Q1 2025 Nestle SA Earnings Call

April 24, 2025

Operator: Conference calling center. Please have your passcode and conference leader's name available. Thank you for calling. May I have your passcode?

Good morning and welcome to Nestlé's three-month 2025 sales conference call. I am David Hancock, Head of Investor Relations.

Sarah Simon: Yes. Hi, it's 3 March 2025.

[Company Representative] (Aiera): Yes. Hi, it's 3 March 2025.

Operator: Thank you. Your first and last name with the spelling, please.

Sarah Simon: Sure. It's Rachel Smith. R-A-C-H-E-L S-M-I-T-H.

[Company Representative] (Aiera): Sure. It's Rachel Smith. R-A-C-H-E-L S-M-I-T-H.

Operator: Thank you. Also your company name.

Sarah Simon: I'm with Aiera. That's A-I-E-R-A.

[Company Representative] (Aiera): I'm with Aiera. That's A-I-E-R-A.

Operator: Thank you. I'll join you into the conference in listen-only mode during the question and answer session. Please press star one to ask the question, and you can press star two to withdraw your question.

I would like to thank our team for their efforts as we navigate the fist full year end.

Our new strategy.

Sarah Simon: Got it. Thank you.

[Company Representative] (Aiera): Got it. Thank you.

Over the last year, we have seen unprecedented cost inflation in coffee and cocoa, we have been proactive on pricing and our team that'd be get teed, the negotiations with kiss them as well with limited disruptions.

Operator: Okay.

My priority is to accelerate our growth there is no gross without investment so generating the resources to invest is critical.

That is why we launched a fruitful grew savings program.

We are making good progress and we are on track to deliver 700 million Swiss francs incremental cost savings in 2025 on top of over 1.2 billion of savings from ongoing efficiency initiatives.

Alignment and focus of the teams is critical to delivering performance.

Following the rapid actions on the organization, we took last year. We also the simplifying to support effective execution.

This includes steps to harmonize all structure is on Europe, and then it's all kept liabilities in R&D.

We are driving these savings and improving organizational alignment to support gross booths accelerating all categories and improving our market share.

Let's turn now to how we have done that in Q1.

We are making good progress on actions, which will accelerate our growth I want to touch on the shoe in each of our gross pillows devoted costa.

Firstly expanding windows.

We continue to invest behind winning brands like Kitkat and Maggie keys.

He'd get tablets were rolled out to 12 markets in Europe during Q1 with strong marketing support.

Early indicators have been acquisitive booths with customers and consumers.

Speaker Change: Maggie we have been investing further behind the brands and strengthening our digital platform.

Which provides access to modern recipes.

Speaker Change: To be a sharing and personalized user experience.

In Q1, we added new functionalities in several markets.

Speaker Change: Between the muggy enriched with this platform, we will rollout and instruments across around 50 market. During this year.

Speaker Change: E Commerce is another area of progress and we continue to deliver strong growth in Q1.

Speaker Change: Dishes shoot bolted baidu rollout that scale of innovative AI tools.

Speaker Change: <unk> to better optimize our digital shelf and significantly improve degeneration of personalize content.

Speaker Change: Next skidding big bids.

Speaker Change: And the full year reserves in Cagny, we talked about the rollout of this cafe spritsail concentrates and I'll go Mets would get Peter I mean, it's.

Speaker Change: Early traction in the market has been good for both.

Speaker Change: During Q1, we also rolled out Shokku bakery and this has no scale to certain markets and let them as well as markets anyway.

Speaker Change: Even the pricing dynamics from cookware inflation. It is a great time to be scaling these chocolate we'd be discrete products sell.

Speaker Change: Said addressing underperformance I've talked before about diagnosing the issue is the cross sell 18 key underperforming sites and we are taking action.

Speaker Change: It is still early days, but I'm encourage that we are seeing signs of improvement in the majority of the sites.

Speaker Change: Finally, we are moving ahead with building new growth platforms.

Speaker Change: Nutrition, we want to play in each stage of life and womens health. He's one of the most promising newer growth areas.

Speaker Change: We've met and that we already have a great brand well established in Latam and Canada. This year, we are expanding globally, including in China, and India, and we are developing a range with premium science led innovation.

Speaker Change: But he sees a small snapshot overall lots of focus and good progress.

Speaker Change: Giving us confidence that even in this uncertain environment, we can continue to accelerate our growth.

Speaker Change: And with that I will hand over to Anna to take you through the Q1 figures in more detail.

Anna: Thanks, Darryl and good morning.

Speaker Change: As Al said, we delivered two plane type organic sales price in the quarter with right at no, 0.7% and pricing of two 1%.

Speaker Change: Sales were negatively impacted by foreign exchange movements.

Pat: Pat this quarter it was much less than last year, but the recent strengthening of the Swiss franc means you'll see an increased impact again looking for it.

Pat: Looking next at the quarterly amazement to sales over time.

Pat: And you can see that pricing gets picked up in the first quarter as we respond to the input cost inflation and coffee and K K.

Pat: I want to spend a moment on our pricing approach.

Pat: We typically aimed to price to the upstate saw the increase in input costs.

Pat: Given the significant meats and coffee and K K, it's critical that we price to the fullest extent possible to provide the margin for future investment behind our brands.

Pat: And our goal is to do that whilst maintaining medium term consumer penetration.

Pat: As we price we have to consider the customer as well as the consumer.

Pat: In some markets, particularly here at customer negotiations are predominantly in the first quarter of each year.

Pat: These are now largely concluded and as Al said Theres been any limited customer disruption.

Speaker Change: From a consumer perspective, it's still too early to get a clear read on elasticity.

Speaker Change: But pricing has been significant it has initially been some impact on rate.

Speaker Change: We are monitoring this closely as can see mezz and the competitive environment adjusts and stabilizes.

Speaker Change: Rick also continues to be dampened by soft consumer demand.

Speaker Change: That confidence in many geographies, which is already fragile even before the increasing macroeconomic and political uncertainties.

Speaker Change: Now, let's look at the performance of our segments in the quarter.

Speaker Change: And Zane Americas macroeconomic uncertainty has made for a challenging environment, if consumer confidence fragile.

Speaker Change: In that context flash organic rice with positive break in North America. It was a very solid performance and we grew nicely in Latin America.

Speaker Change: Where I sit aside it was driven by strong pricing actions and confectionery and coffee.

Speaker Change: It was supposed to hit by high single digit growth in our professional business.

Speaker Change: The main drags on the Zions first quote to delivery, but infant nutrition and fresh foods.

Speaker Change: On the left that we're making progress in restoring competitiveness.

Speaker Change: There are recent indications of improving market share developments.

Speaker Change: Too early to call this a sustained trend.

Speaker Change: And sorry in AOA, we delivered positive price across all categories in most regions.

Speaker Change: The highlight was our confectionery business Haywood.

Speaker Change: Hey, we achieved positive rate and market share gains, even while we took significant pricing.

Speaker Change: We also made good progress in the areas, we've identified as being a strategic focus.

Speaker Change: This includes double digit growths in marquee cooking AIDS and in emerging market pet cat.

Speaker Change: Across design consumer sentiment remained subdued.

Speaker Change: This is particularly true in China.

Speaker Change: In that context, our organic price in China was driven by sales facing with the buildup of inventories rather than by underlying consumption.

Speaker Change: Cement demand remained broadly flat in the quarter.

Speaker Change: Turning to say in Europe, we generated broad based growth across markets and categories with improving market share trends across nice country category combinations.

Speaker Change: Our priority during the course here was our annual price negotiations and as we said we navigated these is relatively limited disruption.

Speaker Change: We now need to see the impact of price increases on consumer demand and coffee and confectionery, which we're watching carefully.

Speaker Change: Beyond these categories. The zions growth continues to be supported by solid regulatory Christ in pet care.

Speaker Change: And let's say how science performance was mixed.

Speaker Change: In H two last year, we had double digit growth as he was guessing back on shelf after the resolution of our supply issues.

Speaker Change: Maybe into this year graces decelerated.

Speaker Change: In some areas, we're performing very well.

Speaker Change: For example, <unk> continues to be double digit and our premium mass brands and they know game.

Speaker Change: Assessing that that's been areas of weaker performance.

Speaker Change: And Nature's bounty, we're now back on shelf that can see and the uptake has been slower than expected.

Speaker Change: And vital proteins as being weak in a category that's seen an increasing number of entrants.

Speaker Change: We've got what today uncompetitive positioning promotional strategies and strengthening our brands and product lineups through innovation and marketing.

Speaker Change: Finally, a comment on pricing which was negative.

Speaker Change: In part this reflects a return to more normal levels of promotional activity in our Vms business.

Speaker Change: Pricing was also impacted by changes to the reimbursement level.

Speaker Change: Zen pet gastro intestinal product as a consequence of the U S inflation reduction Act.

Speaker Change: And especially <unk> had a strong first quarter.

Speaker Change: Chris it's largely driven by the U S. But we also saw reducing share loss in Europe.

Speaker Change: Across the business, we've been progressively taking price and.

In many markets. This took effect towards the end of the quarter and we did see a benefit from some sales pull forward ahead of price increases.

As you look ahead keep in mind that I can see them as purchase nespresso less frequently than our other categories.

Speaker Change: So it will take a while to see the consumer impact just the price increases.

Speaker Change: All of that said it was a good course offend, especially.

Speaker Change: And this is also true of the broader nespresso ecosystem, including Starbucks Nespresso, we continued strong momentum and added a further 130 basis points to grace.

Speaker Change: Finally, net save autism premium beverages.

Speaker Change: We rapidly implemented the new organizational structure and progressed with a strategic evaluation, while staying focused on operational execution.

Speaker Change: Price improved and was broad based across markets, mainly driven by recent product launches in the San Pellegrino and Perrier range.

Speaker Change: I watched this business posted low single digit growth as Perry I was impacted by ongoing supply constraints.

Speaker Change: Turning to categories I'll be brief as we've covered much of this already.

Speaker Change: The group's first quarter growth was driven by powdered and liquid beverages, specifically coffee and by confectionery pet Cat and health science.

Speaker Change: In patches liquid beverages grocers price led.

Speaker Change: Average pricing was mid single digits. This varied across markets and product sets. Our actions were tailored to the specific dynamics of different markets.

Speaker Change: On Petcare category growth has come down from a year ago, but is now stabilizing.

Speaker Change: First quarter organic growth of one 6% was similar to the growth we saw in the second half of last year.

Rick: Rick continues to be positive across all regions led by cat food and therapeutics.

Rick: Negative pricing reflects input costs and a return to a more normal promotional environment.

Speaker Change: Within nutrition and Health Science I've taught you about health science already.

Speaker Change: The attrition saw a decline in infant nutrition impacted by our underperformance in the baby food and any day.

Speaker Change: I'm prepared dishes and cooking AIDS flat broke out at Cray safer or was a function of grace and cooking AIDS led by Mackie and offset by price and state.

Speaker Change: Milk products and ice cream organic rice was slightly positive with grace and ambient culinary offset by coffee creamers.

Speaker Change: And confectionery pricing with double digit with last time, the highest followed by Europe and a L. A.

Speaker Change: As noted this had some impact on demand.

Speaker Change: Waters, we've covered already.

Speaker Change: Turning finally to guidance.

Speaker Change: There's so much in the first quarter was in line with our expectations and our 2025 guidance remains unchanged.

