Nestlé S.A. (SWX:NESN)

Nestlé Investor Seminar Day 1

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May 24, 2016

Summary

Priorities centered on profitable growth through portfolio choices, innovation, efficiency and consumer relevance. Presentations highlighted Americas momentum, global coffee and pet-care opportunities, EMENA actions and water’s growth and sustainability agenda.

Well, good morning everybody. A very warm welcome to our investor seminar. Happy to see you all here in Vevey. I would say back in Vevey. Also good to see that you came in large number. The last investor seminars we were traveling. We were in the U.S. We were also focusing on the other one in nutrition globally and how our nutrition health and wellness strategy is creating value. We went then also before that to China, and each time we wanted to show and share with you some parts of our company and see how our strategy was executed in the different geographies. How we are a company that is living up to the different realities in the world, also the different consumer needs. Now, this year we are back in Vevey, and that has also a special reason because this year is a special year for us. It's the year of 150th anniversary of Nestlé. We celebrate 150 years of existence. 150 years also of passion for nutrition. 150 years of also through nutrition creating value as a company. It is a passion for nutrition that was based on innovation. It has been 150 years of continuous innovation, of developing new concept, new products, new business models, but all linked with nutrition. It is quite a journey. It's quite a successful journey, I may say. It is also 150 years of culture, of a unique forging and living up to a unique- That's also a special reason. That's me. But a little bit later. I hope not too late. It's 150 years of culture forging and living up to a culture. It is 150 years of finding this fine balance between the short term and the long term. You know how close that is to our hearts and to maintain a long-term perspective on things, and yet indeed having a short-term intensity. It is 150 years of a fundamental desire, a desire to grow. It is 150 years of showing a balanced agility and capability of evolving our company, be it structurally, but also in its portfolio. If you see how Nestlé has evolved in its portfolio, and we're going to talk about that a little bit later. But also to keep our portfolio and our products relevant to what matters to consumers, and that through the fundamental engine, which is innovation. It is also 150 years of many changes. 150 years of many changes in the world, you can imagine. The world is changing actually today faster than ever and more deeply. We are fundamentally aware of what is happening around in the world. We are aware about the social demographics and the multiple shifts in the world that is happening there. The macroeconomic environment is changing fast. Politically speaking, there is new dimensions coming in, unexpected dimensions I would say, be it in Europe or elsewhere. We see also developments of science, development of technology, be it in processes, but also in food science, in material science and in how the world is connecting digital wave is there. We see also changes in competition. Competition is moving and moving fast. We see new competition coming up from unexpected angles. We see also disruptions in society, call it in one word, the fourth industrial revolution, new business models coming up. The consumer and the new expectations, the new way of what he eat, how he actually eats, how his relationship to food is, also how his relationship to companies and food companies especially is changing. We are aware of that. Being aware is one thing, but challenging yourself on it is another thing. Then acting and reacting and actually trying to be in front of that is even another thing. That is what we are doing. That is what we are challenging ourselves for permanently. We are also aware of investors, and we are also aware of what you think, and you are keen observers of the industry. You are giving us feedback permanently. These two days are an excellent opportunity of sharing with you a little bit how we see and how we connect with all these things and share that with you. Indeed, these two days are there to make you feel Nestlé and to make and see how we go about these things with an agility and intensity, a competitive intensity, and also how we are organizing ourselves for the future. Hence our agenda, have you seen? Our agenda is about growth. It is about profitable growth. Growth with returns we call it actually. It is returns on what do you put in as resources to get that growth, and also a sustainable long-term growth. It is not a matter of short term. Growth is actually the main topic of our seminar this year because fundamentally we believe, and everybody believes, that success of a company over time is linked with growth. It is linked with really being on top of the dynamics of the market. It is being on top of driving the way and the direction of where this industry is moving in. We are going to speak as another topic, the engine of growth, which is innovation. It is the base of our growth. Our growth is basically organic. If you see, in spite of some acquisitions and all that, if it is over time, it is still pretty much organic. A lot of resources, a lot of dynamism, resource attention goes into our innovation process. It is, again, something that has been in our whole history, very many small innovations that are actually not hitting the radar screen or the titles, but they are the fundamental driver of our success, has been in the past, and yet also combined these very many small innovations with bigger ones, that is actually driving or opening up new opportunities in a much bigger way, and we have quite a few examples of that. We want to share with you some of all these innovations, and that's why we have also. We are going to talk about innovation. We are going to talk about R&D and science that is increasingly being part of our value creation in our company and our industry, I would say. We are going to walk you through the sixth floor, where we are going to share together with the strategic business unit leaders, the different innovation that are happening in the many categories that we cover. Now, for that, you need fuel, and hence we are going to speak about efficiencies. This continuous drive for efficiencies and the cost discipline linked with that, the agility linked with that, too. It is a fuel for growth, and it is also the fuel for returns on growth, and that's why we are going to share with you these two dimensions that we combine operational efficiencies, basically continuous excellence, et cetera, but also the structural efficiencies is the topic of basically tomorrow. Then we are going to speak about something that is all overarching, which is trust. Trust matters, and we are living in a world that is basically distrusting increasingly. Trust is what we deliver. Trust is also based on how we behave, and that is linked with what we call the Creating Shared Value. This fundamental way this company goes about long term, which is linking positively through its operations with society. Another thing that we wanted to build into this program was you to be able to connect to people, because success of companies is all linked with people. So we have a program that allows you to connect with what I call the leaders of this company, the leaders of the different areas of this company, the different geographies, be it zones, be it functions, be it also different initiatives that we have and that drives value creation for this company. You are going to be exposed to quite a few of the leaders of this company, and that is what matters, too, so that you are able to feel the people that makes the success of this company. With that, I wish you all a very fruitful, intense, full two days here with Nestlé. As I have said before, at the end of the day, in two days, I hope and I really think you will feel Nestlé much more than when you came in here this morning. With that, I would like to give it over to François now, who walks you through what has been one of these driving forces behind our performance, which is portfolio. François, floor is yours. Good morning, everybody. It is nice to have you here in Vevey. I wish all of you a good conference. Enjoy it. As Paul and Stephan said, take the opportunity to meet as many of us as you can and ask as many questions as you can. We try to do this conference as interactive as possible. When we prepared the agenda of this conference with Paul and Stephan, Paul suggested that we start with a review of our portfolio. I think it is a great idea, and I am very honored to do this introduction with the portfolio. It is especially interesting for me, after 11 months with the company, to share a little bit of my personal view on it as well. As you know, we have a tool in order to assess our portfolio, a tool that has been developed by my predecessor, Wan Ling Martello, about three years ago, a tool which is called ATLAS, which I must say I found extremely powerful. First of all, because it covers all of our entire business, 100% of our sales. It is a tool which is very granular by design, because it covers about 2,500 business cells, which is a combination of both geographies and categories. It is a tool that is used both at a local level, at a very granular level, where decisions are made, actually, in a given country on a given sale on a given business. But it is a tool that can be aggregated as well, that we can use on a global basis, either on a given geography or on a given category. We look at different dimension, and I will show it to you on the next slide, a different dimension, and we give different roles to different businesses. Some businesses are going to contribute growth on the top line, some businesses will contribute more on the profitability side, and some businesses will, for example, drive and contribute more cash flow. So it is a model that does not aim at having every single businesses fitting within a predefined model. The main objective that we are looking at or the main KPI we are looking at is really economic profit, which we use as a proxy of value. The KPIs we are looking at are quite large, actually. We look first at the market in which we operate and the market momentum, dynamics, and so forth, or market share trends. We do not look at it only as of today. We look at it for the future as well. So it is extremely dynamic process, not only for the current situation. We look at our current organic growth and future growth. We look at margins. We look at P&L items and resources we use, marketing spend, structural cost. In terms of resources as well, we look at working capital, we look at balance sheet, how much assets are we using for any given business or geography, and how much CapEx do we need. Finally, we look at a certain number of KPIs like return on invested capital and economic profit, as I said before. So this tool has been used extensively, both locally and globally over the last couple of years, and gave very good reason. So I want to give you now a little bit of a snapshot of our portfolio. And I must say, the portfolio of Nestlé is, in my opinion, quite unique. First of all, it is very diversified and balanced. If you look at it by category, we are operating in a certain number of categories, but we are not dependent on any category. Our largest one, beverages, which is mainly coffee, is actually representing a little bit more than one fifth of our total sales. So we are not heavily dependent on any category, which allows us to, I would say, grow on a very sustainable basis regardless of what happens to a given category or to a given market. We can accommodate to a certain extent, some crisis or some pressure in a given market or in a given category. We had the example last year, and it didn't prevent us from delivering superior growth. So well-balanced portfolio from a category point of view, well-balanced portfolio as well from a geographic point of view. We are not dependent on a given area or on a given geography, certainly not of our traditional home base. Maybe we are a little bit underweight in AOA, but this is something that we are addressing. But we are well diversified from a geographic point of view. Not only do we have a well-diversified and balanced portfolio, but we have a very positive category and geographic mix. First of all, we play in the right categories. I took there on that slide, the fastest-growing categories in food and beverages over the last 3 years. I took the categories which have values of more than CHF 7 billion in sales. And you can see that we play in the right categories because we are present in seven out of the top fastest categories: portion coffee, milk formula, bouillon, flavored milk drinks, bottled waters, powdered milk, and yogurt. Yogurt is partly through a partnership. So we are playing in the right categories. And on the top of it, we have leading position in this category. So out of the six that we play in directly, I exclude yogurt because it's a partnership, mainly, we are either number 1 or number 2 in this category. Out of the six, by the way, we are number 1 in four and number 2 in two. So playing in the right categories and leading this category. I would say even shaping many of these categories. If we take portion coffee, for example, we clearly shaped this category. I could have taken the fastest 25 categories. You could see that there we are very well-positioned as well. We are present in 17 out of the top 25 fastest categories. By the way, in the next 10, after the first six where we play, we are number 1, number 2, or number 6 in six out of the next ones. So we are very well-positioned as well in terms of leadership. Beyond our traditional food and beverage categories, we extend a little bit further into new categories. As you know, Nestlé Health Science and Nestlé Skin Health. And let me tell you a little bit the way I see these categories. First of all, Nestlé Health Science, we are not playing in pharma. I know probably a little bit more than maybe others what I mean, because I worked 20 years in the pharmaceutical industry, as you know, and we are not playing in pharma. The very vast majority of what we do in Nestlé Health Science is food and beverage, which is specialized for people who have some specific nutritional needs. This is very much about science, for sure, but this is very much about nutrition. People who suffer from allergies, who cannot eat normal food, people who are at the hospital, people who are leaving hospital, elder people who have some nutritional deficiencies, for example. This is very specialized food and beverages for the vast majority of what we do. There is one part where we go a little bit further, which is a type of investment that we did with Seres, for example, where we get into territories which are probably more pharma or at the verge of it, with microbiome, for example. There we get access to really state-of-the-art technology, with microbiome that could be relevant or that are likely to be relevant in our food and beverage franchise in the future. Nestlé Skin Health is something a little bit different. There we are not in the business of beauty. We are not in the personal care business. We are not in skin care. We are in skin health. We are there to address issues like protecting, nourishing, curing the skin. There are a lot of synergies with what we do in food and beverages because the quality of your skin is largely determined by what you eat and by your nutrients. There are a lot of synergies in terms of R&D between Nestlé Skin Health and the rest of our businesses. Both of these businesses, it is not an investment for the future only. It is a reality already. We have a business of over CHF 4 billion already. These businesses are strongly accretive in terms of sales growth to our business, and they continue to be. They are slightly dilutive on the bottom line for the time being, but the main reason why they are slightly dilutive in terms of bottom line is the fact that we are in an investment position. We invest in those businesses, and we deliver superior growth and much higher growth than what we have in food and beverages. We start having interesting positions in these businesses. Moving back to our portfolio, then I am back to the food and beverage part. We have a mix between geographies and categories, which is very positive, and that has a positive impact in terms of margin. If you look at the horizontal axis, which is the category growth over the next 4 years, and all these bubbles are the mix of our categories and geographies, and you have on the vertical axis, the profit. You can see that our fastest-growing categories happen to be the most profitable one, and our categories that are growing less are actually less profitable. We have a very beautiful portfolio from that point of view because of the- Our portfolio is really driving both top line and bottom line. I want to say that everything that I am sharing there, it did not happen by chance or by luck, it happened by choice, it happened by design. This is not something that we benefit from. This is something that we created and that has been achieved by design, which is very important. Very positive impact of our mix, both on the top line and the bottom line. If we look at our portfolio a little with another dimension, which is between developed and emerging market, you know that we have a strong franchise in emerging market, which accounts for about 43% of our sales. We do invest significantly more in emerging markets than in developed markets. We have accelerated in both cases. I will talk about the acceleration of our marketing investment tomorrow. But if you look at it, we have even accelerated our investment in marketing spend further in emerging market than in developed market. We spend on average, about 150 basis points more in emerging market in marketing spend than in developed markets. But you can see that it offers significant benefits. First of all, we grow significantly faster in emerging market. Even if there is more volatility, it is not a straight line. There is more volatility, but we invest more, gets more growth, and we are more profitable in emerging markets. This is helping a lot. It may put a little bit of pressure, though, whenever we have some specific issues in terms of currency, which is what has happened last year. Actually, it may put temporarily a little bit of pressure on our bottom line linked to exchange rates. So positive geographic mix as well. Our portfolio, we manage it very actively, as I just said, and we are putting the right focus and drive behind the right topics. First of all, let us look at our brands. I took there our 34 billionaire brands, so brands that have a value of more than CHF 1 billion at retail level. 34, you could think it is a lot, 34. It is a lot, but it is a lot because Nestlé is big. So we have more than our competitors because we are larger than our competitors. But you can see that we are actually very focused. More than three-fourths of our sales are with these billionaire brands. We are very focused as well in terms of marketing spending, because we spend a little bit more even than their sales contribution on this product. So we are extremely focused. 80% of what we spend goes beyond this brand, and you can see that these brands are more profitable, and they deliver about four times more growth, fortunately, because we spend a lot of money on them. Four times more growth than the rest of the group. So we are very focused behind a limited number of brands. Large because we are big, but limited number of brands. Another interesting aspect of our business, as you know, our strategy is to go for NHW, Nutrition, Health, and Wellness. This is a pillar of our strategy. This is what we do because we believe in it. This is what we do because it is good for our customers. But not only it is good for our customers, but it is good for our investors as well. There, I split our portfolio between what is more NHW and what is less. By the way, what is less, it does not mean that it is not. It means that it is less NHW. And you can see that for the part of our business which is more based on nutrition, health, and wellness, these business lines grow 80% faster. So actually, to be NHW is driving growth on the top line. It does not require more marketing spend. We spend about the same amount of money behind these products. Why? Because probably there is a pent-up demand for this product because consumers want to have more healthy and nutritional product. The good news as well is that these products are more profitable. So our NHW agenda is interesting, obviously, for our customers, it is interesting for everybody, but it is interesting for our investors as well, and it makes sense from a financial point of view, which is not the reason why we do it, but it is interesting as well. Let us talk about premiumization. We are present in all segments from a marketing point of view. We are in premium, we are in mainstream, we are in PPP. This is important, by the way, to be in the three segments, because when people are moving on a social basis from one category to the other, for example, when people get access to the middle class, they may go from PPP, which is more affordability to mainstream, or when people get a little bit more financial resources, they may move to premium. Likewise, for example, in times of crisis, what we experience today in countries like Brazil or China, you have people at a given time, we may have some economic pressure. They are moving, as an example, temporarily from mainstream to PPP. So we need to make sure that we get these customers, that we address their needs at a given time. You can see that over the last three years, through our choice, once again, this is not the product of luck or chance. This is a product of our decision-making. We have been doing very well in premium. We grew 2.5 times faster in premium over the last three years than the average of our total business. Mainstream has grown by slightly less than the average, around 4%, and PPP has grown by about half of the average. It was positive, but half of the average, which is something we probably need to address and do some further work there, but we have been doing a very good job in premium. Our portfolio management is something which is very active, so we do not hesitate either to do some bold move, which is what we have just done with this joint venture in ice cream. I must say very few companies can do this kind of thing. By doing this project, we are going to create very significant value. I cannot give you the detail. I wish I could give you the details, but we are creating a lot of value. There is incredible complementarity between R&R and Nestlé. We are very strong in brands. They are very strong in private labels. We are very strong in out-of-home capabilities. They are much stronger in retail. We have a very strong footprint in distribution with direct point of sales. They are very good at, much better than we are, on the manufacturing side. So there is, without saying that there is a very good geographic footprint complementarity as well. So this project makes a lot of sense, but we can do this kind of projects as well, because we can afford deconsolidating that business, because we will move to equity consolidation. But to create value, we can do things that probably many of our competitors would not be able to do. The value creation there, especially so that we partner with a private equity firm, is very large. Now let's move to what we do with our portfolio. I said during my presentation that we take a lot of actions, so we do not hesitate to discontinue businesses. The slide on the left-hand chart is not a piece of modern art, it is a vision of our portfolio which shows what are the businesses that are driving growth on the horizontal axis and that are driving profitability on the vertical axis, or economic profit, sorry. Whichever business is in the red zone, these are businesses that we do not hesitate to sell if necessary. It's not only about selling, I'll come back to it in a minute. It might be about reinvesting, it might be about addressing some specific issues that we meet. Clearly, we invest even more when we see that we have businesses in the green part, or the more they go to the top and to the right, the better. So we do not hesitate to invest, and I'll show you some examples. We do not hesitate to spend more in marketing spend if necessary, and I will talk about it tomorrow. You will see some example. We have a fairly comprehensive view of our resource allocation, because resource allocation is not only about marketing spend, it is about human resources. Where do we use our staff and our teams? It is about CapEx as well, and it is about assets. We do not hesitate to sell businesses. We have sold over the last couple of years about 3% of our business. It's a fairly long list of products. Some of them, the decision has been made locally, which is coming back to what I said originally about our tool, which is used a lot locally. Some of these decisions have been made locally in a given context where, for example, we were not strong enough from a competitive point of view to really deliver growth and profit, so we exited some of these categories. So we do not hesitate to do so. You can see that it has accelerated, by the way, over the last couple of years. We do not hesitate either to invest on businesses whenever they are profitable. Then there I took a couple of categories, some of them— this is not the full list, but the 8% of our more attractive portfolio, I would say, which is composed of Nescafé Dolce Gusto, Purina LATAM, Medical Nutrition, Nestlé Skin Health. There are plenty of other ones. By the way, the $7 billion, which is 8% of our sales, it goes further than these four examples. You can see that in this, for example, these businesses are growing by about 15%, which is quite strong. The beauty of it is that they have a