intend to work on. Premiumization is the other one. It has been a very promising and rewarding path. Over time, in particular the chocolate side, is one that is key to us. There was a second part to your question, and that is, a human rights organization has filed a class action lawsuit against Nestlé and other chocolate manufacturers for alleged complicity in human trafficking and forced labor in Ivory Coast. Can you rule out the possibility of cocoa being harvested by forcibly recruited children appearing in your supply chain?

And so over time and particularly the chocolate side is one that is a key to us.

And what's the second part of your question and that is.

The human rights organization has filed the class action lawsuit against the nest and of of chocolate manufacturers for electric complicity and human trafficking and forced labor and Ivory Coast can you rule out the possibility of Coke coffee and composite by force at play of recruited children, appearing in your supply chain.

Mark Schneider: This is an area where I just wanted to be very clear, as in the past, that supply chain is an area we're very much focused on, and child labor has no place in our supply chain. I mean, this is an area that we're totally unequivocal on. Child labor is something that we strongly detest and reject, and we're working very hard to rule it out. The next question comes from Pearly Neo, FoodNavigator. What are Nestlé's plans to enhance growth in Asia Pacific countries in the coming year and rebound from the impacts of COVID-19? Plus, for Asia, which countries posted the most growth, and can we get more specific numbers, please? Let me turn this one to François to comment on Asia Pacific.

And so this is an area where I just wanted to be very clear as in the past that our supply chain is an area. We're very much focused on and child labor has no place and our supply chain. I mean, this is an area that would totally unacceptable, Oklahoma and childhood, but it's something that we strongly the.

And reject and we're working very hard to to rule it out.

The next question comes from purely Neal food navigator.

<unk> plans to enhance growth and Asia Pacific countries, and the coming year and the rebound from the impacts of COVID-19.

Plus for Asia of which countries posted the most growth and can we get more specific numbers. Please.

So let me turn of this one and two from spot to comment on the Asia Pacific.

François-Xavier Roger: In Asia Pacific, to start with, in 2020, outside of China, we were already at mid-single digit level, and we ambition to stay at that level. We saw countries like India, Malaysia, and other, Thailand and so forth, growing in mid-single digit or even double digits pace for some of them. We expect that to continue. In China, we had a specific issue last year due to the timing of Chinese New Year that hit our sales both in Q1 and in Q4. We have a stronger exposure to out-of-home as well in China, which hit us more in the context of COVID-19. And the consumers in China did not stockpile during the crisis contrary to other markets.

So in Asia Pacific to start with in 2020 outside of China, We were already at the mid single digit level and we ambition to stay at that level, but we sort of countries like India, Malaysia and Thailand.

London, and so forth is growing and the mid single digit or even double digits is a space for some of them. So we expect that to continue in China. We had the specific issue last year due to the timing of Chinese new year that heat off sales both in Q1 and in Q4, we have the stronger exposure of two out of home as well and in China, which will hit us more and the context of the COVID-19.

And the new consumers in China did not stockpiled during the the crises contrary to other markets. So we expect clearly a way to go back to mid single digit level, both in China and the outside of China, and so there is no specific country, where we expect to see the stronger growth and I think between upper and the across geographies.

François-Xavier Roger: We expect clearly AOA to go back to mid-single digit level, both in China and outside of China. There is no specific country where we expect to see a stronger growth. I think it will happen across geographies, and more specifically in emerging markets because we have a very strong growth platform there. Category-wise, we see the same categories as what we experience in other markets coming from coffee, infant nutrition. Pet care as well is a good growth driver if we see the potential in some markets like China, for example.

And more specifically in emerging markets, because we have a very strong growth, but from the category wise and we see the same categories as to what we experienced you know the other markets are coming from coffee infant nutrition petcare.

Petcare as well and he is a good growth do I. The only if we see the other potential and some markets like the China for example.

Thank you from some of them.

Mark Schneider: Thank you, François. The next question is from Tina Tür at AWP. There's a lot of talk about factories closing down during Chinese New Year and that travel is still restricted. What does that mean for Chinese New Year revenues in Q1? Could we see some downturn here? Tina, I'm very glad you're asking the question because it helps us to explain one calendar issue that affected 2020 and that will benefit us in 2021. 2020 really saw a negative impact from Chinese New Year on both ends. Clearly, the beginning of the year was impacted because Chinese New Year was earlier than this year, and hence a lot of our sell-in actually occurred in the fourth quarter of 2019.

