Full Year 2022 Nestle SA Earnings Press Conference

February 16, 2023

Christophe: Good morning, everyone. Thank you for joining us this morning and a warm welcome to Nestlé's Full Year Results Press Conference. With me here today are Mark Schneider, our CEO, and François-Xavier Roger, our CFO. Before we get started, let me remind you of a couple housekeeping items. You're now all placed on mute. There will be a Q&A session after the presentations. Now, please take a moment to read the following important disclaimer. Thank you. With that, let me hand over to Mark.

[Company Representative] (Nestlé): Good morning, everyone. Thank you for joining us this morning and a warm welcome to Nestlé's Full Year Results Press Conference. With me here today are Mark Schneider, our CEO, and François-Xavier Roger, our CFO. Before we get started, let me remind you of a couple housekeeping items. You're now all placed on mute. There will be a Q&A session after the presentations. Now, please take a moment to read the following important disclaimer. Thank you. With that, let me hand over to Mark.

Good morning, everyone. Thank you for joining us this morning, and a warm welcome to <unk> full year results Press conference.

With me here today are Mark Schneider, our CEO and Francois <unk> Jorge our CFO .

Before we get started let me remind you of a couple of housekeeping items Youre now all placed on mute there will be a Q&A session. After the presentations.

Now please take a moment to read the following important disclaimer.

Thank you.

With that let me hand over to Mark.

Mark Schneider: Thank you, Christophe, and a warm welcome to our full year press conference participants. As always, we do appreciate your interest in our company. It's a good opportunity to update you on all the many actions that it took during a very turbulent and demanding year. I'm all the more pleased to tell you that in a year that saw lots of surprises and lots of challenges, Nestlé, one more time, with its team, proved its dependability and resilience in the face of significant volatility. Let's look at some of the key messages specifically. You're seeing the resilient financial performance with strong organic growth maintained from the year 2021. The nature of that growth has changed. In 2021, it was more volume and mix-led. Now in the year 2022, obviously in the face of inflation, it was more pricing-led.

Thank you Christophe and a warm welcome to our full year Press conference participants as always we do appreciate your interest in our company.

It's a good opportunity to update you on all the many actions that it took to my very turbulent and demanding here in Baltimore pleased to tell you that in a year that saw lots of surprises and lots of challenges.

One more time, what's team proved its dependability and resilience in the face of significant volatility.

So let's look at some of the key messages, specifically youre seeing the resilient financial performance with strong organic growth maintained from the year 2021, the nature of that growth has changed in 'twenty. One it was more volume and mix led now in the year 2022.

And the pace of inflation. It was more pricing led nonetheless, very positive news that we came out episodes slightly with a positive rig or real internal growth, which is the sum of volume and mix that's important to us.

Mark Schneider: Nonetheless, very positive news that we came out ever so slightly with a positive RIG, or Real Internal Growth, which is the sum of volume and mix. That's important to us. Our underlying trading operating profit margin decreased by 30 basis points to 17.1%. That should not come as a surprise. I think we've been guiding towards that all throughout the year in the face of the significant inflation and some of the economic uncertainty that we saw. Nonetheless, given the strong impact of inflation on our gross margin, I believe you're seeing here significant internal efforts that helped us to reduce the impact by only 30 basis points then to the bottom line.

Our underlying trading operating profit margin decreased by 30 basis points to 17, 1%.

It should not come as a surprise I think we've been guiding towards at all throughout the year in the face of the significant inflation in some of the economic uncertainty that we saw nonetheless, given the strong impact of inflation on our gross margin I believe youre seeing here a significant internal efforts that helped us to reduce the <unk>.

Packed by only 30 basis points.

Mark Schneider: Clearly, in the face of a gross margin decline that was 260 basis points, limiting then the decline on the underlying trading operating profit margin to an amount of 30 basis points was a significant achievement. In line with that, you're seeing that our underlying earnings per share growth was 9.4% in constant currency. This is when you compare it to the kind of range that was given out at our Barcelona Investor Seminar last fall. This is a range of 6% to 10% is towards the upper end of that range. Significant achievement at a very turbulent and demanding time. We did not neglect in that year to build for the long term. Clearly the key investment areas of CapEx, innovation, and sustainability continued unabated.

To the bottom line. So clearly in the face of a cross margin decline that was 260 basis points.

Limiting the decline on the underlying trading operating profit margin to an amount of 30 basis points was a significant achievement.

In line with that you're seeing in our underlying earnings per share growth was nine 4% in constant currency. So this is when you compare it to the kind of range that was given out at our Barcelona Investor Day last fall. So this is a range of 6% to 10% is towards the upper end up at range. So significant achievement at a very turbulent.

And demanding time.

We did not neglect in that year to build for the long term. So clearly the key investment areas of Capex innovation and sustainability continued unabated and that's important because we run the company for long term and we want to be well positioned not only for this year, but also for many years to come as <unk>.

Mark Schneider: That's important because we run the company for long term, and we want to be well positioned not only for this year, but also for many years to come. As part of that, as you know, portfolio rotation is a key item in our strategy, and we're now at about 22% of portfolio rotation compared to the starting point in 2017. The portfolio rotation towards items that are in better demand, higher growth, higher margin items does continue. We made continued progress on our Good for You, Good for the Planet agenda. This is our label for all the aspects, all the initiatives we have underway. Good for You, about a better nutrition, healthy and tasty diets, and then Good for the Planet, and that is significantly reducing the eco footprint of our activities.

Part of that as you know portfolio rotation is a key item in our strategy.

And we're now at about 27%, 22% of portfolio rotation compared to the starting point in 2017, so the portfolio rotation towards items that are in better demand higher growth higher margin items does continue.

We made continued progress on our good for you good for the planet agenda. So this is our label for all the aspects all the initiatives. We have underway. Good for you about a better nutrition healthy and tasty diet and then good for the planet and that is significantly reducing the equal footprint.

Mark Schneider: Significant investments underway. I'll update you on some of the progress that we've made during the past year. Again, at a time when so much effort was on inflation and affordability, we did not step away and take a shortcut on these two longer-term initiatives, but rather continue dutifully along our path and our long-term strategies in those areas. Then the whole thing translates also in a good dividend per share of CHF 2.95. We're sharing the benefits of our economic results with our shareholders. This is an increase of CHF 0.15. It's the 28th consecutive year of dividend increases and the 63rd consecutive year where the dividend has been either stable or increasing.

Of our activities significant investments underway I'll update you on some of the progress that we've made to in the past here and again at a time when so much effort was on inflation and affordability with.

It's not step away and take a shortcut on these two longer term initiatives, but rather continue dutifully along up happened our long term strategies in those areas.

And then the whole thing translates also in a good dividend per share.

To Swiss francs Ninety-five stone teams. So we're sharing the benefits of our economic results with our shareholders. This is an increase of 15 strong teams.

Eighth consecutive year of dividend increases and the 16th third consecutive year, where the debate has been either stable or increasing.

Mark Schneider: Before I move on to the more specific review of the year, let me also take a moment to specifically thank and call out our Nestlé employees and associates around the world. This has been a very demanding year, and I'm very proud of what our employees and associates around the world have done to counter the significant challenges that we've seen in so many ways. The team has stayed focused on solid operating management. When you have turbulent times, this is what comes first over and above high-flying strategic thoughts. Solid day-to-day operating management, keeping focused on that, took center stage, and I think the team has done very well on that.

Before I move on to the more specific for you over here. Let me also take a moment to specifically thank and call out.

Initially our employees and associates around the world.

This has been a very very very demanding here and I'm very proud of what our employees and associates around the world have done to calendar the significant challenges that we've seen in so many ways. The team has stayed focused on solid operating management. When you have travel in time. This is what comes first open above high flying strategic.

What's in solid day to day operating management, keeping a focus on that took center stage and I think the team has done very well on that and then of course, you've seen countless situations, where we stepped open about that and provided first eight held in first situations first line help on the ground and situations that demand at all.

Mark Schneider: Of course, you've seen countless situations where we stepped over and above that and provided first aid help in first situation, first-line help on the ground in situations, that demanded, our efforts. Be that, the food and beverage help, and the support of our people on the ground in Ukraine, or be it the frontline help, that we've seen towards the end of the year in flood-torn Pakistan. I think both on the business side and also the social agenda, tremendous efforts from our team. Very proud of what you've done. Team Nestlé, you have every reason to be proud of yourself. With that, let me turn to the year 2022 achievements in particular. You're seeing here some categories and regions and channels that we would like to call out.

Our efforts b that the food and beverage health.

The support of our people on the cloud and Ukraine, albeit the frontline health that we've seen towards the end of the year influx on Pakistan. So I think both on the business side and also the social agenda tremendous efforts from our team very part of what you've done team yesterday, you have every reason to be proud of yourself.

With that let me turn to the year 2022 achievements in particular.

Are you seeing here, some categories and regions and channels that we would like to call out.

Mark Schneider: Clearly, PetCare does stand out with continued very strong growth, double-digit. As you know, this is on the back of very successful years ever since the pandemic began. We're seeing the category of PetCare going from strength to strength, which is very reassuring. Coffee, nonetheless, one of our other very, very high-flying categories, absolutely resilient with an 8.1% organic growth. Remember, this was the year when you saw a post-COVID normalization in many of the markets that we're serving. It would have been absolutely normal to expect that some of the growth comes down. Nonetheless, I think with an 8.1% organic growth, we've proven the resilience of this very important category for us.

Clearly pet care does stand out with continued very strong growth double digit and that should help us on the back of a very successful years ever since the pandemic began.

And so we're seeing the category of pet care going from strength to strength, which is very reassuring.

Coffee Nonetheless, one of our other very very a high flying categories, absolutely resilient with an eight 1% organic growth, but this was the year. When you saw post COVID-19 normalization and many of the markets that we're serving and so it would've been absolutely normal to expect that some of the growth comes down.

Nonetheless, I think we have an eight 1% organic growth with proven the resilience of this very important category for us I would also like to call out. The continued strong success of our Starbucks partnership the global Coffee Alliance, where we've been able to generate an additional incremental $1 5 billion Swiss francs in sales since the.

Mark Schneider: I would also like to call out the continued strong success of our Starbucks partnership, the Global Coffee Alliance, where we've been able to generate an additional incremental CHF 1.5 billion in sales since the year 2018. Emerging markets proved to be very resilient in this turbulent year, +10%. There we've seen not only appropriate pricing, but also continued good development in volume and mix. Out-of-home channels, I believe, they benefited certainly for the first 9 months from the continued normalization that we've seen in this post-COVID world in many markets. Double-digit growth, and also above 2019 levels now for the full year. When you look at the Q4 specifically, I think there were some impacts, in particular from China and the COVID outbreak there.