marginal contribution or gross margin which is 10 points higher than the group average. We are really investing behind these products for the future, and it is driving, obviously, growth, and it will drive profit in the medium term, even if it can be dilutive in the short term, because we are in an investment position, and we do not hesitate to do that. We have been doing that for already decades and with a long-term view on many of these decisions. This tool that we have as well, as I said, is very comprehensive because we are redirecting resources, be it CapEx, be it human resources, be it marketing spend from certain categories which are less profitable or not growing to others. As you can see, over the last two years, for example, we took away five points of sales in terms of resources on products that were below our average in terms of return on invested capital and organic growth, and redirected them towards products which are offering a much better opportunity in terms of growth and return. This minus five points and plus five points on the other side is CHF 1 billion of resources that have been shifted from some products to others. This is really what is driving growth and profitability. We are extremely active on making decisions in order to manage our portfolio. Really, as a conclusion, I think that we have a unique portfolio, a very beautiful portfolio. Very diversified, very balanced by choice, by design. A very positive mix that is helping us to grow on the top line, but that is driving our bottom line as well. We have a very dynamic view of our portfolio. We are very focused on a certain number of brands. We are very focused in terms of resources that we spend behind our products, and we do not hesitate to make tough decisions whenever needed. We do not stop there. Obviously, it is an iterative process. We do these kind of reviews around two times a year, and we do make decisions on a very regular basis on our portfolio. This is not something that is just a one-off exercise. I think I will leave the floor now to Laurent. Laurent actually has an interesting case of what we have done with frozen food in the U.S., where we were struggling somewhat, and we have decided, rather than dispose of that business, to reinvest in that business with very interesting result. I must say, I have been very impressed by it. Thank you very much. Good morning, and welcome to Zone Americas. A few words about myself, Laurent Freixe. I am a Nestlé native, started 30 years ago with Nestlé, and the last eight as a member of the executive board, six years heading Zone Europe. Easy to remember when I have been appointed. That is almost the day when Lehman Brothers collapsed. Midst of the crisis, and I have been heading Zone Americas in the last 20 months. On the menu today, the main course will be, as should be, Nestlé US, by and large, our number 1 market globally. I will show you how we have been capable to reignite a strategic virtuous circle of profitable growth through fueling innovations. I will conclude on a sweet note with an overview on the rest of the zone. There is a good momentum in the business. We have achieved last year 5.5% on organic growth and an improvement of 80 basis points of the trading operating profit, which has been much welcomed in the context of a few negative one-offs. The momentum continues into 2016, which is worth noting, an acceleration in the volume mix, component of the growth in the context of deflationary pressures, and less contribution from pricing. What is the state of the nation? I would like to highlight how big is the stake for Nestlé when it comes to Nestlé in the Americas. I like to highlight that with three numbers. Nestlé in the Americas accounts for 44% of the group net sales. So that is a big stake, but it is also accretive to the group. So when it comes to the trading operating profit, this is almost half of the trading operating profit, which is generated in the Americas. The last number is, of course, extremely relevant. That is highlighting what is the percentage of our net sales, where we are in the leading position. So we got 87% of our net sales number 1. If you look at number 1, number 2, 95% of our net sales. That is certainly an industry benchmark. There is an acceleration taking place in North America, which is much welcome. That is 60% of the zone. In a context where Latin America is under recessionary pressure, we got a few key geographies like Brazil in recession. The good news is that Mexico and Chile are strong and resilient, that those have traditionally been very strong markets for Nestlé. Brazil, that is good news as well, remains competitive in a tough environment. We are gaining market share in Brazil as we speak. I like to highlight, this is more for the medium long term, an opportunity which is Cuba. For Nestlé, it is worth highlighting that we have been operating in Cuba in the last 20 years with majority stakes in two joint ventures, and we are discussing, as we speak, an extension of our portfolio with the Cuban government. So what is the vision for 2016 and beyond? We want to drive market share in a context of lower growth, as we will continue to operate for the foreseeable future in a relatively low growth environment and in a context where there is deflationary pressure. In North America, because of input cost deflating, in Latin America because of the recessionary pressure. So the focus is on market share. If the pie is not growing, we want a bigger share of the pie to be able to grow. We want to put emphasis on the volume mix. We want to put emphasis on North America, but LATAM's contribution, of course, will remain critical. A few words about the economic environment. You know better than me, but I just would like to highlight that, as you know, if there is one engine to the global economy, that's probably the U.S. economy. The point to highlight is that this is true at macro level. If we look at it at micro level, as salary moderation has prevailed in the U.S., the consumer markets are not necessarily as buoyant as that, and I will highlight it later on. As you know, LATAM, all LATAM economies are commodities dependent, and they have all been impacted one way or another by the end of the commodity super cycle. We see, of course, as you all know, a deceleration in economic growth across the continent, maybe with an exception being Mexico, which is pulled by the U.S. economy. What are the external forces shaping the industry? Those are not America's specific, but of course, big food being under pressure is relevant in the U.S. with the millennials. It's also extremely relevant in Latin America because of the regulatory pressures on labeling and on product formulation. The digital disruption is taking place largely in the U.S., and the millennials also is a massive impact. That's a group of 87 million. In the U.S., this is bigger than the baby boomers. They have a big impact. We know that they have a different view on what is nutrition, health, and wellness, and majority of them would pay more for natural and organic. That's the name of the game. They want to discover new foods. They are largely foodies. They want to know what is behind the brand, how it's been sourced, how it's been manufactured, does it apply ethical principles in the sourcing, and they like to share, to post reviews on what they eat. So what's happening is that we see a profound change in the way people eat, in the way they shop and in the way they engage, and that is critical to be taken into account if to stay relevant. NHW, Nutrition, Health & Wellness, is being redefined. A little bit like in Europe a number of years ago, people are moving away from dieting, and now natural, organic, and positive nutrition, a more holistic view on nutrition is in. Time constraint, as we know, that's not necessarily new, but it's good to highlight that 90% of the people are snacking multiple times. When they prepare the meals, this is in less than 30 minutes. Food is globalized. That is particularly visible in the U.S. in a context where, among the millennials, the minorities are the majority. 52% are multicultural, and of course, they find exotic flavors appealing. Changing the way we shop. Convenience stores, proximity is on trend, e-commerce, digital options, of course. Personalization is the name of the game, and pure continues to grow, pure natural. But the main point is that this is now mainstreaming, and we got Costco, Kroger as main players. But basically, every retailer is bringing that on board. The way we engage also is changing in a context where there are so many platforms on which to engage multiple devices. It's amazing to see that people in the past were spending 4, 5 hours on TV. Now they continue to spend 4, 5 on it. But on the top, they spend 5.5 hours on digital. They got multiple screens when they watch TV. Everyone creates contents. Many people have got blogs or are posting reviews. Amazing to see what is the amount of exposure of a U.S. consumer. If you take outdoors, that is 15.5 hours of media exposure a day out of work. That is basically, people are always on. Strategy in the U.S. puts obviously NHW and innovation at the forefront. We have put a major emphasis on quality. We have been reinvesting in quality. Put a big focus on product improvement, 60/40+, and the quality and the strengths of the pipelines, innovation pipeline is in the focus. Of course, executing with excellence is also very much at the core, very much in the focus. On NHW, we have taken a number of bold and strong commitments, reducing sodium by 10% by 2017. We are improving the quality of the fats. We got 100% portion guidance on all our products, this year, remove completely the artificials, and we are committed to improve the percentage of our sales achieving 60/40+. So product superiority with nutritional superiority year on year. We are communicating those advantages on the pack, on the label, like you can see on Natural Bliss or like on Coffee-Mate. Reduced 35% the sugar in Nesquik. It is visible. Improvement also in the pizza arena. We are leading the industry's agenda on physical activity with the Boys & Girls Clubs of America, leading the agenda on GMA and engaging with key stakeholders on NHW. The pipeline is very strong on all core dimensions, healthy contemporary meals. Pure and simple has been embraced, and I will show a few interesting examples. We are also active on sMeals, the small meals, the snacking with the cups, with Hot Pockets, and we are embracing also increasingly modern cooking. There are a number of innovations in the pipeline for Stouffer's. We are focusing as well on high-growth channels. We want to grow in the channels that are growing, so we can see the CAGR achieved in the last three years. Focus is there on club stores, on the dollar stores, digital growing close to 40% in the last three years, and the focus is there. Regional players and Hispanic, of course, are in the focus at any time. Digital capabilities have been also very much in the focus. We got digital acceleration teams. We got a Silicon Valley outpost building up the ecosystem in the valley. We are engaging with consumers offline, but also online, and the communication spend is more than 40% on digital today in the U.S., increasing by more than 40% with great returns. One of the major highlights is that we have been turning around frozen food in the U.S. in the last 18 months. We have been focusing on increasing the relevance of Stouffer's to the consumers, bringing new health also into the range with high proteins, for instance, like the Fit Kitchen range. Creating transparency on the label, on the pack, on what is in the product, modernizing the benefits, redefining meal occasions with the sMeals, and segmenting strategically. A big move, certainly one of the big move has been on Lean Cuisine, which we have brought back in tune with consumer values, moving away from dieting. You can see how strong is and how impactful is the shelf appearance. We got clear 60/40 winners. We have reinvested in the quality of the products, integrated the new health benefits, organic, natural, gluten-free. As well, have engaged in a new communication with real people. It's coming up. Real people, real food. Just would like to highlight how much is the focus, and that's a good example, on achieving clean and simple by design. That's on the left, you've got the recipe of a Lean Cuisine of before, and on the right, you've got the recipe of the new Lean Cuisine, and you can see that these are kitchen cupboard type of ingredients. A lot simpler, a lot more straightforward, understandable by the consumers. I like to show the new communication, which I think highlights very much the change that has been brought. That's real food for real people, and it's a real nurse who is featured in the communication. I'm working when you're sleeping. A lot of moms come in nervous. They look at me, they say, "Oh, I can't believe I did this." I say, "I told you could do it." It's just a normal thing that happens at 3:23 A.M., and you finally get a minute to yourself to just breathe. I try to live a healthy lifestyle, and Lean Cuisine's really changing it up so I can eat the way I want to eat. Feed your phenomenal with the new Lean Cuisine. Real people, real food. Very successful. Real success. We applied the same approach with ice cream. High-quality ingredients with transparency. We leverage also our technologies. We got this Slow Churned technology that allows to offer outstanding quality products with 50% less fat, real fruits and vegetable in our churn, and Häagen-Dazs, and that's in the DNA, in the roots of the brand. We keep on developing through clean and simple by design. Coffee-Mate is a great story as well of continuous innovation, building up from strengths to strengths. That's the last 25 years, and you can see that the brand franchise has been multiplied by 15 in that period of time, from a $100 million brand, which was already sizable in the U.S. 25 years ago, to a $1.5 billion brand, very profitable, and still growing nicely year-on-year. The result of all this is that while we were trailing our categories, so every point on the line is a 52 weeks point, market share point rolling. You can see that 18 months ago, 15 months ago, we were trailing our categories. We have catch up big, big time to be now leading our categories. Same applies to pet care. That's our number one category in the zone. It's a major category also in the U.S. We are putting a lot of emphasis on being relevant, and you will see the power of the range, which we got. We are restaging the Dog Chow as we speak, featuring our people. Those are our people. He's an operator in the Flagstaff factory, featured on pack, explaining the pride he's got to manufacture Dog Chow in the U.S., and we also highlight naturalness. We are restaging as well Beneful, which as you know, has been under pressure in the last 12 months through clean label, and we put real meat as the number one ingredient. That has been a real effort to renovate the brand and invest massively in quality. I'm pleased to report that even ahead of the relaunch, the brand has been growing in the last two months. Beyond is a major move as well to enter mainstreaming in the natural segment. I like to highlight the recent acquisition of Merrick, which is a jewel, and which is today the fastest-growing brand in the industry. We have a real pricing power. We have a real capability to create value. In that category, you can see the Friskies products at the bottom, sold $0.10, and you can see that the premium we can command through innovation. That's not a 20% premium. That's not a 50% premium. That's not 100% premium. We are capable to multiply by four to six and a half through Muse, for instance, or through Purina Fancy Feast, the pricing of our product. That's the power of innovation, and this is the drive that we got across the category. I'd like to show also that because we talk about big food, and I like to highlight the new Purina communication, which highlight that big pet food can be good, and the communication speak for itself. They say big like it is a bad thing. They say big is old, that it moves too slow. They say big can never be good. Purina believes it can, and together we are making a big difference in the lives of pets. Inspecting every ingredient for quality, that is good. Being confident that your pet's food is 100% safe, that is big. Helping your old dog think more like he did when he was younger, that is amazing. Celebrating one more birthday together, that is big. Big is exciting. Big is daring. Big is for everyone, everywhere, every day. Pets don't just make life better, they make it bigger. Purina, live big. Purina is indeed showing that big can be good. I would like to show as well, which is interesting in our strategy, that small is beautiful with Merrick. I am Garth Merrick, and this is Gracie. I think she is the best dog ever. I know a lot of other people feel the same way about their dogs. So we started creating recipes in our own kitchen for food worthy of those dogs. Then we built a bigger kitchen to make those recipes. Now we would like to share them with your dog. The best dog ever. Deboned meats always first. From farmers we trust. Made in small batches. The best dog ever deserves Merrick. In LATAM, we basically follow the same path, leveraging the trends early on, premiumization, the coffee shop at home. We have rolled out, in the last year, Nescafé Azera across the region. We are leveraging also the trend towards natural with the Fitness and Nesfit brands across LATAM. We are also integrated the new health arguments with a big drive towards lactose free. Of course, speed scratch with the Maggi brand is very much in the focus with juicy chicken. As well, the new innovation, which is called Gozo al Sarten. That is a pan solution, which of course is even more relevant to LATAM, where pan cooking is the main form of cooking. We are as well putting a big emphasis on Nestlé being an employer of choice, partnering with the youth, partnering in a way with the millennials. So we have a big drive. We have rolled out the youth initiative across the continent, and we see big impact in terms of the way Nestlé is recognized by the new generation as an employer of choice, but also a tremendous motivation internally. It gives us the opportunity as well to bring on board the millennials who will help us, the digital natives, help us to shape the future of the company. I was yesterday, last week, in Lima, in the context of the first youth forum of the Pacific Alliance, which we are co-organizing with the Swiss government and the four Pacific Alliance countries, and signed up on this occasion, an agreement with the Minister of Labor of Peru and the Minister of Education of Switzerland. At the end of the day, just to summarize the spirit of what we are doing in Zone Americas, we are putting the focus on reigniting a strategic virtuous circle of profitable growth. There is a big focus being put on efficiencies, portfolio strategy, which François highlighted. There is a big focus on cost optimization and simplification. We got goal alignment applied across business units. Every business unit has got an operational master plan. We got 100 lean value stream initiative. Every business unit has got a lean value stream initiative ongoing. There are project structural cost optimization across markets, and we basically focus on achieving a 5%-6% total delivered cost improvement every year. This is what we achieved last year in the high end of the bracket. There is a big focus as well on capital efficiency and on all four levers of the trade net working capital. You will see significant improvement coming from the region. That allows us to generate the fuel for the growth and to invest behind a robust I&R pipeline based on global initiative, regional initiative, and local initiative, because we got in the portfolio a number of iconic local jewels, to achieve market share gains while focusing on the high-growth channels and digital, while, and this is also one of the impacts of the trade virtuous circle, meeting our commitments with society, which, as we know, millennials, for instance, and society, is more and more concerned about. There is a focus on the triple bottom line, economic sustainability, social and environmental sustainability. The numbers speak for themselves. We have been capable, after a couple of years of market share losses, to bring back the zone into a green territory in 2015, and we continue to grow share and to lead our categories across the continent with seven out of our top 10 markets gaining market share as we speak. What are the key takeaways? We are reigniting a strategic virtuous circle of profitable growth with putting innovation in the focus in line with the consumer trends. We are winning with the consumers and with the customers as we are gaining market share in the U.S. and across most parts of the zone, across most categories, seven out of the top 10 market, including Brazil, which is under as tremendous pressure as we know. And we are generating profitable growth, 80 basis point operating profit improvement last year on a high base already, 20 basis points improvement in the U.S. in a context of reinvestment behind the brands to be able to reignite this strategic virtuous circle of profitable growth. With that, I am getting to the end of the presentation. And the good news is that we got half an hour. Please get back down to your seats. I need this. Okay. I have the pleasure to introduce Patrice Bula, our Executive Vice President responsible for Strategic Business Unit Marketing and Sales, who has the session together with Stefan Catsicas, our Executive Vice President and Chief Technology Officer responsible for R&D. I hand it over to Patrice, who is going to introduce the session. It is about growth through innovation, so thank you. Thank you. You can hear me, yes, the back? My name is Patrice Bula. I am a veteran at Nestlé. I do not know if some of you were there 5 years ago where I presented some part of our business. I have spent most of my career, almost 30 years, abroad, a lot in Asia, but also Africa, Europe, and Eastern Europe. I was called back here 5 years ago to head the strategic business unit, sales, marketing, and Nespresso. It is my real pleasure, together with Stefan Catsicas, our Chief Technology Officer, to open a session that will last almost until lunch. In fact, you will eat even more before lunch, I think, because what we decided to do is in the first part, to talk a bit about innovation, how we are organized, and how we see innovation at Nestlé. Very rapidly, go to the sixth floor where you have been told already twice. We have prepared a presentation where you can interact, eat, drink our product, and meet our people. Meet our people who are eager to show you what they are doing with innovation that have been recently launched or are going to be launched in a few months' time. It will give you, I believe, a far better feel for this company depth of innovation, how we create competitive gap in innovation by seeing the depth, the variety of what we do, and hopefully a lot of coherence also with what we do. We have a very dynamic innovation ecosystem that has been put in place over time. At the center of it, of course, is consumer. At the center of it is how we make our brand relevant today, tomorrow, to the consumer that have been with us for some time or new consumer who are coming to us. I will not go through all of this, but I will just point out that tomorrow in the session where we will talk about winning through digital, you will see some results, some outcome of what we have done with our Silicon Valley outpost, which we created a few years ago. Our social listening, our data that we can also visit on the sixth floor, which has several other antenna around the world, is creating for us together with disruptive identification, which is a work we have done with Institute for the Future at Google on getting early warning on new trends coming to the group and being able to have the foresight and go and launch product. You will see the one that are in blue. You will be exposed to them tomorrow in a very tangible way of what we have done. Brands are living creatures. You cannot live 150 years as a company if you are not feeding these brands, if you are not bringing to them investment, of course, building brands, but also innovating and renovating constantly. All of you, I am sure, knows brand that died, brand from your childhood that are no more here today. This is important work, and that is why I put a few metrics to just give you the magnitude of what is done day in, day out in our R&D centers to make this product part of the life of consumer. You saw with Laurent, the work done on the Lean Cuisine, which by the way was more than 200 product, cleaning up label, coming up with new recipe, organic ingredients and so. This is where you see here, about 40% of our turnover are made up of products which are only three years old. This is of course quite a lot of renovation, but it is also the marketplace, product that you saw from Lean Cuisine. About 1,000 renovations a year, 3,000 recipe reformulation, of which 500 is to achieve NF, Nutritional Foundation, which mean for us, the product that fits a healthy lifestyle and diet for our consumer. This is an intense effort that all of us do day in, day out, and you will see this in our R&D network and beyond. Then you heard about 60/40. For those of you who may not know, we have a stringent view that we should win on a blind test against our most direct competitor. That is what we call 60/40. Products which do not achieve a 60/40 preference in a blind test, these products are not advertised because we do not believe we have enough intrinsic, and Laurent highlighted this several time, intrinsic advantage to really talk to consumer and saying, "This brand is better for your life." This is an example of Maggi. This afternoon I will show you another one on Nescafé, how a brand born in 1883 is still alive. Which product which have been improved constantly, and the