Full Year 2024 Nestle SA Earnings Call

February 13, 2025

David Hancock: Good morning and welcome to Nestlé's Full Year 2024 Results Conference Call. I'm David Hancock, Head of Investor Relations, and I'm joined today by Laurent Freixe, CEO, and Anna Manz, CFO. Before we get started, please take a moment to review the disclaimer. Let me quickly take you through the agenda. After the key messages, we will review the 2024 financials, share details of our strategic progress, and look at 2025 guidance before summarizing and then moving to Q&A. With that, I will hand over to you, Laurent.

Good morning and welcome to Nestlé's full year 2024 results conference call. I'm David Hancock, Head of Investor Relations, and I'm joined today by Laurent Fricks, CEO and Anna Manns, CFO.

Before we get started, please take a moment to review the disclaimer.

Let me quickly take you through the agenda.

After the key messages, we will review the 2024 financials, share details of our strategic progress, and look at 2025 guidance, before summarising and then moving to Q&A.

Laurent Freixe: Many thanks, David, and good morning to all. Let me start with four key messages regarding 2024 and our outlook. First, we delivered 2024 results in line with or slightly better than our guidance provided in October, both on topline and on profitability, and cash flow was strong. Second, we have given formal 2025 guidance this morning. This is unchanged versus the previous outlook despite the recent commodity price moves. Third, we are stepping up investment to accelerate category growth and improve market share performance. This is funded by our CHF 2.5 billion cost savings program called Fuel for Growth, and we'll provide some more details on progress today. Finally, we have moved quickly to put the organization in place and align our teams to deliver our plans. We had a solid finish to 2024, and this gives us a good base as we move into 2025.

With that, I will hand over to you, Laurent.

Many thanks David and good morning to all.

Laurent Fricks: Let me start with four key messages regarding 2024 and our outlook.

Laurent Fricks: First, we delivered 2024 results in line with or slightly better than our guidance provided in October, both on top line and on profitability, and cash flow was strong.

Laurent Fricks: Second, we have given formal 2025 guidance this morning. This is unchanged versus the previous outlook, despite the recent commodity price moves.

Laurent Fricks: Third, we are stepping up investment to accelerate calorie growth and improve market share performance. This is funded by our 2.5 billion Swiss francs cost savings program called Fuel for Growth.

and we'll provide some more details on progress today.

Laurent Fricks: And finally, we have moved quickly to put the organization in place and align our teams to deliver our plans.

Laurent Fricks: We had a solid finish to 2024 and this gives us a good base as we move into 2025.

Laurent Freixe: It is important to keep in mind that we are on a journey and that it will take time until we are firing on all cylinders. Things are changing and changing fast. With that, I will hand over to Anna to take you through the 2024 results.

Laurent Fricks: It is important to keep in mind that we are on a journey and that it will take time until we are firing on all cylinders. But things are changing and changing fast.

Laurent Fricks: With that, I will hand over to Anna to take you through the 2024 results.

Anna Manz: Thanks, Laurent, and good morning. I'm going to cover our performance in 2024 and the implications for 2025. We delivered 2.2% organic sales growth with RIG of 0.8% and pricing of 1.5%. Sales were also negatively impacted by foreign exchange movements due to the strengthening of the Swiss franc. Several factors shaped our sales delivery for the year. Consumer demand softened in 2024. Sentiment has stabilized but remains fragile. Consumer hesitancy towards global brands in Zone AOA had a negative impact of 40 basis points on the group's organic growth. The actions taken to reduce customer inventories in the second half of the year had an additional 20 basis point impact on growth. Pricing was lower in 2024, reflecting a reduction in input cost inflation across most categories and a return to a more normal promotional environment.

Thanks, Laurel, and good morning.

Anna Manns: I'm going to cover our performance in 2024 and the implications for 2025.

Thank you.

Anna Manns: We delivered 2.2% organic sales growth, with rig of 0.8% and pricing of 1.5%.

Anna Manns: Sales were also negatively impacted by foreign exchange movements due to the strengthening of the Swiss franc.

Several factors shaped our sales delivery for the year.

Anna Manns: Consumer demand softened in 2024. Sentiment is stabilised but remains fragile.

Anna Manns: Consumer hesitancy towards global brands in zone AOA had a negative impact of 40 basis points on the group's organic growth.

Anna Manns: And the actions taken to reduce customer inventories in the second half of the year had an additional 20 basis point impact on growth.

Anna Manns: And pricing was lower in 2024, reflecting a reduction in input cost inflation across most categories and a return to a more normal promotional environment.

Anna Manz: If we look at the quarterly movement of sales, you can see how these factors impacted growth by quarter. The sharp reduction in Q1 RIG was largely due to the US, where growth in frozen food was strongly negative, and in addition, we had temporary supply constraints in our VMS business. All quarters were impacted by soft consumer demand and consumer hesitancy towards global brands in Zone AOA. Inventory reduction actions impacted Q3 and, to a lesser extent, Q4. As cocoa and coffee prices increased, we took incremental pricing in Q3 and Q4. We delivered 17.2% UTOP margin, down 10 basis points versus 2023, and flat in constant currency terms. Gross profit margin increased 80 basis points, and we stepped up advertising and marketing investments by 40 basis points. I'll explain this in a minute. We saw a 50 basis point increase in administration expenses.

Anna Manns: If we look at the quarterly movement of sales, you can see how these factors impacted growth by quarter.

Anna Manns: The sharp reduction in Q1 rig was largely due to the US.

Anna Manns: where growth in frozen food was strongly negative and in addition we had temporary supply constraints in our VMS business.

Anna Manns: All quarters were impacted by soft consumer demand and consumer hesitancy towards global brands in Zone AOA.

Anna Manns: Inventory reduction actions impacted Q3 and to a lesser extent Q4.

Anna Manns: As cocoa and coffee prices increased, we took incremental pricing in the 3rd and 4th quarters.

Anna Manns: We delivered 17.2% UTOP margin, down 10 basis points versus 2023 and flat in constant currency terms.

Gross profit margin increased 80 basis points.

Anna Manns: And we stepped up advertising and marketing investments by 40 basis points.

I'll explain this in a minute.

Anna Manz: This is due to higher labor costs, the appreciation of the Swiss franc, and increased gross investments, particularly in digitization. To put that labor cost increase in context, our salary inflation was about 3% in 2024, which benchmarks well against a global weighted average for the markets where Nestlé operates. The 80 basis points improvement in gross profit margin was driven by pricing, portfolio optimization, and net input cost reduction. That net input cost reduction is the combination of commodity price increases offset by existing efficiency programs. In 2024, we delivered over CHF 1.2 billion of efficiencies, predominantly benefiting gross profit margin, with CHF 500 million coming from recipe reformulation and the remainder from enhanced technology programs in our plants and logistic network redesign.

We saw a 50 basis point increase in administration expenses.

Anna Manns: This is due to higher labour costs, the appreciation of the Swiss franc and increased gross investments, particularly in digitisation.

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Speaker Change: To put that labour cost increase in context, our salary invasion was about 3% in 2024, which benchmarks well against a global weighted average for the markets where Nestle operates.

Speaker Change: The 80 basis point improvement in gross profit margin was driven by pricing, portfolio optimisation and net input cost reduction.

Speaker Change: That net input cost reduction is the combination of commodity price increases offset by existing efficiency programmes.

Speaker Change: In 2024, we delivered over 1.2 billion Swiss francs of efficiencies, predominantly benefiting gross profit margin.

Speaker Change: With 500 million coming from recipe reformulation and the remainder from enhanced technology programs in our plants and logistic network redesign.

Anna Manz: As you can see, gross profit margin declined sequentially in the second half as we saw higher commodity costs, primarily in cocoa and coffee, and that's continuing into 2025. Pricing efficiencies and strategic revenue management actions will allow us to offset most of that absolute increase in cost of goods sold. Nevertheless, we expect gross profit margin in percentage terms to be lower for 2025. As we told you at our Capital Markets Day, going forward, we'll invest more in growth. This includes taste, quality, and innovation, price, distribution, and advertising and marketing, depending on our diagnosis of where we need to win with the consumer. Investment will be focused behind the most attractive opportunities and where we have robust execution plans. Specifically on advertising and marketing, we expect to reach 9% of sales by the end of the year as we previously guided.

Speaker Change: As you can see, gross profit margin declines sequentially in the second half as we saw higher commodity costs, primarily in cocoa and coffee. And that's continuing into 2025.

Speaker Change: Pricing efficiencies and strategic revenue management actions will allow us to offset most of that absolute increase in cost of goods sold.

Speaker Change: Nevertheless, we expect gross profit margin in percentage terms to be lower for 2025.

Speaker Change: As we told you at our Capital Markets Day, going forward we'll invest more in growth.

This includes taste, quality and innovation.

Speaker Change: price, distribution and advertising and marketing depending on our diagnosis of where we need to win with the consumer.

Speaker Change: Investment will be focused behind the most attractive opportunities and where we have robust execution plans.

Speaker Change: Specifically on advertising and marketing, we expect to reach 9% of sales by the end of the year as we previously guided.

Anna Manz: That means for the full year 2025, the increase should be at a similar level to the 40 basis points increase you've seen in 2024. This slide shows how gross profit margin dynamics and the growth investments flowed through to UTOP, with margin down sequentially in the second half. Looking forward, given what I've told you on gross profit margins, the timing of investments, and efficiencies, for 2025, we expect a further decrease. Let me give you a brief summary of the key factors shaping the performance of our segments this year. In Zone North America, our growth was disappointing. Consumer demand was weak, particularly at the lower end of the income spectrum. We lost share in frozen food, and we were held back in coffee creamers by capacity constraints for most of the year.

Speaker Change: That means for the full year 2025, the increase should be at a similar level to the 40 basis points increase you've seen in 2024.

Speaker Change: This slide shows how gross profit margin dynamics and the growth investments flowed through to UTOP with margin down sequentially in the second half.

Speaker Change: Looking forward, given what I've told you on gross profit margins and the timing of investments and efficiencies, for 2025 we expect a further decrease.

Speaker Change: Let me give you a brief summary of the key factors shaping the performance of our segments this year.

In zone North America, our growth is disappointing.

Speaker Change: Consumer demand was weak, particularly at the lower end of the income spectrum.

Speaker Change: We lost share in frozen food and we were held back in coffee creamers by capacity constraints for most of the year.

Anna Manz: Our actions to improve competitiveness in these underperforming sales have not yet translated to a meaningfully improved growth trajectory. Despite this negative growth, the Zone improved its UTOP margin through mix management and disciplined cost control while stepping up investments for future growth. Zone Europe delivered solid growth with improving market share trends. As we shared on our nine-month call, Q3 was impacted by delistings linked to temporary customer challenges to price increases, as well as a slowdown in Turkey. In Q4, growth improved as we got back on shelf. We're taking more price in 2025, so this may give rise to more customer challenges. Margin improvement in Europe was strong, supported by portfolio management. Zone AOA delivered positive RIG despite multiple macro headwinds. Consumer hesitancy towards global brands in some markets remained a drag through the year, but it's now in the basis of comparison as of Q1.

Speaker Change: Our actions to improve competitiveness in these underperforming cells have not yet translated to a meaningfully improved growth trajectory.

Speaker Change: Despite this negative growth, the zone improved its UTOP margin through mixed management and disciplined cost control, while stepping up investments for future growth.

So Europe delivered solid growth with improving market share trends.

Speaker Change: As we shared on our nine-month call, Q3 was impacted by delistings linked to temporary customer challenges to price increases, as well as a slowdown in Turkey.

In Q4, growth improved as we got back on shelf.

Speaker Change: We're taking more price in 2025, so this may give rise to more customer challenges.

Margin improvement in Europe was strong, supported by portfolio management.

Zone AOA delivered positive RIG despite multiple macro headwinds.

Speaker Change: Consumer hesitancy towards global brands in some markets remained a drag through the year, but it's now in the basis of comparison as of Q1.

Anna Manz: The Q4 slowdown in RIG was partially linked to actions to reduce customer inventory. In LATAM, growth was driven by price. The actions taken to manage customer inventory reduced growth in the Q3, but the Q4 bounced back, driven by additional pricing in confectionery and coffee across most markets. In China, a deflationary environment meant pricing opportunities were limited. Despite that, the Zone delivered solid RIG-led growth thanks to continued innovation with strong performance in RTD coffee and e-commerce. Nestlé Health Science did exactly what we said it would, with the second half of this year seeing growth accelerate. We've started to see an improvement in market share trends in VMS and are growing slightly ahead of the category, and that's a category which is growing in high single digits. The growth leverage delivered a step up in margin.

Speaker Change: The fourth quarter slowdown in RIG was partially linked to actions to reduce customer inventory.

In Latham, growth was driven by price.

Speaker Change: The actions taken to manage customer inventory reduced growth in the third quarter, but the fourth quarter bounced back, driven by additional pricing in confectionery and coffee across most markets.

In China, a deflationary environment meant pricing opportunities were limited.

Speaker Change: Despite that, the Zone delivered solid rig-led growth, thanks to continued innovation with strong performance in RTD coffee and e-commerce.

Speaker Change: Nessie Health Science did exactly what we said it would, with the second half of this year seeing growth accelerate.

Speaker Change: We've started to see an improvement in market share trends in VMS and are growing slightly ahead of the category, and that's a category which is growing in high single digits.

Anna Manz: Nespresso's solid RIG-led growth was largely driven by the US. Europe posted close to flat growth and remains an area of focus. The broader Nespresso ecosystem, that's including Starbucks by Nespresso, adds another 100 basis points to growth. By category, the group's growth was driven by coffee, confectionery, pet care, and health science. Coffee delivered mid-single digit growth led by soluble and RTD. Growth in pet was driven by RIG. As expected, pricing reduced but has started to stabilize a little more in Q4. I've already commented on health science, but nutrition posted positive growth with continued momentum for NAN. Prepared dishes and cooking aids were held back by the performance of frozen food in the US. Milk products and ice cream were impacted by the weakness in dairy and coffee creamers in the US. Confectionery growth was driven by pricing.