2018.

Emerging markets proved emerging markets proved to be very resilient in this turbulent here plus 10% data we've seen not only appropriate pricing, but also continued a good development in volume and mix and then out of home channels I believe they benefited certainly for the first.

Nine months from the continued normalization that we've seen in this post COVID-19 world in many markets.

Double digit growth and also above 2019 levels now for the full year. When you look at the fourth quarter, specifically I think there were some impacts in particular from China in the Covid outbreak banner, but nonetheless, even for the full year, we're seeing a very very significant performance.

Mark Schneider: Nonetheless, even for the full year, we're seeing a very, very significant performance. In the year, we also made progress when it comes to fixing underperforming businesses. The most notable one I would like to call out is China, where I think in infant nutrition, we've done exactly what we told you we were going to do, and that is take a very detailed look at our operations there, and in particular, at our distribution system, distribution channels. I think within a year, that resulted in very significant improvements in the face of nonetheless very low birth rates in that market. It shows you that when we focus on a business, I think we can truly bring tremendous operational improvements to it. This one, of course, is significant because China remains the largest infant formula market in the world.

In the year, we also made progress when it comes to fixing underperforming businesses. The most notable one I would like to call out is China, where I think in infant nutrition, we've done exactly what we told you we would want to do and that is take a very detailed look at our operations there and in particular in our distribution system.

Distribution channels and I think within a year that resulted in very significant improvements in the face of nonetheless, very low birth rates in that market. So it shows you that when we focus on our business I think we can truly praying tremendous operational improvements to it and say this one of course is significant.

Because China remains the largest infant formula market in the world.

Mark Schneider: We were also systematically addressing low-margin businesses, and we streamlined our SKU portfolio around the world. More on that later because I think from something that was very much initiated due to supply chain limitations, we've now blown this up into a full-scale strategy that is giving us significant organic growth prospects. On portfolio management, two key items. One is the focus of Nestlé Health Science on consumer care and medical nutrition. We did share with our investors at the Barcelona Investor Day, late November, that our 2020 acquisition of Aimmune has not fully met its objectives, and we're exploring options for that business. Clearly the best prospects for Nestlé Health Science going forward can be found in our long-standing medical nutrition business and also consumer care, which comprises two subsegments.

We will also systematically addressing low margin businesses and we streamlined our SKU portfolio around the world more on that later, because I think from something that was very much.

Initiated due to supply chain.

Patients with now and loan business into a full scale strategy that is giving us significant organic growth prospects.

And then on portfolio management two key items. One is the focus from Nestle health science on consumer care and medical nutrition.

We did share with our investors at the Barcelona Investor Day late November up at our 2020 acquisition of eight immune has not fully met its objectives and we're exploring options for that business.

So clearly the best prospects for Nestle Health science going forward can be found in our long standing medical nutrition business and also consumer care, which.

Comprises two sub segments, one is vitamins minerals and supplements and the other one is called active nutrition both of those continue to perform well.

Mark Schneider: One is vitamins, minerals, and supplements, and the other one is called active nutrition. Both of those continue to perform well. In food, we've created a new business-to-business fresh food platform based on our Freshly business, which we also acquired in 2020. We merged that business with a different company called Kettle Cuisine. We're addressing here the very important North American need at a time of labor shortages, and that is to supply centrally made fresh food products to all the food service operators that do have staffing issues out at the places that they serve, and that they prefer to actually do business with a company like Kettle Cuisine and Freshly to have the high-performance, tasty, and balanced diet available for their customers, but a safe labor with the food preparation on-site.

In food, we've created a new business to business fresh food platform based on our freshly business, which we also acquired in 2020 with most of that business with a different company called Cadillac, We've seen and we're tracking here the very important north American a need at a time of labor shortages and that is to supply centrally may.

Fresh food products to all the foodservice operators that do have staffing issues.

Out of the places that they serve.

They prefer to actually.

<unk> business with a company like Ketel cuisine, and freshly to have the high performance tasty and balanced diet available for their customers, but safe label with a food preparation onsite.

Mark Schneider: Before I move to the next two slides, which will focus on Nestlé's role in society, and in particular, Good for You, Good for the Planet, let me also take a moment due to the sad events of the past few days and talk about the devastating earthquake in Türkiye and Syria. We're all very saddened by this tragic news. I'm glad to report that Team Nestlé and all of our team members in Türkiye are safe and that they're fully focused on doing what Nestlé stands for, and that is with its food and beverage items to help at moments like these and go over and above just the sheer scope of business. Within a few days, we started to work together with World Central Kitchen.

Before I move to the next two slides, which will focus on <unk> role in society and in particular, good for you good for the planet.

We also take a moment due to the sad events of the past few days and talk about the devastating earthquake and choke here in Syria.

So we are all very saddened by this tragic news and I'm happy to Plateau report that our team yesterday and all of our team members in Turkey are safe.

And that they are fully focused on doing what <unk> stands for and that is whether it's food and beverage items to help up moments like these and go over and above just the sheer scope of business. So within a few days, we started to work together with west Central kitchen.

Mark Schneider: We started to work with the International Red Cross and Red Crescent, and we're also bringing our own logistics capabilities and food supplies to the table to provide first aid. This goes over and above just writing checks. It's more about providing specific logistics, support, and help on the ground. I'm very glad that one more time here in this situation of need, Team Nestlé is rising to the challenge. It's a good example, and these situations, sad as they are, will continue to occur. It's good to see that Team Nestlé is there not only to sell its food and beverage products, but also help at moments like these in the communities where we're present. Moving on to Good for You and the continued progress on our nutritional portfolio.

We started to work with the international Red Cross and Red Crescent, and we're also putting our own logistics capabilities and food supplies to the table to provide first day. So this goes over and above just writing checks, it's more about providing specific logistics support and to help on the ground and then very class.

One more time here in this situation of neat teen Nestle is surprising to the challenge. It's a good example, and these situations status now we will continue to occur and it's good to see that she necessarily they are not only to sell as food and beverage products, but also help at moments like these in the communities, where we are present.

Moving on to good for you and the continued progress on our nutritional portfolio.

Mark Schneider: As you know, this builds on 25 years of our nutrition, health, and wellness strategy, where we were successful over the years in reducing sodium, sugar, and saturated fats in our diets. We realized, of course, that in addition to these important ongoing initiatives, we need to do more. One aspect that the public increasingly demanded was transparency. What we announced last fall, and we're putting it in place now in the next few weeks with our Creating Shared Value report, is a new initiative on transparency when it comes to our global portfolio.

You know this built on 25 years of our nutrition health and wellness strategy, where we were a successful over the years and reducing sodium sugar and saturated fat in our diets.

We realized of course that in addition to these important ongoing initiatives, we need to do more and one aspect that the public increasingly demanded was transparency. So what we announced last fall and we're putting it in place now in the next few weeks with our creating shared value will report is in.

New initiative on transparency when it comes to our global portfolio.

Mark Schneider: To our knowledge, we're the first global major food company that will provide on its entire global portfolio a consistently applied Health Star Rating so that you can see what the entire global portfolio is made up of when it comes to the gradation of the Health Star Rating system. In addition to that, for 14 major markets that we're serving, we're doing the same on the national portfolio, and we're using for those, of course, the national rating systems that apply in those markets. We also upgraded our responsible marketing initiatives, and we implemented and announced the marketing initiatives that will come in place then this year, that will go from 0 to 16. Here again, we're among the industry-leading companies when it comes to the age brackets that fall under this new policy and guideline. We don't stop there.

To our knowledge, we're the first global major food company that will provide on its entire global portfolio.

A consistently applied health star rating. So that you can see what the entire global portfolio is made up off when it comes to the creation of the health Star rating system.

In addition to that for 14 major markets that we're serving we're doing the same on the national portfolio.

We are using for those of course, the national rating systems that apply in those markets.

We also upgraded our responsible marketing.

Initiatives and we implemented.

And announced the marketing initiatives that will come in place then this year.

That will go from zero to 16, so here again, we're among the industry leading companies when it comes to the H brackets that fall under this new policy and guidelines.

Mark Schneider: We have work to do for this year, and one of the initiatives for this year is to work on a specific target for the future size of our plant-based product portfolio. Plant-based is an area, whether you look at food or beverage, that holds tremendous promise for us. We've seen continued and sustainable success in it. We believe it's one of the best areas and one of the best initiatives to square the public's demand for a healthy diet with also a lesser eco footprint. We believe it's time, after we've seen now this business develop successfully for a number of years, to develop and publish a specific target that we're working towards.

We don't stop there we have work to do for this year and one of the initiatives for this year is to work on a specific target for the future size of our plant based product portfolio. So plant based is an area, where if you look at food or beverage that holds tremendous promise for us we've seen continued in.

Sustainable success in it.

We believe it's one of the best areas and one of the best initiatives to square the public demands the public's demand for a healthy diet with also a lesser equal footprint and so we believe its time after we've seen that business develop successfully for number of years to develop and publish a specific target that we're working towards.

Mark Schneider: We are also, in the interest of continued transparency, working on a target globally for how we would like to increase the share of our products that are rated 3.5 or above in the Health Star Rating system. This is the one that would be deemed to be healthy under the Health Star Rating system. There, also late in the year, we're publishing a specific sales number that we are attempting for future years. Overall, we're not stopping there. I think under the responsible marketing set of initiatives, in addition to the guidelines that we published last fall and implementing those this year, we will also unveil further initiatives that help consumers make the right choices when it comes to healthy and tasty diets.

Yeah.

We are also in the interest of continued transparency are working on a target globally for how we would plan to increase the shelf are products that are rated 3.5 or above in the health care rating system. So this is the one that would be deemed to be healthy and other half to half star rating system.

They are also late in the year, we're publishing a specific sales now but that we are at.

Attempting for future years.

Overall, this will end up stopping down I think under the responsible marketing set of initiatives.

In addition to the guidelines that were published last fall and implementing those this year. We will also unveil further initiatives that help consumers make the right choices when it comes to healthy and tasty diet.

