Nestlé S.A. (SWX:NESN)

Nestlé Investor Seminar Day 2

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May 25, 2016

Summary

Regional launches and digital capabilities were central growth levers, alongside China’s Yinlu turnaround and efficiency programs. Management maintained a 5%-6% growth ambition and targeted more than 200 bps of annual structural savings by 2019-2020.

So, the coffee mixes category in ASEAN has become, it has evolved into sort of like a repertoire category where people expect different variants, different flavors. This is a great example of a locally led innovation that is crowdsourced and co-created with our consumers. Its amazing Malaysia launch, coconut flavor, caramel, and mocha. In the Philippines, it is cocoa mocha and cocoa berry, and in Thailand, it is creamy white with Nestlé milk. It is interesting, all the products have had really good consumer acceptance. The new launches, for instance, in the Philippines alone, has already captured 2.4% market share. These are not some Mickey Mouse efforts that we are doing, so it is really exciting. The other type of innovation is centrally led innovation. You might have heard this when Patrice talked. The idea of Blend and Brew is that it delivers a café-style coffee with the taste and aroma of the coffee that you would get in a café, but that you can enjoy within the comfort and convenience of your own home. It is really amazing. Superior consumer preference test. You all know the 60/40 that we talk about, and in the Philippines, it has 65/35, and in Thailand, it has 80/20 consumer preference versus competition. It is already out in the trade. Very well accepted by the trade, very well accepted by consumers so far. The next example of really leveraging consumer insights is our Milo Champions program. You know consumers, unlike all of us, are increasingly more health-conscious. We like to track. I have a Fitbit that reminds me every day that I am not walking enough. But we like to track how we are doing. It is basically an exercise band for Milo, and you are going to hear more about this in this afternoon's digital section with Tambudzi, and Michelle, I think, will present this. But it is cool for kids, it is great for mom because it is also a way for moms and kids to interact. It has been launched in Australia. Early days, 20% awareness among Australian households. Usage rate was 77%, average 9 minutes spent on the app. Currently launching in Malaysia as we speak, and it should go to Indonesia in Q3. But again, it is based on consumer insights. The last example of consumer insights is KitKat. Well, it is actually not last. I have several more. It is this notion about, again, why should we be shy to copy from other markets? You all, I think, had, I saw the boxes that you got yesterday. This was inspired by KitKat Chocolatory in Japan, and it was launched in Australia. But you take a 75-year-old brand, well, it is actually over 75 because we celebrated KitKat 75, I think, 2 years ago, so call it 77 years old. But it is a new way to engage with consumer. It is targeted for millennials, and it is a way to premiumize. I will roll the video and Hey, guys. We are here at the Pitt Street Westfield Mall at the KitKat Studio. We have people lined up around the corner, super excited to create their own delicious, unique KitKat. The first journey that our customers can take is through our limited edition flavors. There are four each week, and they are made fresh daily by our chocolatiers. The second journey we take our customers on is, of course, the Create Your Own KitKat. Customers can choose from three different chocolates, white, milk, or dark, and 17 different toppings, and even personalize their packaging. That is all sent through to our chocolatiers, who create it all on-site. Once your creation has been made by our chocolatiers, a text is sent out to let you know that your KitKat is now ready for collection at the front of our studio. We can take a photo of your finished creation and send that to you via text message. You can share that with your friends and family on social media using our hashtag #KitKatStudio and #CreateYourBreak. I think it is a great idea. It is really creative. It is going for one month, one month only. Get down here and create your own bar. Apparently, the caramelized almond, which is my bar, is the best ever. That is amazing. I am so happy. I think you guys should come to Adelaide. Come and visit us for the ultimate KitKat experience. It was amazing. I was in Sydney in August over a weekend after visiting with the business, and I went to the mall where the KitKat Studio was in. It was in the morning, the store has just barely opened, and there was a long queue. It was wrapped around. It was a big mall. I went into a shop and asking the shopkeeper, I said, "What the heck's going on?" I was just pretending like I didn't know anything. The shopkeeper said, "I don't know. These people started queuing way before the stores even open." It's just amazing. Oh, then, you know the Where magazine? I know it's in the U.S., the Where magazine where you get it free in the hotel room. And I flipped open it, and it was the number one suggested to-do or to see was the KitKat Studio in the mall, in the Where magazine in Sydney. It is amazing. Moving on to consumer insights excellence. This is an example of a flagship brand like Milo has always been part of our consumer's daily breakfast staple. We have now moved beyond breakfast and focusing on lunchbox consumption. This you can see in Q1, 35% growth. The best news is it had very minimal cannibalization in terms of our powder format, our powder Milo. With this principle in mind, we are now doing the same thing for Bear Brand yogurt drink in ASEAN. We launch in the Philippines Q3 of this year. This is amazing, right? When you talk about NHW plus PPP, magic happens. This is the first NESTUM in Angola. It is the first recipe developed and produced in Angola, and this was inspired by NESTUM in Portugal. This is three-in-one solution. You add water for a complete meal, a very robust consumer taste preference, dedicated route to market, to reach the target. Our targeted consumer would be the lower income consumers earning less than $2 a day. 46% growth in Angola and in Congo. It is interesting, in Angola, we built a line thinking that the line would be sufficient to cover us for even in the most aggressive estimates like 18 months. It is like we ran out of capacity after six months. The first block that we just went through was excellence in consumer insights. The second block of the accelerators, the three accelerator, is this notion of perfect brand, perfect assortment, perfect store. Internally, we call it the brand accelerator. You are familiar with the Atlas tool. We talk about focusing, this idea of really focusing where it matters. So taking category and geography, but obviously when it comes down to the market, you have to take it down one step further. You have to drill down below the category level. So within the category, what are the brand priorities? Is the assortment too big at the expense of what we call hero brands or hero SKUs? We do not want people spending advertising or marketing dollars behind a whole bunch of brands to really make choices and really know what makes a difference. For those brands, once you decide, are you having the right advertising mix and spend? Is it consistent? Is it at scale? Is it large enough to have lasting impressions? Then once we decide on the brands, we have to make sure that this clearly is reflected in the store with great execution. Let me show you an example. This is in Milo. Our Indonesian team reviewed the role of each SKU for Milo and having taken tough choices. Sometimes what happens in the market is they are very hesitant because, oh my gosh, I am going to pull back on certain SKUs, I am going to pull back on certain brands. They are nervous because with growth being so critically important for us as a group, but for us as a zone, nobody wants to do that. It is, again, amazing when you have the discipline, you have the rigor in doing the analysis, good things happen. In this case, they actually pull back on a number of SKUs. They upsize some SKUs, understanding each SKU against the consumer consumption habits, against sales velocity, retailer margin, and amazing things happen, 12% growth in Q1 of 2016. Route to market expansion of distribution. Clearly, there is always new sales opportunities as we expand distribution. As we drive numeric distribution, we obviously have to be very focused on the quality of in-store execution, this rollout of picture of success. In Thailand, we closed a partnership with 7-Eleven, which is the biggest convenience store in Thailand with 10,000 stores. It is amazing, we launched our Nestlé ice cream in Q4 2015. It was a great launch for us, and it was actually also a great proposition for 7-Eleven because we lifted their overall category performance. In Indonesia, this is another example, over 3 million traditional outlets, and we are focusing also on alternative trade channels like coffee shops and smaller stores. Another example of expanding distribution, this is MYOWBU, it stands for My Own Business. It is a successful program that started in West Africa and now rolled out to the rest of the continent. In fact, also rolling out in Asia. Bangladesh is now in the midst of doing that. Maybe to bring this to life, let me tell you a story about Abraham in Nairobi. He was, just last year, an office cleaner, a janitor. He started doing this at night, and the next thing you know, he built his business, bring basically Nescafé coffee to his neighborhood, got his wife involved. Today, he quit his job because he used to make $100 a month. Now he has, I think, 30 people working for him who are making about $130 themselves each month, and he is making more than $900 a month now. This is a great example of CSV efforts where it is really a win. We are helping consumers, providing them opportunities to be entrepreneurs, to have a means to livelihood, and still be good for us because it is a very effective way for us to establish our brands in areas where traditional retailers just cannot get to. With that, we covered the three accelerators. I gave you examples of what they have done and what they can do across the markets in our zone. It is, again, bringing rigor back in terms of consumer insights, brand accelerator, and expanding distribution. Now with that, I want to switch gear and be more market-focused. We will pick a market in every block, in the five blocks, and obviously India and China are two that I know you all are keenly interested in listening to. I will do India and China myself, and Kozo will do Japan. For ASEAN, Ganesan will represent ASEAN in the form of Nestlé Vietnam, and Dharnesh will obviously, our biggest market, our biggest business in Sub-Saharan Africa being Nigeria. With that, let me start with India. I cannot be more proud of the team in India. It has been an absolute privilege working with the team. Last year, I remember standing in front when this whole crisis broke. Actually, it was the incident, I do not know if a lot of you know this, started in March of 2014, and it sort of broke the whole thing, just the crisis broke in May of 2015. It is almost like they were waiting for me to start. It was incredible privilege working with the team because there were many decisions we had to make that could have gone one way or the other. They just never gave up. Maggi is progressing way ahead of expectations. You can see the brand trust at crisis was at 3%, and today it is at 83%. You see market share recovery at 53% today. Let me roll a video to tell you the story of how we got here. What do you do when a food brand trusted by mothers for its children is subjected to doubt and suspicion? What do you do when the brand trust scores of a 30-year-old brand fall from 97% to 3%? The crisis on Maggi was unprecedented and sudden. It spiraled into nothing less than a national crisis in India, with the matter even reaching the Indian Parliament. We had to respond without losing any further time. Our ability to respond was made difficult by the fact that case was sub judice in court. Our first move: We strategically first targeted the diehard believers. Social media tracking told us that young people were starting to miss their favorite Maggi. We decided to connect to them first. The only catch, we were not allowed to sell the product. How would we advertise it? Our response was a series of digital films which did not show the product, did not mention the product, and yet communicated love past the legal barriers. This was seen as a completely unexpected response from a brand in crisis. The digital campaign hit home with the youth, and for the first time since the crisis broke, the tide started to turn with loyalists sharing the videos and expressing their support for Maggi. Our next move was to try and create positive disposition for Nestlé India among opinion leaders. As the legal battle was being fought in the courts, we decided to remind India about Nestlé's contribution to Indian lives for the last 100 years. A print and television campaign targeting the general public was launched to reminisce our emotional presence in India's social fabric for last 100 years. The media discourse started to become more empathetic to Nestlé. In October, the courts declared the ban illegal, and lab tests proved that Maggi was safe. Much before we hit the shelves again, we had to face our most important and core consumer, the Indian mother. We told her that her decision to trust us was not wrong. She was right. We were right. A mass media campaign in multiple Indian languages that spoke to Indian mothers across the country that she was right in trusting Maggi, and it was safe to give it to her kids. With the sentiment now turning in our favor, we had to prepare for our re-entry onto the shop shelves and in consumers' life. We launched a high-decibel campaign with a happiness song that welcomed back Maggi in people's lives. The moms, the kids, the small restaurant owners, to the hostel inmates. No wonder it created such a massive anticipation that it took 6 minutes on an e-commerce site to sell out 60,000 welcome back packs of Maggi. We were back on shelves, and people were loving it. As production and distribution ramped up, it was time to start focusing back what has made Maggi great, the same great taste and the priceless emotions. The re-entry into the marketplace and into our consumers' hearts has been hard-won. Winning back consumers' trust takes time. We have begun the journey well to win back love. Great story on Nestlé India. The key now is not just focusing on getting noodles back, but also building other categories. The team with Suresh is moving fast in launching several products in India. Now we move on to the much anticipated market, which is Nestlé China. I will start with setting 4 themes. Look, Chinese market has slowed down, but I will say, and we will tell you, we still believe it is a great consumer story. Clearly, many evolving consumer needs. The channel dynamics are also changing and evolving. What are the implications for Nestlé? Let me take you through, set the scene first, and then we will talk about Nestlé in China. What is the China new normal? Everybody knows this, slower GDP growth rate. It is now at 6%, between 6%-7%. Structurally, they are shifting from investment to consumption, and really, the driving force of growth will be technology. That is what is coming out of the Chinese establishment. The implications for companies like Nestlé, and just FMCG in general, is top-line growth will be slower than before. We have to build new competencies in terms of dealing with new channels like e-com instead of the traditional bricks and mortar. Not only does it have implications from a top-line perspective, it clearly also has implications from a bottom-line perspective. We have to manage our costs a lot tighter. Logistics cost is going up, labor cost is going up. Also, when you do not have the kind of growth that we used to see, you cannot leverage growth as well as we used to do. Embracing new technology is not just as a way to engage with consumers and to work with the trade, but also embracing technologies in order to improve our own efficiency. Again, this is such an important point. Even before all these massive changes in China, it has always been a challenge in making sure we develop talent locally. Now it is even more challenging because not only are you building talent for your own Chinese business, but now you are building talent for these new capabilities that is needed in order to succeed in China. Just a quick look at overall FMCG growth in the last few years, starting in 2011. You can see here that the trend clearly is downward. The bit of a spike there that you see is really actually personal care and home care sort of rebounded in Q4 of 2014 as well as in H1 of 2015, and that is mainly due to growth in skin care. China remains one of the best consumer stories in the world. Why is that? You can see on this slide. Fast growth of middle class and upper middle class. It is a CAGR of 17%, 27%, 17% in the top three household income segment. Not only that, the disposable income growth is still growing well above inflation. So still a lot of room to grow. Chinese urban consumers are affected by so many things. It is a new generation of Chinese consumers. In many ways, China is more advanced in digital, I think one reason is because underdeveloped traditional trade, especially in lower tier cities. Mobile phone is incredibly inexpensive, and it is so accessible. So you see many of the apps on mobile phones have such high penetration. The size of the price, I often hear and meet VCs who are in China because the size of the price is incredibly high. There are 300 million consumers in the U.S., and there is over a billion in China. If you innovate and you come up with a product that works, whether it is an app, the size of the price is four times bigger than that of the U.S., four to five times. One thing is for sure, over the last 10 years, we have witnessed the Chinese market becoming one of the most sophisticated markets in the world. It is interesting, I was comparing notes with my colleagues, and in the group, no offense to any of our great talents running any of our other businesses, China, for us in Nestlé, is one of the toughest markets to manage. Not only are you dealing with very fast evolving Chinese consumers, the trade dynamics is changing, then we also have three big JVs that we have to manage. On top of that, you have seen my chart earlier, e-com is growing really fast. This notion of infinite shelf space. Some website has a billion offerings. What are the implications when you think about a company like ours? All of a sudden, a consumer has just many assortments to choose from, and it is infinite price transparency. So you see shoppers are affected on so many fronts. Talked about this, consumers in China are embracing digital much faster. You start this circle with the discovery. Over 75% of customers use internet for browse or purchase. Then they discuss. 700 million users are active monthly users combined on WeChat. So they get on and discuss on what to buy. Two times more satisfied on e-channel versus offline is what the consumers in China are telling us. Over 50% of purchase decisions are made online, and it is over CNY 12 trillion of online or mobile payments. Then they share. It is like 80% of shoppers give reviews online. It is just like I have to make myself whenever I buy something, and I have to go make a review, but they do. They are just so engaged. The Chinese consumers are embracing digital definitely much faster than their counterparts in other developed markets. What are we seeing in terms of digital providers? That is Baidu, Alibaba, and Tencent. There is a very intense focus on building a holistic ecosystem. You see this chart on what the different players are doing in terms of alliances, joint ventures, in terms of outright acquisition to buy capabilities. It is either from content to transaction to consumer engagement. This O2O, which is online to offline, it changes, it really has a profound impact on how consumers engage and how consumers buy, but it also has profound impact on the way we do business. Digital is permeating many aspects of consumers' lives as well as of businesses. Many of these players are sitting on tremendous data information. Another change in the Chinese landscape is this traditional, the trade model shifting from push to pull. I think many of you heard from us as well as from other FMCG companies on how a few years ago we found ourselves sitting onto a lot of inventories and having to go through a process of destocking. The model for the last 20 years, and this is not just, this is everybody. Everybody did that. It was almost like land grabbing, right? Get the distributors, you rely on a push model. It is multilayer distributors, sub-distributors, wholesalers. Then you have lack of visibility. That is changing to a demand model where your portfolio of products have to really, really resonate with the local consumer. Then you have to make sure you have got the right products, the right brand, and execute it really well, whether it is in store, in bricks and mortar, or on the landing page on the digital store. So clearly, that is another dimension that we, just like other companies, have to cope with. Now let me switch gear from sort of like China in general to Nestlé Greater China region. We are competing across 10 categories. Nestlé in China and GCR is CHF 7 billion, and 42% is globally managed, and 58% is Nestlé F&B. Now you know the largest GMBs are Nestlé Nutrition and Nestlé Professional. For us, we have 35 factories for R&D, and we have 52,000 colleagues or employees covering 1.6 million outlets today. The numbers are mind-boggling. Let me now focus on the 58%, the Nestlé F&B, which is obviously within the scope of Zone AOA. So let me peel the onion and say, okay, our F&B sales in Greater China region is 4.1 billion. Now, on the left, which is other categories, and this is coffee, and I want to give a sense of what are the categories that are doing well or have stabilized and what remains a challenge, which is surprise, Yinlu. Coffee is definitely in the green zone. It is very, very happy with what we have done there. Confectionery also, and that includes both Cailler and Hsu Fu Chi. Culinary, that is mainly Totole. Dairy and ice cream, I put a red. We were debating yesterday amongst the team. I said, "No, it is a red." Because my team was saying, "Oh, maybe it is a yellow." I said, "No, it is a red." I am not happy with our dairy business in F&B. So let me now, and in terms of Yinlu, and it is nothing, it is okay. Peanut milk and congee obviously represent a big chunk of the Yinlu business, but not everything is bad. In fact, the RTD coffee is growing at 30%, and we are really happy with that. But the challenge with that is RTD coffee is not big enough. As the congee and core peanut milk goes down, it is not big enough to try to offset what is happening on that side. Let me start with the left side, which is coffee, confectionery. Let me start with that. China, no different than all our other markets. It is really understanding consumer insights and refreshing the products. With that, reconnecting with consumers through premiumization. Nescafé Dolce Gusto has grown nicely, but I always challenge my team and do not tell me about its growth in the last so many years grew 9%. I said, "Well, 9% of a small base is still very small." I personally am not happy with it, but look, it is still good growth, but it is a key pillar in terms of our coffee premiumization. Confectionery premiumization is also key for maintaining our growth and market share gain trajectory in confectionery. We launched KitKat last year. It was well-received. We will continue to roll out KitKat. We premiumize popular products like Sachima. It is the milk candy. It is the shortcake. And have the Chinese New Year, this past Chinese New Year, it was really good to see in terms of execution and shopping experience, it was better than any other years before. In terms of winning consumers, aside from premiumization, we have launched new products, and that has helped Nescafé. In terms of the importance of shifting trends, making changes in various fronts, today we are number one with 74% share, and 100% with 60/40 win. When you look at Shark and Hsu Fu Chi, same thing. We are targeting young people for Shark, and number one with 32% share. And Totole, which was a JV we bought many years ago, is also doing very well. By the way, in April of 2016, we bought out the remaining 20% of Totole from Mr. Rong, who was the founder CEO. But in order to ensure a successful transition, Mr. Rong is staying there for two years until a new CEO is identified. Deeper penetration and wider coverage. Nescafé, I talked about this before. That is a ready-to-drink Nescafé Smooth Latte, and this is the one that is growing close to 30%. We see great potential for this product. Totole, also, we are rolling it out to out-of-home markets and penetrating lower-tier markets. In terms of e-com, it is again more than doubled in 2015. This is again a constant debate between the China team and myself, because I am not happy when we look at. I should be happy because it is high percentages, but still, with the kind of acceleration that we are seeing in China, growing at even high double digits just is not good enough. But I guess I should give credit where credit is due. They are doing a nice job. They just have to go a bit faster. In order to kickstart, we have a strategy in place in terms of e-com. To kickstart the Alibaba, Nestlé partnership, we are doing a super brand day to sort of celebrate 150 years with Nestlé. This will see quite a few first. First time in China that the Nestlé Group is holding a joint event cutting across the entire categories within the Nestlé Group. We will have 27 brands and 154 products. 50% domestic, 50% international. It is the first time that Alibaba Tmall is holding a promotion of such magnitude, cutting across 13 Tmall stores. It is the first time that an FMCG company in China is using virtual reality technology for communication. We are partnering with Youku, which is the YouTube equivalent. It is amazing. I look at the numbers, and this VR program will be in a pre-roll for the top 2 programs on Youku. I was looking at the numbers in 2015. This top program, which has the top 5 male actors in China, had, in 2015, 2 billion views. That is a B. That is billion with a B. The numbers are just mind-boggling. We are excited about this. We will see. Clearly, it is to accelerate. Now comes Yinlu. Let me now talk about Yinlu. What I call it is a business in transition. Before I start, maybe I should pause and make it very clear that as disappointing and as frustrating as the results have been for Yinlu, we firmly believe that Yinlu provides us with a unique platform that is critically important for China, which is the ready-to-drink. It is a category that is growing very fast in China. As I said, our RTD Smooth Latte grew close to 30% in 2015. We are a firm believer in this platform. We just have to get it back on track. Yinlu has been a very successful business. It is the traditional model. It is profitable. The number one plant protein drink. Nationwide distribution, 2,000 tier 1 distributors, extensive store coverage. As I said before, very much relying on a push model. But in times like this, a few things happen. It is sort of like a perfect storm, with several factors coming into play. The core peanut milk range has been declining, and its consumers are shifting to more premium products, and we have not been fast enough in premiumizing it. Also, with the collapse of milk prices, the consumption of dairy has picked up at the expense of peanut milk consumption. What has taken us a few months, or some time to realize, is we have been so focused on refreshing the portfolio, making sure repositioning the product. What we found out in the last few months is when a product is not working as well with consumers, you start to have this spiral-down effect with distributors. The economics do not work so well in distributors. You start to have churn in your distributor network. Your sales force starts to churn. It is just sort of like a whole host of things just started to happen. We have a very comprehensive turnaround plan in place. First and foremost, I talked about this. We are upgrading existing products to make sure that it is on trend in terms of what people want to drink, healthier choices, more premium. Instead of peanut milk, going to walnut, going to almond drink. We are also accelerating new product development. Milo is now in the trade. Early days tell us that it is very well received. We are launching Shakissimo, which is the shelf-stable version of Shakissimo that you see in Europe. It is a fantastic product. It is a premium product. We will see. Again, we will see, but we are working very closely with the local team. We obviously have to change the route to market and moving towards a pull model. If you have better products that resonates with the consumers, then the pull will naturally come. But in the meantime, we're working with the distributors to make sure the economics continue to work for them as we transition to a pull model. Then, making sure we have strong execution. It's interesting, we have put in a new. This is a 60% owned business, and I have tremendous respect for the CEO founder, Chen Xingzhe. He will be looking at transitioning. So we're working together to make sure that the transition works well. But also, we are working, finding ways to collaborate so that the new product launches work better. How do you. I always think about when I. This is old days, when you have your PCs and you. I don't know if you remember this notion of you have a sticker that says, "Powered by Intel." I was telling them that, "Look, your entrepreneurship works. You go fast. You do this. Why don't you allow Nestlé to kind of power your entrepreneurship, and let us bring what we do well in R&D, in marketing, and sort of find a sweet spot that we can work together to make sure that we get this problem fixed sooner than later and bring Yinlu back on track." I will tell you, this transformation, this turnaround, will take time. Good news and bad news is, good news is we continue to believe that this is an excellent platform and part of the pillar for us to grow in GCR. Bad news is, it's a big business. So as Yinlu goes through the process and in the next few months, the balance of the year, it slowly comes back on track. It's a big drag on the China business, and China being a big part of the zone, it will also have a drag on effect on Zone AOA. But I continue to be personally very. I flew to Xiamen a few times. Last year, I spent, I think I flew to Delhi five or six times this year. My favorite destination is Xiamen in China. Anyway, so with that, let me close the China discussion with sort of four key takeaways. China, we believe, is still a great consumer story. Nowhere in the world will you find the kind of dynamics. But having said that, it's moving really fast. You need to have a product portfolio that will be relevant to a very fast evolving Chinese consumer. Because the trade dynamics is also changing, we need to accelerate digital and commerce, and clearly, we need to turn around Yinlu, get it right, and do it sooner than later. So with that, I will now turn over to my three market heads. We'll start with Japan. This is about helping the zone reignite growth by innovation beyond products, by innovation through premiumization. Followed by Ganesan and Vietnam, and it's about establishing brands and building capabilities. Then followed by Dharnesh Gordhon on Nigeria, and it's about how PPP and getting route to market right has made Nigeria an incredibly good business for Nestlé. So with that, Kozo, take it away. Thank you. Thank you, Wan Ling. Good morning, ladies and gentlemen. Today, let me talk about our Nestlé Japan story of reigniting the growth by our successful innovation beyond the product and premiumization. Japan may not be the very much attractive market to invest anymore for food and beverage companies. Why is that? One of the reasons is economical, no GDP growth for more than 20 years and long time deflation. Secondly, a declining and aging population, which means the number of stomach is decreasing and size of the stomach is shrinking. When I took over the market ahead of Japan, 5 and a half years ago, we have declared the new role of the Nestlé Japan within the group, which is showing up the sustainable, profitable growth model for the aging and shrinking developed market. Since then, we have successfully turned around the business to grow with 3.5% per annum. This growth rate is higher than the average of the developed market within the group, as well as that of local companies. What is more impressive in our achievement is the margin improvements. We have increased our profit by 44% in the past 5 years. This profit level in Japan is several times higher than that of local companies. How did we make it happen? Generally, in Nestlé, we had very careful look at the new reality on the market. This new reality brought us the changing new consumer problems, which we have to solve through our innovation and renovation. This is how we identify the so-called consumer insight. In the case of Japan, regardless of the declining population, the number of the household has been dramatically increasing from 35 million to 55 million in the past 30 years. Already, more than half of the household is single or a couple because of the downsizing family. This demographic change has hugely impacted the way of consumption. For example, housewives have less and less cooking, more and more prepared meal is appreciated, and more often, people go out to eat. What are the new reality of coffee consumption in Japan? One is shifting from the family consumption to individual. Another one is also shifting from in-home consumption to out-of-home. We have identified the following consumer problems to fix. I will explain one by one. Just please imagine you are preparing for one single cup of Nescafé soluble coffee. You have to boil up the small amount of water every time. You may unconsciously feel it inconvenient, don't you? Even as the roast and ground coffee as well, in Japan, the majority of coffee system for roast and ground is still