The World Food Prize International Symposium October 2006 - Des Moines, Iowa, USA

1. The World Food PrizeInternational SymposiumOctober 2006 - Des Moines, Iowa, USA Sustainable Agriculture & The Food Industry Dr. Hans Jöhr Corporate Head of Agriculture, Nestec SA.

2. Disclaimer 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. Sustainable Agriculture & The Food Industry

3. Sustainable Agriculture & The Food Industry Setting the Scene The Challenge for the Food Industry How is Nestlé engaged? Summarizing Conclusions 1 2 3 4 5

4. Emerging economies are set to boost the GLOBAL DEMAND and SUPPLY for consumer goods The Re-Emerging Model Speeding Ahead Emerging economies are growing faster than developed ones and catch up thirsts of their ever-growing population Fast growing economies represent: • 1/2 of the world energy consumption • 70% of world's Foreign exchange reserves 1 Setting the Scene Source: OECD

5. Processed, storable food at high demand Expected development of Income groups Millions of consumers are expected to have higher purchasing power in the near future Growth concentrated in developing countries and overwhelmingly urban 1 Setting the Scene Source: OECD

6. Consumer's expectations are changing faster than ever 1 Setting the Scene • Natural resources are limited and locally eventually overexploited • land, water, energy • Caloric food demand increases fast • Geographical decupling of supplyand consumption (logistic / infrastructure / legislation) "What does it mean for the Food Industry?"

7. 2 The Challenge for the Food Industry • The Food Industry relies on the increasing supply of safe agricultural raw materials in quality and quantity • However, respecting the limits of natural resources and weakening of rural societies threatens agricultural production • Consumers’ confidence depends on the quality & safety of the food supply chain  Need for the development of Sustainable Agriculture

8. What is the SAI Platform? Overall objectivePromote Sustainable Agriculture to meet the needs of today and future generations The Food Industry Response: The SAI Platform Our definition “ Sustainable agriculture (SA) is a productive, competitive and efficient way to produce agricultural products, while at the same time protecting and improving the natural environment as well as the socio-economic conditions of local communities”

9. SAI Platform Principles • Work on a pre-competitive basis between food chain stakeholders and other interested parties • Include all valuable concepts and initiatives contributing to Sustainable Agriculture Activities • Support the development of Sustainable Agriculture principles and practices • Raise overall people’s awareness about Sustainable Agriculture

10. Common guidelines - tested in pilot projects SAI Platform

11. Value Chain Innovations for Nestlé and Society New innovative sourcing & purchasing practices Adapted environmental, labor and safety practices New/Renovated Products for Nutrition, Health and Wellness Agriculture & Sourcing Manufacturing & Operations Consumers Building the Context for Growth Agricultural & local supplier development Food safety standards & workforce development Nutrition knowledge & awareness 3 How is Nestlé engaged? The The The Concept of Shared Value Creation

12. All inclusive value chain approach linking to markets Input Providers Farmer Trade Processor Food Industry Trade Retail Consumer Extension services on technical assistance & farm management advise 3

13. Corporate Social Responsibility built into Nestlé’s strategy 3

14. Creating shared value in practice • Aimed at creating improved business conditions for the company: • reliable, high quality sourcing • improved government functioning - regulatory • skilled, loyal workforce • superior products which successfully compete • For society, results in: • improved earnings of suppliers • increase skills, job stability • higher quality of life • greater stability, economic and social development 2/3 of all 250'000 employees receive formal training every year Linking farmers to markets to generate regular cash flow 3

15. Our Impact 3 • Purchasing of agricultural raw materials US $ 13'000 mio/yr. • Interactions with more than 400 000 farmers directly supported by more than 800 sourcing agronomists and 3'500 technical staff working at farm level and in supply chain. • Running more than 150 Sustainable Agriculture projects worldwide with many different stakeholders.

16. Summarizing Current situation needsHarmonization for Sustainability, Food Safety and Quality Assurance 4 non exhaustive list... Input Providers Farmer Trade Processor Food Industry Trade Retail Consumer

17. Summarizing Standardization Urgently Needed 4 Benefits of Process / Verification Standardization • Safety, compliance and quality assurance at higher awareness level,decreasing risk potentials, • Lower overhead costs due to identical documentation, training material and information systems across the organization, • A company's supply chain with standardized processes presents one face to its suppliers and customers, reducing transaction costs to both, • More flexibility and responsiveness of the supply chain.

18. SummarizingThe way forward 4 Implementation of harmonization processes through Strategic Alliances throughout the food value chain. But, standardization is only successful if: • Communication between stakeholders is very effective and based on trust and credibility, • Agreement on which schemes, standards, guidelines being used is reached, • Farmers, Cooperatives, Suppliers (trade & primary-processing companies) work together, in order to achieve common goals and to secure common interests.

19. ConclusionsSustainability is a business case 5 Sustainable sourcing practices are widely accepted by leading Business Research Institutions as being the way forward to successful business

20. Conclusions • Enhanced food safety, quality assurance and regulatory compliance, • Addresses world food needs, • Creates business opportunities and matches with consumer expectations 5 Sustainable Agriculture leads to

21. Conclusions 5 • The big challenge today is breaking the link between economic growth and negative environmental impact. There are clear limits to the earth's natural resources capacity. Thank you for your attention ! • Further information on http://www.nestle.com/Our_Responsibility or/and • hans.johr@nestle.com