Barclays Global Consumer Staples Conference

Sep 3, 2019

Slides

Summary

H1 organic growth reached 3.6%, with FY19 margin improvement expected at least 50 bps and the 2020 margin target’s lower end expected in 2019. Zone AOA growth priorities include premiumization, digital, Starbucks launches and pet care.

Over 20 years plus. I am delighted to have Nestlé back in Boston. They have been big supporters of our conference, and for that, I would like to thank them. From Nestlé, we have CFO François-Xavier Roger and Head of Zone AOA, Chris Johnson. We have IR, Luca Borlini there in the front. The format today will be a short presentation from François and Chris, about 10, 15 minutes, and then it will be a fireside chat format, although no fire I can see. Then we will take questions from the audience in the room, time permitting, and then in the breakout next door. With that, and no further ado, I pass the floor to François. The stage is yours. Thank you. To Warren, good morning to everyone. I will be actually very brief. I just have two slides because I want to leave the floor to Chris because you do not see him probably as often as you see me. So it is a good opportunity for you to listen to him and to ask him questions as well. Feel free to ask most of the questions to him if you want to. Just my first slide, where I will take the disclaimer as read. I just want to remind everybody about our long-term value creation model and the three building blocks. You know this is about growth to start with. Growth is coming from, obviously, managing our business and especially investing in our high-growth categories. We have five of them, pet care, water, infant nutrition, coffee, and consumer healthcare. These categories are growing by themselves at a mid-single digit, and we are very well-positioned with number one and number two positions in all of these categories. Portfolio management has been and will be a key driver of our growth as well. It has contributed something like 20 basis points on average of accelerated growth for each and every single year over the last three years. What we need to do as well is to fix the base business whenever we are facing some specific issues in some businesses. The second pillar of our growth is about margin improvement, and there we shared an ambition of being between 17.5% and 18.5% of underlying trading operating profit margin by 2020. We will actually reach that level, the bottom end of this target already this year, one year in advance in 2019. This is very much about focusing on what we call our structural cost, which is the sum of fixed industrial cost, fixed distribution cost, and G&A. Overall, these costs have been declining between 1% and 2%, even more this year. The mere fact of growing and seeing this cost declining is contributing to a margin improvement of about 50 basis points per annum. This is what we have been doing over the last two years and what we will continue doing this year and next year. So this is very much about increasing our operational efficiency as well. Part of it is coming from procurement, where we are leveraging on scale. We are the largest player in our industry and obviously, as such, we can leverage on scale. The third pillar of our value creation model is about capital allocation, and there this is very much about capital efficiency. First, we prefer by far to invest in our business, to invest in R&D, to invest in marketing, to invest in CapEx. We do quite a lot of it. There is not necessarily need to do more. Maybe more in marketing, though, because we are starting to reinvest a little bit more. We try to be as disciplined as we can in managing our CapEx, our working capital. I will just mention our working capital, for example, has declined over the last six years from formerly 8.5% of sales to a little bit more than 1% now, and we aim at being probably around zero in the medium term. We value as well the fact of returning cash to shareholders, and we have returned significant amount of cash as a combination of share buyback and dividends. This is very much about maximizing long-term shareholder value. In the meantime, if we look at our performance in H1, which is quite similar to what we have achieved last year, we are actually satisfied with what we have, although we aim at doing even more. But we tick basically all boxes. Everything that had to go up went up. Everything that had to go down went down. Organic growth accelerated by 80 basis points to 3.6%. We aim at being around 3.5 this year, and we aim at being, I forgot to mention that, at mid-single digit next year. The underlying trading operating profit margin, which is before restructuring and restructuring link expenses, we improved by 100 basis points in H1 over the same period of last year. We don't expect to grow by the same amount for the full year. There was a positive phasing impact coming from the commodity cycle, but we do expect to be at least 50 basis points of margin improvement for the full year in 2019. Our EPS grew by 15.7%. That's quite a significant achievement. It comes on the back of a significant increase already last year. It's largely the consequence of our accelerated organic growth, our