Good morning and good afternoon to all participants joining us today, either in person or via webcast. I'm Luca Borlini, Head of Investor Relations for Nestlé. On behalf of our leadership team, it's my pleasure to welcome you to the Nestlé 2022 Investor Conference in Barcelona. I would also like to take a moment to thank the Nestlé Spain and the Barcelona Digital Hub teams. They've done a fantastic job over the last few days, and they really deserve a great thank you on our side. Before we move to today's presentation, let me take care of a few housekeeping items. A copy of the agenda is available on the investor section of the nestle.com website. Presentation will be available in our website five minutes before each presenter starts. Also a replay of all presentation and Q&As will be available after today's event. Now over to the agenda. During today's seminar, we will highlight how Nestlé is performing while transforming in a changing environment. In more detail, our CEO, Mark Schneider, will share our strategy for sustainable value creation, and he will also outline our 2025 financial targets. Stefan Palzer will talk about how we are leveraging meaningful innovation to boost growth. Bernard Meunier and Aude Gandon will follow with an update on how we are accelerating our digital transformation through data. David Rennie will provide a deep dive into our coffee strategy, and Laurent Freixe will then present Testri and Agility, our initiatives to unlock efficiencies and faster decision-making. We will finish the morning with a Q&A session before we break for lunch. The afternoon session will be dedicated and devoted to a deep dive on Nestlé Health Science, with presentation by Greg Behar, our CEO of Nestlé Health Science. Don Kerrigan, Head of Nestlé Health Science US, will focus on Consumer Care, and Anna Mohl, Head of International Business, will focus on Medical Nutrition. François-Xavier Roger, our CFO, will follow with a financial overview, and as usual, we will close the day with a summary Q&A session with our CEO and CFO. Let me pause a moment to allow you to read our disclaimer, as we will be making forward-looking statements throughout the day. Now please let me hand over to Mark, our CEO. Please. Luca, thank you, and good morning and a warm welcome to our Investor Day participants, both here in the room and out on the web. As we prepared this day, it became clear to us that the last time we met in a setting like this was more than three and a half years ago, and that was in Arlington in May 2019. Yes, what a different world it's been. Global pandemic and many crises later, here we are, glad to see you in person, and we appreciate your interest in our company. One of the messages that hopefully will come across from this day is, while we're living in a very volatile and turbulent environment, I think we have the strategies, we have the operational dedication, the execution to provide very consistent financial results for you, very much in line with the Nestlé model that was outlined to you many years ago. That allows you to create value through compounding in investment. Here's a brief summary of what we would like to try to get across today. Looking back first, I think in all modesty, we have delivered to you. We have delivered not only the pre-COVID years, 2017 through 2019, with a very balanced approach on growth and earnings. I think we also have delivered to you in these very turbulent years, 2020, 2021, and 2022. 2020 was all about coping with COVID. 2021 was supply chain. 2022 is the year of inflation. I think in all of these very surprising, turbulent environments, we did what we have to do short term to make sure that our financial model gets upheld and that we live up to our purpose in every way. Now, that's the past. Today's program is about looking towards the future. The message we're trying to get across is, as we look at this new decade we're in, this more turbulent, this very volatile decade, it's important that we believe we get it. We're looking forward. We're trying to embrace the realities of this new decade. It's gonna be a decade of higher highs and lower lows. It's literally gonna be a tale of two cities, best of times, worst of times. In this new environment, we're trying to embrace that new reality, make the most of it. At the bottom, as mentioned before, we believe that even in this environment, we can uphold the main key cornerstones of the Nestlé model and the value creation behind it. To set up the program for today, let's take stock about what has worked for us in the last few years and also what hasn't, because I think that's an important starting point to see where we're going. Page one is the items that have worked for us. I will not go in detail through all of them. You know many of them from past investor calls, quarterly or annually, and some of the past investor days. What I do hope you appreciate is the balanced delivery across a number of dimensions here, whether it's strategy, organization, or the balanced pursuit of our financial goals. I think that was underlying that very consistent, sustainable success over the last few years. Here's a look at some of the things where we believe we have work to do. There is three categories. One is Nestlé Health Science, which is gonna be a focus item for today. I'll talk about it some later in this presentation, obviously, we spend a lot of time on this in the afternoon. Infant nutrition is another category where we have not fully lived up to our goals over the last few years, I'll spend a slide later detailing the new strategy in infant nutrition. Water, I won't spend a lot of time on. Let me just say that I think we did a very important step in 2019, 2020, focusing on premium functional waters. I think now in the face of additional inflation, we have to try further measures on cost efficiency, value-added offerings, and also sustainability to balance all of these objectives. Affordability, sustainability, I think that is an item that has come to the forefront in the face of very significant inflation. There's no point in making the perfect product if it cannot be supported and embraced by the consumers around the world. Making sustainability relevant to consumers, bringing the consumer into the equation, in addition to regulation that happens around the world, I think is one key ongoing challenge that we'll be working on. Also, I think when it comes to quality, let me show you that we do have a very, very strong focus on this. This has always been a hallmark of the company. We also can't help but notice that we did see a pretty significant setback earlier this year with the Buitoni situation in France. Let me assure you, the quality focus has never slowed down. We're taking the situation very, very seriously. We do one postmortem after another to be sure that across all levels in the organization, this quality item is properly addressed, and there is proper learnings from it so that they don't happen again. Last but not least, speed, speed. I think execution is gonna be a