The next question is from Tina toward AWP Theres, a lot of talk about factories closing down during Chinese new year and debt travelers to the restricted what does that mean for Chinese new year revenues and the first quarter could we see some downside here.

The teen and very classy and asking the question because it helps us to explain one calendar issue that affected 2020 and that will benefit us in 2021.

2020, really saw a negative impact from Chinese new year on both ends clearly at the beginning of the year was impacted because Chinese new year was earlier this year and hence a lot of our sell in and actually occurred in the fourth quarter of 2019.

Mark Schneider: Then when it comes to Chinese New Year this year, it's later, hence a lot of the sell-in occurred now in January, and that means we didn't get the usual pickup in the Q4 of 2020. You saw year 2020, there was kind of reduced on both ends. That's one of the reasons why the Q4 growth rate, as good as it was at 3.9%, was not even higher than that. It also means that we picked up a lot of that now in January 2021. The next question is from Pearly Neo, FoodNavigator. Which products and brands led the growth in Asian countries? Like which main coffee products led in South Korea, Nescafé, Starbucks or others?

And then when it comes to Chinese new year. This year. It's later, hence a lot of the sell in of course now in January and to and that means we didn't get the usual pick up in the fourth quarter of 2020. So you saw a year of 2020, there was kind of.

The reduced on both ends and.

That's one of the reasons why the fourth quarter of growth rate as good at the Wassa at three 9% was not even the higher than that.

But it also means that we've picked up a lot of and now in January of 'twenty 'twenty one.

The next question is from purely name of food navigator.

Which products and prance slip of growth and Asian countries.

And like which main coffee products, Latin and South Korea.

Coffee, Starbucks or others, and Kenmore and number of state of info be shared about this and let me hand this to Francois again.

Mark Schneider: Can more numbers, data, info be shared about this? Let me hand this to François again.

And so in the of liking the the rest of the world actually within coffee, we grew across categories and geographies as well. So it's not a newness to feel nespresso and Starbucks I mean, the three Browns getting market share in almost all territories, where we operate and the there is a good very good complementary between the three balloons and.

François-Xavier Roger: In Asia, like in the rest of the world actually, within coffee, we grew across categories and geographies as well. It's not only Nescafé, Nespresso, or Starbucks. I mean, the three brands gain market share in almost all territories where we operated, and there is a good, very good complementarity between the three brands. I think that the beauty of it is that it happens across geographies as well. It's not only one single market, and I think this applies as well to Korea.

The thing that the beauty of it that's the type of wins across geographies as well. So it's not any one single market and I think the supplies as well to Korea.

Thank you for homes from the next question comes from Matthew Jose Cougar and at least the cool.

Mark Schneider: Thank you, François. The next question comes from Marie-José Cougard at Tina. I'm very glad you're asking the question because it helps us to explain one calendar issue that affected 2020 and that will benefit us in 2021. 2020 really saw a negative impact from Chinese New Year on both ends. Clearly the beginning of the year was impacted because Chinese New Year was earlier than this year, and hence a lot of our sell-in actually occurred in the Q4 of 2019. Then when it comes to Chinese New Year this year, it's later, hence a lot of the sell-in occurred now in January, and that means we didn't get the usual pickup in the Q4 of 2020.

What I'm really just trying to be in water and now that you have sold part of your local brands New geographies question Mark do you believe in the future of this activity highly criticized studio plastic pollution question Mark how much does the water business makeup today in your business activity.

So Michael Murphy USA and this is an important question just following the announcements yesterday that we are selling or a domestic north American spring water and purified water of France.

I think what we have announced yesterday is very much in line with the new strategy that we outlined last.

The last summer and <unk>.

That is we are committed to water we are committed to healthy hydration, but we would like to focus on segments and geographies, where we can achieve a higher growth and higher relevance for our consumers and that means in terms of segments International premium brands.

Mark Schneider: You saw 2020, there was reduced on both ends. That's one of the reasons why the Q4 growth rate, as good as it was at 3.9%, was not even higher than that. It also means that we picked up a lot of that now in January 2021. The next question is from Pearly Neo, FoodNavigator. Which products and brands led the growth in Asian countries? Like which main coffee products led in South Korea, Nescafé, Starbucks or others? And can more numbers, data, info be shared about this? Let me hand this to François again.

François-Xavier Roger: In Asia, like in the rest of the world actually, within coffee, we grew across categories and geographies as well. It's not only Nescafé or Nespresso or Starbucks. I mean, the three brands gain market share in almost all territories where we operated, and there is a good, very good complementarity between the three brands. I think that the beauty of it is that it happens across geographies as well. It's not only one single market, and I think this applies as well to Korea.

