Nestlé Annual Report 2014

FY2014 Annual Report · Nestlé

Loading PDF…

Annual Report 2014

CONTENTS

Letter to our shareholders
Enhancing lives and well-being

The strategy
The highlights
The future

Our brands

Financial review
Leading positions in dynamic categories
Business review
Principal risks and uncertainties
Geographical data: factories

Corporate Governance and Compliance
Corporate Governance
Board of Directors of Nestlé S.A.
Executive Board of Nestlé S.A.
Compliance
Shareholder information

Accompanying reports

Corporate Governance Report 2014
Compensation Report 2014
Financial Statements 2014

Nestlé in society

Creating Shared Value and meeting our commitments 2014

Corporate Governance Report 2014
Compensation Report 2014
Financial Statements 2014

Nestlé in society
Creating Shared Value and meeting
our commitments 2014

NESTLÉ IN NUMBERS

Group sales (in CHF)

91.6 billion

Trading operating profit (in CHF)

14.0 billion

Employees

339 000

Countries we operate in

197

Where we sell (in CHF billion)

Our top 10 Markets plus Switzerland (in CHF billion)

EUROPE

25.9

ASIA,
OCEANIA
AND AFRICA

26.3

UNITED STATES

GREATER CHINA REGION

FRANCE

BRAZIL

GERMANY

UNITED KINGDOM

MEXICO

PHILIPPINES

ITALY

CANADA

6.6

5.5

5.1

3.3

3.0

2.5

2.1

2.0

SWITZERLAND

1.6

AMERICAS

39.4

What we sell (in CHF billion)

20.3

16.7

13.5

13.1

POWDERED AND
LIQUID BEVERAGES

MILK PRODUCTS
AND ICE CREAM

PREPARED DISHES
AND COOKING AIDS

NUTRITION AND
HEALTH SCIENCE

11.3

PETCARE

9.8

6.9

CONFECTIONERY

WATER

23.5

Nestlé Annual Report 2014NESTLÉ IN SOCIETY

98%

of our children’s products met all of the
Nestlé Nutritional Foundation criteria (a) for
children at the end of 2014.

Our Healthy Kids Global Programme reached more
than 7.6 million children in 73 countries in 2014.

Top 3

73%

We are ranked one of the top 3 global food and
beverage manufacturers in the current Access
to Nutrition Index.

We audited 8700 of our 10 000 Tier 1 suppliers and
found 73% fully complied with our Supplier Code.

FTSE4Good

Leader

We remain the only infant formula manufacturer
included in FTSE’s responsible investment index,
based on our performance in human rights, labour
rights, responsible marketing of breast-milk
substitutes and more.

We were ranked number one by the charity Oxfam
in its 2014 scorecard, Behind the Brands. The survey
scored 10 food and beverage companies on their
efforts to improve food security.

38%

52%

Volume of high-priority categories of raw material
that are traceable back to the primary source.

Water discharges per tonne of product cut
by 52% since 2005.

12 458

factories achieving zero waste for disposal in 2014.

farmers sensitised on child labour issues in 2014.

11 832

26%

Nestlé Needs YOUth helped 11 832 young people
in Europe find work or apprenticeship opportunities
in 2014.

Energy consumption per tonne of product cut
by 26% since 2005.

(a) The Nestlé Nutritional Foundation criteria are based

on nutrition science and public health dietary
recommendations, such as those of the World Health
Organization (WHO), the Institute of Medicine and other
global or local authorities. Our products are evaluated
against these criteria, using the Nestlé Nutritional
Profiling System, which determines their nutritional
value and whether they achieve the Nestlé Nutritional
Foundation status.

KEY FIGURES (CONSOLIDATED)

In millions of CHF
(except for data per share and employees)

Results

Sales

Trading operating profit

as % of sales

Profit for the period attributable to shareholders of the parent (Net profit)

as % of sales

Balance sheet and Cash flow statement

Equity attributable to shareholders of the parent

Net financial debt

Ratio of net financial debt to equity (gearing)

Operating cash flow

as % of net financial debt

Free cash flow (a)

Capital expenditure

as % of sales

Data per share

Weighted average number of shares outstanding (in millions of units)

Basic earnings per share

Underlying earnings per share (b)

Dividend as proposed by the Board of Directors of Nestlé S.A.

Market capitalisation, end December

Number of employees (in thousands)

2013

2014

92 158

14 047

15.2%

10 015

10.9%

62 575

14 690

23.5%

14 992

102.1%

10 486

4 928

5.3%

3 191

3.14

3.50

2.15

91 612

14 019

15.3%

14 456

15.8%

70 130

12 325

17.6%

14 700

119.3%

14 137

3 914

4.3%

3 188

4.54

3.44

2.20

208 279

231 136

333

339

CHF

(a) Operating cash flow less capital expenditure, expenditure on intangible assets, investments (net of divestments) in associates

and joint ventures, and other investing cash flows.

(b) Profit per share for the year attributable to shareholders of the parent before impairments, restructuring costs, results on disposals

and significant one-off items. The tax impact from the adjusted items is also adjusted for.

LETTER TO OUR SHAREHOLDERS

Dear fellow shareholder,

The business environment was again marked by great uncer-
tainty in 2014. Disruptive socio-economic and political change
continued to affect growth in many parts of the world. In the
emerging markets, economic volatility worsened as growth
rates slowed and currencies weakened. In the developed
markets, deflationary pressures and soft consumer demand
resulted in a continued challenging trading environment. In
the face of such uncertainty it was more important than ever
to stay the course and remain loyal to our strategy, driving
short-term performance while ensuring we made the right
decisions to deliver our long-term goals. We took decisive
steps to further our ambition to be the world’s recognised
leading Nutrition, Health and Wellness company, trusted by
all stakeholders, while again delivering financial results in
2014 that outperformed the market.

Sales were CHF 91.6 billion, with organic growth of 4.5%,
composed of real internal growth of 2.3% and pricing of
2.2%. The Group’s trading operating profit was CHF 14.0 bil-
lion and the margin increased by 10 basis points to 15.3%,
up 30 basis points in constant currencies. This performance
was achieved whilst we again increased consumer facing
marketing support for our brands. The net profit rose to
CHF 14.5 billion. The CHF 4.4 billion increase in net profit also
reflects the profit realised on the disposal of part of the stake
in L’Oréal and the revaluation gain on the 50% of Galderma
already held when the Group brought its ownership from 50%
to 100% (see below). Earnings per share were CHF 4.54, up
44.6%. Underlying earnings per share were up 4.4% in con-
stant currencies. The Group’s operating cash flow remained
strong at CHF 14.7 billion. In view of this performance and the
company’s strong financial position, the Board is proposing
a dividend of CHF 2.20 per share up from CHF 2.15 last year.

Through continuous innovation and renovation of our food
and beverages portfolio we are able to offer people healthier
and tastier choices at every stage of their life, at any time
of the day. Science-based innovation enables us to enhance
the quality of people’s diets, using our knowledge and our
research and development capability to make a positive con-
tribution to society. Wherever you are in the world, we have
safe, nutritious products to help you care for yourself and
your family. A few years ago, we expanded the boundaries
of Nutrition, Health and Wellness with the creation of Nestlé
Health Science, motivated by the opportunity to forge a major
therapeutic role for nutrition in the management of health. In
line with this broadened strategy, in 2014 the Board approved

the sale of 48.5 million L’Oréal shares to L’Oréal for cancella-
tion. Part of the proceeds were used for the acquisition of the
50% stake in our joint venture Galderma from L’Oréal, bring-
ing our ownership of Galderma to 100%. Galderma formed
the foundation of a new Nestlé subsidiary, Nestlé Skin Health.
Its goal is to be recognised as the leading company in skin
health, offering science-based solutions to protect, nourish
and enhance skin, and where needed to treat, correct and
restore damaged skin over the course of people’s lives. Nestlé
Skin Health provides prescription drugs, self-medication,
therapeutic skin care and aesthetic and corrective medi-
cine, allowing us to compete in the growing and promising
multi-billion global skincare market. Nestlé Skin Health was
further strengthened by the acquisition of the full rights to
commercialise several key aesthetic dermatology products in
the United States and Canada.

These developments ensure that, building on the strong
foundations of our food and beverages business and guided
increasingly by science, we can further expand our portfolio
to provide promising platforms for future growth in line with
our strategy of Nutrition, Health and Wellness. At the same
time, we continue the drive to ensure our company is organ-
ised efficiently and effectively to deliver continuous profitable
growth over the long term. With this objective in mind we
made some key decisions, adapting our organisational struc-
ture to better prepare ourselves today to meet the challenges
of tomorrow.

While our company continues to benefit from its decen-
tralised structure, allowing key decisions to be made as close
as possible to consumers, there is still an important oppor-
tunity to better leverage our scale. That is why in 2014 we
set up Nestlé Business Excellence at Executive Board Level,
combining GLOBE (Nestlé’s Global Business Excellence
function) with Nestlé Business Services (our shared operation
for transactional services around the world) and Nestlé Con-
tinuous Excellence (our continuous improvement and LEAN
programme). Through a focus on three areas: Simplifying,
Standardising and Sharing, Nestlé Business Excellence will
allow us to decrease structural costs and operational expens-
es, freeing up resources to support growth. This will also al-
low our markets to keep a sharp focus on generating demand.
We have integrated the Maghreb, the Middle East, the
North East Africa region, Turkey and Israel into Zone Europe
to form Zone EMENA (Europe, Middle East and North Africa).
This balances the different consumer dynamics and oppor-
tunities in each geography. Additionally it allows a sharper
focus in Zone Asia, Oceania and Africa, a fast-growing part

Nestlé Annual Report 2014Paul Bulcke, Chief Executive Officer (left), and Peter Brabeck-Letmathe, Chairman (right).

Nestlé Annual Report 2014LETTER TO OUR SHAREHOLDERS

of the world where three quarters of the global population
live, enabling us to dedicate more attention to countries and
regions which are highly complex but have huge potential.

The new Nestlé Business Excellence function is led by Chris
Johnson, the former head of Zone Americas. Zone Americas
is now led by Laurent Freixe, the former head of Zone Europe,
and the new Zone EMENA by Luis Cantarell, who previously
was in charge of Nestlé Nutrition and Nestlé Health Science.
The new head of Nestlé Nutrition is Heiko Schipper, who was
formerly responsible for our Global Infant Nutrition division.
Nestlé Health Science is led by Greg Behar, who joined the
company from Boehringer Ingelheim in July. The newly estab-
lished Nestlé Skin Health is led by Humberto Antunes, former-
ly the Chief Executive Officer of our joint venture Galderma.

We further reinforced our business through continued
active portfolio management, reviewing the performance
of different products in different markets to assess strate-
gic fit, the extent to which they were accretive against our
financial targets, and what investments were necessary to
deliver growth. We made choices about where we wanted to
invest, where we wanted to improve, and what we wanted to
divest. Making such choices enables us to align our resourc-
es behind our best ideas, products and categories, to deliver
sustained financial performance and help us on our journey
to recognised Nutrition, Health and Wellness leadership over
the short term and the long term.

We also announced new investments and research
collaborations, which will enhance our ability to deliver sci-
ence-based solutions to improve the quality of people’s lives.
A newly-announced research partnership with the EpiGen
consortium will help us to better develop our understanding
of the influence of nutrition and genetics at the beginning of
life and continue to build our knowledge in this important
area. The Nestlé Institute of Health Sciences began a collab-
oration on a groundbreaking project, which could one day
lead to the development of made-to-measure vitamin com-
binations tailored to individual needs. Our company was
founded almost 150 years ago on the product Henri Nestlé
invented, farine lactée. It saved the life of a child. Today we
continue to invest in science-based innovation to ensure we
can answer current and future needs.

