Half Year 2024 Nestle SA Earnings Call

July 25, 2024

Luca Borlini: Good afternoon and good morning to everyone. This is Luca Borlini, Head of Nestlé Investor Relations. Thank you for joining the Q&A session for Nestlé's H1 2024 sales. With me today are Nestlé CEO Mark Schneider and CFO Anna Manz. We have made available our prepared remarks at 7:00AM Central European Time, together with our H1 press release and presentation on the Nestlé Investor Relations website. I trust you have had all the time to review these materials and listen to the recording. Therefore, we can go straight to the question-and-answer session.

Good afternoon and good morning to everyone. This is Luca Borlini, Head of Nestle Investor Relations.

Thank you for joining the Q&A session for Nestle's First Half 2024 sales.

Speaker Change: With me today are Nestle CEO Mark Schneider and CFO Anna Manz.

Speaker Change: We have made available our preparing remarks at 7 a.m. Central European Time, together with our first press release and presentation on the Nestle Investor Relations website.

Speaker Change: I trust you have had all the time to review these materials and listen to the recording.

Luca Borlini: Before we begin, please take note of our usual disclaimer. With that reminder given, let us begin the session. The line for questions from financial analysts is now open. Please remember to limit yourselves to no more than two questions, and the first question is from Jon Cox at Kepler. Yeah, maybe before going into the question, Mark would like to start with a short introductory remarks.

Speaker Change: Therefore, we can go straight to the question and answer session.

Speaker Change: Before we begin, please take note of our usual disclaimer.

Luca Borlini: With that reminder given, let us begin the session. The line for questions from financial analysts is now open. Please remember to limit yourselves to no more than two questions, and the first question is from Jon Cox at Kepler. Yeah, maybe before going into the question, Mark would like to start with a short introductory remarks.

Speaker Change: With that reminder given, let us begin the session.

Speaker Change: The line for questions from financial analysts is now open.

Speaker Change: Please remember to limit yourselves to no more than two questions. And the first question is from Jon Cox at Kepler.

Operator: Yeah, maybe before going into the question, Mark would like to start with some short introductory remarks.

Speaker Change: Yeah, maybe before going into the question, Mark would like to start with a short introductory remarks.

Mark Schneider: Luca, thank you, and a warm welcome to our conference call participants. Let me just start you off with a very brief set of remarks.

Mark Schneider: Luca, thank you, and a warm welcome to our conference call participants. Let me just start out with a very brief set of remarks. We want to allow maximum time for questions and answer, and really just want to reiterate that we delivered a strong, real internal growth recovery based on strong execution and in line with what we said in Q1. As you know, real internal growth, the sum of volume and mix is a very important metric to us. We call it the growth that is earned. It comes as a result of market share gains, volume growth, and also mix improvement due to premiumization innovation. All the things that are very important to us, and I think we delivered along those lines. That increase in real internal growth was broad-based across all zones and categories.

Mark Schneider: Luca, thank you, and a warm welcome to our conference call participants. Let me just start you off with a very brief set of remarks. We want to allow maximum time for questions and answers.

Mark Schneider: We want to allow maximum time for questions and answers and really just want to reiterate that we delivered a strong, real internal growth recovery based on strong execution and in line with what we said in Q1. As you know, real internal growth, the sum of volume and mix, is a very important metric to us. It's not growth that is earned. It comes as a result of market share gains, volume growth, and also mix improvement due to premiumization and innovation, so all the things that are very important to us, and I think we delivered along those lines. That increase in real internal growth was broad-based across all zones and categories.

Mark Schneider: and really just want to reiterate that we delivered.

Mark Schneider: a strong real internal growth recovery.

Mark Schneider: based on strong execution and in line with what we said in Q1.

Mark Schneider: As you know, real internal growth, the sum of volume and mix, is a very important metric to us. We call it the growth that is earned. It comes as a result of market share gains, volume growth, and also mix improvement due to

Mark Schneider: All the things that are very important to us, and I think we delivered along those lines. That increase in real internal growth was broad-based across all zones and categories. We continue to improve our market share, in particular for billionaire brands and in e-commerce, where we're generating strong growth, momentum, and gaining share. We're managing price, obviously, in what is a tough consumer environment. We've made good progress in our Nestlé Health Science business.

Mark Schneider: premiumization, innovation, so all the things that are very important to us and I think we delivered along those lines.

Mark Schneider: That increase in retal internal growth was broad-based across all zones and categories.

Mark Schneider: We continue to improve our market share, in particular for billionaire brands and in e-commerce, where we're generating strong growth, momentum, and gaining share. We're managing price, obviously, in what is a tough consumer environment. We've made good progress in our Nestlé Health Science business. That swing was very important to us and sets us up for a strong H2 in this business, where we're seeing now good category growth. In essence, what we're doing here is delivering for consumers, which is key, and that is what we remain focused on. That's the Nestlé way. We manage the short term while building for the long term, for sustained growth and sustained and profitable growth. Just want to remind everyone of those key messages that hopefully came through in the recorded prepared remarks this morning.

Mark Schneider: We continue to improve our market share, in particular for billionaire brands and in e-commerce, where we're generating strong growth, momentum and gaining share.

Mark Schneider: And we're managing price, obviously, in what is a tough consumer environment.

Mark Schneider: That swing was very important to us and sets us up for a strong H2 in this business, where we're seeing now good category growth. In essence, what we're doing here is delivering for consumers, which is key, and that is what we remain focused on. That's the Nestlé way. We manage the short term while building for the long term, for sustained growth and sustained and profitable growth. Just want to remind everyone of those key messages that hopefully came through in the recorded prepared remarks this morning. With that, very much looking forward to your questions.

Mark Schneider: We've made good progress in our Nestle Health Science business. That swing was very important to us and sets us up for a strong second half in this business, where we're seeing now good category growth.

Mark Schneider: And in essence, what we're doing here is delivering for consumers, which is key.

Mark Schneider: And that is what we remain focused on. That's the Nestle way. We manage the short-term while building for the long-term for sustained growth and sustainable and profitable growth. So just want to remind everyone of those key messages that hopefully came through in my recorded prepared remarks this morning. And with that, I'm very much looking forward to your questions.

Mark Schneider: And that is what we remain focused on. That's the Nestle way. We manage the short term while building for the long term for sustained growth and sustained and profitable growth.

Speaker Change: So just want to remind everyone of those key messages that hopefully came through in the recorded prepared remarks this morning. And with that, very much looking forward to your questions.

Mark Schneider: With that, very much looking forward to your questions.

Operator: Thank you, Mark. So, Jon, please go ahead with your questions.

Luca Borlini: Thank you, Mark. Jon, please go ahead with your questions.

Jon Cox: Yes, thank you very much, Jon Cox with Kepler. A question on the whole equation, the price and the volume mix or the rig. It appears to some people, at least that you've given up price to retailers in order to get volume, but you don't seem to be getting a lot of volume for what you've given up in terms of price. And obviously, it's a bit difficult for us to figure out what you're actually giving to the retailers and what is actually just that normalized pricing as the overall commodity costs have come down.

Jon Cox: Yes. Thank you very much. Jon Cox with Kepler. A question on this, the whole equation, the price and the volume mix or the RIG. It appears, to some people at least, that you're giving up price to retailers in order to get volume, but you don't seem to be getting a lot of volume for what you're giving up in terms of the price. Obviously it's a bit difficult for us to parse out what you're actually giving to the retailers and what is actually just that, you know, normalized pricing as the overall commodity costs have come down.

Speaker Change: Thank you, Mark. So, Jon, please go ahead with your questions.

Jon Cox: Yes, thank you very much, Jon Cox with Kepler. A question on the whole equation, the price and the volume mix, or the rig.

Jon Cox: It appears, to some people at least, that you've given up price to retailers in order to get volume.

Speaker Change: But you don't seem to be getting a lot of volume for what you've given up in terms of the the price

Speaker Change: And obviously it's a bit difficult for us to pass out what you're actually giving to the retailers and what is actually just that.

Speaker Change: you know normalize pricing as the as the overall commodity costs of have have come down so.

Jon Cox: So anything you can give us on that to reassure us that as we go through the year, you just won't be cutting prices to drive volume and get maybe then into a vicious circle where organic sales are really struggling to get back into your 4% to 6% range because you're getting into this pretty tricky environment where you've given up pricing to drive the volume mix? That's the first question. Second question, your profitability is clearly better than expected. I just want to know what your thoughts are on the gross margin for the year, given the fact that some of those commodity costs are coming back, such as coffee and cocoa. Thank you.

Jon Cox: Anything you can give us on that to reassure us that, you know, as we go through the year, you know, you just won't be cutting prices to drive volume and get maybe then into a vicious circle where, you know, organic sales are really struggling to get back into your 4% to 6% range because you're, you know, getting into this a pretty tricky environment where you're giving up pricing to drive the volume mix. That's the first question. Second question, your profitability clearly better than expected. I just wonder what your thoughts are on the gross margin for the year given the fact that some of those commodity costs are coming back, coffee and cocoa. Thank you.

Speaker Change: Anything you can give us on that to reassure us that, you know, as we go through the year, you know, you just won't be cutting prices to drive volume.

Speaker Change: Organic cells are really struggling to get back into your 4-6% range because you're

Speaker Change: you know getting into this a pretty tricky environment where you're giving up pricing to drive the uh the volume mix that's the

Mark Schneider: Thanks, Jon. And I suggest I share the answer to the first question with Anna and then let Anna handle the second one.

Jon Cox: Second question, your profitability clearly better than expected. I just wonder what your thoughts are on the gross margin for the year given the fact that some of those commodity costs are coming back, coffee and cocoa. Thank you.

Speaker Change: The first question, second question, your profitability clearly better than expected. I just want to know what your thoughts are on the gross margin for the year, given the fact that some of those commodity costs are coming back, coffee and cocoa. Thank you.

Mark Schneider: Thanks, Jon. I suggest I share the answer to the first question with Anna and then let Anna handle the second one. Look, it's very important that we do not overinterpret this snapshot here of Q2 2024, and now see that as the movie unfolding going forward. This is a very particular moment in time with some tricky year-over-year comparisons since we have taken price in some categories and geographies in Q2 last year. Also a moment in time where we're still seeing significant value-seeking behavior on the part of the consumer. There is stress, in particular at the low end of the income scale in North America, but also in select other geographies. People are value-seeking, and hence promotional intensity has been particularly strong.

Speaker Change: Thanks, Ron. And I suggest I share the answer to the first question with Anna, and then let Anna handle the second one. So, look, it's very important that we do not overinterpret this snapshot here of Q2 2024, and now see that as the movie unfolding going forward. This is a very particular moment in time with some tricky year-over-year comparisons, since we had taken a price in some categories and geographies in Q2 last year.

Mark Schneider: So, look, it's very important that we do not over-interpret this snapshot here of Q2 2024 and now see that as the movie unfolding going forward. This is a very particular moment in time with some tricky year-over-year comparisons since we took price in some categories and geographies in Q2 last year. Also, a moment in time when we're still seeing significant value-seeking behavior on the part of the consumer. There is stress, in particular, at the lower end of the income scale in North America, but also in select other geographies.

Speaker Change: Also, a moment in time where we're still seeing significant value-seeking behavior on the part of the consumer. There's stress.

Mark Schneider: There is stress, in particular at the low end of the income scale in North America, but also in select other geographies. People are value-seeking, and hence promotional intensity has been particularly strong. As you know from past quarters, we were very much focused on getting the RIG flywheel running again, and I think that's very important for continued and sustained success. We're in no mood here to buy a RIG going forward, so clearly a RIG needs to be earned through compelling product and brand propositions going forward.

Speaker Change: In particular, the lower end of the income scale in North America, but also in select other geographies. So people are value-seeking, and hence promotional intensity has been particularly strong.

Mark Schneider: So, people are value-seeking, and hence, promotional intensity has been particularly strong. As you know from recent quarters, we were very much focused on getting the RIC flywheel running again, and I think that's very important for continued and sustained success. But we're in no mood here to buy RIC going forward. So, clearly, RIC needs to be earned through compelling product and brand propositions going forward. So, it's important that this particular moment in time doesn't get over-interpreted.

Mark Schneider: As you know from past quarters, we were very much focused on getting the RIG flywheel running again, and I think that's very important for continued and sustained success. We're in no mood here to buy a RIG going forward, so clearly a RIG needs to be earned through compelling product and brand propositions going forward. It's important that this particular moment in time doesn't get overinterpreted. Some of the promotional intensity is time limited. A good example is Nestlé Health Science, where we had to promote more strongly as we're making product now increasingly available again, as we're trying to find our way back to shelf. This is an activity that's very much focused on Q2 and Q3 and will taper off afterwards.

Speaker Change: As you know from past quarters, we were very much focused on getting the rake flywheel running again, and I think that's very important for continued and sustained success.

Speaker Change: But we're in no mood here to buy a rig going forward.

Mark Schneider: It's important that this particular moment in time doesn't get overinterpreted. Some of the promotional intensity is time limited. A good example is Nestlé Health Science, where we had to promote more strongly as we're making product now increasingly available again, as we're trying to find our way back to shelf. This is an activity that's very much focused on Q2 and Q3 and will taper off afterwards. For North America overall, for food and beverage, you've seen a lot of listing fees that go against pricing, as part of the innovation that we did roll out.

Speaker Change: product and brand propositions going forward. So it's important that this particular moment in time doesn't get over-interpreted.