dripping coffee maker, which is very convenient to prepare for several cups at the same time, but not necessary for one single cup. Therefore, we have launched the single-serve coffee systems for both soluble coffee and roast and ground. That is Nescafé Barista for pure soluble coffee and Nescafé Dolce Gusto for roast and ground. We have already sold 3.5 million of Barista machine and 1.5 million of Nescafé Dolce Gusto in the past 5 years. By the way, these machines are closed system. Therefore, we could successfully materialize the premiumization of Nescafé, even under the very much deflationary environment. Now, 60% of total out-of-home coffee consumption is in Japan, actually in the office. We have identified consumers' problems in the office coffee consumption, that is to say, no availability of good quality of coffee with a very affordable price. Why that? Apparently, the main choice of the coffee in the office is the can liquid coffee through the vending machine in the office or go out to buy coffee at convenience stores nearby, of which both cost is roughly $1.5. Therefore, we have developed very unique B2C subscription business model through the e-commerce to serve the Nescafé with Barista machine with a very much affordable price, let's say $0.20-$0.30 per cup in the office. That is, we call it Nescafé Ambassador business model. Let me show you 2 and a half minutes to explain in more details. In autumn 2012, we began our Nescafé Ambassador program to spread smiles around Japan's workplaces. At present, there are approximately 6 million offices in Japan, in which almost 60 million people are employed. Among those smaller offices where 20 employees or less work, many don't have vending machines installed. The employees make their own coffee or perhaps go out and buy coffee from nearby cafes. In recent years, in the face of widespread cost-cutting measures, there has been a tendency to withdraw coffee vending machines and to remove smoking rooms and break rooms. In this way, communication spaces within the office are slowly being eroded. It was against this backdrop that we decided to introduce the Nescafé Ambassador program. This is a program whereby registered office employees get free use of Nescafé coffee machines while coffee cartridges and other essentials are purchased by subscription at the Nestlé online shop. Those signed up to the Nescafé Ambassador program can enjoy various flavors of high-quality coffee for only JPY 30 per cup. This fee is collected from each office employee and used to pay for the next coffee machine cartridge. As people gather around the machine, conversation grows, and smiles spread throughout the workplace. Just over 3 years since its introduction, the Nescafé Ambassador program has seen more than 250,000 applications in all types of offices throughout Japan. Ambassadors are spreading. The primary cause for its popularity is the revitalization of communities that the scheme fosters. The spread of Nescafé Ambassadors has not been limited to the standard office environment. At present, various types of workplace are taking notice and signing up. One cup of coffee makes the conversation flow. The Nescafé Ambassador program will continue to reinvigorate communities across Japan. We will go on refining our services, establishing new values, and creating ever more ambassadors. Now we have more than 250,000 ambassadors through Japan and serving 205 million, at least, people every day. We already served 1 billion cups of Nescafé last year. Every day, we have the new recruitment of the ambassador, 200 to 300 through our e-networks. What about the other new reality on the market? Let me talk about price polarization. Interestingly, one same shopper goes to 100 yen shop, $1 shop, and Louis Vuitton boutiques, and that is reality. Even in the category of the confectionery, people are willing to pay very premium price for chocolatier brands like Pierre Marcolini, but not necessary for national brands like KitKat. Why is that? It is because national brand has no craftsmanship like which the other chocolatier brands have. How can we develop the craftsmanship to world's largest chocolate brand, KitKat? We have come up with the idea to collaborate with one of the top local chocolatier, Mr. Takagi. As a test, we have just opened one so-called KitKat Chocolatory shop in one of the most luxury department store in Tokyo. Surprisingly, without much advertisement, we saw the one-hour queuing from the first opening day. This Chocolatory item recipe is designed by Mr. Takagi, the chef. Even though the products are produced in our KitKat factory, most of the shoppers strongly believe in its craftsmanship because of the Chocolatory brand name to pay 20 times more premium price than regular KitKat bar. He finally opened eight shops in the sixth largest cities in Japan, which generated CHF 20 million of the sales. KitKat Chocolatory first launched in 2014 with a new concept of super premium KitKat in department stores infused with craftsmanship of a famous patissier in Japan. Successful opening of the first Chocolatory store in Tokyo was welcomed by eager consumers who lined up in long queues to taste the widely talked about premium KitKat. To respond to the enthusiastic demands from the KitKat lovers, Nestlé has decided to launch a new e-commerce site where people no longer had to wait in line. In 2016, innovation for KitKat Chocolatory continues with new distinguishing products while serving customers with new break moments. As the video said that it is not the end of the story. We have just opened the KitKat Chocolatory e-commerce site in order to maximize the product availability. We are very confident to make the 10 times more sales of this Chocolatory item through this e-commerce channel. 20th century is the history where various kind of the consumer problems have been solved by product. In the 21st century, the remaining consumer problems cannot be so easily solved by only product. It is proven that many of the developed markets already suffering the very stagnant product sales since late 20th century. Big innovation coming from the Silicon Valley, in the 21st century, such as Apple, Google, and even the Uber and Airbnb. That is all the consumer problem solutions by internet and new business model. Today is our example of the innovation for Nescafé and KitKat as well. But this is not the end of the innovation in Japan. Still further innovation and renovation to come in the next set and a half, let me show you some. One is the matcha green tea capsule for Nescafé Dolce Gusto. You know, matcha green tea is very much different from regular brewed green tea. You may know the Japanese traditional tea ceremony because it's very hard to prepare without very skillful stirring for a long time. So people love matcha, but they don't make it at home because of that difficulty. We found that Nescafé Dolce Gusto could solve this local consumer problem by its pressurized brewing system. We have already regionally tested. Surprisingly, this matcha capsule sales is five times more than best-selling coffee item, lungo. Finally, we have the big vision to connect our several millions of the coffee machine system on the market by IoT for the future. You can imagine the aging single household already have the health risk. One day, if they have the heart attack at home, nobody can help. In order to solve this problem, we are soon launching the new barista machine with internet chips inside. Every morning, the old person living alone pushes the button of this machine. The signals goes to the mobile phone of their kids, daughter or son, living separately to know, "Oh, my dad or mom is still fine." This is interesting. It has nothing to do with the problem of the product quality and taste. Our huge penetration of the machine system can solve one of the most important and serious problem in the aging society. In summary, we identify the new changing consumer problems brought by new reality on the market. Then we're going to solve these problems by innovation beyond the product with digital and new business model. This innovation beyond the product can lead easily the premiumization without simple price war. Thank you very much for your attention. Thank you very much. Now we break for 15 minutes before we continue with the other presentations. Thank you. Thank you. I am very pleased now to introduce Ganesan. He is going to talk to us about Vietnam. Thanks. Good morning from Vietnam. I would like to share with you how we are accelerating growth in Vietnam through building our foundations today for today and today for tomorrow. First, Vietnam today. Vietnam has a population of 91 million people. It is the 14th biggest country in the world in terms of population. 1.5 million babies are born every year. 24 million households with a very young median age of the population at 29. Another interesting thing about Vietnam is there are 31 million motorbikes. Each and every household has got a motorbike. The motorbike is an extension of the Vietnamese body, and they practically do many things with the motorbike. In terms of GDP per cap, it is 2,200 US dollars today. It was 500 US dollars 10 years ago. Tomorrow, with the ambition 2030 by the Vietnamese government, they intend to make Vietnam a middle-income country with at least about 8,000 US dollars GDP per cap. The GDP remains very small at 186 billion, and it is primarily still an agri-based country. Nestlé has helped Vietnam, and I will show later in the presentation how we have made Vietnam the second biggest coffee exporter in the world. In terms of population distribution, 68% of the population in Vietnam lives in the rural areas. Moving on to Nestlé in Vietnam. Just now, Wan Ling mentioned many of the companies where Nestlé operate, we are more than 100 years old. In Vietnam, we are 21 years old. With the unification of Vietnam in 1975, with the end of the Vietnam War, most of the multinationals exited, and Nestlé came back into Vietnam post what we call in Vietnam, the Đổi Mới era. Since 1995, we have been steadily and surely investing our capacities and our capabilities in Vietnam. More importantly, we are accelerating these investments. As we speak, we have got a new factory coming on board, this is our sixth factory, and a new DC, which we hope to open next year. Our portfolio remains very narrow. We do not have the full range of the entire Nestlé portfolio in Vietnam. Milo is our single biggest brand, followed by Nescafé and Maggi. In the others, there is a significant water business and there is another big brand called NAN. How are we doing? In 2014, we grew 12.4%. In 2015, we moved up a few notches to 15.4, and this quarter, we grew steadily again at 21.4%. How is this growth coming and where is this growth coming from? I would like to share on the foundations that we have been building, namely by building our brands by knowing our consumers deeper. I would like to share a short video on our number one brand, on the work we do behind Milo. chặng đường. Bên nhau ta làm nên chiến thắng. Chúng ta sẽ đại ngận. Và ta khỏe khoắn hơn, năng động hơn. Mỗi ngày tự tin hơn. Cùng nhau ta tiến lên. Đừng ngần ngừ. Vững vàng cùng Milo. Yeah, yeah. Milo thêm năng lượng. Milo thêm kiên cường. Những thử thách trên đường dài vẫn không hề ngại. Milo thêm năng lượng. Milo thêm kiên cường. Cùng nắm lấy cơ hội này tiến lên mỗi ngày. Oh. Milo here we go. Milo, Milo let's go. Oh. Milo here we go. Milo, Milo let's go. Oh. Milo here we go. Milo, Milo let's go. Oh. Milo here we go. Milo, Milo let's go. Milo thêm năng lượng. Milo thêm kiên cường. Những thử thách trên đường dài vẫn không hề ngại. Milo thêm năng lượng. Milo thêm kiên cường. Cùng nắm lấy cơ hội này tiến lên mỗi ngày. Milo thêm năng lượng. Milo thêm kiên cường. Những thử thách trên đường dài vẫn không hề ngại. Milo thêm năng lượng. Milo thêm kiên cường. Cùng nắm lấy cơ hội này tiến lên mỗi ngày. Milo here we go. Milo, Milo let's go. We kind of succeeded in cracking the consumer code for Milo. The Milo brand has been growing steadily. We have got a product which is very popularly positioned. One of these bricks actually costs $0.30 US, so for $1 you get almost four packs. Year on year, we have been averaging more than 20% growth. We have got a winning product which is tailor-made to Vietnamese taste and consistently scoring on 60/40 and 60/40 plus, which is the NHW benefit. It is the single biggest SKU in Vietnam in terms of their flavored nutritious beverage with about 45% market share. All the activities that you saw in the video just now has been in collaboration with Vietnamese sports bodies like the Football Association and the government of Vietnam. Today, Vietnam is the biggest Milo RTD market in the Nestlé world. Moving on to another pillar of Nestlé Vietnam is Nescafé. But before that, coffee is not new to Vietnam. Being a former French colony, the French introduced coffee more than 150 years ago in Vietnam. Vietnam is a very long country. It is a shape of an S, and from shore to shiny shore, from the Gulf of Siam to the Gulf of Tonkin, it is about 2,000 kilometers. The spread of that 2,000 kilometers shows varied weather conditions and different types of way of consuming coffee. In the north, coffee is drunk primarily in the winter, and it has got relatively lower consumption. In the south, where bulk of the coffee is being drunk, it is drunk cold or other iced coffee. In Vietnam, it is all driven through 3-in-1 and 2-in-1 Nescafés. Again, cracking the consumer code. As I mentioned earlier, bulk of the coffee in Vietnam, and to be precise, 80% of coffee in Vietnam is drunk iced. You might have heard iced blended, in Vietnam it is iced melted. The consumer prepares the coffee hot with using hot water, and that hot coffee is poured over a mug of ice. The first sip of coffee and the last sip of coffee is different because the Vietnamese consumer takes more than 20 minutes to drink a cup of coffee or other mug of coffee. Coffee is not the first cup in the morning. It is drunk later in the afternoon. Based on all of these insights on how Vietnamese drink coffee, we had a challenge to crack the product that delivers the first sip and the last sip with body and aroma, liking it to close as possible to the Vietnamese soluble experience. We managed to crack the code by adding soya at the point of extraction of coffee. This Nescafé Café Việt is a global brand and locally delivered, inspired by what we saw the consumers in Vietnam want. Now I would like to take you through a small culinary journey, our third biggest brand, and I would like to share a little bit about the Vietnamese cuisine. Essentially, there are two parts of the Vietnamese cuisine: what happens in the kitchen and what happens on the table. There are four methods of preparation in the Vietnamese kitchen: soups, stir-frying, fry, and braised. For each and every one of this method of preparation, we spent a lot of time with the consumers figuring out which category opportunity that we can assign to each one of these methods. For soups, there is a bouillon opportunity. For stir-frying, there is an oyster sauce opportunity. For braised, there is a soya sauce opportunity. On the table, there is always dipping sauces: fish sauce and soya sauce. Again, through extensive consumer home visits, we have managed to now produce locally designed, locally competitive with 60/40 across this entire ecosystem of Vietnam. We have got Maggi mushroom granular bouillon to fit into soups. We have got Maggi oyster sauce to fit into stir-frying, and we have got soy sauce that makes a good companion for the braised way of cooking. On the table, we have also got Maggi soy sauce. For each and every one of these categories that we participate, Maggi is number 1. We are number 1 in vegetarian bouillon, we are number 1 in oyster sauce, and we are number 1 in premium soya sauce. Again, in all three brands, we can always say the Vietnamese consumer is different. But we spent a lot of time understanding our consumer more deeply by spending lots and lots of time to figure out what their real needs are. Moving on, we have also been building foundations in our sales and distribution. There are 400,000 outlets in Vietnam. Nestlé Vietnam covers directly 143,000 outlets today. These are direct coverage and not numeric distribution. We have a dense distributor network of 113 distributors. We cover 22,000 outlets a day with a 1,000 person disciplined sales force. Here again, I would like to share something else. Innovation doesn't exactly come on products alone or business models. It is also the way we work. The way we work in Vietnam in sales is something called the sales factory. A normal factory produces products based on a bill of materials, which has got raw materials, packaging, energy, and conversion. Each line has got efficiencies. If you take the same concepts, which is NCE inspired, and translate it into the sales factory, the sales factory produces a call. Calls is when an outlet is visited by a salesman. The bill of material in sales is the number of outlets, channels, and the various kind of turnover that we can get from each of the outlet. In production, we have line efficiency. Here we have distributor efficiency. We have daily operations review, weekly operations review, monthly operations review at distributor level, which allows us to see what exactly goes on and having greater transparency in our sales operations, and more importantly, solving problems at the lowest level possible. So with this movement in sales, we have managed to now have a direct access to more than 140,000 outlets where we can implement our picture of success in terms of merchandising and distribution. Another opportunity, which we are also, again, building foundations for, is the geographical expansion opportunity in Vietnam. Vietnam's population distribution is 32% urban, of which the 32% represents 89 cities. The bulk of the Vietnamese population, which is about 68%, live in the rural heartlands. However, for Nestlé, it is the other way around. For Nestlé Vietnam, at least. 30% of our turnover is from the rural areas and 70% urban. So we have also embarked on another program, how we start moving from the tier 1 cities to tier 2 cities to tier 3 cities, and eventually, we would like to reach to all of these consumers and shoppers by our Go Rural program, which again ensures a relatively healthy pipeline of growth in the future. Apart from building our foundations in terms of production capacity and sales and marketing commercial capability, the other thing we have also been successful in is creating shared value with our stakeholders in Vietnam. As I mentioned just now, Vietnam is the second biggest exporter of coffee in the world, the biggest Robusta coffee producer and exporter in the world. Nestlé Vietnam had a small role to play in that. Today in Vietnam, Nestlé is the biggest buyer of coffee, the biggest buyer of 4C coffee. 4C coffee is the common code for the coffee community, which is again ensuring sustainable way of producing coffee. We work closely with 20,000 farmers, and we have conducted, over the last five years, 18,000 lessons with farmers where we share the best agricultural practices in ensuring through demo plots, the farmers use less water, less fertilizer, and give more yield. Believe it or not, some of the farmers are using way too much water and way too much fertilizer and actually spending a lot more money than required. Also in this process, we have distributed 11 million plantlets which are high yielding. All of this is our way of ensuring that we also build foundations with our relevant stakeholders as a local multinational. Today, Nestlé Vietnam sits as the co-chair with the Minister of Agriculture in the public-private partnership for agriculture. We are sharing to more and more farmers how to plant coffee the right way or the best way using best practices. I like to summarize by giving four takeaways which has helped us accelerate growth in Vietnam today and will also ensure we continue this growth path in the near future. First part was on consumer insight. Milo, Nescafé, and Maggi were all driven through local consumer insights in both the product deployment and consumer communication. Second, our commercial capacity and capability is also being built that we can also reach further and further into parts of Vietnam which remains a white spot for us, especially the Go Rural program, which will give us more distribution expansion in the near future. Last but not least, we also wanted to continue to win in Vietnam as a local multinational, participating and partnering with all our stakeholders, and in particular the government of Vietnam as we progress forward. With that, thank you very much, and I will hand over to Dharnesh to take over. Thank you. Distinguished ladies and gentlemen of the investor community, thank you for coming. Mr. Wan Ling Martello, the Executive Vice President, Nestlé Zone AOA, my esteemed colleagues in the room, I bring you greetings from Nigeria. Many of you have heard many stories about Nigeria. You have seen the CNN worldview, and I thought maybe we will share some perspective of Nigeria with you. We will not labor too much the demographics. I know many of you have gone through the demographics, and you kind of have an idea what Nigeria is. I think I will highlight some of the demographics, some of the challenges, and more importantly, how we have continued to win in a market where many others find real obstacle and find real challenge in winning, and why is it that we are winning. I take you through the demographics just to paint the picture of what is our playing field. Our playing field is a large population, 170 million plus. It is the eighth most populous country in the world with many challenges. The challenges is obviously infrastructure challenges, power generation, roads, et cetera. More importantly, besides being the 26th largest economy in the world, it is the largest economy in Africa. There is a saying that if you really want to win in Africa, you have got to win in Nigeria. How are we doing is what I will want to talk about soon. The Nigerian consumer really is a reflection of Nigeria. Nigeria is a federation of 37 states, extremely diverse from the north and south. Many of you see the challenges of the northeast of the country, which is Boko Haram, the insurgency, et cetera. The southeast of the country is the oil belt. The southwest is this populous city called Lagos, where it is the young, hip social media. It is another world. When you look at how diverse the country is, how is it that we win and what is it that we have to do to win? You see on your right the income pyramid, which is quite startling for lots of people. They never realize this, that when you look at 19 million people earn over 90,000 CHF a year in Nigeria, it is a phenomenal number. More importantly is what is the base and when you go to lower middle class. Just as a reference point, we have some of our brands like Maggi cubes straddle across the entire pyramid, which makes it absolutely unique and which is why it has over 90% in-home penetration. We see massive opportunities on the top, which we will talk about later as well. The pictures really give you an idea of the different cultural Nigeria is not just a Muslim, half Muslim, and half Christian country. You have homes where in a home you will have Muslim and Christian in the same family. This view that it has a religious divide is totally untrue. What is more important is culturally people are different from the regions they come from. They are different in terms of what they consume and the dance and the music and everything else. We will talk more about that just now. We have a long, proud, somewhat scarred at times heritage. Over 55 years, you build many things. You build tangible assets, but more importantly, you build intangible assets. I think one of the reasons why we have continued to perform is that we have over 55 years built intangible assets. We have built it carefully when it was right. We invested ahead of the demand curve. I will demonstrate a lot. We have three manufacturing sites. You see the numbers. It is startling for many people that we have. We have highly efficient operations as well. A large workforce. More importantly, more than 14,000 people rely on us to have full-time labor. We are also proud that we continue to win many accolades. Governance is a key thing. I know many of you think of Nigeria as this totally ungovernable place, but governance is key in the way we run our business. We continue to win awards in best in corporate governance. We are by far the most trusted food company in Nigeria. We are always rated as one of the best places to work in Nigeria. We do things beyond just what you see in the numbers, which I know many of you want to see. Our portfolio is not a widespread portfolio. It has three pillars, two very big pillars. One is Maggi and Milo. A growing third pillar called Golden Morn, which is a locally innovated cereal, which is really spreading. What it is doing is accelerating the cereal category. We are the number one Milo powder market in the world. 80 million cubes of Maggi are sold daily. We have market leadership in all our key categories, and every week we cover 300,000 stores. It is a business that continues to evolve, but evolve at a rate where what we deem to be right for the dynamics of the markets. Our numbers show the resilience, and when you look at CAGR of 13.6 over the last five years, many of you know the economic challenges Nigeria has had over the last two, three years specifically. When you see our operating profit, on top of that you see our continued investment in marketing and trade. I think this is probably the most important number, that we are investing ahead of our revenue growth. We are investing ahead of our profit growth because we believe the opportunities are there and the brand entrenchment, gaining the equity, understanding what consumers want is key to our sustained growth. We talk about group averages, but I think when you look at the numbers below in terms of, I just look at ROIC alone, 47.8% is way above any average anywhere else. Just for some of you who may not know, it is a public listed company, so these numbers are totally public and you can go and validate whether I am just being creative in my numbers. But 47.8% ROIC is real. So it is a serious business, and we will talk about how are we stacking up against our competitors. We continue to outperform the market. Just to give you an idea, our biggest competitor is Unilever, who is about a third our size. Mondelez, who is our second-biggest competitor, is a quarter of our size, just to give you an an idea of the size, not necessarily the performance. I put in here other players in the market just to give you a context. So when you look at Nigerian Breweries, Heineken is one of Heineken's biggest markets. Just to give you an idea of what is happening broader, not just necessarily the people that play in the categories and in the playing field that we play in. Just to give you an idea of where Nestlé is right now. With a cluttered and challenging traditional trade landscape in our operating environment, we have had to evolve consistently with creativity to lead in the marketplace. This we are able to do thanks to a good understanding of our consumers, their needs, habits, beliefs, culture, limitations, and the evolution of trade. Across our portfolio of brands, we have been able to evolve different strategies and tactics to win the hearts of consumers and dominate the marketplace even as our sales team pushes to ensure we win in trade. With over about 117 million population, and a large youth population of 34%, presents huge opportunities for our business group. With a predominant population of Muslims in the north and Christians in the south, and over 250 tribes, low literacy levels, and huge cultural diversity, we employ a tailored approach, face-to-face communication to reach our consumers. Above-the-line media is heavily complemented by activation and sampling. Animating and talking in local languages helps to build trust for our brands. Product trial then guarantees future buying since people have little money on a daily basis. Since its launch in 1966, Maggi manufactures and sells, and Nigerians consume over 18 million Maggi cubes daily. This makes Maggi the market-leading seasoning brand and the most penetrating in-home food brand. We educate and empower the women of Nigeria to lead better lives. We encourage them to pass on the knowledge. Not only securing their loyalty today, but securing a nourished generation and a healthy business well into the future. With Maggi, every woman is a star. Thank you. If you would allow me, I just want to go back to the numbers because it's quite important. The performance of this year, first quarter of this year, if you look at it in context of the market, and many of you know the stories about the liquidity crunch, the challenge on devaluation, et cetera. Why is it that we continue to sustain growth when everyone else is failing? I think it's important to understand the four pillars and maybe just reflect on the numbers and maybe come back to understanding why is it that we continue this growth, is because what you saw in the video is a small sampling of what There we go. Everyone wants to look at the picture on the right. The picture on the right is Captain America. Have you seen the movie Captain America? Yes. Okay. Did any of you notice the Milo branding and the Maggi branding in Captain America? We did not pay for that. My boss wouldn't allow me to pay for it. When the producers of the movie and the directors, they shot a scene of Lagos, but they didn't shoot it in Lagos, obviously. They were too scared to do that. The question was: What is it that really is depictive of Lagos? What is a Lagos market scene? Today, some of you have visited Lagos, and you see the entrenchment of our brands. When they asked for permission to use. There's actually two pictures. One was of Milo, and the other one is of Maggi. It shows you that our brands are so endemic in Nigerian society. Our brands are really top of mind in terms of recall. It was, in a way, a validation for us when they had the movie to have our brands. The reason sustained brand building is important. When you talk about a 55-year history, you have been building the Maggi brand. Today, we have an amazing Maggi brand, but we have been building it for 50 years. It doesn't come to by doing some fancy thing today that you're going to get the kind of entrenchment, the penetration, and certainly the volumes. I think it's important that any market like Nigeria where consumers are very skeptical about new, they're very skeptical about out of pocket, because they don't have the disposable income to try new things. You have got to build, entrench the brand, you have to entrench loyalty, and you have got to build trust. Once you have that trust element, everything else starts working. Everything else we do because we are smart and we know how to do things. Everything else makes us look smarter, but actually, the smartest thing we did was sustainable brand building over a long period of time. The second thing that we do in Nigeria, which is really important in a country like this. When you have high unemployment, when you have micronutrient deficiencies that are really prevalent across. When you have, some of you would have seen, you have very low life expectancy, high infant mortality. The nutrition story and nutrition advice and the role we play is critical. So in that regard, with iron deficiency, vitamin A deficiency, 20 million households we reach with iron-fortified Maggi cubes. With our Golden Morn cereal, which is a locally innovated, locally produced cereal. It is enriched with vitamin A. In terms of creating shared value, we are doing our role, which is our responsible role. Our responsible role is to educate the Nigerian consumer what is the right nutrition, and to help fight or combat some of the micronutrient deficiencies. More importantly, what are we doing for the country? Because a lot of people come to Nigeria because it is a great place to do business, because you have a massive consumer base, but are you really entrenched in the marketplace? Entrenchment is really what is in our value chain? How are we helping local communities develop? We have a lot of programs similar to the coffee plant that Garrison talks about in terms of teaching farmers about aflatoxins on grains, improving yields. So today, we are very happy that 24,000 tons of maize purchase from local farmers. Five years ago, it was not the case, but it took a long time. We built cooperatives in order to supply us the quality that we wanted. The other thing about creating shared value is if societies do not grow, if societies do not continue to be successful, we can never be successful in the market. One of the biggest challenges of having an operation like ours with massive factories, infrastructure, is where do you get the skills from? When you have high unemployment, you have very low skills development. Education across the country is extremely below standard in most countries in the world. What do you do as an organization? One of the things we are very proud of is we continued. We cannot find engineers, so we have to build our own engineers. This is what we are doing with our training center in Agbara. Last month in April, we opened a new Nestlé water factory in the capital city of Abuja, and in the next few months, we will open our second training center. More importantly is that all of these engineers that are trained there are not necessarily employed by Nestlé. So our competitors even can take our engineers because we do not need all of them. But we believe that we have to continue to build scale. Once you build the competence and engineering skills specifically, it starts helping food manufacturing because Nigeria has the potential of being the food basket of Africa. You have 35% arable land. You just need to be able to take the agricultural products and be able to produce it, but you need the skills. I think this is something that we have been doing a lot. One, we talked about the MYOWBU program, which we are also very proud of, and we continue to expand and roll out. You have great brands. You are doing great things in terms of improving the value chain, building competencies. End of the day, what is the offering for the consumer? I think the offering really for us is about unique and affordable. I will talk about unique. Affordable is easy. Everybody understands