The growth leverage delivered a step up in margin.

Nespresso's solid, rig-led growth was largely driven by the US.

Speaker Change: Europe posted close to flat growth and remains an area of focus.

Speaker Change: The broader Nespresso ecosystem, that's including Starbucks by Nespresso, adds another 100 basis points to growth.

Speaker Change: By category, the group's growth was driven by coffee, confectionery, pet care and health science.

Coffee delivered mid-single-digit growth led by soluble and RTD.

Grayson Pett was driven by a rig.

Speaker Change: As expected, pricing reduced, but it started to stabilise a little more in the fourth quarter.

Speaker Change: And I've already commented on health science, but nutrition posted positive growth with continued momentum for NAM.

Speaker Change: Prepared dishes and cooking aids was held back by the performance of frozen food in the US.

Speaker Change: Milk products and ice cream was impacted by the weakness in dairy and coffee creamers in the US.

Anna Manz: KitKat globally and Garoto in Brazil were the key drivers here. Turning to profit, just a few things to note. Margins in coffee and confectionery were particularly impacted by higher input costs. In prepared dishes and cooking aids, the increase was supported by higher gross profit margin driven by portfolio optimization and efficiencies. Milk products and ice cream posted lower margins following higher advertising and marketing investments and reduced growth leverage. Water saw a margin reduction impacted by supply constraints. Now let's talk about what sits below UTOP. The first item to highlight is restructuring. This came in significantly lower than the CHF 700 million we'd expected at the half-year as the implementation of several projects was delayed. The second item is net financing costs, which increased with higher average net debt and an increase in interest rates.

Speaker Change: Confectionery growth was driven by pricing. KitKat globally and Garrotto in Brazil were the key drivers here.

Turning to profit, just a few things to note.

Speaker Change: Margins in coffee and confectionery were particularly impacted by higher input costs.

Speaker Change: In prepared dishes and cooking aids, the increase was supported by higher gross profit margin driven by portfolio optimisation and efficiencies.

Speaker Change: Milk products and ice cream posted lower margins following higher advertising and marketing investments and reduced growth leverage.

Water saw a margin reduction impacted by supply constraints.

Now let's talk about what sits below UTOP.

The first item to highlight is restructuring.

Speaker Change: This came in significantly lower than the 700 million Swiss francs we'd expected at the half year, as the implementation of several projects was delayed.

Speaker Change: The second item is net financing costs which increase with higher average net debt and an increase in interest rates.

Anna Manz: Finally, our reported tax rate increased, mainly due to a write-off in deferred tax assets in the current year and the absence of favorable one-offs impacting last year. To note, our underlying tax rate increased by 70 basis points to 21.9%, driven by higher tax rates in a couple of jurisdictions, as well as changes in geographical, and business mix of profits. Next to underlying EPS, I've already talked to the drivers of our operating profit and interest and tax. The lower share count helped EPS growth, contributing 1.1% to the underlying EPS, but this was more than offset by an adverse FX movement. Working capital continues to trend downwards as we work to optimize our supply chain. We will further optimize our working capital, but the improvement in 2025 won't be of the same magnitude as 2024.

Speaker Change: And finally, our reported tax rate increased, mainly due to a write-off in deferred tax assets in the current year and the absence of favourable one-offs impacting last year.

Speaker Change: To note, our underlying tax rate increased by 70 basis points to 21.9%, driven by higher tax rates in a couple of jurisdictions, as well as changes in geographical and business mix of profits.

Next, the underlying EPS.

Speaker Change: I've already talked to the drivers of our operating profit and interest in tax.

Speaker Change: The lower share count helped EPS growth, contributing 1.1% to the underlying EPS, but this was more than offset by an adverse FX movement.

Speaker Change: Working capital continues to trend downwards as we work to optimise our supply chain.

Speaker Change: We will further optimise our working capital, but the improvement in 2025 won't be of the same magnitude as 2024.

Anna Manz: CAPEX, as a percentage of sales, decreased slightly in 2024 and is expected to trend down from here as we're coming out of a period of elevated investment in new capacity in pet care and coffee. We're now shifting our focus to efficiencies and getting more out of our asset base. When you adjust for the sale of Prometheus stake in 2023, free cash flow improved by CHF 0.9 billion to 10.7 billion Swiss francs. The key drivers of this improvement were a reduction in working capital, lower tax, and lower cash restructuring costs. For 2025, we expect free cash flow to be below the level of 2024. While we will benefit from lower CAPEX, we expect a smaller improvement in working capital and higher restructuring costs as we step up our cost savings program.

Speaker Change: CAPEX as a percentage of sales decreased slightly in 2024 and is expected to trend down from here as we're coming out of a period of elevated investment in new capacity in pet care and coffee.

Speaker Change: And we're now shifting our focus to efficiencies and getting more out of our asset base.

Speaker Change: When you adjust for the sale of Prometheus Estate in 2023, free cash flow improved by 0.9 billion to 10.7 billion Swiss francs.

Speaker Change: The key drivers of this improvement were a reduction in working capital, lower tax and lower cash restructuring costs.

Speaker Change: For 2025, we expect free cash flow to be below the level of 2024.

Speaker Change: While we will benefit from lower capex, we expect a smaller improvement in working capital and higher restructuring costs as we step up our cost savings programme.

Anna Manz: Net debt increased largely due to the CHF 12.2 billion return to shareholders through the share buyback and dividend payment. In addition, there was a CHF 2.1 billion adverse impact from changes in FX rates. Our net debt to EBITDA ratio is towards the top end of our range. Return on invested capital increased, reflecting improvements in working capital as well as lower restructuring costs. With that, I hand back to Laurent.

Speaker Change: Net debt increased largely due to the $12.2 billion return to shareholders through the share buyback and dividend payment.

Speaker Change: In addition, there was a 2.1 billion adverse impact from changes in FX rates.

Speaker Change: Our net debt to EBITDA ratio is towards the top end of our range.

Speaker Change: Return on invested capital increased, reflecting improvements in working capital, as well as lower restructuring costs.

Laurent Freixe: Thank you, Anna. I want now to turn to what we are doing to accelerate our performance. This will build on the frame we set out at the CMD, bringing more color and detail. At the CMD, we set out how we plan to accelerate performance and transformation by driving operational excellence, by unlocking the full portfolio potential, and by strengthening our foundations. With this reminder, let's look at what we have been doing to accelerate Nestlé. We started with sharpening the strategy, building on our nutrition, health, and wellness foundations, and we put in place the organization to set us up for delivery. We simplified the zone structure, moving from five zones to three, reorganized waters and premium beverages into a global standalone business, and I took digital and sustainability to report directly to me.

And with that, I hand back to Laurel.

Laurel: Thank you, Anna. I want now to turn to what we are doing to accelerate our performance.

Laurel: This will build on the frame we set out at the CMD, bringing more color and detail.

Laurel: At the CMD, we set out how we plan to accelerate performance and transformation by driving operational excellence, by unlocking the full portfolio potential and by strengthening our foundations.

Laurel: With this reminder, let's look at what we have been doing to accelerate Nestle.

We started with sharpening the strategy.

building on our nutrition, health and wellness foundations.

Laurel: and we put in place the organization to set us up for delivery.

Laurel: We simplified the zone structure, moving from 5 zones to 3.

Laurel: reorganized waters and premium beverages into a global standalone business and I took digital and sustainability to report directly to me.

Rachel Smith: From the outside, these changes may sound like simple changes to our reporting segments, but these changes are not at all trivial. Ultimately, they impact 270,000 people. We are not only changing the way we report. We are changing the way we work. I'm really pleased that we executed this in a matter of a couple of months, and I want to thank our teams for this. With the plan and with the organization in place, we need to make sure everyone is aligned behind the execution. In the last weeks, we have cascaded down the strategy across the organizations through what we call our OMP, our Operational Master Plan. It sets out in detail the actions and the KPIs behind the objectives, with clear targets and clear owners against each. We have started to track progress through monthly operational reviews.

Laurent Freixe: From the outside, these changes may sound like simple changes to our reporting segments, but these changes are not at all trivial. Ultimately, they impact 270,000 people. We are not only changing the way we report. We are changing the way we work. I'm really pleased that we executed this in a matter of a couple of months, and I want to thank our teams for this. With the plan and with the organization in place, we need to make sure everyone is aligned behind the execution. In the last weeks, we have cascaded down the strategy across the organizations through what we call our OMP, our Operational Master Plan. It sets out in detail the actions and the KPIs behind the objectives, with clear targets and clear owners against each. We have started to track progress through monthly operational reviews.

Laurel: From the outside, these changes may sound like simple changes to our reporting segments.

Laurel: But these changes are not at all trivial. Ultimately, they impact 270,000 people.

Laurel: We are not only changing the way we report, we are changing the way we work.

Laurel: And I'm really pleased that we executed this in a matter of a couple of months and I want to thank our teams for this.

Laurel: With the plan and with the organization in place, we need to make sure everyone is aligned behind the execution.

Laurel: In the last weeks, we have cascaded down the strategy across the organizations through what we call our OMP, our Operational Master Plan.

Laurel: It sets out in detail the actions and the KPIs behind the objectives, with clear targets and clear owners against each.

Laurel: And we have started to track progress through monthly operational reviews.

Rachel Smith: You can see the Virtuous Circle we use internally as our strategic framework. This picture annotated with the OMP actions is something you will find on Nestlé desks around the world. There is a lot that sits behind this. It starts with efficiency and productivity because this is the fuel for the growth engine. Next is investing for growth, with appropriate impact so that we deliver growth with the right returns. It is important to reiterate here that we are not waiting until we have all the additional fuel from efficiencies before we start to invest. This all leads to creating shared value, making sure that we deliver that profitable growth in a long-term, sustainable way. I'm now going to talk to what we have been doing and what we will be doing in these three areas.

Laurent Freixe: You can see the Virtuous Circle we use internally as our strategic framework. This picture annotated with the OMP actions is something you will find on Nestlé desks around the world. There is a lot that sits behind this. It starts with efficiency and productivity because this is the fuel for the growth engine. Next is investing for growth, with appropriate impact so that we deliver growth with the right returns. It is important to reiterate here that we are not waiting until we have all the additional fuel from efficiencies before we start to invest. This all leads to creating shared value, making sure that we deliver that profitable growth in a long-term, sustainable way. I'm now going to talk to what we have been doing and what we will be doing in these three areas.

Laurel: You can see the strategic virtuous circle we use internally as our strategic framework.

Laurel: This picture, annotated with the OMP actions, is something you will find on Nestle desks around the world.

And there is a lot that sits behind this.

Laurel: It starts with efficiency and productivity because this is the fuel for the growth engine.

Laurel: Next is investing for growth with appropriate impact so that we deliver growth with the right returns.

Laurel: It is important to reiterate here that we are not waiting until we have all the additional fuel from efficiencies before we start to invest.

Laurel: This all leads to creating shared value, making sure that we deliver that profitable growth in a long-term sustainable way.

Laurel: I'm now going to talk to what we have been doing and what we will be doing in these three areas.

Rachel Smith: I will start with efficiency, the Fuel for Growth, and as we showed at the CMD, the protection of our margin came from reducing investment more than increasing efficiencies. We are now grasping the efficiency opportunity with three key elements to our approach. First, it is comprehensive and end-to-end. It is actually more than a decade since we thoroughly reviewed many key areas of spend like procurement and commercial spend or the organizational structure of our functions. That is changing. Second, we approach this in a coordinated way with structured group-wide programs rather than ad hoc local projects, and with that comes clear targets with incentives linked to delivery. Third, we are working in a data-powered way, leveraging digital technologies and AI. At the CMD, we announced a new three-year cost reduction program, which is in addition to existing annual cost efficiency initiatives.

Laurent Freixe: I will start with efficiency, the Fuel for Growth, and as we showed at the CMD, the protection of our margin came from reducing investment more than increasing efficiencies. We are now grasping the efficiency opportunity with three key elements to our approach. First, it is comprehensive and end-to-end. It is actually more than a decade since we thoroughly reviewed many key areas of spend like procurement and commercial spend or the organizational structure of our functions. That is changing. Second, we approach this in a coordinated way with structured group-wide programs rather than ad hoc local projects, and with that comes clear targets with incentives linked to delivery. Third, we are working in a data-powered way, leveraging digital technologies and AI. At the CMD, we announced a new three-year cost reduction program, which is in addition to existing annual cost efficiency initiatives.

Thank you.

I will start with efficiency, the food for growth.

Laurel: And as we showed at the CMD, the protection of our margin came from more reducing investment than increasing efficiencies.

Laurel: We are now grasping the efficiency opportunity with three key elements to our approach.

First, it is comprehensive and end-to-end.

Laurel: It is actually more than a decade since we thoroughly reviewed many key areas of spend like procurement and commercial spend or the organizational structure of our functions.

that is changing.

Laurel: Second, we approach this in a coordinated way with structured group-wide programs rather than ad-hoc local projects.

Laurel: And with that comes clear targets with incentives linked to delivery.

Laurel: Third, we are working in a data-powered way, leveraging digital technologies and AI.

Laurel: At the CMD, we announced a new three-year cost reduction program, which is in addition to existing annual cost efficiency initiatives.

Rachel Smith: We have called this new program Fuel for Growth. We target, as you know, CHF 2.5 billion of cost savings by the end of 2027. Approximately three-quarters of the savings will come in procurement, with the remainder coming from operational efficiencies and commercial investments. The savings will build from CHF 0.7 billion in 2025 to reach the full run-rate savings of CHF 2.5 billion by the end of 2027. To date, over CHF 300 million of the expected savings for 2025 have already been secured. To bring these savings opportunities to life, I want to give you a few examples starting with procurement. With annual spend of over CHF 60 billion, we see lots of opportunities in this area. We are increasing the consolidation of our spend, and we are doing it in a more systematic way.