product we sell today have little to do, of course, with 50 years ago, but also quite little to do with product we sold only five years ago. This is the constant work of keeping brands alive, and this is what we do. What we want to do now, and I will leave the floor to Stefan Catsicas, is concentrate on the heart of this innovation ecosystem, where we built competitive gap through science, through nutrition, through health, through discovery, through patented formulas and technologies, and he will do this far better than me. How are we organized? This is my last slide. This is where focus meets the platform of health, science, and nutrition. This is where, in this unique R&D setup in the food industry, you have the verticality of technologies. Technologies to win in coffee, to win in culinary, to win in chocolate, and this is how we describe it. This verticality is competence in the category, in the industry in which we want to win. It also cross-fertilize, and we will talk about this a lot, with platform, which allow us not only to improve our product across horizontally, but also discover new ways with new technology that can apply to more than one category. I will leave the floor to Stefan, who will show you some example of what we are doing on this very unique and very rich ecosystem of research and development at Nestlé. Thank you. Thank you, Patrice, and good morning to all of you. I am Stefan Catsicas. I am not a veteran. I joined Nestlé 3 years ago. I am a molecular biologist and geneticist by training, and I spent most of my life between industry, academia, and venture capital before joining Nestlé. Thank you for setting the scene, Patrice. As you can see, and this slide says it clearly or should say it clearly, we start our innovation and our R&D inside businesses well-aligned with the business strategy. Then what we try to do in collaboration with our business partners is to actually expand beyond what was focused initially, so that we can leverage on the complexity and the breadth of our portfolio. This relationship with businesses create a great freedom to operate, and this freedom to operate actually develops within a number of frameworks. The most important framework for what we have decided to describe to you today is actually the Nestlé commitment in society. To make a long story short, it is about reducing ingredients that we don't want to see too abundantly in our products and increasing the ingredients that we think bring a benefit to consumers. I will give you a few example, keeping in mind, in order to follow the few detailed example that Patrice and I have chosen, that we do this without losing or compromising on taste and preference. Because if you remove too much sugar in one go, you will lose your consumers. We have to do it in an intelligent and structured way. This actually shows you the table of content of my presentation. It's more or less the same slide that Patrice has shown, but what you have on the left-hand side are a few example that we will cover now with you, and you will be exposed to some of the realizations later on during your walk on the sixth floor. Again, you can see, for example, sugar, salt reduction. Let's start with this one. We are developing cutting-edge technologies that we are already thinking to apply across the boundaries of a given category. Let me give you the first example. What you have on the upper left panel is a normal sugar crystal. The interesting thing about this crystal is that it is full of sugar. You have sugar on the outside, you have sugar on the inside. When you put it on your mouth, what happens is what is happening now on the screen. The crystals actually do not dissolve. It takes some time. If you fix one of the small ones, you will see it disappearing little by little. But it takes more time for the sugar to dissolve than it takes you time to swallow it. Basically, you only feel what is on the outside, and you actually eat the whole amount of sugar. So what we have done is to invent new sugar. This is pure sugar, natural sugar, but structured in a way that makes it dissolve almost immediately. The outcome is that whatever you put in your mouth, you feel, and this allows to decrease massively the amount of sugar. We are not talking about removing 1, 2, or 5%. We are talking about massive reductions that we are starting to deploy in collaboration with the businesses. I don't give you timelines because this is still to a large extent at the industrialization phase, but it is our proprietary sugar that we will start to deploy into categories like confectionery, addressing children with reductions of up to 40%, which is a game changer for the industry. More or less the same organization principle for salt, which you see on the left-hand side, colorized artificially, are microcrystals of salt decorating a food particle. Which means that when you eat food, you don't have salt all over or you don't have salt inside the particle. You only have it on the outside. So again, everything you feel, you ingest, which allows to reduce again quite significantly salt, which is a major target. Actually, the first product, Knacki, has already been launched using this technology. Let's move to fat and proteins balance. Quite important. Fat are a bad press. We want to remove fat, but fat are also quite important for us, for our biology, for our physiology. What we need to do is to find the right balance between the different macronutrients: sugar, fat, and proteins. If you just remove fat, human beings go directly into sugar. We don't go to protein. You remove sugar, we go to fat. You remove fat, we go to sugar. So we have to invent a new way to organizing, through material science, the best possible ratio in this particular case. It is a project that we call MIDAS, analogy to Greek mythology. What you see in the little cartoon in yellow are fat droplets decorated with protein. We have discovered a few years ago that if you hit the right ratio, right temperature, right physical condition, you end up optimizing the ratio of fat versus protein. When we started this, we wanted to achieve to reduce fat. What we did not expect, and we have been very lucky, but luck strikes the prepared mind, as Pasteur used to say, is that we generated completely new textures. Different taste, different textures, different mouth feels. It was a surprise. It belongs to us. It is proprietary, and we're going to deploy it. It is already out there. Laurent mentioned it. You remember when he said 50% less fat in ice cream? You have it up here. It is now being deployed in frozen food. What was yet another surprise is that we are now going to deploy it in our Nestlé Health Science products. Why? Because one difficult event in elderly is that the energy needs are very high because the engine doesn't work anymore as well, but the appetite decreases. So by generating these new textures and optimized ratios between fat and proteins, we can actually provide the right energy to elderly people. Let's move on, and let's hit again healthy lipids. To have a healthy lipid, you have to change the lipid content, and you have to reduce it. So Patrice and I picked that example because it is a nice way to illustrate that we know that we are too small to succeed in everything we want to do. So we have engaged in a number of partnerships with industry partners, academia, venture capitals, and this is what I would like to highlight here. Here we had an alarm bell from our colleagues in the business saying that they needed and wanted a white cup creamer that had less calories than the ones the competitor have and than our own. We started in New York with Columbia University and asked scientists over there to explain us better, to work with us to understand how do we feel fat. The big surprise was that it is not through taste receptors. It is through mechanoreceptors, like the ones we have at the tip of our fingers. That opened a completely new set of opportunities because then one could replace fat with particles of the same size and textures that wouldn't be fat. The first thing we had to do is to establish a model whether this would be feasible. We went to the University of Cambridge, the math department, where they did establish that model. With those data, we went to University of Pierre and Marie Curie in Paris, where they developed for us a biomechanical sensor. When we have put all those data together here at the Nestlé Research Center in Lausanne, we came up with a new ingredient. I cannot give you all the details, but it is fully natural. It is fat-based, but much less fat. This ingredient was transferred in our product development center in Singapore, and it is now being industrialized for the markets in Southeast Asia. One example of open innovation. There are many more. Let me now go to pure fractionation. The beauty of nutrition, if you compare it to pharma, for example, is that nutrition is very complex. This complexity makes it very difficult, if at all possible, to master everything. But it gives an opportunity to add and remove ingredients, to try to reach a stage when food has exactly the balance of ingredients that we want. Let me show you an interesting example here. This is one thing that Patrice has referred to. We are consumer-driven. What you see behind me, those pink, green, gray, blue, and light green, are the way we segment the consumer world in terms of preference when it comes to coffee. Nescafé sits in the middle of the green spot, the gray circle that you see. As you know, because I'm sure you have tasted Nescafé, one of the characteristics of Nescafé is this earthy, roasty, sometimes rubbery taste that many Nescafé lovers adore, by the way. But some would like something closer to a smoother sensation. Again, the business had this clear vision. There was pressure to achieve this. They came to us, we sat down together, and we tried to design a solution. The solution was to chemically identify the actual molecules that are responsible for those tastes, the rubbery taste. We were lucky once again because all those molecules belong to the same class, and they can be separated through membranes that put water solutions on one side and molecules that like lipids on the other side. You see this in this cartoon. If I take the processing chain from roasting, grinding, extraction, evaporation, and drying, we were able to design a cartridge that we can plug and play into our existing lines. Very little CapEx, very high efficiency. It is already being deployed in one large market in Zone EMENA. As you can see, it is planned for a major renovation of Nescafé, presented as the freshest Nescafé ever thanks to this membrane technology starting in 2016, starting as we speak. The same technology, again, cross-category, is used in infant formulas. Infant formulas try to mimic, try to be inspired by nature as much as possible. It happens that human breast milk and mammalian milk in general is full of molecules called oligosaccharides. Those are small sugars that we have in our mother's breast milk. The one surprise is that babies are not capable to digest those molecules, yet breast milk is loaded with it. We know from the literature that actually those molecules go and feed the microbiome in the gut of the baby, and in doing so, participate to building their immune system and the digestive system efficiency. We designed a membrane that was specifically designed to see the same principle, flow in one direction, extraction in the other direction, and we can thereby enrich our milk formula in oligosaccharides. Let us move on, getting to the harder and harder part. If you feel really uncomfortable, wave your hand. It will not change anything to my presentation, but at least I will feel uncomfortable, too. Fortification is about adding the nice products, and we all underestimate the impact and power of fortification. We started in developing countries for obvious reason. We now know that in most developed countries, there are major issues and concern in under-fortification. For example, in Germany, very good example, young women are low in iron at periodic intervals every month for obvious reasons, but to an extent that was underestimated by everyone and certainly the medical community. You see this extraordinary number that our colleagues in marketing and sales forces were able to sell in 2015, almost 200 billion of fortified products. Now let's focus on this young lady here. In the case of iron, she's probably low in iron. She feels weak. She has a headache. She cannot concentrate. However, as soon as you replenish her stock of iron, she will feel good. It is totally reversible in adults and young adults. In babies, it is not at all the case. This is the only graph that I'm going to show, but it is so important that I would recommend that you really take some time to follow me. On the vertical axis, you have a measurement of iron in the blood. The horizontal bar here is the threshold to be above or below what is actually needed to have normal levels. Babies that have access to fortified food are safe. Babies that do not have access to fortified food, as you can see, between the age of 6 months and 22 months, are actually below the safety line. The difference between babies and adults is that if in this time window of 2 years, a baby brain is not exposed to the right amount of iron, it will have an irreversible deficit and will never reach the maximal capacity of development. It is a major responsibility to provide those fortified foods. I have here the example. We have leading brands in some of these countries, Pakistan not to name it. We really have more than 50% market share, close to 80% market share. We feel this as a major responsibility to continue to provide at all costs the right fortification for this young mind. We also have economy teams, internal and external ones, showing that not only it is unfair and it is a tragedy for the child, but also for the countries it represents a net loss in productivity capacity. Interestingly enough, many governments respond to this much faster because it is tangible, it is measurable, and it can be demonstrated. Now, we do fortify for babies. I mentioned the infant formula with oligosaccharides. I now mention fortified foods. This is one of the most extraordinary stories that I came across since I joined Nestlé. First of all, this is a major open innovation collaboration between Nestlé, University of Southampton, Singapore, and Auckland in New Zealand. This is a private-public partnership paid 50/50 by us and by the three governments involved, and it is about fighting gestational diabetes. Pregnant women have a tendency to actually, or an increased probability, to develop diabetes. In most cases, we know that it is reversible. However, what we have learned over the last five years, no more, is that being diabetic as a pregnant woman has an impact on the probability of the baby to develop metabolic syndrome disorders, type 2 diabetes, morbid obesity, and so on, later on in life. It is due to very complex, sophisticated epigenetic mechanisms. This is not the point today, but it is important for us because we have an opportunity to support the moms and at the same time to support the future health of the babies. All right. I'm getting close to the end of my part. I will now slow down a bit because this is maybe a bit more technical, but also quite important. A major area of focus for us is brain development for babies, brain function for an adult, and maintenance of cognitive capacity for the elderly. I've chosen, together with Patrice, one example. This is what we call the brain-skin-gut nexus. We will not talk about skin today. We have mentioned a bit the microbiome. You see the bacteria on the lower end of the graph. I will focus on the brain for the example that we have selected today. The brain represents 5% of our body mass and needs 20% of our energy, particularly so during sleep, by the way. That's when the brain is the most active. The body actually channels food and nutrients specifically to the brain during those important moments. Now, sometimes the system gets disrupted, and this is a young boy named Charlie, has so-called refractory epilepsy. This young child has up to 20 or 30 epileptic episodes per day, which means a very difficult life. No real school, difficult to have friends. We don't understand, medically speaking, why it is refractory. Let me show you what it looks like. This is Charlie. He's from Epsom, and he's got epilepsy. Every day, he has between 10 and 20 seizures. 15 minutes after arriving, Charlie has a drop attack which his parents worry is affecting his development. Despite being on anti-epileptic drugs, Charlie still has up to 20 seizures each day that cause him to fall, so has to wear a protective helmet. You're my turn. Mommy. Oh, oh. Wow. What we'd like to try is something called the ketogenic diet. Now, what this does is mimic starvation. It's really important this kind of thing is done under supervision by a trained professional dietician and pediatrician. The ketogenic diet is very high in fat, sometimes up to 90%. Carbs are almost out of the question, and there are restricted amounts of protein. He hasn't had a seizure since the 2nd of August now. Goodness. So that's like nearly 2 months. The fact that he's coming back to the Charlie we used to know, so it's just brilliant. Where are you going with that ball? As with Charlie, the diet has revolutionized the lives of many families. Approximately half of all children with difficult-to-control epilepsy have significant seizure reduction when treated with the diet. This is a clear example of established scientific food as medicine. We do not really know how and why the ketogenic diet works. What we know is that it is very difficult to be compliant because you can imagine what it is to eat only fat. What happens is that as long as the family, parents, are there to prepare the right diet, it works. Then when the children grow up and become more independent, compliance eases. It is a very difficult situation. This is a collaboration of a few years ago with the Federal Institute nearby and IBM, where they have actually reconstructed a group of 10,000 neurons, one of the biggest big data experiment that has been done in this region, by the way. Each of those little dots are neurons, and then they have branches, and they communicate with each other. What the movie shows is that when there is an impulse, they light up, and if you watch it carefully, you see that all of a sudden everything becomes yellow. In the brain of that young epileptic children, what happens is a continuous storm of electrical signals so strong that it shuts down the system, and that is why you see him falling on the ground. We have decided to get into those cells and understand what happens so that we can design alternatives to a strict ketogenic diet. What you see here is actually one single human neuron growing in culture. The black spot in the center is the nucleus with the DNA, and those little blue structures are what we call mitochondria. Every cell in our body has thousands of those. Million years ago, these used to be bacteria that colonized our cells. They colonize plants. They colonize everything that lives on Earth. They are the energy factory of our body, and they determine how much energy should go where and when. What seems to be disrupted in refractory epilepsy is exactly this balance between storing and delivering energy. We have now on the market through Vitaflo, a fully owned subsidiary acquired by Nestlé Health Science, ketogenic diet products, including MCTs, which are medium-chain triglycerides, lipids that are very easy to digest. The life of these children has changed enormously. When the clinical trial started, I remember the principal investigators calling up and saying, "What we would like to do when we start this trial is to show to these children that they will eat normal products, that they will be like anybody else. Can you actually do for us medium-chain triglyceride containing chocolate?" We stopped one of our pilot plants, and we actually produced that chocolate with MCT, which tasted very well, and all the children enrolled in the clinical trial were able to test. We are very happy about that. To summarize, this example, I think in some way retraces the journey towards nutrition, health, and wellness and understanding more and more the molecular basis of nutrition. It started with high-fat diets. We now have today highly safe, palatable, good taste processed products to give to those patients. Tomorrow, we will try to understand the molecular mechanisms so we can design better nutrition-based therapies. I finished this journey that we have designed for you. Before I give back the floor to Patrice, I would like to share with you the key takeaways. The R&D organization is people-centric, which means that through the businesses we follow, we try to anticipate trends out there. We work in the framework that I mentioned, but we are people-centric. We are category-focused, aligned with each business, but at the same time, our job is once something has been discovered, to expand it across categories. We have a global presence. I think you're better familiar than me about our global R&D network. We have 41 sites now around the world. I just showed you the Lausanne and the Singapore sites today. We are open innovation-driven, which is part of the first slide that Patrice shared with you. It was this very dynamic ecosystem, the outpost in California, the MassChallenge to promote entrepreneurship, and so on. We are strong. Of course, we lead in the industry, but we realize that to win those major challenges, we have to partner with others. I thank you very much for your attention and give you the floor. Thank you. Thank you, Stéphane. You understand why we are two to present this. Meanwhile, back at the ranch, I think Stéphane showed you the far end of this extraordinary journey of this company towards nutrition, health, and wellness. That is the ambition. That's what our scientists, our researchers discover and bring, and it's creating this excitement and this unique capability of this company, to drive to new frontier. What I wanted to do before you go on the sixth floor is to show you a few platforms, how we have organized ourselves. These are products that have been launched recently or are going to be launched. These are less extraordinary than what Stéphane just showed. But these are tangible. These are products that exist and contribute to a great life of consumer. I will not go in detail. When you visit, you will see Shape, which is the most advanced infant formula we have today on the market. It shouldn't say low protein only. It should say the exact right protein with the right amount of protein for a baby, and this has required a lot of research. Boost, a product that is very successful in the U.S.A., a product to bring the vitality to people in the recovery stage. One extraordinary product you will see there, Bright Mind, where we talk about and are able to improve cognitive performance in pet. This is nutrition-led. This is where science comes with such authority development that we put them on the market and push them on this authority of science. Another platform is what we call technology-led. This is also in our R&D system, where we find through the network that Stéphane mentioned, points where we can bring a known technology or discovery to other product group and say, "We are going to push it to consumer." Nobody told Nestlé 25 years ago to put coffee in a capsule. We did. This is what we mean. There we have, and we know this will take time, it needs patience, but we believe we will break through. This specialty, you will see this, you know this, we have launched 5 years ago. Tea, 5 years ago, some people say, "Well, this is a small thing." I saw that some of the biggest tea brands are launching also now system in the last few months, because this will take time and this has quite a lot of technology there, and as a startup is moving on. I brought here, what we call Papyrus, which are sheet of a culinary product, which are easy scratch cooking in a pan, and you will discover that if you have not seen this before. The last one is L'Atelier. A technology, sometime you see a product and you see that you have apparent ingredient, nuts and raisin. Well, to achieve this, you need quite a lot of research and patent. This is a product we launch in Europe, which is very successful. Then I have a few slide on consumer insight led. These are really the new wellness dimension that some of you mentioned earlier this morning. We talk about gluten-free. You will see some product we're deploying across quite a large part of our range. Also, this whole drive on more naturality, authenticity, organic product. This means clean label, this means new sourcing of organic product, et cetera, and cleaning up a label. Another dimension, you will see this in action, is a flexitarian reality. People deciding to eat less meat during the year or the week. We are launching a range in Europe now and also adapting under our Herta brand, a whole range of a vegan product. You will see this product in action. Low lactose, grain-based diet. There was this morning a question about plant-based diet or non-dairy. We have outside the U.S. quite a range, of course, in China with Yinlu, but Brazil, Nesfit or grain product with Uncle Tobys in Australia. You will see more when you go on the sixth floor. Premiumization is a big trend. We talk about coffee, but I took other example, ice cream, of course, but maybe some product which are less obvious as premiumization. I put here instant noodle in Malaysia, Singapore, where we have launched noodle 18 months ago, sold at twice the price of a different quality with different ingredients, and have been very well received on the market and carry international. The good life specific need, you will see this, is we will talk about the millennial quite a lot, I'm sure, today, but a big portion of our population is aging and has specific need. You see a few product here, Meritene from Nestlé Health Science, a product launch