major item in the 2020s, especially against the face of the significant volatility and turbulence we're seeing. You can have the most wonderful strategy. If you don't execute on time, if you don't make it happen with a razor-sharp focus, it simply won't pay the results. Lots of change, but also one constant, and that is our strategy. That slide has changed very little from our presentation in May 2019 in Arlington. There had been a development from the one we showed you in 2017- 2019 because, as you know, we divested off Nestlé Skin Health, and we put in this focus on food and beverage, which I think was accepted and understood very well. Since then, the focus is the same. What you will see this afternoon within Nestlé Health Science now, we will have even further focus on the two segments that were performing the best, and that is consumer care and medical nutrition. When it comes to the scope of the entire company, no change of parameter from what you've seen and what you heard before. Within the food and beverage categories, here are two planks that we believe are gonna be really, really important for the 2020s and beyond. We summarize them very simply with good for you and good for the planet. Good for you captions all the items that are related to the nutritional value of our products. Good for the planet, given that food and beverage does account for a major part of the environmental footprint that humanity has on this planet, basically summarizes all of the ESG related aspects related to our products. Good for you. You know that we're stepping into a proud heritage over 20-25 years under our nutrition, health, and wellness strategy, which we fully confirm. As part of the strategy, we've seen major successes in taking sodium, sugar, and saturated fat out of our products, and we stay committed to this journey in using our R&D engine and innovation engine to making that happen. Let's also be clear, with all the science in the world, what you won't be able to do is to turn a piece of chocolate into a tomato. We've got to be realistic on this, and that's where some other dimensions of what we call responsible consumption kick in. You see some of those itemized here. One is around creating absolute transparency, which starts, for example, with food labeling, but also goes to annual reporting so that the public can track our progress. You will have seen two weeks ago, we made an announcement. It's to our knowledge, the first of its kind globally. We're starting from next March, we will provide against the Health Star Rating a complete global overview of how the portfolio is categorized. I think that'll allow you to show you and to track very easily the progress that we're making across the entire portfolio. In addition to that, later in 23, in 14 major markets around the world, we will detail how the country portfolio stacks up against relevant nutritional systems that are used in those countries. Here again, at the local level and at the global level, this will allow people to track our progress and see how we're doing. On the right-hand side, responsible marketing, I think is another important piece of the equation. Absolutely important in the field of infant formula, infant nutrition. Here, I just want to remind everyone that starting January 1st, our new infant formula marketing policy comes into effect. This follows an earlier commitment. Based on the belief that breastfeeding is best, for zero-six months around the world, we will abstain from any promotions. For 163 countries around the world. Where according to objective Food for Good criteria, there's a higher rate of infant malnutrition, infant deaths, we will also have a zero- 12 absence of promotion. That puts us very squarely into the leadership pack when it comes to infant formula around the world. Just yesterday, we made an announcement when it comes to marketing to children. We had a previous policy of zero- 13 years. We now enlarge that to zero- 16, which also puts us in the leadership pack globally. That policy will go into effect July 1st next year. Good for the planet. I won't go through all of these metrics, but, as you know, we've made some very significant commitments over the last five-six years. We're on track to either fulfill the gist of these commitments or to fulfill them actually to the letter. Very glad to report that we have left peak carbon behind us. It was sometime 2018, 2019. Also glad to report on packaging that we have left peak virgin plastics behind us. Of course, when it comes to another, very important item, which is supply chain due diligence, also a very large number of initiatives underway and good progress when it comes to the execution. Let me shift gears and talk to you about portfolio management. Portfolio management here for the purposes of this slide is defined as the narrow angle of portfolio management. This is M&A. This is buying and selling. Obviously, there's a lot of day-to-day portfolio management going on when we develop new products, when we develop new categories internally, and that should not be underestimated. As you can imagine, what grabs the headlines and what you very often focus on is some of the portfolio management that happens through buying and selling. In taking stock here after a number of years, three key observations. One is we have been quite active, certainly more active than we led you to believe at our investor seminar in September 2017 in London. You see, we rotated more than 20% of the portfolio, total de-value in excess of CHF 50 billion over the years. That leads me to the second conclusion. Had we been less diligent, we could have easily doubled that on the buying side. We've been very selective buyers. We've been very disciplined. Certainly, when we didn't like things that we see in a due diligence process or when we didn't like the valuations anymore, we had the guts to say no. François will outline this later in his presentation. These were not superficial glances we were taking of those transactions. These were things that we looked at very seriously in detail. We ended up not liking some aspects of it. It may have been tempting, it may have been tantalizing, but we had the guts to say no. I hope you appreciate that. Coming to the third bullet point, what did it all add up to? Well, the first two sub-bullets are about the operating metrics, and they are clearly, we believe, it did contribute. It is about 50 basis points per annum when it comes to organic growth. It stands, when you look at the buying and the selling, it stands for around one-third of the improvement in underlying trading operating profit margin. I think when it comes to the operating metrics, these transactions have certainly helped. When you look at the third sub-bullet, you also see that more than 80% of these transactions have either met or exceeded the acquisition business plan. Looking at the fourth bullet point, what we're doing is we're netting out for you the ones that have met or exceeded the targets or the ones that have not. We're using a valuation