Frits van Dijk and Kim Jeffery - Nestle

Nestlé Investor Seminar

Nestlé Waters Frits van Dijk and Kim Jeffery

1

This presentation contains forward looking

statements which reflect Management’s current

views and estimates. The forward looking

statements involve certain risks and uncertainties

that could cause actual results to differ materially

from those contained in the forward looking

statements. Potential risks and uncertainties

include such factors as general economic

conditions, foreign exchange fluctuations,

competitive product and pricing pressures and

regulatory developments.


2

Nestlé Waters 2001 key figures

2001 Key Figures

Sales (CHF) 7.5 bio

RIG 9.1 %

Organic Growth 11.7 %

Profit Margin 8.3 %

Market share (value) 16.3 %

Employees

Local

Brands

76%

Nestlé

Brands

2%

International

Brands

22%

Out-of-

Home

30%

Take

Home

54%

HOD

16%

Europe

45% North

America

48%

Latin

America

3%

Asia &

ME

4%

By region By channel By brand

21,300

Nestlé Investor Seminar : Frits van Dijk

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Nestlé Waters Jan-Jun 2002 key figures

Europe

44%North

America

49%

Latin

America

2%

Asia &

ME

5%

Out-of-

Home

30%

Take

Home

53%

HOD

17%

Local

Brands

77%

Nestlé

Brands

2%

International

Brands

21%

By region By channel By brand

Jan-Jun 2002 Key Figures

Sales (CHF) 3.9 bio

RIG 8.7 %

Organic Growth 8.2 %

Profit Margin 9.4 %


4

Nestlé Waters objectives

Annual growth higher than total water market: 6 to 8% p.a.

- Achieve market share growth and value creation

- Reinforce worldwide leadership

Improve profitability to the Nestlé Group average

- Profitable volume growth

- Productivity / efficiency improvements in:

- Production

- Distribution

- Structures

- GLOBE implementation


5

Nestlé Waters strategy (I)

Growth

Strengthen position in existing NW markets through

- internal growth with innovation & renovation

- priority to markets delivering margin opportunities

before volume (North America, Europe, Middle East)

Enter selected emerging markets through

- launching Nestlé Pure Life

- strategic acquisitions

HOD development in Europe, Middle East and selected

emerging markets (emphasis on acquisitions, with some

greenfield approaches)


6

Nestlé Waters strategy (II)

Brands

Three axis (international premium brands, Nestlé brands and local

brands) enabling

- to compete in all market segments

- with a wide variety of price levels

- in all distribution channels (TH / OOH / HOD)

Channel distribution Penetrate all possible beverage channels, particularly in the

expanding on-the-go market

Expand in HOD

Expand regional and worldwide supply agreements with

international customers (airlines, theme parks, hotels groups)


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Nestlé Waters North America

Nestlé Investor Seminar : Kim Jeffery

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North America position within Nestlé Waters

% of revenue (2001)

48%

NWNA

More profitable than the Nestlé Waters average


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Complete market coverage as competitive

advantage

• Channels

All retail

Home & office

• Package segments

Pet

5 Gallon (H&O)

Bulk

Glass

• Brand segments

Premium

Popular

Value


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Complete package offering


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High revenue growth

15.8%

19.8%

14.9%

8.8%

1.7%

0.7%

1.0% 7.9%

0.5%

1998 1999 2000 2001

Acq.