improved margin, as well as the significant decline that we had in our underlying tax rate, but I think we might talk about it later on. Working capital went down, once again, by 50 basis points. We aim at being at around zero. Free cash flow improved. Don't look at the percentage because it's only for six months, but we do expect to see our free cash flow improving as well, and we return an historical level of cash to shareholder, CHF 11.5 billion over the last six months, once again, as a combination of share buyback and dividend. I won't say more at this stage because once again, I want to leave the floor to Chris, and anyway, we have a Q&A session with Warren later on. Thank you. All right. Good morning. I just realized that I joined the company actually 36 years ago to the day. I started the day after Labor Day as a sales trainee in Chicago back in 1983. I would have never imagined, actually, that day when I was sitting there building displays of Carnation evaporated milk in a Jewel store, that I'd be standing here talking to you about how to capture growth in a rapidly shifting environment in Zone AOA. It's a pleasure to be here. 36 years with the company, and 12 years I've spent now working in the zone over my career. It's something close to my heart, and I'm glad to be here. I've only been on the job now for 8 months, and maybe just first of all, a few perspectives on this first 8 months. I feel very fortunate to be leading a very dynamic and diverse zone with some very favorable long-term trends. We know with respect to urbanization, two-thirds of the world's urban population currently lives in this zone. We've got the growing middle class. We've got digitalization. Not just Japan and Korea, but we see this as exploding across the zone. There's nutritional challenges, of course, but also that provides us with all sorts of opportunities as we provide products to address those. It's an attractive portfolio, I'll talk a little bit later on, with some leading positions and some very, very strong brands. I think most importantly is the excellent team of talented people that we have. In a diverse sort of zone like this, we have to rely on the talent in the markets to win, and I've got a great team. There are still significant growth opportunities. There's still opportunities for us to find efficiencies, which we'll invest in the business, and we have been investing in the business. Of course, we're also evolving our business model to win in this new retail and digital environment. We had, I would say, solid organic growth of 3.3% in the first half. We did have some negatives of development in Pakistan, challenges there, as you're well aware, macroeconomically, purchasing power, which hurt our business, and also some softness in some categories in China, which we'll talk about later. The business, again, just to summarize, we've got 70% of the world's population in Zone AOA, 95 countries, which we cluster into five geographic regions, and within that, we have 13 markets. The sales is around 23% of the Group's total sales at CHF 21.3 billion. The operating profit is around 31%, so we're accretive to the group. Close to 100,000 employees in 90 factories. As you can see as well, if you look at the six categories, key categories that Nestlé competes in, we do have a fairly balanced range of categories with some opportunities, which I'll talk about later. We operate in the framework of something that's called the Virtuous Circle, where we seek to strive for efficiencies, which we did last year, 50 basis points in 2018, which we've invested into the business. Through the first half of this year, we're seeing a similar sort of improvement, which again, we're investing behind 0.2, which are growth platforms. Marketing investment was up last year. Marketing investment is also up around the same level in the first half of this year, which then drive market share gains. We've been fortunate in the last year that around 60% of the cells, in other words, a product category in a geography, gained or held market share during last year. We see similar trends this year as well, which then delivers profitable growth. Finally, creating shared value is something very close to our heart, not just for the group, but of course for Zone AOA. If we focus now just on the categories, and key categories, four of the six stand out, of course, as big opportunities. First of all, beverages, including coffee. I should also mention that coffee is about three-quarters of that 28% of zone sales. The other quarter is cocoa malt beverages, primarily the Milo brand, which is very strong, as you know, in ASEAN, and getting also very strong in Central West Africa region. But all sorts of opportunities, whether it be in retail or out of home, and Starbucks is a great opportunity for us, which we launched first in Japan and in Korea in April, and has been really over-delivering and have launched now in China last month and have made introductions and will in the balance of the zone coming. So a lot of good opportunities there. Milk products will be the second-largest category for us. Includes milk powders, and what we're seeing also more and more is these ready-to-drink milk