metric and system that's very much inspired by private equity, where what you typically do is you take the current performance in terms of sales and earnings, and you apply a current market multiple to these transactions to get a sense even for unrealized transactions, where they stand. When you apply that here, about CHF 79 billion of value were created, which equates to an annual return of about 11%-13%. I think whichever way you look at it, operating metrics, hit or miss, or whether it's the total value created, we did overall, I think, have a pretty good acquisition track record. That's the positive side. Of course, when we're saying more than 80%, the more curious among you will probably ask the obvious question, what about the others? Here are two transactions, in the spirit of full disclosure that I would want to talk about that did not meet our objectives fully. The first one is Freshly. That one I know over the last year or so, we have received a number of questions. Some of you were on this case already. You may have seen a very recent announcement just from a few days ago that we merged this company now with a business called the Kettle Cuisine Company. We're doing this in partnership with a private equity firm called L Catterton. We're in the minority position. They are the majority. As you know, this business was acquired just about two years ago in the fall of 2020. We had been a minority owner of this business for three years before, from 2017 through 2020. Basically, I think what happened here is the insight that a D2C channel for a business of this type in the face of rising customer acquisition costs because of a totally different data landscape, and also with lower customer retention in this COVID waning world, is simply too narrow. I think this is something that we had to recognize. This is probably where the environment in 2020 fooled us because we still had much, much lower customer acquisition costs in this cookie-dominated data acquisition world. You'll hear more about that and the changes later on this morning. Of course, as the pandemic waned, clearly, customer retention didn't maintain the levels we saw during the pandemic, and hence, the narrowness of this business case became so much more apparent. That's also the solution now, I think. This is also a general lesson that for many D2C business models will need to get applied. Unless you have something that's truly premium, truly high involvement, truly, fully personalized, a pure D2C model at times can be too narrow. I think with this merger now with the business of Kettle Cuisine, we're putting together two business models that have one thing in common, and that is the focus on freshness, because that is something that customers do appreciate and consumers do appreciate. You also bring it together with a much more nuanced way of going to market, using B2B2C models, where you operate... You're working with food service operators, canteens, for example, restaurants, hotels, and environments like that would like to offer something that is fresh, but don't have the cost and the labor anymore locally to prepare these meals. That business model is very promising, especially in this oncoming age of labor scarcity. I believe that this joint venture also, while the acquisition has not met fully its objectives, it gives us a chance to earn a substantial part back of what we didn't realize in the first round. That's one. The second one, building on this morning's press release is Aimmune. This is Nestlé Health Science, and this may come as a surprise to some of you, given that we did have high hopes for this business. I'm the first one to admit it. This is a business that we also acquired in the fall of 2020. We also had a minority stake in this business from 2017, so we followed the development of this company as the product underwent the clinical trials, finally in early 2020, got the full FDA approval. That was important to us. We didn't want to move on this business before we had a fully FDA-approved therapy because we didn't want to take scientific risk here. What we thought in an area that sees significant unmet medical need was that there was gonna be a launch that we could support in many different ways through our Nestlé Health Science organization. First, as you know from some of the quarterly updates we've given you, that was hampered by the pandemic. The fact that, you know, when risk of infection was so large, people simply didn't wanna go out and visit the allergist's office and, basically, try a new therapy like this. When that started to wane, we saw that there were two more significant underlying problems that have nothing to do with the therapy. Let me stress that the therapy is absolutely safe and, also effective, very much in line with the approval that it has received. It's still, to my knowledge, around the world when it comes to peanut allergy, the only FDA-approved therapy. One problem was that allergist adoption was not as strong as we anticipated. That has to do with the workload that this therapy puts on the allergist office, for which the allergist does not get compensated, and under the rules and laws, we're not allowed to make up for this. Second, with the patients, clearly while there was strong interest, especially from parents of concerned children that have peanut allergy, the discipline and the patient retention was not as good as we thought, given that this requires multiple visits to the allergist office. Each and every time one of these escalating doses is applied, you also have to spend considerable time in the practice to be sure that there's no anaphylactic shock. When you put all of this together, clearly it was much, much harder to get the patient take-up that we anticipated and that we felt was to be expected because of the strong underlying medical need. This is a reality we have to accept. Instead of the blockbuster, what this looks like more and more is a very potent and very successful niche therapy. Now, some of you may ask, if that's the case, why don't you stick it out? Why don't you expand it patiently over time? I think this is where our previous footprint comes in. When you are circulating, when you are selling an FDA-approved RX drug, you need to have certain fixed cost in order to support that by law. Think about pharmacovigilance, for example. Clearly, when you are starting in this, when you don't have other drugs that you can bundle in with that, then that fixed cost is really quite a burden unless you're seeing the rapid success that we had forecast. When we saw that the takeoff is not what it is, and that it would take much, much longer to create a strong niche following for this drug, and that we have all the fixed costs against it, we felt the best way for this company, the best way for Nestlé Health Science going forward is to stay focused. I know some of you never liked this therapy to begin with. You felt that it was outside of the wheelhouse of our company. That also paves the way to the new strategy, which we believe is gonna be more