Nestlé Annual Review 2023 PDF

Annual Review 2023 Nestlé. We unlock the power of food to enhance quality of life for everyone, today and for generations to come. Our purpose Nestlé. Unlocking the power of food to enhance quality of life for everyone, today and for generations to come. Front cover...

Annual Review 2023 Nestlé. We unlock the power of food to enhance quality of life for everyone, today and for generations to come. Our purpose Nestlé. Unlocking the power of food to enhance quality of life for everyone, today and for generations to come. Front cover Contents Accompanying reports Milo 2 Letter to our shareholders Corporate Governance Report 2023 As the world’s leading chocolate malt Compensation Report 2023 beverage, Milo delivers nutritious 4 Our people on the ground Financial Statements 2023 energy and encourages kids to stay 8 Implementing our growth active and grow with sports, engaging over 30 million kids annually through strategy grassroots sports programs. 12 Creating Shared Value Online 16 Connecting through our brands 32 Financial review You can find more information about the Nestlé Group at 56 Corporate Governance www.nestle.com and Compliance Find out more about Creating Shared 63 Shareholder information Value at www.nestle.com/csv Our financial performance Our Nutrition, Health and Wellness strategy is fundamental to how we create value. A summary of the 2023 full-year results is shown here. Group sales (in CHF) Organic growth * Real internal growth * For full results, please consult the ’Financial review‘ section. 93.0 billion + 7.2% – 0.3% Underlying trading Underlying trading Underlying trading operating profit * operating profit operating profit (in CHF) margin * margin * 16.1 billion 17.3% + 40 Basis points Constant currency Trading operating Trading operating Trading operating profit * (in CHF) profit margin * profit margin * 14.5 billion 15.6% + 190 Basis points Constant currency Earnings per share Earnings Underlying earnings (in CHF) per share per share * 4.24 + 23.7% + 8.4% Constant currency Operating cash flow Free cash flow * (in CHF) (in CHF) 15.9 billion 32.1% of net financial debt 10.4 billion Proposed dividend Proposed dividend (in CHF) increase 3.00 + 1.7% * Financial performance measures not defined by IFRS Accounting Standards. For further details, see ’Financial review’ on page 34. Nestlé Annual Review 2023 1 Our business We apply our expertise in nutrition, health and wellness to help people and pets live happier, healthier lives. We do this alongside ambitious sustainability goals to generate significant value for our shareholders and other stakeholders alike. What we sell (in CHF billion) Powdered and Nutrition and Prepared dishes PetCare Liquid Beverages Health Science and cooking aids 24.8 18.8 15.3 11.7 Milk products Confectionery Water and Ice cream 11.0 8.1 3.3 Where we sell (in CHF billion) EUR 22.3 NA 32.5 GC 5.5 LATAM 12.8 AOA 19.9 Number of employees Number of countries we sell in 270 000 188 Total group salaries and social Corporate taxes paid in 2023 welfare expenses (in CHF) (in CHF) 14 2.8 billion billion Our key non-financial performance We create shared value through our social and environmental commitments and supporting actions. To measure our progress, we use a comprehensive set Climate Our KPI * of indicators that support our business performance and generate value for our shareholders and other We aim to reduce our greenhouse gas (GHG) emissions by 20% by 2025 and 50% by 2030 from 13.58% net reduction of GHG emissions versus 2018 baseline (a) stakeholders. Some key performance indicators are 2018 levels, on the road to net included here – the full set is zero by 2050 at the latest (a) Covers emissions related to our net zero commitment. in our Creating Shared Value Net reductions (%) includes removals from both insetting and landscape projects. and Sustainability Report. Nature Our KPI * We aim to achieve and maintain 100% assessed deforestation-free primary supply chains (for meat, 93.4% assessed deforestation-free for stated primary supply chains palm oil, pulp and paper, soy and sugar) by 2022 and 2025 for cocoa and coffee Packaging Our KPI * By 2025, we aim to reduce virgin plastics by one third versus our 2018 baseline 14.9% virgin plastic reduction versus 2018 baseline Diversity, equity Our KPI * and inclusion 46.4% management positions held by women Youth Our KPI * * Non-financial performance metrics are defined in the Reporting Scope By 2030, our ambition is to help 10 million young people around the world have access 7.74 million young people around the world with access to economic opportunities and Methodology for ESG to economic opportunities since 2017 KPIs document available at www.nestle.com/esg-kpis EY has performed limited Health and Nutrition Our KPI * assurance on the six key 127.6 billion performance indicators on this page. The assurance statement with EY’s servings of affordable nutrition with micronutrient fortification independent conclusion can provided in 2023 be found at www.nestle.com/ assurance-statement Pursuing significant global opportunities Dear fellow shareholders, Additionally, we are actively guiding people towards a more balanced diet by making the nutritional value As the Good food, Good life company, Nestlé of our portfolio more transparent. We are strengthening is proud to provide consumers with products our responsible marketing of indulgent products, providing clear front-of-pack portion guidance, and they love and rely on. Even in the face of ongoing engaging with and informing consumers through our global challenges this past year, we stay true to various online communities around the world. our long-term ambitions and see a bright future Supporting healthy aging with emerging opportunities. Nestlé’s food and beverage portfolio caters to people at each stage of their life. It starts with the first 1000 days and continues into adulthood and old age. With a rapidly aging global population, we see an opportunity to provide products that can support the nutrition, health and wellness of older people. We can help boost their energy levels, enhance their cognitive health, support their mobility, and improve their general physical and mental health. Nutrition, Health and Wellness is our past, present and future, and within that frame we continue to set We already offer several Nestlé Health Science and new priorities. Our innovation capabilities enable us dairy products that are specifically targeted to seniors. to consistently meet the rising expectations of a Take, for example, successful brands like Boost, Pure growing population. Portfolio optimization over the Encapsulations or Molico. With our capabilities, we past years allows us to focus our efforts on our proven believe that we can leverage this trend across all of our brands. Our operational excellence enables us to categories to further grow. dependably deliver sustainable, profitable growth. And we continue to do business in a way that creates shared Investing in innovation value for both our shareholders and society. We are investing in our future through