Mark Schneider: With this, I would like to move on to the Good for the Planet section, and there I would like to focus on the continued progress we have seen with greenhouse gas reduction. Last year, I told you that peak carbon is already behind us, and we see that as a significant achievement that only a few companies have graduated to. This year, we can take it one step further, and that is that our greenhouse gas emissions are now below the level of our starting point in 2018. So 2018 was the starting point of our Net Zero Roadmap, the one that we had developed in line with the Science Based Targets initiative. As you know, somewhere in the timeframe, 2019, 2020, we had seen peak carbon.

With this I would like to move on to the good for the planet section.

They are I would like to focus on the continued progress we have seen with greenhouse gas reduction.

Last year I told you about a peak carbon is already behind us and.

We see that as a significant achievement that only a few companies have graduated to.

This year, we can take it one step further and that is that our greenhouse gas emissions are now below the level of our starting point in 2018. So.

So 2018.

What's the starting point on that Sheila roadmap the ones that we had developed in line with our science based targets initiative and as you know somewhere in the timeframe 2019, 2020, we had seen peak carbon where beyond that and now we are below the 2018 levels and we are on track and on our way towards the minus 20%.

Mark Schneider: We're beyond that, and now we are below the 2018 levels, and we are on track and on our way towards the -20% intermediate target that we have called out for the year 2025. We will stand specifically in the year 2023 to benefit from some of the early steps that we have put in place that will give us continued greenhouse gas reductions. As you know, some of these initiatives, for example, when you think about planting trees in our supply chain, in our farming operations, those have lead times. When you plant, you have to wait for 2 years till you can start to count the greenhouse gas reductions of that specific tree. We've done a lot of groundwork over the past few years and stand to benefit from that now in the years 2023, 2024, and 2025.

Intermediate target that we have called out for the year 2025.

We will stand specifically in the year 2023, the benefits from some of the early steps that we have put in place that will give us continuous greenhouse gas reductions Eskimo with some of these initiatives for example, when you think about.

Planting trees in our supply chain in our farming operations.

Those have lead times when you plant you have to wait for two years until you can start to count the clean house gas reductions off that specific tree and so we've done a lot of ground work over the past few years and stand to benefit from that now in the years 'twenty three 'twenty four 'twenty five so we're on track on this very important initiative and I think looking back.

Mark Schneider: We're on track on this very important initiative, and I think looking back at the year 2022, which was not only one of the hottest years in history, but also saw a significant amount of freak weather patterns in all parts of the world. The whole need and the notion of climate protection and addressing that at the greenhouse gas emission situation has become more apparent and more open to many of us. Let's look for a moment at the key focus areas for 2023. Let me start on purpose, not at the top, but with the operational side, because in a time that continues to be very volatile, let me also very clearly tell you that solid, good operational management eats strategy for breakfast every single day.

At the year, 'twenty, two which was not only.

One of the hottest years in history, but also saw a significant amount of a freak weather patterns in all parts of the world.

We'll need and the notion of clients of climate protection.

Trusting that.

Greenhouse gas emission situation has become more apparent and more open to many of us.

Let's look for a moment that the key focus areas for 2023, let me start on purpose not at the top but we'll be operational side because.

In a time that continues to be very volatile. Let me also very clearly tell you that a solid good operational management eats strategy for breakfast every single day and clearly this is what he necessarily as focused on right. Now. So we are working very hard on protecting our volume growth, which is an important driver of long.

Mark Schneider: Clearly, this is what Team Nestlé is focused on right now. We are working very hard on protecting our volume growth, which is an important driver of long-term market shares and the growth of the company. We're working on continued cost efficiencies in order to shield our consumers around the world from the impact of inflation. Of course, after tactically adjusting our marketing expenses here and there in the face of supply chain constraints, it's important over time now to step up these marketing investments again. Coming to the strategic side, we will continue and accelerate, in fact, our portfolio optimization. We will drive and continue to drive fast, relevant, and impactful innovation, which to us is the driver of our mix component of real internal growth.

Term market shares and cope with the company.

We are working on continued cost efficiencies in order to shield, our consumers around the world from the impact of inflation and of course after tactically adjusting our motto.

Marketing expenses here and there in the face of supply chain constraints. It's important over time now to step up these marketing investments again.

Coming to the strategic side, we will continue and accelerate in fact, our portfolio optimization.

Triumph.

And continue to drive fast relevant and impactful innovation, which to US is the trial of our mix component of real internal growth and mix is an area that we have a lot under our control, whereas some of the other factors are more influenced by outside influences and.

Mark Schneider: Mix is an area that we have a lot under our control, whereas some of the other factors are more influenced by outside influences. Of course, we will continue to lead on climate sustainability and nutrition agendas, and that we've already told you on the earlier slides. From a financial point of view, François-Xavier Roger will go into that in more detail. Clearly, restoring our growth margin and improving the cash flow generation after deliberate attempt here to improve the supply chain stability and work with high inventory levels will be key priorities for the year 2023. With this, I would like to spend a moment on a major initiative that we started to unveil as part of our Q3 conference call and that we also elaborated on as part of our Barcelona Investor Seminar at the end of November.

Then of course, we will continue to lead on climate sustainability and nutrition agenda.

Therefore, we're told you on the earlier slides from a financial point of view.

So I wish it will go into that in more detail clearly restoring our gross margin and improving the cash flow generation after a deliberate attempt here.

To improve the supply chain stability and work with high inventory levels will be key priorities for the year 2023.

With this I would like to spend a moment on a major initiative that we started to unveil as part of our Q3 conference call until we also elaborated on as part of our Barcelona Investor Day at the end of November .

Mark Schneider: This is our portfolio optimization, in particular SKU optimization, that we run under Project Tasty here in this company. Originally, this initiative was born about a year ago, under the impact of some of the supply chain constraints that we saw around the world. When you have these constraints, we were forced to think about where we channel and focus our resources to be sure that we serve our consumers and retail partners the best way. That led to this whole notion of SKU rationalization. We labeled this, cutting the tail to push the head. Basically cutting out some of the less wanted, less favorable, and lower rotation products in favor of products that were in strong consumer demand and saw high rotation on shelf. That project has given us tremendous benefits.

And this is our portfolio optimization and in particular SKU optimization.

That we run under project tasting hand this company.

And originally this.

Initiative was born about.

About a year ago under the impact of some of these supply chain constraints that we saw around the world and when you have these constraints we were forced to think about where we channel and focus our resources to be sure that we serve our consumers and retail partners. The best way and that led to this whole notion of SKU rationalization, we laid.

This cutting the tail to push the head so basically cutting out some of the less wanted less payroll wall.

Lower rotation products in favor of products that were in strong consumer demand and so high rotation on shelf and that project has given us tremendous benefits. It helped us certainly navigate the era of supply chain constraints very well, but once we were into it we also saw that over and above.

Mark Schneider: It helped us certainly navigate the era of supply chain constraints very well. Once we were into it, we also saw that over and above what we were doing there tactically to navigate the supply chain situation, there is promise in there to drive longer term growth and profitability. It's a win-win-win situation. It gives consumers the products they want. It gives retailers the products that are high rotation and makes their shelf really efficient. It gives us the products in which we can, with more simplicity and in a leaner way, focus our supply chain and focus our efforts. That gives us better growth and better profitability over time. That project was significantly scaled up even during Q4, and we will continue to scale it up during this year and also go beyond SKUs to brands, segments, and entire geographies.

What we were doing there tactically to navigate the supply chain situation. There is promise India to drive longer term growth and profitability. It's a win win win situation.

It gives consumers the products they want it gives retailers the product at a high rotation. It makes the shelf really efficient and it gives us the products on which we can with more simplicity and in a leaner way focus our supply chain and focus our efforts.

That gives us better quality and better profitability overtime. So that project was significantly scaled up even during the fourth quarter and we will continue to scale. It up doing this here and also go beyond sku's to brands segments and entire geographies, you're seeing some examples here of what we mean.

Mark Schneider: You're seeing some examples here of what we mean, and one of the items refers, in fact, to an announcement we made a few weeks ago, early in 2023, and that's the frozen food business in Canada. Here is a business that was served without its own local manufacturing from the United States. Import requirements and currency made it a very difficult proposition. We announced that we would be, in a responsible way, of course, and in line with our partners, unwinding this business over the next two years. It's a book of business of about CHF 150 million. Because it didn't have its own manufacturing, it was not a business that was separately sellable.

One of the items reversed in fact to an announcement we made a few weeks ago early now in 2023, and that's the frozen food business in Canada. So here is a business that was surf without its own local manufacturing from the United States.

In Puerto Rico, Wireman, and currency made it a very difficult proposition.

And we announced that we would be in a responsible way of course and in line with our partners on.

One day in this business over the next two years, it's a book of business of about 150 million Swiss francs, because it didn't happen on manufacturing it was not a business that was separately sellable, but you see here our willingness to walk away from business because we are at.

Mark Schneider: You see here our willingness to walk away from business because we are eyeing, at the end of the day, longer term benefits on our own growth and our own profitability, and that makes it a very worthwhile business proposition. As we go through the year, you'll see more of these examples. We believe that this exercise, while it was started by supply chain constraints, clearly is one that we hadn't done for a long time, and hence a long tail had been building up, and hence we believe that there's continued good upside coming from it. As I look around, some of our peers are now engaging in similar exercises, so I think we're onto something very, very valuable that is gonna be, as I mentioned, a win-win-win for consumers, for retailers, and for us as well.

At the end of the day longer term benefits on our own growth and our own profitability and that makes it a very worthwhile business proposition. So as we go through the year, you'll see more of these examples we bill.

A leaf that this exercise while it was started by supply chain constraints clearly is one that we havent done for a long time and hence our long tail had been building up and hence we believe that there's continued good upside coming from it as I look around some of our peers are now engaging in similar exercises. So I think we're onto something very very.

Valuable that is going to be as I mentioned, a win win win for consumers for retailers and for us as well.

Mark Schneider: With this, let me turn to the 2023 guidance. I think we're seeing for the year continued strong development of the business. Organic sales growth in the range of 6% to 8%. This continues to be led by pricing in a world that still needs some catching up when it comes to repairing our gross margin. Underlying trading operating profit margin is expected to be between 17% and 17.5%. That also is in line with what we laid out in Barcelona to our investors last year, where we see a gradual repairing of our underlying trading operating profit margin towards the year 2025 and the original band that we set out a few years ago of 17.5% to 18.5%.

Okay.

With this let me turn to the 2023 guidance.

And I.

I think we're seeing for the year continued strong development of the business organic sales growth in the range of 6% to 8%.