Price

RIG

(0.9%)

14.9%

20.8%

11.0%

23.5%

Revenues


$1.3B $1.5B $1.7B $2.1B

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% profit versus revenue growth

11%

24%

22%

29%

2000 2001

% Revenue growth

% Reported profit growth


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26.4% 27.9%

28.4% 29.4%

20%

21%

22%

23%

24%

25%

26%

27%

28%

29%

30%

31%

1998 1999 2000 2001

NWNA market share evolution


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Total bottled water market Market share

1998

Market share

2001

All Others

55.8%

NWNA

26.4%

Danone

14.2%

Aquafina

3.6%

All Others

39.8%

NWNA

29.4%

Danone

13%

Aquafina

9.5%

Dasani

8.3%


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Total 2001 revenues $2.1 billion

Home & office

(tap water replacement)

31%

69%

Retail channels

(refreshment)

$648 million

$1,455 million


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Route delivery

Deliver water to 1.4 million customers

Over 1,800 of our own vehicles

From 70 branch locations

Make 18mm deliveries annually

Receive 5.5mm phone calls

Logistically challenging


17 Nestlé Investor Seminar : Kim Jeffery

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US bottled water industry


2.3%

32.9%

23.4% 11.0%

28.5%

76.6%

22.6%

2.7%

PET +30.0%

Bulk +4.5%

3/5/6 Gallon +4.1%

All Other

Vending +1.6%

Dom Sparkling - 0.1%

2001 % 2001 Source of Industry Growth 2001

Make Up by Growth Package

Imports - 10.1%

PET

100% 100%

Source: Beverage Marketing - Volume Basis - 2001

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NWNA revenues ($bn)

0

0.5

1.0

1.5

2.0

2.5

1998 1999 2000 2001

PET

5 Gal. / H&O

Bulk

Glass


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All price points

Premium: Perrier, San Pellegrino

Popular: Poland Spring

Zephyrhills

Deer Park

Arrowhead

Ozarka

Ice Mountain

Value: Aberfoyle


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Go to market strategy is low cost and

advantaged

• Lower manufacturing costs

Vertical integration

Lower weight water specific packaging

High speed dedicated lines

• Lower cost to market

Warehouse delivered

Hybrid broker/direct sales

Club stores act as value added distribution outlets

• Retailer margins nearly double DSD trade margins


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Brands do matter #1 Southeast U.S. #1 Northeast U.S.

#1 Pacific U.S.

#2 Sparkling Water U.S.

#1 Southwest U.S.

#1 MidAtlantic U.S.

#2 Northeast U.S.

#1 Midwest U.S.

#1 Sparkling Water U.S.


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Brands have strong consumer appeal

• Spring water makes us different

- Naturalness

- Authenticity

- Heritage

- Taste


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Repositioning Aberfoyle

• Converting Aberfoyle over next 18 months to Nestlé Pure Life

• # 1 brand in mass merchandise channel

• # 3 brand nationally in measured channels

• 40 million case brand

• Growing 40% per year

• Extremely low cost high margin business model


25

2002 initiatives

• $115 million incremental spend to defend and expand

market position in all channels while expanding margins

(funded by productivity / efficiency improvements)

Increased media spend by 100%

Increased selling coverage

- Availability team

- Move to direct coverage

Increased merchandising

- PET share of shelf +1.9 points

- End aisle racks +65%

- Increased c-store space +21% vs year ago


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Promotion spend

• Increased % promoted 12 points

• Increased promotion efficiency by 20%


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Summary of competitive advantages

• Ubiquity:

Participating in all channels, packages, and price points

• 70% market share in club channel = excellent path to market

• Low cost manufacturer and distributor

• Brands with heritage and spring water product platform

• Higher retailer margins and retailer consolidation makes

warehouse distribution preferred model


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Share of evolution to date


All Retail Channel PET Market Share Results (Jan-September 8)

Share +/- Change

Nestlé Waters NA 34.4 3.8

Aquafina 16.5 2.2

Dasani 11.0 1.0

Group Danone 8.0 (4.1)

RIG Nestlé Waters NA (Jan - Jun 02) +13.7%

Source: IRI & A.C. Nielsen - Total U.S. F/D/M/C

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Conclusion

• NWNA is a high growth business

• Share growth has been excellent

• Its EBITA margins are high and growing

• NWNA has the competitive advantage, strategies and

organization to continue these trends



Nestlé Waters

Frits van Dijk and Kim Jeffery - Nestle

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