proven, more successful for Nestlé Health Science, and that is resting on the two pillars where we have every right to play and every right to win. One is consumer care, and the other one is medical nutrition. In both of these, we're among the leading providers in the world. Consumer care in the BMS sector, we're clearly number one by now. It's still a fragmented industry, but also one that allows significant consolidation opportunity going forward. In medical nutrition, as you know, we have decades of experience. We're a strong number two globally. When you look at the top four companies in this space globally, you essentially have two consumer goods players and two med tech players active in that. I believe it's long established and well accepted by everyone that as a consumer care company, you can play an important role in that space. That whole-Strategy. The two segments, the promise they hold, and the track record we have in them will of course figure very large in this afternoon's program, and I hope that you come away with the strong confidence that in these two, we have a bright future ahead of ourselves. Infant nutrition, this is another segment, as I mentioned earlier, where over the years we have not quite delivered. Some of that has to do with the global situation, especially falling birth rates, in particular at the times of COVID. Some of it also, very frankly, had to do with our own internal execution problems, in particular in China. We took a good look at this, specifically at the situation in China, but also at the global landscape. As you know, this is a category that is very much key to us, one that the company was founded on and very much aligned with our purpose of using the power of nutrition. Especially at this early stage in life, I think this is where a lot of good can be done, a lot of bad can be avoided. It's clear to us when you look at this CHF 8 billion category, dominated by about 3/4 infant formula share, that there is no successful strategy that doesn't build on revitalizing the core. If you don't revitalize the core, whatever you do as new growth initiatives will not be successful. Hence, you see here several initiatives that are built exactly on doing that. The key part, of course, is the turnaround in China, where proud to say we've seen significant progress this year. This is also where the Chinese reorganization has kicked in and helped a lot. It's also a good coincidence that our new executive board member and head of Nestlé Greater China, David Zhang, has a strong history in this business. He served in it at the time when it still belonged to the previous owner and has a lot of personal pride, took a lot of personal pride in turning around the situation, and I think we'll stand to reap the benefits of that situation going forward. I think that to me is key. You've seen from some other international players there can be winning strategies in the Chinese market. I think we have recently turned around to be on the winning streak, and we'll continue to do that. In addition to that, of course, on a global scale, it's very much driven by science and innovation, and you'll hear some of that later on in Stefan Palzer's presentation. Over and above that, we believe there is a growth opportunity by widening the angle, and that is, rather than focusing on just infancy and toddlerhood, I think if we now go from preconception to preschool, we have a wider way of offering nutritional solutions to help those pivotal early years in life. This is where a few other segments come in. For example, the supplement segment when it comes to pregnancy and pre-pregnancy, and then also meals and trainings for the preschool age. This is where a lot of specialties can be offered, a lot of brand names that we already have in place can be leveraged, and this is what we intend to do going forward. Again, it'll help to offset some of the more muted growth aspects of this category in the face of rising breastfeeding rates and also falling birth rates around the world. It alone will not be successful if we don't turn around the core, which we're very committed to doing. Turning around the core, by the way, in the face of falling birth rates, there is more growth opportunity than you think, because at the end of the day, it's also about market share, not only against other infant formula makers, but also against clearly inappropriate ways of feeding children at that age. That is still very prevalent around the world. By touting the virtues of proper infant formula feeding when breastfeeding is not possible, we believe that additional growth can be generated. Switching gears again, let's take a look at some of the financial metrics. We'd like to have you come away from this investor day today by having confidence that we have what it takes to deliver consistent mid-single digit organic growth going forward. This is something that we called out to you last year. Compared to the original plan from 2017, we were about a year behind. As you know, we were a year early in earnings. We were a year behind on organic growth. I want to confirm again today that we believe we have what it takes to do that. It may look easy at a time like this when inflation, of course, inflates the numbers, but even aside from that, even in a more normalized going forward scenario, we believe based on the categories we're in, the mix development, the innovation we can bring to market, we have what it takes to deliver that consistently, and that's a key feature of value creation going forward. The drivers on the right-hand side are the same that you've seen in previous updates we've given you. Likewise, on margin, that's the other one that's important. We have what it takes, and we have the plans in place to go back to the margin band that we outlined to you in London in 2017, 17.5%-18.5%. Again, some of the steps, some of the drivers on the right-hand side, very similar to what you heard before. That's important to me because as we all know, as when inflation was gearing up last year and this year, everyone's operating margins in this industry were taking a hit. I'm sure it would have been tempting to kind of reset expectations here. We're not in for that. We believe that this company can deliver this margin band in a very consistent manner in a more normalized situation, and we intend to get back there. That leads to a key financial metric slide, which François will present to you in greater detail this afternoon. As you look at some of these metrics, be careful, some of them relate specifically to the year 2025. Others relate to the entire period gearing up to the year 25. For example, the annual underlying EPS growth, that is something that we expect very consistently between now and 2025. By the way, that does not only apply to the underlying EPS growth. When you look at the math of what we intend to do on organic growth and the underlying trading operating profit margin, that also applies then to the annual underlying trading operating margin development. There also, we expect clearly