beverages, which are featured there, primarily for convenience and health, many targeted to children. Also includes ice cream, which is showing some good growth in select markets, as well as coffee and tea enhancers. Nutrition is the third-largest category segment for us, at 23% of total zone sales. Here, primarily in the area of infant nutrition, infant formula, and also in growing up milks and cereals. Here, China is the largest segment that represents 40% of our sales in Zone AOA. 60% is coming from the balance of the zone, again, with some good potential. And one that you can see here is clearly underrated is pet care, where we have strong positions, and today the business is concentrated in Japan and Oceania, but clearly big potential in China, ASEAN, and other markets as we move ahead. Should also touch on, I don't mention here food, but food for us is around 12% of the zone sales. They are very, very strong with the Maggi brand, whether it be in bouillon in Central West Africa region or noodles in India, as well as confectionery. Confectionery is about 8% or so. Again, showing some strong growth, particularly with the KitKat brand, which is our leading brand in the zone. If you look at them by markets, again, we see all sorts of opportunities by markets. Maybe I'll start in the lower corner first. Southeast Asia, the five countries that make up Southeast Asia, are the largest block, basically, of sales in the zone, and there are still even some white space opportunities when you look at countries like Myanmar. Greater China, 30% of the zone. We've seen a bit of softness in many of the categories in China, but still plenty of opportunities thanks to the breadth of the portfolio that we have. South Asia next, and this is a bit of a split story for us this year anyway. We have India growing double digit, very strong, about two-thirds of that. Then we have Pakistan, which I mentioned earlier, is struggling. But clearly, premiumization and innovation are key in that part of the world. Then sub-Saharan Africa as well, population of 1.2 billion, 12% of the Zone AOA sales. Many opportunities, particularly in the area of we call PPP or popularly positioned products. So premiumization, as you can see over time, has grown to account now for around 15% of the sales. I should also mention as well, this idea of PPP or affordable nutrition is something also that we're going to be focusing on, particularly in those areas like Central West Africa region, like the Philippines, where we have a large percentage of the population which has nutritional needs, but yet is operating on a disposable income of less than $2 a day. All sorts of opportunities in digital, which we're seeing. Personalization, as I mentioned before, a lot of mobile-first markets. Then of course, we have new capabilities that we're developing across channels. E-commerce is the fastest growing channel, but it's not just about e-commerce, it's about e-business. It's about the way we also communicate and engage with consumers. Again, it's going beyond just China and Japan, and is something that's being developed across the Zone AOA. Of course, again, kind of the heart of what we do is about creating shared value. We've been doing this for years and years. We provide and touch school-age children, their caretakers, educators, parents, providing nutritional information and guidance to 13 million children over 29 different countries. We have the Global Youth Initiative. Over the last three years, we've hired 40,000 youth, provided internships and traineeships to another 11,000. Caring for water is very important. We've reduced our usage of water by 29% over the past few years. Plastic waste is an issue which, of course, is very key. 80% or so of the mismanaged waste occurs in Zone AOA. Today, we have a large percentage of our packaging which is already recyclable, but we also know that there often isn't the infrastructure in place to really leverage this, so we're working closely in partnership to tackle this area. Nescafé Plan and Cocoa Plan, where we work with farmers again to help their yields, as well as with dairy farmers in milk. Then, of course, gender balance and diversity is something that is important. Also looking to have more local management and leadership as we evolve over time. So we've improved profitability in this last half year reporting. We have come up a bit short on growth, as I mentioned before, primarily because of Pakistan and primarily because of some softness in some areas in China. So to summarize, we have obviously key categories and geographies that offer us plenty of opportunities. Premiumization and digital is driving and has the potential to drive growth in the future. Creating shared value will always remain key to us. While profitability is increasing, we still have more to do to accelerate growth. So in summary, I'm very honored, I'm very humbled to have this role. I'm very excited about the opportunities that are ahead of us and look forward to discussing more. So thank you very much. Thank you, Chris. We are going to start the fireside chat now. The first question from me, and it is actually to both of you. Mark Schneider has been CEO for a couple of years