This continues to be led by pricing in a world that still need some catching up when it comes to repairing our gross margin.

Underlying trading operating profit margin is expected to be between 17% and 17, 5%. So that also is in line with what we laid out in Barcelona to our investors last year.

We see a gradual repairing of our underlying trading operating profit margin towards the year 2025, and the original band that we set out a few years ago of 17, 5% 18, 5% and then.

Mark Schneider: That combination of sales growth development and underlying trading operating profit margin should add up then to an underlying earnings per share growth situation in constant currency of between 6% and 10%, so also within that corridor that we laid out in Barcelona. Needless to say then that we also fully confirm these 2025 intermediate targets that we had laid out at that time in November. With that, I think we're starting the year with strong prospects for the year 2023, but also confirming fully our outlook for the next two years. This concludes my prepared remarks. Let me turn it over to our CFO, François Roger.

That combination of sales growth development and.

Underlying trading operating profit margin should add up to an underlying earnings per share crop situation in constant currency of between six and 10%. So also within that corridor that we laid out in Barcelona Needless to say then that we also fully confirm these 2025.

Intermediate targets that we had.

Laid out at that time in November and so what that I think we're starting the year with strong prospects for the year 'twenty three but also confirming our outlook for the next two years.

This concludes my prepared remarks, let me turn it over to our CFO for Jose.

François-Xavier Roger: Thank you, Mark, and good morning to all. Let me start with some of the key highlights for 2022. In a year shaped by volatile macroeconomic and geopolitical events, we delivered resilient financial results. As you can see from the chart, organic growth was strong at 8.3%. Our underlying trading operating profit margin, while slightly down versus 2021, continued to be resilient at 17.1% in the context of significant input cost inflation. Underlying earnings per share growth was robust, increasing by 9.4% in constant currency to CHF 4.84. Next, let us look at the breakdown of our sales growth components. Organic growth was 8.3%. Pricing increased to 8.2%, reflecting significant cost inflation.

Thank you Mark and good morning to all let me start with some of the key highlights for 2022.

Sure Bobby volatile macroeconomic and geopolitical events, we delivered resilient financial results.

As you can see from the chart organic growth was strong at eight 3%.

Our underlying trading operating profit margin was slightly downhill series 2021 continued to be resilient at 17, 1% in the context of significant input cost inflation.

Underlying earning per share growth was robust increasing by nine 4% in constant currency to four Swiss francs on 84, sometimes.

Next let us look at the breakdown of offsetting components.

Organic growth was eight 3% pricing increase to eight 2%, reflecting significant cost inflation.

François-Xavier Roger: RIG was positive at 0.1% following a high base of comparison in 2021, supply constraints, and portfolio optimization actions. Net acquisition increased sales by 1.1%, largely related to the acquisition of the core brand of The Bountiful Company, as well as Orgain. Foreign exchange decreased sales by 0.9%, turning negative in H2. Total reported sales reached CHF 94.4 billion, an 8.4% increase versus last year. These slides illustrate the development of our sales by geography and includes both our zones as well as our globally managed businesses. As you can see, our business is geographically diverse. We operate in 186 countries, and we maintain a global footprint. North America is our largest region in terms of sales.

Rig was positive at 0.1% following a high base of comparison in 2021 supply constraints and portfolio optimization actions.

Net acquisition increased sales by one 1% largely related to the acquisition of the core brands of the bounty for the company as well as our game.

Foreign exchange decreased sales by 0.9% turning negative in the second half.

Total reported sales reached $94 4 billion Swiss francs, and eight 4% increase vis vis last year.

This slide illustrate the development of our sales by geography and includes both our zones as well as a globally managed businesses.

As you can see our business geographically diversed, we operate and one on grid on 86 countries and we maintain our global footprint.

North America is our largest region in terms of sales.

François-Xavier Roger: Organic growth was positive in all geographies, with particular strength in the Americas. North America reported close to 10% organic growth, building on strong sales development in 2021, while Latin America saw continued double-digit growth. Growth in Asia, Oceania, and Africa reached a high single digit rate. Europe posted mid-single digit growth in a challenging economic environment. Finally, Greater China recorded resilient mid-single digit growth in the context of the pandemic and in the context of limited inflation. Turning to the distribution of growth between developed and emerging markets, organic growth in developed markets was 7.1%, in line with the level of 2021. Growth in emerging markets reached 10%, driven by Latin America, Africa, and South Asia, with continued momentum for affordable offerings. Turning next to the breakdown of sales by channel, organic growth for retail sales remained robust at 7.2%.

Organic growth was positive in all geographies with particular strength in the Americas.

North America reported close to 10% organic growth building on strong sales development in 2021, while Latin America saw continued double digit growth.

Growth in Israel, Russia, and Africa reached a high single digit rate.

Europe posted mid single digit growth in a challenging economic environment.

Finally, greater China recorded resilient mid single digit growth in the context of the pandemic and in the context of limited inflation.

Turning to the distribution of growth between developed and emerging markets organic.

We're getting growth in developed market was seven 1% in line with the level of 2021.

Growth in emerging markets reached 10% driven by Latin America Africa, and South Asia with continued momentum for a full day boat offerings.

Turning next to the breakdown of sales by channel organic growth for retail sales remained robust at seven 2% within retail E. Commerce sales grew by nine 2% and now accounts for 15, 8% of net lease total sales up 150 basis points versus the prior year.

François-Xavier Roger: Within retail, e-commerce sales grew by 9.2% and now accounts for 15.8% of Nestlé's total sales, up 150 basis points versus the prior year. Growth was broad-based across geographies and categories, with particular strengths for North America and PetCare. Organic growth for out-of-home channels was 23.5%. While sales of our out-of-home business now exceeds 2019 levels, growth decelerated throughout the year and moderated to a mid-single digit rate in Q4. This trend reflects the normalization of consumer demand post-pandemic. Let's now look at product categories. As the chart shows, organic growth was positive across all categories in 2022, demonstrating the relevance of our diversified portfolio in fast changing trading conditions.

No.

Growth was broad based across geographies and categories with particular, Australia installed North America on pet care.

Organic growth for out of home channels was 23, 5% while sales of our out of our business now exceeds 2019 levels growth decelerated throughout the Yale a moderated to a mid single digit rate in the fourth quarter.

This trend reflects the normalization of consumer demand post pandemic.

Let's now look at product categories.

As this chart shows organic growth was positive across all categories in 2022, demonstrating the relevance of our diversified portfolio in fast changing trading conditions.

François-Xavier Roger: As you can see, our largest category is Powdered and Liquid Beverages, which accounts for more than a quarter of our total sales. Coffee, the largest component of this category, posted high single-digit growth, supported by a strong recovery of out-of-home channels. Within coffee, sales of Starbucks products grew by 12.9% to reach CHF 3.6 billion, meaning that we have generated an additional CHF 1.5 billion of incremental sales compared with 2018. PetCare, our second biggest category, was the largest contributor to growth, driven by strong momentum for science-based and premium brands, as well as continued robust e-commerce growth. Nutrition and Health Science posted 7.4% growth. Nestlé Health Science saw mid-single digit growth over a high base, with two consecutive years of strong double-digit growth during the pandemic.

As you can see our largest category is spelled out the liquid beverages, which accounts for more than a quarter of our total sales.

Coffee the law.

Just component of this category posted high single digit growth supported by a strong recovery of out of home channels.

Within coffee sales of Starbucks products grew by 12, 9% to reach $3 6 billion Swiss francs, meaning that we have generated an additional $1 5 billion Swiss francs of incremental sales compared with 2018.

Petcare.

Second biggest category was the largest contributor to growth driven by strong momentum for science based on premium brands as well as continued robust e-commerce growth.

Nutrition and health Science posted seven 4% growth Nestle health science, So mid single digit growth. So very high bays with two consecutive years of strong double digit growth during the pandemic.

François-Xavier Roger: Growth in Health Science was supported by innovation, by geographic expansion, and by market share gains. Our infant nutrition business reported 10.1% organic growth with a strong recovery and market share gains across most geographies, particularly China. Infant formula growth was supported by continued robust demand for Human Milk Oligosaccharide products, which grew at a double-digit rate, with sales reaching CHF 1.3 billion in the fourth year of marketing. Prepared dishes and cooking aids saw 3.1% growth, driven by strong sales development for ambient culinary, particularly Maggi in Zone AOA. Vegetarian and plant-based food products posted mid-single-digit growth led by Garden Gourmet. Milk products and ice cream recorded 5.4% growth. The key growth contributors were coffee creamers, affordable fortified milks, and home baking products.

Growth in health Science, what supported by innovation by geographic expansion and market share gains.

While in some nutrition business reported 10.1% organic growth with a strong recovery and market share gains across most geographies, particularly China.

Infant Formula growth was supported by continued robust demand for human milk oligosaccharide products, which grew at a double digit rate, we said, reaching $1 3 billion Swiss francs in the fourth year of marketing.

Prepared dishes and cooking AIDS saw a three 1% growth driven by strong set of development for ambient culinary, particularly all the Maggie in zone AOA.

Vegetarian and plant based food products posted mid single digit growth led by Garden Gourmet.

Milk products on ice cream recorded five focus on growth.

The key contributor the key growth contributors were coffee creamers affordable fortified milks and home banking products.

François-Xavier Roger: Growth in Confectionery reached 9.4%, reflecting strong demand for KitKat, seasonal products, and key local brands. Sales in Water grew by 11% despite temporary capacity constraints for Perrier in Q4. This capacity reduction follows our recent decision to upgrade our Perrier production facility. Next is underlying trading operating profit, which increased by 6.5% in Swiss francs. As a percentage of sales, it decreased by 30 basis points to 17.1% on a reported basis. Our gross profit margin decreased by 260 basis points to 45.2% as significant input cost inflation more than offset a step-up in pricing and realized savings.

Growth in confectionery reached nine 4%, reflecting strong demand for kitkat seasonal products and key local brands.

Sales in water grew by 11% despite temporary capacity constraints for failure in the fourth quarter.

This capacity reduction follows our recent decision to upgrade off period production facility.

Next is underlying trading operating profit, which increased by six 5% in Swiss francs.

As a percentage of sales decreased by 30 basis points to 17, these underlying trading operating profit, which increased by six 5% in Swiss francs.

As a percentage of sales decreased by 30 basis points to 17, 1% on a reported basis.

Our gross profit margin decreased by 260 basis points to 45, 2% as significant input cost inflation more than offset the step up in pricing unrealized savings.