Laurent Freixe: We have called this new program Fuel for Growth. We target, as you know, CHF 2.5 billion of cost savings by the end of 2027. Approximately three-quarters of the savings will come in procurement, with the remainder coming from operational efficiencies and commercial investments. The savings will build from CHF 0.7 billion in 2025 to reach the full run-rate savings of CHF 2.5 billion by the end of 2027. To date, over CHF 300 million of the expected savings for 2025 have already been secured. To bring these savings opportunities to life, I want to give you a few examples starting with procurement. With annual spend of over CHF 60 billion, we see lots of opportunities in this area. We are increasing the consolidation of our spend, and we are doing it in a more systematic way.

Laurel: We have called this new program Fuel for Growth. We target, as you know, 2.5 billion Swiss francs of cost savings by the end of 2027.

Laurel: Approximately three quarters of the savings will come in procurement, with the reminder coming from operation efficiencies and commercial investments.

Laurel: And the savings will be from 0.7 billion Swiss francs in 2025 to reach the full run rate savings of 2.5 billion by the end of 2027.

Laurel: To date, over 300 million of the expected savings for 2025 have already been secured.

Laurel: To bring these savings opportunities to life, I want to give you a few examples, starting with procurements.

Laurel: With annual spend of over 60 billion Swiss francs, we see lots of opportunities in this area.

Laurel: We are increasing the consolidation of our spend and we are doing it in a more systematic way.

Rachel Smith: One example of this is that we are currently moving from a centralized ingredient catalogue covering 50% of raw material spend to 80% of coverage. In addition, we are leveraging AI tools to review invoices versus our contracts to identify and recover value leakage. In the last three months, we have assessed approximately 3,000 of our largest suppliers, covering over 80% of our total spend. This has allowed us to identify historical inconsistencies between contract and invoice that can be recovered, providing a one-time benefit. It also allows us to find potential opportunities to reduce spend on an ongoing basis. The other big bucket of savings opportunity is operational efficiency. In manufacturing and in logistics, digitalization is unlocking multiple efficiencies in areas such as plant maintenance and smart energy usage. We are also looking at our operating model with an end-to-end view across our functions.

Laurent Freixe: One example of this is that we are currently moving from a centralized ingredient catalogue covering 50% of raw material spend to 80% of coverage. In addition, we are leveraging AI tools to review invoices versus our contracts to identify and recover value leakage. In the last three months, we have assessed approximately 3,000 of our largest suppliers, covering over 80% of our total spend. This has allowed us to identify historical inconsistencies between contract and invoice that can be recovered, providing a one-time benefit. It also allows us to find potential opportunities to reduce spend on an ongoing basis. The other big bucket of savings opportunity is operational efficiency. In manufacturing and in logistics, digitalization is unlocking multiple efficiencies in areas such as plant maintenance and smart energy usage. We are also looking at our operating model with an end-to-end view across our functions.

Laurel: One example of this is that we are currently moving from

Laurel: a centralised ingredient catalogue covering 50% of raw material spend to 80% of coverage.

Laurel: In addition, we are leveraging AI tools to review invoices versus our contracts to identify and recover value leakage.

Laurel: In the last three months, we have assessed approximately 3,000 of our largest suppliers, covering over 80% of our total spend.

Laurel: This has allowed us to identify historical inconsistencies between contract and invoice that can be recovered, providing a one-time benefit.

Laurel: It also allows us to find potential opportunities to reduce spend on an ongoing basis.

Laurel: The other big bucket of savings opportunity is operational efficiency. In manufacturing and in logistics.

Laurel: Digitalization is unlocking multiple efficiencies in areas such as plant maintenance and smart energy usage.

Laurel: We are also looking at our operating model with an end-to-end view across our functions.

Rachel Smith: This includes spans and layers, central versus local, shared service centers, and automation. For example, our in-market finance teams spend today 40% of their time on data compilation, report updates, and ad hoc analysis. With today's technology, it should be less than 5%. This is a cost saving, but it also creates organizational agility and improves the experience of our people. There are many opportunities like this across all functions. That is how we are creating the fuel. Now, let's look at how we will deploy it to accelerate growth. As you know, our mid-term ambition is to deliver 4%+ growth, and to do that, we need to accelerate the category growth, and we need to improve our market share.

Laurent Freixe: This includes spans and layers, central versus local, shared service centers, and automation. For example, our in-market finance teams spend today 40% of their time on data compilation, report updates, and ad hoc analysis. With today's technology, it should be less than 5%. This is a cost saving, but it also creates organizational agility and improves the experience of our people. There are many opportunities like this across all functions. That is how we are creating the fuel. Now, let's look at how we will deploy it to accelerate growth. As you know, our mid-term ambition is to deliver 4%+ growth, and to do that, we need to accelerate the category growth, and we need to improve our market share.

Laurel: This includes spans and layers, central versus local, shared service centers and automation.

For example, our in-market finance teams spend today

40% of their time on data compilation.

report updates and ad-hoc analysis.

With today's technology, it should be less than 5%.

Laurel: This is cost-saving, but it also creates organizational agility and improves the experience of our people.

And there are many opportunities like this across all functions.

Laurel: That is how we are creating the fuel. Now let's look at how we will deploy it to accelerate growth.

Laurel: As you know, our mid-term ambition is to deliver 4% plus growth

Laurel: And to do that, we need to accelerate the calorie growth and we need to improve our market share.

Rachel Smith: We have 4 main levers: expand our winners to reach their full potential, achieve more impact from innovation by scaling our big bets, build new growth engines, and last but not least, address our underperformance. I will dig into how we are progressing on these levers on some of our largest categories. First, I want to spend a moment specifically on our underperformance. In 2024, we gained or held market share in approximately half of our business sales by number, but in less than half by sales value. The majority of that share loss is driven by 18 key underperforming cells. We have assessed what gaps in our value proposition have driven the underperformance. Across most of the 18 cells, there is work to do in more than one dimension. It is important to address the issues in the right order.

Laurent Freixe: We have 4 main levers: expand our winners to reach their full potential, achieve more impact from innovation by scaling our big bets, build new growth engines, and last but not least, address our underperformance. I will dig into how we are progressing on these levers on some of our largest categories. First, I want to spend a moment specifically on our underperformance. In 2024, we gained or held market share in approximately half of our business sales by number, but in less than half by sales value. The majority of that share loss is driven by 18 key underperforming cells. We have assessed what gaps in our value proposition have driven the underperformance. Across most of the 18 cells, there is work to do in more than one dimension. It is important to address the issues in the right order.

We have four main levers.

expand our winners to reach their full potential.

Achieve more impact from innovation by scaling our Big Bets.

Build new growth engine.

And last but not least, address our underperformance.

Laurel: I will dig into how we are progressing on these levers on some of our largest categories.

Please see the complete disclaimer at https://sites.google.com

Laurel: But first, I want to spend a moment specifically on our underperformers.

Laurel: In 2024, we gained or held market share in approximately half of our business sales by number, but in less than half by sales value.

Laurel: The majority of that share loss is driven by 18 key underperforming cells.

Laurel: We have assessed what gaps in our value proposition have driven the underperformance.

Laurel: Across most of the 18 cells, there is work to do in more than one dimension.

Rachel Smith: For instance, there is no point in increasing marketing spend behind a product without taste preference or where we got the wrong pricing. Overall, you can see we had the most work to do on value and visibility. We are investing to address those gaps, and our progress is measurable. Let me give you a couple of examples. First, on product superiority, look at illuma China. illuma had lost its premiumness and differentiation versus competitors. We are addressing that through science-based innovation with HMOs. Along with improvements on distribution, this is starting to drive an improvement in share. Next is US Frozen Pizza. You all know that a key reason for our loss of share has been the price gap versus our major competitor. We have now lowered prices as well as launching new products.

Laurent Freixe: For instance, there is no point in increasing marketing spend behind a product without taste preference or where we got the wrong pricing. Overall, you can see we had the most work to do on value and visibility. We are investing to address those gaps, and our progress is measurable. Let me give you a couple of examples. First, on product superiority, look at illuma China. illuma had lost its premiumness and differentiation versus competitors. We are addressing that through science-based innovation with HMOs. Along with improvements on distribution, this is starting to drive an improvement in share. Next is US Frozen Pizza. You all know that a key reason for our loss of share has been the price gap versus our major competitor. We have now lowered prices as well as launching new products.

Laurel: It is important to address the issues in the right order.

Laurel: For instance, there is no point in increasing marketing spend behind a product without taste preference or where we got the wrong pricing.

Laurel: Overall, you can see we had the most work to do on value and visibility.

Laurel: We are investing to address those gaps, and our progress is measurable.

Let me give you a couple of examples.

First, on product superiority, look at Wireless China.

Iluma had lost its premiumness and differentiation versus competitors.

We are addressing that through science-based innovation with HMOs.

Laurel: Along with improvements on distribution, this is starting to drive an improvement in share.

Next is U.S. frozen pizza.

Laurel: You all know that a key reason for our loss of share has been the price gap versus our major competitors.

Rachel Smith: We have begun to see evidence of success and have some early gains in volume share. Overall, we are still early in addressing many of our issues, but we are moving, and there are some encouraging signs. Now, let's take a look at progress across some of our largest categories. In Ready to Drink Coffee, annual sales today are around CHF 1 billion with double-digit growth. There is a lot of runway ahead as we expand beyond our current strongholds. We launched new markets in AOA in 2024, and we are doing the same in Europe and in Latin America. The new launches are off to a strong start. Coffee out-of-home represents annual sales of about CHF 2.5 billion, with an objective to grow at 10%+ annually. We are leveraging all three of our unrivaled brands in Nescafé, Starbucks, and Nespresso.

Laurent Freixe: We have begun to see evidence of success and have some early gains in volume share. Overall, we are still early in addressing many of our issues, but we are moving, and there are some encouraging signs. Now, let's take a look at progress across some of our largest categories. In Ready to Drink Coffee, annual sales today are around CHF 1 billion with double-digit growth. There is a lot of runway ahead as we expand beyond our current strongholds. We launched new markets in AOA in 2024, and we are doing the same in Europe and in Latin America. The new launches are off to a strong start. Coffee out-of-home represents annual sales of about CHF 2.5 billion, with an objective to grow at 10%+ annually. We are leveraging all three of our unrivaled brands in Nescafé, Starbucks, and Nespresso.

Laurel: We have now lowered prices as well as launching new products.

Laurel: We have begun to see evidence of success and have some early gains in volume share.

Laurel: Overall, we are still early in addressing many of our issues but we are moving and there are some encouraging signs.

Laurel: Now, let's take a look at progress across some of our largest categories.

Laurel: In ready-to-drink coffee, annual sales today are around 1 billion with double-digit growth.

Laurel: We launched new markets in AOA in 2024 and we are doing the same in Europe and in Latin America.

the new launches are off to a strong start.

Laurel: Coffee Out of Home represents annual sales of about 2.5 billion Swiss francs with an objective to grow at 10% plus annually.

Laurel: We are leveraging all three of our unrivaled brands in Nescafé, Starbucks and Nespresso.

Rachel Smith: In coffee, beyond those, we have 2 innovation big bets. Nescafé Espresso Concentrate was launched in 2024 in Australia and resonated strongly. In 2025, we are expanding into 7 new markets, including the US and the UK. With Nescafé Dolce Gusto Neo, we are rolling out to 6 new markets in 2025 and launching new machines in existing markets. On underperformance, we have begun to revitalize Nespresso in Europe by increasing availability and visibility. Turning next to pet care, category growth slowed in 2024, but we continue to expect 4% to 5% in the medium term. For Purina, we see a lot of opportunities. In Zone AOA, we can be much larger than what we are today. We are making a substantial investment in capabilities, particularly in route-to-market, innovation, and marketing. Growth accelerated to double digits in the second half of 2024, and we are growing market share.

Laurent Freixe: In coffee, beyond those, we have 2 innovation big bets. Nescafé Espresso Concentrate was launched in 2024 in Australia and resonated strongly. In 2025, we are expanding into 7 new markets, including the US and the UK. With Nescafé Dolce Gusto Neo, we are rolling out to 6 new markets in 2025 and launching new machines in existing markets. On underperformance, we have begun to revitalize Nespresso in Europe by increasing availability and visibility. Turning next to pet care, category growth slowed in 2024, but we continue to expect 4% to 5% in the medium term. For Purina, we see a lot of opportunities. In Zone AOA, we can be much larger than what we are today. We are making a substantial investment in capabilities, particularly in route-to-market, innovation, and marketing. Growth accelerated to double digits in the second half of 2024, and we are growing market share.

In Coffee, beyond those, we have two innovation big beds.

Laurel: Nescafé Espresso Concentrate was launched in 24 in Australia and resonated strongly. In 25, we are expanding into 7 new markets including the US and the UK.

Laurel: With Nescafé Dolce Gusto Neo, we are rolling out to 6 new markets in 2025 and launching new machines in existing markets.

Laurel: On underperformance, we have begun to revitalize Nespresso in Europe by increasing availability and visibility.

Turning next to pet care.

Laurel: Category growth slowed in 2024 but we continue to expect 4% to 5% in the medium term.

Honestly, we see a lot of opportunities.

Laurel: In that way, we can be much larger than what we are today.

Laurel: And we are making a substantial investment in capabilities, particularly in route-to-market, innovation and marketing.

Laurel: Growth accelerated to double digits in the second half of 2024 and we are growing market share.

Rachel Smith: Therapeutics is already a business of over CHF 600 million and growing strongly. To drive that further, we are expanding investment in science-based innovation and veterinary engagement, and we are scaling up in D2C. On innovation big bets, earlier this week, we announced the expansion plans for our unique pyramid-shaped wet cat food. In 2025, we are expanding nationwide across the US and in 15 markets in Europe. Nutrition, health, and wellness, as you know, is a key component of our Nestlé strategy. Our infant nutrition business continues to build on science-based innovation. One of our big bets is Sinergity, a proprietary blend of probiotics and HMOs. We have rolled out in 15 markets in 2024, and we see much more potential, in particular in AOA and in LATAM. On our underperformance, we are seeing a continued strong turnaround of our VMS business in the US.