Mark Schneider: Thank you, François. The next question comes from Marie-José Cougard, and functional waters. This is waters where there's some sort of low sugar flavoring or some micronutrient added so that you have some nutritional benefit or simply caffeine to give you an energy boost. This is an area where both in terms of internal innovation and also external scouting, we're very interested in advancing the waters business. We don't intend to operate it now at this reduced level. Over time, we intend to grow from the smaller base to grow our international premium brands and functional waters. When it comes to plastic, we're fully aligned that plastic should not leak into the environment. That means we have to work on higher recycled content.

And functional waters. So this is what is where there's some sort of lower sugar flavoring or some micronutrient added so that you'd have some nutritional benefit or simply caffeine and to give you and energy boost so and this is an area of where both in terms of internal innovation and also external accounting, we're very interested in.

And advancing the waters business. So we don't intend to operate it now at this reduced level, but over time, we intend to now from the smaller base.

Two CRO around the international premium brands and functional waters. When it comes to plastic we fully are aligned to that the plastic should not leak into the environment. So that means we have to work on the higher recycled content, we have to support recycling system, so that our bottles don't legal and simple.

Mark Schneider: We have to support recycling systems so that our bottles don't leak into the environment, or we have to work on alternative container strategies, and we're doing all of this. Overall, portable solutions that you can take with you to ensure that you have hydration through the day, and also, something where the main ingredient is pure water and where you're not loading up, especially on sugar. I think that is a contribution towards healthy hydration and public health. It's a worthy area to be in and one that I think continues to see significant growth opportunities. Next question is from Gabriella Hunter at Finanz und Wirtschaft. You can't be happy with growth in China. How is your outlook on this particular market for 2021?

And while we have to work on alternatives of container strategies, and we're doing and all of this.

But overall.

Portable solutions that you can take with you to ensure that you have penetration for the day and also something where the main ingredient is a pure water and where you're not loading up especially on sugar I think that is the contribution towards healthy hydration and and public health, it's a worthy and.

And I got to be and and one that I think continues to see significant growth opportunities.

The next question is from Gabriele of Hunter at financial and the bed shaft, you cant be happy with growth in China. How is your outlook on this particular market for 'twenty, one where do you see the major issues and how are you planning to improve the performance.

Mark Schneider: Where do you see the major issues, and how are you planning to improve the performance? Gabriella, I think you're absolutely right, and we're not happy with that performance. Do keep in mind what I just mentioned earlier, and that is the year looked unusually bad because of this double whammy on the Chinese New Year, both at the beginning and the end. That alone will correct itself in 2021. Of course, we also had to deal with a lot of homemade issues and things that we really intend to improve on. One was separating from the Yinlu peanut milk and porridge business and fully focusing now on the ready-to-drink opportunity in Nescafé, which I think is off to a good start.

Go for it I think you're absolutely right and we're not happy with that performance and do keep in mind, what I just mentioned earlier and that is of the.

For the year looked unusually bad because of the established whammy on the Chinese new year of both at the beginning and the and so that alone will correct itself and and.

In 'twenty one.

But of course, we also had to deal with a lot of homemade issues and things that we really intend to improve on.

One was separating from the can do peanut milk and porridge business and fully focusing now on the ready to drink operating already and that's cafe, which I think is off to a good start and now.

Mark Schneider: Another area is clearly giving our Wyeth Nutrition business renewed attention, a deeper push into tier three and tier four cities, and also continued rollout of innovation, including our locally made Belsol brand. I think with all of these activities and a deep commitment to the Chinese market, we intend in this second-largest worldwide market for us that sees a lot of dynamic activity to improve performance. Clearly, we're not happy with where we are. The team is very committed to improving from the levels that we have seen in 2020. Next question is from Pearly Neo, Food Navigator. What solutions is Nestlé looking at to make dairy production more sustainable in New Zealand, with dairy such a major local industry, and China, where the government is strongly pushing for more dairy consumption?

Other area is clearly, giving our wyeth infant nutrition business renewed attention of deeper push into tier three and tier four cities and also continue the rollout of the innovation, including our locally made at Bell Salt brand. So I think with all of these activities and a deep commitment to of the Chinese market and we intend and this set.

And launches worldwide market for us that sees a lot of kind of activity to improve performance. So clearly we're not happy with where we are the team is very committed to improving from the levels that.