innovation and entrepreneurship. Through our main research Encouraging balanced diets center in Switzerland and 23 sites globally, and with Foods and beverages are major drivers of long-term an industry-leading R&D budget, we develop products health, and consumers increasingly recognize this. We tailored to the diverse needs of people and pets while will continue to develop nutritious products that support reducing our environmental footprint. Experts at our people’s well-being, and we believe that such products newly inaugurated Institute of Agricultural Sciences, will see increased demand in the years to come. for example, develop solutions in the areas of plant science, agricultural systems and dairy livestock. In fact, in 2023, we reconfirmed our ambition to This is in addition to our four other research institutes prioritize the development of our more nutritious looking at health sciences, food sciences, food safety products. This entails launching new products and and packaging. renovating existing ones. It involves expanding micronutrient fortification, growing our affordable Digital technologies, including artificial intelligence (AI), offerings, reducing sugar and salt content, and are supporting sharper decision-making and increased increasing our use of plant-based ingredients in speed across the entire company. From procurement to our recipes. e-commerce, digital analytics facilitate efficiency and 2 Nestlé Annual Review 2023 U. Mark Schneider, Chief Executive Officer (left), and Paul Bulcke, Chairman (right) effectiveness. Data science and AI increasingly support global mindset combined with our expert knowledge of us with innovation by revealing and predicting consumer local consumers and markets, we are confident we can demands, while also helping us bring new products to deliver on our ambition and our commitments. market faster. People all over the world rely on Nestlé for good food Creating Shared Value and beverages. Our proven value creation model allows Creating Shared Value is how we do business at Nestlé, us to invest, innovate and grow even in challenging generating value not only for our shareholders but also times, and makes us dependable for our shareholders for society. Nestlé’s long-term success is supported and other stakeholders. We are grateful for the support by this approach. of our employees, business partners, consumers and communities. And we thank you, our shareholders, for An example of this is Nestlé’s efforts to advance your continued trust. regenerative food production by helping protect, renew and restore natural resources. To that end, we are supporting farmers and strengthening their communities. We are delivering on our commitments in a way that appeals to consumers’ increased expectations. Remaining dedicated and dependable Every year, our people show us how much can be achieved when we steadfastly pursue opportunities. We Paul Bulcke U. Mark Schneider know that we do not have all the answers, but with our Chairman Chief Executive Officer Nestlé Annual Review 2023 3 Our people on the ground We engage with our fellow employees, business partners and community members. From meeting with farmers to visiting retailers, touring our factories and doing volunteer work, our culture encourages and supports connecting with internal and external stakeholders. 4 Nestlé Annual Review 2023 Nestlé Annual Review 2023 5 6 Nestlé Annual Review 2023 Nestlé Annual Review 2023 7 Implementing our growth strategy Garden Gourmet Marine-Style Crispy Filet Our Garden Gourmet Marine-Style Crispy Filet launched in several European countries in 2023, expanding the range of plant-based fish alternatives, which includes the popular Garden Gourmet Vuna. 8 Nestlé Annual Review 2023 Our purpose is unlocking the power of food to enhance milk oligosaccharides (HMOs). This led to the launch in quality of life for everyone, today and for generations 2023 of our proprietary blend, Sinergity, for use in infant to come. To achieve this, we pursue growth through formulas to support immunity and gut health. rapid innovation, operational efficiency, and disciplined resource and capital allocation. As we continue our tradition of supporting children’s health, we also need to consider an aging population Our portfolio is diversified, both in terms of geography that is living longer. Under our R+D Accelerator initiative, and category. We have products for people at all life we developed the Nestlé Goodnes range of products in stages that can be consumed as part of a balanced 2023 to support healthy aging. It helps optimize people’s diet. We want to contribute to people’s health through energy levels, restore their sleep quality and improve nutrition and aim to help people of all ages live better. their focus through patented nutritional blends. The Our innovation capabilities ensure we deliver products products were piloted in France, Singapore and the UK. that meet consumer needs and preferences, and are Additionally, we launched the Nestlé N3 range in China good for the planet. Through digital technologies, we that helps people maintain their overall health and well- are able to be more agile and make better and faster being as they age. decisions. Expanding alternative proteins Driving organic sales growth In 2023, we added to our plant-based portfolio by Organic sales growth is key to our growth ambition. launching a range of vegan alternatives to fish filets, Our portfolio is geared to deliver sustained mid single- nuggets and fingers that stand out for their strong digit organic sales growth based on investment in nutrition credentials, as well as their great taste and attractive categories and regions, impactful innovation texture that is close to white fish. Garden Gourmet and execution discipline. Our knowledge of local launched Marine-Style Crispy Filet and Marine-Style consumers coupled with our scientific and technological Crispy Nuggets in Europe, and Harvest Gourmet launched expertise help us deliver innovations that support Crispy Fish-Free Fingers in Asia. business growth, while meeting consumer needs. We also see many opportunities for growth through We also continued to explore new concepts for dairy cross-fertilization between categories and geographies. alternatives. Made with a blend of oat and fava, the new natural bliss beverages are a good source of high-quality In addition to core innovation activities focused on protein. Our teams chose fava beans because of their food safety, taste, nutrition and sustainability, we have many health benefits and good taste. intensified research in high-growth categories, such as early-life and therapeutic nutrition, alternative proteins, In addition, we combined the goodness of milk with and coffee and systems technology. Ecosystem building plant-based ingredients in our new Nido Milk & Soya and business model innovation are also increasingly instant powder launched in Central and West Africa and a focus of our categories. Alongside innovation, we continue to optimize our Nestlé is exploring portfolio to focus on stronger brands and products. emerging technologies