Speaker Change: And this is based on our assessment is the direct impact of current tariffs and our ability to adapt.

Speaker Change: Organic sales growth is expected to improve versus 'twenty 'twenty, four and strengthened over the year as we deliver on our growth plans.

Speaker Change: We expect to your top notch and to be at or above 16% as we invest for growth.

Speaker Change: And as you've heard from Laurel and a complex external environment, we remain focused on execution of our strategy.

Speaker Change: And with that I'll hand, you back to David for the Q&A.

David Hancock: Thank you Anna.

David Hancock: In order to allow everyone jumps to ask a question we ask that you limit yourself to two questions during the Q&A session.

Speaker Change: Our first questions come from Guillermo <unk> from UBS. Please go ahead Kim.

Speaker Change: Thank you very much and good morning, local and I know, David Firstly, maybe a point of clarification could you quantify the impact from this positive self phasing in China, and maybe the sales pull forward for Nespresso and then did it have.

Speaker Change: A visible impact.

Speaker Change: At the group level.

Speaker Change: And also should we expect a immediate reversal in the second quarter.

Speaker Change: And then my two questions. So firstly on your guidance for organic sales growth to strengthen through the course of the year.

Speaker Change: Would it be right to assume that to be expect both Rick and pricing to improve quarter after quarter this year and specifically on pricing.

Speaker Change: Much of your additional commodity costs, particularly coffee and cocoa.

Speaker Change: Are you now covered by your recent pricing actions. So how much is left for the next quarters.

Speaker Change: And then my second question is on infant nutrition.

Speaker Change: Which I think declined in the first quarter it.

Speaker Change: It seems the performance was quite soft across the three zones with some particular weakness in the U S. My question here would be it.

Speaker Change: Is this softness mostly attributable to anemic category grows.

Speaker Change: Or is it also reflective of some share losses.

And I guess at the time, when we are seeing some encouraging signs in China, what would be your action plan and your outlook for this category to rapidly returned to positive growth. Thank you very much.

Speaker Change: These things Hugh Good morning, Smitty question in two.

Speaker Change: So we try to take them one by one.

Speaker Change:

Speaker Change: On the on the growth side are we gave you.

Speaker Change: Our message of confidence on the.

Speaker Change: The wistful world and in ways that are in the environment, which is which of those which is uncertain because we.

Speaker Change: She can get impact Oh fell strategy at play.

Speaker Change: All dimensions, but we see it.

Speaker Change: Shoot for Bruce coming strong and got very confident that we will deliver what tweets.

Speaker Change: Committed to we start to redeploy those investments behind strengthening the cool, but in particular, our beer brands.

Speaker Change: Deploying our big bets and addressing of our Underperformers and we see impact also in all dimensions of that.

We see our market share position improving.

Speaker Change: And and to your question that yes, we.

Speaker Change: Half bus most of the of the.

Speaker Change: Pricing that we expected to bus.

Speaker Change: There is a logic into the number one because we got the visibility.

Speaker Change: For a large bolt of the year so when it comes to the commodities.

Speaker Change: Second because there is one slowed for developed markets, where you can really increase the pricing and the prices and this is this this is the start to the year. This is Q1.

Speaker Change: So we've been through that a round of negotiations with expected results, which means good reserves.

Speaker Change: And are these pricing, though has to translate progressively into consumer prices. So you would see.

You will see the impact are combing them well.

Speaker Change: Well both in terms of our pricing in those swing to them so the consumer pricing.

Speaker Change: Hum.

Speaker Change: Nutrition.

Speaker Change: I mean category is what it is there is the positive of when it comes to China of the.

Speaker Change: Most of them.

Speaker Change: The year of the Dragon with a more babies, so that will support the growth in the coming.

Speaker Change: In the coming couple of years.

Speaker Change:

Speaker Change: Is different in this respect and we have one specific issue to address which is wonderful underperformers with switches Gilbert.

Speaker Change: So that so then you won't have a wonderful focus areas going forward, but back to the core message, we see progress in all dimensions of our strategy.

David Hancock: Good morning, and welcome to Nestlé's Q1 2025 Sales Conference Call. I am David Hancock, Head of Investor Relations. Today I'm joined by Laurent Freixe, CEO, and Anna Manz, CFO. Laurent and Anna will provide a short update on our progress in Q1 before we open up for Q&A. Before we get started, please take a moment to read the disclaimer on page two. With that, I will hand over to Laurent.

Speaker Change: And we are sharpening the strategy we are sharpening the execution. Your organization is aligned to to execute that you saw you see so you saw some.

Speaker Change: Uh huh.

Speaker Change: New announcement as regards sales.

Speaker Change: So the strengthening the organization in Europe, and in R&D, and we expect the impact to grow muscle.

Speaker Change: In the next two periods ER to ER silver.

Laurent Freixe: Thank you, David, and good morning, everyone. Before Anna takes you through the financials, let me share some highlights on our progress in the first quarter. Despite a challenging consumer environment, we delivered resilient and broad-based organic growth of 2.8% in Q1. I would like to thank our team for their efforts as we navigate the first full year under our new strategy. Over the last year, we have seen unprecedented cost inflation in coffee and cocoa. We have been proactive on pricing, and our team navigated the negotiations with customers well with limited disruptions. My priority is to accelerate our growth. There is no growth without investment, so generating the resources to invest is critical. That is why we launched the Fuel for Growth Savings Program.

Speaker Change: Strengths in and shopping Oh, our action plans and our execution.

Speaker Change: Going forward.

Speaker Change: You probably want to that's what I'm, saying, yeah sure she's probably the guy who can sense say.

Speaker Change: So say, maybe it's tight then oh, so what was the impact of the sales pull forward around China and the suppress size.

Speaker Change: Relatively small and Pat so about 20 basis points, such a great level and sales facing customer driven where they unwind well it was customer driven so it's a little bit Hodge Tonight.

Speaker Change: But you know at some point you would expect it to unwind.

Speaker Change: The broader question around Oh got it sounds great strength through the year.

Speaker Change: That is a statement that we are making in the context of the actions that you've just heard Laura I'll call outs to consistently improve our performance against the categories that we play in.

Laurent Freixe: We are making good progress, and we are on track to deliver CHF 700 million incremental cost savings in 2025 on top of over CHF 1.2 billion of savings from ongoing efficiency initiatives. Alignment and focus of the teams is critical to delivering performance. Following the rapid actions on the organization we took last year, we are further simplifying to support effective execution. This includes steps to harmonize our structure in Zone Europe and enhance our capabilities in R&D. We are driving these savings and improving organizational alignment to support growth, both accelerating our categories and improving our market share. Let's turn now to how we have done that in Q1. We are making good progress on actions which will accelerate our growth. I want to touch on a few in each of our growth pillars over the quarter. Firstly, expanding winners.

Speaker Change: So you should see improving formats from a share perspective, as we move through the year well.

Speaker Change: Not trying to say to you is that you should expect.

Speaker Change: And improvement in rig and Daiichi quarter on quarter, because we're not managing the business by quarter.

Speaker Change: Managing to really drive that can see him a poll in the medium term so I see that as a further statement and yeah. There will be some puts and takes by quarter.

Speaker Change: I'm not going to give you specific guidance as such on Q2, but maybe just some of the major boxes.

Speaker Change: Think it through.

Speaker Change: We've taken the majority of our price through Q1 is as you've had little I'll say, obviously, we got the full benefit of that as we move into the second quarter.

Speaker Change: That may or may not be some unwind if this as a pull forward in the second quarter, we'll see we have the benefit of Easter or more Easter this year versus last year and we have the consistent actions, we are taking to improve outperformance versus the category that we're playing.

Laurent Freixe: We continue to invest behind winning brands like KitKat and Maggi. KitKat tablets were rolled out to 12 markets in Europe during Q1 with strong marketing support. Early indicators have been positive, both with customers and consumers. In Maggi, we have been investing further behind the brands and strengthening our digital platform, which provides access to modern recipes, peer-to-peer sharing, and a personalized user experience. In Q1, we added new functionalities in several markets. Between the Maggi and Recetas platform, we will roll out enhancements across around 50 markets during this year. E-commerce is another area of progress, and we continue to deliver strong growth in Q1. This is supported by the rollout at scale of innovative AI tools, allowing us to better optimize our digital shelves and significantly improve the generation of personalized content. Next, scaling big bets.

Speaker Change: And.

Speaker Change:

And just on infant nutrition, maybe it just to give you a couple of the numbers. The category overall is it's like rice because of like that's right April we're gaining share in infant nutrition, what's holding us back a bit just as you've called out as baby food.

Speaker Change: It's nice marks in North America, where our Cadbury is a bigger proportion of the sales, but the what to do with some baby food and work with Microsoft on that.

Speaker Change: Very clear thank you very much.

Speaker Change: Thank you so I will take the next question from Warren Ackerman from Barclays. Please go ahead.

Speaker Change: Yeah. Good morning, Lana, David Warren here at Barclays I'm cool as well. The first one is just what type of pet into pet food.

Speaker Change: I mean, 1.6% organic rise in the quarters not great for what could be one of your best businesses I know, there's a negative price in Napa, even the rig at 3.5.

Laurent Freixe: At the full year results and CAGNY, we talked about the rollouts of Nescafé Espresso Concentrate and our gourmet wet cat pyramids. Early traction in the market has been good for both. During Q1, we also rolled out Chocobakery, and this has now scaled to certain markets in LatAm as well as markets in AOA. Given the pricing dynamics from cocoa inflation, it is a great time to be scaling these chocolate with biscuit products. Third, addressing underperformance. I've talked before about diagnosing the issues across our 18 key underperforming sales, and we are taking action. It is still early days, but I'm encouraged that we are seeing signs of improvement in the majority of the sales. Finally, we are moving ahead with building new growth platforms.

I wouldn't say, it's poorly and.

Speaker Change: You know and that probably includes emerging markets all quite good. So should I then read into that there's something going on in developed markets U S and European pet.

Speaker Change: Pet food.

Speaker Change: Maybe you can discuss what youre seeing on the ground competitively.

Speaker Change: In pet food.

Speaker Change: And is there reason to think that the pet.

Speaker Change: Pet food I know, you've got the innovations coming should be.

Speaker Change: So I mean, you know you'd be talking about what would be the pet food.

Normalizing for some time, but you know I guess most people call. It mid single digit and you know we're kind of running a 1.6. So can you maybe sort of square that for us a little bit.

Laurent Freixe: In nutrition, we want to play in each stage of life, and women's health is one of the most promising newer growth areas. With Materna, we already have a great brand well-established in LatAm and Canada. This year, we are expanding globally, including in China, and India, and we are developing our range with premium science-led innovation. This is a small snapshot. Overall, lots of focus and good progress, giving us confidence that even in this uncertain environment, we can continue to accelerate our growth. With that, I will hand over to Anna to take you through the Q1 figures in more detail.

Speaker Change: What youre, saying, how happy are you with the pet food performance in the different three different designs is my is my first one and then just secondly on tariff and currency clearly Ana you said the Swiss francs move considerably since our liberation Die early early early April.

Speaker Change: Are you able to give them kind of a mark to market on topline and Utah on currencies moving around a lot, but just where we are today because I guess, there's some transactional FX on top of translation and on tariffs can you just confirm you know.

Speaker Change: I will first be applied to cotai.

Speaker Change: And coffee.