Mark Schneider: Some of the promotional intensity is time-limited. A good example is Nestlé Health Science, where we had to promote more strongly as we're making the product now increasingly available again, as we're trying to find our way back to the shelf. This is an activity that's very much focused on Q2 and Q3 and will taper off afterwards.

Speaker Change: Some of the promotional intensity is time-limited.

Speaker Change: A good example is Nestle Health Science.

Speaker Change: where we had to promote more strongly as we're making product now increasingly available again, as we're trying to find our way back to shelf. This is an activity that's very much focused on Q2 and Q3 and will taper off afterwards.

Mark Schneider: And for North America overall, for food and beverage, you've seen a lot of listing fees that go against pricing as part of the innovation that we did roll out. So, it's kind of a corollary to the innovation that we bring to the marketplace. It's a good investment for future growth. So, that's why, if you see it as a straight price to buy RIC, it is an over-simplified picture and doesn't do justice to the true situation.

Mark Schneider: For North America overall, for food and beverage, you've seen a lot of listing fees that go against pricing, as part of the innovation that we did roll out. It's kind of the corollary to the innovation that we bring to the marketplace. It's good investment for future growth. That's why if you see it as straight price to buy RIG, it is an oversimplified picture and doesn't do justice to the true situation.

Speaker Change: for North America overall, for food and beverage.

Speaker Change: You've seen a lot of listing fees that go against pricing as part of the innovation that we did roll out. So it's kind of the corollary.

Mark Schneider: It's kind of the corollary to the innovation that we bring to the marketplace. It's good investment for future growth. That's why if you see it as straight price to buy RIG, it is an oversimplified picture and doesn't do justice to the true situation.

Speaker Change: to the innovation that we bring to the marketplace. It's a good investment for future growth. So that's why if you see it as straight price to buy Rigg, it is an oversimplified picture and doesn't do justice to the true situation.

Anna: And two very small builds. The way we think about pricing in a high promotional environment is that we manage our price gaps with our competitive set so that we stay competitive versus our competitive set. Secondly, as commodity prices move, we will look to take a price if commodity prices go up. So that's on pricing. Maybe I just turn to your question on gross margin. So, yes, we have had a benefit in the first half, as we've seen some favorable input cost prices.

Luca Borlini: Two very small builds. The way we think about pricing in a high promotional environment is that we manage our price gaps to our competitive set so that we stay competitive versus our competitive set. Secondly, as commodity prices move, we will look to take price if commodity prices go up.

Anna Manz: Two very small builds. The way we think about pricing in a high promotional environment is that we manage our price gaps to our competitive set so that we stay competitive versus our competitive set. Secondly, as commodity prices move, we will look to take price if commodity prices go up. That's on pricing. Maybe if I just turn to your question on growth margin. Yes, we have had a benefit in H1 as we've seen some favorable input cost prices.

Speaker Change: and two very small builds. The way we think about pricing in a high promotional environment is that we manage our price gaps to our competitive set so that we stay competitive versus our competitive set. Secondly, as commodity prices move we will look to take price if commodity prices go up.

Mark Schneider: That's on pricing. Maybe if I just turn to your question on growth margin. Yes, we have had a benefit in H1 as we've seen some favorable input cost prices. As we look out to the full year, that favorability will not continue quite as starkly as we've seen it in H1, as we've got pressure on input costs from both coffee and cocoa that will come through in H2. Margin will be lower in H2. The way I'd think about it is as we sit today, consensus is largely in the right place for the group as a whole for the year.

Speaker Change: So that's on pricing. Maybe if I just turn to your question on growth margin.

Speaker Change: So, yes, we have had a benefit in the first half as we've seen some favorable input cost prices. As we look out to the full year, that favorability

Anna Manz: As we look out to the full year, that favorability will not continue quite as starkly as we've seen it in H1, as we've got pressure on input costs from both coffee and cocoa that will come through in H2. Margin will be lower in H2. The way I'd think about it is as we sit today, consensus is largely in the right place for the group as a whole for the year.

Anna: As we look out to the full year, that favorableability will not continue quite as starkly as we've seen it in the first half, as we've got pressure on input costs from both coffee and cocoa that will come through in the second half. So, margins will be lower in the second half. The way I think about it is that, as we sit today, consensus is largely in the right place for the group as a whole for the year.

Speaker Change: We are not going a little extra as we have seen in the first instance.

Speaker Change: on input costs from both coffee and cocoa that will come through in the second half. So margin will be lower in the second half. The way I think about it is, as we sit today, consensus is largely in the right place for the group as a whole for the year.

Luca Borlini: So the next question is from Guillaume Delmas at UBS; please go ahead, Guillaume.

Rachel Smith: Next question is from Guillaume Delmas at UBS. Please go ahead, Guillaume.

Luca Borlini: Next question is from Guillaume Delmas at UBS. Please go ahead, Guillaume.

Speaker Change: So next question is from Guillaume Delmas at UBS. Please go ahead, Guillaume.

Guillaume Gerard Vincent Delmas: Thank you very much, Luca, and good afternoon, Mark and Anna. I have two questions. The first one is on the four businesses that in the past have been Nestle's key growth engines, I mean, for both the top line and the bottom line. So, pet care, coffee, nutrition, and Nestle Health Science. Because, even going back many years, I don't recall seeing such low organic sales growth for the four businesses combined in one half, with, I think, none of them being in the 4% to 6% range.

Guillaume Delmas: Thank you very much, Luca, and good afternoon, Mark and Anna. I have two questions. The first one is on the four businesses that in the past have been Nestlé's key growth engines, I mean, for both top line and bottom line, so pet care, coffee, nutrition, and Nestlé Health Science. Because even going back many years, I don't recall seeing such a low organic sales growth for the four businesses combined in H1. With, I think, none of them being in the 4% to 6% range.

Guillaume Gerard Vincent Delmas: Thank you very much, Luca, and good afternoon, Mark and Anna. I have two questions.

Guillaume Gerard Vincent Delmas: The first one is on the four businesses that in the past have been Nestle's key growth engines. I mean, for both top line and bottom line, so pet care, coffee, nutrition, and Nestle Health Science.

Speaker Change: Because, even going back many years, I don't recall seeing such a low organic sales growth for the four businesses combined in one half, with, I think, none of them being in the 4 to 6% range.

Guillaume Gerard Vincent Delmas: So my question here is, above and beyond the easy basis of comparison for Nestle Health Science in the second half, do you see a clear path for your growth engines to quickly return to that 4% to 6% range? And, ideally, the top end of the range, because it will be difficult otherwise for Nestle Group to return to that 4% to 6%. So, particularly on coffee and pets, if you see some green shoots, that would be interesting.

Guillaume Delmas: My question here is, above and beyond the easy basis of comparison for Nestlé Health Science in H2, do you see a clear path for your growth engines to quickly return to that 4% to 6% range, and ideally the top end of the range, because it will be difficult otherwise for Nestlé Group to return to that 4% to 6%. Particularly on coffee and pet, if you see some green shoots, that would be interesting. My second question is on your decision to step up your new product launch intensity. How do you ensure that this doesn't lead to some SKU proliferation, heightened supply chain complexity? Because here again, you implemented the Tasty program a few years ago to reduce the number of SKUs, reduce complexity.

Speaker Change: So my question here is, above and beyond the easy basis of comparison for Nestle Health Science in the second half,

Speaker Change: Do you see a clear path for your growth engines to quickly return to that four to six percent range?

Speaker Change: and ideally the top end of the range because it will be difficult otherwise for Nestle Group to return to that 4-6.

Speaker Change: So particularly on coffee and pet, if you see some green shoots, that would be interesting. And then my second question is on your decision to step up your new product launch intensity.

Mark Schneider: And then my second question is about your decision to step up your new product launch intensity. How do you ensure that this doesn't lead to some SKU proliferation and heightened supply chain complexity? Because here, again, you implemented the Tasty program a few years ago to reduce the number of SKUs and reduce complexity. So how to make sure that you don't erase all the benefits of Tasty by accelerating the pace of new product introductions? Any comment, that would be great. Thank you.

Speaker Change: How do you ensure that this doesn't lead to some SKU proliferation, heightened supply chain complexity?

Guillaume Delmas: Because here again, you implemented the Tasty program a few years ago to reduce the number of SKUs, reduce complexity. How to make sure that you don't erase all the benefits from Tasty by accelerating now the pace of new product introductions? Any comment on that would be great. Thank you.

Speaker Change: Because here, again, you implemented the Tasty program a few years ago to reduce the number of SKUs, reduce complexity, so how to make sure that you don't erase all the benefits from Tasty by accelerating now the pace of new product introductions. Any comment on that would be great. Thank you.

Guillaume Delmas: How to make sure that you don't erase all the benefits from Tasty by accelerating now the pace of new product introductions? Any comment on that would be great. Thank you.

Mark Schneider: Guillaume, thank you, and let me take a crack at both of these questions and maybe in particular spend some time on the first one because I think there's also a wider strategic context. And let me start with the big picture, and that is, we continue to believe, and we will lay out in more detail to you during Capital Market Day in November, that our portfolio, in a normalized state at the present time, without much surgery by M&A, is capable of delivering mid-single-digit growth.

Mark Schneider: Guillaume, thank you. Let me take a crack at both of these questions and maybe in particular, spend some time on the first one, because I think there's also a wider strategic context. Let me start with the big picture, and that is we continue to believe, and we will lay out in more detail to you during the Capital Markets Day in November, that our portfolio in a normalized state at the present time, without much surgery, by M&A, is capable of delivering mid-single digit growth. Whatever distortions you are seeing and have seen over the last two to three years to be up or down were distortions that had to do with this historic inflation spike. Some special situations, like, for example, our self-induced integration problem at Nestlé Health Science and other situations.

Speaker Change: Guillaume, thank you and let me take a crack at both of these questions and maybe in particular spend some time on the first one because I think there's also a wider strategic context.

Speaker Change: And let me start with the big picture, and that is we continue to believe, and we will lay out in more detail to you during the capital market day in November , that our portfolio in a normalized state

Speaker Change: at the present time, without much surgery by MNA, is capable of delivering mid-single-digit growth.

Mark Schneider: And so whatever distortions you are seeing and have seen over the last two to three years, up or down, were distortions that had to do with this historic inflation spike and then some special situations, like, for example, our self-induced integration problem at Nestle Health Science and other situations. But as we're putting those behind us, and as the inflation situation is now rapidly normalizing, you should have confidence that the portfolio overall is capable of delivering that mid-single-digit range.

Mark Schneider: Whatever distortions you are seeing and have seen over the last two to three years to be up or down were distortions that had to do with this historic inflation spike. Some special situations, like, for example, our self-induced integration problem at Nestlé Health Science and other situations. As we're putting those behind us, and as the inflation situation now is rapidly normalizing, you should have confidence that the portfolio overall is capable of delivering that mid-single digit range.

Speaker Change: And so whatever distortions you are seeing and have seen over the last two to three years, to the up or down, were distortions that had to do with this historic inflation spike.

Speaker Change: and then some special situations like, for example, our self-induced integration problem at Nestle Health Science and other situations. But as we're putting those behind us...

Mark Schneider: As we're putting those behind us, and as the inflation situation now is rapidly normalizing, you should have confidence that the portfolio overall is capable of delivering that mid-single digit range. It's a matter now of really putting these issues behind us, and then in a fully normalized year, we have confidence. Again, we will try to make that case and lay it out in greater detail in the Capital Markets Day in November. The four businesses in particular, remember, several of them now are affected by special situations. One is on Nestlé Health Science. Clearly, the H1 we indicated to you was gonna be impacted by the VMS integration issue. You've seen now great progress in the Q2, and we're slated for a strong H2.

Speaker Change: and as the inflation situation now is rapidly normalizing.

Speaker Change: You should have confidence that the portfolio overall...

Mark Schneider: It's a matter now of really putting these issues behind us, and then in a fully normalized year, we have confidence. Again, we will try to make that case and lay it out in greater detail in the Capital Markets Day in November. The four businesses in particular, remember, several of them now are affected by special situations. One is on Nestlé Health Science. Clearly, the H1 we indicated to you was gonna be impacted by the VMS integration issue. You've seen now great progress in the Q2, and we're slated for a strong H2.

Speaker Change: is capable of delivering that mid-single-digit range.

Mark Schneider: And it's a matter now of really putting these issues behind us. And then, in a fully normalized year, we have confidence. And again, we will try to make that case and lay it out in greater detail at the capital market day in November. The four businesses in particular, remember, several of them are now affected by special situations. One is Nestle Health Science.

Speaker Change: And it's a matter now of really putting these issues behind us and then in a fully normalized year, we have confidence. And again, we will try to make that case and lay it out in greater detail.

Speaker Change: and the Capital Market Day in November .

Speaker Change: The four businesses in particular, remember...

Speaker Change: Several of them now are affected by special situations. One is on Nestle Health Science. Clearly, the first half we indicated to you was going to be impacted by the BMS integration issue.

Mark Schneider: Clearly, the first half, we indicated to you, was going to be impacted by the BMS integration issue. You've seen great progress in the second quarter, and we're slated for a strong second half.

Speaker Change: You've seen now great progress in the second quarter, and we're slated for a strong second half. And then obviously the proof point to you will be that on a clean year 25, we're delivering continued solid growth there.

Mark Schneider: And then obviously, the proof point for you will be that on a clean year 25, we're delivering continued solid growth there. Nutrition, as you know, that one originally in 2017, I had called out as one of the growth drivers. It's certainly one that's very important to us from a mission and purpose point of view. But in recent years, as you know, with lower birth rates, this was not a business that was so much a growth contributor.