It is our fundamental belief that to be successful over time
we need to create value for our shareholders while at the
same time creating value for society. We call this Creating
Shared Value. To prosper we have to take a long-term view,
framed in a robust set of principles and values that are based
on respect: respect for people, respect for the environment,

and respect for the world we live in. What we do and the
effects of what we do are highly visible. It is our responsibility
to connect with different stakeholders, to show transparency
and build trust. We have therefore again in 2014 reported on
our social performance and our compliance in our Nestlé in
society report, and our progress towards meeting the tough
targets we set ourselves.

In 2014 we held another successful Creating Shared Value
forum, this time at the Nestlé Research Center in Lausanne,
co-organised for the first time with a United Nations body,
the UN Conference on Trade and Development (UNCTAD).
The President of the Swiss Confederation used his address to
the event to plead for water to become a self-standing goal
of the future global development agenda. At the event we
renewed our long-standing partnership with the International
Federation of Red Cross and Red Crescent Societies. Since
2006 this collaboration has focused on the improvement of
rural communities’ access to clean water and sanitation.

Currently, at the United Nations there are intense discus-
sions about the global development goals for the period after
2015. At the same time, governments and international organ-
isations are increasingly reliant on the expertise, experience
and resources of the private sector to help address some of
the world’s most pressing problems. This offers an oppor-
tunity for global companies such as Nestlé to make a valu-
able contribution, in partnership with governments and civil
society. We are participating actively in the policy dialogue in
areas which will deeply influence our future business, such as
food security, nutrition and health, water, sustainability, and
human rights.

The Board of Directors has actively supported the decisions
we have taken to further strengthen our Nutrition, Health and
Wellness strategy in 2014. It carried out a review of the Wyeth
acquisition, received an update on Nestlé Professional, and
visited our operations in France, where the discussions includ-
ed a focus on Nestlé Waters. The Board discussed our global
strategy in November, and reviewed our business in the United
States, as well as Nestlé Nutrition, Nestlé Health Science and
Nestlé Skin Health. It also examined our past capital invest-
ments and future needs, as well as our continuing active port-
folio management. The Board exercised its responsibilities for
financial planning and oversight, risk and compliance man-
agement, and setting the right tone at the top of the company.
At our 2014 shareholders’ meeting, the Board proposed
significant changes to our corporate governance in response
to changes in Swiss legislation. The changes to our Articles
of Association were approved by a large majority. For the first

Nestlé Annual Report 2014time in 2014, shareholders had to elect all members of the Board
for annual terms and to directly elect the Chairman of the Board
and the Members of the Compensation Committee. The new
governance framework had a significant impact on our Annual
General Meeting (AGM) and put compliance at the forefront of
the meeting. The role of the Board has changed and the AGM
has been given increased responsibilities. We therefore lead
an active dialogue with our shareholders and proxy advisors to
explain these changes and new responsibilities.

At our next AGM in April, we will for the first time submit our
proposals for the compensation of the Board of Directors and
the Executive Board for approval by our shareholders as required
by the new legislation. We have implemented these measures
in a manner designed to preserve legal certainty, while ensuring
that compensation remains competitive. We continue our active
dialogue with investors and encourage all shareholders to
vote and to help preserve our long-term focus as set out in our
Articles of Association.

Our success has always been based upon our determin ation
to stay the course and look ahead, to understand the environ-
ment in which we operate, to organise ourselves to seize op-
portunities to deliver profitable growth, now and in the future.
Although we are operating in a challenging and turbulent eco-
nomic environment, we see these as fascinating times, full of
opportunities. We continue to commit ourselves to ambitious fi-
nancial targets. We aim to achieve organic growth of around 5%
to 6%, improvements in margins and underlying earnings per
share in constant currencies, as well as capital efficiency. There
will be years when we exceed our ambition and years where we
come close, but this is the line we want to walk over time.

We would like to thank our 339 000 employees, whose com-
mitment to Nestlé, hard work and disciplined alignment behind
our strategy ensured that we achieved our common goals. Their
talent, their creativity, their discipline and entre preneurship are
key to delivering our results. We would also like to thank you, our
shareholders, for your investment and your confidence, which
have enabled us to deliver good returns for investors over the
long term.

Peter Brabeck-Letmathe
Chairman

Paul Bulcke
Chief Executive Officer

Nestlé Annual Report 2014ENHANCING LIVES AND WELL-BEING

Nestlé Annual Report 2014Supporting parents in raising
healthier children

Developing innovative products
to safeguard skin health

Helping ageing dogs maintain brain health

Continuing to deliver the highest quality
espresso coffee through Nespresso

Extending new job opportunities
to European youth

Nestlé Annual Report 2014THE STRATEGY

For almost 150 years we have enhanced people’s lives by offer-
ing tastier and healthier food and beverages choices at all stages
of life and at any time of day, helping them care for themselves
and their families. We have built our success by anti cipating the
future and continuously adapting ourselves to seize the oppor-
tunities it presents.
Through the continuous innovation and renovation of our pro-
ducts we are helping people enjoy healthier diets. In 2014 we
continued to invest behind the ideas, the products and the cat-
egories that help us on our journey towards recognised Nutrition,
Health and Wellness leadership, and deliver sustained financial
performance.
The Nestlé Strategic Roadmap (facing page) is our compass,
driving internal alignment behind our goals. The roadmap shows
the strengths we leverage to drive performance and deliver com-
petitive advantage. Our strong culture, values and principles, all
based on respect, unite us worldwide.
Our ambition is not just to be the leader but the industry refer-
ence for Nutrition, Health and Wellness. In recent years we have
built on the strong foundations of our unrivalled food and bev-
erage portfolio, exploring the benefits of nutrition’s therapeutic
role with Nestlé Health Science. In 2014 we again expanded the
boundaries of Nutrition, Health and Wellness with the creation
of Nestlé Skin Health, offering scientifically-proven products and
solutions for people’s skin health needs throughout their lives.
In the following pages we highlight some of our efforts to con-
tribute to society, driven by our determination to offer Nutrition,
Health and Wellness for all.

Nestlé Annual Report 2014Operational
pillars

Innovation
and renovation

e – Sustain a b ilit y

c
n
a
i
l
p
m
o
C

Whenever,
wherever,
however

Operational
efficiency

Growth
drivers

Out-of-home
consumption

Nutrition,
Health and
Wellness

Emerging
markets and
Popularly
Positioned
Products

t
i

V
a

u
e

Our objective is to be the
leader in Nutrition, Health and
Wellness, and the industry
reference for financial
performance, trusted
by all stakeholders

Premiumisation

Consumer
engagement

stlé culture, values a n d p r i n

c i p le s

Unmatched
product
and brand
portfolio

People,
culture, values
and attitude

Unmatched
geographic
presence

Unmatched
research
and development
capability

Competitive
advantages

Nestlé Annual Report 2014

THE STRATEGY

Nutrition, Health and Wellness –
our promise for a better life

We enhance people’s lives by offering tastier
and healthier food and beverage choices
at all stages of life and at all times of the day.

Nutrition, Health and Wellness is a priority for the people who
buy our products, for society as a whole and for us as a busi-
ness. As the world’s leading food and beverage company we
have a responsibility to use our knowledge and our research
and development capability to make a positive difference to
society. We have an important role to play in not only provid-
ing good nutrition but in helping people understand its value.
Start Healthy Stay Healthy is our interactive, science-based
education programme designed to help parents and care-
givers provide nutritionally and developmentally adequate
nutrition in the crucial first 1000 days of life. We support and
promote breastfeeding as the best start a baby can have in
life. Our educational programmes are targeted at people who
are most involved in implementing good practices during this
important early period in a child’s development. We help to
guide parents and caregivers to raise healthier children and
help healthcare professionals have a greater impact on the
nutritional aspects of care of future generations.

We continue to reinforce our leadership in the area of chil-
dren’s nutrition. By the end of 2014 98% of all our products
for children met the Nestlé Nutritional Foundation criteria for
children. These criteria are based on nutrition science and
public health dietary recommendations from bodies such as
the World Health Organization and the Institute of Medicine.
Our products are evaluated against these criteria using the
Nestlé Nutritional Profiling System which determines their
nutritional value and whether they achieve Nestlé Nutritional
Foundation status.

We are carrying out large-scale studies together with lead-
ing scientists of children’s diet and lifestyles, based on the
success of the Nestlé Feeding Infants and Toddlers Study. In
addition to dietary intakes and behaviours, our research ex-
plores family dynamics around diets and key lifestyle patterns
of children while documenting their height and weight. We
use this data to support our product reformulation, consumer
communication and educational programmes, and we share
the results with the wider scientific community, non-govern-
mental organisations and others.

We ensure global compliance with responsible advertis-
ing and marketing standards for children, abiding by external
pledges such as the EU Pledge. At the end of 2014, the Ex-
ecutive Board approved an updated and strengthened Nestlé
Marketing Communication to Children Policy, which will come
into effect in December 2015. To ensure consistent and effec-
tive implementation, detailed internal guidelines have been
developed and external stakeholders are encouraged to pro-
vide feedback via our Tell us reporting mechanism. We have
phased out our marketing communication in schools and
reinforced our health and wellness education activities, par-
ticularly those that positively impact children’s development
and support governments’ goals to increase physical activity.
By the end of 2014 the Nestlé Healthy Kids programme
was in 73 countries, supporting initiatives which demonstrate
how appropriate nutrition and exercise can improve the health
of children and their communities. In addition, our own stud-
ies in four countries have shown that two thirds of children
are insufficiently hydrated when they arrive at school. In 2014
we provided tools and information that schools, parents and
caregivers need to ensure children learn about the benefits of
healthy hydration.

United for Healthier Kids is a platform, created by Nestlé
in 2014, where society can engage and collaborate to find
ways to improve the health and wellness of children, from
conception to the age of 12 years. In Mexico, a TV series was
launched which supports and encourages five families look-
ing to change their eating and lifestyle habits over six months.
The platform has also been launched in the Philippines.

Through innovation and renovation we continue to make
our products tastier and healthier. In line with the recommen-
dations from public health authorities, we are reducing the
amount of salt, sugar and saturated fats in our products as
part of our contribution towards the fight against non-com-
municable diseases in society. Our reduction targets are in-
cluded in our public nutrition commitments (detailed in the
Nestlé in society report) so our progress can be measured.
We are also ensuring that whole grains are the primary ingre-
dient in our breakfast cereals for children and teenagers.

We want to help people who buy our products to make
informed decisions by giving them better nutritional infor-
mation on our product labels. We are enhancing our portion
guidance and have committed to print GDAs (Guideline Daily
Amounts) on the front of all relevant packaging. These make
it easier for people to see how much salt, sugar or fat is in the
product, and how the amounts compare to reference daily
guidelines. Nestlé Portion Guidance is a voluntary initiative

Nestlé Annual Report 2014that bridges the gap between dietary recommendations and
more user-friendly information to promote the right portion
size. It is designed to help reframe portion norms, particularly
in energy dense categories where habitual servings have in-
creased over time.

In parts of the world where people find it difficult to get
essential vitamins and minerals in their daily diets, we fortify
foods to help them and their families stay healthy. We are
on track to deliver our commitment of 200 billion servings of
micronutrient fortified foods and beverages annually around
the world by next year. In 2014 we continued to extend the
reach of our microfortification programmes, focusing on cat-
egories for children and women of child-bearing age, such as
fortified infant cereals and growing-up milks.

Nestlé Healthy Kids
Finding ways to help children, like these
in Brazil, to be more active and to make
healthy eating choices helps them achieve
and maintain a healthy body weight.

Salt reduction
Nestlé scientists at the Product
Technology Centre in Singen,
Germany, are working to reduce
the amount of salt in Maggi Tomato
Mozzarella Soup by enhancing
other flavours.

Guiding the portions
This label from Italy gives detailed information
about the contents of a recommended
portion made with 13.5 g of Nestlé Nesquik
and 200 ml of milk.