affordable. Everybody understands that when you can get a packet of cereal for $0.25, a 50 gram cereal or three cubes of Maggi for $0.05, you understand affordability. What is unique? Why is it that we have such a competitive edge on Maggi? The uniqueness is the recipe for Maggi. To give you an idea, in the rural areas 20 years ago, 30 years ago, you would find people using a fermented soy process. They would ferment soy, and they add it to their cooking. We had the consumer insight, and we developed a Maggi cube that has a unique fermented soy. The flavor when you use it to cook is very much the traditional Nigerian way of cooking. It is interesting, much more entrenched in the North, but also that traditional that although you have a country that is so diverse and people eat and there is something that kind of unifies them, and this is that fermented soy flavoring in your food. This is what makes us have such a unique business. We have been building the brands. We have been entrenching ourselves in society. We have been building a viable supply chain, developing local skills, having unique and affordable products, and so what? The so what is how do we get it to the shopper? How do we get it that people, it is within reach? Within reach is really the challenge of proximity to shopper. When you have a 50/50 split on urban rural, when you have over 780 secondary towns and thousands of villages that some people have never seen, modern society has never seen, how do you reach them? Really for us, it is about our best-in-class proximity to shopper. Just to give you an idea, the picture with the Milo van is what we call a mobile shop, and we have been using this to go reach into areas where there are no shops, there are no open markets, or there are no neighborhood stores or supermarkets as you and I understand it to be. We believe the opportunities are there. It is clear that you have a large growing consumer base. There is an increasing demand for healthier and tastier choices. Modern trade will help us. The growth of modern trade, which is growing at a phenomenal rate, still small in context, will help us to expand some category ranges. Premiumization, as you had seen in terms of the income pyramid and local sourcing continues to be and will become an even more important key to sustaining our growth. And really with the opportunities, what is the strategy? The strategy is really still based on affordable nutrition, health, and wellness, competitive advantage for our brands, and investing in the new pillars. And investing in new pillars, when you see the rate of investment that we had ahead of revenue and profit, it shows that we continue to invest in our brands. And when you scale all of this and you look at the size of the market for us, we believe the upside potential continues to be immense. So what I've told you basically is the key to our success and continued success is unique and affordable product portfolio. It's also focusing on allocating the resources to the right ideas, because there's a temptation to want to do everything. And we've got to be mindful of the fact that it is an extremely complex market. Supply networks are extremely complex, and we cannot try to do everything that we would like to do. We have to be very measured in what we do. Creating shared value is really an enabler for competitive advantage across from a skills perspective and more importantly, from a supply perspective. And all else said, our continued route-to-market supremacy in reaching shoppers and consumers where nobody else reaches them is really the key to us accelerating our growth. I thank you for your attention. Okay, good. So I have now the pleasure to announce our next session. On the stage is Tom Buday, our Global Head of Marketing on Consumer Communication. Can you watch my phone? He's going to talk around the whole session on digital and e-commerce. Thank you. Thank you. Winning in a connected world. Is it on? Silent. We're turning it off. I will hand over to Tom now. Thank you very much. Good morning, everyone. It is a pleasure to be here. Let me quickly just introduce my colleagues, who you will hear from in a little bit. Pete Blackshaw is our Global Head of Digital Marketing and Social Media. Sébastien Szczepaniak is our Head of Sales and e-Business, and Michelle Alvarillo is in the dairy SBU. She will talk to you about Milo. The first thing I want to say is that winning in a connected world for us is very simple. It simply means leveraging digital technology and e-commerce to enhance consumers' lives, build great brands, and to accelerate profitable growth. We believe that three things are required for that to happen, three things that we need to master. The first one is excellence in consumer communication, the second one is digitally powered innovation, and the third is driving to conversion on e-commerce. This will be the structure of the presentation. I will cover the first bit. Pete will talk about digitally powered innovation with Michelle giving a deep dive on one specific innovation. Then we go to Sebastian to close with driving the conversion on e-commerce. Let us get started. I am going to share with you three examples of what we consider to be excellence in consumer communication in the digital world. Then I am going to come to the question of how we scale success, how do we build institutional capability to win at scale. Lastly, I will share with you our scorecard so that you know how we are defining winning. The first example I want to share is one that was referenced yesterday by Laurent. He talked about Lean Cuisine in the U.S. This is one of the frozen prepared meals that was struggling for a long time. We managed to turn it around. He would have shown you a TV commercial. I want to show you now the digital campaign that accompanied that. Back in the days of leg warmers and fad diets, Lean Cuisine was a billion-dollar brand. But times changed, and Lean Cuisine didn't. After five straight years of declining sales, they needed to change the very thing they were known for: diet. I want you to approach the scale. Oh, okay. Would you like to weigh yourself? You want me to stand on the scale? We asked ourselves and women everywhere to stop focusing on diet and start weighing what really matters. I am 55. I am back in college. My amazing marriage to my husband of 24 years. I was able to give my bone marrow to my sister. I wouldn't have life if it wasn't for my sister. All right, let's put it on the scale. The film got over 6 million views in the first week, and women everywhere started sharing how they wanted to be weighed. As the powerful responses poured in, we decided they deserved to be put on display. We asked artist Annica Lydenberg to put them on scales for everyone to see in New York City's Grand Central Station. In January, when there's a diet message on average every 3 seconds, we gave women the power to change the conversation for themselves with the Weigh This diet filter. It filtered out the word diet across the internet. For TV, we 3D-printed a hardware filter that hacked the closed captioning signal so that every time the D word came up, audio was muted. While women filtered over 3 million diet mentions, we donated to something that really matters, girlsleadership.org. In the end, the brand relaunch resulted in a drastic spike in sales, reversing a six-year decline. The campaign reached over 270 million people. Weigh This didn't just change the way we thought about Lean Cuisine. It changed the way women weighed themselves. I'm more proud of what I'm doing than what my weight is. Please. Mm-mm. When we analyzed the drivers of sales growth of the turnaround, it was interesting that the TV commercial was very effective, the one you saw yesterday. But it was the digital campaign that had the single biggest contribution to lifting up base volume for the brand. You may have noticed that there was absolutely no mention of product in those videos. If you ask yourself how that happened, the reason it was so successful is because we needed to do one thing very strongly before we could get consumers to reconsider the product, and that was we needed to convince them that we understand what's important to them, which was no longer about dieting and losing weight, but rather holistic healthy eating and valuing what's important in their lives. Next example I want to share with you is from a completely different part of the world. This is Maggi from the Middle Eastern region. I'll show you a video again. Too many social and cultural constraints prevent the Arab woman from doing what she wants to do, whether it is pursuing her dream or playing a bigger role in the community. Maggi Diaries wanted to show that every woman could be a force for change. Through the eyes of a real woman on a journey to discover inspiring stories of women and make a difference. Real stories of women overcoming challenges, such as Nora, who didn't give up until she got the government's approval to open her own catering company. She employs other women who are as eager to work and contribute to the community as she is. Or Om Abdel Ghani, who did not let the harsh reality of life stop her from dreaming big and turn her passion for cooking into a family business. Or even the ladies who run Mawahim, an art studio for autistic kids, letting them express themselves not only through art, but also through food. In addition to women empowerment and inspiration, Maggi Diaries elevated cooking, which still plays a central role in the life and identity of Arab women, into a tool to achieve great things around them. The results, positive sentiment and fantastic traction with consumers, creating a change in habits and an increase in consumption. Market share reached an all-time high of 84.8% for Biryani, increasing by 5%. With over 35 million views so far, engagement has reached 5 times the category norm on Facebook. Most of all, Maggi became the voice of Arab women and a catalyst for positive change while truly making a difference in everyday cooking. We talk a lot about the importance of local insights and understanding. I think this is another great example of that. Of course, we need to understand our people in the Middle East, need to understand eating and cooking habits, but this is cost of entry. This is just scratching the surface of what really has to be understood to deliver a campaign like this. This goes deeper into women's sense of self-actualization or lack thereof. What are the societal barriers in their way? Then you have messaging that has to be delivered in a very culturally sensitive manner. You can imagine if this is 5 degrees off left or right, we don't get things right, and we don't get the impact that we saw. The third example I am going to share is actually our nestle.com corporate mobile website which is a website that consumers come to visit as well as other stakeholders like yourselves. We were recently given the award of the world's best corporate website by an organization called Bowen Craggs and Company, which has an index of online excellence. They used to be part of the Financial Times, and there was an index of corporate website excellence. They voted us number 1 this year for 2 reasons. One, for functional reasons, ease of navigation, page loading time, things like that, but the more important consideration was the openness and transparency that we signaled in the section you see at the bottom, We're Listening. I will read to you what they said about the website. Where Nestlé shines in its Ask Nestlé Reputation Management section is in its regularly updated with conversational statements about current criticisms or crises. Not a lot of companies go this far in airing sensitive topics so openly." If you go there now, and I would encourage you later to go there, have a look, you will see in the FAQ section questions like, "Nestlé, do you use child labor in cocoa supply chain? Yes or no? Nestlé, does your chairman believe that water is a basic human right? Yes or no?" We do not avoid anything. We take on all the challenges that people want to ask about us. With that process, are we convincing every skeptical outsider to trust us? Probably not. Are we succeeding to shift the perceptions of reasonably open-minded people who would otherwise be negative to Nestlé? Yes, I think we are succeeding. Those were the three examples. I want to talk now about how we scale success, how we institutionalize winning capabilities across the company. The first thing we do is we have a marketing operational framework called Brand Building the Nestlé Way, which is exactly what it sounds like. Every marketing person in Nestlé, every agency that we deal with understands how we build brands in the company. This helps our people stay grounded in timeless fundamentals of successful brand building. And we do believe there are timeless fundamentals, things that were true 20 years ago that will be true 20 years from now in terms of understanding consumers, defining the essence of a brand coming up with a high-level creative idea. That is the first thing that we do. Second is we have become, I would say, fairly relentless in testing, learning, and then spreading the learning across the organization. We test a lot of things because we are big. On any given day, we probably have dozens or hundreds of experiments going on around the Nestlé world. That is not so hard to do. The tough bit is to grab the insights from the experience and spread those insights with everybody else in the organization. And it is not as simple as simply taking Maggi Diaries or Linguiço from the U.S., packaging it up, and sending it to people, saying, "Take inspiration from this." We spend a lot of time decomposing success or lack thereof and explaining the drivers of the business performance. And then we have established over the years very close partnerships with all the leading digital and social platform companies. They have resourced against us at local level, so they have people on the ground interfacing with our folks, and they can pass the learning on, whether it is related to Facebook, to Google, to Pinterest. Somebody at dinner last night asked me or expressed the view that when it comes to digital and e-commerce, Nestlé is late. Nestlé has been late. Without arguing against that, even to the extent we were late, if we were late five years ago, I think you will see by the end of our presentation that we are moving exceptionally fast now and have been for the last three years. We are not always a pioneer in trying things, but sometimes we are. We were one of the first brands to try the 360 video that you now see on Facebook News Feed. We were one of the first brands to do it with Nescafé. We were among the first brands to try Pinterest paid advertising outside the U.S. because we've had a very good relationship with Pinterest in the U.S. We were one of the first companies to move a website to Tumblr for productivity advantages in such an important asset as nescafe.com. Whether we pioneer with something or whether we're simply doing something for the first time in the Nestlé world, we make sure to learn from the experience and to share the learning. I'd like to take you now through a couple of examples for one brand in the U.S., which is all about testing, learning, and adapting. This is for Coffee-mate Natural Bliss. In the U.S., Natural Bliss is a specific sub-range of Coffee-mate. Last year, we took on the task of establishing brand awareness for Natural Bliss and convincing people that the product was, in fact, natural. Sounds like a simple thing to do, but Coffee-mate, while it's a fantastic brand in the U.S., does not have the reputation of naturalness, so we're going sort of against the grain to convince people, and we decided to deliver an online video that would really grab the consumer's attention. Let me run it. Come on in. Come on, we're serving coffee. We are the all-natural Bliss Café. All natural. Exactly. As is our creamer. The creamer only has four ingredients: milk, cream, a touch of sugar, and natural flavor. I'm sorry. Is that okay if I sit? Sure. Yeah. This is a great idea. Can I see your box? This looks great. That was the video, and here is what we learned about it. Not surprisingly, a lot of people watched the video. 80% of the impressions that were delivered we didn't pay for. They were so-called earned media impressions, which means consumers saw that, liked what they saw, and felt inspired to share it with their friends or family. That's good. That really drives efficiency up. The problem was people didn't know what the brand was. We got only a 3% lift in awareness of Coffee-mate Natural Bliss as a sub-range, and they certainly didn't understand what the product was all about. The team went back to the drawing board, and this year we launched a series of videos. Let me show you a couple, and then I'll show you the results. I'll show you one more. Oh, yeah. Now the results. The earned media ratio went down, not surprisingly. When you take naked bodies out of a video, earned media ratio tends to go down. It was still pretty high at 53%, but we had to pay for more of the distribution than we did with the previous video. But if you look at business impact, brand and business impact, we had a 23% increase in brand awareness, and consumers understood what the product was all about. A good example of testing adapting and going back and retrying. Here is another example for the exact same brand. But what you're seeing now is video advertising on Facebook. These are the autoplay videos that you see in your news feed every day when you scroll through Facebook. The spot on the upper left is the original try, which was a TV commercial that we simply put in Facebook, and we quickly discovered that it wasn't working very well, and in a matter of hours, optimized it to the video that you see at the bottom. Let me explain to you what happened. I'm going to quote Sheryl Sandberg from Facebook, who talked about it in the Facebook earnings call last month. She said, "Nestlé took their TV ad for Coffee-mate Natural Bliss, and in less than a day, edited it for the news feed by creating a new opening and adding text overlays to relay their message without the sound." That's important because when you go through your news feed, you don't have the sound on for the videos. You have to tap on the video to turn the sound on. They showed both the original TV ad and the mobile ad. The original TV ad drove a 4-point increase in ad recall. The optimized one drove a 10-point increase in advertising recall and a 7-point increase in the product awareness. I mentioned we've established very close partnerships with Google, Facebook, and others. They consequently have learned a lot about us. Here are some views that they expressed. The gentleman who looks after Europe, Middle East, and North Africa for Google recently says that he feels we've long been highly effective in traditional advertising. He has seen a shift in us that we're more agile, innovative, more digital, and emerging as a leader in the consumer packaged goods industry. Carolyn Everson, who looks after all clients for Facebook, said that we've been one of the most advanced and progressive business partners for them across advertising, research, experimentation, and capability building. This is good. It's nice to hear that, but it's not a scorecard. Here's what our scorecard looks like. It has six elements, and I'm going to take you through each one. The first one is we are spending 25% of our media through digital channels, and we estimate that to be far above the fast-moving consumer goods industry. We've been increasing it dramatically, as you can see. We believe this is right because of how consumers' media consumption is changing. Second thing is we were rated by an organization called Effie Worldwide. We were rated the best marketer in the food industry this year. Effie does something called the Effie Effectiveness Index, where they rate marketers like ourselves, advertising agencies, and brands. For the first time ever in the food category, we were rated number one. We're delivering above average impact of creative on Facebook. This is what Carolyn Everson talked about, and these are measured Nielsen brand effects studies from the U.S. We're rapidly shifting non-working media to working media in the digital channels. We're doing this by consolidating advertising agencies and by getting more efficient in how we create and share content. We're doing programmatic media buying at a higher rate than the industry, with the industry level estimated by eMarketer. Programmatic buying, for those of you who don't know, means basically automated buying, where we bring together in real time an individual consumer, a piece of creative content, and a piece of advertising inventory to optimize that experience. This depends on having data to power the programmatic buying. We see the potential for tremendous efficiencies as we expand this over time. The last thing is we regularly measure return on investment, and more often than not, we are seeing ROI from digital marketing higher than traditional marketing. This does not mean that TV does not have a role anymore. Of course, it does. We are generally speaking seeing better ROI. This is the other reason why we think a rapid shift to digital makes a lot of sense. That is our scorecard. I am going to turn it over to Pete now, who is going to talk about innovation. Thanks, Tom. I would like to talk about three complementary building blocks of innovation: internal, external, and open innovation. First, a couple of quick tweets about my background. I joined Nestlé in 2011, and this is my second tour of duty, so to speak, in a large company leading digital. My first foray was at P&G, and in between, I launched a venture-funded startup that ultimately was sold to Nielsen. I get asked all the time about, "Why did you return to a large company?" For many of the reasons that Tom just described, there is a lot of momentum here, and there is, I think, a real conviction and a will, especially at the top management level, to move fast, and that obviously is incredibly appealing. Let us talk about the first building block, the internal side, the culture side. One of the first things that we did as part of our roadmap effort was we visited some innovation hubs in Silicon Valley, for example, and we studied Lean startup and hackathon culture. Quite frankly, we were very humbled. There was a speed, an agility, a rapid decision-making that we saw opportunities, and we even liked a lot of the slogans. One of our first inspirations was to take some of this back to our center, and a number of you had a chance to see it yesterday, which is a program we call the Digital Acceleration Team. Which is, can a large company like Nestlé create an entrepreneurial startup-like space deliberately, I repeat, deliberately above the executive suite, in an an effort to really advance our agenda? Essentially what we have is a program that has three different pillars, listening, engaging, and transforming. What we do is we bring in 18 of our most promising high-potential leaders from across our markets. They come here for eight months at a time. They work in this entrepreneurial center, which is surrounded by digital data signals. There is also a content lab where they are constantly sharing best practices. Before I say anything else, let me just let some of the DAT members help to give a flavor for what we are trying to do through this. Digital is at the heart of our consumers' lives in everything we do here at Nestlé. We play our part in helping Nestlé be the recognized FMCG leader in leveraging digital and e-commerce capabilities. All this to delight consumers, enhance lives, build great brands, and ultimately deliver profitable growth. The DAT has a strong focus on rapid prototyping of business concepts in the spirit of Silicon Valley innovation outposts, especially in nutrition, health, and wellness areas. Through our program, we participate in innovation bootcamps, solving problem like a startup, and we also have the opportunity to work with our global media partners, such as Twitter, Google, and Facebook. E-commerce is not just a channel, it is a business. As entrepreneurs, we continuously need to be driven to innovate, create, and sell. We have a trusted source of real-time data and consumer insights. We aim to empower Nestlé leaders and markets to leverage e-commerce, digital, and social media. This will inspire breakthrough innovations and technologies. Most importantly, the DAT leadership program has extended to 18 different markets, with several more to be launched globally next year. After eight months journey, we return to our respective markets to help them accelerate in digital and be faster, bolder, and better. Whoo. Now, is this having an impact? Absolutely. We've graduated, over the last few years, 90 high-potential leaders that are going back to their markets. They represent, in total, 47 Nestlé markets, and they're assuming highly influential roles in those markets, accelerating the digital and the e-commerce or the digitally fortified marketing and sales agenda. As the video notes, and we didn't anticipate this quite frankly, over 2 dozen markets have mirrored the model. It doesn't mean they call themselves a DAT, but the notion of a more startup entrepreneurial environment, it's starting to push very aggressively, and of course, we're benefiting from those learning. Now, importantly, and this is what really gets me very excited every day, is that they have. In the last few years, they've cranked out about 200 hackathons, and these are fast problem-solving exercises against increasing the strategic opportunities, where it might be a couple weeks where they're literally making strategic recommendations in key areas. Let me give a couple examples to give you a sense of how this plays out. So they came up with an Uber of kitchens. The last DAT came up with the notion of an Uber of kitchens, and they asked themselves, "Can we better leverage excess capacity of physical assets, leveraging digital capability as we embark upon more scaled advantages in content?" As we know that we need to produce more streaming video or recipes, and we're pushing that right now. They developed a mobile plan for traditional retailers in Central and West Africa that involves messaging and on-ground activation, and we're pushing that. We're putting that in play. They work with Nestlé Health Science to propose partnerships for providers addressing issues in obesity, aging, and general health. You get the idea. 200 of these. These are the things that we think are not only moving the needle, but inspiring other leaders to accelerate. So we're very proud of this program, and it's continuing, and we're continuing to iterate it. Now, clearly, you can't do enough inside Nestlé. You have to be in the trenches, in the startup hubs, and there are many out there. We recently established a Silicon Valley innovation outpost just a few years ago. It's very closely aligned with our strategic priorities around nutrition, health, and wellness. It's had a really big impact in a short period of time, and we're continuing to invest in it as we get results. Some of the key areas that we're putting attention in include the obvious nutrition and food solution. There's a lot of activity there, and we need to be close to that type of activity. Enhanced brand experiences, Internet of Things, we know that's a big area we have to play in, we have to win. Then, of course, Everywhere Commerce, and we'll hear much more about that in a few minutes from Sébastien. But what's great about this is that with relatively few resources, we've kept it very lean. We've identified a number of high-potential solutions, and we've scaled quite a few of those. In fact, part of what's on my performance evaluation is to really deliver a lot of these new service models. Now, we're working with a large ecosystem of partners from VCs to other entities. A good example of one Patrice mentioned yesterday is the Institute for the Future. They're based in Palo Alto, and they're helping us map out a 5- to 10-year forecast in food and nutrition, especially as it relates to digital natives, which is 19 and under. That's where a lot of the very important trends are taking place. Of course, that data, that trend analysis, will help us to optimize and make some big choices around product portfolio and the like. Now, one thing that we have learned is that in today's environment, you simply can't compete on product alone. All manufacturers are challenged to think about how do you wrap service, experience, more transparency around physical products. This is the obsession of the Silicon Valley Innovation Outpost, and we're spending a lot of. We're starting to make some real headway. I'll give you some examples. We're starting to work with some fast-moving startups that are working in the kind of the personalized messaging space to help parents navigate their journey from parenting onward. We're working with a number of players, too long to list, in the food delivery space. There's been a massive amount of activity, and we're piloting a lot of this, and we're going to figure out what works, what doesn't, and the like. We're also trying to incent more above-market activity. When you get in the service model, sometimes you have to think above the brand. We've created an internal venture fund, if you will, at the strategic business unit to incent above-market solutions that can better partner with some of these players that are out there. Now, let's bring this to life. Seeing is believing. Let me ask Michelle to come up and give us a sense of what we really mean by a service model that sits on top of the core brand. Michelle? Thanks, Steve. Good morning, everyone. I'll just share a few slides with you on Milo and the program before I share with you as well a short demo of how it works. Milo is our leading cocoa and malt beverage brand for children, and it is widely recognized for its nourishing energy benefit platform, as well as advocacy on grassroots sports development for children. The brand believes that good nutrition, along with physical activity and life skills learned through sport, help kids develop holistically. The Milo program aims to enrich consumer experience by providing nutritional advice, world-class coaching, and monitoring, layers of service that can now be easily accessed simply through the Milo app. It also comes with a wearable device that has been specifically designed for children that acts as an activity tracker and syncs directly with the app. The program is fully integrated with our grassroots sports initiatives that have been running in these markets for decades. What we are doing as well is further enhancing consumer engagement through sports tips and inspirational stories delivered through augmented reality that can now also be accessed by simply scanning the Milo pack, also through a button that you will find inside the app. All told, it is an integrated and immersive experience for parents and kids with tools and services that ultimately demonstrate Milo's commitment of helping parents bring out the champion in every child. Here is a short demo of how it works. The Milo Champions app includes a health, fitness, and activity tracker designed to help children make the most of every day. Once the app is downloaded, it is a simple 2 clicks to get started. Here, you can track your child's nutritional intake along with their physical activity tracked by their Milo Champions band. Start by adding the meal plan for your child for that day or week. Select a day from the top and tap on the Today's Food button. Choose a meal category: breakfast, lunch, or dinner. Select a food or meal type and tap the check button to add this to your child's food plan. An algorithmic search assists consumers with finding food quickly and easily. You can also choose the portion size in order to assign the correct intake for your child, which feeds into the energy balance landing page. Parents can reward their children for being a little champion, and encourage them to keep up the good work by sending them medals with personal messages. When a child starts using the app, they can customize a 3D avatar by changing features such as hair, outfit design, and accessories by tapping on the feature they want to change and selecting from a range of options. The Challenge Corner provides kids in the program with a way to interact with their friends using the leaderboard feature. The augmented reality module enables consumers to use Milo packaging as a form of media channel. Just aim and shoot the selected Milo packs to access world-class sports coaching tips. In this training series, we will be demonstrating awesome sports skills and tricks that, along with a nutritious diet and the right sporting values, help you become a Milo champion. Each of our sports skills has been handpicked by top athletes and coaches from around the world to give you that extra edge. Are you ready to join the Milo Champ Squad? Let's get started. As Tom had mentioned earlier, we have also taken very much a test, learn, and share approach on this one. Over the past year, we have done three pilots in three different markets, each time adjusting, modifying the user experience design, and now we are at scale, launched just over a month ago in Australia, and so far the results have been encouraging. The level of awareness that we have reached so far has been largely gained via earned media. The plan is now to roll this out in the rest of the Milo markets, particularly in Asia and Latin America. Also, lastly, we provided each one of you with a Milo Champions band. I think it's in your bags. I invite you with your kids to actually experience the program for yourself. Of course, feedback is most welcome. Thank you, and back to you, Pete. One of the things I love about that example, when you think about Nestlé selling 1.2 billion products every day, you realize how digital can really enhance the value of things like packaging, really kind of add extra value, and that's something that we're looking into. A couple final notes on external innovation. We're organizing for success. In July, we're going to open up our first innovation office in the Silicon Valley, actually in San Francisco, in partnership with Swissnex, with a consortium of other Swiss companies. We're also, in case you're thinking, oh my gosh, too focused on Silicon Valley, we're also trying to build an ecosystem of other innovation hubs. Every time I talk to Wan Ling, we're always talking about how do we tap into the Chinese entrepreneurs that are clearly shaping the environment. I spent a day in Berlin looking at the food startup world. We're going to try to create a very robust ecosystem of anywhere there is innovation that is of material impact to Nestlé, we're going to be there. You may also be wondering about what about investment. You may recall a couple of years ago, we acquired Petfinder, which is one of the world's largest online pet adoption services, a classic service layer. We're looking into the issue of strategic investment and exploring a number of different types of models. You'll hear more from us on that soon, I hope. The last area I wanted to cover is this area of open innovation. And what we're going to be doing in June, we're going to soft launch our first-ever online open innovation platform, and we're calling it HENRI@Nestlé, appropriately in honor of our first innovator. And what it's going to do is enable the rapid sharing of ideas, creative designs, and solutions in response to stated business challenges. And we're trying to figure out different mechanisms of bonding with this very important entrepreneurial and technology community that's out there. And what I'd like to do is give you an example of how this will look. This is kind of the first sneak preview and the philosophy behind it. One of our goals is to make this really simple for entrepreneurs. Just a couple clicks, highly mobile-centric. We'll have archives of case studies to give them a sense of how the process works. They'll know the timeline of when they have to get their pitches in. We're also going to put a huge emphasis on putting a much better human face on Nestlé. We'll hold our managers accountable by having them input it into the system, whether through video testimonials and the like. We'll also have a section within the platform where every entrepreneur can set up a profile, and that we think that will lead to all sorts of opportunities within Nestlé. Our goal is to turn this into our lead collaboration platform, and we've learned a bit from some of the other models that are out there. But we think combined with the business opportunities that Nestlé brings to the table, we think this is a big win. And to the earlier point, we heard about this balancing agility and stability. We know that we can bring a lot of stability to these startups, and we want to use this type of platform to make that value exchange very clear. Now, final point is that how do we connect the dots? None of this matters at all in a radically decentralized company unless we connect the dots. And what we're trying to do is ensure that we maximize sharing and collaboration within Nestlé. So, for example, this started as a DAT hack. We've created one of the largest internal social media networks with about 200,000 users and about 50,000 active users, and that is ensuring that where there are local case studies that can accelerate innovation, we're circulating that in a very smart way. We still have a long way to go, but I think it's a critical step to kind of making that so-called innovation trifecta come together. The last comment is that we're just getting warmed up. We deliberately named it HENRI@Nestlé to remind us that we've got another kind of 150 years to think about. Thanks for your time, and let me now introduce my partner, Sébastien. Morning. My name is Sébastien Szczepaniak. I am the Global Head of Sales and eCommerce, eBusiness at Nestlé. Started my career at P&G, spent 16 years there, marketing, sales, market management as well, before moving to Amazon, where I was leading the consumables business, FMCG business in front, then moving to Europe, working on special projects like Pantry Fresh or the grocery deployments in Europe. Joined Nestlé 1 and a half years ago. Let me start with a quick snapshot on where we stand first with e-commerce. At the end of fiscal year 2015, e-commerce is already 3.9% of Nestlé group sales. Should e-commerce be a Nestlé market, actually it was at the end of 2015, the fourth largest market of Nestlé in size. I can tell you that end of quarter one 2016, now the number 3.9 is 4.5. 