François-Xavier Roger: In H2, we saw a further margin growth margin decrease as inflation was higher than we anticipated in the summer, primarily due to energy as well as labor cost. Distribution cost as a percentage of sales decreased by 20 basis points, mainly as a result of the disposal of the Nestlé Waters brands in North America. Marketing, administration, and R&D expenses as a percentage of sales decreased by 210 basis points, supported by sales growth leverage and disciplined cost control. Overall, sustainability investments, which are mainly recorded in cost of goods sold, were around CHF 700 million.

In the second half we saw it fills up margin gross margin decrease as inflation was higher than we anticipated in December primarily due to an LG as well as the labor cost.

Distribution costs as a percentage of sales decreased by 20 basis points, mainly as a result of the disposal all of the necessary what else Browns in North America.

Marketing administration on R&D expenses as a percentage of sales decreased by 210 basis points supported by selling gross leverage and disciplined cost control.

Overall sustainability investments, which are mainly recorded in cost of goods sold were around 700 million Swiss francs.

François-Xavier Roger: Our cash generated from operations before changes in working capital remained solid and dependable at around 20% over the last 6 years. Free cash flow decreased from CHF 8.7 billion to CHF 6.6 billion, reflecting our decision to temporarily increase inventory levels in the context of supply constraints, the energy crisis in Europe, as well as elevated capital expenditure. As working capital and CapEx normalize, we should see an increase in free cash flow trending back towards 12% of sales by 2025, in line with our midterm financial targets. Finally, at this year's annual general meeting in April, the board of directors will propose a dividend of CHF 2.95 per share, an increase of 15 centimes.

Our cash generated from operations before changes in working capital remained solid and dependable at around 20%, although the last six years.

Free cash flow decreased from $8 7 billion Swiss francs to $6 6 billion Swiss francs, reflecting our decision to temporarily increased inventory levels in the context of supply constraints the energy crisis in Europe , as well as elevated capital expenditure.

As working capital and Capex normalizes, we should see an increase in free cash flow trending back towards 12% of sales by 2025 in line with our mid term financial targets.

Finally at this year's annual General meeting in April the board of Directors will propose a dividend of two Swiss francs on 90 517 per share an increase of 15 sell team.

François-Xavier Roger: If approved, this will be the company's 28th consecutive annual dividend increase, in line with our practice to increase our dividend in Swiss francs. The company has maintained or increased its dividend in Swiss francs over the last 63 years. This year's increase reinforces our commitment to return cash to shareholders, many of whom rely on the steady, reliable income earned through their investments in Nestlé. This concludes my presentation, and now I hand over to Christophe, who will moderate our Q&A session.

If approved this will be the company 28th consecutive annual dividend increase in line with our practice is to increase our dividend in Swiss francs.

The company has maintained or increasing the dividend in Swiss francs of other last 63 years.

This year's increase reinforce our commitment to return cash to shareholders, many of whom rely on the steady reliable income.

Through our investments in this space.

This concludes my presentation and I'll hand over.

Christoph will moderate a Q&A session.

Christophe: Thank you, François. Now let's move into the Q&A. If you wish to ask a question, please click on the yellow hand icon in the bottom toolbar of your screen. As soon as I call on you will be asked to unmute, so don't forget to unmute yourself. When your question is answered, then you will be placed on mute again. There's a first question I see from Dasha Afanasieva, Bloomberg. Dasha, please go ahead.

[Company Representative] (Nestlé): Thank you, François. Now let's move into the Q&A. If you wish to ask a question, please click on the yellow hand icon in the bottom toolbar of your screen. As soon as I call on you will be asked to unmute, so don't forget to unmute yourself. When your question is answered, then you will be placed on mute again. There's a first question I see from Dasha Afanasieva, Bloomberg. Dasha, please go ahead.

Thank you Francois.

Now, let's move into the Q&A, if you wish to ask a question. Please click on the yellow hand icon in the in the bottom toolbar of your screen.

And as soon as I call on you.

We'll be asked on mute so don't forget too on mute yourself.

And when Youre question is answered then it will be placed on mute again.

It was the first question I see from Dasher, often as you ever Bloomberg.

Please go ahead.

Dasha Afanasieva: Hi, thanks very much for the presentation. I've got two questions. One is about the decline in the marketing and administrative costs is 2.6%. I was just wondering where that came from and how you'd answer, you know, any concerns about there not being spent enough for marketing, because obviously now if the branded products are losing market share to supermarket brands, now's probably the time when marketing heavily is important. Then just my second question is a bit more involved. Some of your competitors who are still operating in Russia have said things like, if you know, basically if you do anything, you're just handing over your factories to the Russian state.

Hi, thanks, very much sort of inflation.

Two questions one is about.

The decline in <unk>.

The merging and administrative costs as cheaply, 6% I was just wondering where that came from and.

Understood.

Any concerns about not being spent and that's the most changes obviously now is to blend it protects the lesion market Shang Qi <unk> now still be determined Merck.

Marketing heavily is important and then just my second question is a bit more in both two of your competitors.

They are still operating in Russia have said things like E S.

<unk> anything you will just trending as youll factories to the Ocean state if he.

Dasha Afanasieva: If you know, if you stop producing, if you try to sell anything, if you just are to, you know, make changes. Obviously Nestlé has stopped producing certain products in Russia. I wanted to ask you for a bit more color on what the cost of that has been, both financially and in terms of sort of politically domestic in Russia. Has there been any blowback from the authorities from that? Have you had any problems because you don't make Confectionery in Russia anymore? That's assuming I understood those changes correctly. Thank you.

Stop producing if you tried to sell anything if you just look at it.

<unk> made changes and <unk> has stopped producing products in Russia.

Can you shed a little color on what the question that has been staged.

Financially and in terms of.

Key domestic.

Russia has there been any play back from the authorities from that have you had any problems because he didn't make confectionery.

In Russia anymore, and that's a human I understood those changes correctly. Thank you.

François-Xavier Roger: Good morning, Dasha. François speaking. Let me take the first question, and Mark will take the second question. Indeed, we have reduced our marketing spend last year, but this is not a major point of concern. First of all, we should not look at marketing on its own. That's what I explained in our Capital Markets Day in November in Barcelona. We always look at the combination of trade spend and marketing. At the end of the day, we can arbitrate in between these two lines. It happened that the total of trade spend on marketing did increase in absolute value last year. It doesn't mean that we disengage from marketing activities, not at all.

Good morning, industrial fulfill speaking let me take the first question and Mark will take the second question.

We have reduced our marketing spend last year, but this is not a major point of concern first of all we should not look at marketing on its own and that's what they explained you know the capital market day in November in Barcelona, We always look at the combination of trade spend and marketing at the end of the day we.

Cannot be try it in between these two lines. It happened at the total spend on marketing did increase in absolute value last year. So it doesn't mean that we didn't get from marketing activities not at all but we decided to put a little bit more emphasis on trade spend because it's important in the context of today when affordability matters to consumers to make sure.

François-Xavier Roger: We decided to put a little bit more emphasis on trade spend because it's important in the context of today when affordability matters to consumer, to make sure that we are really accessible from a financial point of view for many consumers. We reduced a bit our marketing spend on the other hand. This came primarily because we're facing some supply constraints during the year, more specifically for categories like PetCare and frozen food, for example, in the US. This is a reason why we adjusted our marketing spend. We already started to increase our trade spend in H2 of the year versus H1, and we are really committed to increase significantly our marketing spend as well in 2023. Just in terms of market share, we did not really lose market share globally.

That we are really accessible from a financial point of view fall menu consumables, but we reduced a bit our marketing spend on the other hand disc and primarily but because we were facing some supply constraints during the Yale.

More specifically for the categories like Petcare on frozen food for example in the U S. So this is the reason why we adjusted our marketing spend we already started to increase all trade spend in the second half of the duo vis vis the first half and we are really committed to increase significantly our marketing spend as well in 2020, just in terms of market share we did.

François-Xavier Roger: I think it has been relatively stable with more than 50% of our business sales, as we call it's a mix of a category and a geography, gaining or holding market share last year. If we look more specifically at our billionaire brands, which account for 70% of our sales, 60%, almost 60% of the cases we did win market share or stabilize our market share.

Not really lose market share globally, I think it has been relatively stable with more than 50% of our business sales as we call. It. It's a mix of a category on the geography, gaining or holding market share last year and if we look more specifically at our video and L brands, which account for 70% of our sales we have 60% almost 60%.

Other cases, we did win the wound market shale all stabilize our market share.

Mark Schneider: Dasha, good morning, this is Mark. Referring to your question on Russia, I think we have done exactly what we announced late March last year. We have significantly reduced our number of SKUs in this market by about two-thirds, and we're focusing on basic and essential food and beverage products. Demand, of course, for food and beverage product is still very strong, and it's not surprising that the shelf stand with these basic and essential products are full and that the volumes also have been increasing on some of these essential and basic brands as some of the others were discontinued.

Industrial good morning. This is mark so referring to your question on Russia, I think we have done exactly what we announced at late March last year, we have significantly reduced our number of skus in this market by about two thirds and we're focusing on basic.

Essential food and beverage products.

Demand of course for food and beverage part is still very strong and so it's not surprising that the shelf them with these basic and essential products are full and that the volumes also have been increasing on some of these essential and basic brands at some of the others were discontinued.

Mark Schneider: While it's hard for me to comment specifically on where competitors are going, I think what we announced there last March is very much in line with our values and the importance of food, which like medicine, as you know, is usually not covered by sanctions. I think the approach is very much in line.

So while it's hard for me to comment specifically on what competitors are going I think when we announced there.

Last March is very much in line with our values and the importance of food, which like medicine. As you know is usually not covered by sanctions and so I think the approach is very much in line.

Christophe: The next question is from Stephen Wynne-Jones, European Supermarket Magazine. Go ahead, Stephen.

[Company Representative] (Nestlé): The next question is from Stephen Wynne-Jones, European Supermarket Magazine. Go ahead, Stephen.

The next question is from Steven Wayne Jones European Supermarket magazine go ahead Stephen.

Stephen Wynne-Jones: Thanks for the presentation. I've a question about the frozen food business. Obviously, we wound it down in Canada. Why was that decision taken? There's some speculation this might pave the way for exiting frozen food in general. Maybe you could provide some color on some of the challenges Nestlé sees in frozen food.

Thanks.