Laurent Freixe: Therapeutics is already a business of over CHF 600 million and growing strongly. To drive that further, we are expanding investment in science-based innovation and veterinary engagement, and we are scaling up in D2C. On innovation big bets, earlier this week, we announced the expansion plans for our unique pyramid-shaped wet cat food. In 2025, we are expanding nationwide across the US and in 15 markets in Europe. Nutrition, health, and wellness, as you know, is a key component of our Nestlé strategy. Our infant nutrition business continues to build on science-based innovation. One of our big bets is Sinergity, a proprietary blend of probiotics and HMOs. We have rolled out in 15 markets in 2024, and we see much more potential, in particular in AOA and in LATAM. On our underperformance, we are seeing a continued strong turnaround of our VMS business in the US.

Laurel: Therapeutics is already a business of over 600 million Swiss francs and growing strongly.

Laurel: To drive that further, we are expanding investment in science-based innovation and veterinary engagement, and we are scaling up in D2C.

Thank you.

Laurel: On Innovation Big Bets, earlier this week, we announced the expansion plans for our unique pyramid-shaped wet cat food.

Laurel: In 2025, we are expanding nationwide across the U.S. and in 15 markets in Europe.

Laurel: Nutritional wellness, as you know, is a key component of our Nestlé strategy.

Our infant nutrition business continues to build on science-based innovation.

Laurel: One of our big bets is SynergyT, a proprietary blend of probiotics and HMOs.

Laurel: We have rolled out in 15 markets in 24 and we see much more potential in particular in EOE and in LATAM.

Laurel: On our underperformance, we are seeing a continued strong turnaround of our VMS business in the US.

Rachel Smith: We have improved availability, and we are now focused on flawless retail execution and winning back the consumers. There is a lot of energy and activity behind our growth acceleration plans. Finally, from my side, I want to talk about the important topic of creating shared value. Nestlé is the nutrition health and wellness company. We enhance the quality of people's lives, playing a role in the diets of everyone, everywhere, at all stages of life. We also have a key role in strengthening the resilience of food systems. Today, I'm pleased to say that we are not just delivering on our plans. We are ahead of schedule on two of our most important targets, on greenhouse gas reduction and on regenerative agriculture. We are creating shared value for all our stakeholders. I'll now hand over to Anna to take you through the outlook for 2025. Thanks.

Laurent Freixe: We have improved availability, and we are now focused on flawless retail execution and winning back the consumers. There is a lot of energy and activity behind our growth acceleration plans. Finally, from my side, I want to talk about the important topic of creating shared value. Nestlé is the nutrition health and wellness company. We enhance the quality of people's lives, playing a role in the diets of everyone, everywhere, at all stages of life. We also have a key role in strengthening the resilience of food systems. Today, I'm pleased to say that we are not just delivering on our plans. We are ahead of schedule on two of our most important targets, on greenhouse gas reduction and on regenerative agriculture. We are creating shared value for all our stakeholders. I'll now hand over to Anna to take you through the outlook for 2025. Thanks.

Laurel: We have improved availability and we are now focused on flawless retail execution and winning back the consumers.

Laurel: There is a lot of energy and activity behind our growth acceleration plans.

Speaker Change: Finally, from my side, I want to talk about the important topic of creating shared value.

Nestlé is the nutrition health and wellness company.

Speaker Change: We enhance the quality of people's lives, playing a role in the diets of everyone, everywhere, at all stages of life. And we also have a key role in strengthening the resilience of food systems.

Speaker Change: Today, I'm pleased to say that we are not just delivering on our plans. We are ahead of schedule on two of our most important targets on green house gas reduction and on regenerative agriculture.

Speaker Change: I'll now hand over to Anna to take you through the Outlook for 2025.

Anna Manz: This slide pulls together the forward-looking references that I made during the presentation, and it's really to help you with your modeling. I won't repeat it here. All these elements come together in our guidance. We're driving change in the context of what is clearly a particularly uncertain period, and the guidance we're providing today is based on current information on key macroeconomic variables. It doesn't assume any further significant movements in commodity prices or foreign exchange rates, or the impacts from new tariffs. Our guidance for 2025 is in line with the output we gave at our Capital Markets Day in mid-November. To summarize, we expect organic sales growth to improve versus 2024 and strengthen through the year as we deliver on our growth plans. Our UTOP margin is expected to be at or above 16% as we invest for growth.

Anna Manns: Thanks. This slide pulls together the forward-looking references that I made during the presentation and it's really to help you with your modeling. I won't repeat it here.

All these elements come together in our guidance.

Anna Manns: We're driving change in the context of what is clearly a particularly uncertain period.

Anna Manns: And the guidance we're providing today is based on current information on key macroeconomic variables.

Anna Manns: It doesn't assume any further significant movements in commodity prices or foreign exchange rates, or the impacts from new tariffs.

Anna Manns: Our guidance for 2025 is in line with the outlook we gave at our Capital Markets Day in mid-November.

Anna Manns: To summarise, we expect organic sales growth to improve versus 2024 and strengthen through the year as we deliver on our growth plans.

Anna Manns: Our UTOP margin is expected to be at or above 16% as we invest for growth.

Rachel Smith: With that, let me hand back to Laurent.

Anna Manz: With that, let me hand back to Laurent.

Laurent Freixe: To close, let me come back to the key messages from today. We are generating the fuel for the growth, and we are already capturing savings that we are investing to accelerate calorie growth and improve market share performance with focused resource allocation. We have aligned the organization behind our plan. In short, we are moving fast, and Nestlé is changing. With that, let me hand back to David.

And with that, let me hand back to Laurel.

Laurel: So to close, let me come back to the key messages from today.

Laurel: We are generating the fuel for the growth and we are already capturing savings that we are investing to accelerate calorie growth and improve market share performance with focused resource allocation.

We have aligned the organization behind our plan.

In short, we are moving fast, endlessly is changing.

And with that, let me hand back to David.

David Hancock: Thanks, Laurent. Let's turn now to the Q&A session. We will take our first question from Guillaume Delmas from UBS. Please go ahead, Guillaume.

Thanks, Laurel. Let's turn now to the Q&A session.

All right.

Laurel: We will take our first question from Guillaume Delmat from UBS. Please go ahead, Guillaume.

Guillaume Delmas: Thank you, David, and good morning, Laurent and Anna. Two questions for me, please. The first one is on pricing. Definitely a need for pricing actions this year given the higher commodity cost. My question here is, what kind of price elasticity would you anticipate at this stage? As in, do you think we will see a stronger impact on volumes from price increases versus two or three years ago? And if so, could this result in your volumes being negative again? I mean, that would be the fourth consecutive year of negative volumes, or are you committed to a return to positive volume in 2025? And then my second question is on pet care because 2024 was, I think, the weakest organic growth posted by pet care in more than two decades.

Guillaume Delmat: Thank you, David. And good morning, Laurent and Anna. Two questions for me, please. The first one is on pricing.

Guillaume Delmat: So, definitely a need for pricing actions this year given the higher commodity cost.

My question here is...

Guillaume Delmat: What kind of price elasticity would you anticipate at this stage as in

Guillaume Delmat: Do you think we will see a stronger impact on volumes from price increases versus two or three years ago?

Guillaume Delmat: And if so, could this result in your volumes being negative again? I mean, that would be the fourth consecutive year of negative volumes. Or are you committed to a return to positive volume in 2025?

Guillaume Delmat: And then my second question is on pet care, because 2024 was, I think, the weakest organic growth posted by pet care in more than two decades.

Anna Manz: Here, my question would be, what kind of visibility do you have on when pet care should reaccelerate and return to more mid to high single-digit organic sales growth? Looking at the 3 mega drivers for the categories, so pet adoption, conversion to packaged food, premiumization, and humanization, I mean, which are the ones you think will recover faster versus other drivers that could continue to be softer for longer? Thank you very much.

Guillaume Delmas: Here, my question would be, what kind of visibility do you have on when pet care should reaccelerate and return to more mid to high single-digit organic sales growth? Looking at the 3 mega drivers for the categories, so pet adoption, conversion to packaged food, premiumization, and humanization, I mean, which are the ones you think will recover faster versus other drivers that could continue to be softer for longer? Thank you very much.

Guillaume Delmat: So here, my question would be, what kind of visibility do you have on when pet care should re-accelerate and return to more a mid to high single-digit organic cells growth?

Guillaume Delmat: And looking at the three mega drivers for the category, so pet adoption, conversion to packaged food, and premiumization, humanization,

Guillaume Delmat: I mean, which are the ones you think will recover faster versus other drivers that could be continue to be softer for longer? Thank you very much.

Laurent Freixe: Thank you very much, Guillaume. Great questions. On the pricing, I will start and then hand over to Anna for more details. Number one, yes, input costs are increasing, but not everywhere. Only in part of the portfolio, essentially, coffee and cocoa. So everything related to coffee and cocoa is a chunk of our portfolio, but it is not all the portfolio. In the rest, we see mild inflation. The good thing is that those two categories of coffee and confectionery have shown in the past and in the recent past resilience in the face of cost increases. I think our portfolio on both sides, actually, is very well positioned.

Okay.

Thank you very much, Guillaume.

Great questions.

Guillaume Delmat: On the pricing, I will start and then hand over to Anna for more details. Number one.

Anna Manns: Yes, input costs are increasing, but not everywhere, only in part of the portfolio, essentially coffee and cocoa, so everything related to coffee and cocoa.

Anna Manns: It's a chunk of our portfolio but it is not all the portfolio and in the rest we see mild inflation.

Anna Manns: The good thing is that those two categories of coffee and confectionery are and have shown in the past and the recent past resilience.

Anna Manns: in the face of cost increases. I think our portfolio on both sides actually is very well positioned.

David Hancock: Coffee, we sell essentially soluble coffee and coffee capsules where the green coffee component, and coffee out-of-home, by the way, and ready to drink where the green coffee component is a lot less than for the rest of the industry, which is selling primarily roast and ground coffee. We are more preserved. Next, our savings program, our saving efficiencies will help us offset part of that. If you look at confectionery, what we sell essentially is chocolate with wafers or chocolate with biscuits. This is the area which we want to develop: choco bakery, choco biscuits, or tablets with biscuits. There as well, impact of commodity, certainly less. We'll take advantage of our cost savings programs, the Fuel for Growth program, to make sure that we get the price right.

Laurent Freixe: Coffee, we sell essentially soluble coffee and coffee capsules where the green coffee component, and coffee out-of-home, by the way, and ready to drink where the green coffee component is a lot less than for the rest of the industry, which is selling primarily roast and ground coffee. We are more preserved. Next, our savings program, our saving efficiencies will help us offset part of that. If you look at confectionery, what we sell essentially is chocolate with wafers or chocolate with biscuits. This is the area which we want to develop: choco bakery, choco biscuits, or tablets with biscuits. There as well, impact of commodity, certainly less. We'll take advantage of our cost savings programs, the Fuel for Growth program, to make sure that we get the price right.

Anna Manns: Coffee, we sell essentially soluble coffee and coffee capsules, where the green coffee components and coffee out of home, by the way, and ready to drink.

where the wind coffee component is a lot less.

Anna Manns: than for the rest of the industry, which is selling primarily roast and ground coffee, so we are more preserved. And next, our savings program, our savings efficiencies will help us offset.

Anna Manns: part of that. And if you look at confectionery, what we sell essentially is chocolate with wafers or chocolate with biscuits, and this is the area which we want.

to develop, ChocoBakery, ChocoBiscuits.

Anna Manns: or tablets with biscuits, and there as well, impact of commodity certainly less, and we'll take advantage of our cost savings programs, the fuel for growth program, to make sure that we get the price right.

Anna Manz: Very quick, Bills. Both very resilient categories. I think what's different this time is you haven't got the whole basket of cost going up, as we were seeing in that sort of cost of living crisis. You've just got two very resilient categories going up, which I think will position them better. With respect to confectionery, I know our competitors have talked about various elasticities from 0.4 to 1. We see it very different by market and somewhere in the middle of that range, but it varies by market. In terms of coffee, actually, that category has been very resilient to price. What we tend to see is maybe a little bit of trade down, but generally, that benefits us.

Speaker Change: Very quick Bill, both very resilient categories. I think what's different this time is you haven't got the whole basket of cost going up as we were seeing in that sort of cost of living crisis. You've just got two very resilient categories going up, which I think will position them better.

Speaker Change: With respect to confectionery, I know our competitors have talked about various elasticities from 0.4 to 1. We see it very different by market and somewhere in the middle of that range, but it varies by market. And in terms of coffee, actually that category has been very resilient to price. What we tend to see is maybe a little bit of trade down, but generally that benefits us.

Laurent Freixe: On pet care, we are seeing a bit in the category. It's clear that there is a little bit of normalization of the growth after a tremendous period of fast growth connected to the lockdowns and people adopting more pets in a context that we have lived through. If you look at the drivers, and you highlighted rightly the drivers, and there is another one for us on top, at least, pet adoption will continue to increase. Why? Aging population, more urban population, less babies, more pets. The dynamic will continue, without any doubt. Caloric coverage, you got 80%. In the US, you got 80%, down to 20% in large parts of emerging markets, maybe 40%, 50%. In the more developed of the emerging markets environments, it's ample opportunity to grow just through the caloric coverage, premiumization, humanization. The trend is in there and will continue.

Speaker Change: And on pet care, we are very upbeat on the category. It's clear that there is a little bit of normalization of the growth after a tremendous period of fast growth.

connected to the lockdowns and the people adopting more pets.

in a context that we have lived through.

Speaker Change: But if you look at the drivers and you highlight it right here, the drivers, and there is another one for us on top.

Speaker Change: at least, pet adoption will continue to increase. Why? Aging population, more urban population, less babies, more pets, the dynamic will continue without any doubt.

Speaker Change: Calorific coverage, you got 80% in the US, you got down to 20%.

Speaker Change: in large parts of emerging markets, maybe 40, 50, in the more developed of the emerging market environments, it's ample opportunity to grow just through the calorific coverage, premiumization, humanization, the trend is in there and will continue.