Read more about Nutrition, Health and Wellness:
www.nestle.com/nutrition-health-wellness
www.nestle.com/csv/nutrition

Nestlé Annual Report 201412

Nestlé Annual Report 2014Supporting
parents in
raising healthier
children

Nestlé aims to support parents with
the information they need to make the
most informed decisions about their
children’s health and eating habits,
such as the importance of regular
consumption of fruits and vegetables,
and of exercise.

We believe getting it right early in life
pays big dividends in terms of health
and well-being throughout life.

Supporting parents is part of Nestlé’s
commitment to helping future
generations develop their full potential
and live healthier lives by providing
high-quality, science-driven nutrition
for infants and children in the first
1000 days of life.

Research carried out by the Nestlé Research Center, and
published in the journal Appetite, indicates that children
who help their parents prepare their own meals eat
significantly more vegetables than those children who are
not involved in cooking with their parents.

Nestlé Annual Report 2014THE HIGHLIGHTS

Our company was founded almost 150 years ago on the product
Henri Nestlé invented, farine lactée. It saved the life of a child.
Nestlé’s success has been built on innovation, which will con-
tinue to drive performance and deliver profitable growth in the
years ahead. Across our portfolio, innovation reinforced our
growth platforms in 2014.
Increasingly, science-based innovation enables us to improve the
quality of people’s lives with new ideas, products and solutions.
We introduced a new lactose free infant formula with probiotic
L. reuteri that helps infants recover from diarrhoea. We rolled out
new organic fruit purée pouches for infants, combining good
nutrition with convenience.
In South East Asia we launched new premium noodles designed
for growing urban populations. Maggi ‘so Tender from the Pan’,
the unique seasoning paper that can be used to cook meat
without oil, was rolled out to new markets.
Nestlé Skin Health offered people innovative ways to protect,
nourish and enhance their skin health over the course of their
lives.
Our expertise in beverage systems ensured a good response from
consumers in North America to Nespresso’s new VertuoLine
system. By the end of 2014, Nescafé Dolce Gusto, the fastest
growing coffee system business in the world, was being sold in
more than 70 countries. In Japan we started using humanoid ro-
bots to sell Nescafé Dolce Gusto and Nescafé Gold Blend Barista
coffee machines.
Across the globe, our petcare business benefited from an in-
novation pipeline that delivered new products with proven bene-
fits based on good nutrition.
Some of these highlights are detailed on the following pages.

Nestlé Annual Report 2014Skin health, clear ahead

Nestlé Skin Health’s unique holistic approach
will help to protect, nourish and enhance skin
health, while working to preserve and, when
needed, to treat, correct and restore damaged
skin back to its healthy state.

The skin is the largest organ in the human body and it is
respon sible for safeguarding our health. Longer lifespans will
mean good skin care will become more important if we are
to extend a good quality of life to those of all ages. Seven out
of ten people are affected by a skin disease at some point in
their life.

Nestlé Skin Health’s goal is to be recognised as the leading
company in skin health. Created in 2014, it focuses on the
CHF 130 billion health-conscious segment of the growing and
promising global skincare market that was worth CHF 245 bil-
lion in 2013. It provides prescription drugs, self-medication,
therapeutic skin care and aesthetic and corrective medicine,
with innovative products from moisturisers to sunscreen,
from medical aesthetic procedures to medicines used to treat
serious conditions such as skin cancer.

Dermatology leader
The strength and breadth of our suite
of innovative products and medical solutions
has made Nestlé Skin Health a global
leader in dermatology.

Nestlé Skin Health’s vision
is to enhance the quality of life
by delivering science-based
solutions for the health of skin,
hair and nails over the course
of people’s lives.

Product range
Nestlé Skin Health has a range of products
that protect, nourish and enhance skin health
and, when needed, treat, correct and restore
damaged skin over the course of people’s lives.

Skin research
Nestlé Skin Health
is supported by
five research and
development centres
around the world
in France, Japan,
Sweden, Switzerland,
and the United States.

Read more about Nestlé Skin Health:
www.nestleskinhealth.com
www.galderma.com

Follow the blog of Galderma’s CEO:
committed.galderma.com

Nestlé Annual Report 201416

Nestlé Annual Report 2014Developing
innovative
products to
safeguard
skin health

The skin is the largest organ in the
human body and it is responsible
for safeguarding our health. Because
our skin is our interface with the
world, healthy skin leads to improved
well-being.

Given the importance of skin in each
of our daily lives, Nestlé Skin Health’s
focus on science-based solutions
is a way to enhance the quality of
people’s lives.

Our focus is to provide a complete
range of innovative products and
solutions, and to make them available
everywhere people go, so we are there,
every day, to help protect, nourish and
enhance, treat, correct and restore the
health of your skin.

We look at our skin and it influences our self-view
and well-being. Other people look at our skin
and it shapes their perception of who we are.

Nestlé Annual Report 2014THE HIGHLIGHTS

Start Healthy Stay Healthy:
nurturing a healthier generation
together

We provide high-quality, innovative, science-
proven nutrition for mothers and infants.

The importance of the right nutrition and feeding practices
during the first 1000 days of life, from conception to a child’s
second birthday, is now widely accepted by the public health
community. Our Start Healthy Stay Healthy programme is
dedicated to supporting mothers and caregivers to get nu-
trition right in the first 1000 days. Good nutrition is crucial for
health, growth and development, and establishing the right
feeding practices in early childhood also supports the estab-
lishment of good eating habits.

We promote and support breastfeeding which is the best
start a baby can have in life. Where breastfeeding is not pos-
sible, we provide breast-milk substitutes. In addition, we have
developed science-based nutritional solutions for infants with
specific medical needs, who are unable to absorb, digest or
metabolise standard infant formulas and are at risk of death
or abnormal development without access to these products.
We also provide a range of complementary foods, such
as infant cereals and meals and drinks. These baby foods
contain carefully selected high-quality ingredients and are
fortified with nutrients to meet the specific needs of infants in
this important phase of life.

We market our breast-milk substitutes in line with the aims
and principles of the World Health Organization’s Internation-
al Code of Marketing of Breast-Milk Substitutes as imple-
mented by governments. Our marketing standards are the
strictest in the industry. We are the only breast-milk substitute
manufacturer to be included in the FTSE4Good responsible
investment index (see the Nestlé in society report).

Breast is best
We firmly believe that breastfeeding is
best for babies and fully support the World
Health Organization’s recommendation on
breastfeeding. We also provide a conducive
environment for our employees to breastfeed,
such as through flexible work arrangements.

We have 150 breastfeeding
rooms at our premises around
the world.

Unique ingredients
Illuma is a premium
brand containing a
unique ingredient
blend designed to
enhance infants’
absorption of key
nutrients.

BabyNes
BabyNes is the first
advanced nutrition
system for infants and
toddlers that offers
age-specific, single-
serve formulas for
children up to the age
of three years old.

For more information:
www.nestle.com/aboutus/ask-nestle/answers/
how-does-nestle-support-breastfeeding

Nestlé Annual Report 2014Prolonging pet companionship

Nestlé Purina is addressing cognitive decline
in pets using research techniques that
focus on adding nutritional enhancements
to pet food.

Nestlé Purina scientists, veterinarians and nutritionists have
been studying the effects of ageing on pets since 1986, when
Purina began the breakthrough ‘Lifespan Study’ of canine
diets.

Around age seven a dog’s glucose metabolism in the brain
begins to change, which can affect memory, learning, aware-
ness or decision-making. Our scientists have discovered that
medium chain triglycerides (MCTs) in certain botanical oils
can be used as an additional alternative source of energy for
the brain in these ageing dogs.

Our scientists have also developed a proprietary brain
protection blend that includes fish oil to promote cognitive
function in cats and dogs. Extensive testing in cats and dogs
demonstrated improved cognitive and learning ability in pets
fed this blend.

Nutritional benefits
Purina Pro Plan Bright Mind helps support
cognitive function in pets.

Better together
Nestlé Purina PetCare hosted its second ‘Better
with Pets’ summit in New York as a forum
for discussing a range of pet care issues. The
one-day event brought together opinion leaders
from across the pet world, including retailers,
bloggers, veterinary practitioners, leading
animal welfare groups, and, of course,
pet-lovers and owners.

In December 2014, Glassdoor,
an online jobs and career
community, rated Nestlé Purina
number three in its 2015 list
of top 50 Best Places to Work.

Cognitive testing
This task, for an older dog, tests its mental
capabilities.

Read more about Nestlé Purina:
www.purina.com/innovation

Read more about the ‘Better with Pets’ summit:
www.purina.com/better-with-pets/summit

Nestlé Annual Report 201420

Nestlé Annual Report 2014Helping ageing
dogs maintain
brain health

We understand the need for good
nutrition to live healthily, so it’s
imperative that pet owners are aware
of similar nutritional breakthroughs
available for their pets that help slow
the changes associated with ageing.

Nestlé Purina scientists, veterinarians
and nutritionists have been studying
the effects of ageing on pets since
1986, when Purina began the
breakthrough ‘Lifespan Study’
to look at canine diets.

Nestlé Purina’s recent work addresses
cognitive decline in pets by using
research techniques that focus on
adding nutritional enhancements
to pet food.

Nestlé Purina’s research has involved developing
neuron-targeted nutrition with a blend of nutrients
sourced from vegetable oils, such as coconut oil,
to help improve memory function in older dogs.

Nestlé Annual Report 2014THE HIGHLIGHTS

Creating Shared Value – our way
of doing business

It is our fundamental belief that for a company
to prosper over the long term we need to
create value for shareholders while at the same
time creating value for society. We call this
Creating Shared Value.

In the Nestlé in society report we detail our progress towards
meeting our 38 Creating Shared Value commitments (includ-
ing three new ones for 2014). These commitments, which
we introduced in 2013, make it possible for stakeholders to
hold us accountable, while at the same time encouraging our
management, and all our employees, to achieve continuous
improvement. Creating Shared Value requires compliance
with the highest standards of business practice, including
international codes and standards as well as our own.

Global companies like Nestlé have a role to play and can
make a valuable contribution to the efforts to address some
of the critical issues the world faces, such as food security,
nutrition and health, water, sustainability and human rights.
Our Creating Shared Value approach focuses the business on
the long term, where the success of society and economic
activity are intertwined and mutually reinforcing.

In 2014, at our sixth Creating Shared Value Forum, held in
Switzerland, participants discussed how civil society and the
private sector could work in partnership to strengthen and
speed up sustainable development, focusing on the key areas
of nutrition, water and rural development.

Bees make honey
The 2014 Nestlé Creating Shared
Value prize was awarded to
Honey Care Africa, an East African
fair trade honey company, which
works with farmers in South Sudan.

Water at the well
In 2014, we renewed a long-standing
collaboration with the International Federation
of Red Cross and Red Crescent Societies,
with a particular focus on improving rural
communities’ access to water.

“We believe that there should
be universal access to truly
safe, not only improved,
drinking water by 2025.”

Peter Brabeck-Letmathe, Nestlé Chairman,
addressing the CSV Forum.

Presidential greeting
Then-President of the Swiss Confederation,
Didier Burkhalter, is greeted by
Peter Brabeck-Letmathe, Nestlé Chairman,
at the 2014 Creating Shared Value
Forum in Switzerland.

Nestlé Annual Report 2014Nespresso VertuoLine – a coffee
revolution for North America

Nestlé Nespresso’s revolutionary system –
VertuoLine – was launched in 2014 in the US
and Canada. It brews long cups, matching
North American preferences, as well as
authentic espresso.

The new system introduces Centrifusion technology to achieve
a high level of precision, using bar-code recognition to adjust
the extraction parameters for each Grand Cru coffee, deliver-
ing the perfect cup. VertuoLine is pioneering a new segment
of highest-quality, long-cup, freshly-brewed coffee. It brings
the quality seal of espresso, the crema, to the world of fresh-
ly-brewed long-cup coffee.

It is the most important innovation breakthrough for Nestlé

Nespresso since the invention of portioned coffee in 1986.