like animal-free dairy Innovating across life stages and health needs beverages made with precision fermentation, The foods and beverages people consume play a pivotal which led to a pilot role in their overall health. From pre-conception to early for Cowabunga in life, through to childhood, adulthood and old age, we aim the United States. to meet people’s nutritional and health needs throughout their lives. Nestlé has deep roots in infant nutrition. For years, we have researched the composition of nutrients and bioactives present in breastmilk as well as the role of probiotics in nutrition and health. Exploring the interaction between these different components, Nestlé experts discovered a proprietary probiotic strain, B. infantis, that unlocks beneficial aspects of six human Nestlé Annual Review 2023 9  Grown by only 59 Colombian farmers and developed to create a unique tasting experience, the new Nespresso N°20 encapsulates over 20 years of expertise. in our Bear Brand Doble Protein powdered beverage Leveraging always-on analytics piloted in the Philippines. Both products are highly We are responding to fast-changing consumer needs nutritious and affordable. in real time, using data to streamline our business processes. Our strategic procurement decisions are Making innovation faster and more efficient more informed, as we increasingly leverage advanced We are using AI and data science to complement our statistical modeling with machine learning and R&D capabilities and manage complexities during automated price-trend analytics. And by deploying new innovation. Our new recipe optimization tool uses marketing analytics capabilities at scale, we are building advanced algorithms to help product developers better data foundation pipelines that automatically refresh our manage tradeoffs between ingredients, nutrition, cost and marketing effectiveness models for faster and smarter sustainability, while still meeting consumer expectations. investment decisions. In the development of the new Nescafé Dolce Gusto Neo In 2023, we spent 68% of our media budget digitally coffee system, our experts optimized the manufacturing and acquired 308 million first-party data records. We are process through virtual simulations before applying on track to meet our 2025 goals of 70% and 400 million technical settings on the physical machine. This helped respectively. Using AI, this data helps our brands reach them make quick and efficient decisions to manage target audiences more efficiently and deliver more the complex interaction between coffee, paper packaging relevant, personalized messages online. material and the machine to ensure the perfect coffee cup for consumers. Accelerating e-commerce Our ambition for 2025 is that a quarter of our sales Improving efficiency with digital technologies come from e-commerce. This will have a significant Digitalization is enabling better and faster decision- impact on all markets, brands and roles. To support making, in addition to improving cost efficiencies. this, we launched an e-commerce academy that offers We are harmonizing our data framework to be able personalized learning paths. Over 1500 employees were to take advantage of different technologies, like AI. trained and certified in 2023. The Nestlé Supplier Portal, a global digital collaboration We have also launched our own eB2B platforms in key platform, supports quality document management, markets such as Brazil, India, Mexico and Vietnam, and sustainability data collection and supplier performance have partnered with other leading platforms, such as management. With over 7000 active suppliers in over the eB2B platform BEES. 40 markets, it covers almost three-quarters of our direct material spend. 10 Nestlé Annual Review 2023 Delivering novel technologies Thanks to our strong global a low lactose content and over 15% IN FIGURES capabilities, we continue to develop fewer calories. exciting innovations that can be applied across different products, Using a proprietary technology, we up to 3x beneficial bifidobacteria growth brands and categories. use specialized enzymes to break down lactose, a sugar found in cow’s One of our latest unique science- milk, while generating prebiotic fibers. based innovations is Nestlé N3 milk, Clinical studies showed that the which offers new nutritional benefits. fibers promote the growth of multiple Made from cow’s milk, it has all the types of bifidobacteria, delivering gut essential nutrients found in milk, microbiome benefits in healthy adults. including proteins, vitamins and minerals. In addition, it also contains N3 milk was first introduced in 2023, beneficial prebiotic fibers and has in a range of powdered dairy products in China, tailored to meet the dietary needs of local consumers. The N3 OUR VOICES range includes a full cream and a skimmed milk product, both high in protein and perfect for the whole “N3 milk will serve as a basis family. To support specific needs for healthy aging, the range includes for nutritious solutions for two products with vitamins, minerals people with lactose sensitivity and probiotics to support bone health, muscle growth and strength, or who want to improve their and immunity. gastrointestinal health.” N3 milk will be introduced in other Isabelle The N3 milk products are the result of Bureau-Franz product categories later, enabling us Head of Nestlé’s development work done by experts at R&D Nutrition, R&D Singapore, R&D Beijing and to support health and well-being R&D for Nutrition Nestlé Research. across life stages. Switzerland Nestlé Annual Review 2023 11 Creating Shared Value Nescafé Plan 2030 In Vietnam and other Nescafé coffee-sourcing countries, the Nescafé Plan 2030 supports farmers to use regenerative agriculture practices to reduce GHG emissions, enhance farmer income and improve social and environmental conditions. 12 Nestlé Annual Review 2023 Drawing on our purpose – to unlock the power of age of 16 years in effect as of July 2023. We are ensuring food to enhance quality of life for everyone, today and that all children’s confectionery and ice cream portions for generations to come – we focus our energy and will be 110 kilocalories or less and that all multi-serve resources on making a positive impact at scale. products from these two categories have clear front- of-pack portion guidance. And to help people enjoy our We regularly conduct a materiality assessment to identify products as part of a balanced diet, we will provide more where Nestlé has the greatest impact on society and guidance, including recipes, menu planning, healthy the environment, and the topics most important to our lifestyle tips and recommendations for nutritious choices. business success. In this section, we provide a summary of the top-rated themes from our latest assessment. Delivering food safety and quality Our Creating Shared Value and Sustainability Report High standards of food safety and quality are provides more details, including how we are aligning non-negotiable at Nestlé and are fundamental in our with the Task Force on Climate-related Financial engagement with