4.5% of our sales is growing over 20% year-over-year. When it comes to e-commerce, the entire FMCG industry is facing two key challenges. The first one is this one, and this is the consumer journey. It is getting more and more complex, multiplying touch points off and online, before and after purchase. That is number one. Number two, it is true that e-commerce lowers barriers of entry for new competitors, for small ones especially. That is triggering SKU proliferation, a challenge for well-established brands and suppliers, manufacturers, to get our fair share in the online business. To cope with these two challenges, actually our strategy is extremely simple. We want to lead online engagement, and we want to lead conversion. We have got more than 20 projects running in parallel from the center, from the HQ here. I am going to deep dive, focus on only six of them, for the sake of time, of course. I am going to start with what we call lower funnel content. What is the content needed to win online? Lower funnel is as well also about our strategy of communication. That is going to be the number two. We want to shape the industry when it comes to mobile commerce. I am going to give you details. We are creating that ecosystems of partners as well to win in e-commerce. I will give you examples and a few business cases. Then I am going to the execution strategy, how to make it happen in the world of Nestlé. Last, I want to give you a glimpse in the future. I am not going to showcase any slide here. I am going to do a demo on my mobile, my own mobile phone, that you are going to see on the big screen. It will be about how to revolutionize purchase and consumer data acquisition in the coming months and years. Let us first start by content. The difference of engagement and conversion between good and bad content can be between 10 and 15 times. E-content means what? E-content mean brand visuals, videos, tutorials, computer-generated images are the one you can see here. But it is at SKU, at product level. This is lower funnel content as we define it. It is very close from the purchase act. It is an absolute prerequisite to win online. We do not expect to do business online without this. We started this journey a bit late, but we started in 2015 with running that process of eContent for 10 global brands of Nestlé. 15 will follow in 2016, but that is not enough. This already represents 70,000 digital assets ready to use plug and play for markets, but we want to go a step further. Let us separate this one, the eContent factory that you see. The idea is very simple. That is a global and above market level service to run creation, aggregation, customization, and distribution of our eContent to our partners, being pure players, bricks and mortar, brand.coms, all digital partners. This is under our pilot phase today, and this is going to be live, up and running for all Nestlé markets in 2017, beginning of 2017. Number 2, touch points, conversion rate, lower funnel media activation. We said that 25% of our total media budget ends up creating digital connections, touch points between Nestlé brands and consumers. As a rule, 20% of all the digital connection we create through media campaigns have to be inclusive of a buy now, shop now, call to action within the campaign itself. You see examples here on my slide on the right-hand side. When you click on the ad, you will choose from the retailer you want and be directed to its website to complete the purchase. That is good. That is fueling our growth. I want to be very clear on this. This is not about implementing a buy now button or technology. No. That is about deploying a marketing framework that we call lower funnel media activation to empower our businesses and media agencies and partners, to be frank with you, in implementing buy now call to action to relevant target audiences. Thanks to our scale, and this is where scales play a big role. Of course, that can be a massive revenue generator for us. Our personalization is in 2 steps. The first one is Nestlé website. That is a pretty easy one, because the audience is pre-targeted, of course. We already cover 70% of the traffic through our Nestlé websites worldwide with a buy now call to action. We are now moving to our media campaigns, paid media campaigns. Number 3, I said shaping the industry in mobile commerce. To me, that is very simple. Mobile is already 50% of the traffic, online traffic. It is going to be soon the first device for commerce. Quick question when it comes to mobile commerce is the balance between engaging content, but not too much, and good conversion rates. That balance we have to find. We collaborated with some, let us say, more advanced industries in mobile commerce, like electronics, the clothing industry, to create that global engagement platform, following a simple 4-step approach that you see here. It is discover, show me something new. It is learn, tell me more about a product. It is inspire, give me a new idea, and shop, make it easier to purchase. We do provide the marketing framework together with a technology backbone, for fast implementation purposes. It means that any business of Nestlé, any market of Nestlé as of today, can go and sell online via this app in less than a quarter, just the time to curate their content, make it through the mobile engagement platform, and go online. Nestlé USA and Infant Nutrition will be the 2 first markets and businesses to go live with that mobile engagement platform in Q3 2016. Number 4 is creating a winning ecosystem of partners. We were the first to sign a global Amazon Media Group agreement worldwide a few weeks ago. We were the first to launch an exclusive super premium chocolate product in 4 markets at the same time with Amazon. That one has been launched and is commercialized right now in 4 markets, U.S., U.K., Germany, and China. Here is a short video. Actually, it's Cailler. So one click away. We are piloting advanced e-commerce solution with our partners like Google or Facebook, as you will see in a minute. As well, we will be commercializing 50 different brands of Nestlé on our Tmall Alibaba 150 years Nestlé anniversary store, opening very soon now. This is a good transition link to me to discuss about the execution strategy. Our execution strategy is very simple, and is respecting the decentralized DNA of Nestlé while empowering markets or businesses, differently than what we used to do at Nestlé. Actually, you see 3 layers of activation. The first one is at market level, okay? My team spends 60% of its time supporting implementation of our group strategy in the markets. We call this the e-business flywheel, okay? It covers all the streams of work. It comes with tool, processes, organizational support, and so on and so forth. You see 2 additional layers here. The first one is about local brands, global expansion. That's in a way, the example of the Alibaba store that I have just showcased. As well, the last one is the example of Cailler, where we build new brands, new ranges we create first for the online business before going offline, and it is globally commercialized. That's the example of Cailler. Now I want to move as my last building block, to the Nestlé Smart Buy. So we said Nestlé invests globally 25% of its total media budget digitally. 20% of that media investment will directly drive to purchase as per the strategy number 2 that you have seen. By doing this, we are sending traffic massively to e-retailers. That's good because this is where consumers do 90% of their online shopping today. This is fueling our growth, but this is also an increasing challenge for us, like for the industry. Why? Two main challenges. The first one is conversion rate. How to ensure a good conversion rate agnostically from the e-retailer that is chosen by the consumer, especially on mobile, and we know that mobile is the future. The second issue is ownership of the first-party data. As traffic that we get, we send it to e-retailers along with the full consumer data ownership. We know that consumer data, especially first-party data, is a goldmine of tomorrow, if not of today. So let me introduce you to the Nestlé Smart Buy concept. I'm going to do it live. I'm going to connect, and you should see my screen on the big screen now. It's going to be live. So this is actually my screen. This is my mobile. Let me introduce you to the Nestlé Smart Buy. This is a very simple concept, yet a powerful one. It is based on artificial intelligence and machine learning. It is a blend of technology and very advanced processes to make the purchase frictionless from any touch point. You are not going anymore to an e-retailer to do your purchase. But you see the offer from the e-retailers. And it is a collection point, a data collection point for Nestlé. Let us go. I am going to go on Facebook as an example. That is my real Facebook, okay? You see my real. I am a cycling fan. Cannot hide that. But you see in my feed, that is my real feed. You see an ad, actually, an ad for Purina. Let us assume that the lower funnel media strategy that I showcased, as a strategy number 2, has been well done. So I am a pet owner. I got a dog. I know Purina. I am very interested by that ad actually, because that is a great offer, okay? Let us assume that. How does it work today? Today, by clicking on the ad, I would choose an e-retailer to buy that product from, okay? So I will go to the e-retailer website and potentially close my purchase, close the sale on the e-retailer website. Three issues. First one is that it is too many clicks. Way too many clicks to go to do my purchase. Two, we give conversion a chance, okay? We are sending traffic to e-retailers. Can be good experience, can be a bad experience. So the conversion rate will vary a lot from one e-retailer to the other. The third one is consumer data. We are letting the consumer data go to the e-tailers, which is an issue. Now with the Smart Buy, it is a bit different. I go on the Smart Buy, I click on the Smart Buy. I have clicked on the ad, and I do not go on the e-retailer website. I stay on Facebook. I am still on Facebook. What I see here actually is exactly what I would like to see in terms of connection. So you see here, I can buy the product from, I will buy it now, that product. I will enter my details here, and then I will click sign and place the order. So by doing this, and I am not going to do it, but by doing this, we lock the consumer in our database, and we are making available the purchase of that product from the Nestlé Smart Buy platform. What does it mean? It means that the Nestlé Smart Buy will act, we can get back on the slide. The Nestlé Smart Buy will act as a personal assistant, shopping assistant. The Nestlé Smart Buy will go in the back-end process of the e-retailer you have chosen, complete the purchase, okay, and confirm the purchase for you. I want to insist on a few things, and that is the conclusion. I am not going to leave Facebook. You see here that I was on Facebook. I will remain on Facebook. I am not going to leave Facebook and go to a retailer website. It works exactly the same from any touchpoints we create via our media campaigns. Can be Facebook, can be Google, can be Twitter, can be YouTube, can be any social platform. It works for one single buy. As you have seen here, it is one single buy of Purina. It works as well for multi-purchases, multi-products. I can build my basket, add to my basket, and when I am ready to buy, I will buy. It is a question of days, of weeks, no matter the timing. You see here that it is not a mock-up, it is a prototype. It works with few SKUs and few e-retailers only. It is obviously a game changer that would fix both conversion from our touchpoint and collection of first-party data at scale. Many industry players call it social commerce right now, but they do not know how to do it. To me, this is ultimately using e-retailers as only supply chain providers, which is very interesting to us, but keeping control on all the rest. We will be piloting that concept now in a few markets of Nestlé. Actually, it will be U.S. and Japan. Upon results, we are going to roll out potentially at the end of the year. Thank you. That is the end of the presentation. Five things we would like you to take away. We have the aspiration to be the industry leader in leveraging digital and e-commerce to enhance consumers' lives, build great brands, and accelerate profitable growth. We are performing ahead of industry peers when it comes to driving brand and business impact on key social platforms. Our culture very much encourages and enables rapid testing, learning, and sharing, and then scaling success across all of the platforms. We are shifting rapidly to an open and collaborative innovation culture powered by digital technology. Lastly, we are actively identifying digitally powered service layers on top of our product brands. With that, I say thank you very much. I will- Good afternoon, ladies and gentlemen. Do you hear me? It is okay? It is fine. After lunch, I hope I can have a lively session with yourselves. It is a pleasure for me to be here. I took over this job last October from José Lopez, whom you might have seen five years ago. 2011 was the last time operations presented in this forum. Let me start, a bit about myself, 2 minutes, because I am kind of the new kid on the block at the executive board. This year is a bit special for me because it is the 150th anniversary for Nestlé, and it is my 25 years in the company. Not quite a veteran like Patrice and others yesterday, but a bit older than others as well. I am half Swiss, half Lebanese, born in Cairo. Raised a lot of interest yesterday. When people saw my name at the table, they wanted to know exactly where I come from. I had to repeat the story three times, unfortunately. I started my career in Nestlé, here in this building. I am an engineer and a PhD in thermodynamics. When I started, one of my first jobs was to establish the environmental footprint of our manufacturing worldwide throughout the sites. I moved, of course. You can see the flags of the various countries I have operated in. I have been in factories, I have been heading operations in markets, and my last job before taking over this one is our CEO for the business of Nestlé in Pakistan and Afghanistan. Naturally, as it was close to my heart, the first thing I did when I came back to this job in October last year was to check where is it, what is the state of the nation, what is our manufacturing footprint today, having kind of left the job in the center for 25 years. You can see the numbers there. In 1991, when I started, I had to deal with 438 sites from an environmental standpoint at that time. Today, end of 2015, we have 436 sites. We have opened, bought, sold, but also closed, for example, closure alone, 298 sites. Whilst, of course, during those 25 years, our sales have doubled and our production volumes have actually tripled. That to me was a nice reflection because actually it shows our ability to still be nimble and to be somehow agile, to adapt, of course, to ever-evolving circumstances out there. Maybe we are not part of those who stand up and shout those types of things on the public place. But for me, it was a sign that we have been doing kind of our job over many, many years, day in and day out. Of course, that is part of our DNA because we come from a continuous improvement mindset. We called it operational excellence. Over the last many years, it started in 1997 when we introduced the first initiative, and then it has evolved towards something that you are more familiar with, which we call Nestlé Continuous Excellence. It is part really of our DNA to kind of have those ongoing savings to be able to support the business growth. What is NCE about? It started in operations, and as you can see today, these are impressive numbers of people on the shop floor and beyond, but still in operations, that are involved in problem-solving. These are simple things to more complex Six Sigma, DMAIC, white belts, green belts, black belts. We have today 30,000 people in operations involved in those methodologies. Also that generates a lot of initiatives and of course, that helps have projects for savings. Today as we speak, that is a snapshot at the end of 2015, we had 27,800 continuous improvement projects and initiatives. But for me, NCE in operations is more about the shop floor. It is about the people who are working close to the lines. Allow me for a couple of minutes to show you these most important people, what the shop floor does and what the shop floor thinks about that. We have about 110 sites today that are on TPM. I will come back to that in a few moments in the presentation. Of course, those are reference factories as well. We are proud to send people from throughout the Nestlé world to those reference factories for them to learn. If you ask me what NCE is about, for me, it is about going to zero. In operations, we believe in zero. When we have developed that operations diamond, all the facets of the diamond, it is about going to zero. Some other companies have other names for those types of initiatives, those types of budgeting methods. We call that NCE within Nestlé. It is a mindset. Let me get you through every one of those facets or every one of those sides of the operations diamond. We will start with safety. What have we done over the last 8 years since NCE started? As you can see, we have reduced the number of recordable injury. We define that as the number of incidents per million hours worked. This year, 2016, the target is 2.3, and we are confident we will get there. This is a huge improvement compared to what we had in the past. Of course, we are not perfect. Of course, this is a journey. This is not an end by itself. This is a roadmap which continues for safety, but also for all the other elements you will see in a minute. If we talk about quality, the perception today from the consumer, maybe your perception in the room might be that our quality is not under control because we hear more things. Why? Because simply we have digital, we have social platforms. We have people taking a picture of something that they do not like, putting it on Facebook or sending it or tweeting, and then very quickly you have hundreds of thousands of people commenting on that. The reality is that when it comes to quality incidents, we have managed to reduce, this is an index on 100 by 65%, our quality incidents, since 2008. Whilst of course, our production volumes during the same period has increased by 27%. If you look at eliminating waste from our value chain, we have OPEX. Here I have chosen only to put you not the total operation excellence savings, only the cost reduction, savings, which are the net cost reductions. So this is without the so-called cost avoidance piece. As you can see, we were around CHF 800 million 8 years ago. Today, we generate around CHF 1.5 billion, CHF 1.6 billion net savings year on year. That is also about eliminating waste. We have commitments, which you will see in a minute on all the aspects of sustainability as well. If you look at delivering the right product at the right time, we talk about case fill rate, and this is vis-a-vis the customer, our customers. This is the number of cases that we deliver, in line, in full, on time. These are real numbers. So we started at 96.5% case fill rate. We have today on average as a group 98.4% case fill rate. In the month of April, which is very fresh, just to give you an idea, we have 10 top markets which have achieved 99.5% case fill rate. We have 126 businesses in Nestlé that have achieved zero case failures also in the month of April. That is just to tell you that this is not stopping there. Although the numbers are 99 plus, we are tracking every single case we are missing, and that is again, a journey. Also, we look at external benchmarks. How do the people outside rate us? Recently this week, Gartner has published the ranking for our supply chain. Very happy to have improved. If you look at our ranking back in 2010, we were number 33. Not something that we should or we can be proud of. If you look at the ranking in end of 2015, we have moved from the 33rd position to the 10th position. So finally, we are amongst the top 10. Are we the best? No. Is there room for improvement? Of course, yes. But what Gartner also has assessed is that we are amongst the FMCG companies, because that ranking is total companies, it is not only FMCG. But Gartner has assessed that amongst the FMCG companies, we are the most improved company over that period of time. So you could think that we deliver to the customer, you could think after what you have seen yesterday around innovation, that actually we are mushrooming our SKUs. That would be the natural tendency to conclude that. But actually, that is not right, because also in SKUs, we have driven those downwards. Nearly 20% reduction, this is an index of 100, over the last three, four years. Just to give you an idea, between late last year, I know that because I just took my new job, as I told you, in October. Between late last year and early this year, we have reduced by a further 4,000 SKUs. So this gives you a bit an absolute number, what we have done. We are looking at, of course, sales threshold and everything to drive the stale of SKUs, which is adding complexity without necessarily bringing sales, actually, and growth to the company. So we are very conscious of that as well. On environment, which is the last piece of this diamond, you can see impressive results. It is all indexed 100. This goes back to 2005. Why? Because on sustainability, all the external world judges decade after decade, because they compare us also to other companies. So we have kept that 10 years cycle. You can see a reduction in wastewater, reduction in greenhouse gas emissions, reduction in energy, reduction in water consumption. These are per ton of product, but of course, this is why production has increased by 42% over the last 10 years. You can see, except for energy, which is flat, a bit up, all the others in absolute numbers have also reduced in spite of this 42 massive increase in production volumes. We have also made commitments for the future. So by 2020, we will further reduce water and energy by respectively 40% and 35%. We have also made public commitments, as you know, to go to zero waste, solid waste to landfill by 2020. Actually, a lot of our sites are already there. We link all those commitments to the Sustainable Development Goals of the United Nations. We have, as we speak, 39 of those commitments linked to the SDGs, and we then engineer this backwards to be able to put in place a list of activities that will allow us to achieve that. Our creating shared value efforts are also recognized, and here I would rather talk about what others talk about us or what others tell us. We have had the number one position from the Carbon Disclosure Project organization. We were number two in the nutrition index, number two, Oxfam, in the ranking behind the brands. We are FTSE4Good certified, as you know, for quite a number of years now. We are number one on the environmental dimension of the Dow Jones Sustainability Index. The spider will show you where we are compared to the best in class, as seen by the externals, and also will show you where we are compared to the inner web, which is the industry average. Of course, we are not benchmarking ourselves with the industry average, we are benchmarking ourselves with the best. That is not something that happens overnight. That is something that is the fruit of a lot of years, at least 10 years, if not more, of really very much hard work to be able to get there. A lot of what you saw, we talk about operations, but actually, a lot of what you saw cannot happen only in operations. If the businesses are not behind that, if the businesses are not part of that zero mindset, then this is not going to happen. Indeed, recently, about a couple of years back, NCE has been with the launch of Nestlé Business Excellence, and my colleague, Chris, will talk about this a bit more in a minute. We have, of course, spread NCE beyond operations, and we have implemented NCE throughout the company. Yesterday you had some numbers, I think from Laurent Freixe in Zone AMS. He mentioned about at least 100 businesses, full value streams that have embraced NCE. He mentioned also goal alignment, which is aligning the goals of the organization, cascading objectives, and escalating issues. He mentioned that that is now implemented throughout his zone. Let me give you a few testimonials of what this is outside operations and why people do it outside operations. We decided to start NCE in the nutrition business unit in ZAR, really to find a competitive advantage. The marketplace started to become more and more intense, and although we lead in all three segments in which we play, we realized we needed to realign, to refocus, to change some processes to really get that competitive advantage and to keep it. I think NCE helps a lot in terms of Making sure we focus on the right priorities and making sure that we follow the right KPIs. It help us have a transparency on how are we doing and what can we do in order to improve or correct when we are not achieving the KPIs that we have selected beforehand. The business which I was handling was actually going through a phenomenal phase. We were selling like anything. All the KPIs were in the right direction, and frankly, there was no need to do it. But I realized that as the business was expanding, we needed sustainability in the business. And that sustainability, I was not able to find the right kind of tools for that, and I did not know anything about NCE. Between that period, I had opportunity to visit one of the markets which was already on the lean journey, and that was the instant click, because I knew that if we had alignment, if we had an aligned value chain, we will be able to get through all the difficulties which will come. And I knew with the competition coming in, there will be a lot of difficulties. Our Nestlé Continuous Excellence and our Creating Shared Values have provided, and I guess are still providing, this foundation, this long-term stability for the company. Now, the question is, are we happy with what we have done? Of course we are, otherwise we wouldn't have done it or we'd have changed something. Are we satisfied? No, we are not. And the reason we are not satisfied is that we believe this is not enough. We believe that the world out there has changed drastically at a fast speed, and we need also in operations, and I'm talking about operations now, we need to do something more. We need to accelerate further. Hence, this image that I want to share with you, NCE and CSV are the foundations of what we do. And we still need to take care that we continue with those foundations. But we need to have a single focus mind now, what I call boosters or accelerators, that will allow us to be more nimble and to react faster. I will share with you four of those today: procurement, asset intensity, category focus, and digital in operations to prepare operations for the future. Let us start with procurement. On the right, you have the way we are organized today, global, zone, and local, and we want to move to above market and market. It means that a lot of the decisions we would take above market, which is not the case today. This will enable us to leverage better our skills, but also to leverage better our scale or size. This is about buying better and cutting cost. Buying better, not versus what we used to do before, buying better versus external benchmarks. The same way I showed you external benchmarks for the other parts of operation that I shared with you earlier. This is about implementing a one procurement model company. We have today Nestrade, which is a trading services company. We want to add a leg for procurement. This will enable us to be also more flexible because it is a two-legged operation with still local for local when it matters. We talked a lot about flexitarians. We talked a lot about the new consumer yesterday. We talked a lot about the need to buy smaller ingredients, maybe, that will be provided with this new structure, whilst also we have the structure to leverage scale above the market. That is the first accelerator, and we believe that we have around CHF 0.5 billion of savings for the coming three years coming from that. That is starting just now, and it is the three coming years. The first year will be kind of a setup of it, hence the numbers are what they are for the time being. The second accelerator or booster is better sweating our assets. This is throughout operations, not only in manufacturing sites. We call that asset intensity. On the right, you have a small graph that shows you the evolution. We have already gained over the last year about 9%, 9%-10% on an index of 100 of asset intensity on average throughout our 436 manufacturing sites. The plan is to gain 30% of asset intensity by 2020, and this is about reducing conversion and distribution costs because we are going to do it throughout the value chain, as I said, not only in manufacturing. This is about looking at our industrial footprint and optimizing this industrial setup. Of course, what is this about in a bit more details? It is about cutting unplanned stoppages, cutting breakdowns. The line should never stop, even more than what we have today. That has also a benefit for safety, for quality of products and services, and for the environmental footprint. So it is a win-win from all angles, and it will further enhance the graphs that you just saw earlier on environmental sustainability. If you look at, and sorry, the benefits over three years, we look at around CHF 1 billion coming from only the asset intensity piece. To do that, apologies, we are still on the second accelerator. To do that, a bit more details on how we accelerate that, it is through TPM. It is one of the tools. You saw a couple of operators referring to TPM, which is Total Productive Maintenance, like the Japanese call it, or Total Production Management systems. Today, already, you can see a gap. The lines that are not on TPM are lower. All lines in Nestlé, we are around 100 on asset intensity on an index of 100, and the lines that are on TPM already today are on average 11% higher than those lines which are not on TPM. On the right, you see an implementation plan which will guide us further by 2020 to have around 90% of our lines on TPM. We have around 