David Hancock: We see the potentials of our therapeutics. This is one of the categories where we can demonstrate with the highest impact the power of nutrition. Pet nutrition is a game changer at many, many levels, cognitive health, immunity, and so on and so forth. We are very, very a bit on that side. Two maybe unlocks for us. Number one, we have been building up capacity in the last years. That capacity will progressively come on stream, H1, H2, and 2026. We'll be able to supply the market adequately. Last but not least, we see a tremendous opportunity in Asia, urbanization taking place there. Aging population, of course, China, but beyond, is also a reality. More pet adoption is taking place. This is very, very impressive to see the dynamic.

Laurent Freixe: We see the potentials of our therapeutics. This is one of the categories where we can demonstrate with the highest impact the power of nutrition. Pet nutrition is a game changer at many, many levels, cognitive health, immunity, and so on and so forth. We are very, very a bit on that side. Two maybe unlocks for us. Number one, we have been building up capacity in the last years. That capacity will progressively come on stream, H1, H2, and 2026. We'll be able to supply the market adequately. Last but not least, we see a tremendous opportunity in Asia, urbanization taking place there. Aging population, of course, China, but beyond, is also a reality. More pet adoption is taking place. This is very, very impressive to see the dynamic.

Speaker Change: and we see the potential for therapeutics. This is one of the categories where we can demonstrate with the highest impact the power of nutrition.

Speaker Change: Pet nutrition is a game-changer at many, many levels, cognitive health, immunity, and so on and so forth. So we are very, very upbeat on that side.

Speaker Change: Two maybe unlocks for us, number one, we have been building up capacity in the last years. That capacity will progressively come on stream.

Speaker Change: H1, H2 and 2026, so we'll be able to supply the market adequately. And last but not least, we see a tremendous opportunity in Asia.

Speaker Change: Urbanization taking place there, aging population, of course China but beyond, is also a reality. More pet adoption is taking place, this is very, very impressive to see the dynamic.

David Hancock: We want to take our fair share of that market opportunity. We are really upbeat about the potential of the category medium-long term.

Laurent Freixe: We want to take our fair share of that market opportunity. We are really upbeat about the potential of the category medium-long term.

Speaker Change: And we need to take, and we have to take, and we want to take our fair share of that market opportunity. So we are really a bit about the potential of the category medium-long term.

Anna Manz: Maybe just to sort of give you some help on 2025, while those drivers will start to feed through to category improvement, we don't expect a sudden big category improvement. We just expect slow, gentle progression.

Speaker Change: And maybe just to sort of give you some help on 2025, while those drivers will start to feed through to category improvement, we don't expect a sudden big category improvement, we just expect slow, gentle progression.

Guillaume Delmas: Very helpful. Thank you.

David Hancock: Thank you, Guillaume. Let's turn and take our next question from Celine Pannuti at JP Morgan. Please go ahead, Celine.

Very helpful. Thank you.

Speaker Change: Thank you Guillaume. Let's turn and take our next question from Celine Panuti at JP Morgan. Please go ahead Celine.

Celine Pannuti: Thank you very much. Good morning, everyone. My first question, maybe I'll start where you finished, Anna Manz, in terms of you talk about slow progression through the year. You mentioned that, I presume as well, is for Q1. I mean, it seems to me that Q1 had an easy comparative, especially on the RIG side. Yet your pricing already accelerated in Q4. How should we be looking at Q1? Is Q1 going to be below the algorithm for the year? Where is the area of weakness in what you're signaling? Then my second question is trying to a bit square what you said on your margin and the COGS inflation. I mean, you say you have a flattish margin at 16% for the year.

Celine Panuti: Thank you very much. Good morning everyone. My first question, maybe I'll start where you finished, Anna, in terms of you talk about slow progression through the year. You mentioned that I presume as well is for the first quarter.

Speaker Change: I mean, it seems to me that the first quarter had an easy comparative, especially on the RIC side, yet your pricing already accelerated in the fourth quarter. So how should we be looking at Q1, and is Q1 going to be below the algorithm for the year?

Speaker Change: And, you know, what, where is the area of weakness in what you're signaling? And then my second question is trying to a bit square what you said on...

Speaker Change: on your margin, and the COGS inflation, I mean, you say you've slated margin at 16% for the year, that implies 100, 220 business points.

Celine Pannuti: That implies 100 to 120 basis points lower than last year, and yet only 40 basis points investment in A&P incremental. Are we looking at about 80 basis points gross margin decline despite the cost savings? If you could as well give us a number of what COGS inflation you're facing this year? Thank you.

Speaker Change: lower than last year, and yet only 40 basis point investment in ANP incremental.

Speaker Change: So, are we looking at about 80 basis points gross margin decline despite the cost savings? And if you could as well give us a number of what COGS inflation you're facing this year.

Anna Manz: Should I do this? You're absolutely right. I've talked about a sales progression through the year, which would imply improving organic growth through the year. Maybe just to talk a bit about Q1. You're right, the comps are weak, but there's some technical factors as well in as much as we have one less trading day in Q1, not in the other quarters. Also, when you look at the timing of Easter, Chinese New Year, and Ramadan, they all have a little bit of an impact on Q1. I'd say it's really a technical thing. The actions that we are taking, I think you'll see progressively benefit the business as we move through the year. I'm not calling out any specific particular area of weakness as we look forward to Q1.

Should I do this?

Speaker Change: You're absolutely right, I've talked about a sales progression through the year, which would imply improving organic growth through the year. So maybe just to talk a bit about Q1, you're right the comps are weak, but there's some technical factors as well, in as much as we have one less trading day in Q1.

Speaker Change: not in the other quarters. And also when you look at the timing of Easter, Christmas, and Ramadan...

Speaker Change: sorry Easter Christmas, Easter Chinese New Year and Ramadan, they all have a little bit of an impact on Q1. So I'd say it's really a technical thing. The actions that we are taking I think you'll see progressively benefit the business as we move through the year and I'm not calling out any specific particular area of weakness as we look forward to Q1.

Rachel Smith: Then with respect to margin, I think your question was really about how to think about COGS inflation and how that feeds through to margin. Maybe to give you a bit of a sense of each of the levers, we've talked about pricing. We will need to take price in the context of increasing commodity prices in coffee and cocoa. We're doing that now. Therefore, you would probably expect that to benefit a little bit more as we go through the year. With respect to COGS, they're at the moment, and I'm giving you a view today, in that commodity prices are continuing to move considerably, and this will change. As I think about COGS, and I'm looking at total COGS here, we would be looking at very high single-digit inflation at this point in time.

Anna Manz: Then with respect to margin, I think your question was really about how to think about COGS inflation and how that feeds through to margin. Maybe to give you a bit of a sense of each of the levers, we've talked about pricing. We will need to take price in the context of increasing commodity prices in coffee and cocoa. We're doing that now. Therefore, you would probably expect that to benefit a little bit more as we go through the year. With respect to COGS, they're at the moment, and I'm giving you a view today, in that commodity prices are continuing to move considerably, and this will change. As I think about COGS, and I'm looking at total COGS here, we would be looking at very high single-digit inflation at this point in time.

Speaker Change: And then with respect to margin I think your question was really about how to think about COGS inflation and and how that feeds through to margin so maybe

Speaker Change: We've talked about pricing, we will need to take price in the context of increasing commodity prices in coffee and cocoa. We're doing that now, therefore you would probably expect that to benefit a little bit more as we go through the year.

Speaker Change: With respect to COGS, they're at the moment, and I'm giving you a view today in that commodity prices are continuing to move considerably and this will change.

As I think about cogs...

Speaker Change: and I'm looking at total COGS here, we would be looking at very high single-digit inflation at this point in time.

Rachel Smith: Of course, don't forget that we've got quite some efficiencies that we can use to offset that. In that François talks about the CHF 1.2 billion of efficiencies that we look to generate every year, a large part of that will benefit gross margin. Of course, you've got some of the Fuel for Growth savings that also go into gross margin. Those are some of the moving parts that give you a sort of sense of how COGS will progress. We've called out the increase in our PFME. Those pieces give you a little bit the shape of how we see the P&L today, but it's moving, right? Commodity prices continue to move, and pricing will be a factor of how we work through the next phase.

Anna Manz: Of course, don't forget that we've got quite some efficiencies that we can use to offset that. In that François talks about the CHF 1.2 billion of efficiencies that we look to generate every year, a large part of that will benefit gross margin. Of course, you've got some of the Fuel for Growth savings that also go into gross margin. Those are some of the moving parts that give you a sort of sense of how COGS will progress. We've called out the increase in our PFME. Those pieces give you a little bit the shape of how we see the P&L today, but it's moving, right? Commodity prices continue to move, and pricing will be a factor of how we work through the next phase.

Speaker Change: But of course don't forget that we've got quite some efficiencies that we can use to offset that.

Speaker Change: that Francois talks about the 1.2 billion of efficiencies that we look to generate every year. A large part of that will benefit gross margin and of course you've got the some of the fuel for growth savings that also go into gross margin.

Speaker Change: So those are some of the moving parts that give you a sort of sense of how cogs will progress. And we've called out the phasing of our, we've called out the increase in our PFME. So those pieces give you a little bit the shape.

Speaker Change: how we see the P&L today but it's moving right you know commodity prices continue to move and pricing will be a factor of how we work through the next phase.

Laurent Freixe: Maybe one point on A&P because there is this question mark about the 8.5%. We absolutely are aligned with what we said. We want to get to the 9% towards the end of 2025. Bear in mind that this is not only the area, the only area where we will invest. We want to strengthen our value propositions. That means investment in quality. That means investment eventually in pricing through price-pack architecture. That means investment in distribution, availability, visibility, investment in consumer engagement, investment in digitalization. Investments will be there as planned. We are not walking away. We are investing to win in the marketplace and investing on all levers. We highlighted A&P because this is the most visible, but bear in mind that we'll invest across the value equation, wherever it makes sense, on levers that will make an impact.

And maybe one point...

Speaker Change: on ANP, because there is this question mark about the 8.5%.

Speaker Change: We absolutely are aligned with what we said. We want to get to the 9% towards the end of 2025. But bear in mind that this is not only the area, the only area where we will invest.

Speaker Change: We want to strengthen our value propositions that means investment in quality, that means investment eventually in pricing.

Speaker Change: through price park architecture, that means investment in distribution, availability, visibility, investment in consumer engagement, investment in digitalization.

Speaker Change: So, investments will be there as planned. We are not walking away. We are investing to win in the marketplace and investing on all delivers.

Speaker Change: We highlighted ANP because this is the most visible, but bear in mind that we'll invest across the value equation, wherever it makes sense, on the levers that will make an impact.

David Hancock: Great. Thank you, Celine. We'll now take our next question from Jon Cox at Kepler Cheuvreux. Jon, go ahead.

Speaker Change: Great, thank you Celine. We'll now take our next question from John Cox at Kepler Chevro. John, go ahead.

Jon Cox: Yes. Good morning. Thanks very much for taking the questions. Sort of two questions, really, which will be long and rambly as always. The first one is on the guidance for the year. I look at coffee prices. I look at confectionery prices. You probably have to put through at least 10% price increases for this year for both of them. The ICO dollar price has doubled in a little over 12 months, for example, in green coffee. We can all see what's happening with the cocoa price as well. That's about 1/3 of the portfolio, 10%, 1/3 of your portfolio. That's over 3% of price alone for the group this year. Your guidance is only 2.2. It would seem sort of like you're pointing to some sort of collapse in volume mix this year. Clearly, that is not what you're planning.

Yes, good morning. Thanks very much for taking the questions.

John Cox: sort of two questions really which will be long and rambly as always but the first one is on the guidance for the year.

Speaker Change: I look at coffee prices, I look at confectionary prices, you probably have to put through at least 10% price increases for this year for both of them, the ICO.

Speaker Change: dollar prices doubled you know in a little over 12 months for example in the year

Speaker Change: in green coffee, and we can all see what's happening with the cocoa price as well. That's about a third of the portfolio, you know, 10%.

Speaker Change: you know, a third of your portfolio, that's over 3% of price alone for the group this year.

your guidance is only 2.2.

Speaker Change: You know, it would seem sort of like you're pointing to some sort of collapse in volume mix this year, and clearly that is not what you're planning. So that's the first question.

Jon Cox: That's the first question. Second question, a bit of a rambling question about free cash flow. It'll be lower than 2024. Just wondering whether it'll be higher than 2023. As part of that, maybe, Anna, if you could talk a little bit about CapEx to sales. It's really bubbled up in the last couple of years. Are we going back down to 5% of sales in terms of CapEx as a result? Are you guys internally thinking about an improvement in your free cash flow margin, which has been quite disappointing for quite a few years? Thank you.

Speaker Change: Second question, a bit of a rambling question about free cash flow. It'll be lower than 2024. Just wondering whether it will be higher than 2023. And as part of that, maybe Anna, if you could talk a little bit about

Speaker Change: capex to sales, it's really bubbled up in the last couple of years. Are we going back down to 5% of sales in terms of capex? As a result, are you guys internally thinking about an improvement in your free cash flow margin, which has been quite disappointing for quite a few years? Thank you.

Laurent Freixe: Yeah. I'll start with the pricing in saying that, of course, we'll have to price in some areas of the portfolio. We might need to invest in price in some parts of the portfolio as we have done it on pizza, for instance, in the US. That is part of the equation I have to keep in mind. We want to grow our categories. We want to gain market share and raise our game when it comes to market share performance. The reality of the dynamic, as I highlighted, is that we will have coffee, cocoa on the one end, on one dynamic, and the rest of the portfolio in another dynamic. We'll see more pricing in those areas, but we are confident that we will be capable to drive growth and gain share in the overall portfolio.

Speaker Change: Yeah, I'll start with the pricing. In saying that, of course we'll have to price.

Speaker Change: in some areas of the portfolio, but we might also need to invest in price.

Speaker Change: in some parts of the portfolio, as we have done it on pizza, for instance, in the US.

Speaker Change: So, that is part of the equation to keep in mind. We want to grow our categories, we want to gain market share and raise our game when it comes to market share performance.

Speaker Change: And the reality of the dynamic, as I highlighted, is that we will have coffee, cocoa on one dynamic and the rest of the porphyry in another dynamic.