an above 6% development between now and 2025. That's simply by putting the two together. Everything else, I would call a positively trending, no surprises scenario. In a world that is full of turbulence and surprises, I think that is a positive surprise to begin with. All of that, as you know, adds up to a pretty consistent financial performance over the years. You see that itemized on this left-hand side of the slide. We're fully aware that this year doesn't stand out as much as in previous years. As you look at it on a three, five or 10-year time horizon, you see that very consistent performance and the power of compounding here when it comes to creating value. Regarding the center on the right-hand side of the slide, I would also like to confirm that we fully intend to continue our long-standing dividend practice of rising dividends, and that, of course, I would like to fully confirm that the current share buyback program will be continued in full compliance with the outline we gave you last year. All of this does not happen on autopilot. That's why I also wanted to spend a second on some of the organizational changes that are needed to make this happen. This is the 2020s. This is an age of significant turbulence and volatility. I think it's also in the face of a changing consumer and the prevalence of all things local, in a more troubled geopolitical environment, an age where local clearly comes first and global second. I think we benefit from the fact that about 20 years ago, in a day and age when global was all the rage, we never went all the way down. I think we always kept a very strong local rooting in our organization, in our manufacturing setup, in our supply chains, and we stand to benefit from it now. In fact, going forward, we will stress it even more. Going to the center of the slide, one aspect of this was the breaking out of our two largest markets last year and the creation of their own zones, for North America and for Greater China. I would like to confirm to you that change has gone really, really well. I think it has already led to much shorter paths, to create decisions, and it also has led to a much more nuanced debate around the executive floor table when we have our senior leadership meetings. The last one at the bottom, you get a taste of some of the consumer-facing digital activities. Let me also say, beyond the consumer-facing part, when you look at the inside of a company, to me, COVID, if there was any one positive thing related to it, then it's the fact that it was the starting chart for so many companies around the world, us included, to start what I call the full digital build-down of what a company can be, if you're using it front to back and top to bottom. This is something where a lot of effort, a lot of investment over the years will be guided to be sure that we are ending up with a fully digitally enabled, fast and very skill set related, headquarters organization that can thrive in this new environment against everyone speeding up. Some of you may remember that slide from September 2017. Same slide, totally unchanged. Let me give you the same three messages. Number one, on a personal note, I'm fully committed to this job. Number two, I'm here for the long term. Number three, when you go beyond me into the full team, I would want to assure you of our grit and determination and the sheer will to succeed in this new environment of the 2020s. Past success is the past. It's all about the future. This team wants to win. We play to win, we will. That ends my key presentation. Let me just set up a few of the deep dives for the rest of the day. Some of them, two, coffee and Nestlé Health Science refer to categories. Three of them relate to something that's more transversal in nature. Right after me, Stefan Palzer, our Chief Technology Officer, will talk about meaningful innovation to boost growth. We will then have a presentation about data, and especially consumer-facing data activities and the digital transformation, building on the seminar that we held online on this issue last November. David Rennie will talk about the world of coffee, because as you know, this is one of our signature categories, and it's also one where a lot of you are curious about what the next growth wave has in store for us and for you. Laurent Freixe will talk about two very important center-based projects, one called Agility, the other one called Tasty, that position the company well for this new environment in the 2020s. The afternoon, as Luca said, will be fully devoted to Nestlé Health Science. As you know, a lot of investment has gone into this category in recent years. We want to be sure that you follow some of the organizational learnings that we had in this period of time, also that you have a full understanding and share the same enthusiasm about the strategies that we're pursuing in this area. With that, let me hand it over to Stefan. Let me say one thing on a personal note as we're presenting to you here. As you know, we're not robots, we're people. Stefan did come down with a cold two or three days ago. He very diligently tested himself a few times. It's not COVID, I can assure you. As a result of that, when he presents, he will not be his usual 130%. He'll be performing at 80%. I hope even at 80%, the one thing that should come across is the major job that Stefan and his team have done in positioning the company now for success through a very strong, very active innovation muscle. That to me, and you heard me say this earlier, that to me is one of the single largest internal transformations we've done in recent years, and here's the man who pulled it off. Thank you. Thank you very much, Mark. I will try to give the 100%, not the 80%. Indeed, the next 30 minutes, we will talk about meaningful innovation to boost growth. During the last five years, we took many measures to shorten time to market, to speed up our innovation process, but also to differentiate stronger our offering while keeping R&D budgets flat despite the growth of the company. I do believe we can truly talk about a transformation of innovation at Nestlé. Before we go more into the details of our measures, let's first have a look at the results we obtained so far. When it comes to speed to market, we were able to shorten the time to market by 60% since 2016. We moved actually from an average project duration of 33 months to 12 months, and that's an average of different categories. In food and beverage, sometimes projects take us only six-nine months. We are faster now here than many of the startups which are out there. While in nutrition, you can imagine timelines are still much longer due to the registration process. We are getting now really fast when it comes to innovation. We were also able to keep the number of launches and shop tests up, and we increased it by 12% despite the pandemic. We were able to execute our innovation pipelines. That required a lot of creativity of our teams and resilience to work around those hurdles which are coming here with the pandemic. In terms