6,500 lines today in the Nestlé Group, and we aim to have 80%, 90% of that on TPM by 2020. That's the plan for the second booster or second accelerator. The third booster, yesterday you had a very good view of that, I guess, with Stefan's presentation, Stefan Catsicas, as well as Patrice Bula's presentation. They showed you that category focus in innovation. What they covered mostly is the discover and develop part. What I'm trying to cover with you today is the deployment part, because of course, operations will be needed to make this happen. That's about implementing the category focus into deployment, into making it happen in the factories, into executing it in a flawless manner. That is going to accelerate our manufacturing performance improvement, let alone the planned stoppages where we have changeovers. This is about also allowing more flexibility, changing over more to allow for more innovation and also reorganizing the footprint. That is about increasing the speed to market, basically, because without operations, you can have a fantastic discover, you can have a fantastic develop, but if you do not have a flawless deploy, then your product is not on the shelf of the supermarket or in the trade or in e-commerce or wherever. So that's about making it happen to be faster in getting new products on the marketplace. The cost here is more of a cost avoidance cost, is about CHF 1 billion over the coming three years. The fourth and last accelerator I wanted to talk to you about is digital in operations. It is preparing the factories and the warehouses and the logistics and all aspects of value chain to the future, to be fit for the future. This is about the Internet of Things, connectivity. This is about advanced analytics, advanced robotics, augmented reality, wearables, and 3D printing. This will go through a stronger enforced standardization, also above the market, to be able to allow our equipment to be ready for the future. We leverage disruptive technologies. We have already started with few pilots in few manufacturing sites, as well as in few DCs to prepare that. Then this will work, and we will then duplicate the learnings, and we will be able to scale up once we have experimented a bit of all of this into those pilots. Traditionally, we have been known in operations to be behaving a bit like the farmers we so much love and that provide the precious raw materials that we use for our products. We have been having a step-by-step approach, very structured, which we need to keep because this has provided stability. We have been eventually accepting more. The farmer accepts more bad weather, and he deals with that. That was a bit the mentality. That is an important mentality because it generates those foundations. Those foundations we need to keep, and we need to build on. The idea here is to go and hunt for further opportunities, to seek targets, to also hunt for things we need to do faster. That was the idea of sharing four examples out of others around accelerators, boosters, and how we go around that. That, we believe, will provide agility that will be combined with our stability. Basically, it is moving from a gradual approach to a more leapfrog type of approach. Combining the stability to the agility will allow us to prepare better and to shape the future of operations of this company moving forward. I would like you eventually to leave this room with three things. Nestlé Continuous Excellence and creating shared value have delivered so far long-term stability. We will continue because we should not jeopardize our long-term journey. We are here to stay for another 150 years, as you heard it many times. Whilst doing that, we need to boost and accelerate our deliveries, and that is the accelerators that will make us more responsive, and both combined together will make of the operations of today a better operations to tackle the challenges of tomorrow. I thank you, and I will then hand over to Chris, who will cover the NBE part. Thanks, Mike. I thought I am the small one. It is more complex for me, but All right. All right. Hey, good afternoon, everybody. I know there's a lot of questions. I heard at the dinner last night, a lot of people asking, "What is this NBE thing, this Nestlé Business Excellence thing?" That's what I'll try to share with you now. It was announced about 18 months ago. We basically kicked off with a new team in January 2015. What NBE is really about is combining three existing organizations within Nestlé into one with a dedicated representation on the executive board, and that would be me. Many of you know, and I spoke to many of you here in this room years ago, when GLOBE was first established back in 2000. The objective of GLOBE, which is one of the three you see there, was to really leverage the size of Nestlé as a strength, and really to avoid that our size and our complexity becomes a liability. That was 15 years ago why we did the GLOBE program. Back then, GLOBE had three objectives. I think many of you even remember these three objectives. One was to harmonize business processes. At that time, the idea was to find a common denominator to look within Nestlé, not best in class, not externally, but look within Nestlé and see if we can harmonize business processes because we were doing things differently in the markets, often for not a good reason. The second was to standardize our data and data management. Magdi talked about the number of SKUs we had. Maybe you didn't know this, but back in 2000, we didn't know how many SKUs we had in the company. We didn't know how much we sold in a given month to some of our international customers because we didn't code the customers the same way. We actually didn't even know exactly how many people worked in the company. That was where we were back then. Data standards, data management has taken to a position now which is very important. It doesn't get talked about a lot. It is not maybe the sexiest thing in the world, but it's absolutely key to what GLOBE delivered. The third was to standardize the IS/IT systems, the information systems. At that time, nearly every market in the world ran their own software programs. Every market in the world had their own data center. We had over 100 data centers around the world, which were not connected. Therefore, we have now a single instance of SAP, primarily SAP, that we're running globally. We've consolidated our data center network to three. We really have an enviable situation when it comes to our IS/IT platform. The question is: Have we really leveraged what we've put in? I think the answer would be we have still work to do. That's, again, one of the reasons why this was formed as Nestlé Business Excellence. That's a bit about GLOBE and where we are. You see on the other side, Global Business Services. That was created in 2005, basically to build off of the platform that GLOBE provided. Today we have an effective but limited network of shared services, and I'll talk more about that later. And the third component, which you heard from Magdi, is Nestlé Continuous Excellence, which, as he mentioned, was really kicked off in the operations committee in 2008, and a few years ago now has been expanded across the rest of the group, and absolutely instrumental in how we will continuously improve what we do in this company. So after these 18 months, it is clear that the original assumption that putting these three organizations together has merit is proved to be, I believe, true. So back in March of last year, we put together a roadmap. Where do we want to go? I will share with you what that is made up of. But it is basically summarized on one slide here. If we are going to, let us say, summarize why are we doing this, why are we doing Nestlé Business Excellence, at the end of the day, it is really about providing fuel for growth. Again, very similar to that original objective in GLOBE about this idea of trying to leverage our size as a strength. It will provide fuel in the form of funds or money, which can be then invested behind our products and brands. But I think more importantly, it will come from the focus we will get when employees, people in the market, spend their energy on driving the business, focus on growth, as opposed to being distracted with non-value activities. NBE will be guided by an approach, simplify, standardize, share. Very easy to remember. I think if you ask anybody in the Nestlé world what is NBE about, this is usually the first thing that will come out. The reaction, understandably, is a little bit different for each component. Simplify everybody is fantastic. The standardized part, not so sure. The share part is, I do not think so. But the idea, of course, is not that we are going to simplify, standardize, and share everything. It is what can be simplified, what can be standardized, and what can be shared. So when we talk about simplify, we have chosen in Nestlé to compete in a large number of categories, to be present in nearly every geography, and to sell our products in a wide range of channels. That is the complexity that gives us a competitive advantage. So we have to be extra vigilant that we do not make our lives even more complicated with unnecessary activities. So that is the importance of simplification. With respect to standardize, and again, it is what can be standardized, we are talking about activities that are not core to our business models. Let me repeat that again. It is about activities that are not core to our business models. Actually, when done in the right way, standardization can enable more speed, more flexibility, more agility by, at the end of the day, eliminating unnecessary variance in the way that we work. The third part, the share, is really based on the following principles. This is different than how we have done it up until now. I mentioned that we have sort of a limited, let us say, adoption of shared services. That was because it was an opt-in model. We are moving to something different now. We are moving based on the principles that any activity that is non-business critical, that can be moved, that can be shared, must be shared at the highest possible level, as much as possible above the market level, while delivering the necessary quality at competitive costs. Again, I will talk more about that later. Now, as in GLOBE, three objectives. We have three objectives for Nestlé Business Excellence. The first of these is optimizing end-to-end flows. Now, a little bit of a difference with GLOBE. In the case of GLOBE, we sort of looked at it more on a functional basis. In reality, we know that materials, products, money, and data flow across functions. It is really the handoffs between these functions that determine how efficient or how inefficient we are. If we try to optimize just within a function, we miss these opportunities. What we have done is we have chosen six industry standard, these are not Nestlé specific, industry standard end-to-end flows which capture much of how we do business at Nestlé. So they are source to pay or how we buy things, order to cash, how we take orders from and deliver to, collect from our customers. Hire to retire, how we take care of our employees. Record to report, how we capture and report figures internally and externally. Plan to execute, how we plan and then produce an idea to launch. When we started, as I mentioned earlier, GLOBE 16 years ago, we focused at that time on best in Nestlé. The difference now is that we are focusing on moving to best in class. So we have actually redesigned these with the purpose of doing that. We have also put in a more formal governance model to ensure and enforce standardization, which is very easy to lose over time unless you do have a very formal governance model. Now we have the NCE tools and methodologies to ensure continuous improvement. We did not have back then. I remember actually it was in one of these meetings when somebody raised their hands, "Well, how are you going to improve the processes that you have wired into then your SAP template?" We did not have really the formality of NCE to help us with that, and now we do, and we are using that. So where we stand today, last year, we completed end-to-end optimization reviews for the first four flows with the involvement of 34 markets, GMBs, and over 240 participants using NCE's lean office and lean design methodologies. We found significant opportunities to eliminate, simplify, standardize, and automate key activities. The remaining two flows plan to execute an idea to launch are being finalized really right now and, by the middle of this year, we should know where we are moving on those. So design developments and proofs of concept are the focus this year in 2016, although with source to pay, and Maggie mentioned a little bit about procurement, those services to procurement are already in the deployment phase. So new processes, technologies, and organizations should be in place by 2019, again, as I mentioned, supported by a governance model to ensure continuous improvement. The second objective, again, is about world-class business services. Here we look at activities on the basis of whether they need to be in market, because again, they are business customer focused or whether they can be shared. And by shared, in either a center of scale you see at the bottom, which are basically transactional activities like accounts payable, order management, payroll, these sorts of things, and centers of competence, which is about executing operational activities that require some kind of skill or judgment like decision support or treasury training. But both of those in green, of course, can be serviced above market level. So 10 years after the introduction of Nestlé Shared Service organization, we have an effective, as I mentioned, but limited network of five centers of scale in five countries. Plus, we have two sites with an outsourcing partner. So all told, it is about 3,000 people. Now, the centers provide primarily financial services and employee services as well as some workplace solution services to procurement, some digital and media social services. But we also have about 70, 7-0, centers of competence scattered around the world, which have limited synergies and coordination today. So if you look at Nestlé versus other CPG companies, with the exception of information technology, because when we moved into GLOBE, we moved already into a shared service model. The percentage of services shared above market is significantly lower than the industry average. So if you look at business services, our headcounts and structural costs for back office support is high, and the total number of employees, as I mentioned, in shared service is relatively low, 3,000 out of our over 300,000. The last objective is to support demand-focused organizations. And here we are talking about a few areas, which NBE will assist. The first one, lean value stream, was mentioned a little bit by Magdi and I think by Laurent yesterday, talking about how, and you saw in the video, how markets can use these processes and tools to help grow categories and grow market share. NBE will also support the businesses to make better decisions through analytics, moving from simply reporting, which has been more the focus in the past, to predictive and ultimately prescriptive analytics. And also NBE will support consumer-facing digital solutions like e-commerce, social media, the things that you heard just before lunch from Sébastien, as well as the future digital factory that Magdi was talking about. Now, while there are clearly cost benefits, the most significant benefits will actually come in other areas. And these have all been validated in those workshops that I mentioned for the first four end-to-ends that we completed last year. One of the biggest benefits we see is in the area of time and effectiveness, where we see really the opportunity for less time spent on administrative activities and meetings, more time for value-added activities, and better analytics for discussion. And just as an example, that one stream hire to retire, one thing we found out by doing these exercises last year that in the case of hire of HR, about 95% of processing time is just waiting as it is today because of the complexity. For example, we spend today over 30,000 hours keying in new hire data twice. But in the future, we are convinced with new processes, with new systems, and new organization, which are the three areas that NBE is covering, the time to hire, time to onboard, and time to run transactions will be significantly reduced. Speed and agility, another big benefit that we see, allows more focus on innovation, investment behind the brands, and ultimately more flexibility. Again, if you look at order to cash, just one example, and by the way, there are examples across all of the flows. We process about 55 million orders annually, over 250 order processing centers. In some markets, we have five different order processing centers for one Nestlé market, and 90% of the orders require some kind of rework today. That rework requires, and that time is soaking up effort from sales reps, who we estimate the 30,000 sales reps we have globally can probably spend up to at least 5% more time with customers if we can be better in how we are handling this. Quality and compliance, very important that will come out of this. Better relationship with suppliers, customers, and consumers, visibility and transparency, and hopefully better audits as well. Source to pay, we buy a lot of stuff. CHF 30 billion in services and indirect materials are purchased annually. Over 100,000 suppliers are used in Nestlé. Again, over 10 million purchase orders need to be reworked. Half of those are on paper. When you buy in Nestlé, you almost take a step back in time versus when you buy at home. When you buy at home, you are on amazon.com, you go on dhl.com and see when your stuff is arriving. We are now enabling Nestlé with those sorts of technologies, sort of an internal type, amazon.com through Ariba Easy Buy and SAP platform, as well as a vendor portal will be established. With that will become not just efficiency, but ensuring that we are adhering to buying off contracts that have been established. Cost efficiency, yes, clearly there will be. Mentioned about procurement, less operational costs and less structural costs, and these benefits will be tracked within the group's existing initiatives. As Magdi talked about operational excellence, we will track. There are going to be MOJI reductions that will also be, of course, tracked. Employee engagement, ultimately, this will make, hopefully, Nestlé a more pleasant place to work with more intuitive, user-friendly tools, and at the end of the day, allow employees to focus on things that really matter, on value-added activities. At the end of the day, this is an exciting opportunity. In many ways, it is building off the platform that was established for GLOBE. It is building on the original premise, but it is taking it now to another level, and I think it is exciting, it is important, and over the next four years, I think it will put us on a solid path for a bright future. I am supposed to give you the four takeaways here. The idea, again, is providing fuel for growth, again, leveraging size and capabilities, and also allowing us to compete in the so-called fourth industrial revolution. We will enable agility, again, with the six best-in-class now, not just best in Nestlé, best-in-class, simplified, standardized, and shared end-to-end flows. We are moving to world-class business services by establishing global, integrated, and again, highly automated. That is important. It is automation in this model. And then at the end of the day, transforming Nestlé with the benefits that we talked about, time and effectiveness, speed and agility, quality and compliance, employee engagement, and yes, cost effectiveness as well. Hopefully that's a little bit of an insight into what NBE is all about. I'm sure there's going to be some questions. Happy to answer them, but before that, I'd like to invite François Roger to the stage. Good afternoon, everyone. I'm back. I hope you enjoyed the conference so far. I thought I was the only one not to use any videos, but Chris, it's very kind of you not to have used any videos. Usually, you do. I thought you would do it, but I won't. I'll try to wrap up a little bit and start maybe by giving you a little bit of a review of where we are and talk a little bit of our environment as well. I just want to start by taking a little bit of a helicopter view of where we are today, just making sure that we are all on the same page. Just in terms of organizing and wrap up as well a lot of the things that we have seen over the last 2 days. To start with, let's not forget one thing, that we are delivering superior growth in terms of organic growth in the food and beverage industry. I just took there the example of what we have achieved with 4.2% organic growth last year against our peers, so you can see that we are at the higher end of the industry. If I were even taking Q1, we would be actually on the left-hand side because we were clearly the number one player in terms of organic growth within the industry. If I look even a little bit further in terms of quality of growth, and if I talk of RIG, which for us is volume and mix, you can see that last year we were leading the show as well. RIG is important. I don't want to discount pricing, and I'll talk about pricing in a minute, but RIG is important because this is what consumers eat. This is what says a lot as well about the shelf space that we have in stores. Pricing, we need to pay attention to it because there is, in some cases, some hyperinflation content. Not so much on our side, but in the market. Even if I look again at the situation in Q1 in terms of RIG, we were leading the industry by far because we grew actually 2 times faster than the number 2 in the industry. You can see that some guys are actually in negative territories. We have to admit, though, that our growth is lower. That's a fact. You can see that our growth has been reducing over time, which is not necessarily something we are happy with, and this is lower than our ambition and than our expectation, and we are fully aware of it. That being said, we cannot neglect what's happening as well and that the environment has changed, and I'm not looking for excuses there, and I'll come back to that. Let's not forget that inflation has decreased in the developed world. We have lost about 3 percentage points of inflation in the West, in the European Union and in the U.S.A. I could have taken China, by the way. China has lost over the same period of time about 3 percentage points of inflation as well. We have about 70%-75% of our business where we are operating in countries where inflation has declined. That means that it's not an excuse for us to say that we have to grow less, but we have to find different ways to grow because we have less pricing at the end. You could see that in Q1 with 0.9 points of pricing growth, pricing in terms of growth component, we were at the lowest level in any single quarter over the last 10 years. That we have to take into account. The fact that there is less inflation means another thing as well, that we have to have less inflation or even deflation in our cost base as well, and I'll come back to that in a minute. Pricing, there is a perception that we are not doing so well in terms of pricing. But if I compare our Nestlé pricing, we lost about 1.6 point of pricing over the last four years, moving from 3.6% to 2%. Actually, our pricing has been relatively resilient, at least against the world consumer price index, because the consumer price index has lost about 3.5 points. So it looks like we have been relatively resilient. Part of it is linked to premiumization as well. But I think that we have done reasonably well. We can always do better, and we will strive to do better because pricing is important. It contributes to deliver our organic growth, but it does impact as well, strongly our bottom line. Another factor that has changed dramatically, at least over the last five years, is the impact of commodity pricing. There I put on the chart the Nestlé weighted commodity price index. This is what we pay actually as a mix of our commodities. You can see that our index of commodity pricing has declined by 40% over the last five years. Once again, this is not an excuse for us to get less organic growth, but this is something that we have to take into consideration, because obviously if there is less input cost inflation, which has been the case, there are less opportunities to increase prices as well in the market. Once again, we have to find other ways to find growth, and this is about innovation, and I'll come back to that. If we look at the competitive landscape as well, we can clearly see that over the last three years, retailer brands, smaller and local players have gained share in our markets. About 200 basis points of share. This is for all categories, actually. Nestlé has not lost 200 basis points of market share. We have lost far less than that, far less than international players. But we have to take into consideration the fact that there are retailers, brands, small and local players, which have been growing fairly fast in the market. We discussed a lot about it. The distribution landscape and retail landscape has changed quite a lot as well with the development of e-commerce. E-commerce is far more relevant in emerging market, in my opinion, because it brings beyond convenience that it brings in developed markets. It brings access to goods and services that are not always available in emerging market. You can see the share of our growth, which is coming from e-commerce in AOA, and you saw it this morning through various presentation, that it is a significant share. This is obviously something that we have taken into consideration. You heard a lot about it this morning. You can see that we already had a 20% sales growth in our e-commerce sales last year. The e-commerce, if it were a country, I wrote there on that slide, it would be among our top 5 countries. Actually, Sébastien this morning said it was already number 4 or number 3 if we were talking about Q1. So it's moving even obviously very fast. And we have been there for long because Nespresso is already more than 50% of our business is coming from e-commerce. Infant formula in China, it's above 10%. U.K. and China, overall for our total business, it's already above 5%. Consumer expectations are changing as well. So we see new consumer expectations which are not fads, because we always need to pay attention when we see new consumer expectation to make sure that they are not fads. Some of them have disappeared. I mean, low-carb and you name it, have disappeared as quickly as they came in. But we see new consumer trends like gluten-free are fast growing, 13.2%, plant protein 15.8%, organic 6.7%. And these markets are going to continue to increase. We already have sizable businesses there. Plant protein, for example, you saw it yesterday during the demos that we did upstairs. We already have about 700 million CHF of business there. Organic, we already have about the same value of business there. So we are already there, but obviously this requires a lot of innovation and quite a lot of investment as well to get there. So in order to get there with all of these changes, less inflation, less commodity input, change in consumer behaviors, change in distribution modes, we have to be in innovation and renovation. Nestlé is in the business of innovation and renovation. You saw it through various presentation. We have today about a third of our products that were not on the market 3 years ago. It was already the case in 2012. It is even more the case today. So we keep on innovating and renovating. If we don't, then we won't find the level of growth that we have. So this is really part of our DNA. This is what innovation is about. This is what R&D is about. And innovation and renovation can take different shapes and form. You saw what we do, for example, with coffee in Japan, which is a good example of distribution that goes beyond marketing and R&D. In order to innovate and renovate, obviously, we need to put some resources behind it. So this is what we have been doing. If you look at our organic growth over the period 2013 to 2015, over the last three years, we grew on the top line on average by 4.4%. But if you look at our consumer-facing marketing spend, it grew by about two times faster or 2.5 times faster. We had to put more resources behind innovation, behind R&D, in order to secure that superior growth that we enjoyed. By the way, it gave good results because if you look at the share of our categories and countries that are gaining or maintaining market share, we were slightly negative in 2013. We were at 56% in 2015. Just to answer the question, because there was a question about EMENA yesterday. If I look at the distribution of the 56% for 2015 between where we gain market share, it's 50 out of the 56 and six has been maintaining market share. So it's 50% increasing, 44% declining. By the way, in EMENA yesterday, the figures that have been provided were not correct. It was not 60% increasing and maintaining. It was 58% increasing or maintaining, which was 3% flat, 55% positive and not the figure that has been mentioned yesterday. Anyway, we are gaining market share, so we are putting more money on the table, obviously, in terms of marketing spend, two times faster than sales, with good results in terms of market share gains. In order to get there, we need to spend more, but spend more doesn't mean that we have to take it out of our margin. We have to make sure that we free up sufficient resources in order to be able to finance our growth at a high level and to finance our innovation platform. This is what Nestlé Continuous Excellence is about. You heard about it from Magdi. We have a strong cost culture. This is part of the Nestlé DNA. We have a culture of zero waste, zero incidents, zero accidents. We have embedded it in our target setting. We have strong methodologies. We have a lot of teams working on it. You saw through Magdi's presentation that we are training a lot of people as well to get there. The scope is large. It's not only about manufacturing. We do it in our offices. We even did it, for example, we built a new building here in Vevey a few months ago. We used even that methodology with outstanding results, for example. So we use it across the organization and across the board. This is not only about cutting costs, this is about driving sales up as well. I just put there some examples of what Zone AMS did over the last year and this year. They took into consideration 64 new initiatives in order to improve their route to market, adapt their portfolio, optimize their portfolio, deal with sourcing optimization with farmers and so forth, which both contributed to reduce cost and to increase sales in a significant way. So it's not only about cutting costs, it's about driving sales up. The savings benefit that we get from NCE are actually quite substantial. We are talking of close or even more than CHF 1.5 billion a year over the last two years. I went and checked because I was a little bit skeptical about where did it go. I mean, after I joined, I said, fine, but our profit did not increase by so much, so where did it go? I did a lot of work in order to make sure that these were real cost reduction. We are not talking there of cost avoidance. We are talking of hard savings, which means costs that were in our P&L the year before. We have, as you can see, and even Magdi showed the slide of a longer period, this is a sustainable base of costs that we are taking out of our P&L every year. You can wonder, where did it go? If you look at the last 3 years over the period 2013 to 2015, 60% of it we reinvested in brands, 25% we reinvested in competitiveness, which is not necessarily pricing, it is a lot of promotional items as well, and 15% we dedicated to margin improvement. These distributions is part of the deliberate choices that we have made to reinvest behind brands, reinvest in competitiveness, and drive profit improvement and margin improvement. Talking of margin improvement, we have increased our margin over the last 4 years on average by 27 basis points, which is part of the commitment that we have. That being said, we are aware of the fact that this is probably not enough, because if you look at this chart, if you look at the horizontal axis, this is SG&A as a percentage of sales. You can see that we are at one of the highest level in the industry, while if you look at the vertical axis, which is sales in billion CHF, you can see obviously that we are at the higher level. We are the largest player in the industry, but we are benefiting from size, but we are not fully leveraging on scale. This is part of the effort that we have to do. NCE has delivered significant savings, but we need to go beyond that. Have we introduced too much complexity? There is no evidence of it, in my opinion, but we need to work in order to make sure that we have not introduced any complexity, so we clearly need to move on the left-hand side. We need to take these slides, though, with a little bit of care because we are talking of SG&A, which includes sales. Sales costs are driving sales. But I did not have a proper benchmark of G&A alone, so I took SG&A. That mean that on the top of NCE, we need to continue doing what we have done with NCE, and I am very confident on the fact that we can continue delivering these significant savings that we have achieved over the last couple of years. But we need to go further than that, and we need to deliver structural savings on the top of operational ones. NCE has a lot to do with operational savings on the ground. It is part of the DNA. All employees are really deeply involved in it. Structural savings has to do more with the way we operate. In terms of structural savings, let me give you a couple of examples. A lot of it has already been mentioned by Magdi and has been mentioned as well by Chris. We have identified, as we speak, structural savings with a benefit that is expected above 200 basis points by 2019 or 2020. I am talking of obviously yearly benefits. All the figures that Magdi shared with you were yearly benefits, and they were not accumulated benefits over a three-year period. We have identified structural savings in three areas. In operations, Magdi talked about it. We can clearly raise our asset intensity. You saw what has been achieved already with TPM, for example. We