in the Greater China region with the four key benefit element required by good lifers. As you may know, we have quite a solid adult milk business in China that we intend to grow further. ActiCol Omega is a cholesterol controlling product. Finally, and this you will see a bit more tomorrow when we talk about digital, what we call innovating beyond product. We believe that brands can live beyond, and the role in the life of our consumer can be expanded if we provide new layers of service centered on nutrition or other thing, but you will talk about nutrition a lot. That enrich the life of this product. You will be exposed to what we have done with Milo, with a quite outstanding and unique ecosystem of children having a activity device on their arm, the mother being connected with a cell phone. You will see this in action tomorrow and on the sixth floor. Vittel is a smart device to remind people to drink water. You will see that Elsa Health Services, this is what we're doing in Japan. You will be exposed to that tomorrow. Finally, route to market, you will see also on sixth floor, we try to reproduce with the success of KitKat Chocolatory, which as you may know, was launched in Japan and is now being, and we are proud of that, rolled out in Australia, because sometime people believe innovation Japan can only stay in Japan, but it's not the case. In there we sell KitKat at extraordinary premium price, specially made KitKat, and hopefully you will enjoy that. I think this is the last slide I have. This is the end of this first part on innovation, and I leave Stefan to guide you. Thank you very much. Okay. Thank you very much, Patrice and Stefan. After lunch, we'll come back to our Q&A, gentlemen. But right now, we Okay. Thank you. I hope I can keep you awake. I know it's difficult for some of you who have jet lag. You can hear me at the back? Yes? It's good. Okay. I'm very pleased to have this hour or so to talk to you about our coffee business, of what we consider still one of, if not the most exciting opportunity in the food industry today and, of course, something that is very, very dear to the heart of Nestlé, the coffee business. What I want to do with you is to show you a bit the landscape of the coffee business today and how much it has changed and the challenges and opportunities that is in there. Then we'll talk about this Nescafé brand and what we're doing, the strategy going forward to stay relevant like we have for 77 years to our consumer. Then I will talk on portion coffee and cover, in that section also, our Nespresso business as well as Nescafé Dolce Gusto. Let me start with the coffee opportunity. Why is it an exciting opportunity? Because the time of not so long ago to enter a coffee shop and ask for a coffee is gone, and today you have a varieties of product and it's more and more the menus in coffee shops and everywhere looking like a wine list of things. That, of course, create ability to be creative, to do new things, and to premiumize a product. New coffee experience, you see, and for those of you who live in the U.S., there is not a month or two without a new coffee being reinvented and sometime old filter coffee being reinvented or re-theatralized to make it relevant to the younger generation. Of course, very close to us is the fact that this coffee experience is now available very much in home thanks to coffee system, which we have pioneers. Last but not least, if you look at this, we still have 3 billion consumers who hardly have one cup of coffee a month in their life. So still a huge opportunity in the emerging world. This is the market, this is the retail market, about CHF 95 billion market, growing at about 5%. This is led, of course, by portion coffee. By that I mean the capsule coffee and all the single-serve coffee, and soluble coffee that continue to grow at 5%, and of course, I will cover that. Going forward, we see about the same growth, a bit slower, but this is inflation neutral. A big part of the growth, I will come back to that, coming from five markets, the U.S., where as you know, we're historically not strong. Brazil, you heard Laurent talk about that, I will talk more about this. China, Russia, two countries where Nestlé is very strong. Then the rest of the growth in AOA, M&A, where we are well-positioned to take advantage of this. We are still, this is done especially when we talk about Starbucks with, how would I call that? This is our best estimate of what Starbucks sell as a coffee company, it's very difficult to get, so this is with all disclaimers, possible. But we are still believing strongly that we are the leading coffee company in the world. We put Starbucks there because we consider them as being part of the competitive landscape, this new one, which goes from coffee shop from your home in the morning, breakfast in the morning, all the way to the evening, but also grabbing a cup of coffee on your way to work or at work, et cetera. Of course, the third one is the creation, this of course is the change in the landscape of coffee, of the creation of JAB, with the aggregation of several coffee brands, some coffee chain, and more recently, of course, the acquisition of Keurig. After that, you recognize quite a few other brands, which are much, much smaller than them. If I look at JAB, which we see coming as a very strong competitor with a very well-managed company, but also with its own strengths and weaknesses, I tried here to just show you a faceoff of how we seize it and what we will face. A good competitor is always good to have because we have seen these 3 billion consumer that we have to convince to drink coffee, I think with Starbucks and JAB, we can help to create and continue to grow these categories at the pace it has grown the last few years. But JAB is a collection of a lot of brand. Of course, it's the result of what they have done of acquisition and aggregation of companies. We will face them with two brands, with two mega brands, Nescafé and Nespresso. If you look in categories and footprint, we will face them off on soluble coffee, where our market share is about double their market share. We are not present in roasted ground. We are present in roasted ground only in a few countries where we are the leaders, in Portugal, in Spain, in the Nordic markets. Of course, in the portion coffee, they are larger than us with the acquisition of Keurig, I will come back to that. But this is where one big battle will take place. Hopefully, a battle on quality, a battle on innovation and delighting consumer. They do 75% of their sales in Western Europe and in the U.S. We do far more of our sales in emerging market, as I show you here. If you look geographically and if you look at portion coffee and soluble coffee alone, you have in red where we are the leaders. I do not want to comment too much on this, but of course, and I will come back to this, the North American gap that we have had for quite some time. To be big, to be strong is one thing, but to have a brand that is vibrant, that is alive, that is delighting consumer and the new consumer is what we really want. The soluble coffee, as I said, is growing still at 6%, and the growth is coming mostly from premium product. You have premium pure product on the top, but also premium, what we call mixes, if you have tried some of this product, cappuccinos, and so, which are growing all over the world, and mainstream 3-in-1 coffee. This is what also explained the slowdown in PPP. In a lot of emerging markets, coffee was sold in sachet at a low price as the first coffee cup you have today. In a lot of emerging market, we are premiumizing our offer because our consumer is asking us for more premium coffee varieties, premium blend, and this is what we are doing. What is Nescafé? I said before, we might be, or we believe we are the leading coffee company in the world. What I am sure we have is the highest penetrated brand in the world. Today in the world, 6,000 cup of Nescafé are drunk a second. The average price of a Nescafé worldwide is a few cents. You can talk about capabilities to premiumize, and you can compare that with Starbucks to see that in pure share of throat, of course, we are far more penetrated than any other brand. Present in 170 countries. A market share in soluble of 44%. We are number one coffee system with Nescafé Dolce Gusto retail system. We say retail system because Nespresso, of course, is sold through its own retailing system. Nescafé today is the third most valued beverage brand in the world. All of this is fine, but this is the past, and big does not mean you are fast. Big does not mean you are agile. Big does not mean you are going to be relevant to the consumer of the future. About 18 months ago, we embarked on a refreshment, rejuvenation of the Nescafé brand, and this was called for because we had new technology coming up, and I will talk about it. You saw maybe some of the product in pure coffee with the technology that Stephan talked about, but also in cappuccino technology with a technology called Snow. We believe with this big innovation we had, we had also to refresh the brand and bring it up to date to what our new consumer was expecting. I am going to show you three dimensions, three films, of how the Nescafé brand over the last 18 months has evolved in the world. I go first. This works. Yes. Because I'm happy. Clap along if you feel like a room without a roof. Because I'm happy. Clap along if you feel like happiness is the truth. Because I'm happy. Clap along if you know what happiness is to you. Because I'm happy. Clap along if you feel like that's what you want to do. Here come bad news, talking this and that. Well, give me all you got, don't hold it back. Well, I should probably warn you I'll be just fine. No offense to you, don't waste your time. Here's why. 200 red icons, a replica of Nescafé's new iconic accent, appeared on the streets of the main cities with an inspiring quote. At 9:00 P.M. on Sunday, May 4th, every major network on both free and paid TV stopped their programming to broadcast Nescafé's new ad. Digital conversation immediately followed, and we took over the digital airspace to boost it even further. Africa is the youngest continent in the world. We set out to inspire young African entrepreneurs to generate innovative ideas that create shared value for Africa. We reached out to dreamers from across the continent, inviting them to send in their dreams. We also drove across the continent, sharing the inspiring power of Nescafé. We showcased exciting highlights from each of the truck stops. Our finalists participated in a Google Hangout and defended their ideas to a jury of successful entrepreneurs. Our final winner was overwhelmed by her victory. Her idea tackles starvation by reducing waste in the food supply chain. She received $30,000 worth of financial and mentoring support. Because I'm happy. Clap along if you feel like a room without a roof. Because I'm happy. Clap along if you feel like happiness is the truth. Because I'm happy. Clap along if you- I love Nescafé! A relaunch of Nescafé has gone worldwide in about 67 countries over the last 18 months. Linked to that, and the second new big endeavor we have, is to create. We know that part of the coffee culture is coming from coffee shop, and there is no way we can compete with the deployment of some of our competitors. We have decided that in major cities, we will open one flagship Nescafé and amplify it through social media and activities and so on. We have started to do this, and I will show you some footage of opening in Japan and in Korea, which was followed with Mexico. The idea here is to create this imagery, but then to execute also, not as coffee shop in the street, but to execute at universities, to execute at point where younger people are meeting. For example, in China, we have about 300 universities with coffee shop. At the university on premise is Nescafé coffee. I show you this footage of launch, Japan and Korea. How wonderful work we have done together with the local marketing team and SBU to completely change the image of the Nescafé here. I think this is one of the very good examples how we can proceed the next 50 or 100 years of the Nescafé globally. It's only 8 months in Korea, and I can tell you that things are moving extremely fast in Korea. We have fantastic support from the center in terms of designing the cafe, in terms of getting the financials to make it happen, and being able to be so visible in a vibrant place like Itaewon is a fantastic way to connect with consumers. Third pillar, the integration of all the work we have done with the Nescafé Plan. The Nescafé Plan started 6 years ago to provide farmers in coffee countries with support in farming, in getting better yield, in also giving them plantlets that were adapted to the conditions of the places they were. This is the part that you will see in several countries being rolled now in mainstream media. It was a lot in social media, but I show you a film there that is going to be rolled out in quite a few European countries, have started already in France. This is, again, to answer the question from our consumers saying, "A brand, what is behind the brand, the social engagement of that brand? What do you do to bring this coffee to us?" I show you this plan. Many of the world's coffee trees are old and need to be replaced. That's why Nescafé has developed the world's most ambitious sustainability plan in the coffee industry. I love my coffee plants. It's like raising a child. Yeah. Like love. Sometimes I feel like my plants, they know me. Yeah I know my plants. I really can feel when I am here, it is like a child. Whenever you get home, they are happy. Yeah. Everything is just love. These are the baby plants. Yeah. This in coffee, they last probably 10 years. Then I have to replant it. You are going to have really nice, good, and healthy coffee beans two years later. This is a very important part today of communication of a brand, and we have such an extraordinary presence and continuous sustained presence in this coffee field and helping farmers that we are going to use it not to use it, but to leverage it and to make it known that this brand is responsible beyond just offering a great cup of coffee. The fourth part, of course, of this relaunch was to communicate to millennial, to be closer to them. There we will talk, I will show you some communication to millennial, but also some new coffee, and we will talk about that and some innovation. This is all in the space of 2 years what we have done. I show you a few communications. These are social media communication. 2 of them have won awards in Cannes, and I let you just judge. Ciao. Ciao. Ciao. Ciao. Salut. Life is full of possibilities. Possibilities to explore every situation. To open yourself up to new encounters, even if the path ahead is sometimes blurry. Know that the only way to go is not to stand still. When you look for inspiration, you will find it staring at you. Every day, a new journey and discovery is about to start. It all starts with a Nescafé. A clumsy comedian's biggest strength is suspense. Not every audience is patient like you. I get stuck, they get irritated. I explained it to my friends. It takes time, man, for buffering. Thank God for coffee. It kept me going, and it kept you awake. My name is Rishi. Let's get started. What you going to do? I got hunger. I got hunger. I got hunger. Hunger. Last 18 months of going through what we have labeled the Red-volution, because we brought the red color back to Nescafé. You saw what we did, and I said this is also based on new product and new technologies. Let me show you a few of these new products also because this morning we talked about non-dairy product. These are a few product that we are launching or have launched to address the millennial opportunities. The second one, the Nescafé Dolce Gusto, is also a technology breakthrough. This is a soya milk-based cappuccino, and this goes after the opportunity that was raised this morning of people wanting non-dairy product. Azera is a portable product. The last one, maybe you tested it this morning on the sixth floor, is a liquid concentrate that allow you to do cold coffee. Cold coffee is important, and this is also a very big drive that the Nestlé Group is embarking on, especially in Asia, where we have been there for a while. Why? Because today, children below 20 years old drink 40% of their coffee cold. They enter the coffee world mostly via the, we need to be there, and this is very, very much so in Asia. You see there our strengths, where we are leading in China, in ASEAN, in Turkey. We are number one in China, in home, in bringing home. We are not in out-of-home product. I put there Greece, because for some of you may know, to gather for a young teenager, to gather around iced coffee in Greece is around iced Nescafé. This is 20 or 30 years old that this has been taking place, and we are going to continue to push this culture around the world. This is important. We want to be part of that. This RTD opportunity will be there. We are also innovating there, and again, here with technology. You maybe tested the Shakissimo. This is a product that is very indulgent, and that is a technology that we have developed, a patented technology, so that fits also this desire to have not only a coffee, but an indulgent product that you sit with for a while, chatting with your friends or going on the internet. So there we go with that Beyond on innovation. I show you here some prototype of things we have done and will be testing. This is also linked to ability to bring system and to bring other experience around a coffee cup. This is very, very much linked with innovation leadership. This is very much link all what you have seen of this brand acting and talking with authority around the world, is linked also to what we say we have product and new technology that allow us constantly to upgrade our product and make it relevant to the consumer of today. This is a story of 77 years, and the red line is the growth line. This is what Nescafé brand, which so many people have said over time, "Soluble coffee will be replaced by roast and ground." No, it has not been the case. Why? You will see more of that, because we have upgraded the experience, making it more modern, making it more interesting, making it more surprising, and continuously bring to this brand vibrancy that a young generation want and carry with them throughout their life. A few innovation, and I will go quite fast on there. This is a mainstream product that we relaunch the last 18 months. This is what Stefan showed this morning with membrane technology. This is also one thing that we do very well with a lot of agility, a coffee made for very, very local culture of coffee. This is Nescafé Café Viet, and you know maybe that in Vietnam, they drink coffee, but they add a bit of fish sauce in it to give it a very specific taste. We are there. We are there with a product that fits their need. The other one is Nescafé Arabiana. This is a coffee that is made in the Arab world with cardamom. We are able to do that, and this is also with this big mega brand to have the agility to offer variants that really fits some part of our consumer expectation. We are premiumizing the mixes. The mixes were seen 20 years ago as the starter of coffee. I'll give you coffee, sugar, and creamers. You just drop it in a cup, you have a safe cup of coffee. Today, in a lot of market, notably in Asia, this is coffee. This is coffee, and we need to upgrade this. We are upgrading the blend. We are upgrading the delivery. For those of you who tested, we are upgrading the foam of the cappuccino, the quality, the density of that foam to offer a far better experience to this middle class that has grown up with Nescafé, and we want to keep on Nescafé with product like this. We are also developing super premium product with a technology that split with yield splitting technology, and if you want detail, you will ask Stefan. This is the best we can do today with soluble coffee, and I will show you some result after. Behind this, a lot of technology, a lot of patented technology. A lot of the competitive gap we create is through technology. You see here at the bottom what I showed this morning, the verticality of our technology R&D. This is what our coffee people, about 450 of them, do every day, make us win in coffee. We have full product technology center. We have also, which is unique in the world, a system technology center, people who work on system, the interface between machine, a capsule or whatever, and a cup of coffee. This, of course, I think today is unique in the world. All of this is irrelevant to our consumer. What is important to our consumer is this. This is a worldwide score on this famous 60/40, that in 75% of the case, we win a clear 60/40. 60 people out of 100 clearly prefer our product on the blind test, and the rest we have to work on. The other two examples are striking examples of Nescafé, the best Nescafé we have today, prepared with the barista machine that you saw, probably this machine developed for Japan, beating the best Italian coffee brand, roast and ground coffee brand. The last one is in Japan, Nescafé, you will hear about this probably tomorrow, beating the best coffee shop brand on the blind test. Soluble coffee with the technology we have extracted at the right temperature and well done is a product that can absolutely compare with best roast and ground coffee. We will continue to develop this to keep our lead in this. I want to talk now about portion coffee. This is a big part. This is the other two second segment where Nestlé is not present, but is a pioneer and continue to lead. I put that chart up maybe not to see the last few years, but maybe to see the first 15 years. Because people, when they talk about Nespresso, they see all this extraordinary success of the last 10 years of Nescafé Dolce Gusto, but look at the beginning. Some of the product, when we talk innovation this morning, are in that phase where we are leading, trying to lead through bringing out technology and trying to change habit to bring new quality to consumer via year in, year out improvement of what we do, and you saw some example of what we are doing. That is our strength. It is not only a story of technology, of great coffee, it is also a story of patience and stamina to develop this. Today, this is what we do. We said, François this morning showed very humbly that we are the number two portion coffee company, which is true. Today, the JAB company with Keurig, Senseo, and Tassimo, three system, is ahead of us if you look at it from a corporate level. If you look at it from a consumer choice point of view, if you look at it from what brand they drink, you have a different picture. This is because JAB and especially Keurig, but also Senseo, are system which have a lot of brands having access to their system. The Keurig system has about 65 brands in the U.S. So it is not that you may have a Keurig machine, but you are going to drink another brand. If you look today in the world, reconstructing the market share, because a lot of course, Nespresso share are not visible to Nielsen. This is what we have. Nespresso is still and by far the largest selling coffee system in the world. Nescafé Dolce Gusto today is the third one, if you accept that you have a lot of private label via Senseo also. Let me talk about Nescafé Dolce Gusto because I am still on the Nescafé brand. Nescafé Dolce Gusto in some market today is as important our soluble coffee business, and in 10 years, it will be a big driver of this brand equity and choice for consumer. More than 1 billion CHF sales achieved since launch, 82 market, more penetrated, in fact, than Nespresso. Number one, Europe, Latin, Asia, in retail machine capsule. Of course, we are not in North America with Nescafé Dolce Gusto. This famous new factory in Brazil that support a very high ambition. If you recall, I show you four key market in coffee for the future. Number two is Brazil. Brazil is a roast and ground market, which we believe and have seen for the last 10 years that we can convert to portion coffee. This is done by Nespresso, but now very strongly with Nescafé Dolce Gusto because we have an industrial presence, and that will allow us to accelerate massively what we can do in the second largest coffee market in the world. This is the story of the launch of Nescafé Dolce Gusto, launched in 2007. These are machine sales in Europe, and today we are the leader in Europe against the other system in retail. This is due to what? This is due to a very specific image of the unconventional coffee of a system that has design that is a bit different from all other system that are less mainstream, that is more breakthrough in design, in what we do, but also in product with quite a lot of product which are indulgent, which are fresh, which are different, which other brands cannot do with a lot of dairy content in our product. These are two and these are two limited edition that we launched, which again, we looked for origin that were unconventional, were not the typical coffee origin you have in the world. This is a system that is targeted to a younger group than Nespresso and is trying really to differentiate itself. You will see in the coming months, a completely new communication that is very much targeted to the newcomer to coffee, who wants to enjoy great individualized cup in their home. That is Nescafé. To complement this, of course, we have Nespresso. Nespresso is, remain, will be an absolutely unique brand, probably a unique story in coffee world. A unique brand, a unique business model, in which a company decides to take care of the full experience of this cup from the moment a bean is picked up in the field, and before, because we provide assistance, all the way to the moment the capsule is disposed and recycled somewhere in the world. A unique business model that bypasses the traditional way of selling coffee, but you know all these stories. Today, we have 400 boutiques in the world, and we will talk about development. About 10,000 employees, out of which 80% are