of differentiation, we also were able to difference stronger our offering. Amongst the 30% of sales coming from growth coming from products launched the last three years, the share of innovation has increased. We still have 30% of our growth coming from products we launched the last three years, but the percentage of innovation in this 30% has increased here by 25%. That means we have a stronger differentiated offer in the market. We also intensified the technology development and related patenting. You see here that in areas of strategic interest, we were able to increase patenting activities by 90% during the last two-three years. That's a significant improvement when it comes to speed to market, but also differentiation. We had also in parallel to build new innovation capabilities. Before we go there, let's have a look now also how we have achieved this improvement, and then we talk a bit about new innovation capabilities. The first step we took is that we simplified our innovation process. We moved from six approval gates to only three, and that already in 2018. We installed 14 R+D Accelerators, and in these Accelerators, the motto is in only six months from idea to shop. Fairly short timelines. The team work intensively on the product, and then we test the innovation under real-life conditions in the retail or in e-tail environment. We also established 30 partnerships with retailers, and that was very important to test truly differentiated offerings under real-life conditions very rapidly in the marketplace. Last but not least, often we are facing always the discussion, if you have an innovation, shall we invest in the factory? Sometimes it takes also time to have this investment and then to build the factory, to build the lines. To bridge this time and to be quick on the market, we established 53 new pilot lines across the company, and that enables us to go quickly into the market to produce and to have an earlier market entrance. These are probably the main measures which we took to accelerate time to market. When it comes to differentiation, for instance, we established an internal Shark Tank for our employees. Employees, they can come with great ideas, they can propose them, and then we fund those ideas. A bit like a Shark Tank, you know, from TV. We have great examples. I have brought here one with me to the stage. That was one employee who had the idea... Well, who had a baby, actually, and the baby was teething. You know, if you have a baby which is teething, typically you have plastic tools the baby is biting on, or you have biscuits and they're all falling on the floor. There was no solution. We said, "Okay, I need something for my baby. This is natural, which is a food product, and the baby can chew on this product." I t was actually an employee even from our pet food business, she proposed this idea and we said, "Well, yes, we fund this idea." Now a couple of years later, we're building a factory. We even created a new category. This product doesn't exist in the market, that shows also the power and the creativity of our employees, and we are able to leverage that via this Shark Tank. Furthermore, we established 60 new collaborations with startups. Here we combine the creativity of the startups with our ability to scale innovation. We have now first products from these collaborations going into the market. AI-based concept generation. We have all those social media insights on social media activities in the world. To leverage that, also to create very innovative concepts, we established an artificial intelligence concept engine, which is transforming these insights into concept proposals, which are then evaluated by our employees, by our staff, and then one or the other, we do prototyping, and then we test it with consumers. Last but not least, I mentioned that already, the patenting activities in priority areas, a clear sign that we have created more differentiated technologies, which, we bring it to the market and which we protect also as our IP. In parallel, we built also new innovation capabilities. This requires funding. Like I said, we want to keep R&D budgets flat. We had to streamline the R&D organization. Since 2015, actually, we closed one-third of our R&D sites. We consolidated fundamental research, and that created funds which we reinvested in new capabilities. For instance, we funded the Institute of Packaging Science, and today you will see already first deliverables of this institute. We funded the Institute of Agricultural Science, and this institute we will inaugurate beginning of next year. We created also dairy and coffee farms, additional farms where we can test our agricultural solutions. Mark Schneider talked about the importance to be close to our consumers, to innovate with our consumers and to innovate for our consumers around the world. We always had innovation centers in ASEAN, in India, in Africa. We had also footprint in China. We reinforced this footprint in China by a new center. Just three weeks ago, we inaugurated a new R&D center in Latin America, which was a bit of white spot for us. That in order to innovate closer to our consumers to ensure that the innovation is really relevant for the local consumer and is also adapted to local supply chain conditions and local raw materials. Our 14 R+D Accelerators, which are placed in nine markets. The last one was the R&D Accelerator in U.S., in Arlington, where we had our last investor seminar back in 2019. In this building, we have now also an accelerator. Another area which is very important for us by going forward, you can imagine the world is getting very complex also for our product developers. If you develop in today's world something, a new innovation, well, it has to taste great. That's for sure. It has to be healthy, but it has to be also sustainable, and it has to be affordable, and quality and safety is non-negotiable. The equation is getting very, very complex. In order to deal with this complexity, we need artificial intelligence tools. We need data science and machine learning. For instance, we developed a clinical data mining approach which allows us to do new discoveries based on existing clinical studies. We valorize much more what we have already done in terms of clinical studies, and we use that to create new discoveries and new inventions. The AI-assisted concept development, I talked already about that, but we have also now a module for recipe development. Under multiple constraints, we can now develop the most appropriate recipe. You see here also we use AI also for classical plant breeding. For us, coffee and cocoa are absolutely key raw materials. Increasingly important are also pulses for all our plant-based offerings. In order to do here the best breeding approaches to get to the most performing plant varieties, we use now also data science and machine learning. We also use increasingly now artificial intelligence to increase efficiencies along the value chain. You see here on the bottom of the chart, a couple of examples. For instance, machine