VertuoLine features a new line of 12 Grands Crus, eight
large-cup coffees and four espresso blends. The machine is
sold directly to consumers through the network of Nespresso
boutiques, over the phone and online and at selected North
American retailers.

Intelligent brewing
An intelligent extraction system allows the new
Nespresso VertuoLine machine to recognise
the different Grand Cru coffee capsules
and brew each blend in the optimal way.

The VertuoLine rotates
the coffee capsule 7000 times
a minute to extract every
drop of flavour.

Ensuring a sustainable supply
of the best quality coffee is a top
priority for Nespresso
The Nespresso AAA Sustainable Quality
Programme, developed with the Rainforest
Alliance, was launched in 2003. It aims to
secure the highest sustainable quality coffee
for Nespresso’s Grands Crus while helping
to improve the livelihoods of coffee farmers
and their families through support and training.
Nespresso pays above-market prices for
its coffee beans, as part of its commitment
in the programme.

Another research
breakthrough
A researcher at
the Nestlé System
Technology Centre
in Orbe, Switzerland,
where many Nestlé
technology systems
have originated,
including Nespresso
VertuoLine.

Read more about Nespresso:
www.nestle-nespresso.com
www.nestle-nespresso.com/ecolaboration

Nestlé Annual Report 201424

Nestlé Annual Report 2014Continuing to deliver
the highest-quality
espresso coffee
through Nespresso

The Nespresso story began with a
simple idea: enable anyone to create
the perfect cup of espresso coffee,
just like a skilled barista.

From its beginning in 1986, Nespresso
has redefined and revolutionised
the way millions of people enjoy their
espresso coffee.

The entire Nespresso system – the
interaction of the Nespresso aluminium
capsule with the Nespresso machine
– is designed to ensure the highest
quality that has made Nespresso the
reference point in the portioned coffee
sector and one of the fastest-growing
global food and beverage brands.

Nespresso’s new coffee technology is delivering
both American-style large-cup coffee and espresso
to North American consumers.

Nestlé Annual Report 2014THE FUTURE

Across the world societies are getting older and the burden of
healthcare costs is increasing. More than ever there is a need
for safe, effective and affordable solutions to help people stay
healthy. Our understanding of the importance of good nutrition
to help manage health and treat disease continues to grow.
We will play our part in addressing the issues the world faces
with the strategy we set out some time ago: expanding the
boundaries of Nutrition, Health and Wellness, investigating the
role of diet and nutrition in health, and innovating and renova-
ting constantly to provide effective solutions based on science.
Building on the strong foundation of our food and beverages
business we will expand our portfolio to provide promising plat-
forms for future growth.
We also need to attract and retain the best talent: we are pleased
that regularly Nestlé is ranked as one of the best global employ-
ers, but we are not complacent. We work hard to offer our staff
the opportunity to grow and develop throughout their careers.
We report on the result of our efforts in these pages; in nutrition,
in sustainable production, workplace policies and more.

Nestlé Annual Report 2014Changing the course of health

Nestlé Health Science is a company engaged
in advancing the role for nutritional therapy in
the management of people’s health through
investing in innovation and leveraging leading
edge science.

By 2020, one billion people in the world will be over 60, in-
creasing the burden on society from obesity and chronic
diseases. It is estimated global healthcare costs could rise to
between USD 5–10 trillion by the end of the decade. At the
same time scientific understanding of health, disease and the
potential of nutrition is growing.

Nestlé Health Science aims to champion the role of nutri-
tional therapies that have proven clinical and health economic
value, and improve the quality of people’s lives. The company
focuses on three areas: Consumer Care, which aims to address
specific health conditions with an emphasis on enhancing
‘healthy ageing’; Medical Nutrition, which supplies hospitals
and other healthcare facilities; and Novel Therapeutic Nutri-
tion, which works on new nutritional therapies (including pre-
scribed medicines) for specific diseases and conditions that
would be administered by a health professional.

Technology health product hub
The Product Technology Centre in Konolfingen,
Switzerland, develops and manufactures a
range of products for Nestlé Health Science.

Nestlé Institute of Health
Sciences is involved in
over 170 research collaborations
with more than 60 partners.

Nestlé Health Science products
Nestlé Health Science has a range of nutrition
solutions, diagnostics, devices and drugs that
target health areas, such as paediatric and
acute care, metabolic and obesity care, healthy
ageing, and gastrointestinal and brain health.

Young at heart
Meritene, launched in
Europe, is a nutritional
range targeting
age-related health
challenges.

Read more about Nestlé Health Science:
www.nestlehealthscience.com

Read more about the Nestlé Institute of Health Sciences:
www.nestleinstitutehealthsciences.com

Nestlé Annual Report 2014
Close concentration
A scientist at
work in the Nestlé
Institute of Health
Sciences, located
on the EPFL campus
near Lausanne,
Switzerland.

Nestlé biscuits
Nestlé Fitness biscuits are
wholegrain cereal-based snacks
low in fat and calories. After just
three years, Nestlé Fitness biscuits
hold the number one position in
Brazil’s healthy biscuit segment.
The biscuits are sold across South
America and in Israel.

THE FUTURE

Nestlé Health Science is supported in its work by the
Nestlé Institute of Health Sciences (NIHS) which under-
takes fundamental scientific research into how nutrition can
be used to empower people to improve and maintain their
health. NIHS research teams are providing greater insight
into how our environment, diet and lifestyle intersect with
our genetic make-up, gut microorganisms, metabolism and
nutritional status to determine our health.

NIHS has established the first complete essential nutrient
profiling platform for accurate analysis of nutrient status.
Thanks to the development of digital applications that capture
dietary intake, the institute can now combine the informa-
tion about the nutritional content of diet with measurements
in people’s blood. This research offers the prospect of de-
veloping personalised nutrition products, including dietary
recommendations.

It has also built a natural products screening platform to
discover compounds that may already exist in diets around
the world and which can be used to improve metabolic and
ageing health.

Special milk for seniors
Nestlé’s Jian Xin Double Care, a specially
designed milk to enhance heart and bone
health for middle-aged and senior adults, was
launched in China in December 2013. The
product contains phytosterols, which lower LDL
(‘bad’) cholesterol, as well as calcium
and vitamin D. The brand raises awareness
of heart health with in-store health checks and
offers toll-free phone contact with doctors
to discuss cardiovascular health.

Fortified morn
Golden Morn is a ready-to-eat breakfast cereal
sold in Nigeria, made of maize or millet, and
fortified with micronutrients vitamin A and iron.

Nestlé Annual Report 2014
Hiring young talent
A group of newly-hired Nestlé employees
in Greece, where we launched our European
Employment Initiative in 2013. Rates of
unemployment in the country are among
the highest in Europe.

Alliance for YOUth

At our 2014 CSV Forum, we announced
that we will transform our European Youth
Employment Initiative into a global programme.
The initiative has two aims – to recruit and
develop the next generation of Nestlé leaders
and to help young people with the transition
from education to work.

For the Nestlé Needs YOUth programme in Europe, where one
in four people under the age of 25 is unemployed, we pledged
to offer 20 000 jobs, apprenticeships and traineeships over
three years, and establish readiness for work activities across
our operations. We are well on schedule to achieve this with
11 832 job and training opportunities created by the end of
2014 and around 1600 readiness for work events completed.
We built on the success of this initiative in 2014 by estab-
lishing the Alliance for YOUth, a collaboration with around
200 other companies, to scale up and coordinate our efforts
to tackle youth unemployment. The efforts of the Alliance for
YOUth will result in the creation of more than 100 000 oppor-
tunities for young people in Europe.

We will continue to lead the initiative
to help tackle youth unemployment
in Europe and globally, offering young
people the chance of a more secure
and productive future.

Follow Nestlé on LinkedIn:
www.linkedin.com/company/nestle-s.a.

Nestlé Annual Report 201430

Nestlé Annual Report 2014Extending new job
opportunities to
European youth

Helping young people become better
prepared to enter the professional
world and to improve their chances
in a challenging job market is one
of the great public policy issues in
Europe today.

With youth unemployment in Europe
at over 20%, we are committed to
working hand in hand with policy-
makers and the education sector to
foster both employability and job
creation.

Building on our efforts, around
200 companies have now joined forces
with us to tackle protracted joblessness
among young people in Europe.

The Nescafé Dolce Gusto factory in Germany is among
the many Nestlé sites in Europe hiring young talent.

Nestlé Annual Report 2014THE FUTURE

Gender balance and diversity

We want to create a workplace culture that
provides equal opportunities for everyone
and ensures that people are always treated
with dignity and respect. Our talent pool
should reflect the societies in which we
operate and promoting gender balance and
diversity makes good business sense.

We believe that different ways of thinking complement each
other and lead to better decisions being made. Diverse teams
are more creative, inclusive and competitive, and better re-
flect the markets we serve. We are a growing business and
we need to recruit and nurture the best qualified people. This
is not just about meeting a talent gap or the expectations
of regulators. Gender balance and diversity strengthen our
business.

In 2014, 33.5% of our managers were women, up from 31%
in 2013. We promote gender balance by focusing on aware-
ness and education, flexible working, mentoring and mobility
solutions. However, more remains to be done. Removing all
gender-related barriers to women reaching top management
positions is a priority for the company. Quotas are not the
answer. We prefer to take strategic decisions with the pri -
mary goal of increasing the diversity and gender balance
of our talent pool, but always promoting the best qualified
person for each role.

We recognise too that we have responsibilities to promote
gender balance and diversity in our supply chains. We have
taken steps, such as our work with the Fair Labor Association
on the role of women in the communities that supply us with
cocoa, to increase women’s participation in these areas in a
sustainable way. Since we signed the United Nations Wom-
en’s Empowerment Principles, a set of seven steps that busi-
nesses can take to advance gender equality and empower
women, more than 700 000 women around the world have
been empowered with the support of Nestlé’s programmes
through education and other means.

Helping protect women in the workplace
The Infant Nutrition team in India was looking
to increase women in the field force, especially
since they would be able to bring their personal
insights and experience to the table. A number
of factors had to be considered in hiring women
as a part of the field force. These were both
cultural and logistical: safety of women during
their travel and stay across locations being of
prime importance.

“Nestlé builds success and our culture
on strong diversity. We will accelerate
gender balance. Women represent
80% of our consumer spending
decisions. 60% of graduates in the
EU and USA are women. Improving
gender balance will enrich our
leadership and improve consumer
understanding.”

Paul Bulcke, Nestlé Chief Executive Officer

Ongoing learning
The training sessions at the Rive-Reine
international training centre in Switzerland
provide additional education and training
opportunities to Nestlé employees.

Nestlé Annual Report 2014Zero water – reducing water
use in Mexico

In 2014, we transformed a dairy factory in
Mexico into the company’s first ‘zero water’
manufacturing site in the world. Cow’s
milk is 88% water, so by extracting some of
it to use in the factory’s systems, we are
saving enough water to meet the average
daily consumption of 6 400 people in the
surrounding area.

The new technology used at the factory in Jalisco, Mexico,
heats milk at low pressure to remove some of the water. The
resulting steam is then condensed and treated and used
to clean machines. It is then recycled and used again. The
process reduces by 15% the total amount of water used by
Nestlé Mexico. Work is now underway to deploy similar tech-
nology in five other manufacturing sites in water stressed are-
as around the world. It is just one of a number of water-saving
initiatives we have introduced in recent years, allowing us to
reduce total water withdrawal in absolute terms by almost
one third in the last decade.

Zero water
A researcher at the
zero water factory
in Jalisco, Mexico,
does a quality check.
The water resource
savings at the factory
are equivalent to the
volume needed per
day to fill an Olympic-
size swimming pool.

Safety at top of priority list
In March 2014, we opened the
Nestlé Food Safety Institute in
Beijing, China. The new centre has
three objectives: to collaborate
with Chinese universities,
research institutes and regulatory
authorities in food safety research;
to increase our ability to assess
risks, anticipate problems and
provide accurate information
in any food safety situations;
and to engage on scientific
communication and food safety
training.