And that we have seen in 'twenty and 'twenty.

Next question.

And as from purely nail food navigator, what solutions isn't as they're looking at to make dairy production and more sustainable and sealant.

And our research of major local industry, and China, where the government is strongly pushing for more dairy consumption.

Mark Schneider: Pearly, I think in both of these traditional dairy markets, we're very committed to advancing the state-of-the-art in dairy. That includes New Zealand, but what I would like to focus on clearly is China, where I think over the past decade, we have patiently contributed to that local industry, improving over time and scaling up. We have a dairy research institute in the north of China that really is quite engaged in working with local farmers and improving agricultural and dairy farming practices, and we'll continue to do that going forward. A good source I can point you to is some of the material that we highlighted in today's press release under the Business as a Force for Good section.

So probably I think and both of these traditional dairy markets, we're very committed to advancing the state of the art in dairy that includes New Zealand, but I would like to but I would like to focus on clearly is China, where I think over the past decade, we have patiently contributed to that local industry.

Improving overtime and scaling up.

We have the dairy research Institute and the North of China, Our debt really is quite engaged and are working with local farmers and improving agricultural and dairy farming practices and we'll continue to do that going forward. So good source I can point you to is some of the material that we highlighted.

And today's press release under the business as the force for good section and a counter and us as being very committed to the space certainly for China, but also for our key dairy market such as New Zealand.

Mark Schneider: Count on us as being very committed to this space, certainly for China, but also for a key dairy market such as New Zealand. Next question is from Tina Tür, AWP. It's a follow-up on China. Follow-up to Chinese New Year question. I meant rather the impact of COVID right now and not the calendar impact. When people travel less this year, will they also buy less gifts, and might that impact your Chinese New Year's sales? Tina, it's still a little early to judge that. Clearly there is less travel activity, but before and after Chinese New Year, I think there's good reason to expect that overall travel activity and presence in offices is going to be on the rise again.

The next question is from Tina Tour AWP, it's a follow up on China.

Follow up two of the Chinese new year question, I mentioned part of the impact of Covid right now and not the calendar impact when people travel less this year will they also buy less gifts and might that impact your of Chinese new year sales.

Peanuts.

And that's still a little early to judge that so clearly there is less travel activity, but before and after Chinese new year I think there's good reason to expect that overall travel activity and the presence in our offices is going to be on the rise of.

Again, what clearly hurt us last year when you look at the timing of Chinese new year was the fact that with people being away when some of the Lockdown started there was never really any consumer pantry loading that we've seen and other market. So we've never had any of the positives that we saw and other markets. But then of course, we were hit by the Lockdown.

Mark Schneider: What clearly hurt us last year when you look at the timing of Chinese New Year was the fact that with people being away, when some of the lockdown started, there was never really any consumer pantry loading that we've seen in other markets. We've never had any of the positives that we saw in other markets. Of course, we were hit by the lockdown. We do have a very large Nestlé Professional business in China, and hence, that also suffered quite a bit during the spring and summer. It has also seen some good recovery now. That makes me quite optimistic when it comes to China and the year 2021. I understand the actual numbers for 2020 do not look great. We're fully aware of that.

And we do have a very largeness of the professional business in China and the hands that also suffered quite a bit you and the spring and summer.

But it has also seen some good recovery now and so that makes me quite optimistic when it comes to China and the of 21, So I understand the actual numbers for 'twenty do not look right. We're fully aware of that but I think the team has taken this very seriously and all potential of fronts, whether it's the gift.

Mark Schneider: I think the team has taken this very seriously on all potential fronts, whether it's the gifting side, the out-of-home side, the infant nutrition side, to work on plans here, to improve matters in 2021 and going forward. Count on our commitment to the Chinese market. There are no more questions right now. If there are any follow-up questions, please direct them to our media team. We'll be happy to assist you, and we appreciate your attention. Thank you for joining us. Hope the format worked for you. On behalf of François and I, wish you a good day. Again, we look forward to hosting you in person as soon as this pandemic is over. Thank you.

The inside the out of home side of the infant nutrition side to work on plans here to improve matters and 'twenty, one and going forward, so counter and our commitment to.

Two of the Chinese market.

The Nobel questions right now if there are any follow up questions. Please direct them to our media team will be happy to assist you and we appreciate your attention. Thank you for joining US hope the format of award for you and won't behalf of pumps for and I wish you a good day and again, we look for.

And what the hosting you in person and as soon as this pandemic is over and thank you.

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