are very confident that this is within reach, and we have the building blocks to get there. In procurement, we have started already this project. These are not only intentions. Some of these projects have already started. Procurement, we have already started the project in order to consolidate above market much more procurement activities, move at least from currently 40% of what we procure globally to at least 60% in a couple of years. Obviously, this is very much about leveraging on scale with a limited cost in order to get there. Once again, we have already started that project. G&A expenses, we have a certain number of initiatives there. We can consolidate further Nestlé in the market. We can leverage on support functions and cross fertilize support functions even more than we do within given markets. Delayer functions, we have embarked on a certain number of activities in order to delayer our activities. There is not much of a problem. For example, in most of our plants, we do not have more than three layers, so we are already very efficient. But in G&A, we can delayer to a certain extent in some functions. Improve facility management. We are present currently on 3,000 sites. We have 22,000 suppliers servicing these 3,000 sites. We can improve when we have benchmarked what we do against some of our competitors. We can clearly see that we can improve facility management. That goes as well with the fact of, for example, having more open spaces. We have already started here at the head office to implement open spaces, which people are very happy with, obviously, but it has a positive impact on cost. Increased shared services. Chris showed you where we are. We did a very good job with GLOBE already. We are ahead of our competitors. Obviously, as far as shared service is concerned, in other areas beyond IT, we can certainly improve significantly, and we have started to work on it. We are talking of at least 200 basis points of structural savings on the top of what we have already achieved and what we will continue to achieve with NCE per annum within a horizon of 2019 and 2020. What are we going to do with these savings? We are going to support our brand, continue supporting our brand. You have seen a lot of what we have done over yesterday, for example, during the presentation upstairs. We have a lot of innovation platforms. You have seen obviously what we have achieved, but we have much more to come so we can support our brand. We have to secure the fact that we will be competitive enough, and we will not neglect the fact that trading operating profit will get part of the benefit. It is too early to talk about how we will distribute these savings between these three concepts, and we will come back to you at a later stage. Clearly, we have identified these savings. I just want to talk a little bit about growth because I think it is important. You have seen a lot of what we have achieved already through what we have done in pet care, what we have done in coffee, what we have done in other areas, in geographies as well. In China, we have been very successful, in Japan, and so forth. Unfortunately, I cannot talk to you about the future innovation that we are going to put on the market because a lot of it has to do with commercially sensitive information. The idea is to replicate in other areas what we have been successfully doing over the last couple of years. I am talking of portfolio strengthening. I am talking of premiumization, expansion globally of some of our brands, innovation rollout, and acceleration on digital and e-commerce. Very quickly, I will show you some examples of what we have achieved. We intend to roll out similar successes in other areas. Portfolio strengthening, you saw what we have done with Purina. This is a case of Purina Europe. By really focusing on our portfolio, you can see that investing behind our brands has been delivering outstanding results. We can do that in other categories with other products. Premiumization, we have been very successful. I presented that yesterday during my initial presentation. In terms of premiumization, I can give other example like Wire, which is a product which is now above CHF 650 million of sales, while we had zero sales three and a half years ago. So this is about premiumization. We talked about it in coffee. We talked about it with confectionery. We talked about it with Maggi as well. We can do more of it. Obviously, this has a cost, but we know how to do it. We can launch more of our brands globally as well. What we have done with Felix, originally in 17 countries, now in 45 countries, you can see the results, increasing sales by 86%. We can roll out Milo. You saw it this morning. Expanding, obviously, our geographic footprint with this product, but you can see that this specific MILO ACTIV-GO was contributing to zero of our sales in 2013. It is already 12% of our Milo franchise already last year in a short period of time. We can do more with other products. I wish I could tell you more about what we are going to do, but once again, this is commercially sensitive information. We can push further with e-commerce. Look at what we have done, for example, with Purina in Germany. We have made a partnership with zooplus. You can see that our share of Purina was 0% on e-commerce in 2009. Now it is 13%. It has a cost, obviously, but we have been very successful, and it does not impact negatively our margin. So really, we are very cost-disciplined. This is not something new. This has been embedded within the culture of the company, but we have to go deeper. We have to go further. We have to increase the intensity of what we have done in terms of cost discipline. I just want to talk a little bit now about cash flow and return on capital and capital discipline. Most of it you probably saw already. Free cash flow is something that is important. I can tell you as far as my agenda is concerned for 2016, my main agenda is obviously on cost discipline. The second-largest item on my agenda is to be on the top of free cash flow. We are doing well already. We are delivering superior cash flow. You can see that we are doing better than our competitors on average. What I like as well is the fact that we have been very regularly driving cash flow without a lot of swings from one year to the other. We can continue improving because we have clearly the building blocks in order to get there. One of them is, we can talk, I should have started about, but I will talk about it, about sales growth, margin improvement, and so forth. We can talk about our asset base and capital base. Working capital, I have presented that already. We have achieved already very good results. I can tell you in Q1 already, in Q1 2016, we have achieved a significant improvement already over Q1 of last year. We have actually decreased our working capital by another 100 basis points against where we were a year ago. Do not draw any conclusion for the rest of the year, but I am confident about the fact that we are moving in the right direction there. It is a clear area of focus. Once again, I am repeating it, do not expect that we will be in negative territories in working capital, because I do not think that our business structure will allow it, but we can always discuss it in Q&A if you want. CapEx discipline, I think that we have shown that we can do it. We are now around 4.3%, 4.5%. We should be able, I think, to stay around that level while driving our growth. It is important to make sure that we achieve the right level of CapEx while being able to support our growth. But I am very confident, and especially with what Magdi is doing in terms of asset intensity. Obviously, it goes in the right direction in order to control properly our CapEx. As a consequence of that, when I look at our return on invested capital before goodwill, I think that we are reasonably well-positioned, around 30%. No specific concern on the small decrease in 2015. It is entirely due to the revaluation of the Swiss francs. So if I had been calculating the ROIC before goodwill without the impact of exchange rate, we would have been at 30.5%, I think so. I think that the fact that we have ROIC before goodwill at that level shows one thing, that we are good operators. We are good at driving sales growth. We are good at driving margin improvement on a regular basis. We are good at driving our working capital down and are controlling our CapEx. That being said, it is clear we are fully aware of the fact that in terms of return on invested capital after goodwill, the trend is not that great. The level is not that great as well. This is largely linked to the fairly significant amount of goodwill that we carry in our balance sheet. It will take some time in order to address that issue, because ROIC after goodwill is a rather medium to long-term KPI. But we are clearly working on it. We are aware of what we have to do. What we have to do is clearly to work on all operating levers. Sales growth, I talked about it a lot. You saw what our capabilities are in terms of innovation, in terms of delivering sales growth. Margin improvement, we have done it over the last 10 years and probably even before, I am sure before, and I am confident that we will continue increasing, although it is not a guidance. Working capital efficiency, you can see the trend is moving in the right direction. Again, Q1 is moving in the right direction. CapEx discipline, we are there. Effective tax rate improvement, we have a tax rate which is rather on the high side. I think the mix of our geography categories and activities should bring us to a level that will be somewhat closer to our peers over time. Although I will not provide any guidance on that, but the mix of our activities, geographies, and categories is moving us in the right direction structurally. M&A, we need to be very disciplined in M&A. We are always looking at M&A first in terms of strategy, cultural, and financial fit, obviously. I want to make sure that we deliver a return on invested capital above the WACC. Our WACC at group level is around 7% today, within 5 years at the latest. My view on M&A is that it is good. It is always exciting, but the most difficult part in M&A is not to buy, especially when you have a strong balance sheet. We need to be extremely careful with that. The challenge is not to buy. The challenge is to be able to turn down opportunities whenever we are not sure that there is a return. In summary, I think that we are delivering superior growth. We are demonstrating some resilience in pricing, although we expect to do more. The environment has changed, but this is not an excuse for us to reduce our organic growth. We have delivered significant structural savings. Part of it has been reinvested to support growth. We need to go further, deeper than where we have been. We have delivered a lot of operational savings. We need to go into structural savings beyond operational ones. We have been good at acting on operational levers in terms of return on invested capital, and we need to be even more disciplined in M&A in the future. We were somewhat, but we have to be even more disciplined. That concludes my presentation. May I invite Chris and Magdi back up on stage together with François, and then I will open for Q&A. Who has not asked a question for a long time? Mitch? Thanks, Stefan. I just wanted to have one point of clarification. I think you said it, but the 200 basis points of structural cost savings, that is on top of the continuation of the other programs, which I think were 500 basis points over the prior 3 years. Yes. The structural savings are on the top of what we have delivered and what we expect to deliver in the future as far as NCE is concerned. Can you add any color on how much of that you would expect to flow through into margins? No, as I said, I think it's too premature today to say exactly the way we are going to allocate it between reinvestment behind our brands, competitiveness, and operating profit. We'll come back to you later on. It is still early to do that. We have been working on really focusing on identifying the structural savings for the time being, and we'll come back to you in due time. I don't expect, just to be clear, whatever I've shared with you will not have any impact on the guidance that we provided as far as 2016 is concerned. And the other programs have a similar quantum to go over the same time period, or as they achieved over the prior three years? We have started already some of these projects. For example, on procurement, we have already started. Most of the other projects, we are really starting as we speak. Expect that, as I said, there will be a limited impact in 2016. We will be really in the implementation phase and execution phase in 2017 and 2018, and we will get the full benefit in 2019. We should get some benefits already in 2017 and 2018. Thank you. Who is next? Jeremy. Hi there. Just another question linked to these additional savings you've got. Is there likely to be any sort of increase in your restructuring costs? Again, could that mean that if there is any sort of benefit that flows down to your operating margin, it's going to be pretty back-end loaded? Thanks. I don't expect to have any impact as far as one-off cost in 2016. We already have anyway, in our yearly budget, some provision that we had already integrated in our communication and in our guidance. So I don't expect any impact for 2016. For 2017 and 2018, we'll come back to you. Be aware of the fact that anyway, traditionally, in our budget every year, we are already building in some one-off cost to start with. Second, some of these projects will not require significant one-off cost. If I take the example of leveraging on scale on procurement, a lot of it is actually achieved without any significant one-off cost. Some of it will certainly require some cost, which we can absorb through the saving that we will get. We will come back to you on due time in 2017 and 2018 on the exact amount. Once again, for 2016, I don't expect any significant impact. Adam. I fear you're going to get question after question on this. Just to be clear, you've announced a cost savings program or savings programs, which is an acceleration of the existing programs. You have said that it's too early to allocate it between the brands building for competitiveness and the margin. That implies that if any is allocated to the margin, we should probably expect an acceleration in margin growth in 2017 and 2018 compared with the 27 basis points you've done in the past five years. Or am I reading that wrongly? First of all, I'm not saying that this is an extension of the former program, because as I said, NCE has essentially to do with operational savings. We are adding structural savings, which have more to do with the way that we are working. I'm not changing any guidance. Anyway, we give a guidance only for a given year, which is 2016. I'm not saying that we are providing a specific guidance for 2017 or 2018, neither on the top line nor on the bottom line. We'll do that in due time. This is not the right time to do it. We'll do that later in the year. But can I just. The feeling the market has is that historically, Nestlé has done modest margin growth, which has historically been 20 to 30 basis points, closer to 30 than 20, but that's what it's done historically. As you said, this is an incremental program. Surely that implies or are we wrong. We have to sort of come out of this with a feeling, is that margin going to accelerate or is it going to continue at roughly the same level? Once again, I'm not giving any guidance as far as the medium term is concerned. I'm just saying we have identified additional savings in order to support our growth, and part of it will be. I gave you the three main uses of these savings, which is support our brand, secure our competitiveness, and the bottom line as well. I'm not talking about the distribution between these three concept of the saving program because it is premature to do it. Thank you. I know that you would like me to be more specific. That is very clear. If it is the same question again, then hands down. If it is a new question, keep your hands up. Thank you, Stefan. John. Well, it is sort of the same sort of question. All right, Gerry. I will not open with that opening line. But in terms of how you choose to allocate the money in the future, will that be done on the basis of an aim, given the current macro backdrop, which we all think is going to continue for a while, of growing the top line of 5%-6%? Or do you think the business may reappraise what is achievable in the current macro environment with perhaps an indication of how much goes on to the margin? You touch a point which is interesting, which is one of the reason why I am saying it is too premature to give indication, because there are a lot of forces that are changing as well. When I talked about, for example, commodity pricing, I forgot to mention that we started to see some signs over the last two quarters of rebounding in terms of commodity pricing. So obviously, this will have an impact on our cost structure. This will have an impact potentially on our top line as well, because we may be in a position to pass on price increases to consumers in a certain number of instances. Which is the reason why for the time being, we are focusing on delivering what we have said that we will do in 2016. We have a commitment, we will meet the commitment. We are working hard in order to accelerate our saving program, our efficiency program with a fairly wide scope because it involves activities like manufacturing and operations, procurement, G&A. Let us work on that. After that, okay, we will come back on due time with a view on what it means for the top line. But clearly, what is important as well is what you saw yesterday, what you saw this morning. I think that Nestlé is in the business of innovation. We have a lot of innovation platforms coming from R&D, coming from marketing, coming from technology, and so forth. We are extremely confident that we can drive innovation even further than what we have done so far. What does it mean for the medium term in terms of top-line growth? This is not what I want to discuss today because this is not the right time to do that. I think the good news is that we have identified capabilities in order to free up additional resources. After that, the destination of these resources we will discuss later as far as 2017 and 2018 is concerned. I will come back again. Basically, just to really clarify. You mentioned the CHF 2.5 billion in the first presentation. That is the 200 basis points you are alluding to improvement. That really comes on top of the CHF 1.6 billion you are doing already. Add it all up, it should be over CHF 4 billion in savings, yeah? Is that the- Yes. I did not say 2.5 to start with, but- No, in the more piece. 200 basis points on the top of the 1.6. Yeah. I didn't say that the 1.6 will deliver. I said the 1.6 is what we have delivered over the last two years, and I'm personally extremely confident on the fact that we should be able to sustain that level in the future. On the top of, yes, it is on the top. The more than 200 basis points is on the top of the 1.6. By the way, the 200 basis points is for 2019, 2020. This is not for 2016 or 2017, obviously. Warren. Hi. It's Warren Ackerman at Société Générale. A question on the ROIC, obviously very interesting chart on the 30% pre-goodwill and 10% post-goodwill. What do you think the ROIC can do on a pre- and post-goodwill on a five-year view? What will be the biggest categories or geographies where you see the biggest ROIC upside? Well, I don't want to give any guidance on ROIC, and certainly not after goodwill, because it is largely influenced by potential acquisition that we could make. I'm not commenting on any acquisitions anyway. Obviously, on return on invested capital before goodwill, we are all working in order to improve the ROIC. Once again, if it had not been for exchange rate last year and for the significant revaluation of the Swiss francs, we would have been up again. So we are acting on all levers on the operating side in order to make sure that we get there. I'm personally confident on the fact that because we are good at operating our business, and we are acting on all levers, from sales growth to margin improvement, regular margin improvement, working capital decline. On working capital, I'm very confident on the fact that we can improve as well, and because we have clearly identified what can be done on payables, on inventories, and so forth. On the asset base, we have a fixed industrial asset base. You can see that what Magdi is working upon will certainly help as well. Because by increasing the asset intensity, I'm not announcing that we will spend less on CapEx, but obviously this is a good contributor as well in order to improve our return on invested capital before goodwill. Cedric. Hi, it's actually Eddie Halgries from Canaccord. Sorry. Just given the focus on cost savings and thinking back to Wan Ling's presentation, when you entered the JVs in China, I think the idea was that you would sort of get to know each other, establish trust, and then perhaps develop that relationship. Would there not be pretty significant savings in buying out those JVs? Why would you not do that at this stage? I don't think that buying out our partners, first of all, it's okay, we have shareholder agreements with our partner to start with. I'm not really sure that this would be a strong driver of synergies actually, because if we have a good partnership which is working well, it doesn't prevent us from accessing to synergies as well. I mean, our partner can benefit from what we develop with GLOBE, or they can benefit from what we develop on the industrial side as well. We don't need to buy out the minorities in order to get there. By the way, the same applies for, I don't know, the public companies we have in India, in Nigeria, and so forth. I don't think that the capital structure of our affiliates is a must-have in terms of full control in order to deliver synergies. I don't know, unless you have, but you know the case of Malaysia, for example, is doing fairly well as well. Everywhere. We have five markets in the world where we are publicly listed, and we do not treat this any differently from an operations perspective with all that we. Eileen, please. Hi. Two questions, please. The first one is on working capital. I know you said that you can never get to negative working capital, but can you just explain why you're so convinced on that? Well, first of all, we are still far away from it. But, the example I give very often, which is it depends a lot on the categories you play in. If you're in fresh dairy products, we are not very exposed to that category directly, at least in our consolidated financial statements. If you're in fresh dairy product, you have structurally a negative working capital by 10% because you are in the fresh dairy product. So as soon as you produce, you have to sell immediately. You have zero inventory. If you're in the water business, as we are, for example, you don't want to have plants in order to meet the demand at peak during the summertime. So what you do is you start producing what, in February or March maybe. You pile up inventories in order to be able to meet the demand in the summertime. When you're in the ice cream business, to a large extent, it is the same. So structurally, we are playing in some categories where we need to have more inventories, for example, or we may need to have specific terms as well in terms of payables. Frankly speaking, we could get there at a cost, which I don't want to do. I want to make sure that if we get there one day, I'm not totally eliminating that possibility, but if we get there, I don't want to get there through artificial means, I would say. Which is, for example, by factoring our receivables, because it has a cost. I don't want to do any trade-off between our balance sheet and our P&L. If we can get there on an operational basis without compromising between our P&L and our balance sheet, we'll get there. But still, okay, we were at 4.7% last year. Okay, let's go first below 4%, and then below 3% or whatever, and we'll see. But I never want to make any commitment that I can't meet. Ideally, I wish I could be there because it's a fantastic story to have a negative working capital, because not only do you generate cash by selling your products, but you generate cash through your working capital in addition to that. But okay, we are not there yet. Heidi? I have one question for Magdi on his presentation. Maybe if you could clarify just on the asset intensity savings of $1 billion, is that a CapEx saving or is that an OpEx saving? No, this is a reduction. It is not an avoidance of CapEx. It is a reduction in conversion costs. That was a net saving that you saw there. It is about utilizing better the lines, reducing the breakdowns, and all that type of things, which comes with waste and costs. That is what it is about. The plants will have bigger capacity, but also less waste. It will be partly CapEx, partly OpEx. Yeah, I think François alluded to that when he linked also the CapEx in future with the increases in asset intensity. It will have also a side effect on that, which means that by continuing to invest the same, we would have even a better or bigger opportunity to manufacture more things. But to be clear, NCE is OpEx only. The NCE is just cost. NCE does not include CapEx. Okay. OpEx. Fair. Pierre, I think you had your hand open for a while. Thank you. I have two questions. One on your M&A criteria, with ROIC above WACC over five years. Do you think that today in current times, there are opportunities in terms of valuation ratio to find targets with ROIC above WACC within five years? Does that mean that you are guiding on no M&A at this stage, or do you think that in coming years, we can have declining valuation ratios in the M&A side in the sector? I am convinced personally that we can deliver on ROIC superior to the WACC within five years. It depends, it is very difficult to make a general statement there because it depends on the story. Is it a growth story? Which is one way to get there. If I look at one of the latest acquisition we made with Merrick, it is clearly a story of growth. So we can deliver this return on invested capital above the WACC within five years through growth. There are other cases where it is a synergy story. It is a cost synergy story, which is something totally different. There are cases where it is a mix of both. I think that this rule of ROIC superior to the WACC within five years is a healthy one. First of all, I can tell you it eliminates, it kills quite a lot of project that we may have. It requires a lot of discipline as well to make sure that we don't build a case over the next couple of years in order to get there. We need to make sure that we build a case that we can achieve from an operational point of view, and that we can meet these financial criteria. After that, the multiple is fine. If the multiples are too high, then let's not do it. But we can always make exceptions as well, and we can always have strategic views on a certain number of acquisition. But I want to be very careful with the concept of strategic views on an acquisition, because if you start saying, "No, this acquisition is strategic," there is a strong likelihood that we won't get a return for it. So we can do it by exception, but it should not be the rule. It may happen from time to time that there is a specific asset that is important for you to get, which could be a defensive position, for example. But I think that this is a healthy criteria, in my opinion, as a general rule. Sorry, I have second question as a follow-up on your working capital remark, relatively to your business. Do you think that over the last three years, the declining rates has probably lower barriers to entry in your specific businesses requiring high level of working capital? Because it's easier for new entrants, probably in beverages and high incentive business in term of working capital to do business. If you take the example of water. Water, part of it is a commodity business because this is water, but we are not in the commodity business because we are in the branded business of water. Marco said it very clearly yesterday. We are very selective in what we do in water. So which mean that, for example, in many countries, we do not go into the part of the business that competes with private labels because we know that there is no return for us. So we are extremely selective in that. When we are with Perrier, with S.Pellegrino, we are in the premium or super premium business. Then we have strong local brands on which we have an appropriate level of pricing. So we are very selective in water. Marco mentioned it very clearly yesterday. We have 11% market share. We are not looking at market share for the sake of getting market share. By the way, you may know that in water, for example, we have lost somewhat a little bit of market share by choice. Why? Because there was no return in a certain number of instances. But that doesn't mean that it's a negative category in itself. It's a very good category because it's a category that offers good growth opportunity, which is what we experience. It's a category that has been strongly accretive recently in terms of margin improvement for Nestlé. It's a category that is generating a level of cash flow which is higher than the average of Nestlé. So we are very happy with that category, but we need to be careful in, I would say, sub-segment of that given category. Robin? Just a question about the shared services. We've all seen the benefit of these as they're introduced into companies. But could you just talk about the risks that you see introducing, particularly within Nestlé, which is obviously a very decentralized business, where you have the local managers, the local flares, the business heads, et cetera? Just address some of the issues that you see that could be negative. Thank you. Yeah. As I mentioned before, shared services aren't new. We've had them since 2005. I think the big difference now is that, it was an opt-in model. If a market would be able to choose whether or not they wanted to join. They make a business case, if they felt the business case was worthwhile, then they would join in. You can imagine in a company like ours, that the adoption wasn't maybe as high as it could be. It is a different approach now. It has been identified clearly that certain activities will be moved to shared services. There is no discussion. There is no business case being done by markets in these particular areas. So this is understood. My concern, I guess, would be, first of all, that we need to ensure that we have even a higher level of standardization with respect to processes. If I look at GLOBE, and if you just look at lines of common code, we have about 75% lines of common code across our GLOBE template. In order to really have interoperable shared services, we actually have to increase the level of standardization, which is what we're doing with these workshops and new designs that we need to do. So we have to make sure we get and hold firm to standards, because that's a little bit hard also in a company like ours. You always want to maybe sort of adjust things slightly. If you do that, very difficult to have the interoperability. The other thing we have to be very strict about is that when activities are moved to shared services, that the structures in markets are dealt with in the appropriate way. That is extremely important, and that is something that we will be following up on, of course, very carefully. But at the end of the day, one of the big benefits of moving activities like this to shared services is the majority of these transactional things, activities, will be automated or can be automated now or will be automated into the future. If we do not actually move them out of the markets into a central area, we are not going to be in an ability to automate across 160 different countries. So that really sets us up as a platform for the future for automation. But those are sort of like the risks and benefits that I see. I would say, again, we have one more. You had your hand up for quite a while, please. A question on your innovation rate, which I think you said had picked up a little bit to 31%. What is your aspiration as to where that can get to? What do you feel is the optimal level for that? I guess a similar question to the statistic you provided over the percentage of business sales you are holding and gaining share in, which I think at the global level was 56. Where do you think that number should be? Thanks. I would say the higher the numbers, the better, in terms of innovation. We were at 30%. We are at 31, it does not make a big difference, but it is a good number in itself, I would say. If we can be at 33, 35, why not? It is even better. The higher, the better, obviously. We are working in order to get there, obviously. What is important as well is what we have explained, I think, about these last two days, is the fact that innovation can take different shapes and form. It is not only about R&D, but R&D is contributing. It can be about marketing. It can be about system, which is a case of, for example, this Nescafé Ambassadors. So which is, I would say, quite unique to a certain extent to what we do at Nestlé. Close to one-third of our products that are on the shelves today that were not on the shelves 3 years ago is, in my opinion, a good performance. Once again, we are trying to get at a higher level. The fact that we have 56% of our sales, both in terms of geographies and categories, that were either maintaining or gaining market share last year. Once again, it is 50% gaining, 6% maintaining, 44% going backwards, it moves in the right direction. It is an improvement against where we were a couple of years ago. We obviously strive to do better as well. If we can be at 60, 65, whatever, it's obviously better, and we are working in that direction. But it's difficult to give a benchmark, but the higher, the better. Okay. We still have another Q&A with CEO and CFO come up, so if you didn't have a chance to ask now, I saw there was a hand from Céline, and there was a hand from you, so we'll catch you next time. So a bit later today. With that, thank you very much to the 3 of you. We'll have a short break now, and please be back here at 3:30 P.M. for polls. Okay. Could we reconvene? Robin, could you close the door? Okay, good. With that, we come