Today our people are carrying out
170 water-saving projects in Nestlé
factories, which will save around
3.6 million cubic metres of water.

Read about Nestlé’s Commitment on Water Stewardship:
www.nestle.com/csv/water/policy-stewardship

Read the blog of Nestlé’s Chairman:
www.water-challenge.com

Nestlé Annual Report 2014OUR BRANDS

3434

Nestlé Annual Report 2014Nestlé Annual Report 2014Nestlé is deeply integrated into
people’s lives with many buying
our products on a daily basis.
This gives us opportunities to
contribute meaningfully to their
quality of life. It is what our
promise of Good Food, Good
Life is all about: offering the best
tasting, healthiest choices across a
wide range of food and beverages,
from morning to night and
throughout life, helping people to
live more enjoyable, healthy lives.

However, today, even brands
that enjoy a high level of loyalty
and trust need attention-
grabbing, engaging consumer
communication to ensure they
remain relevant to consumers.
Therefore, excellence in brand-
building discipline and conviction
about the importance of strong,
sustainable brand equity is more
important than ever, especially
in an increasingly complex and
crowded digital world.

Nestlé Annual Report 201436

Nestlé Annual Report 2014Nestlé Pure Life is the world’s
top-selling water brand by value and
our biggest bottled water brand.
A high-quality brand with an affordable
price and reliable purity; it is the best
choice for healthy family hydration.

N˚1

bottled water brand
in the world, in value

Present in

countries

year old brand

Nestlé Pure Life production
sources worldwide

More than
1500 glasses drunk every
second worldwide

Nestlé Pure Life, launched in 1998, is available in 41 countries from 56 production
sources. It became the first bottled water brand to carry the Nestlé name, strength-
ening our NHW strategy.

The brand was introduced in Europe in 2000 as Nestlé Aquarel, where it adopted
a multi-source model. Today, Nestlé Pure Life is available as still and sparkling water
in a variety of bottle sizes, from bottles that are small enough for a child to hold, to
bigger sizes for a family, or for an office.

In 2010, Nestlé Pure Life became the top-selling bottled water in the United
States, where it is the standard bearer for the Drink Better. Live Better. movement
to promote drinking water as a natural, healthier, low-calorie option for hydration.
In our healthy hydration communication, we emphasise the needs of families,
and specifically mothers and caregivers. Water is the best way to hydrate, and we
want to safeguard healthy habits in future generations.

Nestlé Annual Report 201438

Nestlé Annual Report 2014Nourishing champions for

years

Present in

countries

mio

cups of Nestlé Milo
consumed every day

11.4

billion servings fortified
with iron each year

6 vitamins and 3 minerals
in Nestlé Milo Activ-Go

Nestlé Milo, an iconic brand with
a long and distinguished history, has
been re-launched in parts of South
East Asia and Africa with a new visual
identity and a branded active benefit,
Activ-Go. It is made from a unique
malt extract and a combination of
nine micronutrients (six vitamins and
three minerals).

Parents want their children to make the most of their potential. Nestlé Milo, which
is mainly consumed by children aged 7–12, can help to provide the nourishing
energy they need to succeed. Activ-Go plays a role in energy release, muscle
function, bone maintenance and red blood cell formation, all essential for physical
activity.

The re-launched recipe with Activ-Go was developed by our scientists and intro-
duced in 2014 in Indonesia, Malaysia and Vietnam. It will be launched in other
Asian, African and Latin American countries this year.

Nestlé Milo celebrated its 80th birthday in 2014. It was created by Nestlé engi-
neer Thomas Mayne to help children who had poor diets get sufficient nutrition.
He created Nestlé Milo from malt, milk and cocoa to give children the nutritious
energy they need to get the best out of their day. It was launched at the Sydney
Easter Show in 1934.

Nestlé Milo has been a staunch supporter of youth sports throughout its history,

and has fuelled generations through their formative years.

Nestlé Annual Report 201440

Nestlé Annual Report 2014130

countries where
Maggi products are sold

250

mio

fortified servings everyday

5.2

billion noodle packs
sold per year

12 600

tonnes

of salt reduced since 2005

Last year, Maggi created a new
breakfast option for the Indian
market, Maggi Oats Noodles, offering
Nutrition, Health and Wellness
in a bowl. The noodles are made
from 51% wholegrain oat flour, fibre
(equivalent to one bowl of oats), with
a real vegetable garnish, as well as
the popular authentic masala taste.

The successful roll-out of Maggi Oats Noodles demonstrated that healthy eating
can be both enjoyable and tasty. Strong sales of the new product show that it is also
good business. Maggi Oats Noodles meet Nestlé Nutritional Foundation criteria,
which are based on public health recommendations. The consumer communica-
tion reinforces the importance for families to start the day with a well-balanced
breakfast, including fruits and milk. In 2014, we continued to renovate Maggi
products all around the world, reducing salt and fat and improving their nutritional
benefits.

The Maggi company began selling powdered soups in Switzerland in 1885.
Julius Maggi had pioneered the production of pea and bean soups at the request
of the Swiss Public Welfare Society to address the dietary deficiency of the work-
ing population. The advent of factory work for women meant less time to prepare
food, and the soups were a convenient and nourishing alternative.

Maggi entered the Nestlé family in 1947, when the holding company, Alimen-

tana S.A., merged with Nestlé to become Nestlé Alimentana S.A.

Nestlé Annual Report 2014Financial review

Group sales (in CHF)

91.6 billion

Organic growth

4.5%

Real internal growth

2.3%

Trading operating profit (in CHF)

Trading operating profit margin

14.0 billion

15.3%
+30 basis points

constant currencies

Earnings per share (in CHF)

Underlying earnings per share

4.54

Operating cash flow (in CHF)

14.7 billion

+4.4%

constant currencies

Free cash flow (in CHF)

14.1 billion

Proposed dividend (in CHF)

Proposed dividend increase

2.20

+2.3%

Outlook
While delivering in the short term, we remain focused on our
business long term, strengthening the foundations of future
growth. We expect 2015 to be similar to 2014 and we aim to
achieve organic growth of around 5% with improvements in
margins, underlying earnings per share in constant curren-
cies and capital efficiency.

Nestlé Annual Report 2014LEADING POSITIONS IN DYNAMIC CATEGORIES

In millions of CHF

Powdered and Liquid Beverages

Soluble coffee / coffee systems

Other

Total sales

Trading operating profit

Water

Total sales

Trading operating profit

Milk products and Ice cream

Milk products

Ice cream

Total sales

Trading operating profit

Nutrition and Health Science (a)

Total sales

Trading operating profit

Prepared dishes and cooking aids

Frozen and chilled

Culinary and other

Total sales

Trading operating profit

Confectionery

Chocolate

Sugar confectionery

Biscuits

Total sales

Trading operating profit

PetCare

Total sales

Trading operating profit

2013

2014

9 619

10 876

20 495

4 649

9 328

10 974

20 302

4 685

6 773

678

6 875

710

13 010

4 347

17 357

2 632

12 626

4 117

16 743

2 701

11 840

2 228

13 046

2 723

7 782

6 389

14 171

1 876

7 477

1 230

1 576

10 283

1 630

7 302

6 236

13 538

1 808

7 053

1 148

1 568

9 769

1 344

11 239

2 163

11 339

2 246

(a) Renamed following the integration of Galderma as from July 2014.

RIG (%)

OG (%)

+4.2%

+5.4%

+6.2%

+5.3%

–1.0%

+3.4%

+5.3%

+8.7%

–1.2%

–0.1%

+4.2%

+5.0%

+5.6%

45.9%

54.1%

100.0%

23.1%

10.3%

75.4%

24.6%

100.0%

16.1%

20.9%

53.9%

46.1%

100.0%

13.4%

72.2%

11.7%

16.1%

100.0%

13.8%

19.8%

Nestlé Annual Report 2014BUSINESS REVIEW

Introduction
In 2014 we delivered strong results in a soft trading envir-
onment, building on the good growth of past years. They
demonstrate the intrinsic strengths of Nestlé: the commit-
ment of our people, our global footprint, the strength of our
portfolio and the quality of our innovation. While delivering
in the short term, we remain focused on our business long
term, strengthening the foundations of future growth.

Employees by geographic area

Europe (a)

Americas

Asia, Oceania and Africa

Total

(a) 11 177 employees in Switzerland in 2014.

Employees by activity

In thousands

Factories

Administration and sales

Total

2013

2014

28.0% 28.2%

32.5% 32.7%

39.5% 39.1%

100.0% 100.0%

2013

2014

178

155

333

175

164

339

Factories by geographic area

Nestlé has operations in 197 countries and 442 factories in 86 countries.
Eight were acquired during the year and 13 divested.

Europe

Americas

Asia, Oceania and Africa

Total

2013

2014

140

164

143

447

136

163

143

442

Nestlé Annual Report 2014Principal key figures (a) (illustrative) in CHF, USD, EUR

In millions (except for data per share)

Total CHF

Total USD Total USD

Total EUR

Sales

Trading operating profit

Profit for the period attributable to shareholders of the parent
(Net profit)

Equity attributable to shareholders of the parent

Market capitalisation, end December

Data per share

Basic earnings per share

2013

92 158

14 047

10 015

62 575

2014

91 612

14 019

14 456

70 130

2013

99 452

15 159

10 808

70 329

2014

99 961

15 296

15 774

70 863

2013

74 858

11 410

8 135

51 030

2014

75 431

11 543

11 903

58 307

208 279

231 136

234 087

233 553

169 850

192 170

3.14

4.54

3.39

4.95

2.55

3.74

(a) Income statement figures translated at weighted average annual rate; Balance sheet figures at year-end rate.

Trading operating profit

Operating segments: trading operating profit

14 000

14 047

15.2%

14 019

15.2%

15.3%

In % of sales

Zone Europe

Zone Americas

15.0%

Zone Asia, Oceania and Africa

Nestlé Waters

Nestlé Nutrition

14.8%

Other businesses (a)

2013

2014

(a) Mainly Nespresso, Nestlé Professional, Nestlé Health Science and
Nestlé Skin Health (renamed following the integration of Galderma
as from July 2014).

13 500

13 000

P
P

In millions of CHF
In % of sales

15.3

18.8

18.7

9.7

20.8

19.1

Nestlé Annual Report 2014
BUSINESS REVIEW

Group results
In 2014 Nestlé’s organic growth was 4.5%, composed
of 2.3% real internal growth and 2.2% pricing. Sales were
CHF 91.6 billion, down 0.6%, impacted by negative foreign
exchange of –5.5%. Acquisitions, net of divestitures, added
0.4% to sales.

The Group’s trading operating profit was CHF 14.0 billion,
representing a margin of 15.3%, up 10 basis points, and up
30 basis points in constant currencies. The cost of goods
sold fell by 30 basis points as a percentage of sales, driven
by product mix and pricing actions and savings created
by Nestlé Continuous Excellence which more than offset
increases in raw material costs. Distribution costs were up
by 10 basis points. Total marketing and administration
expenses rose by 10 basis points as we increased consumer
facing marketing support for our brands.

Net profit rose CHF 4.4 billion to CHF 14.5 billion. The
increase also reflects the profit realised on the disposal of
part of the stake in L’Oréal and the revaluation gain on the
50% of Galderma already held when the Group brought its
ownership from 50% to 100%. Reported earnings per share
were CHF 4.54, up 44.6%. Underlying earnings per share in
constant currencies were up 4.4%.

The Group’s operating cash flow remained strong at

CHF 14.7 billion.

Geographic sales

as % of total sales

Americas 43%

Geographic sales and organic growth

OG (%)

Europe 28%

Asia, Oceania and
Africa 29%

P Americas +5.4%
CHF 39.4 billion

P Europe +1.9%
CHF 25.9 billion

P Asia, Oceania

and Africa +5.7%
CHF 26.3 billion

Sales

25.0

30.0

35.0

40.0

CHF billion

Each region includes sales of the Zones, Nestlé Waters, Nestlé Nutrition,
Nespresso, Nestlé Professional, Nestlé Health Science and Nestlé Skin Health.