For the presentation a question about the frozen foods business, obviously, we wound down in Canada.

Why was that decision taken and this is speculation just like paved the way for exiting frozen food.

In general maybe you could provide some color on some of the challenges necessarily sees in frozen food.

Mark Schneider: Yeah, Stephen, a fair question. As you saw from my slide on SKU rationalization, and specifically calling out this 2023 item of, the Canada exit, this is clearly a tactical move under this program. This is not a wider reflection on what we think about the frozen sector. As you know, from many of my comments in the past, we see value in the frozen sector. I think it's one of the best ways of preserving food and in a good way, bringing people a high value, a good nutritious offering if you use good ingredients, which is something we're committed to doing. We believe in that sector, but having said that, like any other sector, like any other category, you have to be very targeted on where you have the best chance to win.

Yeah, Stephen a fair question.

As you saw from my slide on SKU rationalization, and specifically calling out this 2023 item of the Canada exit. This is clearly a tactical move under this program. So this is not a wide a refresher on what we think about the frozen sector as you know for me.

Any of my comments in the past, we see value in the frozen section I think is one of the best ways of preserving food and in a good way praying people are high value. Good nutrition offering if you use good ingredients, which is something we're committed to doing so we believe in that sector, but having said that like any other sector like any other category.

You have to be very targeted in where you have the best chance to win and as I explained with that particular setup, which means no local manufacturing capacity in Canada and then the currency.

Mark Schneider: As I explained with that particular setup, which means no local manufacturing capacity in Canada, and then the currency and import situation, we felt that it was better to withdraw from it. As mentioned, we do it in a gradual manner so that our retail partners and consumers can adjust. We will do that going forward to all categories, and that is, we will have a very targeted review, SKU by SKU, brand by brand, where we have a good chance to win and what the size of the price is at the end of the day. This is not a reflection on the frozen category overall. Next is Richa Naidu, Reuters.

The import situation, we felt that it was better to withdraw from it and as mentioned if we do it in a crash manner. So that's our retail partners and consumers can adjust.

We will do that going forward to all categories and that is we will have a very targeted really U S. <unk> brand by brand, where we have a good chance to win and what the size of the prices have been up a day, but this is not a reflection on the frozen category overall.

[Company Representative] (Nestlé): Next is Richa Naidu, Reuters.

Next is reached naidoo Reuters.

Richa Naidu: Hi, good morning, and thanks for taking my question.

Hi, good morning, Thanks for taking good morning.

Mark Schneider: Good morning.

Richa Naidu: Thanks for the presentation. So real quick, I've got three questions. First off, how much of this year's 6 to 8 organic growth do you expect to come from pricing, and how much do you expect to come from volume? My second question is, when it comes to pricing negotiations, what would you say the main differences are between the way European and US retailers have been negotiating? My third question is also on Russia, because another big consumer company said last week that it might start considering a write-down on Russia, and I wonder if you have started thinking about the same. Thank you.

A presentation.

So real quick I've got three questions.

First off how much of this year's six to eight okay. Thank you.

Do you expect to come from pricing and how much do you expect to come from volume.

My second question is when it comes to pricing negotiations what would you say the main differences between the week.

And U S retailers have been negotiating and my third question is also on Russia.

Because another big consumer company said last week that it might start considering a write down on Russia and I Wonder if you have started thinking about the same.

Mark Schneider: Richa, thanks for your questions. Maybe I'll take the first two and then hand you to François. Clearly for this year, while we believe that most of this growth is gonna be pricing-led, we are not providing a specific breakdown between the pricing and the real internal growth. As you know, traditionally, we guide on organic growth. As much as we're trying to be helpful, I think at a turbulent time like this, to provide a specific breakdown then of organic growth into pricing and real internal growth ahead of time is probably not credible. The second part, I also regret not to be able to be very helpful here.

Michelle Thanks for your question, So maybe I'll take the first two and then hand it to Frank Swan. So clearly for this year.

While we believe that most of this growth is going to be pricing led we are not providing a specific breakdown between the pricing and the real internal growth as you know traditionally we guide on organic growth and as much as we're trying to be helpful. I think at a turbulent time like this to provide a specific breakdown then.

Organic growth into pricing and real internal growth ahead of time is probably not incredible.

And the second part also required to be able to not to be able to be very helpful. Here. As you know these deals we have with our retail partners and that to me is a business to business dealing between the companies that are negotiating and it would not be constructive to speculate about that in the media.

Mark Schneider: As you know, these dealings we have with our retail partners, that to me is a business-to-business dealing between the companies that are negotiating, and it would not be constructive to speculate about that in the media.

François-Xavier Roger: Sorry, Richa, I missed the third question. Could you say it again?

So Richard I missed the third question could you say it again.

Mark Schneider: Write-downs in Russia.

Right.

Write downs in Russia.

François-Xavier Roger: Sorry, it was about write-down in Russia. Yes. We did some impairment in Russia, which is essentially linked to-

Oh, sorry.

Sorry towards about the write downs in Russia, Yes. So we did some impairments in Russia, which is essentially linked to.

Richa Naidu: My third question was that another consumer company last week said that they might consider writing down their business in Russia, and I was wondering if that was something you had considered as well.

So sorry.

With me to begin.

Yes. My first question was Ah another consumer company lost.

Weak set that they might consider writing down their business in Russia, and I was wondering if that was something you had considered yourself.

François-Xavier Roger: Not to the full extent, but we did some adjustments and some impairments last year for some asset that we are not using, and given the fact that we reduced our number of SKUs and the number of product that we use. This was a relatively limited amount, but we have no plans to write off our entire operations in Russia for the time being.

To the full extent, but we did some adjustments on some impairments last year I said that we are not using <unk> on the given the fact that we reduced or.

The number of Skus under the more product that we use.

It was a relatively limited amount, but we have no plans to write off or until you have operations in Russia is filled at Dundee.

Christophe: The next question is from Ivo Ruch, Finanz und Wirtschaft. Ivo Ruch.

[Company Representative] (Nestlé): The next question is from Ivo Ruch, Finanz und Wirtschaft. Ivo Ruch.

And the next question is from Ivano financings that draft.

Ivo Ruch: Good morning. Thank you very much. My questions, the first two regarding the volume decline in Q3 and Q4. Do you think you did too much pricing there, or was this more the result of an overall deterioration in consumer spending? Can you give some concrete examples where you saw downtrading? The other topic is, can you mention the turnover from plant-based products in 2022?

Good morning, Thank you very much.

Yes.

My questions. The first regarding the volume decline in Q3 into Q4 and do you think you you did too much pricing there or was it is more the result of an overall deterioration in consumer spending and can you give some concrete examples of areas.

So a down trading and the other topic is can you mention the turn over from plant based products.

2022.

Mark Schneider: Ivo, yeah, let me try and start and maybe François can chime in here on some of the examples of trading down. So overall, while it is tempting of course to create this push-pull relationship, like we're doing pricing and then the volumes go back. As we explained, what you saw in H2 is a number of other factors at work. Some of it was the deliberate plan as part of our Project Tasty to discontinue a number of SKUs, and that plan was significantly ramped up during Q4. As François explained, we also saw the normalization in our out-of-home business, which had seen significant growth the first three quarters of 2022 as people in this post-COVID world in many markets flocked back to out-of-home environments.

Yeah, Let me try and start in maybe CROSSMARK can chime in here on some of the examples of trading down.

So overall, while it is tempting of course to create this push pull relationship like we're doing pricing and then the volumes go back as we explained what you saw in the second half as a number of other factors at work and <unk>.

Some of it was the labor plan as part of our prototypes to discontinue number of Skus and that plan was significantly ramped up during the fourth quarter as Francois explained we also saw the normalization.

In our out of home business, which has seen significant growth. The first three quarters of 2022 as people in this post COVID-19 world in many markets flocked back to out of home environments and then.

Mark Schneider: Q4 over the Q4 of 2021 didn't offer the same growth prospects. As I had explained in my prepared remarks, we'd also been seeing the downturn in Q4 out-of-home consumption in China, where of course, starting from November, you'd seen that significant COVID outbreak. The third item that we'd flagged was the curtailed water supply in Perrier as part of the upgrading of the factory there. I think it was more like those items than a general reaction, push-pull reaction between pricing and the volumes. Obviously, everyone's volumes in this environment have suffered somewhat, but I don't see it as such as a relation to pricing.

Quarter four over the quarter 421 didn't offer the same growth prospects and as I had explained in my prepared remarks, we had also been seen but downturn in Q4 out of home consumption in China, where of course, starting from November you had seen that significant COVID-19 outbreak.

And the third item that we had flat was the curtailed water supply and Perry as part of the upgrading of the factory. There. So I think it was more like that was the items than a general reaction pushed pour reaction between pricing and the volumes obviously everyone's volumes in this environment have suffered.

Somewhat but I don't see it as such as a relation to pricing and when you compare our pricing to our industry peers I think it doesn't stand out as something that has been going above and beyond and as you see from the gross margin. We still have some repairing to do because the pricing done to date is not fully repairing the cros.

Mark Schneider: When you compare our pricing to our industry peers, I think it doesn't stand out as something that has been going above and beyond. As you see from the gross margin, we still have some repairing to do because the pricing done to date is not fully repairing the gross margin. For trading down, what comes to mind is a few dairy products, particularly in our zone, Asia, Oceania, and Africa. I don't know, François, if you can think of some others.

Margin.

And poor.

Poor trading down what comes to mind as a few dairy products particular in hours on Asia, Oceania and Africa, and I don't know if that's why if you can think of some of us.

François-Xavier Roger: No, indeed, to complement what Mark said, if we look at it even historically, we had volume growth which was around 1%. Exceptionally last year, it was, in 2021, it was 3.7%. It was almost three times higher, the volume growth, than it used to be in the past. As a consequence of that, with a high base of comparison, we had a negative volume development in 2022. No specific concern because the high base of comparison combined with some supply chain issues is, in our opinion, the main reason why our volume went into negative territories last year and even more so in Q4 last year.

Indeed, the two.

Complement what Mark said, if you look at it even historically, we had the volume growth, which was around 1% exceptionally last year. It was in 2021, two or three 7%. So it was almost three times higher volume growth than it used to be in the past and as a consequence of that with a high base of comparison, we had a negative volume development in 'twenty.

'twenty two so no specific concern because the high base of comparison combined with some supply chain issues in our opinion. The main reason why our volume went into negative territory last year and even more so in Q4 of last year, So but no no real if he turns of down trading at this stage, even if there was a little bit of it for sure but.