now. Can you maybe walk us through how you see the company changing in terms of agility, speed to market, execution? How far down the journey are you in that last two years? I think that we have seen quite a lot of changes, but first of all, the company was very successful before. Yeah. We have 152 years of history. I think probably the most dramatic change that we are seeing is about speed. Speed and speed again, speed of execution. We see it in many things. It is not only in R&D, but it happens in marketing, it happens on the industrial side as well. It happens as well, for example, even in portfolio management, where we have been much more active. It happens in the execution of some of the restructuring program we have been seeing as well. We just mentioned a few things in R&D, where we used to take about two years to develop a new product. I am putting infant nutrition aside, which is much more about science and technology. Where we used to take about two years to develop a new product, now we are targeting to do it within six months. Which is a total change of mindset because it means that we are putting a product which is 100% safe on the market, but the product is not necessarily fully exactly to the level where we would like it to be. But we take less time to market it, put it on the market, and then listen to consumers. And consumer can tell us, "We like the product, but maybe look at this one, or look at this aspect of the product that maybe you can improve." Just finally as well, there is certainly much more cost awareness. Consumers do not pay for inefficiencies. There is much more awareness on that. And I would say portfolio management has accelerated significantly as well. From your point of view, Chris? Yeah, I concur with that. I think one of the things behind that, I mean, the speed of let's say, launches and new innovation is maybe what Nestlé did a bit more in the past was to try to make sure you had everything perfect before you go out and introduce in the market. I think the introduction of the YES! bar is a good example of that, where Yeah we went out quickly with a plastic wrap packaging, got the feedback from consumers, and we knew that already, actually, that that wasn't the ideal packaging. Rather than wait until we had the paper packaging all set up, we launched, and then we've come back with sort of a version 2.0. I think that's something that's well embraced then by the R&D community, but I think is much appreciated by the markets. At the end of the day, to be able to be faster and just go there and compete is something important. The second part is also being very consequent on cost management, whether it be restructuring or other areas that I think we'll be able to find that balance where that hasn't crippled our ability to grow. In fact, it's been able to fuel our growth. Yeah. For François, for you, the standout from the Q2s was the RIG number was the best quarter since Q1 2016, so for 13 quarters. You talked about the U.S. being the best performance in 8 years. I remember a few years ago, the U.S. was barely growing, so that given the U.S. is a third of your sales has been a huge change. How has that happened? What's driven that, and how sustainable do you think that pickup in growth is in the U.S.? We believe it is sustainable, and we are very happy with what we see in the U.S. Two years ago, in 2017, we were obviously worried because we were at 0% growth, and basically 0% growth in most of our categories in the U.S., that we would have difficulties to reach mid-single digit growth, which is what we aim at getting next year without the U.S. accelerating their growth. We were very happy to see a significant acceleration last year and this year again. I would say this year it's predominantly the consequence of innovation. We have been really pushing innovation across categories. If you look at one of the categories that experienced the highest level of growth, which is pet care, we are very much in innovation there. We launch organic, natural products. We are moving a little bit further into them supplying food into the business of offering solutions to our consumers. For example, I do not know, obesity is a problem for pets and cats, so we can offer a product for that, or I do not know, my dog is aging and has difficulty to get motion. Can you provide me with some solution? We have solutions for that. Or my dog is barking too much, so we started to market in the U.S. a product to prevent dog from barking or limit their barking, which is not a sleeping pill, just to make sure that everybody understand. No, it is a sophisticated product, which is a probiotic. This is very much about premiumizing and so forth, and even moving in some spaces as well into personalization. Yeah. Innovation is about coffee as well, what we did with Starbucks. Starbucks since we took over in the U.S. that business, has been growing with good mid-single digit growth. But growth is absolutely fantastic as well with Nespresso. Yeah. On Nespresso, the U.S. should be probably the first market for Nespresso, probably in the U.S. next year. Yeah. It is currently François. This is about innovation. What we did differently this year as well