to the final piece of our two-day seminar, and that is Paul Bulcke, our CEO, with his comments on driving growth with returns sustainably. Well, good afternoon, and we're almost at the end of 2 long days. I hope you had good, rich, informative days these 2 days, and I hope we could share with you or lift the curtain a little bit on different aspects, on different parts, different geographies, different initiatives of Nestlé, that we could also answer your questions. A lot is happening. I hope we could convey that to you, too. There's quite a lot of things happening at Nestlé. But that is what Nestlé is all about. Nestlé is many moving parts in many places in the world that are coming together and driving corporate performance behind a shared explicit common purpose. It's all about people, too, and I hope we could convey some of the people. Companies are people, and people are drivers with experience, with knowledge of what they're talking about. I mentioned yesterday morning that I actually want you to feel Nestlé and what's happening here. One thing before I start here. We didn't talk about the roadmap. You may remember. I spoke always about the roadmap, and I can just tell you the roadmap is still valid. It's still this framing. It's giving us the strategic direction that creates this alignment as we are decentralized and have many parts. It creates this alignment. It's the glue that defines what we want to be as a company. It defines also what we want to leverage our competitive advantages that we have to permanently fuel. It defines also where we want to play our growth areas. It also defines how we want to do that efficiently and effectively, the operational pillars that we do have quite for a while, and innovation is so much part of that. And it is also defining the roadmap how we want to do that responsibly, and that is based on our culture or principles that everybody lives up to in our company. And these are dimensions that we speak quite a lot internally about so that we maintain that glue. The roadmap is also the base on which we define how we want to be part of society, create a shared value, and I am going to say a few words afterwards. We have also shared with you six priorities. They are still valid, and we have covered quite a bit of them, quite a bit of these principles or priorities. Digital is there, people, stakeholders also making choices, portfolio management and all is linked to that, and our three focus areas. The focus of the two days was, and I mentioned that, it was about engine. It was about the engine. The engine for growth. Also, the engine of returns and how we are going to go about profitable growth. Indeed, our success as a company is going to be so intimately linked with growth. Mostly organic growth. Growing what we have, growing where we are engaged. Growth is linked with capability to keep relevance. It is so important in an extremely fast-moving world to keep the relevance, to keep connected with what the consumers are expecting. The world is many challenges, giving many challenges, but so many opportunities. We have to stay very self-critical. We have to work with agility, with flexibility, creativity, and discipline. Also, that induce this permanent innovation. Our success, growth, in other words, is so intimately linked also with that permanent innovation. That is actually what we have done now for 150 years. If something characterizes our company, it is this permanent innovation drive. Renovation and innovation drive. It is big and small. We have these nice examples we are so proud of big innovations that really have changed the game in certain areas and certain categories. But, I hope we could convey during the innovation tour yesterday, so much of our success is also linked with so many small innovations that are actually going in the right direction of nutrition, health, and wellness. But the many small innovations, thousands of products every year reformulated on different axes. I hope we could share that with you yesterday. Success is also going to be linked with driving, and I have mentioned the relevance. Be relevant. Be relevant of what consumers expect, and driving added value, margin enhancing relevance. That relevance is linked with answering, it is linked with anticipating, and it is linked with engaging. Engaging the many opportunities and challenges of the challenging environment. It is driving the relevance in answering first the different dynamics of what is happening in society, the different dynamics of geographies, and do that adapted to that geography. It is linked with answering the different expectations of consumers, be it the millennials or aging population or emerging consumer. It is also answering the societal expectations of what health is, and that is redefining itself permanently, especially in the food and beverage industry. It is also driving relevance in anticipating. Anticipating new ways of doing business. E-commerce, we showed part of that, but also different business models. New ways of connecting with consumers and their expectations. Anticipating the increased competitive intensity, we have shared that also when we spoke about coffee, for example. We are totally very much aware of monitoring what is happening out there and reactive or preempting as much as possible. Local competition is something that we have to take very much into account, too. The players that are out there, the competitive landscape gets new names and are going to be very relevant to what we do. Anticipating also new technologies and be there in the frontline, R&D, and to give solutions to many of these challenges we face. By doing that, also creating value again, and to create differentiation versus competition. I think it is going to be increasingly science and knowledge driven if we want to go about this nutrition, health, and wellness purpose. It is also driving relevance through engaging. You can anticipate, but then you have to engage. Engaging in this, call it fourth industrial revolution. It has been said before, the whole NBE, the processes, end-to-end processes, how we want to go above that, is a precondition for success in the fourth industrial revolution. It is also engaging in investing in research. We are investing quite heavily in research, increasingly. As I mentioned before, it is going to be a differentiator. It is going to be such an important part of our success in the future. Do that through platforms. Engaging also in new platforms, Nestlé Health Science, Skin Health, is part of that. These are upfront engagement that we put resources behind that are going to deliver valuable, profitable growth in the future. Engaging in partnerships. These are new ways of going about the complexity of the world. Also in our R&D, we are increasingly setting up partnerships and relationships and networks with the right players. To be able to do that, you need resources. There you have this whole thing about resource allocation. Return on resources is a fundamental concept, and return on invested capital is one of them. Return on resources is something that we want to leverage as being one of the drivers of decision making in this company. Putting the right resources behind the right things, which is basically not putting them behind the wrong things, which is the war on waste. We have been talking about hence working capital is one of them, and going after the money locked into working capital. It is portfolio management, is all driven on these criteria, how we allocate our resources behind the right things, invest more where it works, fix or disinvest. We have been disengaging for more than 2 billion equivalent sales in the last years. Hence also efficient resource allocation in operationally and structural dimensions. We challenge ourselves there and think we have to challenge ourselves more. NCE, Nestlé Continuous Excellence, not new. It is part of our DNA. It touches every part of our business. It is specifically operational, going after waste, zero waste. We go for zero, and that is lean the Nestlé way. It has been driving 1.5 billion savings every year, and that is going to continue, because also a social structure like Nestlé, like every social structure, has a trend to what they call societal entropy, so you have always to maintain that going after waste. NBE was that other, that is more structural resource allocation. This back line, front line. This efficient, effective lean back line that we are building up. Then that allows then to have a sharp, fast, agile front line. That is through simplification, simplifying, standardizing and sharing. This is actually a logical continuation of this GLOBE initiative that we had in the past. We have combined now NCE, our Nestlé Continuous Excellence, together with our shared services that we had together with GLOBE. That is a powerful setup that allows us to really scale up. We felt too much that Nestlé has size, but do we really bring it to scale and to competitive advantage? That should be the base of unlocking quite a lot of resources that we call then fuel for growth. All these actions, all these initiatives that we have shared with you, is part of unlocking these resources that we want to put behind our more brand support or brand through R&D, through innovation renovation, that is increasingly important, even more through marketing support. The second level is capacity to compete, resource for that, too, and then also the resources for higher returns. Now, we speak about profitable growth, and we speak also about profitable growth sustainably. This is this fiddle line, this balancing act between short term and long term. Living in a world where short term is more valuable than long term, but we have to maintain this balance. We are a long-term inspired company. But we do have short-term intensity, and that is decision. That is management. That is decision-making and framing. This is what we do. We are investing now heavily for certain things that is going to happen in four or five years' time. We do that because somebody else did that for us a few years ago. This balancing act is something that is always under pressure, always pushing to the short term, and you know about that more than I know, but we are a long-term inspired company, but we do have short-term intensity. When we speak about long term, we speak about trust. Trust in the broader context, because our success is based on trust. It is trust of consumers, customers, trust of investors, shareholders, trust of stakeholders. That is the obvious trust. But it is also linked with what we do. First of all, product and service quality, reliability, consistency. That is what we do, but also how we do it. Nestlé, in that sense, assumes how we assume our responsibility in the context of society and how we contribute to healthier, sustainable, inclusive society. In the world of today, we have to be very explicit on these things. This is something that is really, I would say, tangible and is part of our success, too. We call that creating shared value, which is linked with how do you combine growing your business and at the same time also creating value for society? We truly believe, and I think we have our anniversary of 150 years. It is 150 years that we have been creating shared value. We have framed it as such now in these three words, but it is the fundamental way we have been going about our business for a long time, always. It is the healthy way of connecting with society. We have been communicating about this. We are focusing on 3 areas, nutrition, water, and rural development, because that is where we most intersect with society and where we can add value. We report. We have a report now for the third time, a report on our commitments on these levels, and they are linked with. We send them out when we send the annual report out, so you can read about them, too. It is something that we did not talk too much about, but it is something that is omnipresent. 340,000 people in this company are living up to these principles of all what we do. There is no contradiction should bring us to be successful and operational results and success for this company. At the same time, should create value for society at large, and it is not contradictory. Well, that brings me then to an end, though. Oh, yeah, before I forget, we did not speak about the Nestlé model. It is all on your mind. Nestlé model, what is it? It is top line, bottom line, capital efficiency. First half hour in business school. That is what defines success of a company over time. Top line, bottom line, capital efficiency. It is actually all about cash flow at the end of the day. It gets a little bit messy when we speak about 5%-6%. That is where it gets messy. Why? Because we mix up ambition with targets, I would say. We do not back off from our ambition of 5%-6%. If you have walked through the sixth floor, if you see what is happening in society, if you see the potential value creation that we are working on, that we are investing in, et cetera, that is more or less a line that we over midterm, long term have to walk. We are realistic, and when you have situations like the few years we are living in, no pricing and you can go on, well, then we are realistic, too. 5%-6% is our ambition, and we keep that going. Top line, bottom line, capital efficiency consistently. Brings me to the end. I hope with that, we could convey our confidence in the future, the confidence in our future. Also in the confidence of building the right resources and the right initiatives to be successful in that future. It is based upon our passion for nutrition, something we celebrate this year for 150 years. Basically, we celebrate that as a base for the next 150 years. That is with the purpose of enhancing lives, and contributing to a healthier future for all. Healthier future is also our common shared financial future. Thank you very much, and I think we now have some time for question and answers. Looking forward for your questions. Okay. Same here? Yeah. Let us do here. Who goes first? Gosia. No question yet, please. Gosia Eggimann, Lombard Odier. I have very general question. During these 2 days, we got clear vision. If I look at P&L, all lines, we got clear vision what you want to do about cost savings, what you want to do, about all reduction items. Now, if I go to the We also got the presentation on different brands, the opportunities of different product that can be deployed globally or to different countries, extensions and so on. The question I am asking myself after all these 2 days is what prevents you, as of today, of defining exactly what is the growth potential and what resources you need to put behind? Because what we understood right now, that you clearly see what kind of savings you can do, but it is not clear yet how you want to use these resources and what kind of growth it can generate and what kind of marketing spend is needed, what investment in R&D is needed. Can you describe more the process that is going to be deployed right now to define precisely what kind of growth we can expect. I would really want this to be so simple, too. I have mentioned, Nestlé has many moving parts, and decisions are made on many levels, especially also on support behind brands, et cetera, commercial programs, et cetera. It is done in the markets. We have programs here on R&D. We have also quite a lot of product development in our factories. We have 450 factories, and these are all moving parts. Actually, I am privileged because I am enjoying the law of the big numbers. When you add it all up, it smooths the whole thing out. This is like a bicycle. It is permanently adjusting, seeing. We have, every month, an executive board where we go really into detail, see what manage, what works, what goes faster, what goes slower, and adjust permanently. The fundamental thing is that we do see upsides on operational, and that is in CEO, and structural resources that we feel are locked in, where we can use them better somewhere else. We do see needs of higher R&D spend because I really believe there is a competitive advantage. I hope we could share some of that with you. There is quite a lot of more deeper, I would say, signs coming in that we want to use to drive our growth and profitability. There is also more need for competitive identity behind our brands, in the future. What we do see is that we are going to unlock resources. We are going to create also through innovation, offers and products that do have better margins, hence portfolio management and the mix shift. And we are going to use that and basically be safe to simplify again, is to have more brand support to compete better in the marketplace and also returns, which is bottom line and return on invested capital. How much, what, and here. I understand you. You want to have a figure. But look, top line, bottom line, capital efficiency consistently, that is what we promise. We are going to handle this as a bicycle, permanently fine-tuning this equation. That is a commitment. That is a strong commitment. To do that consistently over time, good times, bad times. Sometimes you have tailwinds, sometimes you have headwinds. Then we have to push a little bit harder. That is actually what we do now for quite a few years already, pushing harder. Ask the people. So I understand your question. You understand that I cannot answer it like it is going to be 4.1, 4.2 here, 3 point here. I do not do that. That is not how we can manage a company like ours. But what we want to do is to show you some reliability and consistency over time. We want to be on the higher end on growth, definitely. Who is next? I think Alain has his hand up since a while. Thank you very much. Alain Oberhuber from MainFirst. I have a question regarding Brexit. Have you taken any precaution, or is it business as usual? No, I called every Englishman. Look, first of all, we have a natural hedge because we produce so much locally, and there you go. That's a natural hedge we have as a company. We are basically producing and selling locally. We have local management. They know how to live in the reality and all that. So, that creates a little bit of, all right, let's see, and I think wisdom is going to prevail. I am quite confident that wisdom is going to prevail, and let's just see. I mean, look, first of all, there is no specific need of saying, "Look, if that happens, we have to close the factory A, B, C, and D." No, because we are hedged there by localness. But again, there is so many things. What if, what if, what if? We have some contingency plans on big things. We have risk analysis framing, which is quite explicit on things. You know what the biggest thing is that we have on that risk management? Trust. I mentioned it before. That's the biggest one. We have some examples, rightly or wrongly, but that should be showed here of when you lose trust, there is millions going. I do not think Brexit would be one of them hitting the top 10 list of Nestlé on risk assessment. I think it's part of our daily business for Brexit. We, too, have talked about Argentina. We could talk about Venezuela. We could talk about Russia. I think it's part of our daily business. We are obviously running a certain number of scenarios and protecting our interest, be it on the assets or liability side for any of these cases. But it's really business as usual, I would say. Especially so that we do not know what will happen, but we have to take that into consideration. Patrick. Patrik Schwendimann with ZKB. In terms of the portfolio management, how much in terms of sales do you still have to fix or sell in the future? Fix or sell? We have something like 10% that we have been looking at, and we have done something, 80% of it, something like that. 80? 14 three years ago. We are quite stubborn, too, in the sense of we have quite a few that we want to fix. Fix means not we will bring it out of negatives, but doing and bring it to be a creative to the mix. I think we have done quite a bit. Now, it is a dynamic tool. It is moving in time. Certain businesses that we are doing well may shift into a lower gear. There you have it. It is a permanent thing that is linked with our yearly cycle of strategic planning in our company. The tool is not a tool that François uses. That is it. The tool is something that everybody in the market uses every year through his own planning process. The strength of the tool is that it has allowed us, because that is another new tool. Portfolio management, we have done always. If not, you would not go after acquisitions and brands like we did. What we did, though, a few years ago, is really standardize it in such a way and discipline it in such a way that everybody speaks the same language, and that we do not have these classical corporate discussions of, "Yeah, but that is your figure. My figure is different." No. That is the discipline on 2,200 cells that we have driven by the market. We can then here aggregate, also thanks to the data systems we have. We can aggregate category in a region or category worldwide or a geography, and that is what we do then on a higher level. That is then the more broader portfolio management that you may have seen some projections from. Every market has the same map charts. It is a permanent tool. We always going to have businesses that are starting to fade into a territory that we want to clean up, or we want to reinvest or redefine. We always going to have parts of our business that we say, "Look, this is not anymore for us. Other players may be better at it." I think we did quite a bit. You saw it, over 2 billion of selling off. Yeah. Yeah. That doesn't mean that was it. We have done a lot of fixing also in the meantime. We have also accelerated quite a bit. In many categories, we have put more money because it's working well, and we want to surf the wave. Coffee is one of them, but in culinary, we have done KitKat and certain brands, confectionery. It's an ongoing tool, a very good one. Okay, who's next? Céline, please. Yes. In 2015, margin expansion in food and beverages was 30 basis points, and there was a drag from Skin Health and Health Science. I would like to understand whether we are now, I understand that there's faster growth, and you want to put investment behind it. Have you now put enough investment in order that the margin of this business, going forward, is stabilized or going up? Maybe if you can talk about the outlook for that. Where was the money spent effectively? Where was the money spent? On Nestlé Health Science and Skin Health. Because I think the margin went down a lot. There was the issue of the rebates, the issue of the acquisition. But even beyond that, there was still a big gap. First of all, I don't like when we say, "Where did you spend the money?" We want to invest. It's important difference, though. These are platforms that we're actually resourcing now. We are building them up. Yes, we want to do that again and not saying to you, "Look, we are building new platforms for in 5, 10 years' time, so wait for us." We're going to be not driving results during that time. Again, we are dancing on that fiddle line of combining short-term delivering and long-term investment and delivering them later on. These are two platforms that we are investing in for the time being. So adjusting, investing, profiling, we have engaged, and we do some de-risking there because the timelines and the engagements are a little bit tougher and happy to have François there, who knows what we're talking about. These are the things we're doing. What we do want to do there is that growth, they should be accretive to growth definitely, and they should not be a drag in the short term on the bottom line, because there, with a higher risk profile, I need more bottom line. That's the logic. We want to see that in the near future, starting to be accretive to our business model. Eleanor. I'd just like to come back to what you were saying about global procurement and wanting to get a feeling of to what extent foreign exchange considerations come into play here. Because you mentioned the natural hedge that you have in the U.K. in the context of Brexit. But if you're going to start centralizing a little bit more of your procurement, it might lead to more variations in terms of your foreign exchange exposure. I give it then to you, but basically, also, having a global procurement doesn't say everything is going to pass through Vevey. We're going to have that, again, globally framed, globally steered, globally structured, global deals where it makes sense, but colas and factories and quite a lot, we're not going to ship products through Vevey. There's not enough highway for that. Again, shared services or sharing, scaling up doesn't mean centralizing per se. That's my first answer. I wouldn't like to lose this natural hedge we have. We're not in the speculation business of currencies per se. I don't want to lose that. But there are certain hedging to be done to stabilize our cost base, basically. That's why we also have some dimension of futures, only to stabilize our costing. Why? Because we know also that pricing is not as agile towards retailers than maybe sometimes our cost base of raw materials. That's my answer. I think that the main objective is obviously to leverage on scale as far as procurement is concerned, which is a reason why we can buy more above market, either regionally or globally. That being said, you have a point, which is that it could impact negatively our bottom line in terms of foreign change exposure, but that is easy to manage because we can use hedging instruments. We can't hedge, I don't know, if a given market, the currency is falling down the cliff. That we can't hedge because there is no transaction there. Whenever we have a transaction of import, export, and so forth, that's relatively easy to hedge. It may have a cost, though, so this is not an issue at all. Jonah? When you mentioned that you saw or feel there is a greater need for higher investment in R&D because you want to extend your competitive advantage, I think we are very supportive of that, if it does extend your competitive advantage. The question is, could you give an idea of how much? Do you have a clear path already or a visible path as to how much of this can be commercialized and how much of this will be pharma type trial and error sort of R&D? Excuse the term, but. That is always the hundred million question, right? R&D. First of all, it is not a matter of just more. I also think we have upside in structuring R&D maybe better. We have these two dimensions, category-wise, and then transversal technologies, and there we are structuring. There is actually restructuring happening also in our R&D setup to go for more efficiency. I say it more as a general concept. Somewhere, you see it all over, our strategic direction of added value links food with nutrients with health, and that is through normal daily food and beverages. But then also these other dimensions that we are building up is going into additional levels of knowledge, science, development, that if we want to build competitive advantage, and there is more of that. The more science link your business is, to a certain extent, if you do it right, the more competitive differentiation you can have. I want to be there. You just think why you saw some of this sugar, material science. Because food was, and I have mentioned before, food was texturization, raw materials, and supply chain processes, flavorization. We are good at that. If you start to move to another layer of material science, how you can actually make crystals that are different and dissolve differently, you saw that, I think, right? That is another story, and that brings it to another level. If you think about how food is linked with health in a much more direct health-inducing way, and you think about the microbiome, and you had already quite a few brutal answers to that. Probiotics actually is about the microbiome. There is so much more that goes into that direction. You saw the example of epilepsy. Think about that. The example you show, these are just examples of top of the icebergs. If you then go underwater, it is an amazing amount of potential that society, not only Nestlé, that society is starting to discover. I want to be on the front line there. Whatever touches nutrients. I do not want to go to pharma, but nutrients. Nutrients is increasingly having a functional role there that is to be understood. Well, to understand, you have to study. To study, you have to invest. That is why I say I do see R&D having a more predominant role, and cost linked to that, in driving the success of this company by differentiating and finding solutions before the others and building our brands with these additional arguments, and you go on. We have products like Vitaflo. I could tell stories. It is really motivating to see what food and the right formulation can do to health, especially in babies. You can make a difference between handicapped and not. Well, we want to be there. It is good for society, definitely, and I think there is business purpose linked to that, too. That is why I say. Now, how much is that? I do not know. That is also why we do not want to do it all under our roof. We want to share. We are much more in networking and growth funds and venture funds dimensions and being part of startups and having outposts somewhere to be linked in. Our R&D also is more and more having the right people, not doing these things, but knowing where what happening in the world. So we want to have capabilities of doing things, processes, everything. We have that, product technology centers, but we want to have also bases of the best guys around who are really knowing where what is happening and where we should engage and where not. That is what we are building up with Nestlé, the Nestlé Institute of Health Sciences, for example. That is what we are doing with having connections with startups in Boston and so on. So I hope we could share some of that with Stefan Catsicas when he was talking about. He only just showed you something. The whole innovation you saw is, I hope you saw quite a bit. This is only part of. We are not showing everything because there is quite a lot of more happening that we want to surprise you with. But that is deeper science, and I think more investment. I would do the round of the usual suspects. Let us start over there, Robin. We had the opportunity to. Over here. Sorry. Oh, sorry. We had the opportunity to meet the chairman earlier this year and it was a round table discussion. All right. We were talking about the change in the metric for EPS growth, where management incentives kick in, et cetera. That number was reduced by 1%. I think it was down from 7 to 6, or something like that. Presumably, that has impacts and feeds through into the Nestlé model. It seems to suggest that the Nestlé model, the 5% to 6%, is more of an aspirational target given this low inflation. I guess the reduction in EPS target reflects lower deflation. Is that a good way to look at it, do you think? Well, first of all, I will say the 5% to 6% I see that as an ambition to target. EPS is part. When we speak about top line, bottom line capital efficiency, that is basically something that you drive operations with. That is how you drive markets. Actually, return on invested capital per se is something that you have to see on what level you use it. If I use it in a market, and you saw, for example, Nigeria or other markets, Nigeria still has factories and investment, but some markets do not having investments. Well, it is top line, bottom line. But then we add it up on the right level to have return on invested capital. It is clear that we also use EPS in judging how we drive value creation there, too. The 5% to 6% ambition is definitely one of these part of your equation that makes a big difference in the EPS. We have our targets there definitely, clearly, too. The largest factor influencing EPS is trading operating margin, which is really part of our incentive program anyway. Trading operating profit is in itself largely influenced by our sales growth. Obviously, we are really looking at the entire value chain, from the top to the bottom line of the P&L. We are managing the whole tree you saw. You showed it yesterday. The economical value, recreation, return on invested capital tree you have there, all these elements. Then how do you drive businesses and how do you commit, then you have to have a framing on incentives, and that is what we have longer term. I guess it speaks to a lower growth environment over medium term. Is that how you interpret it? Well, I would say that's an expression of some realism, yes. Yeah. Yes. And fairness, too. Who's next? Mitch. Thanks. I've got three totally unrelated questions, if that's okay. Yeah. If we take one, then we go around and we come back. Okay. That's fine. The first one is, I guess, the most important, which is lots of companies within the food and beverage industry have been able to achieve very large margin improvements through a combination of either trade budget optimization or more aggressive cost-cutting plans. I appreciate you've given a new structural cost reduction ambition, the flow through of which is to be defined. Perhaps some perspective on why you think a similar level of margin improvement is not achievable at a company like Nestlé. Is it because you're already so efficient? Is it because of the scale and breadth of the company? Is it because your categories are relatively heterogeneous, or is there something else perhaps I'm missing? I don't speak for other companies. It is linked with that fiddle line between short-term, long-term again. We have increased our investments for the longer term, too. I feel this consistency of going, we can increase our bottom line 300, 400, 500 basis points tomorrow. Why and how? Easy. Cut PFME marketing spend. R&D we can cut, too. You go on. I wouldn't do that. I said there is this combination of short-term intensity deliver consistently and long term. That's our job here, to maintain that balance. We have many moving parts. So we do have the law of the big numbers, many small dimensions that are converging in the same direction, adding up to what we are, stabilizes the numbers. But I wouldn't go to jumping on the scene and saying we're going to have 300 basis points next year. By doing so, we can survive three, four years cutting some marketing spend. We have a lot of brand momentum and all that. That's not responsible. We owned it to people a few years ago doing the same thing for us and having that rolling dimension going. So it is top line, bottom line