Mark Schneider: Obviously, the proof point to you will be that on a clean 2025, we're delivering continued solid growth there. Nutrition, as you know, that one originally in 2017, I have called out as one of the growth drivers. It's certainly one that's very important to us from a mission and purpose point of view. In recent years, as you know, with lower birth rates, this was not a business that was so much a growth contributor. It's still a very important one from a value perspective, and certainly a very important one when it comes to the nutritionally best start in life where breastfeeding is not possible, and hence, we're deeply committed to it.

Speaker Change: Nutrition as you know

Speaker Change: That one, originally in 2017, I had called out as one of the growth drivers. It's certainly one that's very important to us from a...

Speaker Change: mission and purpose point of view. But in recent years, as you know, with lower birth rates, this was not a business that was so much a growth contributor.

Mark Schneider: It's still a very important one from a value perspective, and certainly a very important one when it comes to the nutritionally best start in life, where precipitating is not possible. And hence, we're deeply committed to it. We do believe that in a fully normalized state, especially with some of the market share gains we're working on, that business can do better than what we've seen in the first half. But I also believe that the first half, because of the special circumstances, was not the best answer.

Mark Schneider: It's still a very important one from a value perspective, and certainly a very important one when it comes to the nutritionally best start in life where breastfeeding is not possible, and hence, we're deeply committed to it. We do believe that in a fully normalized state, especially with some of the market share gains we're working on, that business can do better than what we've seen in H1. I also believe that H1, because of these special circumstances, was not the best yardstick.

Speaker Change: It's still a very important one from a value perspective, and certainly a very important one when it comes to the nutritionally best start in life where breastfeeding is not possible, and hence we're deeply committed to it.

Mark Schneider: We do believe that in a fully normalized state, especially with some of the market share gains we're working on, that business can do better than what we've seen in H1. I also believe that H1, because of these special circumstances, was not the best yardstick. Pet food, we did indicate that after four years of consecutive double-digit growth, normalization was in place. When you're taking now H1, you are basically looking at a normalizing business. I think the true longer term, midterm point of view would be to take an average of several years that are above and below performance. I think the snapshot from H1 doesn't do it full justice. Coffee, I think, is one of our strong growth categories.

Speaker Change: We do believe that in a fully normalized state, especially with some of the market share gains we're working on, that business can do better than what we've seen in the first half. But I also believe that the first half, because of the special circumstances, was not the best yardstick.

Mark Schneider: Pet food, we did indicate that after four years of consecutive double-digit growth, normalization was in place. When you're taking now H1, you are basically looking at a normalizing business. I think the true longer term, midterm point of view would be to take an average of several years that are above and below performance. I think the snapshot from H1 doesn't do it full justice. Coffee, I think, is one of our strong growth categories. You're seeing very good success, for example, close to 6% organic growth in H1 on Nescafé.

Mark Schneider: For pet food, we did indicate that after four years of consecutive double-digit growth, normalization was in place. So when you're taking out the first half, you are basically looking at a normalizing business. I think the true longer-term, mid-term point of view would be to take an average of several years that are above and below performance. So I think the snapshot from the first half doesn't do it full justice.

Speaker Change: Pet food, we did indicate that after four years of consecutive double-digit growth, normalization was in place. So when you're taking out the first half, you are basically looking at a normalizing business.

Speaker Change: I think the true longer-term, mid-term point of view would be to take an average of several years that are above and below performance. So I think the snapshot from the first half doesn't do it full justice. And coffee, I think, is one of our strong growth categories. You're seeing very good success.

Mark Schneider: And coffee, I think, is one of our strong growth categories. You're seeing very good success, for example, close to 6% organic growth in the first half of Nescafe. So clearly, I think the coffee category in the segments we're in is doing well for us. So I think, in summary, you do have very specialized situations here applying to three out of four of these growth categories. But the more important wider picture is that the portfolio overall can definitely deliver the mid-single-digit growth in a fully normalized state that is not impacted by serious, significant one-offs and is not impacted by the distortions we've seen through inflation over the last two years.

Mark Schneider: You're seeing very good success, for example, close to 6% organic growth in H1 on Nescafé. Clearly, I think the coffee category in the segments we're in is doing well for us. I think in summary, you do have very specialized situations here applying to three out of four of these growth categories. But the more important wider picture is that the portfolio overall can definitely deliver the mid-single digit growth in a fully normalized state that is not impacted by serious significant one-offs, and is not impacted by the distortions we've seen through inflation over the last two years.

Speaker Change: For example, close to 6% organic growth in the first half on Nescafe. So clearly, I think the coffee category in the segments we're in is doing well for us.

Mark Schneider: Clearly, I think the coffee category in the segments we're in is doing well for us. I think in summary, you do have very specialized situations here applying to three out of four of these growth categories. But the more important wider picture is that the portfolio overall can definitely deliver the mid-single digit growth in a fully normalized state that is not impacted by serious significant one-offs, and is not impacted by the distortions we've seen through inflation over the last two years.

Speaker Change: So, I think in summary, you do have very specialized situations here applying to three out of four

Speaker Change: of these growth categories, but the more important wider picture is that the portfolio overall can definitely deliver the mid-single-digit growth in a fully normalized state that is not impacted by serious significant one-offs.

Speaker Change: and is not impacted by the distortions we've seen through inflation over the last two years.

Mark Schneider: Now, on your second question, obviously, when we did the tasty SKU rationalization, we didn't just rationalize, but we also put procedures in place that make sure that for new SKUs, which get launched all the time, we also have ongoing review processes that make sure that older ones do not pile up. I think at the time when we outlined Tasty, we told you that this piling up had essentially occurred in the second half of the last decade when, because of the strong focus on organic growth and rigor, people were reluctant to let certain products go.

Mark Schneider: Now on your second question, obviously, when we did the Tasty SKU rationalization, we didn't just rationalize, but we also put procedures in that make sure that for new SKUs, which get launched all the time, we also have ongoing review processes that make sure that older ones do not pile up. I think at the time when we outlined Tasty, we told you that this piling up had essentially occurred in the H2 of the last decade when, because of the strong focus on organic growth and RIG, people were reluctant to let certain products go. I think now we have better processes in that identify these products and then cut them out if they don't meet certain performance criteria, so that the ongoing new launch doesn't add to product proliferation.

Speaker Change: Now, on your second question, obviously, when we did the tasty SKU rationalization,

Speaker Change: We didn't just rationalize, but we also put procedures in that make sure that for new SKUs, which get launched all the time,

Speaker Change: We also have ongoing review processes that make sure that older ones do not pile up. I think at the time when we outlined Tasty, we told you that this piling up had essentially occurred in the second half of the last decade.

Mark Schneider: I think now we have better processes in that identify these products and then cut them out if they don't meet certain performance criteria, so that the ongoing new launch doesn't add to product proliferation. Keep in mind that while the launch intensity is up 15%, for example, for H1 of this year, and we're targeting 20% for the entire year, what we're doing here is not going to new and unprecedented levels, but rather we're restoring a large intensity that we had seen prior to the year 2022. These launch intensities are not unknown to us, and they don't create a new high watermark.

Speaker Change: focus on organic growth and rig, people were reluctant to let certain products go.

Mark Schneider: I think now we have better processes that identify these products and then cut them out if they don't meet certain performance criteria so that the ongoing new launch doesn't add to product proliferation. Do keep in mind that while the launch intensity is up 15%, for example, for the first half of this year and we're targeting 20% for the entire year, what we're doing here is not going to new and unprecedented levels, but rather we're restoring a large intensity that we had seen prior to the year 2022. So these launch intensities are not unknown to us, and they don't create a new high watermark.

Speaker Change: I think now we have better processes in that identify these products and then cut them out if they don't meet certain performance criteria so that the ongoing new launch doesn't add to product proliferation.

Mark Schneider: Keep in mind that while the launch intensity is up 15%, for example, for H1 of this year, and we're targeting 20% for the entire year, what we're doing here is not going to new and unprecedented levels, but rather we're restoring a large intensity that we had seen prior to the year 2022. These launch intensities are not unknown to us, and they don't create a new high watermark.

Speaker Change: Do keep in mind that while the launch intensity is up, 15%, for example, for the first half of this year and

Speaker Change: We're targeting 20% for the entire year.

Speaker Change: What we're doing here is not going to new and unprecedented levels, but rather we're restoring a large intensity that we had seen prior to the year 2022. So these launch intensities are not unknown to us, and they don't create a new high-water mark.

Luca Borlini: Thanks, Guillaume. The next question is from Bruno Monteyne at Bernstein. Please go ahead, Bruno.

Rachel Smith: Thanks, Guillaume. Next question is from Bruno Monteyne at Bernstein. Please go ahead, Bruno.

Luca Borlini: Thanks, Guillaume. Next question is from Bruno Monteyne at Bernstein. Please go ahead, Bruno.

Speaker Change: Thanks, Guillaume. Next question is from Bruno Monteyne at Bernstein. Please go ahead, Bruno.

Bruno Monteyne: Hi Mark and Anna. Just the first one is, there are a few times that we've mentioned that the track channels, particularly in the U.S., are performing worse than the non-track channels now. Could you just sort of elaborate a little bit more on that? Is there a chance that the pressures you're seeing in the track channels are just, It takes a bit of time before we see the same in the other channels. So could there be delayed pain, or are there any structural reasons why you think the non-track channels will be performing better for you and also going forward?

Bruno Monteyne: Hi, Mark and Anna. Just the first one is, there are a few times that you've mentioned that the tracked channels, particularly in the US, are underperforming worse than the non-tracked channels now. Could you just sort of elaborate a little bit more on that? Is there a, you know, the chance that the pressures you're seeing in the tracked channels, it just takes a bit of time before we see the same in the other channels? Could there be delayed pain or is there any structural reasons why you think the non-tracked channels would be performing better for you and also going forward? The second thing is, you've mentioned a few times in the past, you know, the growth potential you're seeing in the longer term for coffee in India and in China, and these countries becoming coffee markets.

Bruno Monteyne: Hi Mark and Anna. Just the first one is, there's a few times that we've mentioned that the track channels, particularly in the U.S.

Speaker Change: I do the performing worse than the non-track channels now.

Bruno Monteyne: Could you just sort of elaborate a little bit more on that? Is there a, you know, a chance that the pressures you're seeing in the track channels is just...

Bruno Monteyne: Could there be delayed pain or is there any structural reasons why you think the non-tracked channels would be performing better for you and also going forward? The second thing is, you've mentioned a few times in the past, you know, the growth potential you're seeing in the longer term for coffee in India and in China, and these countries becoming coffee markets. I mean, it's clear that the potential could be huge for that. I'm trying to get a bit of a stab for what is the timeframe over which new growth engines for Nestlé could become material.

Speaker Change: It takes a bit of time before we see the same in the other channels, so...

Speaker Change: Could there be delayed pain or is there any structural reasons why you think the non-drug channels will be performing better for you and also going forward? The second thing is, you've mentioned a few times in the past, you know, the growth potential you see in the longer term for coffee in India and in China and these countries becoming coffee markets. Could there be delayed pain or is there any structural reasons why you think the non-drug

Mark Schneider: The second thing is you've mentioned a few times in the past the growth potential you see in the longer term for coffee in India and China and these countries becoming coffee markets. I mean, it's clear that the potential could be huge for that. But I'm trying to get a bit of a stab at what the time frame over which new growth engines for Nestle could become material. Is that a kind of a three to five year time frame before this becomes a major topic of analytical ideas, or is it faster, is it slower?

Bruno Monteyne: I mean, it's clear that the potential could be huge for that. I'm trying to get a bit of a stab for what is the timeframe over which new growth engines for Nestlé could become material. Is that a kind of a 3 to 5 year timeframe before this becomes a major topic of analytical like this? Is it faster? Is it slower? Thank you.

Speaker Change: I mean, it's clear that the potential could be huge for that, but I'm trying to get a bit of a stab for what is the timeframe of which new growth engines for Nestle could become material. Is that a kind of a three to five-year timeframe before this becomes a major topic of analytical like this? Is it faster? Is it slower?

Bruno Monteyne: Is that a kind of a 3 to 5 year timeframe before this becomes a major topic of analytical like this? Is it faster? Is it slower? Thank you.

Mark Schneider: Thank you.

Mark Schneider: Thanks, Bruno. Let me take a crack at the second one, and then Anna can take the lead on the first one, and I'll chime in when needed.

Mark Schneider: Thanks, Bruno. Let me take a crack at the second one and then Anna can take the lead on the first one, and I chime in when needed. Look, I think coffee in China is happening as we speak, and I think we're seeing good success there for H1, tempered by the general economic caution that we're seeing in China, in particular in Q2. That was also something that we witnessed, that in Q2, compared to the optimism that people had at the beginning of the year. Clearly the general economic growth and consumer sentiment was a bit of a disappointment that led to more consumer hesitation and more intense price competition.

Speaker Change: Thanks, Bruno. Let me take a crack at the second one and then Anna can take the lead on the first one and I chime in when needed. So, look, I think Coffee China is happening as we speak.

Mark Schneider: So, look, I think coffee China is happening as we speak, and I think we're seeing good success there for the first half, tempered by the general economic caution that we're seeing in China, in particular in the second quarter. So that was also something that we witnessed in the second quarter, compared to the optimism that people had at the beginning of the year, clearly, the general economic growth and consumer sentiment were a bit of a disappointment.

