1

Presentation of
Nestlé Brazil
to Investors and Analysts

Sao Paulo, December 8th, 2005

 Disclaimer 2
This presentation contains forward looking statements which reflect
Management’s current views and estimates. The forward looking
statements involve certain risks and uncertainties that could cause
actual results to differ materially from those contained in the forward
looking statements. Potential risks and uncertainties
include such factors as general economic conditions, foreign
exchange fluctuations, competitive product and pricing pressures
and regulatory developments.
 3

Nestlé in Latin America and Caribbean

 Nestlé has Leadership & Scale 4
Mexico

519 million people

4 major languages
Bolivarian
Central America (English, Spanish, Portuguese and French)
and Caribbean
Countries: 21
Brazil Pants: 74
Employees: 39.000
Austral Sales: CHF 8.7bn
America Organic growth: 10,7 % 2004
4 Brands over CHF 1 Billion: Nestlé, Nido/Ninho, Nescafé,
Nestlé Chocolate
 Latam 2005 Performance 5
EBITA Zone AMS H1 2005

13,6% + 80bps

Sales 9M 2005
RIG OG
% %
Latin America and Caribbean 4,5 8,9
• Brazil 6,4 5,2
• Mexico 3,2 9,1
Nestlé Brazil - a business perspective
 MILK,
CULINARY
Current Organization 7
CHOCOLATES
+CEREALS,
( L. Leiman )
( G. Aubry )

PRESIDENT
( Ivan Zurita ) DPA
COFFEE,
BEVERAGES+
BISCUITS FINANCE AND FOOD SERVICES
( F. Costa ) TECHNICAL
CONTROL ( A. Berger )
( L. Paravicini ) ( J. Blaser )
CPW
LEGAL SUPPLY CHAIN
( H. Maccabelli ) ( Moacyr Calligaris )

REGIONAL
ICE CREAM HUMAN RESOURCES SALES NORTH AND
( J. Dornellas) ( L. Brinckmann ) NORTHEAST WATERS
( L. Oddone )
( J. Wei )
COM. + MKT
CORPORATE
MATTERS SERVICES
( C. Faccina ) ( M. Castelar )
PURINA
GLOBE
NUTRITION BRASIL
( M. Rosado) ( O. Carvalho )
Being Big is part of our country 8

Big… Population : 180 Mio

GDP : USD 482 Bi
Territory : 8,5 Mio Km2
Cultural Diversity

Also - Violence
- Poverty
big… - Bureaucracy
 Nestlé in Brazil 9
RR AP • Leader in Food Industry
• 84 years of Brazil
CE
AM PA
MA RN • 15.200 Employees
PE
PB • More than 220.000 indirect employees
PI
AL
AC
TO SE
• 200 Brands
RO
BA • 1300 SKU´s
MT
DF • 26 factories
GO
MG
• Present in 95% of Brazilian Households
ES
• 1.4 Million tons handled
3.240 Km

MS
SP RJ
• 10 thousand trucks loaded monthly
PR
SC
To Operate in the Country
RS

3.550 Km

We must think BIG

 Importance to Brazil 10

Foremost tax payer among the country’s food companies

US$ 560 million in 2004

Average annual investments Major Commodity Buyer

US$ 144 million in infrastructure Sugar = 237 thousand tons
US$ 123 million in marketing Coffee= 1.5 million sacks
Cocoa = 42 thousand tons
Milk = 2 billion litres
Performance
Ranking in Nestlé Group
Performance 12
0,7% 0,5%
• nd
2 in volume 3,9%
0,6%
5,6%
• 5 th in sales

Sales 2004 – Mio CHF 2.899* 88,7%

Nestlé DPA 50%

NPP Brazil Nestlé Waters
CPW 50% Galderma 50%
*Total sales of Nestlé in Brazil
 Diversified Sales Portfolio 13

25% Shelf Stable Dairy

10% Chocolate
9% Nutrition and Cereals
Powdered Beverages
Export
9% Biscuits
Culinary
7% 26% Ice Cream
4% 3% Foodservices
4% 3% Soluble Coffee
 Driven by Innovation & Renovation 14