learning for advanced process control. So some of our lines, for instance, our Kit Kat lines, they are self-regulating, self-controlling. They have feed loops in those lines, so they detect the product quality, they measure the attributes of the wafer, for instance, and then they regulate the process back. It's a self-controlling mechanism. We have also developed, for instance, machine learning approaches for preventive maintenance. That allows us to reduce downtime of our lines. I would like to review with you progress versus our priorities and selected key developments in those priorities. We have five R&D priorities related to our core business, and these priorities are well aligned with the rest of the company. Food safety and quality, taste and aroma, nutrition and health, affordability, and also sustainability. We also define four high-growth areas to focus on: alternative proteins, and that includes plant proteins, coffee and systems, early life and medical nutrition, including also the best nutrition for the aging organism, and then science-based pet nutrition. Let's now review selected discoveries in those areas and selected technologies which we developed, and I would like to focus on the areas here marked with the brown numbers. The first area, nutrition and health. I want to introduce you to a breakthrough technology which we developed here for sugar reduction. It's based on a fermentative transformation of intrinsic sugars found in our raw materials, for instance, lactose in milk, maltose in malt, or fructose in, for instance, fruit juice. Using fermentation, we transform those intrinsic sugars into prebiotic fibers. That reduces the sugar content of the products. The technology is, first of all, allowing to reduce sugar content of the product by up to 50%. Depends a bit on the recipe, of course, and to reduce calorie content of our products by 25%. More importantly, it's also having very little impact on taste, so we are able to maintain sweetness, so we don't need to add sweetness here to the product. It's clean label, so we have no additives, no filler to be added. Last but not least, it's also cost neutral or sometimes you're facing a small cost impact, but it's absolutely manageable. We are already deploying this technology at large scale. Until mid of next year, we will have 200,000 tons of product produced with this new technology. There is more good news. The prebiotic fibers, and we did now some first clinical studies, they have also very positive effect on the microbiome of the people consuming the product. You see a positive shift in the microbiome. For instance, you see more bifidobacteria emerging, more probiotics emerging in the microbiome of those people. We have a technology allowing us in a very cost-effective way to reduce sugar, but in the meantime, we get also health benefits, which is fantastic news for us as a company. The second area I would like to deep dive into is the area of proprietary ingredients for affordable products. Affordability is, for us as a company, one of the priorities. True affordability requires technology. It requires new recipes. It also requires new ingredients. Here, four great examples of very recent developments. For instance, we developed here, porridges based on spent grains. If you do our Milo malt extract, then we have those spent grains, and they're very nutritious, high in fiber and many micronutrients. We were able to develop a technology to upcycle those spent grains and to create porridges out of this. First of all, that's very good for the environment because you don't have waste, but it's also very good for affordability of those porridges because we can position them at 20% lower price points. Second example are great-tasting blends for very affordable coffee beverages. Here you see a product, NESCAFÉ Malty, which we launched already in South Africa, Nigeria, Kenya, India, in 2021. This product is also positioned at 20%-30% lower price points. Third example, often fortification is required for formula nutrition, it's not always very cost effective, and sometimes it's also oxidizing the product and interacting with the product. If you add iron to a traditional milk powder, well, this milk powder might get rancid. Our scientists, our researchers developed here a solution for fortification of milk powder, the good news is this iron which we are adding here to fortify, for instance, the milk powder in Pakistan, you see here the example of the BUNYAD brand, is three times more bioavailable and has a very long shelf life. This solution we are already launching this year into the market. Two weeks ago, we announced also that we are launching a nutritious protein blend to partially replace egg in egg dishes in Latin America. You see that here, Ovo Mas. That's a protein powder, very nutritious, which you can blend with eggs, and you can extend the volume of those eggs. You can create, for instance, omelets, tortillas, or scrambled eggs at much lower cost and still keeping great nutrition and great taste. These are four examples how we enable truly affordable products via technology, via ingredients in our company. Sustainability, that's the third area to support our base business. Sustainability is a company priority. To reach our related goals, we need new technologies. For instance, our packaging experts, they are reducing head space of packaging. They're simplifying packaging materials to make them easier to recycle. Often that's not enough. We are also developing barrier papers, totally new generations of papers, which are protecting the product very well, but which are still recyclable in the paper stream. We are working on biodegradable bioplastics. Very often we combine paper with those bioplastics to come to a solution. For example, while doing so, we already replaced 5 billion straws globally, plastic straws with paper versions. A massive undertaking. We completed that already two years ago. Furthermore, we are executing together with our colleagues from operations a very comprehensive program to reduce greenhouse gas emissions of milk. That includes feed supplements. It includes also measures to reduce soil emissions, but also manure management. We think that the combination out of different interventions will enable us to reduce greenhouse gas emissions by 30%-50%. Let's now review progress in some of the growth areas. The first one is plant-based innovations. We progressed very well when it comes to alternative proteins and plant-based innovations. Contrarily to many companies out there, we do not restrict ourself to only meat and dairy or fish alternatives. We use nutritious plant proteins to innovate across categories, brands, formats, including chilled, frozen, but also ambient formats and geographies. You see here a number of examples. Chilled meat, the schnitzel, which is now going into the market, seafood alternatives, ambient plant-based products, a vegan Kit Kat, by the way, which is also available at the stands outside. I invite you to taste this product. Also coffee creamers, a