Anna Manz: Thanks, Laurent, and good morning. As Laurent said, we delivered 2.8% organic sales growth in the quarter with RIG of 0.7% and pricing of 2.1%. Sales were negatively impacted by foreign exchange movements. The impact this quarter was much less than last year, but the recent strengthening of the Swiss franc means we'll see an increased impact again looking forward. Looking next at the quarterly movement of sales over time, and you can see that pricing has picked up in Q1 as we respond to the input cost inflation in coffee and cocoa. I want to spend a moment on our pricing approach. We typically aim to price for the absolute dollar increase in input costs.

Speaker Change: Sorry, Paris own coffee in the U S. How does that work because I heard your comment about pricing, mostly thumb, but then on coffee tariffs in the U S would you then need to take more pricing over and above what you've done or do you have sort of inventory, where you don't need to take any additional pricing I'm just I just wanted to under.

Speaker Change: Stan your towards Harris strategy.

Speaker Change: With regards to your you know the key commodities are going into the into the U S and what that means for pricing. Thank you.

Speaker Change: Okay. So let me start with the question on pet food.

Speaker Change: I think the key point is the slightly negative pricing, which is largely justified by.

Anna Manz: Given the significant moves in coffee and cocoa, it's critical that we price to the fullest extent possible to provide the margin for future investment behind our brands. Our goal is to do that while maintaining medium-term consumer penetration. As we price, we have to consider the customer as well as the consumer. In some markets, particularly Europe, customer negotiations are predominantly in Q1 each year. These are now largely concluded, and as Laurent said, there's been only limited customer disruption. From a consumer perspective, it's still too early to get a clear read on elasticities. Where pricing has been significant, there's initially been some impact on RIG. We're monitoring this closely as consumers and the competitive environment adjusts and stabilizes. RIG also continues to be dampened by soft consumer demand. Consumer confidence in many geographies was already fragile even before the increasing macroeconomic and political uncertainties.

Speaker Change: My the commodity environment. So there is no need for a pricing to protect the margins on the womens.

Speaker Change: And and chicken, we got more capacity coming on stream and in multiple come by the way as we are still constrained in a few areas, especially with pet food.

And Ah that makes the promotional like promotional activities have resumed and that has an impact also.

Speaker Change: On pricing, but I would qualify the regas solid it says that it ahead of the rest of the group.

Speaker Change: And we have a broad based positive regain more of course, you can imaging My kids then.

Speaker Change: In the developed markets, but the category is strong we took muskie volumes when you think of the <unk>.

Speaker Change: Bruce or a 2% unless your volumes. This is this is very very significant.

Speaker Change: And we got everything it takes to she pulled the gross.

Brian: Brian Sweet goods, the R&D capabilities, we've got.

Speaker Change: Our innovations are.

Speaker Change: And we go to resources being deployed and on top of the capacity.

Anna Manz: Now let's look at the performance of our segments in the quarter. In Zone Americas, macroeconomic uncertainty has made for a challenging environment with consumer confidence fragile. In that context, flat organic growth with positive RIG in North America was a very solid performance, and we grew nicely in Latin America. Growth for the zone was driven by strong pricing actions in confectionery and coffee. This was supported by high single-digit growth in our professional business. The main drags on the zone's Q1 delivery were infant nutrition and frozen foods. On the latter, we're making progress in restoring competitiveness. There are recent indications of improving market share developments, although it's too early to call this a sustained trend. In Zone AOA, we delivered positive growth across all categories in most regions. The highlight was our confectionery business.

Speaker Change: So being available. So we are very very confident you're right to say that this is something you want a full base to categories.

Speaker Change: Among the best or one of the best.

Speaker Change: And and are strong across the board in the ship with each one of them. So you.

Speaker Change: You know pointing to.

Speaker Change: Performance.

Speaker Change: In the in the competitive set.

Speaker Change: But that would be for pit truthful.

Speaker Change: Rest of the question.

Speaker Change: Yeah sure.

Speaker Change: So currency.

Speaker Change: Are you you're right current she's amazing around the fab at the moment.

Speaker Change: On the back of recent events as all commodity prices by the way you know so you've got positives and negatives.

Speaker Change: That's to currency in the back of the slides, we've given you our sales by country and the Q1 exchange rates really to give you the data in one place to build a ready Reckoner show you can.

Anna Manz: Here, we achieved positive RIG and market share gains even while we took significant pricing. We also made good progress in the areas we've identified as being a strategic focus. This includes double-digit growth in Maggi cooking aids and in emerging market pet care. Across the zone, consumer sentiment remains subdued. This is particularly true in China. In that context, our organic growth in China was driven by sales phasing with a buildup of inventories rather than by underlying consumption. Consumer demand remains broadly flat in the quarter. Turning to Zone Europe, we generated broad-based growth across markets and categories with improving market share trends across most country category combinations. A priority during the quarter was our annual price negotiations, and as we've said, we navigated these with relatively limited disruption.

Speaker Change: Continue to model the impact on the topline as we move through the year because I'm sure. It's the currency basket will continue to move in with risk.

Speaker Change: Back to the Utah impact of currency. If you look backwards over the last few years. What you will see is that the rule of thumb is roughly a 5% strengthening of the Swiss franc has a 10 to 15 basis point negative movement on new top notch.

Speaker Change: And now that is a rule of thumb because of course, it depends on market mix and and specific currency movements within the basket, but that will give you an order of magnitude.

Speaker Change: Hum and as I say this is all moving around quite a lot at the nine months as a commodity prices.

Speaker Change: This is sitting around.

Speaker Change: Oh listen on tariffs.

Speaker Change:

Speaker Change: You're right that Ah, maybe impact a handful of king nespresso into the U S and some soluble coffee will be impacted by tariffs.

Anna Manz: We now need to see the impact of price increases on consumer demand in coffee and confectionery, which we're watching carefully. Beyond these categories, the zone's growth continues to be supported by solid RIG-led growth in pet care. In Nestlé Health Science, performance was mixed. In H2 last year, we had double-digit growth as we were getting back on shelf after the resolution of our supply issues. Moving into this year, growth has decelerated. In some areas, we're performing very well. For example, growth continues to be double digit in our premium VMS brands, and in Orgain. Offsetting that, there's been areas of weaker performance. In Nature's Bounty, we're now back on shelf, but consumer uptake has been slower than expected, and Vital Proteins has been weak in a category that's seen an increasing number of entrants.

Speaker Change: In the overall scheme of our business. This is this is manageable where we sit today.

Speaker Change: And we are looking at a number of different mitigating actions and you know that this includes a number of things around them like balancing how we saw some things as well as of course pricing is is supposed to have another lever.

Speaker Change: I guess, what I would say is we've seen them.

Speaker Change: Supply chain disruption and changes like this a number of times over the last five years I am quite a good yet at pitching the action plans together to manage the different scenarios as they evolve and we've been very focused on that.

Speaker Change: It maybe copper.

Speaker Change: A couple of additional comments just to.

Anna Manz: We've got work to do on competitive positioning, promotional strategies, and strengthening our brands and product lineups through innovation and marketing. Finally, a comment on pricing, which was negative. In part, this reflects a return to more normal levels of promotional activity in our VMS business. Pricing was also impacted by changes to the reimbursement model of our Zenpep gastrointestinal product as a consequence of the US Inflation Reduction Act. Nespresso had a strong Q1. Growth was largely driven by the US, but we also saw reduced share loss in Europe. Across the business, we've been progressively taking price. In many markets, this took effect towards the end of the quarter, and we did see a benefit from some sales pull forward ahead of price increases.

Speaker Change: Well, so reframed the frame the.

Speaker Change: The state of play for Us and just to highlight that in the tariff environment.

We got that unique position that we make where we said we.

Speaker Change: Produce essentially local for local and you look at those three big geographies.

Speaker Change: U S Europe, China more than 90% of what we sell is produced locally so that's a kind of natural protections.

Speaker Change: For for most parts and on the and Bugs with Ana was saying on the on the category.

Speaker Change: Most exposed which would be coffee for us in the U S, especially in this space, who are premium widows brands Pall Nestle health science for ingredients those are categories, where we got pricing power.

Speaker Change: So are the highest pushing forward so hence our confidence going forward recognizing that this is a fast moving.

Anna Manz: As you look ahead, keep in mind that our consumers purchase Nespresso less frequently than our other categories, so it will take a while to see the consumer impact of the price increases. All of that said, it was a good quarter for Nespresso, and this is also true of the broader Nespresso ecosystem, including Starbucks by Nespresso, where we continued strong momentum and added a further 130 basis points to growth. Finally, Nestlé Waters & Premium Beverages. We rapidly implemented the new organizational structure and progressed with our strategic evaluation while staying focused on operational execution. Growth improved and was broad-based across markets, mainly driven by recent product launches in the S.Pellegrino and Maison Perrier range. Our waters business posted low single-digit growth as Perrier was impacted by ongoing supply constraints. Turning to categories, I'll be brief as we've covered much of this already.

Speaker Change: The reality and I wish the tune that and are ready to address.

Speaker Change: Moving fast moving environment.

Speaker Change: Okay. Thank you don't Wanna. Thank you and the next question comes from Patrick friend of mine is that K P. Please go ahead.

Speaker Change: No. Thank you David it's Patrick shrink around starts giving you. Good morning, Laura Good morning, and could you. Please give us a little bit more color on the current tough situation for Gerber and needle and how optimistic you are to improve the situation in the next couple of quarters. That's my first question and those are coming back to the U S tariffs what percentage of U S sales are export.

Speaker Change: What's from Switzerland, and how much is coming from other countries. Thank you.

Speaker Change: Thanks, Patrick for the question good morning.

Speaker Change: Gabelli neither do we come back to the same point that we made on the Underperformers has to do with Oh value equations, Oh, what do you call that equation competitive are in the in the marketplace.

Speaker Change: Do we have the right product at the right price with the.

Anna Manz: The group's Q1 growth was driven by powdered and liquid beverages, specifically coffee, and by confectionery, pet care, and Health Science. In powdered and liquid beverages, growth was price-led. On average, pricing was mid-single digit. This varied across markets and products as our actions were tailored to the specific dynamics of different markets. On pet care, category growth has come down from a year ago but is now stabilizing. Q1 organic growth of 1.6% was similar to the growth we saw in the second half of last year. RIG continues to be positive across all regions, led by cat food and therapeutics. Negative pricing reflects input costs and a return to a more normal promotional environment. Within Nutrition and Health Science, I've talked about Health Science already. Nutrition saw a decline in infant nutrition impacted by our underperformance in Gerber baby food and in Nido.

Speaker Change: Alright availability visibility and the right level of consumer engagement. So those are the.

Speaker Change: Elements on which we are focusing on that I suppose just would like to highlight that on those two we are fighting from a place for ablation of strengths we have leadership.

Speaker Change: In both categories, we have.

Speaker Change: Capabilities, we have the brands. So it's really about sharpening opens and this is part of our work on the 18 call Underperformers and there's just would like to highlight two put sanctions in the context that we are making good progress. The majority of those sales are showing improvements in market share. So.

Speaker Change: We are determined to.

Speaker Change: And it takes time, obviously when you need to address our.

Speaker Change: Value proposition.

Speaker Change: Dimensions, as we explained already in the capital market day and for your results, but we are making the right steps in the right direction.

Speaker Change: To be a in a in a winning position going forward.