Speaker Change: We will see more pricing in those areas but we are confident that we will be capable to drive growth and gain share in the overall portfolio.

Anna Manz: Maybe if I just come back to the guidance point. We delivered 2.2% growth in 2024. Today, we've guided on an improvement in that. As you know, we've said that our medium-term growth rate will be more than 4%. To help you with some of the moving factors as you think about organic growth, firstly, I'm not expecting the consumer sentiment to materially change from where we are today. Secondly, we had a couple of headwinds in 2024 that won't repeat in 2025, or at least will lap, which is the retailer destock that we've seen, and also the consumer hesitancy to global brands. That will help us. You've got the actions that we are taking to accelerate growth, and we will see that build through the year. Finally, there's pricing, which will come on top of that.

Speaker Change: So maybe if I just come back to the guidance point. So we delivered 2.2% growth in 2024, and today we've guided on an improvement.

Speaker Change: that and as you know we've said that our medium-term growth rate will be more than 4%.

Speaker Change: So to help with you with some of the moving factors as you think about organic growth.

Speaker Change: Firstly, I'm not expecting the consumer sentiment to materially change from where we are today.

Speaker Change: Secondly, we had a couple of headwinds in 2024 that won't repeat in 2025, or at least will lap, which is the retailer de-stock that we've seen, and also the consumer hesitancy to global brands. So that will help us.

Speaker Change: Then you've got the actions that we are taking to accelerate growth, and we will see that build through the year. And then finally there's pricing, which will come on top of that.

Rachel Smith: Now, as we move into pricing, and as we've talked about, we're working our way through pricing now, we'll have to see how the consumer responds to those price changes. We will make sure that we are balancing our pricing to make sure that we're maintaining that penetration that we have of our portfolio while at the same time optimizing margin. Those are the moving parts to help you think it through. Maybe if I then move on to free cash flow, I'm not going to sort of give more precise guidance. I think at the heart of your question is how focused are we on free cash flow, and are we really working to make sure that we are improving some of those metrics that contribute to free cash flow? The answer to is CAPEX, the percentage of sales coming down.

Anna Manz: Now, as we move into pricing, and as we've talked about, we're working our way through pricing now, we'll have to see how the consumer responds to those price changes. We will make sure that we are balancing our pricing to make sure that we're maintaining that penetration that we have of our portfolio while at the same time optimizing margin. Those are the moving parts to help you think it through. Maybe if I then move on to free cash flow, I'm not going to sort of give more precise guidance. I think at the heart of your question is how focused are we on free cash flow, and are we really working to make sure that we are improving some of those metrics that contribute to free cash flow? The answer to is CAPEX, the percentage of sales coming down.

Speaker Change: Now, you know, as we move into pricing, and as we've talked about, we're working our way through pricing now, we'll have to see how the consumer responds to those price changes.

Speaker Change: we will make sure that we are balancing our pricing to make sure that we're maintaining that penetration that we have of our portfolio whilst at the same time optimizing margin. So those are the moving parts to help you think it through.

Speaker Change: and maybe if I then move on to free cash flow.

Speaker Change: I'm not going to sort of give more precise guidance but I think at the heart of your question is

Uh...

Speaker Change: how focused are we on free cash flow and are we really working to make sure that we are improving some of those those metrics that contribute to free cash flow. So the answer to is CAPEX is the percentage of sales coming down the answer is yes.

Rachel Smith: The answer is yes. We've been through a period of quite intense investment, and we're working our way through that. You will see a gradual decline there, which will obviously help free cash flow. Then secondly, working capital. We said to you that we target zero working capital, and we're making good progress towards that. There is more to do there, and we are very focused on that. Again, you'll see those metrics continue to improve. It's just that we saw such a big step change in working capital in 2024 that I'm cautioning that the level of improvement won't be as high in 2025.

Anna Manz: The answer is yes. We've been through a period of quite intense investment, and we're working our way through that. You will see a gradual decline there, which will obviously help free cash flow. Then secondly, working capital. We said to you that we target zero working capital, and we're making good progress towards that. There is more to do there, and we are very focused on that. Again, you'll see those metrics continue to improve. It's just that we saw such a big step change in working capital in 2024 that I'm cautioning that the level of improvement won't be as high in 2025.

We've been through a period of quite intense investment.

Speaker Change: and we're working our way through that so you will see a gradual decline there which will obviously help free cash flow and then secondly working capital we said to you that we target zero working capital and we're making good progress towards that but there is more to do there and we are very focused on that and again you'll see those metrics continue to improve.

Speaker Change: It's just that we saw such a big step change in working capital in 2024 that I'm cautioning that the level of improvement won't be as high in 2025.

Jon Cox: Thank you.

David Hancock: Thank you, Jon. Let's take the next question from Warren Ackerman at Barclays. Your line should be open. Go ahead, Warren.

Thank you. Thank you.

Thank you.

Speaker Change: Thank you, John. Let's take the next question from Warren Ackerman at Barclays. Your line should be open. Go ahead, Warren.

Warren Ackerman: Yeah. Thanks, David. Good morning, Anna Manz. Good morning, Laurent Freixe. Two from me as well. First, on pricing, back on pricing. Your chairman said back in November that in some places, Nestlé had taken too much pricing and needed to roll back pricing in some places. It sounded to me like there was some concern about affordability. Which category or geographies was he talking about back in November? And does that mean that we should expect Nestlé to under-recover inflation again? And isn't that a concern given your gross margins haven't recovered from the last wave of inflation, still down a few hundred basis points as the next wave of inflation is kicking in? Just trying to understand the kind of messaging around this given you've got massive inflation in cocoa and coffee.

Speaker Change: Yeah, thanks David. Good morning, Anna. Good morning, Lauren. Two for me as well. First of all on pricing, back on pricing. Your chairman said back in November that in some places Nestle had taken too much pricing and needed to roll back pricing in some places. It sounded to me like there was some concern about affordability.

Speaker Change: Which category or geographies was he talking about back in November and does that mean that we should expect Nestle to under-recover?

Speaker Change: inflation again and isn't that a concern given you know your gross margins haven't recovered from the last wave of inflation still down a few hundred bits as the next wave of inflation is kicking in so just trying to understand

Speaker Change: the kind of messaging around this, given you've got massive inflation in cocoa and coffee, and where does that all leave us for kind of gross margins, not just in 25, but actually going back to this kind of journey of back to pre-COVID.

Warren Ackerman: Where does that all leave us for kind of gross margins, not just in 2025, but actually going back to this kind of journey of back to pre-COVID? Then secondly, could you maybe update us a little bit more about your innovation plans for 2025, Laurent? We went to the R&D centre post the CMD to hear about some of these CHF 100 million platforms you're building. Maybe you can give us an update on where we are on some of those for this year and perhaps how that plays into addressing the underperformance. Thank you, Anna, for kind of giving us the numbers on that, 18 sales, 21% of sales. How does innovation play into addressing those underperformers? Just trying to see how much granularity there is in these plans and the part that innovation plays. Thank you.

Speaker Change: And then secondly, could you maybe update us a little bit more about your innovation plans for 2025, Lauren? You know, we went to the R&D...

Speaker Change: Center post the CMD to hear about some of these hundred million Swiss franc platforms you're building. Maybe you can give us an update on where we are on some of those for this year and perhaps how that plays into this addressing the underperformers. Thank you Anna for kind of giving us the numbers on that 18 sales 21% of sales but how does the innovation play into addressing those underperformers you're trying to see how your you know how much granularity there

Laurent Freixe: Thank you, Warren, for the great questions. On the comment on price inflation, I think the comment by Paul was general in nature. It's a matter of fact that we have been through a period of high food price inflation. As I said on a few occasions, I don't think there is any place in the world, including Switzerland, where you would see consumers telling you that food prices are low or affordable, etc. Everyone is impacted. Everyone sees it. Those are the kind of expenses that you would do on a daily basis in a country like Switzerland, maybe weekly basis. People feel it and see it. That was the nature of the answer. Of course, we are mindful of that. Of course, our response to cost inflation will always be the same.

and the part the innovation plays. Thank you.

Thank you, Warren, for the great questions.

Speaker Change: On the comment on price inflation, I think the comment by Paul was general in nature and it's a matter of fact that we have been through a period of high food price inflation.

Speaker Change: And, as I said on a few occasions, I don't think there is any place in the world, including Switzerland, where you would see consumers telling you that food prices are low or affordable, etc. And everyone is impacted. Everyone sees it. Those are the kind of...

Speaker Change: Expenses that you would do on a daily basis in a country like Switzerland, maybe weekly basis, so people feel it and see it

Speaker Change: So that was the nature of the answer and of course we are mindful of that and of course our response to cost inflation will always be the same. We first look at all the levers that we can pull to mitigate the cost inflation and our savings programs the 1.2 billion

David Hancock: We first look at all the levers that we can pull to mitigate the cost inflation and our savings programs, the CHF 1.2 billion that we had through Project TASTE and others. Plus, Fuel for Growth is, of course, coming very, very timely to help us mitigate part of the cost impact. On the.

Laurent Freixe: We first look at all the levers that we can pull to mitigate the cost inflation and our savings programs, the CHF 1.2 billion that we had through Project TASTE and others. Plus, Fuel for Growth is, of course, coming very, very timely to help us mitigate part of the cost impact. On the.

Speaker Change: that we had through Project Tasty and others. Plus, fuel for growth is, of course, coming very, very timely to help us mitigate part of the cost impact.

Anna Manz: I just built on that very quickly because there was quite a specific modeling question in there about whether we would cover inflation and gross margin. I just wanted to sort of point out something I said in the script earlier, that we will not fully recover the cost inflation through price and efficiency. You would expect to see our gross margin be down. You see us acting to make sure that we're driving that consumer penetration to deliver that medium-term growth trajectory.

Speaker Change: Can I just build on that one very quickly, because there was quite a specific modelling question in there about whether we would cover inflation and gross margin. And I just wanted to sort of point out something I said in the...

Speaker Change: we will not fully recover the cost inflation through price and efficiency so you would expect to see our gross margin be down.

Speaker Change: and you see us acting to make sure that we're driving that consumer penetration to deliver that medium-term growth trajectory.

Laurent Freixe: On the innovation, you know that we put the focus on innovation, big bets. I guess you are following the news flow that we are expanding at pace, those innovations, the Nescafé Espresso Concentrate in the US and getting to the UK, two massive opportunities for us, and more rollouts to come. The wet cat food, the wet shape cat food is also getting rolled out in the US, across the US also, again, a massive opportunity, and more varieties getting into Europe. We are executing on our plan and putting the investment behind. On the underperformers, think more of renovations. We want to make sure, and we kind of highlighted the value equation. At the end of the day, when we lose share, it's that our value equation is not at par with competition or is not attractive enough.

Bye.

Speaker Change: And on the innovation, you know that we put the focus on innovation big bets and I guess you are following...

Speaker Change: The news flow that we are expanding at pace, those innovations, the Nescafé Espresso Concentrate in the US and getting to the UK, two massive opportunities for us and more allowances to come.

Speaker Change: The wet cat food, the wet cat food is also getting rolled out in the U.S., across the U.S. Also, again, a massive opportunity and more varieties.

Speaker Change: getting into Europe, so we are executing on our plan and putting investment behind.

Speaker Change: On the underperformers, think more of renovations. We want to make sure, and we kind of highlighted the value equation. At the end of the day, when we lose share, is that our value equation is not at par with competition.

David Hancock: We need to strengthen the value equation. In that case, renovation plays a role. Maybe innovation can also play a role. The core of the focus will be to strengthen our value propositions. This is quality. We want to achieve a clear-cut quality preference. We want to have the price right through price-pack architecture. We want to maximize distribution, and we want to engage with the consumers and make sure that we raise our game when it comes to our share of voice, vis-à-vis our share of market. The determination is to strengthen our value propositions and win in the marketplace. Renovation is part of the game sometimes. Line extensions also can be part of the game.

Laurent Freixe: We need to strengthen the value equation. In that case, renovation plays a role. Maybe innovation can also play a role. The core of the focus will be to strengthen our value propositions. This is quality. We want to achieve a clear-cut quality preference. We want to have the price right through price-pack architecture. We want to maximize distribution, and we want to engage with the consumers and make sure that we raise our game when it comes to our share of voice, vis-à-vis our share of market. The determination is to strengthen our value propositions and win in the marketplace. Renovation is part of the game sometimes. Line extensions also can be part of the game.

Speaker Change: It's not attractive enough, so we need to strengthen the value equation. In that case, renovation plays a role, maybe innovation can also play a role. But the core of the focus will be to strengthen our value propositions.

to achieve a clear-cut quality preference.

Speaker Change: We want to have the price rights through price pack architecture.

Speaker Change: We want to maximise distribution and we want to engage with the consumers and make sure that we raise our game when it comes to our share of voice vis-à-vis our share of market. So the determination is to strengthen our value propositions.

Speaker Change: and win in the marketplace. Renovation is part of the game sometimes. Line extensions also can be part of the game.

David Hancock: Thanks, Warren. Let's take the next question from Olivier Nicolai at Goldman Sachs. Go ahead, Olivier.

Speaker Change: Thanks, Warren. Let's take the next question from Olivier Nicolai at Goldman Sachs. Go ahead, Olivier.

Olivier Nicolai: Thank you, David. Good morning, Laurent and Anna. Two questions, please. First of all, there was a few headlines this morning regarding the water business. Could you perhaps give us a bit of an update on the strategic review of this business in terms of your preferred option, and also timing? Secondly, going back to the coffee inflation that we see in 2025, how much pricing should we expect in espresso or also in Nescafé and Starbucks? What kind of pricing elasticity are you assuming which could affect volumes? Typically, if I look back in 2022, for instance, Nespresso pricing was up 5% and volumes were down 2%. Will that be a good proxy, for instance, this year? Thank you.

Olivier Nicolai: Thank you David. Good morning Laurent and Anna. Two questions please. First of all, there was a few headlines this morning regarding the water business. So could you perhaps give us a bit of an update on the strategic review of this business in terms of your preferred option and also timing?