Speaker Change: And I think we're seeing good success there for the first half, tempered by the general economic caution that we're seeing in China, in particular in the second quarter.

Speaker Change: So that was also something that we witnessed that in the second quarter, compared to the optimism that people had.

Mark Schneider: Clearly the general economic growth and consumer sentiment was a bit of a disappointment that led to more consumer hesitation and more intense price competition. Aside from these short-term sentiment moves, I think the success of coffee in China is something that is scaling up now, and we are one of the lead competitors in that market. India, I think, is also discovering coffee at a fast pace. The pattern is the same as in China.

Speaker Change: At the beginning of the year, clearly the general economic growth and consumer sentiment was a bit of a disappointment. That led to more consumer hesitation and more intense price competition.

Mark Schneider: That led to more consumer hesitation and more intense price competition. The success of coffee in China is something that is scaling up now, and we are one of the leading competitors in that market. India, I think, is also discovering coffee at a fast pace. The pattern is the same as in China.

Mark Schneider: Aside from these short-term sentiment moves, I think the success of coffee in China is something that is scaling up now, and we are one of the lead competitors in that market. India, I think, is also discovering coffee at a fast pace. The pattern is the same as in China. First, you see the growth in coffee shops because for someone who is new to the category, that is the lowest risk way to simply try it one cup at a time. Then when people feel confident that this is something they're sticking with longer term, the retail growth takes off. People then may buy a coffee machine or they may stock up on soluble coffee, and then it kind of captures the retail channel.

Speaker Change: But aside from these short-term sentiment moves,

Speaker Change: The success of coffee in China is something that is scaling up now and we are one of the lead competitors in that market.

Speaker Change: India, I think, is also discovering coffee at a fast pace. The pattern is the same as in China. First, you see the growth in coffee shops because for someone who is new to the category, that is the lowest risk way to simply try it one cup at a time.

Mark Schneider: First, you see the growth in coffee shops because for someone who is new to the category, that is the lowest risk way to simply try it one cup at a time. Then when people feel confident that this is something they're sticking with longer term, the retail growth takes off. People then may buy a coffee machine or they may stock up on soluble coffee, and then it kind of captures the retail channel. India is a bit behind into China in that regards, but we're seeing the same trends unfold, and so that one, I think, is also having a positive future on a several-year timeframe.

Mark Schneider: First, you see the growth in coffee shops because for someone who is new to the category, that is the lowest-risk way to simply try it, one cup at a time. And then, when people feel confident that this is something they are sticking with longer term, the retail growth takes off. People then may buy a coffee machine, or they may stock up on soluble coffee, and then it kind of captures the retail channel. So India is a bit behind China in that regard, but we are seeing the same trends unfold. And so that one, I think, is also having a positive future on a several-year time frame.

Speaker Change: And then when people feel confident that this is something they're sticking with longer term, the retail growth takes off. People then...

Speaker Change: They may buy a coffee machine or they may stock up on soluble coffee and then it kind of captures the retail channel. So India is a bit behind to China in that regards, but we're seeing the same trends unfold. So that one, I think, is also having a positive future on a several-year time frame.

Mark Schneider: India is a bit behind into China in that regards, but we're seeing the same trends unfold, and so that one, I think, is also having a positive future on a several-year timeframe.

Anna Manz: To answer the first one, in the US, the big on-track channels for us are e-commerce, vet, specialty, pet specialty, and club. Those are the big ones. Collectively, we're seeing double-digit growth there, so we're growing at a little over 10%. Now, why are those channels growing fast? Well, a lot of this goes right to the heart of the consumer. There is a greater move globally to shop online, and to shop in more specialty places than go to the more traditional brick-and-mortar outlets. I think these channels are fundamentally less under pressure, and that's why, you know, they're great places to be winning. That's the sort of channel context. I think the important point is we're gaining share in all of those channels.

Speaker Change: So to answer the first one, so in the U.S., the big untracked channels for us are e-commerce, vet specialty, pet specialty, and club. So those are the big ones. And collectively, we're seeing double-digit growth there, so we're growing a little over.

Speaker Change: Channels growing fast.

Speaker Change: Well, a lot of this goes right to the heart of the consumer. There is a greater move globally to shop online.

Speaker Change: and to shop.

Speaker Change: in more specialty places than go to the more traditional bricks and mortar outlets.

Anna Manz: I think these channels are fundamentally less under pressure, and that's why, you know, they're great places to be winning. That's the sort of channel context. I think the important point is we're gaining share in all of those channels. That's because we are very focused on our execution, and making sure that particularly we have our digital share of shelf, you know, exactly right. Actually, more generally globally on e-commerce, we're gaining share in every zone. I think we're holding in Europe and gaining everywhere else. Gaining at quite a nice rate.

Speaker Change: So I think these channels are fundamentally less under pressure, and that's...

Speaker Change: Why? You know, they're great places to be winning.

Speaker Change: So, that's the sort of channel context. I think the important point is we're gaining share in all of those channels.

Anna Manz: That's because we are very focused on our execution, and making sure that particularly we have our digital share of shelf, you know, exactly right. Actually, more generally globally on e-commerce, we're gaining share in every zone. I think we're holding in Europe and gaining everywhere else. Gaining at quite a nice rate. That's important because as we look at where the world is going, ensuring that we've got the executional capability to win as channels shift, is obviously a big area of focus for us.

Speaker Change: And that's because we are very focused on our execution and making sure that particularly we have a digital share of shelf.

Speaker Change: You know, exactly right. And actually more generally, globally on e-commerce.

Speaker Change: We're gaining share in every zone. I think we're holding in Europe and gaining everywhere else.

Anna Manz: That's important because as we look at where the world is going, ensuring that we've got the executional capability to win as channels shift, is obviously a big area of focus for us.

Speaker Change: and gaining at quite a nice rate, and that's important because as we look at where the world is going, ensuring that we've got the executional capability to win as channels shift is obviously a big area of focus for us.

Mark Schneider: Bruno, let me build on that. Fully in agreement here, we have a very simple mantra when it comes to channels, and that is win with the winners. As Anna explained in, I think, very good detail here, we will recognize those as superior performers, and we bet on them early on, and now we are seeing the benefits. If that picture is changing over time, I would expect us to recognize that as well and then basically put our emphasis on where we see the greatest consumer relevance and hence the greatest growth opportunity.

Speaker Change: And Bruno, let me build on that. So, fully in agreement here, we have a very simple mantra when it comes to channels, and that is, win with the winners.

Speaker Change: And so, as Anna explained in, I think, very good detail here, we will recognize those as superior performers, and we bet on them early on, and now we're seeing the benefits.

Speaker Change: If that picture is changing over time, I would expect us to recognize that as well and then basically put our emphasis on where we see the greatest consumer relevance and hence the greatest growth opportunity.

Luca Borlini: The next question is from Jeremy Fialko at HSBC; please go ahead, Jeremy.

Jeremy Fialko: Thank you.

Bruno Monteyne: Thank you.

Rachel Smith: Next question is from Jeremy Fialko at HSBC. Please go ahead, Jeremy.

Luca Borlini: Next question is from Jeremy Fialko at HSBC. Please go ahead, Jeremy.

Speaker Change: Thank you. Next question is from Jeremy Fialko at HSBC. Please go ahead, Jeremy.

Jeremy Fialko: Hi, good afternoon. I have a couple of questions from me. So the first one is, can you talk about what's going on in AOA in terms of some of the sort of boycotts of Western brands? I see that some of your Malaysian sales were down quite a lot in the quarter. So which markets are you seeing it in, whether the situation's getting kind of worse, and what sort of drag that it might be having on your business?

Jeremy Fialko: Oh, hi. Hi, good afternoon. A couple of questions from me. First one is, could you talk about what's going on in AOA in terms of some of the sort of boycotts of Western brands? I see that some of your Malaysian sales were down quite a lot in the quarter. Which markets you're seeing it, whether the situation's getting kind of worse and what sort of the drag that it might be having on your business. The second one is, I guess, a bit of a follow-up on Guillaume's question from earlier. If we focus on Nespresso in particular, again, you are relatively slow period for Nespresso. You know, I thought that you were through this kind of post-pandemic normalization.

Jeremy Fialko: Hi, good afternoon. A couple of questions from me.

Jeremy Fialko: Can you talk about what's going on in AOA in terms of some of the sort of boycotts of Western brands? I see that some of your Malaysian sales are down.

Jeremy Fialko: quite a lot in the the quarters. So which markets you're seeing it, whether the situation's getting kind of worse, and what sort of the drag that it might be having on your business. And then the second one is I guess a bit of a follow-up on Guillaume's question from earlier. If we focus on Nespresso in particular, again a relatively slow period for Nespresso, you know I thought

Jeremy Fialko: And then the second one is, I guess, a bit of a follow-up on Guillaume's question from earlier. If we focus on Nespresso in particular, again, relatively slow period for Nespresso. I thought that you were through this kind of post-pandemic normalization. So could you sort of talk about what the path to that business back to mid-single-digit growth is, or whether indeed you think it is a mid-single-digit growth business going forward, or whether now, because the penetration of the systems or whatever is so high, we do need to have a more kind of gradual type of growth rate from Nespresso going I'm talking here, particularly about the standalone business rather than the Starbucks stuff that you're selling at retail. Thanks.

Jeremy Fialko: You know, I thought that you were through this kind of post-pandemic normalization. Could you sort of talk about what the path to that business back to mid-single digit growth is, or whether indeed you think it is a mid-single digit growth business going forward, or whether now because the penetration of the systems or whatever is so high, we do need to have a more kind of gradual type of growth rate from Nespresso going forward. I'm talking here particularly about the standalone business rather than the Starbucks stuff that you're selling in retail. Thanks.

Jeremy Fialko: Could you sort of talk about what the path to that business back to mid-single digit growth is, or whether indeed you think it is a mid-single digit growth business going forward, or whether now because the penetration of the systems or whatever is so high, we do need to have a more kind of gradual type of growth rate from Nespresso going forward. I'm talking here particularly about the standalone business rather than the Starbucks stuff that you're selling in retail. Thanks.

Speaker Change: you were through this kind of post-pandemic normalization. So could you talk about

Speaker Change: What the path to that business back to mid-single-digit growth is, or whether indeed you think it is a mid-single-digit growth business going forward, or whether now because the penetration of the systems or whatever is so high, we do need to have a more gradual

Mark Schneider: Jeremy, thank you. Let me try and take a crack at both.

Speaker Change: type of growth rate from Nespresso going forward. I'm talking here particularly about the standalone business rather than the Starbucks stuff that you're selling in retail. Thanks.

Mark Schneider: So in AOA, you're right, we're seeing continued consumer hesitancy in some select markets as a result of the Middle Eastern political situation, and that is ongoing. It has not improved very much since the beginning of the year, but I also don't see it turning worse at this point. We've stayed away from more targeting. I don't see us as a company particularly pointed out. I think it's a general hesitancy with regard to global consumer brands.

Mark Schneider: Jeremy, thank you. Let me try and take a crack at both. In AOA, you're right, we're seeing continued consumer hesitancy in some select markets as a result of the Middle East political situation. That is ongoing. It has not improved very much since the beginning of the year, but I also don't see it turning worse at this point. We've stayed away from more targeting. I don't see us as a company particularly pointed out. I think it's a general hesitancy with regards to global consumer brands. Regarding Nespresso, it is important that, of course, we report this business to you as a globally managed business. You have to see the wider reality of Nespresso plus the portion coffee that runs on its machines.

Speaker Change: Jeremy, thank you. Let me try and take a crack at both. So in AOA, you're right, we're seeing continued consumer hesitancy.

Speaker Change: in some select markets as a result of the...

Speaker Change: Middle Eastern political situation.

Speaker Change: That is ongoing. It has not improved very much since the beginning of the year, but I also don't see it turning worse at this point. We've stayed away from more targeting. I don't see us as a company particularly pointed out. I think it's a general hesitancy with regards to global consumer brands.

Mark Schneider: Regarding Nespresso, it is important that, of course, we report this business to you as a globally managed business. You have to see the wider reality of Nespresso plus the portion coffee that runs on its machines. That would be then our Starbucks capsules and also NESCAFÉ Farmers Origins. Between those three brands, we're covering different price points, and we're also covering different channels. I think overall, we're doing quite well when it comes to what we call the Nespresso system sales.

Speaker Change: Regarding Nespresso, it is important that, of course, we report this business to you.

Speaker Change: as a globally managed business.

Speaker Change: But you have to see the wider reality of Nespresso plus the portioned coffee that runs on its machines. So that would be then our Starbucks capsules and also Nescafé Pharma's origin.

Mark Schneider: That would be then our Starbucks capsules and also NESCAFÉ Farmers Origins. Between those three brands, we're covering different price points, and we're also covering different channels. I think overall, we're doing quite well when it comes to what we call the Nespresso system sales. Nespresso, depending on what quarter you look at it, the performance may not tell you the full story. In particular now, when it comes to the H1, for example, and pricing opportunities, do keep in mind Nespresso, when it comes to its coffee mixes, it relies to a larger degree than some of the other brands on Arabica, and hence the pricing opportunity and the pricing need was less pronounced in this area.

Speaker Change: And so, between those three brands, we're covering different price points and we're also covering different channels.

Speaker Change: And so I think overall we're doing quite well when it comes to what we call the Nespresso system sales.