facing consumer. They are in boutique. They are our people. They are people that are here to delight our consumer every day, and we want to continue this story the way it is. What is it based on? It is based on creative, constantly competitive gaps in three big areas. How we innovate and premiumize on coffee and machine, and I will show you that. How we continue to expand geographically, and we have more markets to conquer, not only market, but also channel. How we continue to cultivate this absolutely unique relationship we have with our Nespresso Club members, people who are affiliated to the Nespresso Club, and how we continue and intensify the way we talk and live with them. Rare coffee origin. This is what we have done, and I show you here also the premiumization that we are able to achieve. In a market and in a system which, as you know, has been opened, that is now you have competition. We have about 200 compatible capsule or so-called compatible capsule to Nespresso. In spite of this, through this ability to find origin, to market them well, to bring them to our Nespresso Club member and excite them, we are able, not only that they continue to buy the product that they like every day, but also premiumize. You see here some of the price points of what we have achieved. I want to come here to one example that we are quite proud of what we achieved in Sudan. As you may know, 85% of Nespresso beans are bought through a program called e-collaboration, in which we have a contract with farmers to buy their beans with a premium to this because we need a certain quality. Only 2% of the world production of coffee fits Nespresso standard of quality for the beans. So we contract these farmers. A lot of work was done in Latin America until three years ago. Three years ago, we decided to go to Africa and to do the same work in Ethiopia, in Kenya, in Tanzania, and we went to South Sudan. South Sudan was still almost at war. As you know, we have a brand ambassador, more than ambassador today, called George Clooney, who has a clear view on what we could be doing in Sudan. So we launched, and very proudly for the first time, a coffee from South Sudan last year. We sold everything within three hours at a very big premium, because it is a story beyond just another variety of coffee. So I show you the social media communication. In the mid of December, the war started. We left because it was not easy. This is not an ordinary story about coffee. This is a story set in a country divided by conflict, a country that has so much potential but continues to be blighted by war. But a story of positive impacts. This is South Sudan. Rich in culture, beauty, and land. It's hard to believe just how much the people have suffered over the last 40 years. This isn't a country that was always struggling. This is a region with a long and rich history in producing high-quality coffee. The ongoing investments being made here are directed towards setting up a sustainable infrastructure for the first time in more than 30 years. It creates wealth in agriculture and offers a stable livelihood to thousands of farmers in the country. Nespresso, they help the farmers improve their quality, and this coffee quality will help them to earn a better price. It's not the only solution, but sustainable coffee development can contribute to a diversified economy, which in turn sets in motion a positive momentum, encouraging a long-term positive impact. We are joyful that our country is being lifted up. No, this is not an ordinary story about coffee. This is breathing new life into an industry that was thought to be lost entirely. Together, we can ensure every cup of coffee has a positive effect on the world. We had only a few thousand tons. We will be able this year with production going up, and I can tell you people who are there do extraordinary work to preserve this production from all that's going around. We will be able to release this variety to more countries. This is the way Nespresso wants to position itself, a brand that is a touch of everyday luxury in a cup of coffee, but also a brand that marries this luxury also with extraordinary responsibility in what it does along the whole value chain. I think this is quite an example. We will continue. I talk about coffee. Machine is an important part of why people choose us. The interface with machine, the design of a machine, the functionality of machine. I show you saw this example on the sixth row, the Prodigio, which is a new one, the connected machine. The one on the right, I will talk a bit later on when I talk about food service. This is our food service machine for multiple usage, which has been doing very, very well. Second leg, conquering new territories. New territories, I show you here a map of still what is to be conquered. You see where we are today since 2011. The market we are entering, we still have a lot to do. We still have a lot of places where we can put a boutique, and believe me, a boutique in Accra or a boutique in Lagos works. We can conquer this place. You have everywhere in the cities of the world people who want to have great coffee. If they do not get Nespresso today, they bring it with them from the airport. This is why we open boutiques also in some airports going to Africa, notably in France. This is a big part of our geographical expansion. Very important part, I come back to the beginning of presentation, is the U.S. because Nestlé has been, and you know that this is a frustration, weak in the U.S. on coffee. We have never really, really break that market along a whole history. Well, this might be changing, or at least this is what we want to do. At least this is our ambition. This ambition is not only to talk. This ambition materialize with the decision to design a system that had all the quality of Nespresso but corresponded to the cup that the American consumer wanted. That is why we launched a VertuoLine. I will talk about that in the next slide. Also a campaign, also with George Clooney as the ambassador, and a retail expansion. Let me cover these three things. VertuoLine, and some of you may have tested this, was developed over several years to bring to the U.S. the best long black cup Nespresso could do with our technology, and in fact, we developed a new technology for it. We have launched this a year ago with very good result. I will talk about that. This is quite a breakthrough in quality. Of course, we have 60/40. We would have not launched otherwise. We have versatility in the system, which other machine, Keurig mostly, do not have to that extent. We hope we have a design, or at least the consumer told us a design, and the way we market this, the convenience and of course, the club membership. That create in the U.S. a very, very important market, but also a very competitive market, a unique positioning for us in that market. We launched VertuoLine a year ago now. A year ago? Two years ago. 18 months ago, sorry. I want to show you here a piece of communication that we put in market. These are different. This is to convince American to upgrade to a new coffee level. As you have seen, this coffee has quite a lot of crema on top. This for the American is new. We will have to work at this to explain, like we did 20 years ago, that this crema on top of a coffee is a symbol of quality and helps to retain the flavor in the coffee. I show you two pieces of communication, mainstream first with Clooney, and we enrolled Danny DeVito in advertising where Danny DeVito wants to upgrade his coffee. Is that coffee? Yes, Nespresso. I want in. You ready? Get ready to experience a cup of everything. Nespresso. Okay, I show you a second ad, which is on the form of interview. This is a social media ad, and this is George Clooney talking about Nespresso. The coffee that you drink from the pot when you're growing up in Kentucky and Cincinnati, Ohio, was sort of this very American, very watered down taste of coffee. It sort of throws you off. You're like, "What is that?" Pour a lot of milk in it. Once you get to Italy, for instance, and you start drinking a much richer coffee, it changes your taste completely. On a motorcycle ride through the Swiss Alps about almost 20 years ago now, there was a Nespresso machine. I thought it was amazing to be able to go in and just go boink and make a really great cup of coffee because it tasted so different. It really took your breath away. I thought that was a very expensive, rich, sort of elite place that had this machine that they'd built. I didn't understand that those machines were going to be able to be in your home. Just the idea of taste, it doesn't require wealth at all. It just requires what you enjoy. And you hope that what you enjoy isn't the most expensive thing in the room. I've been working with Nespresso for a lot of years now, and I've been to Costa Rica to their AAA farms, and there's a sustainability project with Nespresso that's surpassed by no one. Nobody in the world does it like they do. When we talk about sustainability, it means a lot of things. It means recycling, right? Now you're talking about aluminum capsules, not these plastic things that can live for 100,000 years. They've set this up so that if you are responsible and want to participate in truly recycling, it's very easy to do, and they'll take the capsules back and you can recycle 100% of the capsules. Sustainability means a lot of things. It's not just the idea of the farms or the plants. It's also the people. They pay attention to the idea that if all of these people, starting at the farms, are looked after and given the opportunity to make a great product and be paid better, then the product and everything else rises to the top. I couldn't be more proud to be a part of the company. I think more than 2 million views on YouTube, the U.S., and we are going to continue to do this because it's an extraordinary message. Linked to that, and third, expansion of our retail footprint in the U.S. You see the number of new boutiques we are going to open. A large part of this is going to be in North America, where the biggest opportunity is for us today. Where are we today? After this, you see the growth here, about 33% CAGR. We are, I think, on our way. Of course, if you look at system today, it's Keurig versus Nespresso, roughly, basically. This is, and it looks like an overwhelming Keurig domination, and it is. When you start looking at what is drunk in Keurig in branch choice by consumer, you start to have different figures of where Nespresso stands. And we are pleased with this result. Basically, between the ranking, the fifth ranking and the third ranking, there is not a lot. We are on our way. We are encouraged. We are going to continue in the U.S. to improve, to launch new varieties of coffee, really made for American consumer. To launch new machine, improve machine. You saw one that we launched 2 months ago, but we will continue it the same way within the rest of the world to bring year after year better experience with Nespresso. And hopefully, this will be our main endeavor in the U.S. as a Nestlé coffee company to bring consumers to our brands in the U.S. The last part, when I talk about geographical expansion, channel expansion, I talk about this machine that you see here in the middle, the Aguila, which is a beautiful machine that not only delivers coffee, the Nespresso quality, but also allows for a lot of modeling of the foam you want, of the dairy parts that you want, and the intensity of the foam of your cappuccino or latte. So very versatile machine that has been very well received by the trade and notably the upper end today of the restaurants. You see here 750 top shelf. We today, in Europe, one-third of Michelin star restaurants serve Nespresso today. We will continue to do that. We will do this also by personalizing blend and doing things that only Nespresso, we believe, can do at that scale. Unique customer experience. I will go quickly. We continuously work at making our boutique interesting, relevant, easy to shop, fast through if you want, having new coffee experience if you want, and this is a constant work we do. Second, improving the digital experience. Mobile, today more than 30% of orders Nespresso are made on mobile. We have, like everybody, we are working at making this easier and easier and faster to be able to order Nespresso and get it delivered the way you want, the hours you want to be able to give you capsule for recycling, which is an important part of what we believe the brand stands for also, that we are fully responsible up to the recycling of our capsule and building this unique relationship with our consumer. This ends my presentation. Just as a summary, I hope I have somehow convinced you that we have innovation capabilities and a lot is happening, and this is technology, but it is also marketing flair and being relevant to the new consumers. We have technology, we have coffee expertise, we have two global brand, mega brand, but we have also agility to move this brand. You saw in the U.S. what we have been able to do with a completely new system and new communication, and continue to do this. In position, we are in portion, we are accelerating in portion with deployment worldwide, and the U.S. is important. We lead in soluble, and we want to continue to lead with quality and marketing flair. We touched upon the ready-to-drink opportunities that exist today in the world. Key territories, the U.S. will be a big play, big challenge, big play. Brazil, we have decided to go there. We are now industrially present. This has a lot of competitive advantage if you know the import duties of coffee not coming from Brazil, and that will give us an opening in Latin America, which are coffee countries, where we think we can convert also to Nescafé Dolce Gusto. We have leadership in Russia and China, which will be the two other very big market to conquer in the coming 3-5 years. This end my presentation, and I thank you for your attention in this early afternoon. Thank you. Okay, we're back. I don't know where everybody else is. Few seconds. Alex, can you close the door, please? All right, welcome back. I have the pleasure now to introduce, you know Patrice right now very well, but also to introduce Bernard Meunier, our head of the pet care business in Europe, and Fernando Mercé, our head of pet care business in Latin America. They're both up here. We have the pleasure that they present their business to you today. But Patrice offered kindly to give a short introduction between the two business and care globally in order to put it into perspective. Over to you, Patrice. Thank you. Don't worry, I've only two charts. You have seen enough of me. But I'm very, very pleased to be able to delegate this presentation to two of our best executive who are driving these businesses of this extraordinary interesting, exciting business of pet food into two very, very strategic region. I have only two chart. One chart is the total pet care categories going at just above 5%. What I want to say, I think we presented to you our North American business last year or 2 years ago. Today we are very pleased to show you, and you know that we are the leader in North America, to show you how in EMENA, the zone Europe, Middle East and LATAM, we have been able to make extraordinary inroad in this very exciting category. That's why my second chart is just to show you where the growth will come from between now and to 2020. You see LATAM, EMENA will do, if you look at this, about 50% of the growth in pet care. So it's a big play. It's a very interesting play, and I'm very pleased that it's very well led by two people, and they will show you what they are doing to win in that space. Thank you. Thank you. Good afternoon, all of you. It's a pleasure to have the chance to present to you another love child of the Nestlé family after Nespresso and Nescafé, coming now to Purina, and starting with Purina in EMENA, Europe, Middle East and North Africa. So you've seen in Patrice chart, the market is big. It's CHF 22.5 billion in sales. The total market value, it's about two-thirds grocery, one-third specialist, which is a conglomeration of different channels, pet stores, vets, breeders, e-com. We have a share of about 22.5, so shortly below 25%, one quarter of the market, but growing fast. We've gained about 100 basis points in the last year only in grocery. There is more than 200 million cats and dogs in Europe, a bit more cats than dogs, and you see that the cats population is growing a little bit faster than the dogs population. If you look at what is really important for us, which is the calorific coverage, which is the percentage of the calories intake by pets that is covered by industrial pet food as opposed to table scraps or home cooking, you see very various figures, from 3% in Egypt, which is the lowest in the zone. Large population of cats in Egypt, but very little coverage by industrial pet food, up to 93% in Belgium. You could say the mature markets like U.K., Germany are very high up, then you have Russia at 31%, Italy in the middle. Still a lot of potential growth coming from an increase in the calorific coverage of pets nutrition. Looking at our business, we've had very strong, profitable growth over the last 15 years, and here you see the last 10 years, a clear acceleration of our growth. With profits growing even faster than our top line, and you see our profit growing by 480 basis points over the last year. I'll spend a few minutes detailing this, first showing that, in fact, this comes from operational savings in total delivered cost, about 30 basis points per year, as well as in SG&A, 15 basis points per year that have been reinvested in marketing spend behind our brands, about 30 basis points per year, as well as in improving our bottom line, 40 basis points per year. A virtuous circle clearly at play here. Looking at our share, I said we have 22.5% market share. This is all channels. If you look and zoom on the biggest channel, which is retail, where we have the Nielsen data, which are the most reliable, you'll see that our share is actually even higher in retail, and you also see the gap with our competitor narrowing dramatically. Going back 15 years ago, they were double our share. We had about 20, they had about 40, with a 20 points gap. Now the gap says diminished by a factor of five, down to 4.3 points, and even if you look at the last period, it's 3.7 points. Leadership is definitely now a realistic goal. This is total Europe retail. Zooming now on Western Europe, 15 years ago, this was pretty much the whole market because industrial pet food was very, very small in Eastern Europe. Western Europe, the gap was the same, 20 points between us and the competitor, and now we have taken leadership. In 2015, for the first time, we are leaders in Western Europe. We've created a gap that in the last period is 120 basis points. Where we still have a big gap versus competitor is in Russia. Russia, which was not really a big market 15 years ago, has become a sizable market and is still growing fast. There we had a huge gap of 75 points, basically. We have a very small, less than 10-point share 15 years ago. Now we have reduced that gap half more or less to about 46 points, but growing really fast, especially a clear acceleration of our share gains in the last three years. If you look at the last period, we are now 26, 27 points of share in Russia, where we used to be less than 10, 15 years ago. Then, as you see on the chart, around 10, 15 for a long time. Now, what has driven those improvements in our top and bottom line? The first thing is a massive transformation of our portfolio. We look at our portfolio as accelerate, defend, or fix. If you look in 2002, barely 13, 14 years ago, we had 26% of our business in accelerate, so high margin, high growth, 43% in defend, but a good third of our business was a big question mark. So we had to either fix it or exit this part. This is basically what we have done. As you see, the portfolio last year in 2015 was two-thirds in accelerate, high growth, high margin, 24% in defend, and practically nothing left in fix. I will come to that later on and show you what we have fixed. We have also simplified our SKU counts. We came down from 12,000 down to 5,500 by streamlining the portfolio, going for common brands across Europe with multi-language packs. We have also increased dramatically the EUR per kilo or the CHF per kilo of our sales, going from 1.3 to 3.1 over the same period. We now have a whole portfolio that is concentrated on five brands, five power brands that represent 80% of our sales. This is Felix, Friskies, Gourmet, Purina ONE, and Purina Pro Plan. Our largest brand is Felix. Felix comes from an acquisition we made in 1999 with the Spillers acquisition. It was originally only strong in Northwest Europe, mostly U.K., Benelux, Germany. We have now expanded, thanks to our regional model, where we use a common strategy and a common marketing drive across Europe. We have expanded the brand in various waves, starting in 2010 in the south of Europe and Central Europe, then again in Italy. You can see with the different colors covering the whole of Europe over a period of basically 10 years. At the same time, thanks to an iconic spokesperson, which is our black and white cat, as well as superior quality and palatability of the product, we have gained share, and now we have taken leadership clearly over the last years in the wet cat single-serve segment of the market, creating a gap of four points versus the nearest competitor. Now, I want to show you what Felix stands for, and this campaign here is remarkable for two things. First of all, it is a good example of a very consistent communication strategy over the years, where we have used consistently this animated cartoonish cat, black and white, which is mischievous and will do anything to get the best food possible. At the same time, this ad is also showcasing an innovation, a very important innovation for us that has worked extremely well in Europe, which is the first time you have wet cat single serve, so wet cat food, but with a topping, a crispy topping to be added by the owner on top of the food. Right, Felix. Mum's out, so what do you fancy for dinner? Mum says you love your Sensations crunchy crumbles. Sensations crunchy crumbles. Hmm. Oh, Sensations crunchy crumbles. Felix? Pour the meaty pieces and add the crunchy toppings for a new crunch-tastic meal experience. Hmm. I see you found his favorite. I had some help. Clever cats get new Felix Sensations crunchy crumbles. Purina. You see why this brand is so successful, unstoppable, very cute character, and also great products and great innovations. I was talking about the transformation of the portfolio. In more details, we've cleaned up the portfolio in a manner that is quite extreme because we started with enormous quantity of brands coming up from all these acquisitions we made, Spillers and then Purina. We decided to concentrate on those brands that had potential for the whole of Europe, as well as merits from either technology or positioning. We stopped a lot of brands like you see here, Arthurs, for example. Some of them were quite big. We concentrated on promoting super premium dry cat and dog food rather than economy or mainstream. We moved the whole market progressively from multi-serve canned wet food to single serve, and this has required massive investments, as well as the grill technology that is proprietary to us. We exited private labels. We focused on Felix, as you've just seen. We're now moving aggressively into snacks, which is a small but growing part of the market. Finally, last year, we exited accessories by selling that business. As a result of this, we've seen an acceleration of our growth, which used to be around 2%, then 3%, and now more than 6% on CAGR for the last five years. Second key success factor that is explaining our success and our growth of share as well as business is innovation. Here you see the impact in net sales of our innovation year after year. You have the baseline in green, then you see the innovations launched in 2011 in yellow, the light blue ones in 2012, in 2013 in brown, then in orange in 2014, and in dark blue in 2015. What you see here is that first, innovations are successful. We generate between CHF 140 million and CHF 160 million of value or sales with our innovations in year 2 or year 3. They don't disappear. You see that over time, these innovations consolidate. On top, they don't cannibalize. You see the baseline in green is flat over the years, which means that innovations come on top and do not take away from the baseline. Next key success factor, premiumization. Back to something that we've seen in other categories. You have in pet food, two types of premiumization at play. The first one is premiumization within the brand. A good example is Gourmet. Gourmet traditionally was cans of 200 gram, flat cans, that were sold at EUR 2.4, sorry, here it's Swiss per kilo. Then we've launched the small cans, 85 grams, and we launched Gourmet in pouches. Then we added value through specific textures as well as sustainable fish variants. Finally, we've launched soups. Soups in pouches at a price which is four times higher than the original can. You see this premiumization in Swiss franc per kilo over the various innovations that we've launched over the years. The next one is bringing people through the quality levels from economy to mainstream, and then mainstream to premium to super premium. This is a good case here in dry cat food, where the Friskies brand, which is our defend brand, is sold at CHF 1.5 per kilo. We've progressively managed to transition consumers from the Friskies brand into the Purina ONE super premium brand, which retails for roughly twice the price, thanks to strong palatability, pet appeal, but also now brand detective ingredients. Last key success factor I wanted to mention is the digital acceleration. We've been prime movers in digital. We are working extremely fast and well, both with social platforms as well as e-com players. This is the example from the U.K., which is the biggest market for e-com