consumers. Quality is integral to our Disclosures recommendations. Corporate Business Principles and embedded in our purpose and values. The end-to-end approach we take Supporting tasty and balanced diets to food safety and quality applies to design, delivery As a company that stands for Good food, Good life, and consumption. We apply international standards Nestlé is stepping up its measures to help people enjoy and help raise the bar in our industry using rigorous a balanced diet. processes and leading scientific techniques. We are providing complete transparency on the We update our food safety and quality systems nutritional value of our portfolio. Products with a Health to respond to considerations, such as tightening Star Rating (HSR) of 3.5 stars or more – together with regulations, changes to suppliers or ingredients, specialized nutrition products, such as baby foods, introduction of regenerative agriculture practices, new vitamin and mineral supplements, and medical nutrition – packaging and geopolitical developments. In 2023, are considered nutritious. Together, these products our Quality Assurance Centers performed more than accounted for close to 59% of our food and beverage 4.1 million analytical tests for quality and food safety sales in 2023. Our pet care portfolio is excluded from risk assessment and management. this assessment. Progressing to net zero Looking at people’s diets holistically, we know that We are more than halfway to our 2025 goal to reduce people consume food and beverages not only for absolute GHG emissions included in our Net Zero nutrition but also for enjoyment. Nestlé aims to offer Roadmap and are progressing well. Most of the the right products for all these occasions, while also reductions are due to changes in the way we source guiding people towards a more balanced diet. We are raw materials, such as investments in deforestation strengthening our responsible marketing practices, with prevention and regenerative agriculture in our agricultural new rules restricting the marketing to children under the supply chains. We have identified more than 80% of the supply chain initiatives needed to hit the 2025 target and are seeking further reductions to reach our planned 50% cut by 2030. For example, through the newly inaugurated Nestlé Institute of Agricultural Sciences, our experts are SELECT 2023 RATINGS exploring novel approaches in dairy farming that have the potential to reduce GHG emissions in the areas of cow feed and manure management. Helping prevent deforestation plays a major role. By the end of 2023, 93.4% of our primary supply chains for cocoa, coffee, meat, palm oil, pulp and paper, soy and sugar were assessed as deforestation-free. The decrease from 99.1% in 2022 is due to the inclusion of coffee and cocoa in this indicator for the first time, where deforestation risk has not been assessed for as long. Nestlé Annual Review 2023 13  We are working with partners on packaging solutions, including a pilot of reusable stainless- steel packaging for Nesquik in over 60 German grocery stores. As of 2023, Nestlé has approved near- and long-term Regeneration is important for water resources as well. science-based emissions reduction targets with the Over 40 water regeneration projects are now underway Science Based Targets initiative (SBTi). The SBTi has around our water bottling sites. Each one is tailored validated Nestlé’s net-zero science-based target by 2050. to local challenges and based on a mix of natural and technical solutions for improving the quality and quantity Promoting regenerative agriculture practices of water available. We continue making progress in responsible sourcing, which ensures our raw materials are traceable to point Implementing our vision for packaging and circularity of origin and are farmed using methods aligned to our Our vision remains that none of Nestlé’s packaging ends Responsible Sourcing Standard, while progressively up in landfill or as litter. Our strategy addresses both delivering benefits to people, nature and climate. We have product design and infrastructure systems for reuse and set requirements for 14 priority raw materials: cereals and recycling. By reducing unnecessary packaging, designing grains; cocoa; coconut; coffee; dairy; fish and seafood; better packaging, modeling fair collection systems hazelnuts; meat, poultry and eggs; palm oil; pulp and and supporting good regulation, we aim to support the paper; soy; spices; sugar; and vegetables. Our aim is transition to a waste-free future. for 100% of these materials to be responsibly sourced by end of 2030. In 2023, this figure reached 36.2%. Packaging innovations in 2023 support this transition. Redesigned jars for Malher Bouillon are saving 156 tonnes Reforestation within or near our sourcing locations is of plastic annually, with a format that is easy to recycle in an essential part of decarbonizing our operations and local systems in Guatemala. In Latin America, Nescafé supply chain. Nestlé became the first food and beverage reduced single-serve sticks packaging, saving 44 tonnes company to pilot Airbus’s new Pléiades Neo satellites. of plastic annually. We are using high-resolution images to monitor trees planted in our sourcing regions to ensure they thrive in Innovations to reach this goal go beyond packaging the long term. redesign. In Indonesia, we collaborated with a team of start-ups and retail partners to pilot a reusable and We continue to expand our regenerative agriculture refillable dispenser, and single-serve reusable packaging, program across a wider range of raw materials and for Milo and Koko Krunch brands. Shipping innovations also regions, supporting farmers with training. Our farmer help. Reusable shipping boxes and reusable pallet bands relationship management system collects data that replace plastic shrink wrap are cutting plastic use by for over 250 000 farms, helping us track progress 100 tonnes annually in China. on GHG emission reductions and regenerative agriculture practices. 14 Nestlé Annual Review 2023 Looking at the whole landscape The farms in our supply chains are Earthworm Foundation has led to IN FIGURES not isolated – they are part of broader a significant reduction in deforestation, landscapes and economies. Only by as well as the reforestation of almost joining forces with other stakeholders 1500 hectares in the Cavally Forest can we address complex issues, such Reserve. In 2023, the Cavally project as deforestation, while advancing entered a new phase with additional regenerative agriculture practices. partners to achieve greater impact. Nestlé has been partnering with others To help scale landscape initiatives, through landscape initiatives that Nestlé supports Landscape Enterprise address these issues. Since 2020, Networks (LENs) in the UK and Europe. a partnership with the Ministry of Water LENs brings together organizations and Forests in Côte d’Ivoire and the that need nature-based solutions with 15 the farmers who can provide them. landscape initiatives supported in 2023 In the East of England, Purina and Nestlé Cereal Partners UK are working