Mark Schneider: Nespresso, depending on what quarter you look at it, the performance may not tell you the full story. In particular now, when it comes to the H1, for example, and pricing opportunities, do keep in mind Nespresso, when it comes to its coffee mixes, it relies to a larger degree than some of the other brands on Arabica, and hence the pricing opportunity and the pricing need was less pronounced in this area. There's always some special factors that apply and, hence, you may not have seen sort of the organic growth for this particular period in time, that we had in mind.

Speaker Change: And then Nespresso, depending on what year, what quarter you look at it.

Speaker Change: The performance may not tell you the full story, so in particular now, when it comes to the first half, for example, and pricing opportunities, do keep in mind Nespresso, when it comes to its coffee.

Speaker Change: And, of course, there was a lot of mixed, it relies to a larger degree than some of the other brands on Arabica, and hence the pricing opportunity and the pricing need was less pronounced in this area.

Mark Schneider: There's always some special factors that apply and, hence, you may not have seen sort of the organic growth for this particular period in time, that we had in mind. On a longer-term basis, still very bullish here on the opportunity with Nespresso and the two formats, both the original line and the Vertuo line.

Speaker Change: So there's always some special factors that apply and hence you may not have seen sort of the organic growth for this particular period of time.

Mark Schneider: On a longer-term basis, still very bullish here on the opportunity with Nespresso and the two formats, both the original line and the Vertuo line.

Speaker Change: Bullish here on the opportunity with Nespresso and the two formats, both the Original Line and the Ventura Line.

Luca Borlini: So the next question is from Celine Pannuti at J.P. Morgan. Please go ahead, Celine.

Rachel Smith: Next question is from Celine Pannuti at J.P. Morgan. Please go ahead, Celine.

Luca Borlini: Next question is from Celine Pannuti at J.P. Morgan. Please go ahead, Celine.

Celine Pannuti: Thank you for taking my question. Good afternoon. Perhaps before taking my question, I would like to thank you, Luca, for your help and your dedication while at IR at Nestle. So a warm thank you and congratulations for your next move.

Speaker Change: So next question is from Celine Pannuti at J.P. Morgan. Please go ahead, Celine.

Jeremy Fialko: Thank you for taking my question. Good afternoon. Maybe before taking my question, I want to thank you, Luca, for your help and your dedication while at the IR at Nestlé. A warm thank you and congratulations for your next move. My first question is on the pricing. Mark, you said that pricing, I mean, we see that pricing is decelerating to 0.6% in Q2. Can you help us understand the level of pricing that we should be expecting into H2? Would they be already placed like in coffee and confectionery, where you will see new pricing that will accelerate? Or do we see that 0.6% as, you know, a level where you will see less pricing even than that in H2?

Celine Pannuti: Thank you for taking my question. Good afternoon. Maybe before taking my question, I want to thank you, Luca, for your help and your dedication while at the IR at Nestlé. A warm thank you and congratulations for your next move. My first question is on the pricing. Mark, you said that pricing, I mean, we see that pricing is decelerating to 0.6% in Q2. Can you help us understand the level of pricing that we should be expecting into H2? Would they be already placed like in coffee and confectionery, where you will see new pricing that will accelerate?

Celine Pannuti: My first question is on the pricing. So Mark, you said that pricing, I mean, we see that pricing is decelerating to 0.6 in the second quarter. Can you help us understand the level of pricing that we should be expecting into the second half? Would they be already places, like in coffee and confectionery, where you will see new pricing that will accelerate? Or do we see that 0.6 as a level where you will see less pricing even than that in the second half?

Celine Pannuti: Or do we see that 0.6% as, you know, a level where you will see less pricing even than that in H2? My second question probably is follow up as well on that pricing point. Given what you said, Anna, gross margin will be negative in H2. I wonder, as we look into 2025, and into the range of 17.5 to 18.5, which is your margin target, how comfortable are you that in an environment where you will have to face the higher cost inflation because that would be as well the case for 2025, what measures are in place for you to deliver on that, given H2 margin will be under pressure? Thank you.

Jeremy Fialko: My second question probably is follow up as well on that pricing point. Given what you said, Anna, gross margin will be negative in H2. I wonder, as we look into 2025, and into the range of 17.5 to 18.5, which is your margin target, how comfortable are you that in an environment where you will have to face the higher cost inflation because that would be as well the case for 2025, what measures are in place for you to deliver on that, given H2 margin will be under pressure? Thank you.

Speaker Change: My second question, probably a follow-up as well on that pricing point, but given what you said, Anna, gross margin will be negative in the second half of the year. And so I wonder, as we look into 2025 and into the...

Speaker Change: the range of 17.5 to 18.5, which is your margin target. How comfortable are you that in an environment where you will have to face the higher cost inflation because there will be as well the case for 2025, what measures are in place for you to deliver on that given H2 margin will be under pressure. Thank you.

Anna Manz: Shall I have a go at the first one? How to think about pricing. As I look forward, I would presume that the level of promotional intensity that we're seeing currently continues. With respect specifically to Nestlé Health Science, there we are investing specifically to get our products back on shelf and really get that business going again. That's quite a time-bound thing. That should be done by the end of Q3. Then as I look out across H2, we will see commodity prices, you know, continue to go up in coffee and cocoa, and there we will be taking pricing. If you wrap all of that together, you know, yes, I expect to see positive price in H2 and for the year.

Anna: Shall I have a go at the first one? So how do you think about pricing? So as I look forward, I would presume that the level of promotional intensity that we're seeing currently will continue. So if you wrap all of that together, you know, yes, I expect to see positive price in the second half and for the year. And, you know, we'll take every opportunity that is appropriate whilst maintaining the right competitive price gapping for our brands for consumers.

Speaker Change: Shall I have a go at the first one? So how to think about pricing. So as I look forward I would presume that the level of promotional intensity that we're seeing currently continues.

Speaker Change: With respect specifically to Nestle Health Science, there we are investing specifically to get our

Speaker Change: products back on shelf and really get that business going again. And that's quite a time-bound thing, so that should be done by the end of Q3. And then as I look at across the half,

Speaker Change: We'll see commodity prices, you know, continue to go up in coffee and cocoa and there we will be taking pricing So if you wrap all of that together, you know, yes, I expect to see positive price

Anna Manz: If you wrap all of that together, you know, yes, I expect to see positive price in H2 and for the year. You know, we'll take every opportunity that is appropriate while maintaining the right competitive price gapping for our brands, for consumers.

Anna Manz: You know, we'll take every opportunity that is appropriate while maintaining the right competitive price gapping for our brands, for consumers.

Speaker Change: in the second half and for the year, and, you know, we'll take every opportunity that is appropriate whilst maintaining the right competitive price gapping for our brands for consumers.

Mark Schneider: And Celine, maybe if I can build on that, well, I know you were asking sort of with a view to the second half, also to give a bit more color on where we saw the situation now for the first half, and in particular the second quarter. I think you've probably seen less surprising than expected in North America, where on the one hand there is this promotional intensity coming from the value-seeking consumer that Anna talked about, but on the other hand, I also wanted to point out some of the more active moves we've made, in particular around getting product, new product, on the shelf and paying the listing fees.

Mark Schneider: Celine, maybe if I can build on that. While I know you were asking, sort of with a view towards the H2, also to give a bit more color on where we saw the situation now for the H1, and in particular the Q2. I think you've seen probably lesser pricing than expected in North America, where on the one hand it's this promotional intensity coming from the value-seeking consumer that Anna talked about. But on the other hand, I also wanted to point out some of the proactive moves we've done, in particular around getting new product on shelf and paying the listing fees.

Speaker Change: And, Celine, maybe if I can build on that, I know you were asking, sort of, with a view towards the second half, also to give a bit more color on where we saw the situation now for the first half, and particularly the second quarter.

Celine: I think...

Celine: You've seen probably less surprising than expected in North America, where on the one hand is this promotional intensity.

Celine: coming from the value-seeking consumer that Anna talked about. But on the other hand, I also wanted to point out some of the more active moves we've done, in particular around getting product, new product, on shelf and paying the listing fees.

Mark Schneider: The other area I wanted to point out from a geography point of view is China, where I think, compared to the expectations beginning of the year, Q2, from an overall economic point of view and consumer sentiment point of view, clearly was weaker than anyone expected, and hence that led to more intense price competition and a more hesitant consumer. In terms of category, clearly the one that stands out is pet, where I think in line with some of the input cost inflation reduction, you've also seen now a certain price normalization. As you know, price was the main reason why in 2023 and 2022 we had seen double-digit organic growth for pet.

Mark Schneider: And then the other area I wanted to point out from a geography point of view is China, where I think compared to the expectations at the beginning of the year, Q2 from an overall economic point of view and consumer sentiment point of view clearly was weaker than anyone expected, and hence that led to more intense price competition and a more hesitant consumer. In terms of category... Clearly, the one that does stand out is PET, where I think, in line with some of the input cost inflation reduction, you've also seen a certain price normalization.

Celine: And then the other area I wanted to point out from a geography point of view is China.

Speaker Change: where I think, compared to the expectations beginning of the year.

Speaker Change: Q2 from an overall economic point of view and consumer sentiment point of view Clearly was weaker than anyone expected and hence that led to more intense price competition and a more hesitant consumer. In terms of category

Speaker Change: Clearly the one that does stand out is PET.

Speaker Change: where I think in line with some of the input cost inflation reduction.

Mark Schneider: As you know, price was the main reason why in 2023 and 2022 we had seen double-digit organic growth for pet. Now as that normalized, of course, we want to be sure that our price gaps to where the market level is do not get out of hand. Hopefully that gives a bit of color on where we saw things go in H1 and Q2.

Mark Schneider: As you know, price was the main reason why in 2003 and 2002 we had seen double-digit organic growth for PET, and now it's normalized, of course. We want to be sure that our price gaps to where the market level is do not get out of hand. So hopefully, that gives a bit of color on where we saw things go in the first half and the second quarter.

Speaker Change: You've also seen now a certain price normalization. As you know, price was the main reason why, in 2023 and 2022, we had seen double digits.

Mark Schneider: Now as that normalized, of course, we want to be sure that our price gaps to where the market level is do not get out of hand. Hopefully that gives a bit of color on where we saw things go in H1 and Q2.

Speaker Change: Organic crow for pet and now it's that normalized of course we want to be sure that our price gaps to where the market level is do not get out of hand so hopefully that gives a bit of color on where we saw things go in the first half and the second quarter

Anna: And with respect to margin, as I just said in the answer, I can't remember whose question it was now, but year-on-year, our gross margin will improve. And, you know, that leaves us confident of where we stand on Utah Margin.

Anna Manz: With respect to margin, as I just said, in answer, I can't remember whose question it was now. Year on year, our gross margin will improve. So the issue is more that there's a phasing difference between H1 and H2, but we're seeing that gross margin improvement over the year as a whole. We will continue to see rebuilding of our gross margin over time, as we work through what's been a really unusual period. With respect to our UTOP margin, gross margin is just a piece of it, as you know. We also have the leverage benefit of the extra volume. We have the mix benefits that go through.

Speaker Change: And with respect to margin, as I just said in answer, I can't remember whose question it was now, year on year our gross margin will improve.

Speaker Change: So, the issue is more that there's a phasing difference between H1 and H2, but we're seeing that gross margin improvement over the year as a whole.

Speaker Change: And we will continue to see rebuilding of our gross margin over time as we work through what's been a really unusual period. With respect to our UTOP margin...

Speaker Change: Gross margin is just a piece of it, as you know. We also have the leverage benefit of the extra volume. We have the mixed benefits that go through. And so you put all of that together with the work that we continue to do on structural costs.

Anna Manz: You put all of that together with the work that we continue to do on structural costs and, you know, that leaves us confident of where we stand on UTOP margin.

Speaker Change: And, you know, that leaves us confident of where we stand on Utah margin.

Mark Schneider: If I could just build on that's why it was so important for us to also get that real internal growth flywheel running again, because as you know, as inflation peaked and came down, there was a period of 6 to 7 quarters with kind of weak RIG development and at times negative volumes. Clearly what you don't get then for the business is operational leverage. Getting the flywheel running again, having now a convincing RIG performance for Q2 and also continued positive RIG outlook for the business is important because it gets the operational leverage going again that Anna's referring to.

Speaker Change: Never could just build on that. That's why it was so important for us to also get that real internal crow flywheel running again, because as you know,

Speaker Change: As inflation peaked and came down, there was a period of six to seven quarters with kind of weak rig development and at times negative volumes. And clearly, what you don't get then for the business is operational leverage.

Speaker Change: Getting Flywheel running again, having now a convincing rig performance for Q2 and also continued positive rig outlook for the business is important because it gets the operational leverage going again that Anna is referring to.

Luca Borlini: Celine, thanks for your kind words. It has been a pleasure to work with you and all the investor community over these years. Next question is from David Hayes at Jefferies. Please go ahead, David.

Speaker Change: Celina, thanks for your kind words. So, it has been a pleasure to work with you and all the investor community over these years. Next question is from David Hayes at Jefferies. Please go ahead, David.

David Hayes: Thanks, Luca. Good afternoon, everyone. Just to quickly follow up on that question, just to clarify. I'm not quite clear on the H2. Gross margin is still gonna be up, but just not as much as the H1? That's what I understood. Or is it down year-on-year? You said specifically, maybe I missed that, but for the full year it will still be up. Just to clarify that one more time. I guess just in terms of the two questions and staying with margin, and that question, I guess. If you think about the pricing, you kind of talked about it being more promotional, more pressure downward than you expected. AMP demand seemed to be maybe a little bit higher as well than you expected.