sales in pet food in Europe, even higher in penetration than the U.S., by the way. You see in red at the top is our share online. The light blue at the bottom is our competitor's share online. This is from Nielsen. You see the gap, 620 basis points. The two lines in the middle are the shares offline. And you see that offline, we are fighting for leadership with the competitor. We are more or less at the same level. But online, we have created a huge gap thanks to our prime moving into social and digital. Now going forward, we feel very confident we can continue to generate this strong growth both in share and in sales. This is also due to our strong pipeline of innovations based on health benefit platforms. Very much linked to what you saw this morning with Patrice and Stefan. First, brain health. I think this was mentioned already by Patrice. The Pro Plan with MCTs to fight against dementia or the equivalent of Alzheimer in dogs, cognitive function starting to diminish after seven years old for dogs. And obviously, a lot of elderly people want their dogs to live as long as possible with as much of their quality of life as possible. This is gaining importance. Obesity, there is an increase in obesity in dogs and cats. And obviously, weight management going forward will be a very strong platform where we also have great research going on with great potential. And finally, immunity. This is a great example that we are launching this summer in a matter of weeks. We will have Purina ONE relaunched in Europe with NRMs, which are functional bacteria. Think of it as heat-treated probiotics. For the first time, we will have sort of probiotics in our dry cat product, boosting immunity for cats. Immunity is very important for cats because they are very sensitive animals, and you cannot see when they have an immune system that is down. But you will see that their digestion, for example, can be impacted, and this product will reinforce their immunity and therefore their digestion. Now natural has been a question we heard with Fernando on the pet care stand this morning at the exhibition from you very often. What are we doing? We are doing a lot of things. The first thing is building the Purina brand as a competitive advantage, reinforcing trust in our corporate brand. The second one is adding natural cues into our existing portfolio. You see here the example of Cat Chow being relaunched in Europe with basically a natural recipe and natural claims on the pack. We are launching Beyond in the U.K. after the success of the U.S. We have Merrick now joining our portfolio. We will see what we do in Europe. The last frontier is probably to go towards customized natural foods, but this is more for the future. There are some trials going on in the U.S. Now I was talking about building trust in the Purina brand name. How many of you, raise your hand, have a cat or a dog at home? Yeah. Practically half the attendance. I think all of you that have cats or dogs or had in the past, you will understand how much the bond is important between pets and their owners. This is really where we feel we can make a difference because we believe that when people and pets bond, life gets richer, and this resonates very strongly with our consumers. That is why we have this Purina in Society journey. We have defined 10 commitments that we take towards pet owners and society. Here you have them. These commitments, we will live by them, but we will also engage with society, with NGOs, with pet owners to make the world a better world for pets and people. For this, we launched our first Better With Pets forum in Brussels in February, where we launched publicly the commitments. You can see the panelists. Some of them were four-legged. We had there 80 scientists, NGOs, authorities, bloggers, media, all discussing this bond, the richness of the bond between pets and people, in particular the concept of One Health, which is a concept I am sure you will hear more of going forward. The fact that you have to look at the health of people in the same system as the health of animals and the health of the environment, and that there are a lot of interactions between health of people and health of pets. We have obviously an impact on the health of pets, but the pets have a big impact on our health as well, potentially a very big positive impact on our health. At the end of this forum, we launched a movement, a movement on social networks. We Are Better With Pets. I will show you, before closing, a short video explaining to you what it is all about. You see this video, celebrities from nine countries around Europe that are known for their engagement, their motivation to do something about the pets-human bond. For example, for U.K.-based people, you will recognize Clare Balding, a very famous person in the U.K., but very committed to the health of pets. Here it is. Arise, sleepy pet lovers. Open the doors to your shops and cinemas. Dogs with cancer-sniffing superpowers. Heart rate. Yeah. Oh, super. Thank you. Could help us all. If you believe pets and people are better together, then join us and make your commitment. Let's make the world better, one human at a time. This is a movement we are launching right now. As a conclusion, my four key takeaways is that we've had 20 years of success, of profitable growth and continuous market share gains. We strongly contribute to the NHW agenda of Nestlé as a whole because our entire business is about NHW. We have the Nestlé, the nutritional foundation on all our products, competitive advantage on more than two-thirds of our products. It's strong contribution as well, to the premiumization strategy. Our ambition is to be the most trusted name in pet care, becomes a market leader in grocery in Europe, and continue to be a strong growth contributor. The future growth will come from engaging with pet owners with health-enhancing solutions that are underpinned by this corporate trust in the Purina name, which is our competitive advantage. Thank you for your attention. Now Fernando will take you through Purina LATAM. Good afternoon, and thank you for being here. Somebody said that I was moving quickly into the danger zone one and a half hours after lunch, so I will try to get us out of the danger zone. Bernard and I built these presentations so that they wouldn't be repetitive, so my presentation is somewhat complementary to the things that Bernard had to say. But above all, you're going to see that our strategies in Latin America are very much aligned with the strategies in Europe, which are very much aligned with what we're doing in the U.S. and in AOA. We are One company facing the market. Before I get started, I just wanted to share with you that I've been 20 years in the group. I reluctantly say that I'm a veteran, but I guess with 20 years you have to say that. Ten years in pet care in total, and for the last 5 years in Purina LATAM. It has been a great adventure. If we look at pet care in Latin America, it is really a story about top-line and bottom-line growth over the last 5 years on a very strong basis, and I will be sharing that in some detail in a few minutes. It is also a story about great products and, above all, great brands. It is also a story about people and a great culture. Our company has grown tremendously over the last few years, and on average, for you to have a sense, the age of our associates is 35. It is a young company, very dynamic, very agile, very exciting. I wanted to kick it off with that and start sharing not the disclaimer, but the story of our company. On the top left corner, you see the numbers that Patrice already shared, that we are a $7.5 billion category in Latin America. Probably the most important statistic on this chart is the two numbers that come after the $7.5 billion, which is that roughly two-thirds of our business takes place in what we call the specialist channel, and one-third takes place elsewhere. It says grocery there, but it really includes club class of trade, as well as wholesalers and so forth. The real important number is the percentage of business on the specialist channel. The specialist channel is where veterinarians live. It is where people who influence the category live, the small pet shop owner, really the people who develop the category. They develop the category with a passion for the category that is difficult to find elsewhere because these are folks who are very interested in the health of the animals. That is a really interesting dynamic. You saw in Europe it is the opposite of that, the two numbers. It is very good. In terms of the numbers of cats and dogs, I am not going to get into the details of that. What you see is that there are lots of cats and dogs. Order of magnitude is similar to Europe, similar to the U.S., which means that we have tremendous business potential. I will talk about our market share in a little bit more detail in a few charts. When we take a look at one of the key drivers of business potential for our business, as Bernard showed for Europe, it is caloric conversion. Caloric conversion or calorific conversion, is a measure of what percentage of the dog's or cat's nutritional needs are being fulfilled by commercial foods that are 100% nutritious and balanced. In Latin America, we were at about 31% about 10 years ago, and now we are in the 40%-45% range. To give you a perspective, Western Europe is in the 70%-80% range. North America is in 90% range. We have grown a lot in terms of calorific conversion, and we have yet a lot to grow. The other component that is really important about this is that we have tens of thousands, possibly hundreds of thousands of new households entering this category on an annual basis. We see it at Nestlé Purina as one of our key missions to make sure that those consumers who are entering the category for the first time have the greatest, possibly the best experience they could possibly have in terms of solutions that they can find, in terms of the quality that they can find, in terms of food safety. That is our job number one in Latin America, and you will see that we are doing a good job of that. Super attractive category for consumers because they are finding the solutions that they are looking for. In Latin America, 70% of consumers indicate that pets are members of the family. That is slightly higher than in the U.S. and about the same as some countries in Western Europe. The pet culture is already developed. Retailers love the category because it has high penetration, yet the caloric conversion is low, which means that it has a lot of territory to grow, and we are bringing new households into those retailers. From a Nestlé perspective, as you saw today, nutrition, health, and wellness is such an important component of what we do. This category is 100% about nutrition, health, and wellness. The vast majority of our products, with the exception of some snacks, are 100% nutritious and balanced. So it is a category that is driven by nutrition, health, and wellness. How are we doing in this world of caloric conversion, of new households coming into the category? Well, if you take a look at growth rates versus our key competitor, we have outdone our key competitor over the last five years. Our growth rate, NPP here means Nestlé Purina, not only are we higher than our key competitor, we are also higher than the category. So overall, we are gaining share in the category. When you take a look at that same chart in terms of market share, you can see that we have gained a substantial amount of market share over the last few years, and we are starting to get very close to that key competitor. Where is this share coming from? It is broad based. We are either number one or number two in every single market in Latin America. Obviously our ambition is to be number one. So we are working to be the number one in Latin America in every single country, let us say in the near term. Like Bernard, I think there are a couple of very important components to our secret sauce. One of them has been to focus on a few brands. Some time ago, we determined that there were seven brands that we wanted to make sure that we wanted to either maintain them as large brands in the portfolio or brands that we wanted to plant the seed in order to drive growth in the future. These are the seven brands that we chose back then. What we have done since that time is increase their weight in our portfolio from 57% of sales to close to 70% of sales, and obviously continue increasing that in the near term. We have decreased the weight of the non-strategic brands. That is key because the strategic brands have a better margin structure. They have better pull in the trade, better consumer relevancy. So being focused on those strategic brands improves the entire value chain of our business in a substantial manner. Innovation renovation is key. We have seven brands. We want to make sure that they're up to date. We want to make sure that those tens of thousands or hundreds of thousands of consumers entering the category on an annual basis are always finding the solutions that they should be finding, the greatest solutions. We've designed our organization to significantly improve our ability to innovate and renovate. For the last two years in a row, we've been able to either innovate or renovate close to 60% of our portfolio. This doesn't mean that we're adding a ton of SKUs on top of it. It means that if we want to add a new technology to Dog Chow, a new piece of communication on pack to Dog Chow, we're able to do that on an annual basis. The other real neat thing about how we're doing innovation renovation is that it's the same from Mexico to southern Chile or southern Argentina. Every single country has the same communication, the same product design, the same everything. What that allows us to do is to move really fast in any one market and still leverage the scale that Nestlé brings to us. As a consequence of that, the activities that we've been doing, as well as the great tailwind that we have from the category, we've been able to grow sales about $600 million over the last five years, which is a CAGR of about 21% on an annual basis. Our profit has improved faster than our top line at 31%, and we've been able to gain close to 500 basis points in market share. Things are working well. We're gaining the scale that we need to have, and we're able to deliver on all the key parameters that the company is really looking forward to. But we have to look into the future and can we sustain, can we get the next billion dollars worth of growth with what we're doing in the category and the activities that are going on? When we look at the drivers of the category that we've had up to this point and the next five years, I have to say that I see caloric conversion or calorific conversion continuing to increase. It is true that some of it is driven by macroeconomic situation, but even in countries like Brazil today that have a tough macroeconomic environment, we continue to see the caloric conversion increasing because consumers are becoming more and more sophisticated. They have less and less time, more time spent in traffic or working at their job location, so forth. They're looking for those solutions. So caloric conversion will continue increasing. The pet culture is already incredibly strong, one of the strongest in the world, and that will stay with us. Channels are developing. Retailers see the opportunity here. A few years ago, two, three years ago, difficult to find pet food in a convenience store in Latin America. Today, it's difficult not to find pet food in a convenience store in Latin America. So new channels are developing, and that will be a driver of growth for the future. If today we are 7.5 billion as a category, we believe that over the next 5 years to the end of the decade, there will be another $5 billion worth of growth, about 11% on an annualized basis, which is a substantial amount of growth yet to come. We are going to go about capturing our fair share, at a minimum, our fair share of that growth. We feel that with the strategies that we have in place and the success we have had over the last 5 years, that we are in a good position to capture more than our fair share. We are going to continue focusing on our key brands and developing those brands. Product innovation is critical. I am going to share a couple of things there. Industrial capabilities is important. It is important that we have local manufacture of these products that we are close to where they are being consumed, and you will see that we are making tremendous progress there. Culture. We are a young company developing very quickly. As we develop new regions, sales regions, so forth, we have to hire all new people. If you build a greenfield factory, it is new people to the company. Maintaining the culture that has kept us moving in this direction is really important, and you will see that our culture is quite unique. I will also share a quick video on that. No brand is more important to our portfolio today and in the future than Pro Plan. Pro Plan represents the best that we can do as a company, the best technologies, the best positioning. It is an incredibly important brand. It is driven primarily by the technologies that we can put in there, and we have developed proprietary technologies for puppy stage, for senior stage, for mature dogs, and so forth. The latest technology that we are including, and actually in Latin America, we are the first ones to do it. This morning Stefan talked about MCTs. We have MCTs in Bright Mind in the U.S. We also have some studies that take MCTs to a different level and allow us to make even harder claims. Last month we launched a neurological care line, Pro Plan therapeutic line in Latin America. I can say that the response from the veterinarians who saw this product has been outstanding, and that is what is going to continue driving the growth of Pro Plan. We also have the number one brand in the premium dry dog segment, and that is Dog Chow. Dog Chow represents today roughly half of our sales. It has had growth over the last 5 years, around 25%. It is accretive on the growth side. It is also accretive on the profit side. It has just been a fantastic brand for us. Dog Chow leverages the key insight in Latin America, and that is that pets are a member of the family. I am not going to talk a ton of it. I am going to let the commercial do the talking. This is the latest commercial in which we are launching our new weight management and senior age product line, and you will see how it connects with the member of the family positioning. In Purina Dog Chow, we know that every dog is unique. Those who need to manage their weight to break the rules. Those who need flexibility to ignore them. And those who need to grow healthy to learn them. For every dog there is a Dog Chow, like new Healthy & Fit, Mature & Senior and Puppy. It's more than a dog, it's family. Every time we do a new communication, new product launch on Dog Chow, the reception is fantastic with the consumer base. I think the positioning today in Latin America is right on with what consumers are expecting and especially these tens or hundreds of thousands of new consumers coming into the category every year looking for somebody who understands that my dog is a member of the family. It's very exciting to see that. We have the number two premium cat brand in the market and that's Cat Chow. It has also been growing in the mid-20s range, so it's accretive to our growth. And it's doing extremely well. What we've done in the last about 12 months is we have restaged Cat Chow to be the first brand to bring not only taste palatability to the cat segment in Latin America, but we're also bringing a nutritional or functional component to it, which we're calling Defense Plus. This is the first and only premium brand that delivers not just taste, but also a functional benefit to consumers. And I'm also going to play the video because it really brings to life the new positioning. When it comes to little hassles, Tigre is good at protecting himself. But when it comes to his health, Alejandra protects him with the new Purina Cat Chow with Defense Plus. An exclusive combination of nutrients that strengthens his immune system and keeps him healthy. New Purina Cat Chow with Defense Plus. Because his health depends on you. If any of you live in Latin America, you will have noticed that in the last 12-18 months, the shield is everywhere. We're using that icon to execute this positioning at point of sale, on the internet, on pack. It has again, delivered really great results from a growth perspective. We've seen this brand accelerating substantially. From a capital investment or industrial capabilities, it's important with the growth that we have that we retain our ability to supply the market. Somebody asked me earlier on in the innovation session, what did we do when we couldn't supply? The reality is that's the advantage of being part of the Nestlé group. If we do not have the local manufacturing, we bring it in. We bring it in either from the U.S., from Europe. We have a lot of flexibility, and this has allowed us to move extremely fast in our new launches or in covering production gaps. We've tripled our investment in the last. If you look at 2011 versus 2014, 2015, we've brought it up to a pretty substantial level that has allowed us to build a greenfield facility in Mexico, which we launched last year. We're launching a greenfield facility soon in Chile. It's under construction right now. We're expanding our wet production in Brazil and Mexico, and we pretty much have expanded production capabilities in every single facility that was already existing. We've done this all while maintaining real tonnage growth on the business with the top-line growth that you saw. As you look into that future of the calorific conversion and where the category is going to go, we are in a good position to continue supplying the fantastic brands that we have. Finally, I think culture is one that sometimes gets ignored, but culture is incredibly important. Recently, I was rereading something about Peter Drucker, and he said that culture eats strategy for breakfast, meaning that people really have to understand what they're doing and why they're doing it. We have a young organization that's growing very fast, and one of our biggest risks is that we lose our culture, that somehow we cannot keep that glue of what brings us all together. The other component we're really trying to leverage is keeping a very entrepreneurial spirit that we have in our company, capable of leveraging the scale that Nestlé brings to the party. I have a video of an initiative that has been going on for some time, but we did a sort of milestone event last year with the top 200 associates from the company, and that now has been spread to all 2,700. I'll just share that with you'll get a sense for what it is that we're doing. That gives you a quick summary of what we're trying to do. It's really, really powerful as we're bringing new people in the company to see what we're trying to do, and it has so far worked really well. Obviously, there are a number of things behind this that are necessary in order to implement it, but for expediency today, I just kept it really short. In conclusion, we have a really attractive category with a lot of potential for profitable growth ahead. The key here is consumers in Latin America are becoming more and more sophisticated. They're looking for those solutions, more specialized solutions, which will bring profit to the entire category and continue to do so. We have a lot of potential sort of pent-up demand in the future. You saw the $5 billion in retail sales dollars that are in front of us, and I think that we're well-positioned to capture at least our fair share of that, if not more. We are a little over 1 billion today, and we have set our eyes on the next billion. Thank you very much. With that, I close the pet care session. Next up, Luis Cantarell. I think most of you know him. You have seen him before and you heard him speak before. Luis is our Executive Vice President in charge of Zone EMENA. I think Luis can introduce his long and distinguished career himself. Yeah. Thank you, Stefan. I'm not going to do that because it's a long career, and I will maybe use some time that you'd like to have other conversations. It's interesting. What I'm going to talk to you is about a new zone. It's Zone EMENA, which is something that is combined with something that I did already between 2006 and 2009, a new market that is coming. My conversation with you will be based on four points that I'm going to explain. What you have seen here, this document. This is the front page of a document of four pages, which I use with more than 100,000 people that work in the zone. You see here is what I call the priorities and commitments that we have designed for this year. I'd like to highlight two things here. The first is to be successful in this new zone. Our vision is to be the most innovative, competitive, and inclusive company in the area that we compete, that we define about helping people having tested and healthier choices for them and for their families. I like to concentrate on these three words: innovation, competitiveness, and inclusivity. The way we are working in the zone is by basically saying there are four things that we need to do to achieve that. The first is growth. The second is efficiencies. Because in a real difficult context that we're living today, not only in Europe but also in the Middle East and North Africa, if you are not able to deliver the maximum efficiencies, you would not be able to fund your growth, and at the same time, to deliver good margins for all of us in the company. But in the context of not only Europe, but also Middle East, but specifically more Europe, this concept of inclusivity, which I define inclusivity is be in and not be out. The company, the products, the people, we need to have strategies, ways of workings, the way we work, where we are part of a society, and we basically address the challenges of the society, which are not all of them linked about