Anna Manz: On prepared dishes and cooking aids, flat organic growth overall was a function of growth in cooking aids led by Maggi and offset by frozen food. Milk products and ice cream organic growth was slightly positive, with growth in ambient culinary offset by coffee creamers. In confectionery, pricing was double digit, with LATAM the highest, followed by Europe and AOA. As noted, this had some impact on demand. Waters we've covered already. Turning finally to guidance. Performance in Q1 was in line with our expectations, and our 2025 guidance remains unchanged. This is based on our assessment of the direct impact of current tariffs and our ability to adapt. Organic sales growth is expected to improve versus 2024 and strengthen over the year as we deliver on our growth plans.

Speaker Change: Question experts from Switzerland to large name, especially.

Speaker Change: But I I should've urge you to step up above this one on the kitchen, the Brewers away because I think there is a risk.

Speaker Change: Well nice false precision in what's a very dynamic environment with.

Speaker Change: People things changing.

Speaker Change: To try and model that too precisely.

Jon Cox: Thank you next question comes from Jon Cox from Kepler Chevron jumped go ahead.

Jon Cox: Yeah. Good morning, guys. Thanks for letting me ask a couple of questions just on the the sort of reorganization of Europe.

Jon Cox: Wonder if you just talk a little bit about that or are we talking about collapsing sort of country admin structures or.

Jon Cox: Maybe some factory consolidation.

Jon Cox: And you know maybe it sort of indicates you're moving on from the procurement savings and I'm going to say stage two of the Oh the program.

Anna Manz: We expect our UTOP margin to be at or above 16% as we invest for growth. As you've heard from Laurent, in a complex external environment, we remain focused on execution of our strategy. With that, I'll hand you back to David for the Q&A.

Jon Cox: Then a question on inflation.

Jon Cox: More of a follow up from what we had before you're talking about commodity costs move into rang previously you talked about high single digit I'm. Just wondering if that's still the case given what's happening to our cocoa, specifically, but also coffee as.

Jon Cox: As well and.

David Hancock: Thank you, Anna. In order to allow everyone a chance to ask a question, we ask that you limit yourself to two questions during the Q&A session. Our first questions come from Guillaume Delmas from UBS. Please go ahead, Guillaume.

Jon Cox: Just wondering on the consumer you you're talking about the consumer being pretty difficult or in a fragile place in many parts of the world I Wonder if you said elaborate little bit on that you talked about Europe, you called out you talked about other countries I guess the U S is still.

Guillaume Delmas: Thank you very much. Good morning, Laurent, Anna, and David. First, maybe a point of clarification. Could you quantify the impact from this positive sales phasing in China and maybe the sales pulled forward for Nespresso? As in, did it have a visible impact on the Nestlé group level? Also, should we expect an immediate reversal in Q2? Then my two questions. Firstly, on your guidance for organic sales growth to strengthen through the course of the year. I mean, would it be right to assume that you actively expect both RIG and pricing to improve quarter after quarter this year? And specifically on pricing, how much of your additional commodity costs, particularly coffee and cocoa, are you now covered by your recent pricing actions? How much is left for the next quarters?

Jon Cox: It's still not great and I'm just wondering if you saw any deterioration on that and then just a point of clarity.

Jon Cox: Warren's question, a 10% rise in the franc costs you may be 10 to 15 bps is that the correct figures you mentioned that thank you.

Jon Cox: Thanks, John and good morning on the.

Jon Cox: Our European the reorganization and to put things in context to your right to highlight that this part of all.

Jon Cox: Sure for gross a program I mean, it goes beyond that and I'll explain it and you are right to say that the procurement piece.

Jon Cox: As we highlighted these oh biggest contribution.

Jon Cox: But there is also the our operation efficiency and in the context of Europe, we cant even speak about efficiency and effectiveness of what we.

Jon Cox: We are doing is that we are bringing back Ah is in Europe into a similar model as the rest of the zones with a mix of a regionally managed businesses and locally managed businesses are exactly the same as in America or how soon anyway.

Guillaume Delmas: My second question is on infant nutrition, which I think declined in Q1. It seems performance was quite soft across the three zones with some particular weakness in the US. My question here would be, is this softness mostly attributable to anemic category growth, or is it also reflective of some share losses? And I guess at the time when we are seeing some encouraging signs in China, what would be your action plan and your outlook for this category to rapidly return to positive growth? Thank you very much.

Jon Cox: And we'd give more power to the market. So we put more feet on the ground.

Jon Cox: Our capacity to decide closer to consumers and to the customers.

Jon Cox: And and we eliminate duplication as well as part of that and of course, we continue which we have started to optimize our footprint, including many manufacturing footprint. So that that's a good place in Europe. We are in the design phase. So it will unfold in the next.

Laurent Freixe: Thanks, Guillaume. Good morning. It's many questions in two, so we'll try to take them one by one. On the growth side, we gave you a message of confidence on the way forward. Why is that in the environment which is ours, which is uncertain? Because we are seeing impact of our strategy at play in all dimensions. We see Fuel for Growth coming strong, and we are very confident that we will deliver what we committed to. We start to redeploy those investments behind strengthening the core, in particular our big brands, deploying our big bets and addressing our underperformers, and we see impact also in all dimensions of that. We see market share position improving.

Jon Cox: A couple of shows but starting starting right now and we expect the sharpening of our execution.

Jon Cox: We are getting more ts in the market and more capacity to do decide to consumers and to the customers and greater alignment to the way the group is operating.

Jon Cox: On the commodity cost side, the nothing really new on that front and if anything maybe we see.

Jon Cox: The the landscape is improving a little bit. So there is no listening we are seeding the same high single digit and we see more softening.

Jon Cox: Towards the I mean, as we can see if you follow the futures a softening in.

Jon Cox: In the in terms of impact for us going forward.

Jon Cox: On the consumer piece are you know we entered the 2025 with <unk>.

Laurent Freixe: To your question, yes, we have passed most of the pricing that we expected to pass. There is a logic into that, number one, because we got the visibility for a large part of the year when it comes to commodities. Second, because there is one slot for developed markets where you can really increase the pricing and the prices, and this is the start to the year, this is Q1. We have been through that round of negotiations with expected results, which means good results. This pricing now has to translate progressively into consumer prices. You will see the impact coming, well, both in terms of our pricing and also in terms of the consumer pricing.

Jon Cox: Consumer who.

Jon Cox: Was not to them.

Jon Cox: Optimistic.

Jon Cox: To say, the least I'm cautious maybe concerned by the impact of inflation and the economic development and I think uncertainties.

Jon Cox: Created by economic policies trade wars, and the evolution of so of the financial markets have increased.

Jon Cox: The concerns and created more uncertainty so we go to more concerned.

Jon Cox: Consumer and that's a visible <unk> in.

Jon Cox: In many parts of the world how does it translate a cautious on consumption and the increased savings, especially in China.

Jon Cox: He said dynamic that we are seeing unfolding, but I would like to highlight once again that our dishes to do.

Laurent Freixe: On nutrition, I mean, category is what it is. There is the positive, when it comes to China, of the boost of the Year of the Dragon with more babies, so that will support the growth in the coming couple of years. US is different in this respect, and we have one specific issue to address, which is one of our underperformers, which is Gerber. That's only one of our focus areas going forward. Back to the core message, we see progress in all dimensions of our strategy. We are sharpening this strategy. We are sharpening the execution. The organization is aligned to execute.

Jon Cox: This is a context oh well initially if you drew a circle is designed to.

Jon Cox: <unk> make us grow and we are in the kind of context, why because we are raising our game when it comes to cost savings cost efficiency productivity to be able to invest in all brands strengths in the cool deep look be beds and address underperformance. So we are very very confident.

Jon Cox: <unk>.

Jon Cox: I'll stretch it either way it is unfolding and you know that our food and Bev ease resilient category are in and in a context of.

Jon Cox: Economic uncertainty people have to eat and drink every day.

Jon Cox: So there is a resilient spilt into indicate agreed between all the time I know you've got taking action to outperform all categories through the swell plan. So that's that's where he is our focus.

Laurent Freixe: You saw some new announcement as regards further strengthening the organization, Europe, and R&D. We expect impact to come also in the next periods to further strengthen and sharpen our action plans and our execution going forward. Now you probably want to add something.

Jon Cox: And just to.

Jon Cox: Let me clarify the your top notch in point, I said, 5% amazement are strengthening and the Swiss franc.

Jon Cox: Order of magnitude has a 10 to 15 basis points impact to each other.

Jon Cox: And just on the commodity cost.

Jon Cox: Obviously, all commodity costs and not just about spot prices because of course, we have quite a level of hedging as we move through the year that will give you a further update on that at the half year.

Anna Manz: Yeah. Sure. To do some of the guidance points. Maybe to take them in order. What was the impact of the sales pull forward around China and Nespresso? Relatively small impact, so about 20 basis points at a group level. That sales phasing, customer driven. Will it unwind? Well, it was customer driven, so it's a little bit hard to know. You know, at some point you would expect it to unwind. The broader question around organic sales growth strengthening through the year. That is a statement that we are making in the context of the actions that you've just heard Laurent call out to consistently improve our performance against the categories that we play in. You should see improving performance from a share perspective as we move through the year.

Jon Cox: Thank you.

Speaker Change: Thank you. The next question comes from Olivier Nicolai of Goldman Sachs. Your line is open.

Olivier Nicolai: Hi, good morning.

David Hancock: And David just two question. Please could you just go back to the health and science pass ovens and quantified the values moving parts here how much he the premium part of the portfolio van could you quantify the impact of the private Liberty's coordination for instance, and then going back to to coffee.

Olivier Nicolai: And a coffee inflation.

Olivier Nicolai: Do you think you would be able to affect the input costs in absolute term I know that's a goal, but do you think you a boat to a fed that some of your peers from what you can see what I felt was cannot that's how so pushing who are strong double digit price increase.

Olivier Nicolai: Seems to be a much less for us so I'm trying to reconcile the two thank you.

Anna Manz: What we're not trying to say to you is that you should expect an improvement in RIG and OG quarter-over-quarter because we're not managing the business by quarter. We're managing to really drive that consumer pull in the medium term. See that as a full year statement, and you know, there will be some puts and takes by quarter. I'm not going to give you specific guidance as such on Q2, but maybe, you know, just some of the moving parts as you think it through. We've taken the majority of our price through Q1, as you've heard Laurent say. Obviously, we get the full benefit of that as we move into Q2. There may or may not be some unwind of these sales pull forward in Q2. We'll see.

Olivier Nicolai: So on the Nestle Health Science are as we said Oh premium premium brands.

Olivier Nicolai: Doing well growing double digits with.

Olivier Nicolai: We faced more challenges is more in the mainstream side and part of it is related to the fact that we.

Olivier Nicolai: Our pruning are the private label.

Olivier Nicolai: I'm part of the portfolio I'm, particularly to focus on where we can.

Olivier Nicolai: Create the most value that that has an impact on the gross short term, but that to strengthen the portfolio.

Olivier Nicolai: Going going forward.

Olivier Nicolai: On a coffee.

Olivier Nicolai: You know we have this privileged position that not only we could debate the brands, but we are much less exposed than.

Olivier Nicolai: Are most of the players not to say all of the players that are primarily roast and ground.