40% 1`811 Mio BRL

Goal
30% 1´526 Mio

20%
771 Mio 30%
28% ...........
450 mio 26%
10% 209 Mio
14%
5% 8%
0
2001 2002 2003 2004 2005
No. Product 70 54 90 138 206
Innov/Renov
 Innovation and Renovation 15
Adding nutritional value: NINHO

Benefit: Milk-based Nutrition

Product: Full Cream Milk Powder

5-10% Price Premium

Benefit: Protection Stimulation Growth

Product: Specialized Milk Powder
 Innovation and Renovation 16
Being relevant to consumer

Launch: October 2004 Launch: February 2005

Market Share: 38,2%
Seven cans per second
are sold in Brazil

Condensed milk Condensed milk

 Participation of Nestlé in Market Categories 17
Categories Ranking Main Competitors

Infant Formulas 1º Support

Baby Food 1º
Traditional Cereals 1º Nutrimental, Mococa
Soluble Coffee 1º Melita, Santa Clara, Iguaçu
Milk Powder 1º Itambé, Camponesa/
Parmalat
Choc Powder 1º Quaker
Chocolates (Nestlé+Garoto) 1º Lacta-Kraft, Hershey´s, Ferrero
Condensed Milk 1º Parmalat, Itambé, Elege
Soups 1º Unilever
Dairy Milk 1º Parmalat, Glória, Itambé
Biscuits (up to 300gr) 1º Danone, M.D.Branco,
Nabisco, Bauducco, Piraquê
Pet food 2º Effem (Mars), Nutriara
Yogurts 2º Danone, Batavo
Cubes 2º Unilever, Arisco
Ice Cream 2º Unilever
Breakfast Cereals 2º Kelloggs *Nielsen AC – YTD/05
 Continuous Performance Improvement 18
2001 2002 2003 2004 CAGR %

Net Sales 100 125 143 155 11,6

EBITA 100 137 149 194 18,0

GDP 1,3% 1,9% 0,3% 5,2% 1,7%

INFLATION 7,7% 12,5% 9,3% 7,6% 7,3%

Nestlé Consolidated Sales and EBITA

outgrow both inflation and GDP
Garoto
 Garoto Evolution 20
Key Performance Indicators ( 2004 X 2001)

2001 2004

NPS 100 155

EBITA 0 100
(minimal)

M. SHARE % 22 25
 Passion to grow 21
Commu-
nication

Operational
Efficiency
Nestlé on
the Move
Regionali
zation

New
Consumption
Sector
 A Simple Insight 22

Brazilian consumers have an emotional relationship with Nestlé.

Nestlé brand transcends the marketing dimension being perceived

as part of Brazilian life.

Nestlé brand adds a special and unique value to product brands.

 Positioning 23
One communication concept: Nestlé faz bem*

Related with

• Consumers perception and with

• Nestlé. Good Food, Good Life

*Has in large a meaning of “Do Well, Well Done”

 One Communication Concept 24

Nestlé faz bem

Related with
• Consumers perception of nutrition, health
and wellness

and

• Nestlé. Good Food, Good Life

New communication examples
 Conceptual Magazine 26

2.100.000 issues
Carnival Project 27
Social Sector 28
 Awards 29
• Top of Mind (Folha de São Paulo newspaper)
• Marketing best (Getulio Vargas Foundation)
• iBest (best Internet site)
• Consumer service - Respect to consumers (Radio Bandeirantes)
• Best company (Exame magazine)
• Most admired foreign company (Carta Capital magazine)
• Top Social, Eco, Good citizen,
• Promotion of the Year
• First Choice - Forbes
• Top 100 companies to work – nine times
 30

Regionali
zation

Nestlé on
the move
 Brazil – A country of contrasts Size and Diversity 31
North Region
Area: 46% Northeast Region
Population: 8%
Income: 5% Area: 18%
Population: 28%
Income: 12%

Midwest Region
Area: 19%
Population: 7%
Income: 7%
Southeast Region
South Region Area: 11%
Area: 6% Population: 43%
Population: 15% Income: 60%
Income: 16%
Fonte: IBGE
 Brazil a country of contrasts 32
North/Northeast Southeast/South
 A Major Opportunity 33
North / Northeast

. 62 Mio inhabitants (35% BR)