OUR VOICES with water companies and local authorities to fund the introduction of nature-based solutions. Over “Working at a landscape level 60 farmers and land managers will can offer various benefits for implement these solutions across more than 10 000 hectares of land. biodiversity, water stewardship, climate change, human rights In 2023, we also supported sustainable landscape initiatives in Brazil, Chile and resilient livelihoods.” and Malaysia. We are also active Michele Zollinger in numerous landscape initiatives Climate Forest Lead, In the UK, Purina Go-Cat cat food and Nestlé developed by our palm oil suppliers Global Reforestation Original Shredded Wheat cereal contain Program ingredients sourced from farmers involved and partners in different parts United States with the LENs program. of Indonesia. Nestlé Annual Review 2023 15 Connecting through our brands Our broad portfolio of trusted and loved brands are enjoyed by people around the world. Powdered and Liquid Beverages Page 18 PetCare Page 20 Nutrition and Health Science Page 22 16 Nestlé Annual Review 2023 Prepared dishes and cooking aids Page 24 Milk products and Ice cream Page 26 Confectionery Page 28 Water Page 30 Nestlé Annual Review 2023 17 powdered and liquid beverages At a glance Perfecting the world’s 24.8 Sales (in CHF billion) favorite beverages 20.7% UTOP margin 26.7% Our Powdered and Liquid Beverages category includes our coffee, Percentage of cocoa and malt beverage businesses. This category features iconic Nestlé’s sales coffee brands Nescafé, Nespresso and Starbucks, plus the world’s most popular chocolate malt beverage, Milo. Nespresso Nescafé Dolce Gusto Neo A pioneer of high-quality, Piloted in Brazil and sustainable coffee, now launched in France Nespresso launched and Switzerland, Neo its first paper-based is the next generation home and industrial of Nescafé Dolce compostable capsule in Gusto coffee systems, France and Switzerland, combining unique brewing compatible with Nespresso technologies, connectivity Original machines. and sustainability. Milo Milo has strong growth Nescafé Ice Roast momentum in Malaysia, Launched in Mexico and thanks to a reignited China, Nescafé Ice Roast is grassroots sports program Nescafé’s first soluble coffee and the implementation of specially crafted to enjoy Nestlé’s sugar-reduction with cold water or milk over technology that reduces ice, catering to the growing sugar while preserving taste. number of cold-coffee lovers. 18 Nestlé Annual Review 2023 Building India’s coffee culture Nescafé has been introducing the Nescafé is particularly focused on IN FIGURES globally loved coffee experience growing the coffee culture among to Indian consumers. It is playing a lead role in developing at-home Indian youth, establishing the role of coffee in their lives. 10 million Indian households consumption of coffee in a country introduced to coffee known for its traditional preference Manufactured at the state-of-the-art in 2023 for tea. Nanjangud roastery, Nescafé roasts Indian green coffee beans, tailoring Nescafé is leading both the creation the final product to cater to local of the coffee category and the market taste preferences. Thanks to strategic in India. The brand has introduced its positioning, Nescafé is increasingly coffee to more than 30 million Indian available and easily accessible households in the past seven years. across the country in three million retail outlets. OUR VOICES By investing in product quality and consistently communicating the “Nescafé is on an exciting relevance of coffee, Nescafé has captured the attention and loyalty of journey in India, poised its target audience, recruiting non- to further strengthen its coffee drinkers to choose coffee as their beverage of choice. Alongside position as a leader, driving these efforts to bring coffee culture to both consumer delight and India, Nescafé is backing its Nescafé sustainable impact.” Plan 2030 with actions on the ground. It is helping ensure that the entire value Sunayan Mitra chain of coffee is sustainable as well Coffee & Beverages The Nescafé Plan 2030 is helping communities as socially and economically inclusive. Director transition to regenerative agriculture and India improve livelihoods, positively impacting 4900 Indian coffee farmers. Nestlé Annual Review 2023 19 petcare At a glance Caring for pets 18.9 Sales (in CHF billion) and people 20.7% UTOP margin 20.3% Our PetCare business delivers life-changing nutrition for pets Percentage of that helps them thrive. Purina is guided by science and driven Nestlé’s sales by passion to enrich the lives of pets, the people who love them and the planet we all share. Purina One DualNature Purina Pro Plan Purina One DualNature, Vital Systems Purina’s first carbon- Purina Pro Plan Vital Systems reduced range, has cut 4-in-1 cat food formulas the carbon footprint of its proactively support major products by 15.7% since systems of health – such as 2019 by optimizing recipes, kidneys, brain, digestion and manufacturing methods, immunity – with meat or fish packaging and logistics. always the first ingredient. Purina Pro Plan Purina Dog Chow Veterinary Diets The new product line The new OM Metabolic boasts exciting protein Response + Joint Mobility combinations and innovative is specially formulated to kibble textures, all fortified help dogs lose fat while with Purina’s proprietary maintaining muscle, with EXTRAlife, providing dogs long-chain omega-3 fatty with excellent nutrition acids plus glucosamine to and delicious taste. help support joint health. 20 Nestlé Annual Review 2023 Leading the way with pet supplements Pet owners are increasingly choosing minor upset stomachs to more to customize their pet’s nutrition with severe gastrointestinal problems supplements, toppers and snacks that or food allergies. Purina Pro Plan cater to their pet’s individual needs. Veterinary Supplements FortiFlora is Purina is responding to this shift the #1 U.S. recommended probiotic in consumer habits with additional by veterinarians. It is a proprietary health-focused nutrition options. probiotic supplement that supports digestive health and helps improve Purina Pro Plan Veterinary Supplements stool quality in dogs and cats. are specialized supplements for dogs and cats, designed to support their Water is crucial for cats, just like it is health and address specific conditions. for humans. Many cats dislike drinking Purina innovates supplements scientifically designed to support various needs, including water – especially still or stagnant digestion, immunity, hydration, joint health Digestive disorders are common water – which can lead to dehydration. and calmer behavior. health issues for pets, varying from Purina Pro Plan Hydra Care addresses this, offering nutrient-enriched water OUR VOICES IN FIGURES for cats. It contains osmolytes that help 22.6% cats absorb water at a cellular level, ensuring they stay hydrated. “Science and nutrition are organic growth for Purina Pro Plan Veterinary Supplements in 2023 the foundation of long-term Like humans, dogs can experience anxiety, which varies across