David Hayes: Thanks, Luca, and good afternoon, everyone.

Anna: just to clarify, so I'm just, I'm not quite clear, on the second half, gross margin is still going to be up, but just not as much as the first half. That's what I understood.

Speaker Change: Just to quickly follow up on that question, just to clarify, so I'm just, I'm not quite clear, on the second half gross margin is still going to be up, but just not as much as the first half.

Anna: Or is it down year on year? You said specifically, maybe I missed that, but for the full year, it will still be up. Just to clarify that one more time. And then, I guess, just in terms of the two questions, and staying with margin, and that question, I guess, if you think about the pricing, you kind of talked about it being more promotional, more pressure downward than you expected. AMP demands seem to be maybe a little bit higher as well than you expected.

David: First half that's what I understood all

Speaker Change: or is it down year-on-year, you said specifically, maybe I missed that, but for the full year it will still be up. Just to clarify that one more time. And then I guess just in terms of the two questions and staying with margin.

Speaker Change: And that question, I guess, if you think about the pricing, you kind of talked about it being more promotional, more pressure downward than you expected. AMP demands seem to be maybe a little bit higher as well.

David Hayes: AMP demand seemed to be maybe a little bit higher as well than you expected. You've got the cocoa and the coffee prices going up through the year, which you've talked about as well, but you're still happy with the same guidance on margin and consensus being up around 20 basis points to your point earlier. Just to understand, what's the offset to that margin not having to change given all of those moving parts that seem a little bit less contributory than you thought at the beginning of the year?

David Hayes: You've got the cocoa and the coffee prices going up through the year, which you've talked about as well, but you're still happy with the same guidance on margin and consensus being up around 20 basis points to your point earlier. Just to understand, what's the offset to that margin not having to change given all of those moving parts that seem a little bit less contributory than you thought at the beginning of the year? I guess, are those trends likely to continue, which means that we should be thinking lower end of the 17.5, 18.5 now for next year? Or is there a lot of things that again will shift, that means that you can get well into that range?

Anna: And then you've got the cocoa and the coffee prices going up through the year, which you've talked about as well, but you're still happy with the same guidance on margin and consensus being up around 20 basis points from your point earlier. So, just to understand, what's the offset to that margin not having to change, given all of those moving parts that seem a little bit less contributory than you thought at the beginning of the year?

Speaker Change: guidance on margin and consensus being up around 20 basis points to your to your point earlier so so just understand what what's the offset to that margin not having to change given all of those

Speaker Change: moving parts that seem a little bit less contributory than you thought at the beginning of the year. And I guess, are those trends likely to continue, which means that we should be thinking of lower end of the 17.5, 18.5 now for

David Hayes: I guess, are those trends likely to continue, which means that we should be thinking lower end of the 17.5, 18.5 now for next year? Or is there a lot of things that again will shift, that means that you can get well into that range? Then the second question, just in terms of the US orders into the Fourth of July promotion, can you quantify that at all for the US business? We've got a bit more of an idea of that ongoing trend into the H2.

Anna: And I guess, are those trends likely to continue, which means that we should be thinking lower end of the 17.5, 18.5 now for next year, or are there a lot of things that will shift that means that you can get well into that range? And then the second question, just in terms of the US orders for the 4th of July promotion, can you quantify that at all for the US business?

Speaker Change: for next year or is there a lot of things that again will shift that means that you can get well into that that range and then the second question just in terms of the US orders into the 4th of July promotion

David Hayes: Then the second question, just in terms of the US orders into the Fourth of July promotion, can you quantify that at all for the US business? We've got a bit more of an idea of that ongoing trend into the H2. Were there any other promotional activities that took place?

Anna: We got a bit more of an idea of that ongoing trend into the second half. And were there any other promotional activities that took place in other markets as you tried to be more competitive that just weren't as significant as that particular one but that you'd again maybe flag into the third quarter to take account of?

Speaker Change: Can you quantify that at all for the U.S. business? We've got a bit more an idea of that ongoing trend into the second half. And were there any other promotional activities that took place?

David Hayes: Were there any other promotional activities that took place? In other markets as you tried to be more competitive, that just weren't significant as that particular one, but that you'd again maybe flag into the Q3 to take account of. Thank you so much.

David Hayes: In other markets as you tried to be more competitive, that just weren't significant as that particular one, but that you'd again maybe flag into the Q3 to take account of. Thank you so much.

Speaker Change: and other markets as you tried to be more competitive that just weren't significant as that particular one but that you'd again maybe flag into the third quarter to take account of. Thank you so much.

Anna: Thank you so much.

Anna: So let me see if I've got all of those. So on margins, just to be super clear, over the full year, we expect a gross margin improvement, and the consensus is there or thereabouts. In the first half, we saw a big improvement in market margins. The second half may be slightly below the prior year if you work the math of that through a number of things. I think we've laid out for you how we're thinking about continued rig growth, and that gives us some leverage. Of course, we're going to see some mixed benefits from that as well, and we'll get some leverage benefits from that. And then I think the next one is the US phasing out now.

Anna Manz: Let me see if I've got all of those. On margins, just to be super clear, over the full year, we expect a gross margin improvement, and a consensus is there or thereabout. In H1 we saw a big improvement in margins. In H2 may be slightly below the prior year if you work the math of that through. That was the first question. The second question, I think, was why are we confident of our full year margin guidance overall? I think a number of things. I think we've laid out for you how we're thinking about continued RIG growth, and that gives us some leverage. Of course, we're going to see some mixed benefits in that as well, and we'll get some leverage benefits from that.

Speaker Change: So let me see if I've got all of those. So on margins, just to be super clear, over the full year we expect a gross margin improvement and a consensus is there or thereabouts. The first half we saw a big improvement in margins. The second half may be slightly below the prior year, if you work the maths of that through.

Speaker Change: So that was the first question.

Speaker Change: The second question, I think, was why are we confident of our full year margin guidance overall? And I think...

Speaker Change: A number of things. I think we've laid out for you how we're thinking about continued rig growth and that gives us some leverage. Of course, we're going to see some mixed benefits in that as well. And we'll get some leverage benefits from that.

Anna Manz: Of course, we're going to see some mixed benefits in that as well, and we'll get some leverage benefits from that. I won't talk more about pricing, so I think we've done that one to death. In terms of AMP investment, we've had a big step up in H1 of the year, and we will continue to grow our AMP investment. I think you said that was higher than expected. I don't think that's the case. This is the right level of investment to grow our business. This is the investment that drives future growth, and we think it's really important.

Anna Manz: I won't talk more about pricing, so I think we've done that one to death. In terms of AMP investment, we've had a big step up in H1 of the year, and we will continue to grow our AMP investment. I think you said that was higher than expected. I don't think that's the case. This is the right level of investment to grow our business. This is the investment that drives future growth, and we think it's really important. That's the execution that we're delivering that delivers the RIG growth. If you look at H2, we're lapping a much higher level of investment in H2 of last year. While it will continue to increase, there won't be such a big step up half on half.

Speaker Change: I won't talk more about pricing, because I think we've done that one to death. In terms of A&P investment, we've had a big step up in the first half of the year, and we will continue to grow our A&P investment. And I think you said that was higher than expected.

Speaker Change: I don't think that's the case. This is the right level of investment to grow our business. This is the investment that drives future growth, and we think it's really important. And that's the execution that we're delivering that delivers the rig growth.

Anna Manz: That's the execution that we're delivering that delivers the RIG growth. If you look at H2, we're lapping a much higher level of investment in H2 of last year. While it will continue to increase, there won't be such a big step up half on half. Yes, you know, we've talked about cost inflation coming through and we continue to manage our structural costs. If you wrap all of that together, we're comfortable with our margin. Then I think the next one is the US phasing.

Speaker Change: But if you look at the second half, we're lapping a much higher level of investment in the second half of last year. So while it will continue to increase, there won't be such a big step up half on half.

Anna Manz: Yes, you know, we've talked about cost inflation coming through and we continue to manage our structural costs. If you wrap all of that together, we're comfortable with our margin. Then I think the next one is the US phasing. Now, maybe just to step back a minute. The RIG swing that we've seen in the US has been substantial. It was 860 basis points from -5.8 in Q1 to 2.8% growth in Q2. That is a real turnaround. The impact of the phasing of orders in Zone North America in Q2 was about 100 basis points of that 860 basis point swing. It's not material from a group perspective.

Speaker Change: And yes, we've talked about cost inflation coming through, and we continue to manage our structural costs. So if you wrap all of that together, we're comfortable with our margin.

Speaker Change: And then I think the next one is...

Anna Manz: Now, maybe just to step back a minute. The RIG swing that we've seen in the US has been substantial. It was 860 basis points from -5.8 in Q1 to 2.8% growth in Q2. That is a real turnaround. The impact of the phasing of orders in Zone North America in Q2 was about 100 basis points of that 860 basis point swing. It's not material from a group perspective. The reason we're calling it out is just so that you can understand the phasing of RIG performance won't be linear in North America over the next couple of quarters. That's all.

Anna: Maybe just to step back a minute, the rig swing that we've seen in the U.S. has been substantial. So it was 860 basis points from minus 5.8 in the first quarter to 2.8% growth in the second quarter. And that is a real turnaround.

Speaker Change: the U.S. phasing.

Speaker Change: Maybe just to step back a minute, the rig swing that we've seen in the US has been substantial. So it was 860 basis points from a minus 5.8 in the first quarter to a 2.8% growth in the second quarter.

Speaker Change: And that is a real turnaround.

Speaker Change: The impact of the phasing of orders in zone North America in Q2 was about 100 basis points of that 860 basis point swing. So it's not material from a group perspective.

Anna Manz: The reason we're calling it out is just so that you can understand the phasing of RIG performance won't be linear in North America over the next couple of quarters. That's all. Are there any other promotional activities that are elsewhere? No. Only this one.

Speaker Change: The reason we're calling it out is just so that you can understand the phasing of rig performance won't be linear in North America over the next couple of quarters, that's all. And are there any other promotional activities that are elsewhere? No.

Anna Manz: Are there any other promotional activities that are elsewhere? No. Only this one.

David Hayes: Great. Thank you.

Rachel Smith: Next question is from Sarah Simon at Morgan Stanley. Please go ahead, Sarah.

Luca Borlini: Next question is from Sarah Simon at Morgan Stanley. Please go ahead, Sarah.

Speaker Change: Only this one.

Speaker Change: Great. Thank you. Next question is from Sarah Simon at Morgan Stanley . Please go ahead, Sarah.

Sarah Simon: Yes. Afternoon. I've got two, if I may. Just to come back on this point about marketing and pricing. If you're stepping up materially the level of innovation, so if it was 15% more new launches in H1 and it's gonna be 20 for the full year, that obviously is a big step up again in H2 to get there. Does that not entail the need for more marketing again and also maybe more paying fees to get onto shelves? That was the first thing. Second question was just on this 100 basis points. Can you call out any specific categories where which benefited just so we can think about it from a category perspective rather than a geographic perspective? Thanks.

Anna: Yes, afternoon. I've got two, if I may.

Sarah Simon: Yes, afternoon. I've got two if I may. Just to come back on this point about marketing and pricing, if you're stepping up materially the level of innovation, so if it was 15% more new launches in H1 and it's going to be 20 for the full year, that obviously is

Anna: Just to come back on this point about marketing and pricing, if you're stepping up materially the level of innovation, so if there were 15% more new launches in H1 and it's going to be 20 for the full year, that obviously is a big step up again in H2 to get there. Does that not entail the need for more marketing again, and also maybe more paying fees to get onto shelves? That was the first thing. The second question was just on this 100 basis points. Can you call out any specific categories which benefited, just so we can think about it from a category perspective rather than a geographic perspective?

Anna: Thanks.

Speaker Change: a big step up again in H2 to get there. Does that not entail the need for more marketing again and also maybe more paying fees to get onto shelves? That was the first thing.

Sarah Simon: Second question was just on this 100 basis points. Can you call out any specific categories where which benefited just so we can think about it from a category perspective rather than a geographic perspective? Thanks.

Speaker Change: Second question was just on this 100 basis points, can you call out any specific categories which benefited, just so we can think about it from a category perspective rather than a geographic perspective? Thanks.

Anna Manz: With respect to innovation, we've got a wide range of innovations coming out. What we're consistently doing is really using forward-looking executional metrics to make sure that we're taking our innovations more broadly across more countries in a more effective way. Actually, you see that, you know, in our billionaire brands. You see that sort of focus that we're bringing in our advertising to really focus it in the areas where it can make the biggest impact. We're seeing the benefit of that in terms of the market share gains that we're seeing. As we look at the innovation we're bringing forward, it's often variants of existing brands. As we launch them into market, it's not like they need a whole new set of brand building.

Speaker Change: So with respect to innovation, we've got a wide range of innovations coming out. And what we're consistently doing

Anna: really using forward-looking executional metrics to make sure that we're taking our innovations more broadly across more countries in a more effective way. And actually, you see that in our billionaire brands.

Speaker Change: We're really using forward looking executional metrics to make sure that we're taking our innovations more broadly across more countries in a more effective way.

Anna: You see that sort of focus that we're bringing to our advertising to really focus it in the areas where it can make the biggest impact. And we're seeing the benefit of that in terms of the market share gains that we're seeing. So as we look at the innovation we're bringing forward, it's often variants of existing brands, and so, as we launch them into the market, it's not like they need a whole new set of brand building; it's about delivering on a specific consumer need in a market. So, look at, for example, Nescafe Ice Roaster.