Olivier Nicolai: And then, secondly, going back to the coffee inflation that you see in 2025, how much pricing should we expect in Espresso or also in Nescafe and Starbucks? And what kind of pricing and elasticity are you assuming which could affect volumes?

Olivier Nicolai: Typically, if I look back in 2022, for instance, Nespresso pricing was up 5% and volumes were down 2%, would that be a good proxy for instance this year? Thank you.

Laurent Freixe: The first question on waters, we are really moving quickly. You know that we announced that we set up the business as a globally managed business just three months ago, not even. The organization is fully fledged, up and running, managing the business globally. This in a matter of a couple of months. They are also working on the next phase and building up those partnership opportunities. What I would like to say there is that we are getting ready and that our commitment to the category remains. It's not that we want to get out of the category. We look for partnerships so that we can realize the potential of the global premium brands and as well develop the new space, which is the space of premium beverages, which is massive and which requires investment.

Speaker Change: So the first question on waters, we are really moving quickly. You know that we announced that we set up the business as a globally managed business just three months ago, not even.

Speaker Change: and the organization is fully fledged, up and running, managing the business globally and this in a matter of a couple of months. They are also working on the next phase and...

Speaker Change: building up those partnership opportunities, what I would like to say there is that we are getting ready.

Speaker Change: but that our commitment to the category remains. It's not that we want to get out of the category. We look for partnerships so that we can...

Speaker Change: realize the potential of the global premium brands and as well develop the new space which is the space of premium beverages which is massive and which requires investment. So we are an organization fully fledged, up and running and preparing for the next phase.

David Hancock: We are organizationally fully fledged, up and running, and preparing for the next phase. On the coffee, maybe you want to take that?

Laurent Freixe: We are organizationally fully fledged, up and running, and preparing for the next phase. On the coffee, maybe you want to take that?

Anna Manz: Sure. I'm not going to give you specifics of price increases on coffee because obviously, we're working through that at the moment with our customers. You can see us looking to take price increases in the context of the inflation that we are seeing. Then we will see how the consumer responds to that. Now, with respect to price elasticity, actually, it's quite hard to know in that last time we took price, the whole basket was going up, and the consumer was in the middle of a cost of living squeeze that caused a broader set of changes in behavior. We're in a slightly different environment this time where the rest of the basket is pretty static. It's a couple of specific categories where we're seeing price increases.

On the coffee, maybe you want to take that? Sure.

Speaker Change: So I'm not going to give you specifics of price increases on coffee because obviously we're working through that at the moment with our customers.

But you can see us.

Speaker Change: looking to take price increases in the context of the inflation that we are seeing and then we will see how the consumer responds to that. Now with respect to price elasticity actually it's quite hard to know.

Speaker Change: in that last time we took price the whole basket was going up and the consumer was in the middle of a cost of living squeeze.

Speaker Change: that caused a broader set of changes in behavior. We're in a slightly different environment this time, where the rest of the basket is pretty static.

Rachel Smith: They're categories that are naturally quite resilient in that they're the things that the consumer tends to really stick with. Hard to say. We'll see as we go through it, but I'm optimistic. The other thing I would call out maybe with respect to our positioning in coffee is that we're actually very well positioned in that we play in portioned and soluble, particularly which are areas which are going to be slightly less exposed to pricing vis-à-vis something like roast and ground because there is less coffee cost in the product that we're selling. That will be helpful. I guess the other thing that I would say with coffee is when we do see consumer reaction, usually it's trade down. Usually, we benefit from that given the nature of our brands.

Anna Manz: They're categories that are naturally quite resilient in that they're the things that the consumer tends to really stick with. Hard to say. We'll see as we go through it, but I'm optimistic. The other thing I would call out maybe with respect to our positioning in coffee is that we're actually very well positioned in that we play in portioned and soluble, particularly which are areas which are going to be slightly less exposed to pricing vis-à-vis something like roast and ground because there is less coffee cost in the product that we're selling. That will be helpful. I guess the other thing that I would say with coffee is when we do see consumer reaction, usually it's trade down. Usually, we benefit from that given the nature of our brands.

Speaker Change: And it's a couple of specific categories where we're seeing price increases and they're categories that are naturally quite resilient

Speaker Change: in the things that the consumer tends to really stick with. So, hard to say. We'll see as we go through it, but I'm optimistic. And the other thing I would call out maybe, with respect to our positioning in coffee, is that...

Speaker Change: we're actually very well positioned in that we play in portioned and soluble.

Speaker Change: particularly which are areas which are going to be slightly less exposed to pricing vis-a-vis something like roast and ground because there is less coffee cost in the product that we're selling so that will be helpful and I guess the other thing that I would say with coffee is

Speaker Change: And when we do see consumer reaction, usually it's trade down, and usually we benefit from that given the nature of our brands.

David Hancock: Thank you, Olivier. Let's take the next question from Sarah Simon from Morgan Stanley. Go ahead, Sarah.

Speaker Change: Thank you, Olivier. Let's take the next question from Sarah Simon from Morgan Stanley. Go ahead, Sarah.

Sarah Simon: Yeah. Morning. A couple of questions. One was a sort of philosophical one. As you think about weighing up market share, organic revenue growth, and within that sort of rig versus price and then margin, how do you prioritize those? Then the second question was just on marketing. Obviously, you didn't actually increase marketing spending in the second half of last year. Is that because kind of the change or the changes you felt you needed to make came too late in the year? Because I think probably people thought that there was going to be a bigger step up in the second half and into this year. Thanks.

Yes, morning.

Sarah Simon: A couple of questions. One was a sort of philosophical one. As you think about weighing up market share, organic revenue growth, and within that sort of rig versus price, and then margin, how do you prioritize those?

Sarah Simon: And then the second question was just on marketing. Obviously, you didn't actually increase marketing spending in the second half of last year. Is that because?

Speaker Change: Kind of the the change or the changes you thought you needed to make came too late in the year Because I think probably people thought that there was a going to be a bigger step up in the second half and into this year Thanks

Laurent Freixe: Yeah. Thanks, Sarah. As we said, and I think we laid out it very, very clearly, that we want to accelerate performance. We want to accelerate the growth. The two levers that we pull is, number one, driving category growth. Number two, driving market share performance. This is absolute top priority. We know that growth is the main lever of value creation. This is where our focus is. Through the Virtuous Circle, through our Fuel for Growth savings program, we enable investments while kind of protecting margins at the same time. This is the line that we are working. On the marketing spending, there is an element of phasing there. We like to highlight that we need to get the value equation right.

Speaker Change: Thanks, Sarah. As we said, and I think we laid out it very, very clearly, that we want to accelerate performance, we want to accelerate the growth.

Speaker Change: And the two levers that we pull is number one, driving category growth, number two, driving market share performance.

Speaker Change: This is an absolute top priority, we know that growth is the main lever of value creation, so this is where our focus is. And we, through the virtuous circle, through our fuel for growth savings program, we enable investments.

Speaker Change: On the marketing spending, there is an element of phasing there. We like to highlight that we need to get the value equation right. It doesn't make sense to invest in communication, A&P, if you don't get the product right, if you don't get the quality right.

David Hancock: It doesn't make sense to invest in communication, A&P, if you don't get the product right, if you don't get the quality right, if you don't get the price right, if you don't have the distribution right. We want to make sure that we systematically put the right levers in the right place, that we got taste preference, that we got the right pricing through the right price-pack architecture, that we maximize distribution and fill rate. Of course, then we can go full blast with our communication efforts. There is an element of phasing in there, as you rightly pointed out in your question, and putting the spends and investing in the right levers that will really make sure that we are preferred and that we drive category growth and gain market share.

Laurent Freixe: It doesn't make sense to invest in communication, A&P, if you don't get the product right, if you don't get the quality right, if you don't get the price right, if you don't have the distribution right. We want to make sure that we systematically put the right levers in the right place, that we got taste preference, that we got the right pricing through the right price-pack architecture, that we maximize distribution and fill rate. Of course, then we can go full blast with our communication efforts. There is an element of phasing in there, as you rightly pointed out in your question, and putting the spends and investing in the right levers that will really make sure that we are preferred and that we drive category growth and gain market share.

Speaker Change: if you don't get the price right, if you don't have the distribution right, so we want to make sure that we systematically put the right levers in the right place that we got taste preference

That we got the right pricing.

Speaker Change: through the right price architecture, that we maximize distribution and fill rate, and of course then

Speaker Change: and we can go full blast with our communication efforts. So there is an element of phasing.

in this, in there.

Speaker Change: as you rightly pointed out in your question, and putting the things and investing in the right lever that will really make sure that we are preferred and that we drive growth, carry growth and gain market share.

David Hancock: Thank you. Thanks, Sarah. The next question comes from James Edwardes-Jones at RBC. Go ahead, James.

Speaker Change: Thank you. Thanks, Sarah. The next question comes from James Edwards Jones at RBC. Go ahead, James.

James Edwardes-Jones: Thank you very much. Morning, all. Actually, I've got three, but one doesn't really count. First one, can I just pin you down a bit further on that A&P? Should we be thinking about the 9% as the basis for the future, or is there a risk that 9% is just a spike at the end of this year, and then it reverts to 8.5% or something more like that? Second, on mix, the 1.1% mix growth you saw in 2024 is the lowest since 2018. It's really useful, incidentally, to disclose that. Should we be concerned about that? A final very small one is the regional disclosure with fewer zones that you're going to be implementing. Is that available somewhere? I just haven't seen it yet.

Thank you very much, good morning all.

Thank you.

Speaker Change: Actually, I've got three, but one doesn't really count. First one, can I just pin you down a bit further on that AMP?

Speaker Change: Should we be thinking about the 9% as the basis for the future, or is there a risk that 9% is just a spike at the end of this year and then it reverts to 8.5% or something more like that?

on the second

on mixed, the 1.1% mixed growth you saw in 2024.

Speaker Change: is the lowest since 2018. It's really useful in STEMI to disclose that.

Speaker Change: Should we be concerned about that? And then a final, very small one, is the regional disclosure with fewer zones that you're going to be implementing, is that available somewhere? I just haven't seen it yet.

Laurent Freixe: On A&P, we are determined to invest. We put the ambition that the 9% level will get there by the end of the year, and there is no way back. We want to keep investing. Because our brands and innovation being incremental, requires incremental resources, we absolutely are determined to keep investing from that level. On the mix, yeah, we have various elements of the mix, the country mix, the category mix, the product mix. Normally, they all play in our favor. I guess Anna can give a little bit more flavor on that one.

Speaker Change: So on A&P we are determined to invest and we have put the

Speaker Change: ambition that the 9% level will get there by the end of the year and there is no way back. We want to keep investing and because you know our brands and innovation, innovation being incremental, requires incremental resources.

We absolutely are determined to keep investing from that level.

Speaker Change: On the mix, we have various elements of the mix, the country mix, the category mix, the product mix, and normally they all play in our favor, but I guess Anna can give a little bit more flavor on that one.

Anna Manz: Yeah. I wouldn't be unduly worried by the mix number this year. Then there's been a sort of couple of things that you know about that has influenced it. For example, in pet care, as we've reestablished some of the lower price point SKUs, as we've had more capacity, that's impacted mix. Our regional mix has been impacted by things like consumer hesitancy to global brands. I wouldn't be too worried. What I would point you to, actually, though, is the improvement that we've seen in volume versus the losses that we were seeing last year. We are moving in the right direction. I think that is important. A little bit to go back to Sarah's philosophical question about trading off the different levers. Over the medium term, shareholder value requires our consumers to be consuming our products.

Anna Manns: Yeah, so I wouldn't be unduly worried by the mixed number this year, and then there's been a sort of couple of things that you know about that is...

Anna Manns: has influenced it. So, you know, for example, as we've, in pet care, as we've re-established some of the lower price point skis as we've had more capacity, that's impacted mix.

Anna Manns: and our regional mix has been impacted by things like consumer hesitancy to global brands. So, I wouldn't be too worried.

Anna Manns: point you to actually though is the improvement that we've seen in volume versus the losses that we were seeing last year so we are moving in the right direction and I think that is important. A little bit to go back to

Anna Manns: Sarah's philosophical question about trading off the different levers, over the medium term shareholder value requires our consumers to be consuming our products.

Rachel Smith: That's why volume is an important metric. We need to do that in a way that maximizes margin so that we can invest behind those products. I think that improving volume trajectory is good, important, and one we're very focused on. In terms of the regional disclosure, David, do you want to just pick that one up?

Anna Manz: That's why volume is an important metric. We need to do that in a way that maximizes margin so that we can invest behind those products. I think that improving volume trajectory is good, important, and one we're very focused on. In terms of the regional disclosure, David, do you want to just pick that one up?

Anna Manns: that's why volume is an important metric and we need to do that in a way that maximizes margin so that we can invest behind those products.

Anna Manns: So I think that improving volume trajectory is good and important and one we're very focused on.

David Hancock: Sure. Yeah. We haven't published the new zone reporting data today. We will publish it ahead of the Q1 results in April. You will get that ahead of time in April, where we will disclose 2024 restated for the new reporting structure ahead of the Q1 results.

Speaker Change: And in terms of the regional disclosure, David, do you want to just pick that one up? Sure, yes. So we haven't published the new zone reporting data today. We will publish it ahead of the Q1 results in April. So you will get that ahead of time in April where we will disclose.

Anna Manns: 2024 restated for the new reporting structure ahead of the Q1 results.

James Edwardes-Jones: Thank you.

David Hancock: Thanks, James. Let's take the next question in the queue from Tom Sykes at Deutsche Bank. Go ahead, Tom.

Thank you.

Speaker Change: Thanks, James. So let's take the next question from in the queue from Tom Sykes at Deutsche Bank. Go ahead, Tom.

Tom Sykes: Yeah. Thanks, David. Morning, everybody. Just to, again, try and understand this view for FY 2025 on RIG because consensus is about 1.4%. You're obviously pushing through price rises and potentially some elasticity. That 1.4% is pretty similar to what you did in H2. But if that's going to edge down potentially and your underperformers are getting better, are we assuming that the RIG in the rest of the business is therefore in aggregate going to be moderately slower than it was for the full year? And then maybe could you make some comments on perhaps lower income versus higher income consumers or products exposed perhaps to lower income, higher income consumers, whether there is a bit more pressure than you have seen before on those in lower income cohorts, please?