Nestlé Annual Report 2014

Business review
The Nestlé Group’s organic growth was broad-based, 5.4%
in the Americas, 1.9% in Europe and 5.7% in Asia, Oceania
and Africa. Our business in developed markets grew 1.1%,
achieving sales of CHF 51.4 billion. Our emerging markets
business grew 8.9%, delivering sales of CHF 40.2 billion. Real
internal growth was 2.3% in the Americas, 2.4% in Europe
and 2.4% in Asia, Oceania and Africa.

In 2014 we created Nestlé Skin Health, complementing
Nestlé Health Science, further expanding our existing food
and beverage business in line with our strategic ambition
to be the world’s recognised leading Nutrition, Health and
Wellness company. We also established Nestlé Business
Excellence at Executive Board level, aggregating business
support services. This allows us to better leverage our scale,
decrease structural costs, increase the quality of support ser-
vices and free up resources to deliver growth and to allow
our markets to focus on generating demand.

Sales by geographic areas

Differences 2014/2013 (in %)

By principal markets

United States

Greater China Region

France

Brazil

Germany

United Kingdom

Mexico

Philippines

Italy

Canada

Spain

Russia

Australia

Switzerland

Japan

Rest of the world

By continent

Europe

United States and Canada

Asia

Latin America and Caribbean

Africa

Oceania

Total

(a) Not applicable.

in CHF

+0.7%

+0.3%

–1.3%

+0.0%

+0.6%

+5.8%

–6.9%

+3.3%

+0.5%

–5.0%

+0.7%

–6.5%

–8.6%

+3.5%

–5.0%

–1.2%

–0.6%

+0.8%

+1.5%

–5.0%

+0.7%

–7.7%

–0.6%

in local
currency

+1.8%

+1.6%

+0.1%

+10.6%

+2.0%

+1.7%

–1.8%

+9.4%

+1.9%

+2.9%

+2.1%

+13.4%

–0.8%

+3.5%

+4.1%

(a)

in CHF
millions
2014

23 489

6 638

5 507

5 117

3 340

2 987

2 960

2 489

2 108

1 962

1 856

1 731

1 622

1 566

1 491

26 749

25 903

25 601

20 801

13 836

3 421

2 050

91 612

Nestlé Annual Report 2014BUSINESS REVIEW

Zone Americas
Sales of CHF 27.3 billion, 5.0% organic growth, 1.1% real
internal growth; 18.8% trading operating profit margin,
+60 basis points.

Zone Europe
Sales of CHF 15.2 billion, 1.5% organic growth, 2.2% real
internal growth; 15.3% trading operating profit margin,
+30 basis points.

The Zone’s organic growth was supported by double-digit
growth for Nescafé Dolce Gusto and strong performances
in ambient dairy and petcare. In North America growth im-
proved towards the end of the year while in Latin America
good growth was helped by pricing, reflecting inflationary
pressures.

Our performance in North America was affected by the
frozen category. Projects are underway to reposition Lean
Cuisine, Hot Pockets and Stouffers. They address all elements
of the marketing mix, reflecting trends such as organic and
ethnic, enhancing the brands’ relevance to consumers. We
are taking the same approach in frozen pizza where our
California Pizza Kitchen did well. In ice cream the super pre-
mium segment performed well with Gelato, and snacks re-
turned to growth, although the premium segment was sub-
dued. In confectionery the successful roll-out of Butterfinger
Peanut Butter Cups continued. Innovations like Natural Bliss
and seasonal renovations of flavours helped Coffee-mate de-
liver good growth. Innovation also ensured the petcare busi-
ness in North America continued to grow with Dog Chow,
Pro Plan and Tidy Cats Lightweight cat litter as highlights. The
launch of Beyond natural pet food gained momentum.

Latin America delivered good organic growth despite a
worsening of the macroeconomic situation towards the end
of the year. Although consumer sentiment varied across the
region, most markets did well. All Brazil’s categories grew,
with Ninho in growing-up milks, KitKat in confectionery,
Nesfit in biscuits and Nescau in cocoa and malt beverages
making strong contributions. In Mexico the changes in fiscal
legislation, pricing and subdued consumer demand affect-
ed the market. Nescafé Dolce Gusto delivered double-digit
growth across the region, while Dog Chow and Pro Plan
drove sales in the petcare business.

Despite higher input costs the Zone’s trading operating
profit margin improved by 60 basis points to 18.8%, reflect-
ing operational and structural efficiencies and lower other
trading expenses.

Relative to the market this was good growth, driven by
innovation and premiumisation. The European trading en-
vironment continued to be volatile and intense, with defla-
tionary pressure increasing during the year and consumer
confidence very fragile, reducing the flexibility to price.

Good performances in France, Switzerland, Austria and
the Netherlands, and a recovery in Spain and Portugal sup-
ported the growth in Western Europe. The Great Britain
region, Germany, Italy and Greece were more challenged.
There were strong performances from petcare and Nescafé
Dolce Gusto across Western Europe and we saw good
growth from innovations in several categories. Highlights
included Nescafé Gold and Azzera premium soluble coffee,
Fresh Up and Buitoni Fiesta in frozen pizza, Maggi snacking
noodles in ambient culinary and the launch of premium
chocolate tablets Les Recettes de l’Atelier in France.

In Central and Eastern Europe, Russia and Ukraine drove
the growth in a deteriorating economic environment. Pet-
care, Nescafé Dolce Gusto, soluble coffee, particularly Gold
Blend, and confectionery with KitKat were the highlights.
The ongoing roll-out of Papyrus cooking papers in ambient
culinary also continued to do well.

Petcare delivered broad-based growth across the Zone,
further strengthening its positions, in particular through the
premium category with Felix, Purina ONE and Gourmet, and
our snacks range.

The Zone’s trading operating profit margin was 15.3%,
up 30 basis points, reflecting our achievements in leverag-
ing our real internal growth and continuous improvement in
efficiencies.

Nestlé Annual Report 2014Zone Americas (a)

In millions of CHF

United States and Canada

Latin America and Caribbean

Powdered and Liquid Beverages

Milk products and Ice cream

Prepared dishes and cooking aids

Confectionery

PetCare

Total sales

2013

16 701

11 657

2014

16 396

10 881

3 447

7 939

5 196

4 186

7 590

3 190

7 676

4 745

3 972

7 694

RIG (%)

OG (%)

60.1%

39.9%

11.7%

28.1%

17.4%

14.6%

28.2%

28 358

27 277

100.0%

+1.1%

+5.0%

Trading operating profit

Capital expenditure

5 162

1 019

5 117

1 039

Zone Europe (a)

In millions of CHF

Western

Eastern and Central

Powdered and Liquid Beverages

Milk products and Ice cream

Prepared dishes and cooking aids

Confectionery

PetCare

Total sales

2013

12 722

2 845

2014

12 610

2 565

4 067

1 587

3 879

3 061

2 973

4 027

1 455

3 737

2 915

3 041

18.8%

3.8%

83.1%

16.9%

26.6%

9.6%

24.6%

19.2%

20.0%

RIG (%)

OG (%)

15 567

15 175

100.0%

+2.2%

+1.5%

Trading operating profit

Capital expenditure

2 331

964

2 327

747

15.3%

4.9%

(a) 2013 comparatives have been restated following the transfer of responsibility for Nestea RTD businesses in geographic Zones

to Nestlé Waters effective as from 1 January 2014.

Nestlé Annual Report 2014BUSINESS REVIEW

Zone Asia, Oceania and Africa
Sales of CHF 18.3 billion, 2.6% organic growth, –0.3% real
internal growth; 18.7% trading operating profit margin,
–20 basis points.

Nestlé Waters
Sales of CHF 7.4 billion, 5.4% organic growth, 6.3% real
internal growth; 9.7% trading operating profit margin,
+50 basis points.

Nestlé Waters delivered solid broad-based organic and
real internal growth in all three geographies. Nestlé Pure Life
continued to be a growth engine, particularly in the emerging
markets but also in North America and the United Kingdom.
Perrier and S.Pellegrino, our premium international brands,
continued to demonstrate our ability to create value in the
category. Complementing these performances, strong local
brands also delivered good growth, especially Buxton in
the United Kingdom, Erikli in Turkey, La Vie in Vietnam and
Yunnan Shan Quan in China.

The trading operating profit margin was 9.7%, up 50 basis
points, mainly driven by solid growth on the back of con-
tained structural costs. Lower input costs were partly offset
by higher distribution costs.

The slower growth in the Zone was due to our largest mar-
ket China and to Oceania. In China we needed to adapt our
portfolio to reconnect with the fast-changing expectations of
the Chinese consumer. Therefore, in addition to correcting
trade stocks throughout the year, we focused on innovation,
on reformulation and on re-launches, particularly in coffee,
ready-to-drink and confectionery. We continued to see good
performances in ambient culinary, ice cream and ready-to-
drink coffee. In Oceania we are focused on developing new
trade channels.

Strong growth continued in most other emerging mar-
kets, in particular the Philippines, South Asia, the Indochina
region, Turkey and many markets in Africa. We introduced
new premium noodles in Singapore and Malaysia. In the
Philippines the new fortified Bear Brand milk powders were
well received. Maggi created a new breakfast option for the
Indian market, Maggi Oats Noodles, and Nestlé Milo Activ-Go
was launched in parts of South East Asia. It was also rolled
out in Africa, helping to deliver good growth across the
continent.

Strong innovation in products and business models drove
performance in Japan with the coffee systems Nescafé Dolce
Gusto and Nescafé Gold Blend Barista doing well and KitKat
maintaining its growth momentum.

The Zone’s trading operating profit margin was 18.7%,
down 20 basis points, mainly due to slower growth, input
cost increases and some exceptional items.

Nestlé Annual Report 2014Zone Asia, Oceania and Africa (a)

In millions of CHF

Oceania and Japan

Other Asian markets

Africa and Middle East

Powdered and Liquid Beverages

Milk products and Ice cream

Prepared dishes and cooking aids

Confectionery

PetCare

Total sales

2013

3 050

10 274

5 527

5 868

6 814

2 835

2 659

675

2014

2 802

9 860

5 610

5 733

6 547

2 888

2 500

604

RIG (%)

OG (%)

15.3%

54.0%

30.7%

31.4%

35.8%

15.8%

13.7%

3.3%

18 851

18 272

100.0%

–0.3%

+2.6%

Trading operating profit

Capital expenditure

3 562

1 280

3 408

697

Nestlé Waters (a)

In millions of CHF

Europe

United States and Canada

Other regions

Total sales

Trading operating profit

Capital expenditure

2013

2 205

3 702

1 350

7 257

665

377

2014

2 190

3 780

1 420

7 390

714

308

18.7%

3.8%

29.6%

51.2%

19.2%

RIG (%)

OG (%)

100.0%

+6.3%

+5.4%

9.7%

4.2%

(a) 2013 comparatives have been restated following the transfer of responsibility for Nestea RTD businesses in geographic Zones

to Nestlé Waters effective as from 1 January 2014

Nestlé Annual Report 2014BUSINESS REVIEW

Nestlé Nutrition
Sales of CHF 9.6 billion, 7.7% organic growth, 3.6% real
intern al growth; 20.8% trading operating profit margin,
+80 basis points.

Other businesses
Sales of CHF 13.9 billion, 7.1% organic growth, 5.6% real
internal growth; 19.1% trading operating profit margin,
+140 basis points.