increase every year. Now, 400 or 500 basis points one year and then going down and then going back, that's not our model. That's not what we believe in. It is in that balanced way. It's a fiddle line. It's a very subtle balance, but that's a good balance. Actually today, we are investing more proportionally for the future because it's intrinsic to our added value business model that I just explained also that is more related to research. We are having a heavier agenda on innovation and innovation, which is linked with a moving and evolving society. You see, the food and beverage business is going through, I would say, an inflection point of capabilities, science again, and answers, but also needs. Call it the millennium syndrome. Everybody understand what I'm saying. The love relationship to food is changing and worldwide, not only in the developed world, definitely everywhere. There it's now it's know that you have to engage there. It's know that you have to invest or reformulate and be in the front line. So it's that balancing act, and I think part of what we are as a company, and I know you like that, but still you challenge it, and that's the right thing to do. But is this consistency somewhere? I like this consistency. A little bit boring maybe. I think also it is good for 340,000 people to know what drives us. We are much more intense than in the past on many areas, but consistent. You are totally right to challenge and say, "Hey, the other guy is here and the other." We look at that too and say, "Well, yeah, what is in for us? What should we?" We are adapting to it. We would not jump in every pool. If I can just follow up there, it is obviously too soon. Can we come back? Yeah. Yep. John. Thanks, and thanks, Paul, and maybe I speak on behalf of everybody, thanks very much for all the management giving up a good 48 hours, and I am sure there is a lot of preparation went into it from the IR team, so well done on that, guys. Thank you. A question, I ask the buyback question, if I can. You said you do not want to go back to AAA. You could go back to AAA the way you are generating cash. Can comment on that? I will sneak in a quick one. Is Europe doing a Japan, and is that going to be the focus for you in terms of cost-cutting over the next couple of years? Thank you. Well, AAA maybe, but we want to be gold standard in the industry. That is what we are, and I think where it is relevant, we keep it, and that is what we want to do. Is it per se an objective to be AAA? I saw yesterday, was it, that how many companies do have AAA still? Not too many. But we are the gold standard in our industry. That is what we want to be. Now, Europe and Japan. You may remember when the crisis started and all, there was quite a lot of noise with growth. Ooh, yeah, and Europe and all that, forget it for a while. If we go to emerging market. There was a time that the Chinas of this world were still double digit, and everybody there. We said from the start, we are an end company, so we want to have growth also in the developed world. We never left growing in Europe. I do believe some of the inspiration that I hope you felt a little bit with through Kozo when he spoke about Japan, I feel there is potential in Europe, too, on this, of different business models. The Nescafé Ambassadors, I definitely believe there are millions of small offices also in Europe. And why? So there is commonality. For me, somewhere, the reverse inspiration, the inspiration coming from Japan is saying, also in Europe, we have to bring our creativity to another level. It is not pushing the same buttons harder. It is rethinking certain dimensions. Coffee in Europe. Should we go there into this ambi? Yeah, I think so. KitKat. KitKat is one of these products that we have that has a strong, narrow personality. There is the 2 fingers, 4 fingers, that is it. He has been able to be creative in that narrow framing. Well, that is not only conditioned to Japan. So I do see a lot of commonalities of driving growth, defying gravity, and a country like Japan should be inspiration for the rest of the world. And that is what he has been, and that is what we believe in. And it should not be these answers bring over here, part of that, but also rethink in Europe what we can do in changing the business models and drive growth. We have done quite well so far, but I do think there is more. Also, United States, definitely. Oh, the whole world. You see, I am using your question for more, but the developing emerging markets, I truly believe also there is going to be reverse innovation. China, definitely, and I think Wenling has shared that with you, too. E-commerce. The whole digital dimension is definitely so much is going to come from that inspiration that we are going to have there. That is why we engage in accelerated way in China. Not only in China, elsewhere, too. There are quite a lot of e-dimensions initiatives in many markets. Why? In emerging markets. Why? Because they do not have systems to defend. They do not have an oversized retail set up to defend. So it is like the cell phone. The cell phone was going and introduced, penetrated faster in these markets. That is why I believe in these reverse innovations in many areas. And that is why also sixth floor, for example. We did not set it up for you only. That is permanently there to inspire our people from all angles. And you see lots of products are coming from emerging markets. And that is something where we have a competitive advantage because we do have decision-makers, we have development that is local. Creates some complexity, but it is good complexity. It is a good investment. And Kozo is a good symbol of that. Marta. Thank you. Some of the science you showed us from your R&D was very impressive. I had the impression also that it's converged more to the pharma, especially with the clinical trials, and you say you want to invest more in that's great. But I was just wondering, your pricing environment must be far more sensitive than that of the pharma companies, but the investment and the scope seems quite similar. I've been wondering, how do you assess the potential return on this R&D investment into developing the functional or health food? First of all, we are not pharma, and I have to stress that although there's some smell. There's some smell because you go to functional relationships with health. There you go. But there's a fundamental, big difference between pharma and a company like ours. It is clear that somewhere you go to somewhere in the middle, because we speak about inducing health through nutrients and all that. It is clear when you speak about functional benefits, that in a society that is serious about these things, you have to prove. We are still a Cartesian society. We have to prove. It's not a matter of belief because we observed 3,000 years, and so on. That is clinical trials, but still, you have different levels of clinical trials that are fundamentally different. We still talk about GRAS, which is safe ingredients, and so on and so on and so on. We spoke about return on R&D as something that we are monitoring too, the pipelines, the output, how much of our business is innovation that is linked with our R&D setup. We're monitoring behalf call of KPIs to monitor our R&D setup area by area and to see how dense the pipelines are, how far out we are. It's clear that with health signs, the timelines are longer, because if you do, and it is actually not easy to do clinical trials or to build proofs on things that say, "If you take this your whole life, you're going to be healthier and safe." You have to wait a long time. It is clear. But there is so much affinity with what we have done, if you think about our first product, and that was because it was obvious. You have to eat and cereals and milk and it just goes a little bit deeper. That's why I don't believe we are pharma, and that's why I do believe our R&D spend, our investment is going to be still away from what pharma has to do. On pricing, you say the pricing sensitivity, we're not pharma. There is competitive intensity. We have to be aware of that. All the investment we do in R&D is to differentiate, to justify a margin. It is through this differentiation that you don't The further you get in differentiation, the further you get out of commodity, the more honest pricing you have. Overpricing is not part of our business model in the sense of hit and run. It should be honest to the value you deliver. You see through and also pharma being challenged on that. Pharma is somewhere going a few years later than the food and beverage business through quite a few experiences like private label we had and all that. I observe. Stuart? Paul, there's a sense in the business that where you managed to grow significantly above the market in Japan and Europe, there was an intensity required of the business because of the lack of growth in those markets, which has been lacking in other parts of the business and is reflective of a lack of intensity in the search for growth across the business in general. How do you think about that or respond to that? You speak across the business or across the industry? Across your business. You say, just to understand your question, you say in Europe we sell good and bad? No, because the market lacks growth. Your organization is then absolutely focused on driving whatever growth they can find and therefore grows above the market. Whereas in other markets, you have a tailwind of growth and you are not so hungry to outperform the market because you are happy to grow in line with the market or maybe even a bit less because you have got some top-line growth anyway. Is that your perception? Yeah. That does not look like our reality. No, the facts are a little bit different somewhat because indeed in Europe, we are delivering growth above the market. In Japan, that is what we do. In the U.S., we do as well. If you look at the food and beverage market last year, it declined, I think for the first time ever. It declined by volume last year in the United States, and we are growing in the U.S. It might have been different a few years back, though. But last year we grew as well. And in emerging market, you saw I presented it yesterday, we grew over the last three years on average by above 8% in terms of CAGR on sales. So we are growing, I think, above market levels in most geographies. Okay, you can always find different markets where it does not happen that way. I would not like to leave a feeling that we are standing up here and saying, "Growth, whatever it takes." It is growth with return. And sometimes you have to invest a lot to keep your position because growth comes afterwards, and so you have to balance these things out. But I would not go in the direction of growth is first. We are not company. It is growth with returns. And you said something in the sense of maybe the intensity of resource you put to have some growth in a certain area where growth is not a given, that same amount of money there could have bigger impact somewhere else. That is a little bit your question, I think. And that is where portfolio management and return on resources is linked with. And these things have to be paced out. And we do a reallocation of things. For example, we, during the year. We reallocate, say, "Look, that is like going against a wall for the time being. Let us keep our position." But there we have tailwind, and we reallocate resources during the year. So we do that. And actually, the portfolio tool helps us there to judge the sensitivity of certain shifts and arbitration, if you want. You have to watch out, too, that you do not overdo that because you compete in categories, and you cannot only always shift from one category to another because you have to keep your competitive positions, too. And it is not only one year versus another, because your positions, when you lose them, it costs double to regain them. But that is judgment. There is no formula for that, and I hope we have the right brains to judge these things on the right levels because that is not all done here. That is done in the markets. That is why also this relatively complex structure, because you could also say, "Why has Nestlé not grow or managed category by category worldwide?" Because of that. Because that feeling, that nuancing, and that reacting meaningfully is basically also given locally with some regional global judgment, and you go on. So that is how it goes. And sometimes, yes, you may be right. Somewhere, we have been pushing too hard versus the potential, and the return would have been But these are the judgment calls that then the portfolio tool takes up again and say, "Well, the last two years, that was lost." Okay, fine. So what do we do now? Fix it or disengage? Was that the question? Yes. Okay, perfect. Georgios. Given your solid free cash flow generation and your encouraging goals to improve it with increasing margins over time and lower working capital and about 4.5% CapEx to sales, can you tell us about your plans or desires for the use of free cash flow in terms of dividends, small acquisitions, and big acquisitions? Well, our use of cash flow is known. We have several levels, and you have shared that. That is first. Play short-term, long-term investment for the future and the right with supporting our brands or what we have been discussing here. The other one is doing the investments, CapEx, but you see also how we are sweating our assets. Margdi has been sharing that with you, how we go very sharp on this, and I do believe we. She is driving a lot of efficiency there, too. Portfolio management, again, and combination of, and then you have giving back to people who trust us and put their money in our company, and the stable way to do that is dividend. Then you have build on acquisitions to keep monitoring and see what makes sense, watch out the goodwill, and you have seen there how that has an impact. Then you may have something like share buybacks. But wait, that is exceptional, and we should not overdo that. That is how I see. But mind you, the dividend policy that we had has been quite essential. You can do the calculation. But I think we should privilege that and keep that going. Again, consistency over time matters to us. I do not know if you want to add something on this one. No, I think we have been fairly clear on that, and this is what we have applied indeed, supporting the business, securing the dividend. The dividend has increased, as you know, over the last few decades in absolute value in CHF, which is quite a bold move. Then M&A, we discussed it. It is an opportunity. It is not an obligation. We need to be careful, especially in terms of returns. Then comes at the end, share buyback, as Paul said, which is obviously we are not going to be sitting on piles of cash. This is not the case today. If it was the case, obviously, we will return it probably in terms of a share buyback, but we are far from that case today. Okay. Mitch, you had another one? I have in mind you wanted some more. 25 more questions. I do not have 25, but I have two. Let's take one. Okay. The second one I wanted to ask was, I appreciate the attractiveness of a focus on health and wellness. Do you think there is any sign at all that that focus is maybe hampering the parts of your business that don't focus on that aspect, confectionery perhaps? Are you doing enough to innovate there? Oh. In confectionery, first, the link with nutrition of amounts, I don't see a contradiction there, to be very honest, I don't. I do see a company going responsibly above that category. That is linked in with how can we deliver the same moment of enjoyment. You like chocolate or Yeah, I look like I like chocolate. I do like chocolate. She's the first you meet. My thing was a question. The answer is yes. But you see, that's what we are as a company. We are a company that goes about food and beverages, and the link with quality of life of people, but in a responsible way. Confectionery is part of that. There's technologies. You have seen how we can deliver that, and our iteration, you can put and portionability, and you go on. Now, should we drive it better? Yes. There's upside here. You just think about the phenomena of KitKat. We use and abuse the example, but KitKat is one of these that we have in our company, and it is a 75-plus year brand, and it was in, I may be wrong, seven, eight markets, basically. Now, we are a global company. We have a brand that is unique. We have a brand with a product personality that is and so on and so on and so on. Now we have it over 40-plus markets, and that in a few years' time. There is upside, and it is for us to land these things. You can say, "Yes, but you are a third in the global." Yeah, but that is mathematics. At the end of the day, people buy brands, and KitKat is the top 10, definitely, and it is one of the fastest-growing. So I may have more of that, potentially, and we work on that. You know, and I have shared with you last time we met in this setting that I have a little bit of frustration somewhere here and there, like Cailler. We are not going to blast ourselves on the world scene with Cailler. We are going to do smart on the tangent and all that, but I do believe there is upside of creating these nice, enjoyable moments in people's lives. That is also part of our business model. It does not take away the fact that we are serious about nutrition and wellness. Thank you. Good. Let us take a few more. Céline? Yeah. A clarification. In a few presentation, there was a discussion about above market, where some of the managed Zone businesses seem to be given a bit more their independence to be above the market. Is this a trend? Does it mean that those companies or those categories are better managed on a standalone basis more successfully? Does that mean that your structure probably is ill-adapted to what you see right now in the market? Well, there's a famous question between globally managed, locally managed, this pendulum always. I have mentioned that we are fundamentally a decentralized structure, but that doesn't mean that we should be capillary in everything we do. KitKat is a KitKat is a good example of that. We didn't have the dynamics of KitKat. Why? Because localness prevailed there, where actually a global brand offering should be more into in the markets. We have not one size fits all in Nestlé, so we have different business models globally, regionally, locally. We have globally managed brands, locally managed brands. It's for us to maintain that balance again. Yet again, the portfolio tool helps to judge and have judgment on these things. I do believe, though, that if we go to deeper layers of research, of innovation, that leveling that up, scaling that up to more markets, we call it the big three, bigger, bolder, better innovation, is definitely something that should drive a world that is increasingly interconnected, you see. We still have 170 blends of Nescafé. You can say, "Well, now come on, coffee, it should be one." No, no. Watch out. That's the localness. That's the 60/40 plus that drives that. Again, to fit the line between overcomplexity or over localness. Localness should not be the alibi of not doing the right thing and taking up what globally works. That is, again, the balance we have to work with. That's a little bit a challenge. We have structured certain businesses globally, water. You saw Marco, he spoke about water. Yet again, in water, we have global brand, Pure Life. We have global brands, international brands, Perrier, S.Pellegrino, and we have local brands. That combination, again, is a winning combination because people buy local. People in the fourth industrial revolution, people are still physical. They need to eat. They touch brands, et cetera. Yet it should not be all locally invented. As more and more is going to be global. Nestlé Health Science definitely is more global. Infant formulas is more global. Why? Because you have one drive of innovation, of understanding, of research. Purina actually is regional. Although the platforms, but the brand structure is regional, but the platforms are global. That's how we have then another model, where we coordinate the thing regionally. Actually, we have a regional that is quite specific. You saw also that we have Latin America linked with St. Louis. We have now linked also AOA with the drive, the good drive of Petcare in Europe. There's no black and white answer to all these things. There's judgment again, and driving it, learning, adapting, adjusting. I think there this balance, a fine balance again, local and global is what works, but it tilts to more global inspiration and local execution. NBE is also a proof of that. Okay. I have four hands up. Number one. Hi there. I think there was a slide earlier on that showed that local companies have gained about 200 basis points of share in your categories over the last couple of years. If you're positioning yourself as the local multinational, we have just had lots more chat about the degree of decentralization, why aren't you gaining that share or at least more of that share? Good question. That's how I challenge the structures, too. But local competition has, and that's why we have to really go and maintain agility. There's a part of the millennium syndrome that is linked with small and local, that although you are the local multinational, you're still global and multinational. That's part of the explanation. That's why also we have to watch out that we don't fall in the trap to say, "Oh, we have to buy all small local brands." I think we have to build these emotions into our global brands because, at the end of the day, people don't buy a brand, say, "Oh, that's a global brand," if we don't position it that such. So we should do a better job there. I do think also the agility to adapt to localness in a fast-moving, especially emerging, market is higher when you are a local startup or you are a local player. We have a little bit more of framings, and we have to make that more agile, too. There is a little bit of that agility that goes in their favor that they do not see we should lag that. We should build it into our model, too. Totally right. You saw Vietnam this morning. Vietnam, I was there, and you go to the street, you try to survive the motorbikes, and you see these billboards, and you see, oh, that product. What is that? We have, oh, yeah, that is a local competitor. They say, "But we have that somewhere in another country. We could do the same here." Oh, yeah, we do, but in another country. You see? If that is a high potential, we then organize to get it then. That is because you saw it, and that is somebody doing it already, you see? Because we do not have it in our portfolio there, we do not have a factory. That is where this, I would say, this link in time is, and we have to shorten the time of reaction. Or we say we disengage. We do not go there because that is not possible. It is hard to find a category where we cannot have an answer. But it is hard to find a country where we have all categories with all products and production capabilities, too. So that is somewhere where I feel we are having upsides to go faster after these things. I think that probably as well, it shows one thing, which is the fact that we are not looking for market share only. I think we need to strike the right balance between top-line growth, market share, profitability as well. By choice from time to time, we decide not to go in some markets. I shared the example earlier of, for example, water. In some categories in the United States, for example, we decided not to go against label brands because there were no returns. In emerging market, from time to time, you have local players who are going extremely low in terms of price point. We are in the business of affordability, but there is a certain part of the market where we do not want to go too low either because there is no return. At the end of the day, even if we lose market share in a certain number of instances while preserving our market or profitability, that is the right thing to do. Okay. So, Heidi. We saw a very interesting presentation about your digital and online efforts this morning. If I just think about what some other European FMCG companies have done, some of them have elevated the digital expert to the executive level. I was just curious how you think about that question in terms of whether it would make sense to have that kind of a person in your executive committee or whether it's not sufficiently strategic or just your overall thoughts. Everybody in the executive board is digital. It's like having executive board, somebody that is responsible for growth. No, I wouldn't like that. I mean, or having somebody who is responsible for innovation. We, as a collegial group of people there, we're quite hands-on, and we talk about digital every time we sit together. Digital and the people you saw are administratively reporting into Patrice Bula. But basically, everybody's involved here. You see even our communication guys are linked with digital, and you see one link definitely is linked with digital in the market. I don't want to have a bottleneck on something that is one of our priorities, broad-based priorities. You see Chris Johnson definitely is linked with digital. He's actually the hardware digital guy. So it's again, an option. What you do with that is saying, we take it seriously. Well, then I'm the digital guy here. I have to drive it. This is highest priority for this company. We have been accelerating this big time. We should maybe talk more about all what's happening, but I'd rather have it showing through our business performance, and that will. I'm quite upbeat of what's happening all over the company. Alan, you have your hand up since a while. Well, I think it was in 2011 when Nestlé Health Science was created that you set an objective of within a decade being the undisputed leader of the use of nutrition to treat and prevent chronic disease. You were sort of at the halfway stage here. Do you still think that's a realistic target? Have you been pleasantly surprised or disappointed with the progress you've made versus that roadmap? No, we have gone a long way, and definitely on nutrients we want to be the leader in that field. Yes. We still have that ambition. We have driven our business as we had, and there are basically consumer dimensions. We have engaged in the right platforms. We have a lot of learning curves, that's true. We brought in talent. So the building up has moved quite a bit. We also, in that field, are taken differently than at the time, because I remember when we started, "Okay, what is this?" So we can engage with the leaders in thinking and in knowledge in the world. So the authority of seriousness of which we go about this is there. The leadership of initiatives and platforms that we're driving also. So I'm confident that we are on the right track. With the right pace, 10 years, well, yeah, it's definitely already five years. Well, five years to go, let's talk every year how it moves. I'm upbeat. Mitch, the last of your 25. I don't think my last question is an appropriate last question, but I'll do it anyway. I wanted to ask in the e-com panel and also the AOA panel, you said that you think your shares online are higher than offline in the Americas and in Europe. I noticed that statement wasn't made in the AOA presentation. I wondered if it was also true there. I accept it's very difficult to measure what your shares are online and off. I wondered what the best way of doing it is that you found, and where you think you're doing best. Thanks. I didn't hear the beginning. You said our share? Yeah, your share online versus your share offline. In the EMENA presentation and the Americas presentation, the statement was made that you think your shares are higher online than off in general. I noticed that statement wasn't made in the AOA presentation, which is arguably where it's most important. I wondered if it was still true. Also I wanted to know how you measure, because it's obviously very difficult to know what shares are online. I rather feel, depending on category by category, again, there you go. I rather feel that we were catching up because our share online was under our share offline, that we have caught up quite heavily in the last two years and may have passed in certain categories. I still believe our upside potential is online, is still in catch-up mode versus the best players in each cherry-picking. In AOA, again, you go country by country. I do see there is upside in general in China, but then you go to certain categories. In infant formulas, definitely I feel there is upside, although already a big portion of infant formulas is going over E. Some other people may have started earlier, but we are catching up very fast there, and I want to be leading there, too. In Purina, a higher proportion of pet care in China is going online. That is higher than offline, for example. So category by category, it is distinctive and different. Again, what we are engaging with, and I think when Wan Ling shared with you this 150 years Alibaba partnership that is coming up and all that goes beyond, actually proportionally, that should go beyond our offline. Why? Because we do believe that online is going to be proportionally much more important in general as a driver factor of innovation, et cetera. That is where we want to be. Certain categories are more open and normal, and have a normal affinity to internet and e-commerce than others. Then you go to Africa. Africa and e-commerce is an intriguing relationship that I mentioned it to a few of you yesterday at the table. If I were younger, I would start e-commerce in Africa. We do not talk too much about Africa. Also, we could cover that next time here a little bit. Africa is, for us, one of these silent growth drivers where I truly believe, too, we are going to e-commerce products also specific for that region is going to bring us quite a lot of growth potential. This is a continent where we have been growing very steady. Small still proportionally. The continent per se has been growing. That is one of our highest priorities. This is going to also view two steps back now, not only Nestlé. This is one of these regions in this world, if you think about agriculture and the need for agriculture produce and all that is going to have an impact on society. I want to be there. We have been there now for more than 100 years. We have 35 factories in that region. I have a head start and do not want to lose it. That not losing head start is going to be linked with e-commerce definitely also. So upside. Okay. Final question. Eileen, you didn't have any more? No? It's over? Good. Well, I can ask. Can I? No, you had your hand up, but if you. Yeah I don't want to. Good, then we call it. Yes, she wants to ask. You want to ask? Yeah. It was just about innovations, really. I am trying to square your comments on bigger, more global innovations. Is it more important to have big global innovations introduced from the center or innovations that are started at the end market at the local level? Because it sounded from the AOA presentation that the latter was perhaps more important. It is a combination, and that is why I have said the small and big. But I do see so much potential of having good ideas being rolled out faster. You see, and we have to speak about failures. We failed with LC1. We still have it, though, this probiotic yogurt. Why? Well, we have 5, 6 years in front of anybody else, this probiotic argument. We had it. But we were Nestlé, so you go with that innovation, and you go knocking doors. You go to country A, country B, and then you see these timelines. Everybody has their own timeline. "Oh, yes, very interesting, but I have a priority A, priority B." These are innovations that are game-changing innovations, where we, as a company, should believe in and then see how we organize it to be broad and roll it out. We are monitoring now innovations and nice and good ideas, how many countries are rolling out in what time frame. We are monitoring that now much more than in the past. Then you have examples. I mentioned KitKat already, so no. Dolce Gusto. Dolce Gusto is a classical example of where we have forced markets to roll it out in Europe. It was Europe first. There was a zone head saying, "We are going to do this, and we are going to do this in 2, 3 years," rolling out in so many markets, and A, B, and the timelines were done. It was driven centrally. It is locally managed but driven and inspired globally. The advantage of these things is that you do not have every market saying yes, and they want to tweak things always. Like a machine, yes, but my machine should be with 3 buttons because 3 is lucky number. Doesn't work. We have to have more. That should not overrule the fact that we allow people to have local innovation, too. That combination is again a call-off. The 60/40 plus, for example, this whole way of going about nutritional wellness and preference and taste is something that drives quite a lot of localness. It should be consumer-driven localness, not ego-driven localness. That is judgment again. That is where the pivotal function of zone heads and non-global managed businesses is so critical to judge that and see where what call is to be made. I believe that there is got to be more of that global inspiration, but still local execution. There is much more buy-in of markets. There is much less defensive attitude to saying, "Well, not invented here." Why? Because we have so many good examples of being part of a global resourced idea is so much more forceful and drives so much nice returns, so there is an easier buy-in. We do SKU management, too because you can imagine with localness, you can have an hyperventilation of SKUs, so we do quite a stringent SKU management. We went actually from over 100,000 to 70 something thousand. Magnificently done. All right. There you go. That is central. This is a little bit with forceps sometimes because always you have somewhere a mother of a father of an SKU, and it is always hard, emotional. Again, there we have a lot of buy-in because you free up capacity, so less CapEx. You have a much easier time managing your stocks and provisions, and you do not have to sit on your knees to have all your SKUs on the shelf, and so on and so on and so on. So it just makes sense, these more global dimensions. Yeah, it makes sense. Okay. I look in some really tired faces. I think we managed to exhaust you over those two days. Thank you very much. Thank you also. I really appreciate it.

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