François-Xavier Roger: No real evidence of downtrading at this stage, even if there was a little bit of it for sure, but in the context of pricing, because we did material pricing last year at 8.2%, but no really clear evidence. In addition to that, as Mark said, we did some portfolio pruning. We gave some examples like, you know, some dairy products in the Middle East, some dairy products in Brazil as well. Or, for example, we pruned as well our offering in direct-to-consumer operations in Japan, for example. Then comes now this Canadian frozen food business as well. We are actively working in order to do the same across the entire organization, but no very clear evidence of downtrading. By the way, I can complement it as well.

In the context of pricing because we did the material pricing last year was $8 two person, but no real clear have you done in addition to that as Mark said, we did some portfolio pruning. We give some example ones like you know some dairy products in the middle East some dairy products in Brazil as well all of them for example, we pruned as well Oh.

In our direct to consumer operations in Japan for example, and then it comes now Kennedy in the frozen food business as well and we are actively working in order to do the same across the entire organization, but no very clear have you done some down trading.

By the way I can complement it as well.

François-Xavier Roger: If you look at downtrading, we can see it as well to a certain extent with our mix. If you look at our mix component, it has remained very stable over the last 5 years around 1.5 to 2%, which is the evidence that we maintain a good capacity to innovate and to premiumize on our market, even during the difficult time that we experienced during COVID and with the inflationary times we go through today.

If you look at don't trading we can see it as well to a certain extent with our mix and if you look at our mix component. It remains very very stable over the last five years around 215, 2%, which is you have you done that we maintain a good capacity to innovate and to premium is the la market, even during the difficult time that week.

Parents during Covid and with the inflationary times, we go through today.

Mark Schneider: Regarding your second question on plant-based, for the plant-based food range, that is about CHF 800 million. As mentioned, we're seeing continued strong consumer interest, in particular in Europe and in particular for our Garden Gourmet product range.

Regarding your second question on plant based so for the plant based food range batteries about 800 million Swiss francs and as mentioned, we're seeing continued strong consumer interest in particular in Europe and in particular for our garden Gourmet product range.

Christophe: Pearly Neo, FoodNavigator-Asia is next. Pearly, please go ahead.

[Company Representative] (Nestlé): Pearly Neo, FoodNavigator-Asia is next. Pearly, please go ahead.

Curly Neal Foods Navigator Asia next purely please go ahead.

Pearly Neo: Hi. Thanks, Christophe. Also thanks for the presentation, everyone. I do have three questions actually. The first one focuses on the Good for You initiative. So first of all, there was a Health Star Rating model mentioned, I believe. I'm wondering whether this is in relation to the one in Australia, New Zealand or is it your own sort of rating? Secondly, I'd like to ask whether of the 14 markets mentioned that are, you know, set for piloting this, are there any APAC markets that will be involved? I guess the last one is I wanna ask, just confirm the emerging markets that were mentioned, where quite significant growth came from this year. Thank you.

Hi, Thanks can stop it.

Hello, everyone.

You have.

Questions actually the first one focuses on each.

Yes, yes, yes.

First of all there was the <unk>.

Shanghai Geneva Wednesday.

<unk> is the one in Australia.

Thank you.

Okay.

You mentioned.

Or how do you think.

I mean.

It would be helpful.

And I guess the last one.

Just to confirm the emerging market.

Uh huh.

Okay.

Mark Schneider: Pearly, thank you. I'll try to be helpful, but I also don't want to front run some of the disclosures that are coming then with the full report in March. The Health Star Rating we have picked as a globally recognized rating that is also, for example, used by the Access to Nutrition Index. We felt that here's a rating system that is globally well respected and understood. As we looked for the best one to pick for the global one, this clearly offered itself. Yes, there will be APAC markets included as well. Again, more details coming on that. On the third question, François?

Thank you.

Currently thank you and then I'll try to be helpful. But I also don't want to front run some of the disclosures that are coming down with a full report in March So the health Star rating, we have pegged as a globally recognized rating that is also for example used by the access to nutrition index and so we felt that.

Here is a rating system that is globally, well respected and understood and as we looked for the best one to pick for the global one there's clearly offer itself and then yes, there will be APAC markets included as well again more details coming on that and then on the third question.

François-Xavier Roger: Third question, Pearly. In emerging markets we did well. We grew by 10% last year in 2022 with a very resilient business. We were very happy to see that actually innovation responded very well to consumers. Even our RIG was very resilient, maybe with a slightly different composition between volume and mix, maybe a little bit less volume as in the past, as commented earlier, and a little bit more mix as well. We were very pleased to see that even in a context in emerging markets where affordability matters, in spite of the fact that we had to pass on price increases, our business has been very resilient across emerging markets.

So question poorly so in the emerging markets would we did well we grew by 10% last year and 22 with a very resilient business.

And we were very happy to see that actually innovation responded very well to consumers.

Even though rig what's very resilient, maybe with a slightly different composition composition between volume and mix, maybe a little bit less volume as in the past as I commented earlier and a little bit more mixed as well, but we were very pleased to see that even in a context in emerging markets, where affordability metals in spite of the fact that.

We had to pass on price increases all business has been very resilient across emerging markets.

Christophe: The next question is from Hanna Ziady, CNN.

[Company Representative] (Nestlé): The next question is from Hanna Ziady, CNN.

The next question is from Hana theory CNN.

Hanna Ziady: Hi there. Thanks so much for the presentation and taking my questions. Just to come back to pricing, and Mark, I think you have really said this perhaps not in so many words, but could you just be a bit more explicit about whether Nestlé does expect to increase prices further this year, more so than what it has already done? Well, firstly, maybe, you know, has it already put price increases through early on in the year? Does it expect to increase prices further? And can you maybe speak a little bit to which categories in particular will be affected? And then a second question on your main drivers of cost inflation and how those are changing or not.

Hi, there. Thanks, so much for the presentation and taking my question just come back to pricing and Mark I think you have really said this perhaps not in so many words, but could you just be a bit more explicit about.

Within Italy does expect to increase prices further this year more so than what it has already done.

And <unk>, maybe you know has it already put price increases Chi.

Early on in the year does it expect to increase prices further and can you maybe speak a little bit too which categories in particular.

Will it be affected.

And then second question on <unk>.

Your main drivers of cost inflation, and how those are changing or not.

Hanna Ziady: A third question just on your negotiations with retail partners. Are those taking longer than, you know, typically, than they typically would, because there is perhaps a bit more pushback? Thank you.

And then the third question just on your negotiations with retail partners.

Although it's taking longer than you know typically than they typically would because it is perhaps a bit more pushback. Thank you.

Mark Schneider: Hanna, thank you. Here again, there's a limit as to how specific I can be because we always need to be careful about the competitive signaling involved, whether it's by category or geography, and ask for your understanding on that. Obviously, there is a number of price increases that we have announced, even sometimes late last year, that will go into effect during the first part of this year. Obviously we will have to stay flexible throughout the year as we see a number of our input cost factors develop and then see how to reflect that.

And I think you enter here again, there's a limit as to how specific I can be because we always need to be careful about the competitive signaling involved whether it's by category or geography and ask for your understanding on that.

There is a number of price increases.

We have announced even sometimes late last year that will go into effect. During the first part of this year and so they will provide for some additional pricing and then obviously, we will have to stay flexible throughout the year as we see a number of our input cost factors develop and then see how to reflect that.

Mark Schneider: When it comes to certain input cost factors and how they develop, it's important that you separate between the spot prices that you're seeing, which of course move up and down in weekly fashion or monthly fashion, and then our situation, which is much more of a year-over-year situation. Because you know, in some cases you have forward contracting that then creates cost pressures going forward. In other cases, you still have catching up to do because on a full year-over-year basis, even though the price may have eased a little bit over the last few weeks or months, you're still north of where we were a year ago, and the pricing so far has not fully reflected that.

When it comes to <unk>.

Certain input cost factors in helping develop its important that you separate between the spot prices that youre seeing which of course move up and down in weekly fashion monthly fashion and then our situation, which is much more of a year over year situation. Because you know in some cases you have forward contracting that then creates.

Crush us going forward in other cases, you still have catching up to do because on a full year over year basis, even though the price may have eased a little bit over the last few weeks amongst.

You're still north of where we were a year ago when the pricing so far has not fully reflected that.

Mark Schneider: This is where spot price development, whether it's on a number of commodities or energy costs, is not always an indicator of what our pricing then is gonna be, the week after. I think that situation applies to most manufacturers. When it comes to the retailers, as mentioned before, this is a relationship and a conversation that I do not wanna talk about in public. Suffice it to say, I mean, this is a time of inflation that has been unprecedented in most of our professional career here, when it comes to advanced markets.

This is where spot price development, whether it's on a number of commodities or energy costs is not always an indicator of what our pricing is going to be the week after and I think that situation applies to most manufacturers.

When it comes to the retailers as mentioned before this is a relationship and a conversation that I do not want to talk about in public but suffice it to say I mean this is a time of inflation that has been unprecedented and most of our professional.

Professional career here when it comes to advanced markets.

Mark Schneider: This is new, so a lot of talking to old hands, you know, experiences from the 1970s and early 1980s, but this is new for many of us, and everyone has the same goal, and that is to shield the consumer from excessive inflation. Obviously in that context, it's clear that intense negotiations are taking place.

This is new so a lot of talking to old hands experiences from the 19 seventies and early eighties, but this is new for many of US and everyone has the same goal and that is to shield the consumer from excessive inflation and obviously in that context, it's clear that our intense negotiations are taking place.

Christophe: The next question is from Peter Stiff, Wall Street Journal. Go ahead, Peter.

[Company Representative] (Nestlé): The next question is from Peter Stiff, Wall Street Journal. Go ahead, Peter.

The next question is from Peter This Wall Street Journal go ahead Peter.

Peter Stiff: Hi. Good morning. Thanks all for your time. Two questions, if I may. Sorry. The first one is on pricing. Just to be crystal clear, you seem to be saying that there's been no impact on volumes from your pricing measures at all in the Q4 in particular. Just seems quite surprising, given this like the eighth consecutive quarter of price increases, and obviously it would stand to reason that some people might cut back if things are more expensive. Then secondly, my second question is about cost inflation. Could you give a bit more color around what you're seeing go up, what specific inputs are rising, and how do you see that evolving into the new year? Thanks very much.

Hi, good morning, John .