Our infant nutrition business saw a very strong perform-
ance in many Asian markets including China. Growth was
double-digit across Asia, despite political unrest in parts of
the Middle East that hindered the distribution of products
there. Growth in Latin America was solid, while in Europe
and North America, the environment was more challenging.
Infant formula’s growth was driven by strong sales of NAN
and our premium brands S-26 and Illuma which benefited
from the roll-out of successful innovation. In baby food, in-
fant cereals saw a steady recovery in the United States and
Gerber Organic fruit purée pouches for infants, combining
good nutrition with convenience, were a highlight for meals
and drinks.

We divested our Performance Nutrition business PowerBar

during the year.

The trading operating profit margin rose 80 basis points to
20.8%, despite the impact of higher input costs. The improve-
ment was driven by the effects of portfolio management, the
good performance in Wyeth Nutrition and efficiencies.

The growth for Nestlé Professional was driven by the
emerging markets, particularly China, the Philippines, the
Indochina region, Middle East and Russia whilst Western
Eur ope and North America continued to face challenges in
the out-of-home environment. The strategic growth drivers;
beverage solutions and desserts solutions, continued to
perform well.

Nespresso grew in all regions, further expanding its
presence around the world. The focus on quality and in-
vestments in products, machines and services were the
base for its strong results. Nespresso continued to drive the
expansion of the global single-serve coffee market with the
successful launch of the VertuoLine system in North America
creating a new premium coffee segment. The roll-out of the
innovative automated retail boutique, the Nespresso Cube, is
pioneering a new way of shopping and a personalised ser-
vice for consumers.

Nestlé Health Science continued to develop nutritional
therapies that have proven clinical benefit and health eco-
nomic value. Growth was primarily driven by strong perfor-
mances in Europe and by its increasing presence in China.
New innovations for Vitaflo in the United Kingdom, the new
Boost bottle in Canada, and the Meritene range in Europe all
helped deliver good growth.

Nestlé Skin Health delivered double-digit growth in line
with expectations with strong performances in all geograph-
ies but particularly in the Americas and Asia. All business
lines contributed to the growth. Nestlé Skin Health was
further strengthened by the acquisition of the full rights to
commercialise several key aesthetic dermatology products in
the United States and Canada.

The trading operating profit margin of the Other businesses
increased by 140 basis points to 19.1%, driven mainly by the
good performance of all businesses and helped by the excep-
tional contribution during the first six months of Galderma’s
integration into Nestlé Skin Health.

Nestlé Annual Report 2014Nestlé Nutrition

In millions of CHF

Europe

Americas

Asia, Oceania and Africa

Total sales

Trading operating profit

Capital expenditure

Other businesses (a)

In millions of CHF

Total sales

Trading operating profit

Capital expenditure

2013

1 742

3 724

4 360

9 826

1 961

430

2014

1 655

3 323

4 636

9 614

1 997

363

2013

2014

12 299

13 884

2 175

642

2 654

573

RIG (%)

OG (%)

17.2%

34.6%

48.2%

100.0%

+3.6%

+7.7%

20.8%

3.8%

19.1%

4.1%

RIG (%)

+5.6%

OG (%)

+7.1%

(a) Mainly Nespresso, Nestlé Professional, Nestlé Health Science and Nestlé Skin Health (renamed following the integration of Galderma as from July 2014).

Nestlé Annual Report 2014BUSINESS REVIEW

Net profit and earnings per share
Net profit rose CHF 4.4 billion to CHF 14.5 billion. The increase
includes the profit realised on the disposal of part of the stake
in L’Oréal and the revaluation gain on the 50% of Galderma
already held when the Group brought its ownership from
50% to 100%. As a consequence, reported earnings per
share were CHF 4.54, up 44.6%. Underlying earnings per
share were up 4.4% in constant currencies. The underlying
tax rate was 27.1%, relatively flat compared to 27.0% in 2013.

Cash flow
The Group’s operating cash flow was CHF 14.7 billion com-
pared to CHF 15.0 billion in 2013, and was again affected by
the strength of the Swiss Franc in a challenging foreign ex-
change environment. The Group’s free cash flow remained
strong at CHF 14.1 billion. While this figure includes the pro-
ceeds from the partial disposal of the L’Oréal stake, it is also
a reflection of our ongoing focus on capital discipline, includ-
ing all elements of working capital, capital expenditure and
a continuous focus on efficiencies and profitable growth.

Financial position
The Group’s net debt fell from CHF 14.7 billion to CHF 12.3 bil-
lion reflecting our strong free cash flow during the year
at CHF 14.1 billion more than offsetting the payment of the
dividend of CHF 6.9 billion and the initial phase of the current
share buy-back programme.

110.0%

107.5%

105.0%

102.5%

100.0%

97.5%

95.0%

Evolution of the Nestlé S.A. share in 2014

In CHF

72.50

70.00

67.50

65.00

62.50

.00

F M A M

S O N D

P Nestlé S.A. share
P Nestlé relative to Swiss Market Index

Dividend per share

In CHF

2.20

2.15

2.05

Return on invested capital
The Group’s return on invested capital was 10.8% including
goodwill, impacted partially by the integration of Galderma
and it was 30.4% excluding goodwill, up 30 basis points.

1.95

1.85

Dividend
The Board of Directors is proposing a dividend of CHF 2.20
per share, up from CHF 2.15 in 2013.

Outlook
While delivering in the short term, we remain focused on our
business long term, strengthening the foundations of future
growth. We expect 2015 to be similar to 2014 and we aim
to achieve organic growth of around 5% with improvements
in margins, underlying earnings per share in constant cur-
rencies and capital efficiency.

2010

2011

2012

2013

2014

Nestlé Annual Report 2014

PRINCIPAL RISKS AND UNCERTAINTIES

Group Risk Management
The Nestlé Group Enterprise Risk Management Framework
(ERM) is designed to identify, communicate, and mitigate
risks in order to minimise their potential impact on the Group.
Nestlé has adopted a dual approach in identifying and as-
sessing risks. A top-down assessment is performed at Group
level once a year to create a good understanding of the com-
pany’s mega-risks, to allocate ownership to drive specific
actions around them and take any relevant steps to address
them. A bottom-up assessment occurs in parallel annually
and focuses on the global risk portfolio in the businesses/
corporate functions. It involves the aggregation of individual
assessments by the Zones, Globally Managed Businesses
and all markets. It is intended to provide a high-level risk
mapping and allows Group Management to make sound de-
cisions on the future operations of the company and ensure
that any risk growing in importance within the organisation
is captured and addressed in Nestlé’s ERM agenda. In 2014,
a total of 42 risk assessments were performed and updated.
An annual compliance risk assessment is performed in the
Group Compliance Committee. Risk assessments are the
responsibility of line management; this applies equally to a
business, a market or a function, and any mitigating actions
identified in the assessments are the responsibility of the
individual line management. If Group-level intervention is re-
quired, responsibility for mitigating actions will generally be
determined by the Executive Board. The results of the Group
ERM are presented annually to the Executive Board and to the
Audit Committee, and conclusions reported to the Board of
Directors. Nestlé uses the outcome of stakeholder meetings
to better understand potential gaps between internal and
external perception of risks and their impact on reputation.

Factors affecting results
Nestlé’s reputation is based on consumers’ trust. Any major
event triggered by a serious food safety or other compliance
issue could have a negative effect on Nestlé’s reputation or
brand image. The Group has policies, processes, controls
and regular monitoring (dedicated dashboard with relevant
KPIs) in place to prevent such events.

The success of the Nestlé Group depends on its ability to
anticipate consumer preferences and to offer high-quality,
appealing products. The Group’s business is subject to some
seasonality, and adverse weather conditions may impact sales.
The food industry as a whole is faced with the global chal-
lenge of increasing obesity. The Group makes all its products
available in a range of sizes and varieties designed to meet all
needs and all occasions.

Nestlé is dependent on the sustainable supply of a number
of raw materials, packaging materials and services/utilities.
Any major event triggered by natural hazards (drought, flood,
etc.), change in macroeconomic environment (shift in pro-
duction patterns, biofuels, excessive trading, etc.), resulting
in input price volatilities and/or capacity constraints, could
potentially impact Nestlé’s financial results. The Group has
policies, processes, controls and regular monitoring in place
to (if ever possible) anticipate such events and adequately
mitigate against them.

Nestlé manages risks and opportunities related to climate
change proactively given the impact it may have on agricul-
ture and food production systems.

The Group’s liquidities/liabilities (currency fluctuation, inter -
est rate, derivatives, and/or hedging, pension funding obli-
gations/retirement benefits, banking/commercial credit, and
cost of capital, etc.) could be impacted by any major event in
the financial markets. Again, Nestlé has the appropriate risk
mitigation measures in place.

Nestlé is dependent on sustainable manufacturing/supply
of finished goods for all product categories. A major event in
one of Nestlé’s key plants, at a key supplier, contract manu-
facturer, co-packer, and/or warehouse facility could poten-
tially lead to a supply disruption and impact Nestlé’s financial
results. Business continuity plans are established and regu-
larly maintained in order to mitigate against such an event.

The Group depends on accurate, timely information and
numerical data from key software applications, without dis-
ruption, to enable day-to-day decision making.

The Group is subject to environmental regimes applying
in all countries where it operates and has put controls in
place to comply with legislation concerning the protection

Nestlé Annual Report 2014GEOGRAPHIC DATA: FACTORIES

Americas

Argentina

Bolivia

Brazil

Canada

Chile

Colombia

Costa Rica

Cuba

Dominican Republic

Ecuador

Guatemala

Jamaica

Mexico

Nicaragua

Panama

Peru

Trinidad and Tobago

United States

Uruguay

Venezuela

P L P L P L P L P L

L P L

P L P L P L P L P L P L P L

P L

L P L P L P L P L

L P L

L P L P L P L

L P L

L P L P L

L P L

P L

L P L

L P L P L

L P L

P L P L P L P L P L P L P L

P L

L P L

P L

L P L P L P L P L

L P L

P L P L P L P L P L P L P L

P L

L P L

L P L P L P L P L P L

of the environment, including the use of natural resources,
release of air emissions and waste water, and the generation,
storage, handling, transportation, treatment and disposal of
waste materials.

Nestlé is subject to health and safety regimes in all coun-
tries where it operates and has procedures in place to com-
ply with legislation concerning the protection of the health
and welfare of employees and contractors.

Our Group companies are party to a variety of legal pro-
ceedings arising out of the normal course of business. The
relevant companies believe that there are valid defences for
the claims, and such companies intend to defend any such
litigation.

Nestlé has factories in 86 countries and operations in
197 countries around the world. Security, political instability,
legal and regulatory, fiscal, macroeconomic, foreign trade,
labour and/or infrastructure risks could potentially impact
Nestlé’s ability to do business in a country or region.

Events such as infectious disease could also impact the
Group’s ability to operate. Any of these events could lead
to a supply disruption and impact Nestlé’s financial results.
Regular monitoring and ad hoc business continuity plans are
established in order to mitigate against such events.

One of the most valuable assets of Nestlé is the Group-
wide geographical and product category spreads, which
represent a tremendous natural hedge.

The figure in black after the country
denotes the number of factories.
P Local production (may represent
production in several factories).
Imports (may, in a few particular
cases, represent purchases
from third parties in the market
concerned).