. U$ 115 Bi GDP 2004 (18% BR)

. 5,2 Mio Km2 (64% BR)

. 15 states (out of 27 states)

Sources: IBGE, Nielsen, LatinPanel, Nestlé BI

 Nestlé has a Strong Position 34
Main Competitors and
CATEGORIES Ranking
Local Comp.
Infant Formulas 1º -
LOCAL TACTICS
Baby Food 1º -
Chocolates (Nestlé+Garoto) 1º Lacta-Kraft
Unilever / Arisco
• Intense promotion activity
Soups 1º
Cream 1º Gloria / Vale Dourado • Fiscal benefits opportunities / Local manufacturing
Milk Powder Whole 1º Itambé / Camponesa • Tax engineering / evasion (by smaller companies)
Milk Powder Skimmed 1º Glória • DSD in focused areas
Soluble Coffee 1º Santa Clara/ Maratá • Packaging flexibility (out-of-pocket)
Choc Powder 1º Quaker / Santa Clara • Strong political lobbying
Modified Cereals 1º Unilever / Nutriday

Condensed Milk 1º Itambé / Vale Dourado

Biscuits (up to 300gr) 3º M.D. Branco / Vitarella

Bouillons 1º Unilever / Arisco

Breakfast Cereals 1º Kelloggs / São Bras

First Results
183,8 tons 1.907 tons 81,2 tons 2.497 tons 145,6 tons
Jul - YTD Feb - YTD Mar - YTD Jan - YTD Jun -YTD (only Salvador)

EXCLUSIVE North/Northeast
 Presence in Regional Events 37

Northeast: São João

The most expected party in the region, with several events involving
millions of consumers that party with regional music, tricks and typical
foods.
North: Festival de Parintins
Strong folklore “competition”
between Caprichoso & Garantido In-store
teams (oxes) in the North region, visibility
with strong link with consumers
passion.
In Street Promotion
visibility
 38

New
Consumption
Sector

Nestlé on
the move
 Business Model 39
Traditional business model New model
Key
Account
Street
vendor
DAN

Nestlé
Small CDE
Wholesaler
Retail Consumer

Broker Door-to-
door

New
Consumption
Sector

Currently serving 238.000 Point Of Sales 1 million additional Point of

Sales to serve more effectively
 Implementation Tools 40

Nestlé – New Consumption Sector

NCC
Nestlé Community CDE Partnerships Food basket
Center
 NCC* - Door-to-door 41

Status:
Results of one NCC in São Paulo:
• Net Sales: Jan/Oct-2005 US$ 1.4 mio
• Improved 60% in relation to the same period 2004
• 50 sales representative
• 28.000 homes in its database

* Nestlé Community Centre

 NCC - Street Vendors 42
Geladinho Nestlé Até Você

+ +

Description:

• Street vendors selling ice-pops Description:

• One coin concepts (R$ 0,50) • Street vendors in public spaces and mass
transit places where low income consumers
are.
• One coin concepts (R$ 1)
 Partnerships 43
Food Baskets

Description:
• Sale of Nestlé´s products through the staple
food baskets
• 60 million baskets/year sold in Brazil

Casas Bahia
Nestlé Store at Casas Bahia
Description:

• The largest retail store in Brazil

• Represents 30% all home appliance sales in Brazil
• Net sales of US$ 3,5 billion
• 90% belong to CDE classes
• 503 Stores
 44

Operational
Efficiency

Nestlé on
the move
NBS* LATAM will be located in Ribeirão Preto and will provide services for 21 markets
45
Shared Services Center Main Carateristics
LATAM
- More than 500 employees
7 regions – 21 - Two Shifts / 6 days per week
countries
- Now with 5 projects of continuous improvement
Brasil
- Brazil is being attended since September 2005
México
- 21 countries incorporated until the end of 2006
Ex-Andean
Bolivariana
- Customer Service incorporated to the Center

Caribe - Serve all Nestlé Business and our affiliated

(eg. Purina, DPA, CPW etc.)
América Central
Ex-Plata

Savings: 10 Mio CHF

*Nestlé Business Center

 46

Nestlé Brazil
Passion to Grow

Sao Paulo, December 8th, 2005