Two questions if I may.

Sorry, the first one is on pricing.

Just to be Crystal clear you've.

You seem to be saying that there has been no impact on volumes from Neil pricing, which is a tool in the fourth quarter in particular.

It seems quite surprising.

Given that the eighth consecutive quarter of price increases and obviously it would stand to reason that some people might cut back is more expensive and then secondly, my question second question is about cost inflation could you give a bit more color around what youre seeing.

What specific inputs.

Rising and how do you see that evolving into the new year. Thank you very much.

Mark Schneider: Peter, just to put this in context, I think what François didn't suggest to say is that we didn't see any volume impact at all. I mean, as I explained in my prepared remarks, while 2021 was mostly volume and mix driven in its growth, you're seeing in 2022 a growth that is much more pricing driven. Everyone, I think, in the face of economic uncertainty and high inflation, everyone in the industry has seen some volume reaction. The response was specifically to the question that we had received before, and that is when you look at the H2, and in particular Q4, you know, was that pricing driven mainly? Our point was, no, there were a number of specific circumstances and initiatives that led to this volume reaction more than the pricing situation.

And Peter just to put this in context, I think what Francois didn't suggest to say is that we didn't see any volume impact at all that.

As I explained in my prepared remarks, while 2021 was mostly volume in mixed revenue and its growth.

Are you seeing in 'twenty to accruals that is much more pricing driven so everyone I think in the face of economic uncertainty and high inflation everyone. In the industry has seen some positive reaction. The response was specific to the question that we had received before and that is when you look at the second half and in particular Q4.

Whats that pricing driven mainly and our point was no there were a number of specific silke.

Circumstances and initiatives.

That led to this volume reaction more than the pricing situations. So that was the point we were trying to make and then going forward again, it's important that we stay away in this turbulent world from speculating about which commodity or where energy cost exactly are going to go I think this is a little few row. This is where we all have to stay very far.

Mark Schneider: That was the point we were trying to make. Then going forward, again, it's important that we stay away in this turbulent world from speculating about which commodity or where energy costs exactly are gonna go. I think this is a little futile. This is where we all have to stay very flexible. One thing, of course, we are watching, like everyone with interest in H1 of this year, as many country markets negotiate labor contracts and wage contracts for the year 2023. Everyone is watching to what extent now an inflation that was by and large commodity and energy driven is now translating into one that is wage driven. Again, the verdict is out and like everyone else, we're watching with interest.

Flexible one thing of course, we are watching like everyone with interest in the first half of this year as many country markets negotiate labor contracts and waste contracts for the year 2023, everyone is watching to what extent now an inflation that was by and large commodity and energy driven.

This now translating into one that is a wage driven against the verdict is out and like everyone else, we're watching with interest.

Christophe: We have five minutes left, maybe for one or two questions. The next question is from Johannes Ritter, Frankfurter Allgemeine. Please go ahead.

[Company Representative] (Nestlé): We have five minutes left, maybe for one or two questions. The next question is from Johannes Ritter, Frankfurter Allgemeine. Please go ahead.

We have five minutes left maybe for one or two questions. The next question is from a harness Victor from Florida, Oregon liner.

Johannes Ritter: Good morning. Thank you. Last year, Nestlé had to write off CHF 1.6 billion on Aimmune Therapeutics. What lessons do you draw from this for your general acquisition strategy? Will you be more cautious in the future when it comes to buying companies? And secondly, a brief follow-up on Russia. A recent report in Neue Zürcher Zeitung said that you are still very active in Russia, and that there are still a lot of products in Russian supermarkets that are not only essential nutrition. What is your comment on this?

Please go ahead.

Good morning, Thank you.

Last year, Mr lay ahead too right.

One 6 billion on you will see in their projects.

Do we draw from this for you.

The acquisition strategy would you be more cautious in the future when it comes to buying companies and secondly, a brief.

Follow up on Russia.

A recent report and more agile.

You are still very active in <unk>.

Russia and the tariffs too.

Products and Russian supermarkets that are not only essential nutrition what is your comment comment August .

Mark Schneider: Johannes, thank you. On the acquisitions, it's very clear we regret that our Aimmune acquisition did not meet its objectives. We've been very open, transparent about this as part of our Barcelona Investor Day. I think when it comes to Nestlé Health Science and its future direction of growth, we didn't only offer our regrets. I think we also offered where the focus of that future growth strategy is gonna be, and that is in medical nutrition and consumer care. I feel, you know, on this particular business segment, we've attached a good, credible, and meaningful consequence to the situation. Going forward, it's also important to point out acquisitions are an important part of our growth strategy, just like the organic growth component.

Thank you and so on the acquisitions.

Very clear, we regret that our eight England acquisition did not meet its objectives. We've been very open transparent about this as part of our Barcelona at Investor Day, and I think when it comes to Nestle Health science and its future direction of growth we didn't only offer our requests I think we also offered.

Where the focus of their future growth strategy is going to be and that is in medical nutrition and consumer care and Tim.

IPL.

On this particular business segment, we've attached good incredible and meaningful.

Consequent.

To this situation.

Going forward. It's also important to point out acquisitions are an important part of our growth strategy just like the organic growth component. It is one of the two together that things really become interesting and that is something that we are committed to.

Mark Schneider: It is when the two together that things really become interesting, and that is something that we are committed to. When you look at the acquisition track record, over the past several years, here again, I can only point you to some of the slides that we published as part of the Barcelona Investor Seminar. It has been, even in spite of our situation, a very successful one, where net-net a lot of value was created for our shareholders. While of course we do a deep dive into every specific situation that doesn't meet objectives and then try to do better going forward, it should not take away from the underlying success that we've had with our acquisition activity.

And when you look at the acquisition track record.

Over the past several years here again I can only point you to some of the slides that we published as part of the Barcelona Investor Day. It has been even in spite of that situation.

A successful one where net net a lot of value was created for our shareholders and so while of course, we do a deep dive into every specific situation that doesn't meet our objectives and then try to do better going forward. It.

It should not take away from the underlying success that we've had with our acquisition activity.

Mark Schneider: Regarding the report that you referenced by Nordea side, I can only tell you that we've done exactly what we were saying last March, and we're focusing on these necessary basic food and beverage items. The fact that we have continued activity in those is no contradiction to what we had announced last March.

Regarding the report that you referenced by in order to as I said I can only tell you that we've done exactly what we were saying last March and we are focusing on these necessary basic food and beverage items and so the fact that we have continued activity in dose is no contradiction to what we had announced last.

<unk>.

Christophe: There's time for one last question, very short. Olivia

[Company Representative] (Nestlé): There's time for one last question, very short. Olivia. Yes. We can hear you.

There is time for one last question very short Olivia.

[Analyst]: Yes.

[Analyst]: We can hear you.

If you go.

Mark Schneider: Yeah, Olivia, thank you. Look, on the pricing, as mentioned, it's not productive, not in the interest of our stakeholders and shareholders if we go into specifics on where exactly we're gonna be doing what. I ask for your understanding on that. Obviously, you're absolutely right. We need to be very, very targeted where we do our pricing, and that applies to categories and products, and applies to specific geographies. We owe it to our retail partners and the public to explain why that is, and we typically do that very well. As you see from the summary numbers, again, we're still in a situation where we're repairing our growth margin and where, like all the consumers around the world, we've been hit by inflation and now we're trying to repair the damage that has been done.

[Company Representative] (Nestlé): Yeah, Olivia, thank you. Look, on the pricing, as mentioned, it's not productive, not in the interest of our stakeholders and shareholders if we go into specifics on where exactly we're gonna be doing what. I ask for your understanding on that. Obviously, you're absolutely right. We need to be very, very targeted where we do our pricing, and that applies to categories and products, and applies to specific geographies. We owe it to our retail partners and the public to explain why that is, and we typically do that very well. As you see from the summary numbers, again, we're still in a situation where we're repairing our growth margin and where, like all the consumers around the world, we've been hit by inflation and now we're trying to repair the damage that has been done.

Olivia.

Are you on mute.

Okay.

Yes.

I wish that I always make it and at what wasn't that one question about pricing because of.

All of the other companies like that because it does they will play.

Thank you anymore. So I'd like to ask how are you able to manage price increases.

Diana.

We discuss it with you you still have pricing power.

Got Ya Li Yu, you dodged one last.

Question about that.

Because I'm not sure I can get well your objective.

Can you can you repeat it thank you very much.

Do you believe that thank you and Tim look on the pricing as mentioned, it's not productive in open interest of our stakeholders and shareholders and it will go into specifics on where exactly we're going to be doing what so I ask for your understanding on that obviously, you're absolutely right.

We need to be very very targeted where we do our pricing and that applies to categories and products and applies to specific geographies.

And we owe it to our retail partners and the public to explain why that is and we typically do that very well and so as you see from the summary numbers again, we're still in a situation, where we're pairing our gross margin and where like all the consumers around the world. We've been hit by inflation and now we're trying to repair the damage that has been done but we.

Mark Schneider: We will be very targeted and of course only do the pricing where the input cost situation justifies that. It'll be a very targeted situation, product by product, market by market. On plant-based, what I was trying to say is that, we've seen continued success with it. We believe in it as something that has merit for public health but also for the eco footprint of food and beverage around the world going forward. What we're trying to do then, in order to give you more clarity on where this is going later in the year, to give you a more comprehensive target where we believe we can take this from a sales point of view over time.

We'll be very targeted and of course, only do the pricing where the input cost situation justifies that.

It will be very targeted situations product by product market by market and on plant based what I was trying to say is that so we've seen continued success with it we believe and it is something that has merit for public health, but also for the eco footprint of our food and beverage around the world going forward.

And what we're trying to do then.

In order to give you more clarity on where this is going later in the year to give you a more comprehensive target where we believe we can take this from a sales point of view over time.

Christophe: It's 10:00. We need to close the call here. Thank you so much for joining us, and as always, the media relations team is available for you. Either send an email or call the hotline, and we will answer your questions. Thank you very much again, and I wish you a very pleasant day.

[Company Representative] (Nestlé): It's 10:00. We need to close the call here. Thank you so much for joining us, and as always, the media relations team is available for you. Either send an email or call the hotline, and we will answer your questions. Thank you very much again, and I wish you a very pleasant day.

It's 10 o'clock, we need to close the call here. Thank you so much for joining us and Thats always the media relations team is available for you either send an email or call. The hotline and we will answer your questions. Thank you very much again and I wish you a very pleasant day.

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