products, margins, and innovation. It's the way you do things. That's a very important element on our way of doing things, basically in Europe, but even more so with what's happening in the world in the Middle East. The last point, which for me is the most important, is this can only be done if you have the best people in the organization. I take a lot of time talking about people. Some of you know that I'm passionate about football. The way I define a people is I say that I need to have a bunch of people that are able to play in what I call the Champions League, then I need to have a kind of people that are the junior league that one day are going to replace them. That's basically a kind of hidden dossier that I travel everywhere in the world with names of people, and you're going to see, I'm not going to talk about the people specifically, but the changes and how do we move the bench, like in ice hockey, that you have more people in the bench than people that play the game. I'm not going to spend much time here, but that's to give that if there is today something, if I compare this with my previous experience, specifically in Europe, is that today we're living in a very volatile world. This volatile world, which is defined by the pictures that we have here, you can add to that the Brexit, you can add to that other things, is creating a lot of tension that affects our people, our consumers, the investments we do. So we need to be far more demanding on return on invested capital. We need to be far more demanding in the way we address consumer needs because things changes at a speed that it is unprecedented. I'm not talking about areas like e-commerce, digital, which is part of the way we're doing things. My previous experience, both in nutrition and in Nestlé Health Science, has given me the idea that the concept of digital and the e-commerce is going to be a big driver of change in the way we do business, even in the most traditional categories that we have in our food. This context could be defined by four figures. I could have elected more, is that we're talking about a region that the volume growth has been basically close to zero in the last five years. I'm talking about Nielsen average of products that we are basically in the marketplace plus others. This is just the food and beverage context. Inflation is not only that we don't have inflation, is that we have deflation. And you know how difficult is to create future and to develop efficiencies and having good margins in a context with your prices and the context of consumers are basically looking at the prices maybe lower in the next month. Retail concentration, that is something that is having a big impact today. I wonder what you have read about buying alliances, companies that basically the only thing they need do is that they took together. The question is whether this is something that could be acceptable, but they put it together with the only objective to try to buy the cheapest price when it comes to the sale of our products. This is happening today in countries and above the market, specifically, in this case, in Western Europe. But the main element of some of them, except the e-commerce, in the so-called brick and mortars, as you will define, is basically they are looking to compete on the basis of prices. I wonder what you have seen, but I think it was in January that Asda declared publicly in U.K. that they are going to dedicate half a billion pounds just to reduce prices in all stores to compete against Sainsbury and to make the life of Tesco miserable in that situation. This is just one part. A country that was supposed to be more healthy, more relaxed, which was the U.K., today, this is where the fierce battle in terms of pricing is there. The last point is what we call consumer confidence. This is a Nielsen index of fast-moving consumer goods. This is not only our products. But just to give you a sense that if 100 is neutral, we talk that the world is around 97. The average of the countries that we are in talk about 78. Things like job prospects, and you are going to see that we have an important initiative in youth job creation, is that less than one-third of people believe that the future, the next year, will be better than this year. That is why there is a lot of people that basically are taking their personal finance in a situation where you do not have interest rates, and they are basically containing a lot of consumption. This is also affecting consumption of fast-moving consumer goods. That is the context that we are in. Just two charts to give what we are talking about, as this is a new zone. So we are talking about a region where Western Europe still is the dominant place, 70%. You have Central Eastern Europe, 13%, and Middle East, North Africa, 17% of the sales of Nestlé in this area. It is not only my direct responsibility, but all the businesses that we have in Nestlé in this category. What you have seen here is what has been the real internal growth of these three areas in last year, which in the context of what we have done, we consider this a very good result. Just to highlight something, is that this growth, you need to take care that only in 2015, between 2014 and 2015, we have lost more than 100 million sales in countries like Libya, where we are not present today, unfortunately. Countries like Syria because of the ISIS, and countries like Yemen, where basically today all our distributors has been basically bombarded and our stores have been destroyed, and we're trying to recover the situation. The Nestlé in this part of the world is around CHF 27 billion. I'm talking about 69 countries. We group the countries in 21 markets, around 110,000 employees and around 171 factories. Another interesting element is that this is represented the balanced product portfolio in this area. This is what I call a mini Nestlé because the percentage of distribution of the presence of our products is very, very close. It replicates quite well the Nestlé overall, with two exceptions. Our presence in dairy is far lower than the average of the group, and our presence in coffee is higher than the average of the group, specifically Nescafé Dolce Gusto, and of course, Nespresso, which have a predominant position in this part of the world. The rest is quite similar in terms of strength if you take big numbers as they are represented here. The zone is doing well. It's doing well in 2015. Was doing already well in 2014. Has been accelerated in the first three months, and I'm quite convinced that these figures roughly will stay along the first half and maybe the end of the year because the prospects on the innovation and the plan that we have give me confidence that unless there is a big crisis that I don't count in addition of what we have today, we can deliver that. What you see is there is. The most important one is you see the growth in terms of RIG. What you see here, for example, in the first quarter is this effect of deflation, which has in part been contained compared with 2014, but it's clear lower than the year 2015. Also by investing behind the brands and helping by a disciplined process in terms of making choices, I'm going to talk in a minute, we have been able also to improve the trading operating profit, and I'm convinced that this year we can also improve this figure again. Just one point. You might be surprised because you say, "Well, there's Middle East here." One of the reasons why we don't have inflation in Middle East is because of milk prices. Because our business in Middle East is very much depending on milk. That's the only way. This is the only area where powder milk is important. It's not in Europe, it's not in Eastern Europe. Here, basically, the price has been contained because of the reduction of the milk prices over the years. Maybe the situation will change. I don't think this will change this year, but I'm sure in the future, this situation you will see this again going up. Let me talk about the first thing is growth. I said to growth, efficiency. Let's talk about growth, and I have a few charts to talk about that. The first thing is the discipline process that we do about making choices, and this has been a mantra. Already in 2006 when I started in the zone, I developed what at that moment, and maybe some of you might remember, a process called cell methodology that today is called ATLAS. Since then, since more than now 10 years, we have been using this to define where to invest, where to make priorities. In Zone EMENA, just to give a sense, we talk about 750 cells, and a cell is a business in a channel and in a category. We fundamentally review this every year, and we make the right decisions regarding the investments behind that. In the case of last year, and it will be probably the same this year, we have also focused our investments in CapEx. Two-thirds of the investments has been done at one-third of the sales, which is basically where the growth is coming. You will see that this is very much in areas like the pet care that Bernard, my colleague, was talking before to you, and also in terms of coffee. The process of analyzing every cell by every country and grouping them by category and by geography gives us the possibility to decide whether to put marketing expenses, whether to invest, and which are the projects that we're going to manage at multi-market level in EMENA. Specifically, I know that you have seen this figure for a long time, it's no news for you, but let me talk about that because it was already in 2006 when I started that. This is where we started with 6 million. I was the head of Europe at that moment. At the end of the year, we did 6 million of sales. If someone would have ever told me that 10 years later we'll be in CHF 1 billion or even more if you have constant currencies, I would say this is an outstanding result that even myself would have not believed. The most important thing is that we have been doing that while investing in launching the Nespresso concept from 1 country to 43 countries in roughly eight years. Some of you may have questions about are we getting money out of that? Let me tell you two things. First, the gross margin is higher than the average in coffee. The second point is because now we are more present in the majority of countries, now we're going to deliver money that this money is going to basically improve our margins as we don't need money from one country to invest to develop other countries as we basically said. There are not many new countries in EMENA that we are going to launch that. Maybe some of them and maybe the one that we're discussing is Maghreb, but as you could imagine, that's not a priority compared with Russia, with Germany, with Spain, with Italy, with Greece, et cetera, and Poland, Eastern Europe, et cetera, and Middle East today. This is the first contributor to the portion coffee category growth, and we are number one with Dolce Gusto in machine sales in retail and number one in capsule sales in retail. As you know, we don't compete in other segments. Also, the e-commerce is a very important part. It's not as important as you will have in Nespresso, but it's quite significant and we're pushing this as we speak more and more because we believe there are opportunities also to develop that. A second element that is basically an example of something that has been talking to you before is pet care. Some of you were asking questions about premiumization, and premiumization in Europe. This is just an example. These are 2 launches, and this is the index price per kilo that we have in Gourmet Gold. In this segment, we are market leaders, and this is the product that we recently launched. It is 2.8 times the price per kilo in the marketplace. The other interesting one is that in the trend that in U.S. is very important, 25% of the market of pet food in U.S. is in the natural segment. This is something that we have launched now is this new brand called Beyond, which you already had. I remember when I was managing the Americas, we already had this launch in U.S. We are now launching this in retail. This is the first initiative, big one, that we are doing it in a big way in retail. You can see that it is not only that we are basically addressing a consumer trend, a need of more natural products, more natural ingredients in the area of pet food, but also in terms of the pricing per kilo. That is another example of how a process and you make the choices, and we have decided to invest that. All these investments, like the one that we are going to present in the next chart, are all multi-markets. It is not only that. We are also addressing new trends. I am sure that in the innovation exhibition that you have been seeing before, you may have seen some of that. I would like to highlight that in coffee, it is not only about Nescafé Dolce Gusto, it is about soluble coffee. In soluble coffee, we launched some time ago this brand, Nescafé Azera. This is micronized coffee. We were in a way or another, trailing behind some of our competitors in the area of super premium coffee in Central and Eastern Europe. With the launch of Azera and micronized coffee, we are basically regaining that. This is a huge product, and I am sure this is going to be a big success, as it is already today in U.K. Then a new cappuccino, a better formulation of cappuccino where the foam is white, and that is creating a kind of very good competitive advantage. It has also been launched. In the area of healthy eating, that is basically a gluten-free. Gluten-free today is quite relevant more in Southern Europe than in the North of Europe, and that is basically the Buitoni. We have pizzas today under the Wagner brand and the Buitoni that are there in this segment. This is a concept that when we took the Create the Zone, this was a concept very well-developed in Israel by one of our companies, Osem and Tivall. I saw this concept that we define this flexitarian, meaning people that like to reduce their consumption of meat, either because of environmental reason or because of health reasons. We have decided to take this brand and converted this in a European brand, and we have just launched this in Germany. We have now in a market in Spain. I am sure that this new trend of reducing meat consumption and having a brand we call Garden Gourmet, it will do a big inroad because this is very much where consumers today are looking in terms of looking to the future of food. Children health, this is Nido. This is basically Middle East. This is basically using a new nutrition product in order to enhance the value of the kids. This has been launched in all markets in Middle East as we speak. In the area of pizza, this is a snack. This is not really a pizza, it is more a snack pizza called Rustipani. This is under Wagner. This is Germany. The same brand, Rustipani, is being launched as we speak now that we have capacity invested in Germany in all European markets. Mövenpick, as you know, a big and important super premium brand, namely in Switzerland. Last year, we launched in Switzerland for the first time Sticks. Sticks is something that we did not have before in Mövenpick brand. It has been a good success in Switzerland, which has given us the possibility and the decision that we are going to launch this in all markets. In confectionery, I know you have seen some of these products we call Recettes de L'Atelier. Basically, these products have different brands, Perugina in Italy, Cailler, Nestlé in other countries. This is a patent technology. This is a kind of black chocolate with good pieces that we are launching in all markets. We have introduced already in 4 markets with good success, specifically in France, which is our key competitive market, but where black chocolate is very well appreciated. The other one is Baci. This is a brand that I am passionate of that. I think this is a brand that deserves more focus. We decided to create a kind of unit, a kind of small unit in Italy, replicating the success of S.Pellegrino, basically using S.Pellegrino people and asking them to help us to create what we call an international small unit where we can develop this brand in a more performance way as we have done so far in the rest of the world. The project is today being discussed and being born. I do not have a lot of news today to tell you, but I am sure that in the future we can basically fundamentally increase the weight and the importance of what I believe is one of the most unique products in the chocolate area, and a product that you should know that the formulation has not been changed over the last 80 years. When we talk about innovation, renovation, time to time, we need to think that when you have a great product, you do not touch the product, and this is still doing a good job. Another area that maybe is specific about the EMENA that I like to talk to you, because I have dedicating a lot of time to that, is what I call that we embrace complexity. The question is how to manage this in an efficient way. Here we have different business models. In fact, in Zone EMENA, we have the most different business models in the company, from business that are managed locally for business that manage in different ways. This is what has been recently announced, the creation of a joint venture in ice cream. This is in terms of not only all the EMENA business, but even Brazil, Argentina, Philippines for us, then incorporating South Africa and Australia. Lactalis Nestlé Ultra-Frais, this is a company that was created basically 10 years ago, and I am very happy to say that our brands today, and it is quite impressive that La Laitière is the leading brand in their segment in France, which is something that we believe is a great success for a business that has been always in a difficult situation. The situation is today very good. We have also CPW. I think you know this quite well. We have just celebrated the 25 years of the creation of the joint venture. Then we have other models like Purina. Purina is managed at a regional way. You have been seeing what Bernard has presented to you and the results. Maybe the last initiative is something that we took this year, is that in the context of the big and the acceleration of competitiveness with new competitors like JDE that is happening today, I thought that we are doing a very good job in coffee, but we need to take some decisions above the market in order to be far more quicker and identify the new trends. So we have created a unit called Nescafé EMENA, basically without adding any people. It is basically deploying the responsibilities, allowing someone to take full P&L responsibility, and decided about more market allocations where we can decide whether we need to compete, which kind of products, then rolling out initiatives far quicker and far more efficient, I believe. This has today been formed, and it will be completely operational as of the 1st of January next year, and we are going to basically reshuffle that. In addition, this is what we call the local managed business. Just to give a sense, in the weight of Zone EMENA, not Nestlé in EMENA, the zone that I am responsible, 50% of the business is managed above the market. If you look at Nestlé in EMENA, one-third is managed at the market level. All the others are managed in a way or another, either through joint ventures or above the market. That is a very important way, and we embrace that. I always said that the way you define the structure is that a structure follows a strategy, not a strategy follows a structure. That is how we have done a huge amount of discussion this year in what is the best way to compete in some categories, and we are basically putting all these models at the same time in our organization. Channel, I am not going to spend too much time. I think we know that wherever it is that we are in all channels, maybe just one comment is that we are very proud and happy with the result that we are having in e-commerce online. Our share online is slightly higher than the offline share that we have in the marketplace. That is a key metric that we are following. We are growing around 20% this year already in online sales, and we believe that the category of the pure players, the Amazons, the Ocado of this world, our growth is even more than 35%. The traditional trade, it remains a key element and a key player in Middle East. As you can imagine, if you go to Libya or you go to Iraq or you go to these countries, and Morocco, they don't have the same kind of approach, even if the e-commerce is growing everywhere. What is important in this part of the world, we have great expertise when it comes to digital. The way that we're working on the Maggi in Middle East through digital empowerment is quite outstanding. Maybe you have seen something of that in your innovation exhibition. That's about growth. When it comes to efficiencies, basically we follow a simple model. How could you continue fueling growth and delivering results by playing in a context, which is one of the most competitive in the world, where you have inflation? Basically what we do is, what are the efficiencies? We measure that. This is the efficiencies of one year versus the previous year in terms of core distribution, factory overheads, and overheads. These overheads are 11 basis points this year against 10 basis points in the past year. We also have an objective of continuing fueling the growth through investments, through efficiencies. This is in addition to the fact that, as you know, we have been also helped by the cost of raw materials that we have been pre-played. That has helped us to invest in marketing, consumer-facing spend, more than 80 basis points last year, which has helped us to keep. Maybe it's not only gaining, it's keeping and gaining share in 60% of the sales that we follow through Nielsen or other measures. We basically follow in EMENA between 200 to 250 different sales when it comes to market share, 60% of which last year we were growing or we were basically keeping and holding our share. All this, of course, we're able to, if you have a good growth, as you have seen, you basically deliver good results in terms of profit while you keep what I call the sustainability of this model. Basically, it's based on making choices, being very tough on efficiency in terms of costs, and also investing. It looks pretty simple, but you need just to make it happen, and you need to have the discipline, which is the most difficult part, in order to make choices. Making choices basically is deciding what you are not going to do versus then concentrating and put a list of things, and then you have the list. That's about efficiencies. I talk about the third and the fourth point. Let me talk about very quickly on what you call inclusivity. Europe is a place where you have the most critical, informed, and critical consumers when it comes to companies like us. It is clear that we need to look at a more holistic approach when it comes to the way we do business. This, I have identified three areas that we are very active on. One is in the area of environmental sustainability and all initiatives that we're doing and we're committed with our partners. The second is nutrition, health, and wellness. That's obvious. This is where the company has been basically focused, but you are going to see that I'm going to concentrate in areas like sugar reduction, like salt, et cetera. Then the concept of employability and basically connecting with the authorities, specifically in the case of Europe in terms of Brussels, where basically I am present there more than once every month to have discussions in terms of projects that we can go. This has been helping us to improve not only the perception of Nestlé within the political environment, but also in terms of the organizations and the youth organizations that today exist different in Europe. Environmental sustainability, just three figures. By 2020, all our factories, with no exclusion, will have factories without waste to landfill. Today, we are at 40, and we believe that this figure is easily achievable with all the investment we are doing in this category. CO2 emissions, that are a very important point, that despite the increase in terms of tonnage, we are reducing. The reduction is around 35%, reduction by ton of product produced in the zone. Then another element that you know is close to our heart also is water consumption. This is basically a reduction that we have committed to do between 2010 and 2020, is 44% reduction in water consumption per ton produced of our products. Nutrition, health, and wellness, that's the commitment I like to look. First of all, let me show a product that is very important. Nesquik is a jewel in Europe. Competition is more in the private label. We don't have big competitors there. That's a category that we have been growing. But we believe that the concept of sugar reduction is something that we need to do while keeping the taste, and we have been doing that. We have just launched this product with 37% of sugar reduction. It gives you 5 grams of sugar per serving, is what we call nutritional foundation, let's say, compliant. 