Nestl in the Global Food Market

2. 2 Nestl� Sales (2004)CHF 86.8 billionUSD 69.9 billion Food is a (3.5 trillion)USD 3,500,000,000,000global industry Nestl� in the Global Food Market Nestl� in the Global Food Market � Food and drink is a huge industry. It sells an estimated 3.5 trillion dollars a year of processed food, and Nestl� has less than 2% share of this industry. In other words, although we are the largest, we are by no means in a monopoly position, and we have a lot of potential for growth. The food industry is a very fragmented industry where the largest 20 companies make up less than 8.6% of the processed food industry. (note to speakers: the USD 3.5 trn figure is total consumer spending, i.e., including trade margins, which Nestl� sales do not include) � Nestl� in the Global Food Market � Food and drink is a huge industry. It sells an estimated 3.5 trillion dollars a year of processed food, and Nestl� has less than 2% share of this industry. In other words, although we are the largest, we are by no means in a monopoly position, and we have a lot of potential for growth. The food industry is a very fragmented industry where the largest 20 companies make up less than 8.6% of the processed food industry. (note to speakers: the USD 3.5 trn figure is total consumer spending, i.e., including trade margins, which Nestl� sales do not include) �

3. 3 The World's Leading Food Company The World's Leading Food Company But we are the world�s largest food and beverage company And that puts us on a truly world scale. Unlike many of our competitors, Nestl� is almost completely concentrated on food and beverages. 94% is food and beverages and the other 6% is pharmaceuticals no other company is so clearly focused on food and beverages � The World's Leading Food Company But we are the world�s largest food and beverage company And that puts us on a truly world scale. Unlike many of our competitors, Nestl� is almost completely concentrated on food and beverages. 94% is food and beverages and the other 6% is pharmaceuticals no other company is so clearly focused on food and beverages �

4. 4 Nestl� in Figures 2004 Worldwide Sales: CHF 86,769 mio EBITA: CHF 10,970 mio Net Profit: CHF 6,717 mio Factories: 500 Employees: Around 247,000 Organic Growth: 4.5 % R&D Expenditures (F&B): CHF 658.5 mio Nestl� in Figures 2004 � So first, some facts and figures (note to speakers: figures are end of year 2004) EBITA = Earnings before interest, taxes and amortization of goodwill R&D Expeditures ? importance of patents to ... these huge investments in R&D � Nestl� in Figures 2004 � So first, some facts and figures (note to speakers: figures are end of year 2004) EBITA = Earnings before interest, taxes and amortization of goodwill R&D Expeditures ? importance of patents to ... these huge investments in R&D �

5. 5 World-wide No 1 in: Nestl� is the world leader in several sectors in the world food industry. In each of these we have products which everyone recognises. �We are number 1 in instant coffee, which is not surprise since Nestl� brought the 1st successful instant coffee to the market. We estimate that more than 3,600 cups of Nescaf� are consumed every second of every day throughout the world. That�s about three-quarters of a million cups of coffee since I started talking. Nestl� is also number 1 in infant nutrition - remember that Henri Nestl� produced the 1st commercial infant formula� We are number 1 in confectionery. In the year 2000 4.5 billion KitKat bars were consumed world wide, which would equal 143 Kit-Kat bars per second. � Nestl� is number 1 in dairy products� Chocolate Milk Beverages� We are number 1 in bottled water. We sell 14% of the world�s bottled water, 25% in the United States. We are number one in PetCare (co-leader with Mars) after our recent acquisition of Ralston Purina Also we are strong number 2 in Ice Cream and breakfast cereals, in our joint venture with General Mills, called Cereal Partners Worldwide (CPW), which has its headquarters in Lausanne, Switzerland � World-wide No 1 in: Nestl� is the world leader in several sectors in the world food industry. In each of these we have products which everyone recognises. �We are number 1 in instant coffee, which is not surprise since Nestl� brought the 1st successful instant coffee to the market. We estimate that more than 3,600 cups of Nescaf� are consumed every second of every day throughout the world. That�s about three-quarters of a million cups of coffee since I started talking. Nestl� is also number 1 in infant nutrition - remember that Henri Nestl� produced the 1st commercial infant formula� We are number 1 in confectionery. In the year 2000 4.5 billion KitKat bars were consumed world wide, which would equal 143 Kit-Kat bars per second. � Nestl� is number 1 in dairy products� Chocolate Milk Beverages� We are number 1 in bottled water. We sell 14% of the world�s bottled water, 25% in the United States. We are number one in PetCare (co-leader with Mars) after our recent acquisition of Ralston Purina Also we are strong number 2 in Ice Cream and breakfast cereals, in our joint venture with General Mills, called Cereal Partners Worldwide (CPW), which has its headquarters in Lausanne, Switzerland �

6. 6 Global Presence with Local Flavor � We aim to have one key worldwide brand in all of the major food categories. This slide shows our 6 strategic brands. Our Nestl� brand is the most important of these, 40% of our turnover comes from it, and it covers 12 categories from infant formula to chocolate. Nestl� is global presence with local flavor, and the way that we achieve this is through adaptation � Global Presence with Local Flavor � We aim to have one key worldwide brand in all of the major food categories. This slide shows our 6 strategic brands. Our Nestl� brand is the most important of these, 40% of our turnover comes from it, and it covers 12 categories from infant formula to chocolate. Nestl� is global presence with local flavor, and the way that we achieve this is through adaptation �

7. 7 Organisation in Three Zones � Nestl�s global presence is divided into 3 zones: Europe, the Americas; and Asia, Oceania and Africa. � ����� � Organisation in Three Zones � Nestl�s global presence is divided into 3 zones: Europe, the Americas; and Asia, Oceania and Africa. � ����� �

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9. 9 The Group Intellectual Property Department Manages IP Rights Worldwide

10. 10 A genuinely global function In 2002 the team which had been split between the Centre and the NOCs was reorganised as a Corporate/Centre service in keeping with the Nestl� Licensing System Advisers serving the SBUs are located with their SBU and advisers serving an NOC or group of NOCs are located in the markets

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13. 13 The RIPA is the first point of contact in the NOC / region Gives advice on all IP matters to businesses in the region including clearance searches for new trademarks, designs, domain names and enquiries regarding patents monitors IP infringements and manages / resolves conflicts & litigation ensures that the Nestl� Group IP Policies are applied supports IP issues in local M&A and R&D Activities

14. 14 Mission of the IP Department Our mission is very concise - to generate competitive advantage through development of Intellectual Property Rights (IPRs) To ensure that IP provides a competitive advantage for each of our businesses, we apply the WHW Test: WHAT can we protect to gain a competitive edge ? HOW do we get the best protection ? WHERE do we protect ?

15. 15 Nestl� is a brand driven company ... How many brands do we have world-wide ? Total: Nearly 6'400 brands ! 340 strategic brands 6'000 local brands (var. max 10%) Most valuable brand: NESCAFE : 2004: USD 11,89 billion (source: Interbrand); about 3'600 cups per every second, every day consumed in more than 120 countries worldwide = 23 rank in the global brand scoreboard No 2 food & beverage brand after Coca Cola ranked at 1st rank with a value 67.39 billion USD Show slide 100 Top Brands How many brands do we have world-wide ? Total: Nearly 6'400 brands ! 340 strategic brands 6'000 local brands (var. max 10%) Most valuable brand: NESCAFE : 2004: USD 11,89 billion (source: Interbrand); about 3'600 cups per every second, every day consumed in more than 120 countries worldwide = 23 rank in the global brand scoreboard No 2 food & beverage brand after Coca Cola ranked at 1st rank with a value 67.39 billion USD Show slide 100 Top Brands

16. 16 Strategic and local brands are protected & managed by IPD

17. 17 Nestl� has a substantial patent portfolio The Nestl� patent portfolio contains as at 18.03.2005: 9'018 granted patents 6'127 pending cases which may result in the grant of a patent The top 5 patenting territories for Nestl� are: USA, Europe, Canada, Australia and Mexico

18. 18 Nestl�'s IPRs are centrally owned & licensed to local Nestl� Companies... Soci�t� des Produits Nestl� S.A. is the registered trademark and design owner and Nestec SA is the registered patent owner, in both cases acting as nominee for Nestl� S.A., who is the beneficial owner - Central ownership applies to trademarks linked to strategic as well as to local brands These rights are licensed, together with know-how, to the Nestl� Operating Companies who pay royalties for their use

19. 19 Proper Defence is fundamental We defend our rights against any infringements, e.g. imitations including counterfeits unauthorised use of patented processes internet & domain name misuse Cybersquatting Examples: maggi.com, rowntrees.com Derogatory use of our trademarks For instance use of our brands in pornographic sites

20. 20 ... Infringements are frequent ...

21. 21 ... in various parts of the world ...

22. 22 ... and touch all our products

23. 23 Counterfeits are a serious problemand a crime in most countries!

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25. 25 Counterfeiting is a multi-faceted issue ... customer safety brand protection corporate reputation profits (loss of revenue & government taxes) - increase of food counterfeits ? serious health & safety risk (China : baby milk powder without nutritional value killing babies) - organized crime networks involved in counterfeiting use their profits to finance drug trafficking & terrorism (report EU-Commission 2003 / increase of 900% in pirated goods from 1998 to 2001). - increase of food counterfeits ? serious health & safety risk (China : baby milk powder without nutritional value killing babies) - organized crime networks involved in counterfeiting use their profits to finance drug trafficking & terrorism (report EU-Commission 2003 / increase of 900% in pirated goods from 1998 to 2001).

26. 26 Why protect creativity ? Why safeguard innovation ? To safeguard the 58% of the value of the company which is not recorded on our balance sheet. This amounted to 83 Billion Swiss francs in 2003*. A key component is Intellectual Property which is part of our "intangible" or invisible assets. These were referred to by Mr. Brabeck in the May 2003 Blueprint-Reshaping of Nestl� as "the invisible advantages that drive long-term business performance". These are vital assets; and their protection & defense are crucial for Nestl�'s business.*202 Billion MYR .*436'842 Billion IDR. - share prices end of 2003 x N� of shares. - inventories, debtors, machinery, stock, work research, factories. Mkt cap - 115237 CHF mio Non-recorded values - 66817 58% Recorded values - 48420 42%Why protect creativity ? Why safeguard innovation ? To safeguard the 58% of the value of the company which is not recorded on our balance sheet. This amounted to 83 Billion Swiss francs in 2003*. A key component is Intellectual Property which is part of our "intangible" or invisible assets. These were referred to by Mr. Brabeck in the May 2003 Blueprint-Reshaping of Nestl� as "the invisible advantages that drive long-term business performance". These are vital assets; and their protection & defense are crucial for Nestl�'s business.*202 Billion MYR .*436'842 Billion IDR. - share prices end of 2003 x N� of shares. - inventories, debtors, machinery, stock, work research, factories. Mkt cap - 115237 CHF mio Non-recorded values - 66817 58% Recorded values - 48420 42%

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