Powdered and liquid beverages: sales of CHF18.9 billion, 12.8%
organic growth and 7.4% real internal growth. The EBIT margin
declined by 30 basis points. This excellent sales performance
confirmed the dynamism of Nestle's billionaire brands Nescafé,
Milo, Nespresso, Nesquik and Nestea. These brands benefited from a
strong pipeline of nutritionally enhanced products, including new
PPP offerings for lower-income consumers. In Asia and Australia,
soluble coffee benefited from its continuous focus on products with
improved nutritional profiles such as Nescafé Body Partner, Nescafé
Protect and Nescafé Greenblend. The successful roll-out of Nescafé
Dolce Gusto continued and allowed Nestle to increase its market
share in Europe in the fast-growing portioned coffee segment.
Following a successful launch in Mexico, Nescafé Dolce Gusto was
extended to Japan and the US. Nespresso continued to achieve an
outstanding performance with more than 30% organic growth. The
decline in the product group's EBIT margin reflected increased
support for the accelerating Nescafé Dolce Gusto launch and raw
material cost pressures.
Milk products and Ice cream: sales of CHF20.6 billion, 9.2%
organic growth and 1.2% real internal growth. The EBIT margin
increased by 40 basis points with both milk products and ice cream
contributing. The dairy category benefited from a multi-tier
strategy with products adapted to different affordability levels
and nutritional needs, reflected in the Nestle Nido Nutrition
System. Ice Cream's organic growth was impacted by the decision to
discontinue less profitable products and distribution routes. The
super-premium portfolio with brands such as Moevenpick of
Switzerland and Haagen Dazs performed well, as did health-focused
offerings such as Skinny Cow in the US.
Prepared dishes and cooking aids: sales of CHF18.1 billion, 6.1%
organic growth and 1.1% real internal growth. The EBIT margin
declined only slightly, by 20 basis points, due to a strong
recovery of the category over the second half of the year,
particularly in frozen food, in spite of cost pressures. Culinary
products in Asia and Eastern Europe achieved double digit organic
growth, especially the Maggi brand. In the US, the three
billionaire brands Hot Pockets, Stouffer's and Lean Cuisine
accelerated during the course of the year. In Europe, the Wagner
and Buitoni pizza business continued to perform well, as did Herta
in France due to launches of products with nutritional
advantages.
Confectionery: sales of CHF12.4 billion, 8.0% organic growth and
1.4% real internal growth. The EBIT margin improved by 150 basis
points reflecting in part the successful reorientation of the
European business. The relaunch of the "Best Ever" KitKat and the
launch of KitKat Senses continued successfully in Western Europe.
These initiatives, as well as a continued strong performance in
emerging markets, resulted in this product category's strong
performance. The category continued to focus on both the lower
income and the premium and super-premium segments. The upmarket
move resulted in the roll out of dark chocolate products and a new
range of chocolates designed by Pierre Marcolini sold exclusively
in Nespresso boutiques in Switzerland and France.
PetCare: sales of CHF12.5 billion, 12.1% organic growth and 5.2%
real internal growth. The EBIT margin increased by 20 basis points
with a strong second half performance. Strong organic growth was
driven by resilient demand for key premium and super-premium brands
across all Zones which benefited from new product launches such as
Fancy Feast Elegant Medley's, Cat Chow Healthful Life and ONE
Natural Balance.
Pharmaceutical products: sales of CHF7.5 billion, 8.8% organic
growth and 8.4% real internal growth. This was the result of high
single-digit growth by Alcon and double-digit growth by Galderma
and Laboratoires innéov. The EBIT margin increased by 80 basis
points to 34.1%.
Popularly Positioned ProductsNestle's Popularly Positioned
Product (PPP) strategy, one of Nestle's four growth platforms and a
specific business model which focuses on lower income consumers by
offering them relevant and high-quality nutritious products at
daily-affordable prices, is proving particularly beneficial in
these turbulent economic times. Nestle's Food and Beverages
business in emerging markets achieved organic growth of 15% on
sales of CHF35 billion. With an increasing number of consumers
trading down in the current economic environment, PPPs and other
initiatives providing lower-priced products are proving
particularly popular, also in developed countries. PPPs achieved
organic growth of 27% overall, with hundreds of separate
initiatives worldwide.
Nestle Professional
Nestle Professional, the company's division dedicated to the
out-of-home food and beverage market, was organised as a globally
managed business unit in 2008 with full profit and loss
responsibility as of 1 January 2009. In 2008, Nestle Professional
achieved organic growth of 6.1% with sales of CHF6.2 billion.
Outlook
The global business environment in 2008 was affected by a number
of unforeseen events, especially in the latter part of the year.
Economies around the world have significantly weakened over the
last few months and it is likely that developments could further
impact consumer demand. However, Nestle believes that it will once
again be one of the industry's fastest growing companies of this
year, in line with the long-standing Nestle model. For 2009, Nestle
is committed to achieving organic growth at least approaching 5%,
as well as a further improvement of the EBIT margin in constant
currencies.
L'Oréal
The conditions of Nestle's agreement with L'Oréal are public.
The main point of the agreement states that the Bettencourt family
and Nestle will keep all of their L'Oréal shares until at least 29
April 2009 and not increase their respective stakes in L'Oréal
during the lifetime of Mrs. Liliane Bettencourt and six months
after that. This is a commitment which Nestle will honour whatever
the circumstances. Consequently, Nestle does not need to take any
action or decision regarding its stake in L'Oréal next April.
The future of Nestle's participation in L'Oréal is an important
topic for the Group which the Nestle Board of Directors is
addressing with great attention in the framework of the Group's
global nutrition, health and wellness strategy. Nestle's
participation in L'Oréal has been beneficial to both companies for
many years and Nestle will continue to take a long-term strategic
view in shareholders' best interest.
Appointment to the Executive BoardThe Nestle Board of Directors
has appointed Petraea Heynike as Executive Vice President in charge
of Strategic Business Units, Marketing and Sales, and Nespresso,
effective on 1 March 2009. Mrs. Heynike, currently Head of the
Chocolate, Confectionery and Biscuits Strategic Business Unit and a
former Nestle Canada CEO, has more than 36 years of experience with
Nestle in 6 countries and, over the past three years, was
responsible for the successful reorientation of Nestle's
confectionery business, giving the category new strategic direction
and delivering strong business results. Her international
experience combined with her deep product, market and
communications expertise make her ideally suited to help define the
strategic direction of Nestle's different product categories.
Board proposals to the Annual General MeetingThe strong
performance in 2008 will enable the Board to propose to
shareholders a dividend increase of 14.8% to CHF1.40 per share.
The mandate of Professor Guenter Blobel, who first joined the
Board in 2005, expires in April 2009. The Board wishes to express
its gratitude to Professor Blobel for his highly-appreciated
services over the years. Finally, the Board will propose the
individual re-elections of Ms. Carolina Mueller-Moehl as well as
Messrs. Kaspar Villiger and Daniel Borel.
Company Web Site: http://www.nestle.com
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