Anna Manz: We have the benefit of one more Easter this year versus last year. We have the consistent actions that we are taking to improve our performance versus the category that we're playing in. Just on infant nutrition, maybe just to give you a couple of the numbers, the category overall is low growth because of low birth rates. Overall, we're gaining share in infant nutrition. What's holding us back a bit, as you call out, is baby food, and that is most marked in North America, where Gerber is a bigger proportion of the sales. The work to do is on baby food, and we're focused on that.

Olivier Nicolai: We are a suitable coffee play you are less impact of green coffee, we oh so.

Olivier Nicolai: Coffee systems coffee Cups will play you are again less impact or more of these value less impact of green coffee in the equation. So we are quite privileged to in that context are generally LNG players are short COVID-19 or short to cover the Dennis so they have to increase quicker and more so.

Olivier Nicolai: In the competitive context are we all doing what we have to do too.

Olivier Nicolai: Cover our costs are but we are also very mindful of the consumer capacity to absorb them and two how is the competitive set is moving and we want to make sure that we strike the right balance between covering our costs and maintaining the penetration of our brands and yeah.

Laurent Freixe: Very clear. Thank you very much.

David Hancock: Thank you. We'll take the next question from Warren Ackerman from Barclays. Please go ahead.

Warren Ackerman: Yeah. Good morning, Laurent, Anna, David. Warren here at Barclays. A couple as well. First one is just wanna dive a bit into pet food. I mean, 1.6% organic growth in the quarter is not great for arguably one of your best businesses. I know there's a negative price in there, but even the RIG at 2.5 I wouldn't say is brilliant. You know, and that probably includes emerging markets that aren't quite good. Should I then read into that there's something going on in developed markets, US and European pet food? Maybe you can discuss what you're seeing on the ground competitively, in pet food. Is there reason to think that, pet food, I know you've got the innovations coming, should be better?

Olivier Nicolai: I mean, as you can see and as you could see with the numbers from that.

Olivier Nicolai: The coffee area and this pursue our momentum is a he's very very solid.

Speaker Change: Thank you.

Speaker Change: Thank you. The next question comes from Sarah Simon at Morgan Stanley. Please go ahead Sir.

Speaker Change: Yeah morning, I have a couple of questions first of all can you give us some idea of kind of when in the quarter you took a price in the in the key categories.

Speaker Change: And then the second one was on margin phasing through the year.

Speaker Change: I am sure you nail you'll pay a has kind of slightly adjusted the phasing of margin.

I'm just wondering how you see that developing them.

Speaker Change: Through the S E T.

Warren Ackerman: I mean, you know, you've been talking about sort of, you know, pet food normalizing for some time, but, you know, I guess most people thought mid-single digit, and, you know, we're kind of running at 1.6. Can you maybe sort of square that for us a little bit and what you're seeing? How happy are you with the pet food performance in the three different zones? That is my first one. Then just secondly, on tariffs and currency, clearly, Anna, you said that the Swiss francs moved considerably since, you know, Liberation Day, early April.

Speaker Change: So on pricing we have to.

Speaker Change: Very very different situations. According to all categories, we have categories, a little impacted whether these lethal pricing require the way, we even have the possibility to.

Speaker Change: Promote more and be more aggressive to attract the consumer will keep the consumer.

Speaker Change: And in Cushing Cook, who are more impacted so those are the two where we had to take a.

Speaker Change: More action and and there is different dynamic between developed markets emerging markets developed market that he's a slot where you negotiate because you start to do you.

Warren Ackerman: Are you able to give kind of a sort of a mark to market on top line and UTOP on currency? I know it's moving around a lot, but just where we are today, because I guess there's some transactional effects on top of translation. On tariffs, can you just confirm, you know, will tariffs be applied to cocoa and coffee? Tariffs on coffee in the US, how does that work? Because I heard your comment about pricing mostly done. On coffee tariffs in the US, would you then need to take more pricing over and above what you've done? Or do you have sort of inventory where you don't need to take any additional pricing?

Speaker Change: We are screwed that there that the negotiation without a disruption and without a negative impact hopefully.

Speaker Change: From the customer standpoint, and the and I mean, we have to see how the consumers do do react, but we are really satisfied with the way our negotiations have been.

Speaker Change: <unk> been growing are in developing markets, we have the possibility to do it step by step.

Speaker Change: Most most of it has been done, but a little bit more to come possibly depending also on how things develop.

Speaker Change: From a cost standpoint in theory standpoint.

Speaker Change: But yeah. This is a dynamic that are that you see in the marketplace.

Warren Ackerman: I'm just trying to understand your sort of tariff strategy, with regards to your, you know, the key commodities, going into the US and what that means for pricing. Thank you.

Speaker Change: On the margins on them Yeah sure. So just maybe to give you the moving parts.

Speaker Change: As you know.

Laurent Freixe: Okay. Let me start with the question on pet food. I think the key point there is the slightly negative pricing, which is largely justified by a mild commodity environment, so there is no need for pricing to protect the margins on the one end. Second, we got more capacity coming on stream, and more to come, by the way, as we are still constrained in a few areas, especially wet pet food. That makes promotional activities have resumed, and that has an impact also on pricing. I would qualify the RIG as solid. It's ahead of the rest of the group, and we have broad-based positive RIG, more of course in emerging markets than in developed markets. The category is strong.

Speaker Change: As we've just been talking about pricing. It is something that we have taken through Q1 and the timing of that varies enormously market to market that definitely will see an increasing impact from pricing in H two verses H one and.

Speaker Change: And in terms of costs, you see an increasing impact of the commodity costs coming through during the year and then the other moving factors are really the timing of and which we generate efficiencies versus the rate at which we increase our investment and we will give you an update on all of this in more detail at the half year.

Speaker Change: I get that.

Speaker Change: Thank you Sir the next question comes from Jeremy Falco with HSBC go ahead Jeremy.

Jeremy Falco: Hi, Good morning, Thanks for taking my couple of questions. The first one is on <unk>.

Speaker Change: And I know you said in certain areas, it's a bit too early to tell.

Laurent Freixe: We, you know, took massive volumes, when you think of a growth over 2% on massive volumes, this is very, very significant. We got everything it takes to support the growth. We got the brands, we got the R&D capabilities, we got innovation, and we got the resources being deployed, and on top of that, the capacity also being available. We are very, very confident. You're right to say that this is certainly one of our best categories, among the best, one of the best, strong across the board and the share position also, you know, pointing to performance in the competitive set. That would be for pet food. For the rest of the question, Anna?

Jeremy Falco: But I guess in other areas.

Jeremy Falco: I think pricing is going a bit so could you talk about how.

Jeremy Falco: Evolution reported.

Jeremy Falco:

Jeremy Falco: Is it relative to your expectations you see.

Jeremy Falco: Anticipated reaction.

Jeremy Falco:

Jeremy Falco: As expected I, then secondly, coffee creamers, perhaps you could just give us a bit of a deeper dive into that business and why you are intensive places distribution recovering your market share 70 innovations coming to market et cetera. Thanks a lot.

Speaker Change: So I understand that the first question was on volumes the connection was not great Jeremy its a good windows in Cleveland.

Jeremy Falco: Yeah, So let us right to thanks.

Jeremy Falco: Thanks, let's start with the volume so we explain the dynamic of Q1 are there are many many dimensions are in Q1, we didn't highlight that much and dishes entirely volume related the early Chinese new year and newly pure and the later you said that that doesn't impact because there's some volumes and we highlighted than this.

Anna Manz: Yeah, sure. Currency. You're right, currencies are moving around a fair bit at the moment, on the back of recent events, as are commodity prices, by the way, you know, so you've got positives and negatives there.

Crystal.

Laurent Freixe: Mm-hmm.

Anna Manz: With respect to currency, in the back of the slides, we've given you sales by country and the Q1 exchange rates, really to give you the data in one place to build a ready reckoner so you can continue to model the impact on the top line as we move through the year, because I'm sure currency, the currency basket will continue to move.

And Oh.

Jeremy Falco: Yes.

Jeremy Falco: So that was on the on the volumes.

Jeremy Falco: We.

Jeremy Falco: Pricing to both protect the margins and make sure that we support the volumes.

Jeremy Falco: So we are not.

Jeremy Falco: Once I did and the way we take action, we are really trying to.

Laurent Freixe: Mm-hmm.

Anna Manz: With respect to the UTOP impact of currency, if you look backwards over the last few years, what you will see is that the rule of thumb is roughly a 5% strengthening of the Swiss franc has a 10 to 15 basis point negative movement on UTOP margin. Now, that is a rule of thumb because of course it depends on market mix and specific currency movements within the basket, but that will give you an order of magnitude. As I say, this is all moving around quite a lot at the moment as are commodity prices, and we look at it in the round.

Jeremy Falco: I cover the two dimensions and market shares of cool so all of the essence.

Jeremy Falco: So our volume is an important part of the equation AR and AR and am and pricing will come on top so that's the way we are.

Jeremy Falco: Focusing on it and Oh.

Jeremy Falco: You know the the the big difference this year compared to history or recent history. It initially is that in the context of inflation in some categories, we will keep investing.

Jeremy Falco: In marketing to our strengths and alcohol to deploy or big bets innovation, our growth platforms and to address our underperformers that should translate then that would translate in that translates already.

Warren Ackerman: On tariffs?

Anna Manz: Tariffs? You're right that, you know, the impact of importing Nespresso into the US and some soluble coffee will be impacted by tariffs. In the overall scheme of our business, this is manageable where we sit today. We are looking at a number of different mitigating actions. You know, those include a number of things around load balancing, how we source and things, as well as of course pricing is also another lever. I guess what I would say is we've seen supply chain disruption and changes like this a number of times over the last 5 years.

Jeremy Falco: In market share improvement and that will that will support the volumes going forward.

Jeremy Falco: On the Creamers you want to.

Jeremy Falco: I think so.

Jeremy Falco: I think there was I'll say, there's cat she was a bit back, but I think there was something about elasticity.

Okay, then maybe just a comment on that.

Jeremy Falco: These aren't base pretty.

Jeremy Falco: Pretty resilient categories, I mean, coffee, particularly has been pretty resilient through previous rounds of price increases and confectionery too because it's an impulse and gifting category as is.

Jeremy Falco: Generally less elastic it's.

Jeremy Falco: Too early to say, how these price increases will play out, but maybe just to kind of.

Jeremy Falco: Bring that to life for you I just two different market examples.

Laurent Freixe: Mm-hmm.

Jeremy Falco:

Anna Manz: We're quite good at putting the action plans together to manage the different scenarios as they evolve, and we've been very focused on that.

Jeremy Falco: We've taken price on confectionery in Japan, which is a big confectionery market.

Jeremy Falco: Ah, it's predominantly a gift he market than we've seen.

Laurent Freixe: Maybe a couple of additional comments just to also frame the state of play for us. Just to highlight that in the tariff environment, we got that unique position that we make what we sell. We produce essentially local for local. You look at our three big geographies, US, Europe, China, more than 90% of what we sell is produced locally. That is a kind of natural protection for most parts. Back to what Anna was saying on the category is the most exposed, which would be coffee for us in the US, especially in Nespresso or premium waters brands or Nestlé Health Science or ingredients. Those are categories where we got pricing power or the highest pricing power.

Strong rate performance and a very good elasticity equally if you look at the initial reaction to them we've taken a price on a soluble coffee in the U K. The initial reaction was a bit more muted because consumers in the U K generally have you know.

Jeremy Falco: That's the bottle of NES cafe in the cockpit.