is to take pricing in the U.S. We were a little bit reluctant to do it in the past. I think that we have gained confidence in pricing. We have gained confidence in our pricing power. In the past, maybe we were a little bit concerned that we would have negative elasticity, which we had for water, although, to be fair. Yeah. We have it because we are too much in the mainstream segment. But in most of our other categories, pricing did not impact negatively on growth. We like volume as well. Volume is about share of stomach. This is about share of consumer or consumer shelf space as well. Just in terms of the U.S., obviously recently you talked about DSD change. I wonder whether you could maybe give us an update on the rationale for it and the kind of the financial impact we should see in the back half and how you think that will help improve the kind of capital intensity or reduce the capital intensity of the business. We had a little bit of a strange model before because we had part of our cold chain business, more specifically frozen, which was in a warehouse model already. Then we had ice cream and pizza with a DSD, direct store delivery model. Which, by the way, is a model that is a little bit peculiar because we are not, like some of our competitors, delivering to the moment of store. We are delivering only to the modern and large retailers and filling their shelves in their space. They are not necessarily happy with it because they don't like to see our employees moving into their store. It's a model that doesn't make sense, which is very labor intensive because we had a few thousand employees, which is very capital intensive. We had 1,400 trucks or 1,500 trucks. It is quite a significant activity, which is not really adding a lot of value neither for us nor for the trade. I think that it makes sense that we pull out of this activity, and really focus on what we are good at, which is innovating, which is really marketing our products, developing new products, and this is where we will focus. It will have a negative impact in sales Yeah because we will sell at a lower level to compensate the trade for the additional activities that they will do. But we will obviously save on costs. The benefit will be obviously positive for us, so it is really a win-win situation both for us and for the retailers. You touched on pet food, and I saw that pet food grew over 6% organically in the first half of the year. In fact, it contributed almost a quarter of the entire organic growth for Nestlé. I saw in your slide, Chris, pet food was only 3% Yeah or Zone AOA. It is an example of a category that is doing very well in developed markets where there is still upside. Right potentially in emerging markets. Can you just talk about that number and, Chris, maybe specifically about pet food in Asia and the veterinary channel, which is an area that you have invested with IVC in Europe. Just interested to hear the perspective. Just a few words, and Chris will rebound on it. There are two main drivers of growth. In the West, what we call the calorie conversion, which is a percentage of dogs and cats that are using processed food, is somewhat at 90% plus, so there is not much room there. Yeah. This is in the West, it is really about innovation and premiumization, and we are doing a very good job there. Yeah. But in developed market, that is totally different because this is what we call the calorie conversion. So once again, where we have quite a lot of potential, be it in Eastern Europe, be it in Latin America or in Asia, but, Chris, maybe you can elaborate on it. Yeah. No, absolutely. There's a huge amount of upside. I mean, if you just look at the sheer number of dogs and cats in Zone AOA, it's 300 million or so, and you have 200 million of that, 100 million dogs, 100 million cats more or less Yeah in China alone. Again, we talk about this calorie conversion or their percentage of food, which is coming from commercially prepared, percentage of calories the dog consumes from commercially manufactured food. There in Zone AOA, the levels are very low, probably, about 25%, 15%, for example, for cats in China, 9% for dogs. So that's setting a stage then for all sorts of opportunities. As I mentioned, the bulk of our business today is in Japan and Oceania. We've had some longstanding businesses there. We've adjusted those portfolios to be more focused on premium. We've also then also adjusted even what we had in China. Although small, we've also focused it to a more premium portfolio, which is now showing some good results. In fact, if you look at the performance of the first half this year across really all markets in Zone A, we're exceeding our objectives and targets are looking good. It's one of the first times Yeah in a long time that we've seen that sort of growth. So there's a lot of upside. A lot of it depends upon the right execution, making sure we hold on this correct strategy, but obviously, a lot of upside. Sure. François, back to you on margin, the 17.5%-18.5% margin target for 2020. Can you just talk a bit about the kind of cost buckets that you are looking at, where you are? You showed us some examples at the CMD a few years ago. How much progress have