Speaker Change: And actually you see that, you know, in our billionaire brands, you see that sort of focus that we're bringing in our advertising to really focus it in the areas where it can make the biggest impact.

Anna Manz: As we look at the innovation we're bringing forward, it's often variants of existing brands. As we launch them into market, it's not like they need a whole new set of brand building. It's about delivering on a specific consumer need in a market. Look at, for example, Nescafé Ice Roast, which is the cold-soluble Nescafé. It comes out under the Nescafé brand halo, but it really delivers on a specific young consumer need.

Speaker Change: and we're seeing the benefit of that in terms of the market share gains that we're seeing. So as we look at the innovation we're bringing forward...

Speaker Change: It's often variants of existing brands and so as we launch them into market It's not like they need a whole new set of brand building It's about delivering on a specific consumer need in a market. So look at for example Nescafe ice roast

Anna Manz: It's about delivering on a specific consumer need in a market. Look at, for example, Nescafé Ice Roast, which is the cold-soluble Nescafé. It comes out under the Nescafé brand halo, but it really delivers on a specific young consumer need. You know, yes, there is a step up in advertising and promotional investment H1 on H2, and we think we've got the right focus and targeting for the innovation we're bringing to market. Yes, in the US specifically, where we're launching new brands, there will be listing fees, but that's a US-specific issue. With your question on the North American phasing. Across most categories, I mean, slight weighting to frozen, but not big in the scheme of things.

Speaker Change: which is the cold soluble Nescafe, it comes out under the Nescafe brand Halo but it really delivers on a specific young consumer need.

Anna Manz: You know, yes, there is a step up in advertising and promotional investment H1 on H2, and we think we've got the right focus and targeting for the innovation we're bringing to market. Yes, in the US specifically, where we're launching new brands, there will be listing fees, but that's a US-specific issue. With your question on the North American phasing. Across most categories, I mean, slight weighting to frozen, but not big in the scheme of things.

Anna: So, you know, yes, there is a step up in advertising and promotional investment, half on half, and we think we've got the right focus in targeting for the innovation we're bringing to market. And yes, in the U.S. specifically, where we're launching new brands, there will be listing fees, but that's a U.S.-specific issue. And then with your question on the North American phasing, across most categories, I mean, slight weighting to frozen, but not big in the scheme of things. Next question is from Jeff Stent at Exxon. Please go ahead, Jeff.

Speaker Change: So, you know, yes, there is a step up in advertising and promotional investment, half and half, and we think we've got the right focus and targeting for the innovation we're bringing to market. And yes, in the U.S. specifically, where we're launching new brands, there will be listing fees.

Speaker Change: But that's a US-specific issue.

Speaker Change: And then with your question on the North American phasing, across most categories, I mean, slight weighting to frozen, but not big in the scheme of things.

Rachel Smith: Next question is from Jeff Stent at Exane. Please go ahead, Jeff.

Luca Borlini: Next question is from Jeff Stent at Exane. Please go ahead, Jeff.

Speaker Change: Next question is from Jeff Stent at Exane. Please go ahead, Jeff.

David Hayes: Thank you, Luca. Just to echo Celine's comments, I'll miss you, Luca. Thank you. To my question. At the start of the year, you said you intended to achieve mid-single digit growth in 2025. I assume that guidance remains in place, does it?

Jeff Stent: Thank you, Luca. Just to echo Celine's comments, I'll miss you, Luca. Thank you. To my question. At the start of the year, you said you intended to achieve mid-single digit growth in 2025. I assume that guidance remains in place, does it?

Jeffrey Patrick Stent: Thank you, Luca. And just to echo Celine's comments, I'll miss you, Luca. Thank you.

Jeffrey Patrick Stent: But to my question, at the start of the year, you said you intended to achieve mid-single digit growth in 2025. I assume that guidance remains in place, does it?

Mark Schneider: Jeff, that's your only question or do you have a second one?

Jeffrey Patrick Stent: Oh no, sorry, sorry, that was my only question. Yeah, I realized I should ask two or three, but I'm just asking one. Yeah, my apologies.

David Hayes: Oh, no, sorry. Sorry, that was my only question. Yeah. I realized I should ask two or three, but I'm asking one. Yeah, my apologies.

Speaker Change: And Jeff, that's your only question. Do you have a second one?

Jeff: Oh no, sorry, that was my only question. Yeah, I realize I should ask two or three, but I'm asking one. Yeah, my apologies.

Mark Schneider: Look, I mean, as you know, going back to the Capital Markets Day in Barcelona, this whole notion of reestablishing mid-single-digit 2025 is a medium-term goal of ours and remains that, specifically for 2025, given how choppy the environment is and, you know, how unforeseen some of the macro and geopolitical events are. I'd like to reserve basically that to the moment in time when we give the annual guidance, and that is February next year.

Speaker Change: So, look, I mean...

Speaker Change: As you know, going back to the Capital Market Day in Barcelona...

Speaker Change: This whole notion of re-establishing mid-single-digit 25 is a mid-term goal of ours.

Speaker Change: and remains that.

Speaker Change: Specifically 4.25, given how choppy the environment is and, you know, how unforeseen some of the macro and geopolitical events are, I'd like to reserve basically that to the moment in time when we give the annual guidance, and that is February next year.

David Hayes: Okay. Thank you very much.

Mark Schneider: Thanks, Jeff. Next question is from Victoria Petrova at Bank of America. Please, go ahead, Victoria.

Luca Borlini: Thanks, Jeff. Next question is from Victoria Petrova at Bank of America. Please, go ahead, Victoria.

Speaker Change: Okay, thank you very much. Thanks Jeff.

Speaker Change: So next question is from Victoria Petrova at Bank of America. Please go ahead, Victoria.

Anna: Understanding is your cost of goods sold in 2024 will be up because of cocoa and coffee costs, primarily. Are you hedged on cocoa till the year end? How should we think about that? And my second question: at the beginning of the year, when you talked about the potential 4% organic growth target, it was around 1% volume and price and around 2% mix. Now you're moving to more than 3%. What has changed within this equation? What has been surprising in 2024 mostly? Is it price?

Victoria Petrova: Thank you very much. I have two clarification questions. First, my understanding is your cost of goods sold in 2024 will be up because of cocoa and coffee costs primarily. Are you hedged on cocoa till the year-end? How should we think about that? And my second question, in the beginning of the year, when you talked about the potential 4%, organic growth target, it was around 1% volume and price and around 2% mix. Now you're moving to more than 3%. What has changed within this equation? What has been surprising in 2024 mostly? Is it price or is it mix? Again, we have very different performance in Q1 and Q2 when we look at RIG. It would be interesting to understand how you think about it. Thank you so much.

Viktoria Petrova: Thank you very much. I have two clarification questions. First, my understanding is your cost of goods sold in 2024 will be up because of cocoa and coffee costs primarily. Are you hedged on cocoa till the year-end? How should we think about that? And my second question, in the beginning of the year, when you talked about the potential 4%, organic growth target, it was around 1% volume and price and around 2% mix.

Victoria Petrova: Thank you very much. I have two clarification questions. First, my understanding is your cost of goods sold in 2024 will be up because of cocoa and coffee costs primarily.

Victoria Petrova: Are you hedged on cocoa till the year end? How should we think about that? And my second question, in the beginning of the year, when you talked about the potential 4% organic growth target,

Viktoria Petrova: Now you're moving to more than 3%. What has changed within this equation? What has been surprising in 2024 mostly? Is it price or is it mix? Again, we have very different performance in Q1 and Q2 when we look at RIG. It would be interesting to understand how you think about it. Thank you so much.

Speaker Change: It was around 1% volume and price and around 2% mix. Now you're moving to more than 3%. What has changed within this equation? What has been surprising in 2024 mostly? Is it price? Is it volume?

Speaker Change: or is it a mix? Again, we have very different performance in Q1 and Q2 when we look at RIC, so it would be interesting to understand how you think about it. Thank you so much.

Mark Schneider: Victoria, let me take the second one and then hand it to Anna for the first one. Look, when we said around 4%, we did not provide at the time a detailed breakdown into pricing and RIG, and that's just in line with our long-standing practice. It's very clear that as we went through H1, we've done, especially in Q2, everything we said we were gonna do on RIG. That's important to me from an execution point of view. You know, we did see finally the lift off from the stronger brand support, the focus on the billionaire brands, betting on these fast-growing channels that Anna described, and then also getting that innovation out there that so far has seen good success.

Speaker Change: Let me take the second one and then hand it to Anna for the first one. at the time, a detailed breakdown into what we were looking at.

Mark Schneider: Especially in the second quarter, everything we said we were going to do, on rig. And that's important to me from an execution point of view. You know, we did finally see the lift off from the stronger brand support, the focus on the billionaire brands, betting on these fast growing channels that Anna described, and then also getting that innovation out there that so far has seen good success. So all of these good drivers across the board, and I think that's why this slide in the presentation is so important.

Mark Schneider: You know, we did see finally the lift off from the stronger brand support, the focus on the billionaire brands, betting on these fast-growing channels that Anna described, and then also getting that innovation out there that so far has seen good success. All of these good drivers across the board, and I think that's why this slide in the presentation is so important. This is not a one-trick pony. This is something that applies to all five zones, and it applies to all categories. I think that was, in my opinion, the key turning point, and that one worked just as foreseen.

Mark Schneider: All of these good drivers across the board, and I think that's why this slide in the presentation is so important. This is not a one-trick pony. This is something that applies to all five zones, and it applies to all categories. I think that was, in my opinion, the key turning point, and that one worked just as foreseen. The part, as we went deeper into Q2, that we had to realize is that overall, in addition to some of the special circumstances we pointed out to you, like the listing fees and reestablishing Nestlé Health Science VMS products back on shelf and so forth, that there is a bit of a stronger promotional intensity environment out there than we had foreseen. Hence, pricing was gonna get lower for the full year.

Mark Schneider: This is not a one-trick pony. This is something that applies to all five zones, and it applies to all categories. I think that was, in my opinion, the key turning point, and that one worked just as expected.

Mark Schneider: The part, as we went deeper into Q2, that we had to realize is that overall, in addition to some of the special circumstances we pointed out to you, like the listing fees and reestablishing Nestlé Health Science VMS products back on shelf and so forth, that there is a bit of a stronger promotional intensity environment out there than we had foreseen. Hence, pricing was gonna get lower for the full year. That's why in this equation now, we felt that it's more appropriate, rather than guiding around 4%, to guide at least 3%.

Mark Schneider: In addition to some of the special circumstances we pointed out to you, like the listing fees and reestablishing Nestle Health Signs, VMS products back on the shelf, and so forth, there is a bit of a stronger promotional intensity environment out there than we had foreseen. Hence, pricing was going to get lower for the full year. And that's why this equation is indicating to you that greater than 3%, at least 3%, is the better descriptor of what we have to expect than around 4%.

Mark Schneider: That's why in this equation now, we felt that it's more appropriate, rather than guiding around 4%, to guide at least 3%. You may remember, in the full year, in the Q1 call, I mentioned to you that when we were saying around 4%, we didn't mean a backdoor 3% to 5%. That was important to us, so we bracketed the target range more closely around 4%. Now we're staying true to that. We are basically indicating to you that greater than 3%, at least 3%, is the better descriptor of what we have to expect than around 4%. But you also see that this is just literally a few basis points apart, and it's not too far away from where consensus is anyways. Overall, pricing has come down.

Mark Schneider: You may remember, in the full year, in the Q1 call, I mentioned to you that when we were saying around 4%, we didn't mean a backdoor 3% to 5%. That was important to us, so we bracketed the target range more closely around 4%. Now we're staying true to that. We are basically indicating to you that greater than 3%, at least 3%, is the better descriptor of what we have to expect than around 4%. But you also see that this is just literally a few basis points apart, and it's not too far away from where consensus is anyways. Overall, pricing has come down.

Anna Manz: And now we are staying true to that and we are basically indicating to you that greater than three at least three is a better descriptor of what we have to expect that at around four but you also see that this is just literally a few basis points apart and it's not too far away from where consensus is anyways. So overall.

Mark Schneider: But you also see that this is just literally a few basis points apart, and it's not too far away from where consensus is anyway. So overall, pricing has come down, and the pricing expectation has come down a little bit from what we expected at the beginning of the year in Q1. And maybe just barely.

Speaker Change: Pricing has come down to pricing expectation has come down a little bit from from.

Mark Schneider: The pricing expectation has come down a little bit from what we expected at the beginning of the year and in Q1.

Speaker Change: From what we expected at the beginning of the year and in Q1.

Anna Manz: Maybe just to cover that first question. You talked about our input costs going up. They're not actually in aggregate. Coffee and cocoa are definite upward pressure, but we've got, you know, benefit elsewhere. In aggregate, where we sit today, our input costs are broadly flat year on year.

Speaker Change: And maybe just to cover that first question.

Speaker Change: You touched Bachelor and pet costs going up they're not actually in aggregate.

Mark Schneider: Coffee and cocoa are definite upward pressures, but we've got, you know, benefits elsewhere. So, in aggregate, where we sit today, our input costs are broadly flat year on year.

Speaker Change: Coffee and K K are definite upward pressure, but we've got you know benefit elsewhere. So in aggregate law, we sit today, our input costs are broadly flat year on year.