Jeremy Falco: They do allow you that pricing that the purchasing.

Jeremy Falco: Action, while they wait to see how prices play out and how that May say you initially see quite a big move and then you see it come back as people adjust to the new pricing. So that's why it's a little bit hard to read elasticities at this stage, we just need a little bit of time for all its place right, but we are.

Jeremy Falco: Activity managing attach a market category level in the context of the competitive set and making the adjustments that we need to make oh, yeah, as we see that play out.

Laurent Freixe: Hence our confidence going forward, recognizing that this is a fast-moving reality and we stay tuned and ready to adjust to fast-moving environments.

And then on.

Jeremy Falco: On cream as I think I had the question, which was how are you doing on share and distribution.

Speaker Change: Yeah, exactly sorry, if that was right.

Operator: Okay. Thank you, Laurent. Thank you, Anna.

Warren Ackerman: Okay. Thank you, Laurent. Thank you, Anna.

Speaker Change: Yeah, sorry, it's a bad connection I didn't know why you should back.

David Hancock: Next question comes from Patrik Schwendimann at ZKB. Please go ahead.

Speaker Change: Albeit not all done yet, but but you know big strides and you see the share performance improving I actually three claims in competitive distribution. So you would expect to see Oh shaft performance, starting to embrace a desk or something like.

Patrik Schwendimann: Yeah, thank you, David. It's Patrik Schwendimann, ZKB. Good morning, Laurent. Good morning, Anna. Could you please give us a little bit more color on the current tough situation for Gerber and Nido, and how optimistic you are to improve the situation in the next couple of quarters? That's my first question. Also coming back to the US tariffs, what percentage of US sales are exports from Switzerland, and how much is coming from other countries? Thank you.

Speaker Change: That's creamers.

Speaker Change: We just have the capacity now to compete in the market place. So you would see impact in terms of with the supply base.

Laurent Freixe: Thanks, Patrick, for the question. Good morning. On Gerber and Nido, we come back to the same point that we made on the underperformers. Has to do with our value equations. Is our value equation competitive in the marketplace? Do we have the right product at the right price, with the right availability, visibility, and the right level of consumer engagement? Those are the elements on which we are focusing on. I just would like to highlight that on those two, we are fighting from a position of strength. We have leadership in both categories. We have capabilities, we have the brands. It's really about sharpening our pens, and this is part of our work on the 18 core underperformers.

Speaker Change: The presents on shelf and it will be.

Speaker Change: Competitive in all dimensions bearing in mind that is a category that we.

Speaker Change: I need to from a market share standpoint.

Speaker Change: Thanks very much.

Speaker Change: Our next question comes from David Hayes at Jefferies Go ahead, David.

David Hayes: Good morning, all right. Thank you G for me one on the sales guide and then one on the margin outlook. So on a sales guy was just going to pick up on this coming about sequential improvement can I just clarify what do you feel about being pet Oh S. G than last year is that one of the points that I was just your 0.3 or are we thinking about that from the underlying basic.

David Hayes: You've talked about of about 2.8 would you just for the Muslim a western brand boycott in the second half Destocking that you.

David Hayes: Took action on through the through last year, and then answered over arching.

Laurent Freixe: I just would like to highlight, to put things in the context that we are making good progress. Majority of those sales are showing improvement in market share. We are determined to. It takes time, obviously, when you need to address value proposition dimensions, as we explained already at the capital markets day and full-year results. We are making the right steps in the right direction to be in a winning position going forward.

David Hayes: And some of the commentary I guess that you'd be making you know some of your competitors have talked about with the country's needs.

David Hayes: Discount water to narrow price gaps with private label local players A&P spend something like you mentioned needing to go up so I guess two questions relates to the A&P spend extra thing at 9% of sales versus the 8.1 through last year is that still the right level in that kind of competitive environment and and those points being made.

David Hayes: And I guess in terms of picking up on your comments at the beginning about pricing plans need to be taken off consumer sentiment and your determination to improve consumer penetration at 16%, but you've obviously reiterated they still the right level. It feels like that's a bit of a need a compromise and if that is still the right level.

Anna Manz: On the tariffs question, exports from Switzerland are largely in Nespresso. I'd sort of urge you to step up above this one and look at it in the broader way, because I think there is a risk of almost false precision in what's a very dynamic environment with multiple things changing, to try and model it too precisely.

David Hayes: Setting that compromises more cost saving deeper Quaker cost saving just trying to get an understanding of the moving parts to get to the same profit point. Thank you.

David Hayes: Yeah, so to put things in context, and you ended up with the cost savings and the you said you and you should just stop as well.

David Hancock: Thank you. Our next question comes from Jon Cox from Kepler Cheuvreux. Jon, go ahead.

Jon Cox: Yeah. Good morning, guys. Thanks for letting me ask a couple of questions. Just on the sort of reorganization of Europe, I wonder if you just talk a little bit about that. Are we talking about, you know, collapsing sort of country admin structures or maybe some factory consolidation? You know, maybe it sort of indicates you're moving on from the procurement savings and now into, say, stage two of the program. A question on inflation. It's more of a follow-up from what we heard before. You're talking about commodity costs moving around. Previously, you talked about high single digit. I'm just wondering if that's still the case given what's happening to cocoa specifically, but also coffee, as well.

David Hayes: And the starting point of being kept able to invest more in the marketplace and are making impact fall brands strengths into coal.

David Hayes: Deploying innovation.

David Hayes: These get the consumers onboard buildup royalty and also address Underperformers, which we which we are doing in the last two quarters have been showing.

David Hayes: Already the impact of.

David Hayes: What we have been capable to implement them in no time. So you know it's a it's a.

David Hayes: At the capital market day, a few months ago that we deployed to explain the strategy and it's already in action and again showing the impact.

David Hayes: So the guidance says what it says that.

David Hayes: It's about the an acceleration.

Jon Cox: Just wondering on the consumer, you're talking about the consumer being pretty difficult or in a fragile place in many parts of the world. I wonder if you could elaborate a little bit on that because you talked about Europe, you called out, you talked about other countries. I guess the US is still not great. I'm just wondering if you saw any deterioration on that. Then just a point of clarity, to Warren's question, a 10% rise in the franc costs you maybe 10 to 15 bps. Is that the correct figures you mentioned there? Thank you.

David Hayes: Compared to last year and again in the last two quarters give you.

David Hayes: A picture of a.

David Hayes: What is you seem to making.

Speaker Change: The critical point is that all the building blocks are in place.

Speaker Change: The savings programs, Oh, bringing what do we expect a fast and we can redeploy quickly we are doing those redeployments, we have increased.

Speaker Change: Significantly our investments already in Q1 with you already some are in the last in the last quarter of last year and in and we start to see the impact our share position is improving Madrid with your phone to perform is improving.

Laurent Freixe: Thanks, Jon, and good morning. On the European reorganization and to put things in context, you're right to highlight that as part of our Fuel for Growth program. I mean, it goes beyond that. I'll explain it. You are right to say that the procurement piece, as we highlighted, is our biggest contribution. But there is also the operational efficiency. In the context of Europe, we can even speak about efficiency and effectiveness. What we are doing is that we are bringing back Zone Europe into a similar model as the rest of the zones, with a mix of regionally managed businesses and locally managed businesses. Exactly the same as Zone Americas or Zone AOA. We give more power to the markets.

Speaker Change: Our market shares are we see the fuzzy pregnant of Oh, a few novation.

Speaker Change: So that will produce the expected results.

Speaker Change: Is the 9% or the end 0.5, the right Mark well.

Speaker Change: I think this is what we what we framed in the this is what we.

Speaker Change: Having to making and and again, we should impact so it looks like being being working in the we want to make sure that we put the right level of support.

Speaker Change: 12 co brands 12, cool, we will win through the call and also through on on both so you know we shouldn't be bits in the performance.

Speaker Change: I wonder about it and you want to do something.

Speaker Change: Maybe just to clarify if the guidance point say so the sales guidance.

Laurent Freixe: We put more feet on the ground, more capacity to decide close to the consumers and to the customers. We eliminate duplication as well, as part of that. Of course, we continue what we had started to optimize our footprint, including our manufacturing footprint. That is the play in Europe. We are in the design phase, so it will unfold in the next couple of years, but starting right now. We expect a sharpening of our execution, with again, more teeth in the markets and more capacity to decide close to consumers and to the customers, and greater alignment to the way the group is operating. On the commodity cost side, nothing really new on that front.

Was that a way and it's just a guidance. He made at the third year is it we expect to improve our organic sales growth compared to 'twenty 'twenty four and trying to transfer was 2.2%.

Speaker Change: So 20 to 25 will be an improvement on that and.

Speaker Change: That was not intended that she's not shouldn't be read as a quarter by quarter and placement, it's an improvement coming from the.

Speaker Change: Execution of strengthening on the investment that we're bringing behind our brands that will see us perform against that.

Speaker Change: And the best way to improve our share performance quarter on quarter actually with.

Speaker Change: Facing as days and shipment phasing and all the other moving parts what that actually means of course by quarter in reported terms could move around a little bit.

Speaker Change: But that's the underlying driver F F F. A sales improvement and you've seen some Eddie you know good signs of that share improvement in the Q1 numbers.

Laurent Freixe: If anything, maybe we see that the landscape is improving a little bit, so there is no worsening. We are still in the same high single digit, and we see more softening towards the, I mean, as we can see, you follow the futures, softening in terms of impact for us going forward. On the consumer piece, you know, we entered 2025 with a consumer who was not optimistic, to say the least, cautious, maybe concerned by impact of inflation and economic development. I think uncertainties created by economic policies, trade wars, and evolution of the financial markets have increased the concerns and created more uncertainty.

Speaker Change: In terms of the P. F M. A guidance what we said is we would like to be by the end of last year, a 9% run rate our investment as a percentage of sales.

Speaker Change: Sorry at the end of this year I'm confusing my years here.

Speaker Change: And a 10 to 25 and that's what you should expect this year to see us ramp up. So you know if you think about just improving roughly 40 basis points off where we were at year.

Speaker Change: And if for the full year 2023.

Speaker Change: Three you'll see us getting on my yes confused here for their attention and 24, you'll see us at about eight and a half the center that you have the sense that loral was referring to and that that increase in P. F. M. A has not been.

Speaker Change: Arrived at through a solving for margin.

Speaker Change: We have started by solving for what's the right investment in our brands in this environment on the margin as the outcome.

Laurent Freixe: We got a more concerned consumer, and that's visible in many parts of the world. How does it translate? Cautious on consumption and increased savings, especially in China. This is dynamic that we are seeing unfolding, but I would like to highlight once again that this is the context. Our Nestlé Virtuous Circle is designed to make us grow and win in that kind of context. Why? Because we are raising our game when it comes to cost savings, cost efficiency, productivity, to be able to invest in our brands, strengthen the core, deploy big bets, and address on the performance. We are very, very confident with our strategy, the way it is unfolding.

Speaker Change: And you know the reason why that 16% is the right number is.

Speaker Change: Because there's substantial opportunity as large as said for efficiencies in our business and it's really important that we hold ourselves accountable to driving out those efficiencies to make sure that our businesses, where it needs to be for the medium term. So that's really what informs that 16%.

Speaker Change: If we felt that we needed to invest more we would be having that conversation that we feel we've got the right level of investment to drive and prevent from here and maybe the point to highlight total eases. The you said not just a matter of the pace of investment that we put you know India question, we go to so.