breeds health and the starting point and individuals. Purina Pro Plan to an amazing life for pets Veterinary Supplements Calming Care includes a proprietary probiotic strain and their owners.” shown to help dogs and cats manage stress and maintain calm behavior. Brittany Vester Boler Global Nutrition Director, Nestlé Purina R&D United States Nestlé Annual Review 2023 21 nutrition and health science At a glance Optimizing health 15.3 Sales (in CHF billion) through nutrition 18.5% UTOP margin 16.4% Our nutrition business provides science-based products and solutions Percentage of for mothers, babies and children. Our Nestlé Health Science business Nestlé’s sales supports healthier lives by offering an extensive portfolio of science- based consumer care and medical nutrition. Gerber Popped Crisps Vitaflo PKU sphere Leveraging the goodness Vitaflo PKU sphere helps of grains and plant protein, people with phenylketonuria this new healthy snack in the (PKU) manage their diets China market was created with the most advanced with taste, texture and nutrition system alongside nutrition ideal for children superior taste, now in three years and up. a ready-to-drink format and two new flavors. NAN Supreme Pro The new NAN Supreme Pro BOOST Glucose Control is now made with Sinergity, Now available at Costco a proprietary blend of in the United States, BOOST six age-adapted HMOs Glucose Control is clinically and precision probiotic shown to produce a lower B. infantis, to synergistically blood sugar response versus support infant immunity a standard nutritional drink and gut health. in people with type 2 diabetes. 22 Nestlé Annual Review 2023 Addressing childhood nutrition deficiency A collaboration between Nestlé and 6 to 60 months, Cerelac Pushtimix is IN FIGURES the Bangladesh Council of Scientific fortified with 11 vitamins, 5 minerals and Industrial Research (BCSIR) has and probiotic B. lactis. resulted in a groundbreaking product to help combat malnutrition in young Cerelac Pushtimix was designed to children in Bangladesh. give parents a simple, accessible format to help combat malnutrition A significant percentage of Bangladeshi in their young children. Developed as children under the age of 5 years suffer a convenient powder, consumers can from various micronutrient deficiencies. easily sprinkle it on homemade foods. In collaboration with BCSIR, Nestlé The aim is to make it accessible to all > 4.4 million Bangladesh developed a cereal-based children, including those in rural areas, Cerelac Pushtimix sachets sold in 2023 fortifier, Cerelac Pushtimix (pushtimix thanks to its affordable price point means mix of nutrients in Bangla) to of BDT 5 (less than 5 Swiss centimes) OUR VOICES address these deficiencies. Specifically per 5g sachet. designed to cater to the nutritional needs of Bangladeshi children aged In 2023, Nestlé Bangladesh was “This innovation will honored with the prestigious SDG Brand Champion Award in Sustainable help empower the nation Partnerships & Institutions. The to eliminate malnutrition Bangladesh Brand Forum, in collaboration with the Global Compact while increasing the Nestlé Network Bangladesh, bestowed footprint across Bangladeshi this award in recognition for this households.” successful collaboration’s support for the UN Sustainable Development Goals (SDGs). Hafizul Islam The single-dose sachets of micronutrient BEO Nutrition powder can easily be sprinkled on homemade Bangladesh food – like rice, semolina or khichuri – to combat malnutrition. Nestlé Annual Review 2023 23 prepared dishes and cooking aids At a glance Advancing delicious 11.7 Sales (in CHF billion) and nutritious food 18.3% UTOP margin 12.5% Our prepared dishes and cooking aids category provides daily essentials, Percentage of including bouillons, chilled culinary products, and frozen food and pizzas. Nestlé’s sales Iconic brands such as Maggi, Stouffer’s and DiGiorno cater to regional and local tastes. Maggi Veg Totole Recipe Solutions The new Maggi Veg line The expanded Totole in Chile and Germany gives Recipe Solutions range consumers shelf-stable in China added four new options for wholesome and single-portion options tasty plant-based solutions that specifically cater to that are a good source one-person households and of protein and fiber. independent mealtimes. Lean Cuisine Balance Bowls New tasty and nutritious Maggi Air Fryer Lean Cuisine Balance Bowls The new Maggi Air Fryer are the first meals to meet seasoned coating range in the American Diabetes Australia enables consumers Association frozen entrée to make easy, delicious, nutrition guidelines, home-cooked meals in their helping people manage air fryer, a cooking appliance blood sugar levels. that is gaining in popularity. 24 Nestlé Annual Review 2023 Increasing access to quality meals Consumers worldwide want food is made with quinoa, bulgur, carrots OUR VOICES that tastes great while providing and broccoli. the nutrition they need, all within their budgets. To address this Nestlé uses its innovation expertise “We innovate to support challenge, Nestlé is constantly to give consumers affordable and consumers in creating developing products that are delicious, affordable and nutritious. nutritious products they can use in their favorite recipes. In 2023, affordable, delicious and Nestlé launched Maggi Soya Chunks, nutritious meals every day.” Plant-based meals can offer quality which offers Nigerian consumers nutrition, including protein, and many a tasty meat alternative for rice, Shivani Hegde consumers are interested in trying stews and pasta. Not only does this Global Category Leader, Affordable Nutrition these. In Italy, Garden Gourmet is provide a convenient and affordable Switzerland enabling more families to access way to deliver the flavor of meat plant-based products at an attractive at a fraction of the cost, Maggi Soya price point. The tasty Garden Gourmet Chunks also provides a nutritious IN FIGURES 99kcal Miniburger, for example, source of protein, iron and zinc. Nestlé continues to create new options that provide quality protein through grains. As part of the International Year of Millets 2023, we launched Maggi Nutri-licious Masala Oats Noodles with Millet Magic. This product leverages the power of these ancient grains to bring protein and fiber to Indian consumers in one of their Building on MyMenu IQ, available in over 30 countries to give consumers nutritional favorite meals. 