Speaker Change: Thank you very much. So next question is from GNC do a Jones with RBC. Please go ahead James.

Victoria Petrova: Thank you very much.

Viktoria Petrova: Thank you very much.

Mark Schneider: Thank you very much.

Mark Schneider: Next question is from James Edwardes Jones at RBC. Please go ahead, James.

Luca Borlini: Next question is from James Edwardes Jones at RBC. Please go ahead, James.

James Edwardes Jones: Thank you, Luca. Mark, you said that, I'm paraphrasing, but you should do mid-single digit revenue growth without one-offs. On one-offs, what always or normally happens in big diversified consumer staples companies like Nestlé, so, you know, I could point to Unilever with ice cream or Danone with its struggles in plant-based. Wouldn't it make sense for these one-offs to somehow be reflected in your medium-term expectations?

James: Hi, Judy.

James: You said.

Speaker Change #112: You should I'm paraphrasing British to mid single digits revenue growth without one offs on.

Speaker Change: One offs, what weighs on Nuomi happens in big diversified consumer staples companies aren't necessary. So I could point to or do you need with ice cream or genome with its struggles in plant based.

Speaker Change: It makes sense for these one offs to somehow be reflected in your medium term expectations.

Mark Schneider: Yeah, James, important question. And what I should have said really is material, significant one-offs. And those typically you don't have every quarter, every year. So, yes, of course, I mean, there's always a number of one-off situations that you're dealing with.

James: Yeah, James important question and what I, what I Should've said really is material significant one offs and those typically you don't have every quarter every year. So yes of course, I mean, there's always a number of one off situations that you're dealing with.

Mark Schneider: Yeah, James, important question. What I should have said really is material significant one-offs. Those typically you don't have every quarter, every year. Yes, of course. I mean, there's always a number of one-off situations that you're dealing with. I think you've also seen many years which we had reported that didn't have any of those or that have positive ones to equal out, then some of the negatives. Clearly, what I was trying to intend to say is something that we very much called out to you in the middle of the COVID crisis, that with that last major portfolio move at the time, which was the divestiture of Nestlé Waters US, and that deal closed and out of the system, we felt we had a portfolio, and that feeling still applies today.

James: But I think you've also seen many years, which we had reported that didn't have any of those or can have positive ones too.

James: Equal out than some of the negatives. So clearly what I was trying to intend to say is something that we very much called out to you in the middle of the Covid crisis that with that last major portfolio move at the time.

Mark Schneider: Clearly, what I was trying to intend to say is something that we very much called out to you in the middle of the COVID crisis, that with that last major portfolio move at the time, which was the divestiture of Nestlé Waters US, and that deal closed and out of the system, we felt we had a portfolio, and that feeling still applies today. We have a portfolio that can, in a normalized state, deliver mid-single digit growth, defined as 4% to 6%. That statement still applies.

Mark Schneider: But I think you've also seen many years which we have reported that didn't have any of those or that had positive ones to equal out some of the negatives. So, clearly, what I was trying to intend to say is something that we very much called out to you in the middle of the COVID crisis that, with that last major portfolio move at the time, and due to inflation, we've been significantly north of that.

Speaker Change: Which was the divestiture of Nestle waters U S and.

Speaker Change: And that deal closed and out of the system. We felt we had a portfolio that feeling still applies today, we had a portfolio. We have a portfolio that can in a normalized state deliver mid single digit growth defined as 4% to 6% that statement still applies what you've seen since we made that state.

Mark Schneider: We have a portfolio that can, in a normalized state, deliver mid-single digit growth, defined as 4% to 6%. That statement still applies. What you've seen since we made that statement in 2020, is you've seen some years where due to COVID and due to inflation, we've been significantly north of that. Now as we're coming out from that significant inflation spike, you're seeing a year where with at least 3% organic growth guidance, we're gonna be slightly under it. But that the portfolio overall is capable of delivering that, we have confidence and again, we'll lay this out in greater detail in November.

Mark Schneider: What you've seen since we made that statement in 2020, is you've seen some years where due to COVID and due to inflation, we've been significantly north of that. Now as we're coming out from that significant inflation spike, you're seeing a year where with at least 3% organic growth guidance, we're gonna be slightly under it. But that the portfolio overall is capable of delivering that, we have confidence and again, we'll lay this out in greater detail in November.

Speaker Change: And in 2020, as you've seen some years, where due to COVID-19 and due to inflation, we've been significantly north of that and now as we're coming out from that significant inflation spike you're seeing a year, where with in at least 3% organic growth guidance, we're going to be slightly under it.

Mark Schneider: And now, as we're coming out of that significant inflation spike, you're seeing a year where, with an at least 3% organic growth guidance, we're gonna be slightly under it. But that the portfolio overall is capable of delivering that, we have confidence, and again, we'll lay this out in greater detail in November.

Speaker Change: But that the portfolio overall is capable of delivering that we have confidence and again, we'll lay those out in greater detail in November.

Speaker 17: Thank you.

James Edwardes Jones: Thank you.

Speaker Change: Okay. So next question is from Tom Sykes Deutsche Bank. Please go ahead Tom.

Luca Borlini: Next question is from Tom Sykes at Deutsche Bank. Please go ahead, Tom.

Anna: Thank you. Are you able, given all the puts and takes on the rig number, to commit to whether the rig will accelerate Q3 versus Q2? Cocoa exposed categories. Do you at all get any pre-buying ahead of price increases, or have you had any pre-buying? How early can people do it given the expected high price increases that are likely or the price increases that are likely to come through? And then just on productivity, you've historically generated 60, 70 basis points or so of productivity. I wondered, Anna, in your time there now, is that something that can be relied upon, and would you see any possibility that that level could increase at all?

Thomas Richard Sykes: Thank you yeah.

Speaker 18: Thank you. Are you able, given all the puts and takes, on the RIG number, just to commit to whether the RIG will accelerate Q3 versus Q2? In coffee and cocoa exposed categories, do you at all get any pre-buying ahead of price increases, or have you had any pre-buying? How early can people do it given the expected high price increases that are likely or the price increases that are likely to come through? Then just on productivity, you've you know, historically generated 60, 70 basis points or so of productivity. I wondered, Anna, in your time there now, is that something that can be relied upon, or would you see any possibility that that level could increase at all, please?

Tom Sykes: Thank you. Are you able, given all the puts and takes, on the RIG number, just to commit to whether the RIG will accelerate Q3 versus Q2? In coffee and cocoa exposed categories, do you at all get any pre-buying ahead of price increases, or have you had any pre-buying? How early can people do it given the expected high price increases that are likely or the price increases that are likely to come through? Then just on productivity, you've you know, historically generated 60, 70 basis points or so of productivity.

Thomas Richard Sykes: Are you able given all the puts and takes.

Thomas Richard Sykes: On the rig number just to commit to whether the rig will accelerate in Q3 versus Q2.

Speaker Change: In coffee and tea.

Alex: Thanks, Alex based categories G with toga any pre buying.

Speaker Change #103: Ahead of price increases or have you had any pre buying how early can people do it given the expected high price increases.

Speaker Change #106: The price increases that are likely to come through.

Speaker Change #110: And then just on productivity.

Speaker Change: <unk>.

Speaker Change: Historically generated 60 70 basis points or so.

Speaker Change: Productivity I wondered.

Tom Sykes: I wondered, Anna, in your time there now, is that something that can be relied upon, or would you see any possibility that that level could increase at all, please?

Speaker Change #107: In your time, there now is that something that can be relied upon on would you see any possibility that that level could increase at all.

Speaker Change #104: Should we kind of got some of this so with respect to rig closer and closer I'm not going to give you quarterly guidance on Reg them that we are back to positive rate Grace and we feel like we've got that momentum in the business and the.

Anna Manz: Can we have a go at some of those? With respect to RIG quarter on quarter, I'm not going to give you quarterly guidance on RIG. We are back to positive RIG growth, and we feel like we've got that momentum in the business and the things that we have done around really driving execution, investing, and innovating is working, which is what gives us that confidence. In terms of coffee and cocoa and pre-buying, I think the way to think about this is we're in 170 countries, and we are taking price with different customers in different channels at different times. In some cases, there's a small level of pre-buy, but when you look across the group as a whole, that's not something that is distorting our overall performance.

Anna: have a go at some of those. So, with respect to RIG quarter on quarter, I'm not going to give you quarterly guidance on RIG, but we are back to positive RIG growth, and we feel like we've got that momentum in the business and the... And in terms of productivity, I'm learning my way around Nestle and enjoying it very much, and I would say there is a great focus on productivity on an ongoing basis.

Speaker Change #102: The things that we have done around really driving execution investing and innovating is working which is what gives us that confidence.

Speaker Change #101: In terms of coffee and cocoa and pre buying I think the way to think about this is it's we're in 170 countries and we are taking price with different customers in different channels at different times in some cases, there's a small level of pre buy but when you look across the group as a whole.

Anna Manz: In some cases, there's a small level of pre-buy, but when you look across the group as a whole, that's not something that is distorting our overall performance. It's not an area I would focus on much. In terms of productivity, I'm learning my way across Nestlé and enjoying it very much. I would say there is great focus on productivity on an ongoing basis. I think that's really important for a business like us, and I think it's something that, you know, we'll be continuing to focus on and use metrics to focus on. I'm confident that we can continue to drive incremental productivity savings.

Speaker Change: That's not something that is distorting our April performance say, it's not an area I would focus on much and in terms of productivity.

Anna Manz: It's not an area I would focus on much. In terms of productivity, I'm learning my way across Nestlé and enjoying it very much. I would say there is great focus on productivity on an ongoing basis. I think that's really important for a business like us, and I think it's something that, you know, we'll be continuing to focus on and use metrics to focus on. I'm confident that we can continue to drive incremental productivity savings.

Speaker Change #105: I'm learning my way across NASA and enjoying it very much and I would say there is great focus on productivity on an ongoing basis.

Anna: And I think that's really important for a business like us. And I think it's something that, you know, we'll be continuing to focus on and use metrics to focus on. So I'm confident that we can continue to drive incremental productivity savings.

Speaker Change #105: And I think that's really important for a business like us and I think it's something that you know, we'll be continuing to focus on and use metrics to focus on so I'm confident that we can continue to drive incremental productivity savings.

Mark Schneider: Tom, let me build on that last point. As you followed us over the years, I think we are very, very much beholden to this continuous improvement mindset. There was a brief pause, and that was during the depth of COVID, because we felt at that point to go ahead with significant restructurings, even at a single location, would have been the wrong thing to do. The minute that COVID normalized, we started identifying projects again that give us good efficiency improvements going forward. You see that, by the way, reflected in our 2023 and H1 difference between underlying trading operating profit margin and trading operating profit margin. This is where some of the restructuring work can be seen.

Speaker Change #105: Tom Let me build on that last point and as you've followed us over the years I think we are very very much beholden to have us continuous improvement mindset.

Speaker Change #113: There was a brief pause and that was due on the depth of Covid, because we felt at that <unk> to go ahead with it.

Speaker Change #105: Significant restructurings, even at a single location it would've been the wrong thing to do but the minute that Colbert normalize we started identifying projects again.

Speaker Change #105: That give us good efficiency.

Speaker Change #105: Improvements going forward you see that by the way in our reflected in our 'twenty three in first half difference between underlying trading operating profit margin and trading operating profit margin. So this is where some of the restructuring work.

Mark Schneider: You see that, by the way, reflected in our 2023 and H1 difference between underlying trading operating profit margin and trading operating profit margin. This is where some of the restructuring work can be seen. I think that ongoing improvement way is the best way to seek a business that in a harmonious way, kind of builds on its growth. As you know, we're not interested in significant slash and burn style restructurings. We believe that those tend to be disruptive to growth. We believe that this continuous pathway is the right one to go.

Speaker Change #105: Can be seen.

Mark Schneider: I think that ongoing improvement way is the best way to seek a business that in a harmonious way, kind of builds on its growth. As you know, we're not interested in significant slash and burn style restructurings. We believe that those tend to be disruptive to growth. We believe that this continuous pathway is the right one to go. You've seen, in my opinion, an exemplary period between 2017 and 2019, where we had that flywheel on the improvements going, and we had the flywheel going on RIG and organic growth. Basically, after these twin distortions now of COVID and the historic inflation spike, what we're trying to get back to is exactly that dual flywheel kind of approach that funds future growth.

Speaker Change #108: And so I think that ongoing improvement way is the best way to seek a business that in ammonia is way kind of dip built on its growth as you know we're not interested in significant slash and burn style restaurant trends, we believe that those tend to be disruptive to growth. We believe that this continuous pathways there.

Speaker Change #109: I don't want to go.

Mark Schneider: You've seen, in my opinion, an exemplary period between 2017 and 2019, where we had that flywheel on the improvements going, and we had the flywheel going on RIG and organic growth. Basically, after these twin distortions now of COVID and the historic inflation spike, what we're trying to get back to is exactly that dual flywheel kind of approach that funds future growth.

Operator: So we have no further questions. We have come to the end of our session today. We all thank you for your interest in Nestle. As usual, if you have any further questions, don't hesitate to reach out to our IR team. And with that, we wish you all a very good day.

Luca Borlini: We have no further questions. We have come to an end to our session today. We all thank you for your interest in Nestlé. As usual, if you have any further questions, don't hesitate to reach out to our IR team. With that, we wish you all a very good day.

Speaker Change #108: [music].

Unnamed Speaker: This is the first time I've ever seen a cat in my life. I've never seen a cat in my life.

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