Speaker Change: The pricing element of it are we going to have called the kitchen investments and all sorts of flavors that are capabilities as well Pete on the ground and so on and so forth that are.

Laurent Freixe: You know that food and bev is a resilient category in a context of economic uncertainty. People have to eat and drink every day. There is the resilience built in the category, but we are determined, and we are taking action to outperform our categories through our plan. That's what is our focus.

Speaker Change: Makers.

Speaker Change: Sharper and more competitive organization to win in the marketplace. So it's one element. This is one of the babies people element, but we are pulling all levers.

Speaker Change: To shopping Oh performance going forward.

Speaker Change: Thanks.

Speaker Change: Thank you. Our next question comes from Jeff Stent at BNP Paribas Exxon's go ahead, Jeff.

Anna Manz: Just to re-clarify the UTOP margin point, I said 5% movement or strengthening in the Swiss franc order of magnitude has a 10 to 15 basis points impact at UTOP. Just on the commodity cost, obviously our commodity costs are not just about spot prices because of course we have quite a level of hedging as we move through the year. We'll give you a further update on that at the half year.

Jeff: Hello can you hear me David.

David: I can hear you yes.

Speaker Change: Okay great.

David: Just a question on <unk>.

David: Does it doing it obviously, you've got the commitment to increasing the dividend was trying to see every year.

David: My Reckoning you know this year, you probably be north of the 70% payout ratio.

David: Are there any point, where the board might see actually.

Laurent Freixe: Thank you.

Jon Cox: Thank you.

David: No longer makes sense, given the development of the Swiss franc currency.

David Hancock: Thank you. The next question comes from Olivier Nicolai at Goldman Sachs. Your line is open.

Olivier Nicolai: Hi, good morning, Laurent Freixe, Anna Manz, and David Hancock. Just two questions, please. Could you first go back to the Health Science performance and quantify the various moving parts here? How much is the premium part of the portfolio there? And could you quantify the impact of the private label discontinuation, for instance? Then going back to coffee and coffee inflation, do you think you will be able to offset the input costs in absolute terms? I know that's the goal, but do you think you are able to offset that? Some of your peers, from what we can see, whether it's on scanner data also, are pushing through a strong double-digit price increase, and it seems to be much less for you. So I'm trying to reconcile the two. Thank you.

[Analyst] (Goldman Sachs): Hi, good morning, Laurent Freixe, Anna Manz, and David Hancock. Just two questions, please. Could you first go back to the Health Science performance and quantify the various moving parts here? How much is the premium part of the portfolio there? And could you quantify the impact of the private label discontinuation, for instance? Then going back to coffee and coffee inflation, do you think you will be able to offset the input costs in absolute terms? I know that's the goal, but do you think you are able to offset that? Some of your peers, from what we can see, whether it's on scanner data also, are pushing through a strong double-digit price increase, and it seems to be much less for you. So I'm trying to reconcile the two. Thank you.

David: The big question for sales cool and and you know I'm sure one that you are well.

David: Well raise again as we move through them.

David: We are committed to our dividend and we are a strong cash flow generating organization you see us in this year with a slightly lower margin, but that's because we.

David: Have made the conscious decision to really invest to accelerate our medium term growth.

And do you see in the first quarter.

David: The impact of the decisions that we're making starting to come through.

David: As you see improving share in the billionaire brands and progress on all days.

Laurent Freixe: Yeah, on Nestlé Health Science, as we said, our premium brands are doing well. They are growing double-digit. Where we faced more challenges is more in the mainstream side, and part of it is related to the fact that we are pruning the private label part of the portfolio logically to focus on where we can create the most value. That has an impact on the growth short-term, but that to strengthen the portfolio going forward.

David: That's why we have historically been losing share.

David: Right now our focus is very much on executing against our strategy because we believe firmly that as we do this performance for Phi.

Speaker Change: Thank you and our last question comes from Tom Sykes from Deutsche Bank. Your line is open to them.

Speaker Change: Great. Thanks, Dave Good morning, everybody and just firstly.

Speaker Change: Following up on your comments about the consumer you've previously spoken about.

Laurent Freixe: On coffee, you know, we have this privileged position that not only we got the best brands, but we are much less exposed than most of the players, not to say all of the players that are primarily roast and ground. We are a soluble coffee player, less impact of green coffee. We are also a coffee systems, coffee capsule player, again, less impact, more added value, less impact of green coffee in the equation. We are quite privileged in that context. Generally, R&G players are short covered or shorter covered than us, so they have to increase quicker and more.

Speaker Change: The qualification as you can see Marin.

We used to love income exposed categories is it.

Speaker Change: Is that still the case and it is they retool a point, where you annualized pace of decline that actually begins to be.

Speaker Change: Less of a drag at some point in 'twenty five excuse me and then in addition to that in the U S.

Speaker Change: I like to eat it's grown a little bit more quickly than categories space to Hispanic consumers.

And there's been some talk about changes in consumer behavior that you are seeing any impact on your business.

Laurent Freixe: In that competitive context, we are doing what we have to do to cover our costs, but we are also very mindful of the consumer capacity to absorb and of how the competitive set is moving. We want to make sure that we strike the right balance between covering our costs and maintaining the penetration of our brands. We are, I mean, as you can see, and as you could see with the numbers from the coffee area and Nespresso, momentum is very solid.

Speaker Change: Potentially even a benefit from people, saying, hey, more and is there any impact on.

Speaker Change: The food supply chain.

Speaker Change: Given the high impact too.

Speaker Change: Later on food supply is not at all a concern.

Speaker Change: Well the the quality of the connection was not great for them. So.

Speaker Change: Yeah.

Speaker Change: I think the question on the consumer was how do we see these developing.

So yeah, we would like to know if you'd like to have a crystal ball.

Speaker Change: I think it would be very very much related to economic policies.

Olivier Nicolai: Thank you.

[Analyst] (Goldman Sachs): Thank you.

Speaker Change: Yeah.

Speaker Change: You Couldnt be drug development at this point towards these there there is no risk.

David Hancock: Thank you. The next question comes from Sarah Simon at Morgan Stanley. Please go ahead, Sarah.

Speaker Change: Recession are inside the group.

Sarah Simon: Yeah, morning. I have a couple of questions. First of all, can you give us some idea of kind of when in the quarter you took price in the key categories? The second one was on margin phasing through the year. I'm sure you know your peer has kind of slightly adjusted the phasing of margin. I'm just wondering how you see that developing through the year for you. Thanks.

Speaker Change: We see.

Speaker Change: The GDP growths outlook globally and are in core geographies being are being reduced.

Speaker Change: So yeah, so that the that impacts are the buckets the financial markets will suit developments impact.

Speaker Change: Many of the consumer, especially in the U S.

Speaker Change: So that's that's the context and I guess, the sinks, who levels economic policies do evolve and we see more color and the blueberry couldnt meet turning the corner from what these are at the moment.

Laurent Freixe: On pricing, we have two, and we have very different situations according to our categories. We have categories, little impacted, where there is little pricing required, or where we even have the possibility to promote more and be more aggressive, to you know, attract the consumer or keep the consumer. Coffee and cocoa, more impacted. Those are the two where we had to take more action. There is different dynamic between developed markets, emerging markets. Developed market, there is a slot where you negotiate at the start of the year. We are through that period of negotiation without disruption and without negative impact, hopefully, from the customer standpoint.

Speaker Change: Declining trend to a stabilization at least in the in coming back what we seen China, if the determination of a sort of sudden important geography.

I will tell you the U S and I guess.

Speaker Change: Administration will have to do something to reassure the consumers. So that's for the U S for China is a real determination from the government to see both consumption.

Speaker Change: So that should produce results also maybe not in the very short term, but certainly a medium long term, we know that the police interventions in China, a bit more focus on the supply side, maybe less on the human side.

Laurent Freixe: I mean, we have to see now how the consumers do react, but we are really satisfied with the way negotiations have been going. In developing markets, we have the possibility to do it step by step. Most of it has been done, but a little bit more to come, possibly, depending also on how things develop from a cost standpoint and price standpoint. Yeah, this is the dynamic that you see in the marketplace. On the margins, Anna?

Speaker Change: But there is real determination and and the means to address the human side than the consumer with a thought.

Speaker Change: On the U S. Hispanic what I can say is that it's a big of course is a big segment. It's.

Speaker Change: It's been growing segment and that's we just highlight the twin Super well placed.

Speaker Change: Thanks to our strong portfolio in Mexico and in Central America that Mexico is the number four market in size.

And that we have a leading position in all categories, where we play coffee dairy food and so on and so forth pet food. So.

Anna Manz: Yeah, sure. Just maybe to give you the moving parts, as you know, as we've just been talking about, pricing is something that we have taken through Q1, and the timing of that varies enormously market to market. Therefore, we will see an increasing impact from pricing in H2 versus H1. In terms of costs, you see an increasing impact of the commodity costs coming through during the year. Then the other moving factors are really the timing in which we generate efficiencies versus the rate at which we increase our investment. We'll give you an update on all of this in more detail at the half year.

Speaker Change:

Speaker Change: The dynamic of the spending consume out we of course follow but we are very very well placed to play a role in an increasing role in that in that context.

Speaker Change: Just to cover the supply chain.

Speaker Change: Yeah.

Speaker Change: I guess he thought we had a lot of child.

Speaker Change: Challenges in the supply chain. Nevertheless, she is if you think of that kind of it and then the supply chain disruption that we saw and then some of the conflicts that has.

Speaker Change: Being a caring and.

Speaker Change: So managing our way through supply chain change or volatility, it's just part of our everyday.

Speaker Change: And I would say, it's something that.

Sarah Simon: Okay, thanks.

Speaker Change: You know we've had a lot of opportunity to build muscle around and so as I look at kind of some of the current challenges around tariffs and the like it's more of the same as how to think about it.

David Hancock: Thank you. The next question comes from Jeremy Fialko at HSBC. Go ahead, Jeremy.

Jeremy Fialko: Hi. Morning. Thanks for taking my couple of questions. The first one is on elasticities. I know you said in certain areas it's a bit too early to tell. I guess in other areas, maybe more in the EM, the pricing did go in a bit earlier. Can you talk about how the volume evolution that you reported sort of is relative to your expectations? Are you seeing, you know, the anticipated reaction or is it a little bit more, or less than you had expected? Then secondly, on coffee creamers, perhaps you could just give us a bit of a deeper dive into that business and where you are in terms of getting back your points of distribution, recovering your market share, some of the innovations coming to market, et cetera. Thanks a lot.

Speaker Change: Thank you we have no further questions. So we will bring the call to a close thanks for the questions and the attention. We will look forward to hearing from you again on July 24th with our half year results if not before.

Speaker Change: Okay.

Speaker Change: Mhm.

Speaker Change: Yeah.

Speaker Change: Okay.

Laurent Freixe: I understand that the first question was on volumes. The connection was not great, Jeremy. The second one was on creamers.

Jeremy Fialko: Uh.

Laurent Freixe: Yeah.

Jeremy Fialko: That's right. Thanks.

Laurent Freixe: Thanks. Let's start with the volumes. We explained the dynamic of Q1. There are many dimensions in Q1. We didn't highlight that much, and this is entirely volume related, early Chinese New Year, no leap year, and a late Easter that has an impact, obviously, on volumes, and we highlighted Nespresso. And,

Jeremy Fialko: Sorry. It was more on the elasticities that you were seeing.