12.6% scores of meals, Poland added an extra tool organic growth for affordable nutrition food for assessing meal affordability. products in 2023 Nestlé Annual Review 2023 25 milk products and ice cream At a glance Responding to 11.0 Sales (in CHF billion) evolving preferences 24.5% UTOP margin 11.8% Our milk products business delivers nutritional products for all stages Percentage of of life, ambient dairy, plant-based alternatives and coffee creamers. Nestlé’s sales Our ice cream business offers a variety of special treats. KitKat Pink Yiyang JiaHeng Launched in Malaysia with The new Yiyang JiaHeng plans for global rollout, milk powder supports the new KitKat Pink healthy aging in China strawberry cheesecake- by delivering comprehensive flavored ice cream bar is nutrition for seniors in each successfully addressing serving, helping to maintain rising demand for immunity, mobility and unique cross-category cardiovascular health. brand extension. Nido Milk & Soya Starbucks Vanilla Creamer Nido Milk & Soya offers Inspired by the popular an affordable nutrition Starbucks Vanilla Latte solution to consumers in served at Starbucks stores, Nigeria thanks to a new this highly anticipated milk powder fortified with launch continues to support iron that is made from both the growing demand for dairy and soy, providing high Starbucks coffee enhancers quality protein. in the U.S. market. 26 Nestlé Annual Review 2023 Bringing regeneration to the table Ninho, together with thousands By adopting practices, such as water IN FIGURES of milk-producing families, delivers conservation, manure and waste nutrition that supports a better future management, minimum cultivation for over 38 million Brazilian children. and soil cover, crop rotation and In support of a bright tomorrow, better animal welfare practices, Nestlé is incentivizing Brazilian dairy dairy farmers can enable sustainable farmers to protect and restore natural farming for generations to come. resources by adopting sustainable farming measures. Farmers in the program can engage in three levels of regenerative The Nature por Ninho program trains agriculture practices: bronze, silver 11 400 and incentivizes farmers to adopt regenerative agriculture practices and gold. For each level, the farmer receives an extra bonus in pay per acres of dairy farms now utilizing regenerative that result in lower carbon emissions liter of milk. At the end of 2023, agriculture practices in Brazil and increased carbon sequestration. 179 Nature por Ninho farms were in the gold category, supplying 17 million liters of milk per month. OUR VOICES In 2023, the Ninho team embarked “By 2025, our aim is to have on a mission to communicate 30% of the Brazilian milk in these best farming practices to consumers, sharing progress on our supply chain coming from three pillars: animal welfare, soil gold-category dairy farms.” and water. Through nationwide communication, including Ninho Barbara Sollero Forti+ commemorative packs, Sustainable Agriculture millions of Brazilian consumers Manager Visits from Nestlé’s Regenera technicians, are learning about the difference Brazil a WhatsApp farmer community and monthly YouTube sessions empower farmers to improve that comes from the farm. sustainability. Nestlé Annual Review 2023 27 confectionery At a glance Delighting consumers 8.1 Sales (in CHF billion) with tasty snacks 16.8% UTOP margin 8.7% Our confectionery business includes the iconic KitKat brand and a portfolio Percentage of of much-loved regional and local brands. The business innovates to create Nestlé’s sales great tasting chocolate products and nutritious snacks. KitKat Milo Nestlé Choco Trio Following on the heels Our leading chocolate of the rollout of the most heartland brand in Latin successful cross-brand America is now expanding collaboration in Australia to capture the Chocobakery that brings together two opportunity, bringing popular and distinctive together chocolate tablets brands, KitKat Milo has now and biscuits, with a winning, also been launched in Japan. value-up innovation. Nestlé Damak Aero Truffle Nestlé Damak, a leading As the leading aerated tablet heritage brand in Türkiye, brand in Canada, Aero is now has invested over a decade expanding its offering with in a sustainable pistachio a new range of Aero Truffle program in Gaziantep that indulgent dessert-inspired promotes responsible flavors like Black Forest, Salted farming practices and Caramel and Tiramisu. benefits communities. 28 Nestlé Annual Review 2023 Supporting breaks for good Our income accelerator program good agricultural practices (GAP), aims to improve the livelihoods of agroforestry and diversified incomes. cocoa-farming families and tackle child labor risks in cocoa production, Since the launch in 2022, the program while advancing sustainable farming has benefited 10 000 cocoa-farming practices. Now, cocoa from the families in Côte d’Ivoire. It will expand program has found its way to KitKat. to include Ghana in 2024. Initial results from a report by third-party KIT The program incentivizes and Royal Tropical Institute are promising, encourages change in cocoa-farming while also informing program The KitKat “Breaks for Good” packs include a QR code so consumers can discover families through a cash incentive paid improvements. Pruning has increased more about the school enrollment pillar directly to them through mobile money. cocoa farm productivity by more than of our income accelerator program. It supports four areas: child education, 20%, on average. School enrollment rates have risen by 8%, reaching 83%. OUR VOICES Women are more involved in decision- IN FIGURES making, which has improved the allocation of family resources. Cash “We are confident that as 160 000 incentives are primarily used where the program scales, we will cocoa-farming families planned to be it matters most, first and foremost supported by the program by 2030 for schooling. see a measurable impact We are also putting into practice on cocoa farmers’ incomes our ambition to fully segregate our and an improvement cocoa ingredients. In late 2023, KitKat in the lives of children.” factories in Hamburg, Germany, and Sofia, Bulgaria, started using 100% segregated chocolate mass from the Darrell High income accelerator program. We will Head Nestlé Cocoa Plan Switzerland expand segregation in KitKat factories to most of Europe by early 2024. Nestlé Annual Review 2023 29 water At a glance Offering more 3.3 Sales (in CHF billion) than hydration 10.6% UTOP margin 3.6% Our water business is dedicated to providing healthy hydration Percentage of and enhancing quality of life while contributing to a sustainable future. Nestlé’s sales The strategic focus is on international premium mineral water brands as well as healthy beverages. Vittel+ Nestlé Pure Life Following the successful launch of Nestlé Pure Life unveiled Vittel+ Immunity with zinc in 2022, a new portfolio architecture the brand expanded this functional design, inspired by the ripples range with two new benefits: Active effect, to help consumers with B vitamins and Recharge navigate across the range while with magnesium. enhancing brand uniqueness and impact on shelf. PERRIER + STARCK As Perrier celebrates its 160th anniversary, the brand S.Pellegrino Essenza continues to captivate with S.Pellegrino Essenza successfully the launch of a new limited rolled out its vibrant Mediterranean edition of the iconic glass bottle blends range in France, seizing redesigned by visionary creator the momentum of the fast-growing Philippe Starck. flavored sparkling waters market. 