Tom Sykes: Yeah, thanks David. Morning everybody. Just to try and understand this view for full year 25 on RIG because the consensus is about 1.4 percent.

Tom Sykes: You're obviously pushing through price rises and potentially some elasticity. That 1.4% is pretty similar to what you did in H2.

Speaker Change: but if that's going to edge down potentially and your underperformers are getting better, are we assuming that the rig in the rest of the business

Speaker Change: therefore an aggregate going to be moderately slower than it was for the full year.

Speaker Change: then maybe could you make some comments on perhaps lower income versus higher income?

Speaker Change: consumers or products exposed perhaps to lower income higher income consumers whether there is a bit more pressure than you have seen before on those in lower income cohorts please.

Laurent Freixe: Maybe I can start with that one. Thanks, Tom. That we see this polarization of society in many countries. Clearly, the lower income consumers are more impacted because the weight of food in their household budget is a lot greater than the higher levels of the consumers. They are more impacted. They are more sensitive. That part certainly is under pressure. We see premiumization continuing to take place, confirming that even in more challenging times, there is still space for premiumization. We are very, very mindful of affordability. This is one thing that we have front and centre. We want to make sure that our value equations are rock solid and that we are preferred by the relevant segments of the population. That's something that we have core to our strategies.

Maybe I can start with that one. Thanks Tom.

Speaker Change: that we see this polarization of society in many, many countries and clearly

Speaker Change: The lower income consumers are more impacted because the weight of food in their household budget is a lot greater than in the US.

the higher

Speaker Change: of the consumers. So, they are more impacted, they are more...

He's under pressure.

Speaker Change: We see primarization continuing to take place, confirming that even in more challenging times there is still space for...

Speaker Change: premiumization. We are very very mindful of affordability. This is one thing that we have front and center. We want to make sure that our value equations

Speaker Change: are rock-solid and that we are preferred by the relevant segments of the population. So that's something that we have called to our strategies.

Anna Manz: With respect to RIG, I mean, look, we guide on OG. I'm not going to guide on RIG. But maybe just to go back to some of the drivers we talked about around OG and read them across to RIG because that may help you. I mean, the starting point is consumer sentiment is unchanged. I talked about then lapping consumer hesitancy to international brands. That's now in our base. We've also had some retailer destocking this year that we shouldn't have in 2025. Both of those drive OG, but they are RIG drivers. Then you've got the actions that we are taking to accelerate our portfolio and the categories that we are in. Obviously, there is a clear RIG focus around those actions.

Thank you.

Speaker Change: And with respect to RIG, I mean, look, we guide on OG, and so I'm not going to guide on RIG, but maybe just to go back to some of the drivers we talked about around OG and read them across to RIG, because that may help you. I mean, you know, the starting point is consumer sentiment is unchanged.

Speaker Change: I talked about then lapping consumer hesitancy to international brands, that's now in our base.

Speaker Change: accelerate our portfolio and the categories that we are in and obviously there is a clear rig focus around those actions and then you've got the

Rachel Smith: Then you've got the price increases that we need to put through on coffee and cocoa, which will likely have some sort of negative impact on RIG. To be honest, we will understand that as we work our way through this pricing environment.

Anna Manz: Then you've got the price increases that we need to put through on coffee and cocoa, which will likely have some sort of negative impact on RIG. To be honest, we will understand that as we work our way through this pricing environment.

Speaker Change: price increases that we need to put through on coffee and cocoa which will likely have some sort of negative impact on rig but to be honest you know we will understand that as we work our way through this pricing environment.

David Hancock: Thank you, Tom. The next question comes from Jeff Stent at Exane BNP Paribas. Go ahead, Jeff.

Speaker Change: Thank you Tom. The next question comes from Jeff Stent at Exxon BNP Paribas. Go ahead Jeff.

Jeff Stent: Okay. Thank you. Two questions, if I may. The first one is you said you remain committed to Waters. Should I understand from that, regardless of what happens in terms of reshaping, it'll be likely you'll still be consolidating Waters revenues? And the second one is just on pet. Slowly but surely, the fresh category seems to be growing and taking share. What are your current thoughts about Nestlé's presence in the fresh segment of pet? Thank you.

Jeff Stent: Okay, thank you. Two questions, if I may. The first one is, you said you remain committed to waters. Should I understand from that, regardless of what happens in terms of reshaping, it will be likely you'll still be consolidating waters revenues?

Jeff Stent: And the second one is just on pets, you know slowly but surely the fresh category seems to be growing and taking share. What are your current thoughts about Nestle's presence in the fresh segment of pet? Thank you.

Laurent Freixe: Yeah. Thank you very much. We are absolutely committed to our brands, to our premium brands in particular that are unique jewels in the Waters area. We exclude an outright sale. I didn't say that we look for keeping the consolidation. We look for the partnership that will help us enhance and grow that business forward. Of course, there are many options possible on the table. Bear with us a few months, and we'll give more clarity on the way forward. On the.

Yeah, thank you very much. So we are absolutely.

Jeff Stent: committed to our brands to our premium brands in particular that are unique jewels in the waters area so we exclude

Jeff Stent: an outright sale, but I didn't say that we look for keeping the consolidation.

Jeff Stent: We look for the partnership that will help us enhance and grow that business forward and of course there are many options possible on the table. Bear with us a few months and we'll give more clarity on the way forward.

Anna Manz: Fresh pet food.

Laurent Freixe: Fresh pet food, this is a trend, absolutely, especially in the US. We see it also emerging in other geographies. The quick action mark is always on fresh and chilled, attractive because they are close to as close as possible to natural in the perception, the investment equation, the investment intensity, and the returns and the profitability. We, of course, are looking at that. We have some investments in the space. Besides this, keep in mind that we see massive opportunities with what we have. Be it segments, be it geographies, in particular, emerging markets offer us an ample opportunity to grow. In those environments, it's less about fresh than about building up the consumption, calorific coverage, and developing the right capabilities.

on the fresh pet feed

Jeff Stent: Fresh pet food, this is a trend, absolutely, especially in the U.S. We see it also emerging in other geographies. So, the Caucasian Mark is always on fresh and chilled, attractive, because they are close to, you know...

Jeff Stent: as close as possible to natural in the perception, the investment equation, the investment intensity and the returns and the profitability, but we of course are looking at that, we have some investments in the space.

Jeff Stent: And besides this, keep in mind that we see massive opportunities with what we have.

Jeff Stent: be it segments, be it geographies, in particular, emerging markets offer us an ample opportunity to grow and in those environments it's less about fresh than about...

Jeff Stent: building up the consumption, calorific coverage and developing the right capabilities.

Jeff Stent: Thank you.

David Hancock: Thanks, Jeff. The next question comes from David Hayes at Jefferies. Go ahead, David.

Thank you.

Speaker Change: Thanks Jeff. The next question comes from David Hayes at Jefferies. Go ahead David.

David Hayes: Thanks, David. Morning, all. They're chiefly one on the procurement clawback and one on the cost savings. On the clawback in the procurement of CHF 300 million that you talked about in terms of contract versus the prices that you paid, can you just talk us through the process that led to that realization? Was that something that took place at the beginning of this year? Is that a review that has completed, or is there potential for further assessment to find additional clawbacks through this year that could help with the profitability?

David Hayes: Thanks, good morning all. So two for me, one on the procurement clawback and one on the cost saving. So on the clawback in the procurement of 300 million that you talked about in terms of contract versus the prices that you paid, can you just talk us through the process?

David Hayes: that led to that realisation? Was that when it took place at the beginning of this year? Is that a review that has completed or is there potential for...

David Hayes: On the cost savings more broadly, are you talking about any sort of headcount reduction as part of these savings over the next couple of years, or do you see those savings being achieved with a net no change in headcount because it's just about process and system improvements that deliver on the 2.5? Thank you so much.

David Hayes: further assessment to find additional clawbacks through this year that could help with the profitability. And on the cost saves more broadly, are you talking about any sort of headcount reduction as part of these savings?

David Hayes: over the next couple of years? Or do you see that those savings be achieved with a net no change in headcount because it's just about processing system improvements that deliver on the 2.5? Thank you so much.

Laurent Freixe: Yeah. On the cost savings, which is a very, very important part of our equation, this is the starting point of the Virtuous Circle. You see that we put on the table very, very significant numbers. On the procurement, we are really reviewing end-to-end the opportunity. Keep in mind that we spend CHF 60 billion in procurement. We are talking big numbers. There are many areas of opportunity through consolidation of spends, for instance, or simplification of specs, and so on and so forth. We are working on all of those. What we highlighted is the impact of AI on our procurement activities. What we have been doing now systematically is reviewing our contracts. Bear in mind that we got 100,000 suppliers plus. That's the base that we got. Imagine the number of contracts that we got to review.

David Hayes: On the cost savings, which is a very, very important part of our equation, this is the starting point of the virtuous circle, you see that...

We put on the table very, very significant numbers.

David Hayes: On the procurement, we are really reviewing end-to-end the opportunity. Keep in mind that we spend $60 billion in procurement, so we are talking big numbers.

and there are many areas of opportunity through consolidation.

David Hayes: of spans, for instance, or simplification of specs, and so on and so forth, so we are working on all of those. What we highlighted is the impact of AI.

David Hayes: on our procurement activities and what we have been doing now systematically.

David Hayes: is reviewing our contracts and bear in mind that we got 100,000 suppliers plus. That's the base that we got. So imagine the number of contracts that we got.

David Hancock: We match that with the invoices. We are talking millions of invoices. Just checking inconsistencies. There are always inconsistencies in those and identifying them and then getting back to the suppliers. This is where we have found the quick savings. There is a lot more to it. There is a lot of work happening between procurement, business, and suppliers, of course, to make sure that we go to the heart of the opportunity. It's massive. We highlighted the impact on the Fuel for Growth program. It's real. It's savings. It's interesting that there are question marks on, "Is it real? Is it not real?" Ask the retailers if it's real or not and if you can pull savings through negotiation. Ask our suppliers as well.

Laurent Freixe: We match that with the invoices. We are talking millions of invoices. Just checking inconsistencies. There are always inconsistencies in those and identifying them and then getting back to the suppliers. This is where we have found the quick savings. There is a lot more to it. There is a lot of work happening between procurement, business, and suppliers, of course, to make sure that we go to the heart of the opportunity. It's massive. We highlighted the impact on the Fuel for Growth program. It's real. It's savings. It's interesting that there are question marks on, "Is it real? Is it not real?" Ask the retailers if it's real or not and if you can pull savings through negotiation. Ask our suppliers as well.

David Hayes: to review, and we match that with the invoices, we are talking millions of invoices, and just checking inconsistencies, there are always inconsistencies.

David Hayes: in those and identifying them and then getting back to the suppliers.

David Hayes: And this is where we have found the quick savings, but there is a lot more to it. And there is a lot of work happening between procurement and business and suppliers, of course.

David Hayes: and to make sure that we go to the heart of the opportunity. So it's massive.

David Hayes: and we highlighted the impact on the Fuel4Growth program. Is it real? Is it savings? You know, it's interesting that there are question marks on is it real, is it not real? Ask the retailers.

David Hayes: if it's real or not and if you can pull savings through negotiation and ask our suppliers as well if something is happening. At Nestle you will see that something is clearly happening at Nestle.

David Hancock: If something is happening at Nestlé, you will see that something is clearly happening at Nestlé. On productivity of the workforce, we are always looking at the impact of technology, impact of shared services. It's not by chance that shared services are under the responsibility of ANA now. We see lots of opportunities end-to-end to improve the productivity of our workforce and eliminating basically everything that can be automated that brings quality, speed in the processes, and cost savings while freeing up valuable quality time for the people to analyze the data, act on the data, and not pull up reports together. Anna, maybe you want to comment?

Laurent Freixe: If something is happening at Nestlé, you will see that something is clearly happening at Nestlé. On productivity of the workforce, we are always looking at the impact of technology, impact of shared services. It's not by chance that shared services are under the responsibility of ANA now. We see lots of opportunities end-to-end to improve the productivity of our workforce and eliminating basically everything that can be automated that brings quality, speed in the processes, and cost savings while freeing up valuable quality time for the people to analyze the data, act on the data, and not pull up reports together. Anna, maybe you want to comment?

Shared services are under the responsibility of ANA now.

David Hayes: We see lots of opportunities end-to-end to improve the productivity of our workforce and eliminating basically everything that can be automated, that brings quality, speed in the processes and cost savings, while freeing up...

David Hayes: valuable quality time for the people to analyze the data, act on the data, and not...

Speaker Change: pull up reports together. Anna-Mamie, do you want to complement? Maybe just one build, I mean your question was, is there more? I think the attitude which we were approaching all of this is

Anna Manz: Maybe just one build. I mean, your question was, "Is there more?" I think the attitude which we're approaching all of this is, "We're just going to keep going. We will continue to look for efficiencies." What we're sharing with you is where we've got to. As you can see, we found some great quick wins that are helpful. We really are doing a systematic review. That is what will continue to fuel our investment for growth going forward.

Speaker Change: we're just going to keep going and we will continue to look for efficiencies and what we're sharing with you is where we've got to and you know as you can see we found some great quick wins that are helpful but we really are doing a systematic review and that is what will continue to fuel our investment for growth going forward.

David Hancock: Thank you, David. Thanks, Anna and Laurent. We will need to close the call here. Thank you for your interest and for joining us today. We look forward to meeting many of you as we are on the road over the next weeks. Otherwise, look forward to connecting again when we have our Q1 results call in April. Many thanks.

Speaker Change: Thank you, David. Thanks, Anna and Laurent. We will need to close the call here, but thank you for your interest and for joining us today. We look forward to meeting many of you as we are on the road over the next weeks. Otherwise, I look forward to connecting again when we have our Q1 results call in April. Many thanks.

David Hancock: Thank you.

Thank you.

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