Laurent Freixe: So-

Jeremy Fialko: That was in what-

Laurent Freixe: On the volumes, we are pricing to both protect the margins and make sure that we support the volumes. We are not one-sided in the way we take action. We are really trying to cover the two dimensions, and market shares, of course, are of the essence. Volume is an important part of the equation. Pricing will come on top. That's the way we are focusing on it. Our

Laurent Freixe: You know, the big difference this year compared to history, or recent history at Nestlé is that in the context of inflation in some categories, we will keep investing in marketing to strengthen our core, to deploy our big bets, our innovation, our growth platforms, and to address our underperformers. That should translate, and that will translate, and that translates already, in market share improvement, and that will support the volumes going forward. On the creamers, you want to?

Anna Manz: Yeah. Can I just actually build on that one? 'Cause I think there was also, the connection was a bit bad, but I think there was something about elasticities in there too. Maybe just to comment on that. Look, these are both pretty resilient categories. I mean, coffee particularly has been pretty resilient through previous rounds of price increases. Confectionery too, because it's an impulse and gifting category, is generally less elastic. It's too early to say how these price increases will play out, but maybe just to kind of bring that to life for you, just two different market examples. We've taken price on confectionery in Japan, which is a big confectionery market, and there it's predominantly a gifting market, and we've seen, you know, strong RIG performance and a very good elasticity.

Anna Manz: Equally, if you look at the initial reaction to when we've taken price on soluble coffee in the UK, the initial reaction was a bit more muted because consumers in the UK generally have, you know, a spare bottle of Nescafé in the cupboard, and so they delay their purchasing action while they wait to see how prices play out and how that moves. So you initially see quite a big move, and then you see it come back as people then adjust to the new pricing. So that's why it's a little bit hard to read elasticities at this stage. We just need a little bit of time for it all to play through.

Anna Manz: We are actively managing it at a market category level in the context of the competitive set and making the adjustments that we need to make, or, you know, as we see that play out. Then on creamers, I think I heard the question, which was, how are you doing on share and distribution?

Jeremy Fialko: Correct. Exactly. Sorry.

Anna Manz: If that was right, I would say we're making.

Jeremy Fialko: Yeah, yeah. Thank you. Sorry, it's a bad connection. I don't know why.

Anna Manz: Good progress on getting our distribution back. Albeit not all done yet, but you know, big strides. You see the share performance improving. Actually we've reclaimed some competitive distribution, so you would expect to see our share performance starting to improve. I don't know if there's anything you want to add to creamers.

Laurent Freixe: No, I think it's. Yeah. We just have the capacity now to also compete in the marketplace, so you will see impact in terms of better supply, better presence on shelf, and will be, you know, competitive in all dimensions, bearing in mind that this is a category also that we lead from a market share standpoint.

Jeremy Fialko: Thanks very much.

David Hancock: Thank you. Our next question comes from David Hayes at Jefferies. Go ahead, David.

David Hayes: Good morning, all. Thank you. Two from me, one on the sales guide and then one on the margin outlook. So on the sales guide, just to kind of pick up on this comment about sequential improvement, can I just clarify, when you talk about being better OSG than last year, is that on the reported OSG of 2.3, or are we thinking about that from the underlying base that you talked about of about 2.8 when you adjust for the Muslim Western brand boycott and the second half destocking that you took action on through last year? And then going to the margin and some of the commentary, I guess, that you've been making.

David Hayes: You know, some of your competitors have talked about with the consumer environment need to discount more to narrow price gaps with private label or local players. A&P spend, some are committing to needing to go up. I guess two questions related to that. A&P spend exiting at 9% of sales versus the 8.1 through last year, is that still the right level in that kind of competitive environment and those points being made? I guess in terms of picking up on your comments at the beginning about pricing plans need to be taken off consumer sentiment and your determination to improve consumer penetration, is 16%, which you obviously reiterated today, still the right level? It feels like that's a you know bit of a needed compromise.

David Hayes: If that is still the right level, what's offsetting that compromise? Is it more cost saving, deeper, quicker cost saving? Just trying to get an understanding of the moving parts to get to the same profit point. Thank you.

Laurent Freixe: To put the things in context, and you ended up with the cost savings, and you see the end, and you see the start as well. The starting point of being capable to invest more in the marketplace and make an impact for our brand, strengthen the core, deploy innovation at pace, get the consumers on board, build up loyalty and also address underperformers, which we are doing. In the last two quarters, we've been showing already impact of what we have been capable to implement in no time.

Laurent Freixe: You know, it's at the Capital Markets Day a few months ago that we explained the strategy and it's already in action, and again, showing impact. The guidance says what it says, that it's about an acceleration compared to last year. Again, the last two quarters give you a picture of what is in the making. The critical point is that all the building blocks are in place. The savings programs are bringing what we expect fast, and we can redeploy quickly. We are doing those redeployments. We have increased significantly our investments already in Q1. We did already some in the last quarter of last year, and we start to see the impact.

Laurent Freixe: Our share position is improving. Majority of our underperformers are improving. Market shares, we see the fast deployment of innovation. That will produce the expected results. Is the 9% or the 8.5% the right mark? Well, I think this is what we framed, and this is what we have in the making, and again, we see the impact, so it looks like it's working, and we want to make sure that we put the right level of support to our core brands, to our core. We will win through the core and also through both our innovation big bets and underperformance. On the margin, you want to say something, Anna?

Anna Manz: Yeah. Maybe just to clarify a few of the guidance points. The sales guidance was that we expect to improve our organic sales growth compared to 2024, and this is the guidance we made at the full year, and 2024 was 2.2%. 2025 will be an improvement on that, and that was not intended. That is not. Shouldn't be read as a quarter by quarter improvement. It's an improvement coming from the executional strengthening and investment that we're bringing behind our brands that will see us perform against our categories in a better way to improve our share performance quarter on quarter.

Anna Manz: Actually, with you know phasing of days and shipment phasing and all the other moving parts, what that actually means quarter by quarter in reported terms could move around a little bit. But that's the underlying driver of our sales improvement. You've seen some early you know good signs of that share improvement in the Q1 numbers. In terms of the PFME guidance, what we've said is we would like to be, by the end of next year, at a 9% run rate investment as a percentage of sales. Sorry, at the end of this year. I'm confusing my years here. At the end of 2025, therefore you should expect this year to see us ramp up.

Anna Manz: You know, if you think about us improving roughly 40 basis points off where we were at the end of full year 2023. No, I'm getting all my years confused here. Full year 2024, you'll see us at about 8.5%, and that's the 8.5% that Laurent was referring to. That increase in PFME has not been arrived at through solving for margin. We have started by solving for what's the right investment in our brands in this environment, and the margin is the outcome.

Anna Manz: You know, the reason why that 16% is the right number is because there's substantial opportunity, as Laurent just said, for efficiencies in our business, and it's really important that we hold ourselves accountable to driving out those efficiencies, to you know, make sure that our business is where it needs to be for the medium term. So that's really what informs that 16%. If we felt that we needed to invest more, we would be having that conversation, but we feel we've got the right level of investment to drive improvement from here.

Laurent Freixe: Maybe the point to highlight, too, is that this is not just a matter of the PFME investment that we put, you know, in the equation. We got also the pricing element of it. We got, of course, the PFME investments, and all sorts of levers that capabilities as well, feet on the ground and so on and so forth, that make us a sharper and more competitive organization to win in the marketplace. It's one element. This is one of the very visible element, but we are pulling all levers to sharpen our performance going forward.

Anna Manz: Thanks.

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

Jeff Stent: Hello. Can you hear me, David?

David Hancock: Can hear you, yes.

Jeff Stent: Okay, great. Just a question, Anna, on the dividend. Obviously, you've got the commitment to increasing the dividend in Swiss francs every year. By my reckoning, you know, this year you'll probably be north of the 70% payout ratio. You know, is there any point where the board might say, "Actually, this just no longer makes sense given the development of the Swiss franc currency?" Thanks.

Anna Manz: The big question for a sales call. You know, I'm sure one that you will raise again as we move through. We are committed to our dividend, and we are a strong cash flow generating organization. You see us in this year with a slightly lower margin, but that's because we have made the conscious decision to really invest, to accelerate our medium-term growth. You see in the first quarter, the impact of the decisions that we're making starting to come through, as you see improving share in the billionaire brands, and you know, progress on those brands where we have historically been losing share. Right now our focus is very much on executing against our strategy because we believe firmly that as we do this, performance will follow.

David Hancock: Thank you. Our last question comes from Tom Sykes from Deutsche Bank. Your line's open, Tom.

Tom Sykes: Great. Thanks, David. Morning, everybody. Just firstly, following up on your comments about the consumer. You've previously spoken about the bifurcation of the consumer and weakness in lower income exposed categories. Is that still the case? Is there at all a point where you annualize a fast pace of decline that actually begins to be a bit less of a drag at some point in 2025? Excuse me. Then in addition to that, in the US, I thought you'd grown a little bit more quickly in categories exposed to Hispanic consumers. There's been some talk about changes in consumer behavior there. Are you at all seeing any impact on your business, you know, potentially even a benefit from people staying at home more?

Tom Sykes: Is there any impact on the food supply chain, given the high impact of immigrant labor on food supply? Is that at all a concern? Thank you.

Laurent Freixe: The quality of the connection was not great, Tom. I think the question on consumer was how do we see this developing through the year? We would like to know. We would like to have a crystal ball. I think it'll be very much related to economic policies, economic growth development. At this point there is no recession in sight. But we see the GDP growth outlook globally and in core geographies being reduced. That impacts the markets. The financial markets also, developments impact many of the consumers, especially in the US. That's the context.

Laurent Freixe: I guess the things will evolve, as economic policies do evolve and we see more color and the global economy turning the corner from what is at the moment a declining trend to stabilization at least and coming back. What we see in China is the determination that it's also an important geography, not only the US, and I guess administration will have to do something to reassure the consumers. That's for the US. For China, is a real determination from the government to support consumption. That should produce results also, maybe not in the very short term, but certainly, medium long term. We know that the policy interventions in China a bit more focused on the supply side, maybe less on the demand side.

Laurent Freixe: There is real determination and the means to address the demand side and the consumer part. On the US Hispanic, what I can say is that it's a big, of course, it's a big segment. It's a growing segment, and that we just highlight that we are super well-placed thanks to our strong portfolio in Mexico and in Central America. You know that Mexico is our fourth market in size, and that we have a leading position in all categories where we play coffee, dairy, food, and so on and so forth, pet food. The dynamic of the Hispanic consumer, we of course follow, but we are very well-placed to play a role and an increasing role in that context.

Anna Manz: Just cover off the supply chain one. I guess we've had a lot of challenges in the supply chain over the last few years. If you think about COVID and then the supply chain disruption that we saw, and then, you know, some of the conflicts that have been occurring. Managing our way through supply chain change or volatility is just part of our everyday norm. I would say it's something that, you know, we've had a lot of opportunity to build muscle around. As I look at kind of some of the current challenges around tariffs and the like, it's more of the same is how I think about it.

David Hancock: Thank you. We have no further questions, so we will bring the call to a close. Thanks for the questions and the attention. We will look forward to hearing from you again on 24 July with our half year results, if not before. Many thanks.

Q1 2025 Nestle SA Earnings Call

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