30 Nestlé Annual Review 2023 Nurturing the art of tasteful living Sanpellegrino aims to nurture the the S.Pellegrino Young Chef Academy IN FIGURES art of tasteful living, today and for competition to discover new talents generations to come. This purpose is and inspire the next generation embodied by our initiatives to support of culinary game changers. future gastronomic talent, responsible fine dining and fine drinking, and We are partnering with Food for Soul protection of nature. to inspire a culture of responsible dining. Founded by renowned chef To nurture the future of gastronomy, Massimo Bottura and Lara Gilmore, the S.Pellegrino Young Chef Academy Food for Soul aims to prevent food > 2000 connects talented young chefs across waste while encouraging a healthy chefs representing 50 nationalities belong the globe with influential members and equitable food system. Together, to the S.Pellegrino Young Chef Academy community of the gastronomic world for education, we launched the Why Waste? mentoring, networking and career initiative to foster awareness and OUR VOICES opportunities. Every other year, it hosts inspire consumers and chefs through our Fine Dining Lovers platform as well as through courses “We are pleased with the offered to S.Pellegrino Young Chef Academy members. popularity of the S.Pellegrino Young Chef Academy, helping We are also dedicated to protecting us build a strong global the source of taste by managing water resources sustainably and network of next generation respecting the environment. Our culinary talent.” Acqua Panna and S.Pellegrino plants are already certified to the Alliance Stefano Bolognese for Water Stewardship (AWS) Sanpellegrino Sanpellegrino’s editorial digital platform, Standard. By 2025, we aim to create International Business Fine Dining Lovers, inspires with interviews, Unit Director stories, recipes and videos about responsible a positive water impact everywhere Italy gastronomy. we operate. Nestlé Annual Review 2023 31 Financial review 32 Nestlé Annual Review 2023 Key figures (consolidated) In millions of CHF (except for data per share and employees) 2022 2023 Results Sales 94 424 92 998 Underlying trading operating profit (a) 16 103 16 053 as % of sales 17.1% 17.3% Trading operating profit (a) 13 195 14 520 as % of sales 14.0% 15.6% Profit for the year attributable to shareholders of the parent (Net profit) 9 270 11 209 as % of sales 9.8% 12.1% Balance sheet and Cash flow statement Total Equity 42 792 36 387 Net financial debt (a) 48 159 49 638 Ratio of net financial debt to total equity (gearing) 112.5% 136.4% Operating cash flow 11 907 15 941 as % of net financial debt 24.7% 32.1% Free cash flow (a) 6 570 10 403 Capital additions 8 264 7 159 as % of sales 8.8% 7.7% Data per share Weighted average number of shares outstanding (in millions of units) 2 707 2 646 Basic earnings per share CHF 3.42 4.24 Underlying earnings per share (a) CHF 4.80 4.80 Dividend as proposed by the Board of Directors of Nestlé S.A. CHF 2.95 3.00 Market capitalization, end December 285 865 255 604 Number of employees (in thousands) 275 270 Principal key figures (b) (illustrative) in CHF, USD, EUR In millions (except for data per share) Total CHF Total CHF Total USD Total USD Total EUR Total EUR 2022 2023 2022 2023 2022 2023 Sales 94 424 92 998 98 772 103 584 94 010 95 730 Underlying trading operating profit (a) 16 103 16 053 16 845 17 880 16 033 16 525 Trading operating profit (a) 13 195 14 520 13 802 16 173 13 137 14 947 Profit for the year attributable to shareholders of the parent (Net profit) 9 270 11 209 9 697 12 485 9 230 11 539 Total Equity 42 792 36 387 46 281 43 245 43 444 39 081 Market capitalization, end December 285 865 255 604 309 177 303 784 290 225 274 532 Data per share Basic earnings per share 3.42 4.24 3.58 4.72 3.41 4.36 (a) Certain financial performance measures are not defined by IFRS Accounting Standards. For further details, see Foreword on page 34. (b) Income statement figures translated at weighted average annual rate; Balance sheet figures at year-end rate. Nestlé Annual Review 2023 33 Group overview Foreword Group sales The Financial review contains certain financial Organic growth was 7.2%. Pricing was 7.5%, performance measures, that are not defined by reflecting cost inflation over the last two years. IFRS Accounting Standards (thereafter “IFRS”), RIG was – 0.3%, impacted by soft consumer that are used by management to assess the demand, capacity constraints and a temporary financial and operational performance of the supply disruption for vitamins, minerals and Group. They include among others: supplements in the second half. As expected, RIG turned positive in both the fourth quarter and – Organic growth, Real internal growth the second half, supported by the benefits from and Pricing; portfolio optimization, improving customer service – Underlying trading operating profit margin levels and increased brand support. and Trading operating profit margin; – Net financial debt; Growth was broad-based across most geographies – Free cash flow; and and categories. In developed markets, organic – Underlying earnings per share (EPS) and EPS growth was 6.4%, led by pricing with negative in constant currency. RIG. In emerging markets, organic growth was 8.4%, driven by pricing and positive RIG. Management believes that these non‑IFRS financial performance measures provide useful By product category, Purina PetCare was the information regarding the Group’s financial and largest contributor to organic growth, with strong operating performance. momentum across all channels. Purina ONE, Purina Pro Plan and Friskies all recorded double- The Alternative Performance Measures document digit growth. Sales of Purina Pro Plan reached published under www.nestle.com/investors/ almost CHF 3 billion. Coffee saw high single- publications defines these non‑IFRS financial digit growth, with positive sales developments performance measures. across brands, supported by strong demand in out-of-home channels. Infant Nutrition posted high single-digit growth, based on continued momentum for premium infant formula, including human milk oligosaccharides (HMOs) products as well as specialty formulas. Dairy reported mid single-digit growth, led by fortified milks, coffee creamers and home-baking products. Confectionery recorded high single-digit growth, fueled by continued double-digit growth for KitKat. Prepared dishes and cooking aids posted mid single-digit growth, with robust demand for Maggi across geographies and segments. Water posted mid single-digit growth, led by S.Pellegrino and Acqua Panna. Nestlé Health Science recorded low single-digit growth, as continued strong momentum for Medical Nutrition was partly offset by temporary supply constraints in vitamins, minerals and supplements. 34 Nestlé Annual Review 2023 By channel, organic growth in retail sales Sales by geographic areas remained robust at 6.5%. E-commerce sales Differences 2023/2022 (in %) grew by 13.4%, reaching 17.1% of total Group in local in CHF sales. Organic growth of out-of-home channels in CHF currency millions By principal markets 2023 was 15.9%. North America – 1.4% (a) 32 553 United States – 0.9% + 5.5% 30 034 Net divestitures decreased sales by 0.9%, largely Canada – 6.2% + 3.5% 2 519 related to the divestment of a majority stake in Europe 0.0%