P Powdered and Liquid Beverages
P Water
P Milk products and Ice cream
P Nutrition and Health Science
P Prepared dishes and cooking aids
P Confectionery
P PetCare

Nestlé Annual Report 2014Europe

Austria

Belgium

Bulgaria

Czech Republic

Denmark

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Netherlands

Poland

Portugal

Republic of Serbia

Romania

Russia

Slovak Republic

Spain

Sweden

Switzerland

Turkey

Ukraine

United Kingdom

P L

L P L

L P L P L

L P L

L P L P L P L

P L P L P L P L P L

L P L

P L P L P L P L P L P L P L

P L P L P L

P L P L

L P L P L

P L P L P L

L P L P L P L

L P L P L

P L P L P L

L P L P L

P L

L P L P L

L P L

L P L P L

P L

L P L

P L P L P L P L P L P L P L

L P L

P L P L P L P L P L P L P L

P L

L P L

P L P L P L P L P L P L

P L P L P L

L P

P L

L P L P L

P L P L P L P L

L P L P L

Asia, Oceania and Africa

Algeria

Angola

Australia

Bahrain

Bangladesh

Cameroon

Côte d’Ivoire

Democratic Republic
of Congo (DRC)

Egypt

Ghana

P L P L P L

L P L

P L

L P L P L P L P L P L

L P L

P L

P L P L P L P

L P L

P L

L P

L P L

P L P L P L P L P

P L

L P L P L

Greater China Region

P L P L P L P L P L P L P L

India

Indonesia

Iran

Iraq

Israel

Japan

Jordan

Kenya

Lebanon

Malaysia

Morocco

New Zealand

Nigeria

Pakistan

Papua New Guinea

Philippines

Qatar

Republic of Korea

Saudi Arabia

Senegal

Singapore

South Africa

Sri Lanka

Syria

Thailand

Tunisia

United Arab Emirates

Uzbekistan

Vietnam

Zimbabwe

P L

L P L P L P

P L

L P L P L P L P L

L P

P L P L

L P L

P L

L P L P L P

P L

L P L

L P L P L

L P L

P L

L P L P L P L

L P L

P L

L P L P L P L P L

L P L P L P L

L P L

L P L P L P L

P L P

P L P L P L P

P L P

P L P L

P L

L P L

L P L P L P L

L P L

L P L P L P L

L P L P L P L P L P L

P L P L P

P L

P L P L P L

L P L

P L

P L P L P L

L P L P L

L P

P L P L

P L P L P L

L P L

P L

L P L P L P L

Nestlé Annual Report 2014Corporate Governance
and Compliance

Nestlé Annual Report 2014CORPORATE GOVERNANCE

For our company to be successful over the long term and
create value for shareholders, it must create value for society.
Our approach to Creating Shared Value is built upon a set of
strong principles and values set by the Board of Directors.

In our governance, our Board of Directors plays a central
role, among other things, for our long-term strategy; com-
pany values, culture and ‘tone at the top’; the oversight of
management and long-term performance; financial planning
and audit process; risk oversight, compliance and integrity;
compensation and performance goals; director nomination
and evaluation; succession planning; and our engagement
with shareholders and other stakeholders.

In this report, we give examples of our key strategies, crit-
ical developments in 2014 and an outlook on the future. We
aim to give insights into our strategy, factors that affect our
ability to create value over time and our relationship with key
stakeholders.

Our Nestlé in society report includes both our financial
and nonfinancial commitments in line with the UN Global
Compact and the Global Reporting Initiative. It reflects our
continuous journey towards integrated reporting.

Our Corporate Governance Report describes how our
governance ensures the effectiveness of our Board. In 2014,
we were an early adopter of new Swiss governance require-
ments; the related revision of our Articles of Association was
adopted by a strong majority of our shareholders.

Our Compensation Report explains our compensation
system and pay-outs and is submitted annually to a separate
advisory vote of our shareholders. In 2015, we will for the first
time submit the compensation of our Board of Directors and
Executive Board for approval by our shareholders.

We regularly review our governance against legal require-
ments and best practices. We lead an intensive dialogue with
investors through our periodic reports, roadshows, investor
meetings, shareholder surveys, analyst and engagement calls,
Chairman’s Roundtables and bilateral meetings with share-
holders. Our engagement follows a holistic approach that
manages both their financial and governance expectations.

Distribution of share capital by geography (a)

100%

80%

60%

40%

20%

Others

France

China

Canada

Japan

Luxembourg

Belgium

Germany

8.83%

1.91%

2.04%

2.13%

2.33%

3.00%

3.49%

4.51%

United Kingdom

6.17%

United States

28.53%

Switzerland

35.28%

2010

2012

2014

Share capital by investor type, long-term evolution (a)

100%

80%

60%

40%

20%

Institutions 79%

Private
Shareholders 21%

1998

2002

2006

2010

2014

(a) Percentage derived from total number of registered shares. Registered
shares represent 57.1% of the total share capital. Statistics are rounded,
as at 31.12.2014.

Nestlé Annual Report 2014

BOARD OF DIRECTORS OF NESTLÉ S.A.

Peter Brabeck-Letmathe

Paul Bulcke

Andreas Koopmann

Helmut O. Maucher
Honorary Chairman

David P. Frick
Secretary to the Board

KPMG SA Geneva branch (1)
Independent auditors

(1) Term expires on the date of the

Annual General Meeting 2015.

(2) Chairman’s and Corporate
Governance Committee.
(3) Compensation Committee.
(4) Nomination Committee.
(5) Audit Committee.

Board of Directors of Nestlé S.A.
at 31 December 2014

Peter Brabeck-Letmathe (1, 2, 4)
Chairman
Paul Bulcke (1, 2)
Chief Executive Officer
Andreas Koopmann (1, 2, 3, 4)
1st Vice Chairman
Chairman, Georg Fischer AG
Rolf Hänggi (1, 2, 5)
2nd Vice Chairman
Former Chairman, Rüd,
Blass & Cie AG
Beat Hess (1, 2)
Former Group Legal Director,
Royal Dutch Shell plc.
Daniel Borel (1, 3)
Co-founder and Board member,
Logitech International S.A.
Steven G. Hoch (1, 4)
Founder and CEO,
Highmount Capital
Naïna Lal Kidwai (1, 5)
Chairperson, HSBC
Group of Companies in India
Titia de Lange (1)
Associate Director,
Anderson Cancer Center,
The Rockefeller University
Jean-Pierre Roth (1, 3)
Chairman, Geneva Cantonal Bank
Ann M. Veneman (1, 4)
Former Executive Director,
UNICEF, and Secretary, U.S.
Department of Agriculture
Henri de Castries (1, 5)
Chairman and CEO, AXA
Eva Cheng (1, 5)
Former Corporate Executive
Vice President and Chairwoman,
Amway China

Nestlé Annual Report 2014Rolf Hänggi

Beat Hess

Daniel Borel

Steven G. Hoch

Naïna Lal Kidwai

Titia de Lange

Jean-Pierre Roth

Ann M. Veneman

Henri de Castries

Eva Cheng

For further information on the
Board of Directors, please refer
to the Corporate Governance
Report 2014.

Nestlé Annual Report 2014EXECUTIVE BOARD OF NESTLÉ S.A.

For further information on the
Executive Board, please refer
to the Corporate Governance
Report 2014.

Nestlé Annual Report 2014COMPLIANCE

Compliance at Nestlé means we will not sacrifice our prin-
ciples and values for short-term success. We follow applic-
able laws and our own commitments across the ten Corporate
Business Principles, including our commitments to integrity
in the Code of Business Conduct, to maintain sustainable
trust with employees, shareholders and other stakeholders.
While compliance is a leadership responsibility, line man-
agement is supported by all functions engaged in our risk-
and principles-based compliance programme. A dedicated
Corporate Compliance function and a cross-functional Com-
pliance Committee define the framework, facilitate coord-
ination and provide guidance and best practices. Under our
custodian concept, our Market Heads play a critical role for
compliance. Market Compliance Officers and committees
ensure a consistent approach and help identify local compli-
ance priorities.

Executive Board of Nestlé S.A.
at 31 December 2014

Paul Bulcke
Chief Executive Officer

Luis Cantarell
EVP, Europe, Middle East,
North Africa
José Lopez
EVP, Operations
Laurent Freixe
EVP, United States of America,
Canada, Latin America,
Caribbean
Chris Johnson
EVP, Nestlé Business
Excellence
Patrice Bula
EVP, Strategic Business Units,
Marketing and Sales
Doreswamy (Nandu)
Nandkishore
EVP, Asia, Oceania, Africa
Wan Ling Martello
EVP, Chief Financial Officer
(includes Legal, Intellectual
Property, Tax, Treasury)

Stefan Catsicas
EVP, Innovation Technology,
Research and Development

10 Marco Settembri
EVP, Nestlé Waters

11 Peter Vogt

Deputy EVP, Human
Resources

12 Martial Rolland

Deputy EVP, Nestlé
Professional
13 Heiko Schipper

Deputy EVP, Nestlé Nutrition

14 David P. Frick

SVP, Corporate Governance,
Compliance and Corporate
Services

Yves Philippe Bloch
Corporate Secretary

EVP: Executive Vice President
SVP: Senior Vice President

The right tone at the top is reflected in our Corporate
Business Principles, our Management and Leadership Prin-
ciples, our Code of Business Conduct and our Supplier Code.
Awareness campaigns and regular risk assessments help us
in their continuous implementation. Proper consequence
management is reinforced by our performance evaluation
system, which includes an assessment of “how” goals were
accomplished.

We monitor compliance through our corporate functions,
internal and external audit, as well as our CARE programme
relying on independent external auditors. 120 audits were
conducted in 2014 and gaps addressed.

In 2014, we addressed 920 complaints from employees
through our integrity reporting system, which complements
our ombudsman system for WHO Code compliance. Our
new Tell Us reporting system allowed us to address 87 com-
plaints from suppliers and other third parties. All complaints
are investigated and remedial action taken.

Our WHO Code compliance programme covers all Nestlé
operations involved in the marketing of infant nutrition prod-
ucts. We adhere to the decisions of all governments regard-
ing the application of the WHO Code in their countries and
voluntarily apply the WHO Code in all developing countries.
Our continued inclusion in the FTSE4Good index is a testi-
mony to our commitment.

Our Human Rights compliance programme is based on
the applicable UN Framework and includes risk and impact
assessments perfomed together with the Danish Institute
for Human Rights, training, monitoring and stakeholder
engagement.

We continuously reinforce our compliance programme
based on selected focus areas. In 2014, they included our
enhanced anti-bribery programme; improved efficiency of
processes and tools; the launch of ‘Tell us’; renovated and
re-launched trainings; improved transparency; and a focus
on new regulations.

Nestlé Annual Report 2014

Important dates
16 April 2015
148th Annual General Meeting, Beaulieu Lausanne,
Lausanne (Switzerland)

17 April 2015
2015 First quarter sales figures

17 April 2015
Last trading day with entitlement to dividend

20 April 2015
Ex-dividend date

22 April 2015
Payment of the dividend

13 August 2015
2015 Half-yearly Results

16 October 2015
2015 Nine months sales figures

18 February 2016
2015 Full Year Results

7 April 2016
149th Annual General Meeting, Beaulieu Lausanne,
Lausanne (Switzerland)

SHAREHOLDER INFORMATION

Stock exchange listing
At 31 December 2014, Nestlé S.A. shares are listed
on the SIX Swiss Exchange, Zurich (ISIN code:
CH0038863350).
American Depositary Receipts (ISIN code: US6410694060)
representing Nestlé S.A. shares are offered in the USA by
Citibank, N.A., New York.

Registered Offices
Nestlé S.A.
Avenue Nestlé 55
CH-1800 Vevey (Switzerland)
tel. +41 (0)21 924 21 11

Nestlé S.A. (Share Transfer Office)
Zugerstrasse 8
CH-6330 Cham (Switzerland)
tel. +41 (0)41 785 20 20

For additional information, contact:
Nestlé S.A.
Investor Relations
Avenue Nestlé 55
CH-1800 Vevey (Switzerland)
tel. +41 (0)21 924 35 09
fax +41 (0)21 924 28 13
e-mail: ir@nestle.com

As to information concerning the share register
(registrations, transfers, dividends, etc.), please contact:
Nestlé S.A. (Share Transfer Office)
Zugerstrasse 8
CH-6330 Cham (Switzerland)
tel. +41 (0)41 785 20 20
fax +41 (0)41 785 20 24
e-mail: shareregister@nestle.com

The Annual Report, and its accompanying reports are
available online as a PDF in English, French and German.
The consolidated income statement, balance sheet and
cash flow statement are also available as Excel files.

www.nestle.com

Nestlé Annual Report 2014