3.3 grams of dietary fiber, and this has been launched in France, basically three months ago, and we are going to relaunch this in all markets where Nesquik is important. Then, in addition to that's the commitment that the company has publicly committed, and you can find this in the annual report, about sugar reduction, sodium, saturated fatty acids. We can say that in the case of EMENA, the figure, as we speak today, of sugar reduction is 7.6% versus the 10 objective at the end of the year. In sodium, we are higher than 8, and in saturated fatty acids, 6.2. In trans fatty acids, we have not had anyone coming from hydrogenated oils at the end of 2016. That's very important because there are more and more people, basically, they lose something today, that how many people, when they buy a product, the first thing they do is exactly that. This movement is basically having a big impact in the way you market and you develop products. Looking about the composition, which kind of composition you have in this product, and that's something that for us is very important. This is one of the areas where our renovation efforts on research and development is being taken in this year and even previous years. When it comes to youth employability, you know that that's where we're talking about our presence in different European institutions. We were the first company to commit to basically give support, engage new people. The most important thing is not only the figures. We have basically engaged more than 8,200 apprenticeships and traineeships position within our factories of our companies. We have already organized more than 3,500 workshops with more than 11,000 Nestlé employees to help people to prepare their CVs and to basically get ready to start working. We have been working that with Google, with Facebook. The most important thing is that there is what I call the Alliance for YOUth. Alliance for YOUth is, as much as Nestlé could do a lot of jobs, it is more important that we create a movement. This movement that we call Alliance for YOUth, we have today 200 companies. We have companies like Metro, for example, in Germany, that have joined that. ENGIE in France, Solvay in Belgium, that have basically partnered with us. The idea is we work with the authorities in the countries to promote dual education learning and also to engage. This is helping us to really be part of the society, and we move that, and we believe Nestlé is leading this today as we speak. This is an important point, and it is not just by coincidence that all these initiatives, plus the fact that I have mentioned to you before, has been made Nestlé improving their position as the most attractive employers in Europe. I am talking about competing with companies like Google, BMW, Facebook, and biotech companies. So I think it is quite important that the position of Nestlé being number nine, and I am sure that if we continue doing the innovation and the renovation and initiative, this figure will improve. My last point is about people, is about leadership, and basically four points. It is about diversity. That is a very important point because the creation of a Zone EMENA has given me and our people the possibility to start thinking about moving people around. Today we have increased the number of people, if I may say, between the south and the north, from the south of the Mediterranean to the north of the Mediterranean, we have multiplied by three today, and we have plans the transfers of people. So we are taking people from Egypt, people from Morocco, people from Syria, and we are going to basically offering them jobs in the Western world. We are also sending people with experience in premiumization, in new technologies, in digital, to this part of the world. That is something that thanks to this opportunity that I call the value creation opportunity, that means a new zone we are doing. Retaining gender balance. One third of our management teams in the markets are basically composed by women. We believe that this is a figure that is now getting not only solid but also improving. We are also retaining talents. Just to give a sense, if I was telling you that we have 21 markets, and the market has been one of the most important positions in our market, we have basically in the last year moved and changed, not only changed people, but even moving people around. More than 10 out of 21 have been changed in the last year by basically, as we are telling you before, moving the bench that we have of people, and that is a very important point, which helps to improve. This what you may not know what does it mean, Nestlé & I. Nestlé and I is a survey that was started last year that we do with all employees. We send this to the 110,000 employees. We have a response around 80%, and they tell us how they feel engaged, what are the problems they feel. The level of engagement today in EMENA is around 80%, and we are in some of these metrics best in class. One very important is retaining the best talent. We have identified which kind of talent we like to retain, and we follow this very closely. 70% of the people we like to retain have said that they are very willing to stay and follow a career. I believe that this figure is not good enough, and hopefully, by the initiatives we're doing, we're making this figure even bigger because at the end of the day, it's all about people and not only about processes and systems. The four takeaways for my presentation is growth. In a zero volume growth deflationary environment, we're achieving industry-leading growth thanks to the process I have been talking to you, and thank you by embracing different business models that we can develop in the area of our responsibility. Efficiencies, if you are not able to take cost out of the system, if you don't buy better and you don't take that, and you basically leverage that and identify where to invest, that's what we call the virtuous circle. We're using this as a mantra in our organizations. The concept of being part of the society, working in these three streams that I have mentioned to you, and this is something that myself and some of my leadership team in the zone, we're dedicating a lot of time, and at the end of the day, taking care of what I call the Champions League and the junior league that is going to make all this successful. With that, Stefan, I tried to recover some time, and I think this is a message. I know that you might be tired, but I'm here to address any questions you might have to me. Thank you. Marco, please. Thank you, Stefan, and good afternoon to all of you. My name is Marco Settembri, 28 years in Nestlé. Actually, I started being brand manager of Nesquik, the product that you saw before in the presentation. I am a category guy, so I work basically all my career in Nestlé in two categories, pet care and waters. So I am now CEO of Nestlé Waters since 2013, and I am happy to welcome you in the world of waters. So I will try to demonstrate, or I will demonstrate in the next session why waters is a critical category for Nestlé for two main reasons and two main scope is because it is critical for the nutrition, health, and wellness journey and agenda of Nestlé. But also is a contributor also of the Nestlé model. But before doing that, allow me to introduce you in the water world and in what Nestlé Waters job in the water. Water, it is the essence of life. It makes everything possible, like the air we breathe. Yet like the air we breathe, we take it for granted, certain it will always be there, healthy, pure, abundant. Some, however, face a different reality: unsafe, inaccessible, scarce. Nestlé Waters is the world's leading bottled water company. We are taking action to protect the planet's most vital resource today and for the future. We believe we can achieve better health for ourselves and the environment by taking care of water. We lead the delivery of healthy hydration, championing water as the ideal beverage choice, enabling healthy lives through the best water products, and ensuring access to safe quality water. Our business practices reflect responsible stewardship of our planet's most cherished natural resource. We continuously strive to develop new and innovative solutions to address our collective needs for water. Together, we will transform the way we care for our water and each other. This is our future: healthy, natural, transformative. We are Nestlé Waters. Water. Water is the essence of life, but also water is an essential and the best hydration vehicle. Drinking water is a pillar for a healthy lifestyle. You know that everybody now agrees that you need to do three things to have a healthy life. It is to eat well, good food, move, but also drink well. Statistics show that sugary drinks is the first source of added sugar in your diet. Also statistics and the forecast show that one out of two people will be overweight in 2030, and also the cost of diabetes-related disease is already now $2 trillion for the human population. Clearly, healthy hydration is critical for the future, and people are recognizing that. By leading the healthy hydration movement agenda and market, we are very well positioned also to contribute, as I said at the beginning, to the Nestlé agenda in nutrition and wellness that I do believe that in the previous presentation you got, that is central to the positioning of Nestlé. But if water, as we have seen in the video, water topic is a critical topic for the future of the humankind, because water availability is at the stake. 40% of the population will feel and will have the issue not to have a shortfall by 2030. If we do not manage properly the water together, we will have this issue as a population, and this will create an issue also to the economical development of all categories and all business. Also, big part of the population already today do not have access to drink water that they can drink, potable water at home. If you take into account also the all aspects of the quality of the water, this number is up to 1.8 billion people. The facts are quite clear, and bottled water is part of the solution. Why? Because bottled water is an ally together with tap water to help people drinking more water. This is good for two reasons: for the health of the people, because it is the best hydration that you can have, but also because it is the most sustainable packaged beverage that you can have. If you consider that for one liter of water, total value chain, you need around two liters of water to bottle one liter. If you take a sugary drink, a carbonated soft drink, you need up to 300, 400 liters of water in total value chain for one liter of sugary drinks. Beer, wine, and so on, is even higher than that. If you really want, if you have an issue of water scarcity, the best way to preserve water is to drink water. Then it is up to you. It is your choice to drink tap water or to drink packaged beverage, packaged water, bottled water. But you know that in order to have and to drink in every moment of your life, bottled water is giving you an extra available solution when you travel, when you are in a meeting, like today, when you go around, and also because you want a specific quality on the water. This is what is driving the category growth. Category is growing because of different factors. I just put six trends over there. Even in that, I want just to focus on a couple of trends. Growing population. Clearly, there are more people in the globe, and there are aging population also, people that live longer. Automatically, you have more water that is consumed in the world. It is also more than that. People want to have healthy living, so people are moving from less healthy beverages to water. People want also to have a quality, a specific quality that is granted also by bottled water, and so that is why there is this movement versus bottled water. People also want to choose, want to have a specific quality, want to have something specific when they have water, and they can find it in their water. All trends are pushing and will push the category growth in the future. You can see already now that bottled water is growing 5-6 times faster than other beverages. It is already happening. You see also this U.S. trend between carbonated soft drinks and bottled water, in which bottled water is surpassing carbonated soft drinks in the biggest country that has invented, let us say, the carbonated soft drink in the world. It means that the trend is very clear and unstoppable, I would say, in a certain way. Even if when we take numbers, it is a huge category. The category has grown 90 billion liters in the last four years. 90 billion is huge. $40 billion. Sometimes when we talk different categories, if the category in total is $5 billion, $10 billion, $12 billion, we are talking about just the growth of bottled water percent. I gave you the reason why, and I do not want to go back on that. I want to now to focus on Nestlé Waters. Nestlé Waters has a vision that is very aligned with the Nestlé vision, is very simple, around people. The vision of Nestlé is enhancing people quality of life, and that is exactly what we want to do by providing the best quality water. In fact, healthy hydration we provide and our passion for water. These are the three things that you can find in our vision. Here you have the summary of the, or a picture, I would say, of Nestlé Waters. We are number one worldwide, so it is a huge category, extremely fragmented, obviously, because of the nature of the product. We are number one worldwide. We are growing. Our growth is accretive to Nestlé. Last year, we grew 6.7%. The first quarter also is close to 6%. Also we are creating value more and more thanks to our strategy that I will describe. We have basically double our return on invested capital in the last four years. In terms of where we compete, we see this growth and that is why I was saying the category destiny is growing. It is not just growing in certain part of the world. It is broad-based, the growth. It is double digit in emerging markets. It is also quite important still in mature market like Europe. When I talk about Europe, I talk mainly France and Italy, that are the two biggest country in which the consumption liter per capita is huge already. North America, that is by far the biggest market in the world. How we compete? We compete, first of all, with our strategic assets, and the first big asset is our portfolio. You heard a lot about portfolio today, but that is critical also in Waters. We compete with these three, I would say, simplified three layers. The Nestlé brand, that is the base of everything, the Nestlé Pure Life brand. The local brands, and we have a huge number of local brands in different geographies. Then two international sparkling brands that are Perrier and S.Pellegrino. If we go into details, we are leading the fast growing sparkling market. Sparkling is also because of this carbonated soft drinks defection, is growing faster than still water, and so we are leading this market worldwide. We had, in the last years, always 5%, 6%, and now in the last four years, 7% yearly growth in the sparkling. We compete with these two brands, Perrier and S.Pellegrino, but also with the sparkling version of our local brands. Now I will show you the two brands that we have, Perrier, S.Pellegrino, that are the real super premium, two strong super premium brands for Nestlé. Thirst for the extraordinary. Perrier. Maybe it is because we live here, where it is only natural to be passionately in love with beauty. Where it is easy to be inspired, and where there is always a desire for elegance, style, harmony, and design. Be assured that even right now, there is someone creating something new and beautiful. This is Italy, where we never resist the quality of life. Food, for example, is an art we practice every day, even at work, even if only for 20 minutes. As soon as we can, we nurture the desire to be together. This is Italy, and here a refined and unique art was born: the art of living à la italiana. If you cannot come here to Italy to experience this extraordinary thing, don't worry. We will bring it to you, because the art of living à la italiana is also the most exported art in the world. The interesting of Perrier, S.Pellegrino is the fact that are super premium brands. When I talk about super premium brands, S.Pellegrino is sold in a restaurant in New York, in London, in Paris, or in Shanghai at $8, $9, when you can have water solution for a tap, so for free or for 20, 30 centimes in other forms. This really means capability of creating iconic brands. Perrier, S.Pellegrino has 140, 150 years of history behind, no change in packaging in the last 140, 150 years. Continuously growing, constant. The most distributed brand in the world for Nestlé are Perrier, S.Pellegrino because where is an hotel, where is a restaurant, you can find these two brands. I will go back anyway on a few elements on that in the next part of the presentation. Then you have the local brands. Local brands, water by definition is local. Perrier and S.Pellegrino are the only two brands that really we export in every country in the world. All the other rest of the business is very local, is rooted in the origin, in the quality, in the taste of a single place. We have 69 brands, products in the world. I would say where we compete, we have the best or among the best brands in the countries where we compete. They cover different positioning, different expectation, different taste according to the nature of this water. I took as an example, the leader in Turkey, that is Erikli. "Thank you, thank you, thank you, Erikli. It is very difficult to come across someone like you. In Erikli, in Erikli, I found liveliness in you. I found naturally in Erikli. Thank you, thank you, Erikli." Bizi Türkiye'nin en çok sevilen suyu yapan herkese kalpten bir teşekkür. Erikli. Lezzetiyle geçmişten bugüne seninle. Erikli. Nestlé Pure Life is something that we have created, that we have launched 18 years ago. It is now brand leader worldwide, is the biggest brand in the water market by far. It is also the biggest Nestlé product in the world. It has 14 billion acts of consumption per year. It is very simple concept. It is coming also from the insight that we have, the mineral water strategy, I would say, journey that we had for many years could not be applied in every single place in the world. Through the concept of purification and remineralization, we could give access to water, to good quality, safe water in every place in the world. That is why we created this brand, and this is now leading the market worldwide. This is the worldwide campaign for Pure Life. Mom, you always gave me the best. You cared for me. You gave me a safe and healthy life with Nestlé Pure Life, so that I could give the best to my own daughter, care for her, give her a safer and healthier life. Mom, you gave me more than life. You gave me Pure Life. Guaranteed purity through a rigorous 14-step quality process. Nestlé Pure Life. Drink better, live better. This is our first and most important asset. Water access, water resources, and brands. Then also what we do around this brand is across the portfolio, is around innovation, premiumization, and scale. Scale and premiumization, I would say, are the two mantra of the water business. Premiumization is coming from portfolio mix. I show you also how we play in the different level of portfolio. You do it through format, through segmentation, you do through occasion of consumption. When is available, the water is consumed. The more occasion you give to consumer, the more you sell and the more you premiumize. Innovation is coming also from flavors where it makes sense in the waters. For instance, in these two brands, we have two products, the sparkling fruit beverages that is with fruits coming from Sicily in S.Pellegrino that is now becoming a huge total natural organic product that we sell in every place in the world. Perrier, this is an example, Perrier with lime, that is launched a couple of years ago in U.S. and in many other countries is now really growing substantially. So where it makes sense, where it's close to the positioning, we do it. Where it makes less sense, obviously, when a brand is totally rooted with the full water concept, we don't do it. That's part of the pleasure search of consumer that's looking the water also the pleasure sensation of the bubbles or of the flavors. Also we innovate through functional water. Hépar in France is one strong example in which with huge level of margin contribution and profitability because it's a water that has a specific benefit proven by clinical studies and also by digital. Digital is not only e-commerce and market share, online share that is very high for us versus offline, but it also allow us to connect directly with consumer. We have a huge business in the U.S. and not only of direct delivery to consumer, home delivery. Thanks to the digitalization, we are fully transforming this business, especially in the U.S., with direct connection to consumer and direct delivery to their home. When we deal with such a precious but also delicate product like the water, is better that we take care, and we take care in different elements of the different elements of our strategies. First of all, we care for people by leading the healthy hydration movement with our products, with our Nestlé Pure Life, that I explained before, and also the other waters, but also with kids education. Kids is the next generation. If we convince kids that the water, kids and their moms and fathers, that is the best hydration for themselves. We will have better also consumer in the future, more educated, more healthy adults in the future. We do strong programs in the school. For instance, the Project WET, the Water Education for Teacher, now is in every country in which we operate to educate teacher and kids around the water. Then also partnership. More and more, in different countries, there are movements to convince people to drink more water, like the Drink Up in U.S., and is a movement in which we together, we are allied to different elements of the society to have people drinking more water. We are also pioneering in every place where we operate the water stewardship movement. Water stewardship is about working around the water in what is the water, where is the water, how we can save more water in which we operate, in the place we operate. Working around the catchment, protecting the catchment from pollution, from external attacks, working with different people to understand what is the different role of this level of protection of the water, but also contributing to communities. Very often, our water is coming from remote places in which the community is living around the water, is living around our water. Working with this community in order to give a mutual advantage of operating around the water is also part of our focus in the future. The last is also striving for solution. We feel that the solution that we have today are not enough in order to preserve the water in the right quantity, quality for the future. We are working together with other actors of water to have different solution like we do with the ECOBOIS here in Aignan, just 50 kilometers far away. We are doing a very novelty project with different industry and communities. The last element is also we care for environments. The environmental care that we do is such that we work on the different elements of our operation. It is not only measuring and reducing the impact of our operation, that we all do it in Nestlé, but also understanding that in water, we need to do something more. With our R&D, we not only work in reducing, for instance, we work a lot in R&D, we are really leading the industry in light weighting, having the light design for the bottle to have the lower possible weight. It is good for the environment, it is good also for the P&L, obviously, but it is also giving the right preservation or the right quality in every moment of the life of the bottle. We are also working also for future solution for bottles and for delivering the water with zero journey, zero impact on the environment. That is our last and future, I would say, objective or vision in the business. If we talk about business, it is also the competitive advantage that we have is also coming from our business model. You heard a lot about business model today in the different presentation that was before me. In Waters, we are managing this business as a global business. We work really focusing totally 100% on this business, and we work in a lean way, end-to-end with the integrated value chain. Why? For one very simple reason, because we have a product that as a consumer is paying for a bottle 30, 20, 25, 40 centimes for a bottle like that, 50 centiliters. You can understand that for us, of course, every drop of water counts when we produce it, but also every cent count when we bottle this water. For us, saving money, obsession for cost end-to-end in all elements of the value chain is critical. So that's why we work from zero-based budgeting in our overhead management, in how we construct our operation and our sales force and our support services. But also we work on revenue management in order to understand what is the best balance that we can have with our retailers, because this is a product usually is the most sold product by every retailer, and you can imagine that the discussion that we have on the revenue is very critical. So that's why managing the category in a focused way and lean way for us is even more critical than any other category in Nestlé. I talk before the results in terms of growth. We are accretive in growth in Nestlé. We are also, thanks to the previous effort that I described, we are reducing the total delivered cost in percentage that every year. We are investing more on our brands because especially in a period of low cost inflation, the brands makes a difference. So you can justify the premium price that I was describing before. But also we are now accretive in terms of profit improvement above the Nestlé group average. So we are growing substantially our profit bottom line, and the profit improvement is accretive. And in return on invested capital and free cash flow percentage on net sales is already accretive to the group. So we are strongly contributing to the improvement of the capital efficiency in Nestlé. So as a final message, the message is quite clear, and that's I don't think that I need to convince you that the category will grow substantially in the future for all the reason that I told you before. I hope that I convey you enough why we are well positioned to capture also a good percentage of this growth. One of the key element is also to have unique water access. When the water is becoming an issue, having the best brands, so means also the best springs and sources in the different countries also become a competitive advantage. The portfolio of brands that I described, also our business model and our focus inclusive and lean culture. With that, I have concluded, and I thank you for your attention.

Data Source: Quartr Last updated: May 24, 2016

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