you made on those? I think most people are pretty comfortable with the margin for 2020. How do you see the kind of algorithm for the company beyond 2020? Can that kind of momentum be sustained? Well, beyond 2020, I do not want to say too much because we are still working on it, as you can expect. Let me just tell you what we have been doing and what we continue doing this year or next year. This is relatively simple, which is to, first of all, remove inefficiencies from the system because the consumers do not pay for inefficiencies. First, we are really attacking the back end of the business, which is non-consumer-facing activities, industrial, supply chain, G&A in general, procurement as well. A lot of what we have done as well is to consolidate some of these activities, what we call above market, which mean that we do not need to have 190 procurement team in 190 markets, or 190 teams doing payroll or accounting work in the market. We can consolidate these activities above market and generate savings as a consequence. We can be much more efficient as well in handling our real estate, be it for industrial purposes or for offices as well. So we have been quite efficient, and we did it very simple, by the way. This is what I called earlier structural cost, fixed industrial cost, fixed distribution cost, G&A. This accounts for about 18% of sales of CHF 17 billion. So this is a significant mass by itself. We ask people, can you keep this cost flat or slightly declining in CHF? Which means basically spend the same or slightly less than what we spent last year. When we leverage that against growth, let us say 3% last year or around 3.5% this year, that brings automatically 50 to 60 basis points. We protect R&D and marketing, which are ring-fence in order to make sure that we drive growth. By the way, now we are entering into a period which is interesting, where we can probably even not only let these savings flow to the bottom line, but maybe start reinvesting a little bit more in marketing. Okay. Which is quite interesting. Since we grow at a higher level as well, the leverage is helping us a little bit more to that end. Post 2020, still early to say, but some of the program that we have embarked upon and started will still be valid. Always said that, for example, for procurement, we did 90% of what we originally thought we would do. We can do probably a little bit more. In G&A, we are currently around 60% of what we have to do. Doesn't mean we can't do more, by the way. On the industrial side, this is a program that will certainly continue way beyond 2020 because these are long-term programs. When we restructure, we have done quite a lot. Yeah. When we used to close about 2 plants a year, now we close about 1 plant a month. Okay. Which is quite a significant acceleration. If you look at our fixed industrial cost, last year, they declined by 2.5%. When you measure that against the sales growth of 3%, that means about 5% plus productivity increase in 1 year. Yeah. This year, this cost are even declining more than that, 3.5%. Again, 3.5% of growth, this is another 7% of productivity in industrial cost. Okay. We continue looking at new ways to get savings and efficiencies. That is not something that we decided in 2016, and we froze it in 2016. That is something that we keep on pushing on a daily basis. Again, changing topics. Chris, I have got to ask you about China and your vision for China. Yeah. Because when I look at the, there are some acquisitions like Yinlu, Hsu Fu Chi that have not been great. Arguably, Nestlé historically focuses very much on the bottom end of the pyramid, the PPPs, and you have missed out on some of the aspirational Asian consumers trading up. I know you are trying to address that. Yeah. Can you just talk about China, your capabilities in e-commerce, how you kind of see that Yeah growing? Because it's holding back Zone AOA overall, which should be doing better. Well, China is growing. China grew mid-single digit last year. It's low single digit in the first half of this year. Yeah. I am very bullish on China. Yeah. We are fortunate to have quite a wide range of products there. Some doing very well this year. For example, our culinary food business, Totole, which was also an acquisition, is growing at double digit. Yeah. Ice cream does well. Milk powder, particularly targeted for seniors, is doing very well. We did struggle with a tough Chinese New Year. I do not think we are the only ones to talk about this. Yeah. That had an impact both on Hsu Fu Chi and on the Yinlu business in the short term, I would say. Specifically on Hsu Fu Chi, we have now a new management team in place. We have done some reformulations of our biscuit, which is kind of the main core brand within that category. We are looking at leveraging them through good execution and also some more omni-channel work to make sure that this is a viable platform. I believe this does have some potential for us. Yinlu is a mixed story. Yinlu is a mixed story. I just came back after spending a week with the beverage distributors and Yinlu distributors trying to understand kind of what is going on. Yeah. The messages are very, very consistent. Tough for beverages this year in China. Exceptionally tough year across the board. Struggling with peanut milk and with congee to a certain extent. But the flip side of that is that the ready-to-drink coffee, where we have leadership- Yeah where we have strong brands, is doing very, very well. So that platform, that depth of distribution, and that loyalty that we have is paying off, and we're seeing there great chances for premiumization. Yeah. The launch of Cold Brew, for example, in the major cities, priced at almost double the price of our PET Smoovlatté Nescafé brand, is showing good promise. So it's a mixed story there. Yeah. Overall, no, very positive about China and the potential. The potential for Starbucks, obviously the priority Yeah was in developed markets. I have seen that you are already taking the capsules into China quite quickly. Absolutely. When you try and size that opportunity, how do you think about that? It's probably bigger than we think. Of course, we get forecasts from the markets. We launched in April already into Japan and Korea, went into Taiwan and Hong Kong. We got a little bit of feedback from those markets, which of course are different from China. The main, or mainland China, I should say. The main point, though, is that they all oversold their estimates. Yeah. We're actually air freighting capsules to Japan in order to meet customer demand. Right. We just launched in August in mainland China. Yeah. So far, the initial offtake interest is very high. Starbucks has a great image, a great network of stores, very premium image that I think we can leverage well across the Zone AOA. And I guess infant formula China is a question that always comes up. We all know the illuma brand has done amazingly well Yeah for a very long period of time, but there is a lot of competition in there Right from the locals and the multinational players. Yeah. As perhaps some of your other brands, like S-26 Yeah have done less well in China. How do you think about trying to make sure that your share gains in China over a long period of time can continue in favor? Yeah. That's very important. illuma continues to do well. Even in the first half continues to do Yeah very well with double-digit growth. So that's good. It's true that some of the more affordable brands, we struggle. We're in the process right now of relaunching S-26. Of course, the dynamics in China are unique. We do have, I think, good presence and a good platform in e-commerce, which we'll continue to leverage. In baby stores, there's opportunities still to expand, whether it be with new brands or even increasing the coverage, which is going to be important. Yeah. Because there is no doubt birth rates are going down. That's a given. Local competition is increasing. Yeah. Consumers' acceptability of premium or super premium local infant formulas is a reality. Yeah. Our presence, our science-based innovations, the quality of our products, and again, the advantage of being a company which not only imports infant formula into China Yeah but also we have local production with two factories there. So that gives us Okay a unique hedge and a unique balance. In addition, I should also add, although it's only 10% of our nutrition business in Zone AOA, is baby food. Yeah. Baby food is a category which is showing very strong growth, particularly the Gerber brand in China is outstanding. Okay. A question on India. When I look at India for Nestlé, it is like 1% or 2% of sales. Yeah. For some of your peers, it is 7%, 8% of sales. When I look at your market shares in India, you have some very high market shares Yeah in some categories. Right. It just seems like your portfolio is relatively narrow. In terms of coming into running the zone, you look at India. Yeah It's a huge population. How do you grow that? Is it through organically? Is it through M&A? Which categories should you be prioritizing in that environment? Well, I think the growth potentially come from both, but at this point, Okay if I just look organically at the opportunities, we have a big nutrition business. We have actually the biggest. We have a big food business with Maggi, and it's good to see that Maggi is back. Yeah. It gained share, and again, is available in more than 4 million outlets across India. Ambient dairy also is a fairly big category for us. Yeah. Big opportunities, though, and where we're seeing big growth in India, by the way, as I mentioned, India is firing really well across all the areas, are just where we're present, but relatively small. Coffee, for example. The per capita consumption of coffee is even lower than in China. Yeah. Big opportunities in that area. We have opportunities still in confectionery and even in pet food. We've got many in pet food. Now, these are things that are going to take some time. This isn't something that's going to be immediate. But we do have actually a lot of, let's say, breadth of portfolio in India. For us, I see a ton of opportunity. Okay. I've noticed the clock's ticked down to zero, so I think we'll probably have to cut it there. We have got a half an hour breakout session next door. Thank you for your time. All right. We'll move next door for questions. Thank you. Very good. Thank you.