very good success for us. The Starbucks plant-based coffee creamer, also available outside. Ambient and chilled dairy, baby food, and medical nutrition. The latest one you will get tonight for dinner. We will have yesterday we served already to you some plant-based appetizers, for instance, including our tuna alternative. Tonight, you will get plant-based shrimp alternatives, you will get calamari, you will get salmon, and you will get vegan foie gras. You are the first to taste this product. It's just getting ready for the Christmas season. I promise you it tastes great. Let's see what you think. During the last two years, we launched 100 innovations which are plant based, and that allows us to still grow in this area double digit. You always see now this discussion in the public that plant based is slowing down, not for us. For us, it's still a very successful journey. We are leveraging in those developments our various expertises along the value chain. It stretches from agricultural science. Peas and beans have not been created by nature to do a milk alternative out of those ingredients. We are adapting now the raw materials to the product we want to make by classical breeding. Our agricultural science is the absolute key to get to the best product at the end. We have analytical science, nutritional science, material science. These are the food technologists. Culinary expertise, and you got yesterday evening already a flavor of the capabilities of our chefs. Then packaging science. Sometimes these products need also a bit different packaging solution. Now the next area will be nutrition, but before we go there, maybe also a quick word because I often get the question, what do you do in cultured food and what are Nestlé's activities when it comes to precision fermentation? Well, it's not either/or. It's not plant based versus cultured food. At the end, the combination out of both could be very promising. We're working here together with startups in the area of precision fermentation and cell-based meat and fish. Those ingredients we will use to close any sensorial gaps which we still might face in our plant-based developments. You see here we have planned first shop tests and first pilot tests in the markets in the U.S. mainly, but also in Israel, which are coming up in the next 12 months. Now, a word about coffee. The exciting world of coffee, and for us as a company, a very important area. Later today, my colleague, David Rennie, will also present additional key innovations in the area of coffee. One key achievement is the development of a new high-performing coffee variety by classical breeding. This variety delivers a 50% higher yield, and that means you can use less fertilizer. Less fertilizer means less greenhouse gas emissions, because in green coffee production, the majority, the vast majority of greenhouse gas emissions is coming from the usage of fertilizer. We can reduce with this coffee variety, greenhouse gas emissions of green coffee by 30%. Our scientists in the Agricultural Institute also developed drought and disease-resistant varieties. You can imagine climate change is really a challenge for us, and we are worried about supply with green coffee. These varieties will enable us to keep up supply even if there's less rain or even there is more diseases which are spreading. That's very important for us in the future to secure our supply with green coffee. Our teams also continue to develop new roasting and brewing technologies to access new taste territories, but also to increase yield. You can taste some of the products again at the booth outside this room. The yield is very important for many reasons. Obviously, for affordability, but it's also important for sustainability. If we can brew a cup of coffee with less green coffee, well, it's a more sustainable cup. It's very important for us to always keep a great taste and not to change the taste, but to make better usage out of the raw material. We keep innovating in coffee systems. For instance, some years ago, our engineers developed Nespresso Vertuo system, and you see this system also in the exhibition outside this room. In this system, the coffee capsules, and this is the capsule, is rotating at 6,000- 7,000 revolutions per minute. That's 3x the speed of an airplane propeller. The machine is still remaining on the table. It's not moving, and it's not very loud. You will see that. Why this rotation? With the rotation we have a much more complex and complete extraction of the coffee, meaning we have a richer and more tasty long cup. We were not stopping there. We also developed now an additional system for Nescafé Dolce Gusto. You see that here on the left hand of the current slide. It's a new coffee system which works with a home compostable paper pod. This system is protected by 38 patents, and due to the new packaging format, we are able to reduce the packaging amount by 70% and to lower the carbon emissions by 20%. You will be able to taste this coffee. I think it's a fantastic cup. It's a great cup. That was enabled by our scientists of the Packaging Institute and the technologists in the Systems Technology Center. They work together here, so it's one of the major contributions of our packaging scientists in the institute. Right-hand side, you see another key development, which is a paper-based home compostable capsule for Nespresso Original. The challenge was here to make this capsule retro-compatible with the large machine park which we have out there. Now, it sounds very simple, a paper capsule, but inside this capsule, we have 15 bar ex pressure during extraction. 15 bar, this is 3 times the pressure in the tires of your car. To maintain this pressure and still have a capsule which is composting and which is degrading in a compost facility, within six- 12 months, was really challenging. At the end, and I feel very proud what our scientists and Technology Center achieved there, we made it, and we will bring that to the market beginning of next year. You see here also both inventions are, and both developments are protected by many patents, so each one by roughly 40 patents. We have created quite a patent fortress in this, in this area. Now let's talk about nutrition for all stages of life. Early life nutrition. Mark mentioned that we need to accelerate growth of our infant formula core business. Here are two discoveries and two developments which should enable that. First of all, our human milk oligosaccharides. We talked already about that during the investor seminar in Arlington back in 2019. Human milk oligosaccharides are carbohydrates which are found mainly in mother milk, but not in bovine milk. We brought the first generation of those human milk oligosaccharides to the market, and we launched in 50 markets. The sales represent already CHF 1.3 billion. The business growing 15%, very good success for us. The second generation, we are now bringing to the market. Until end of this year, we will have launched it in 20 markets, and that's a more complex blend of those human milk oligosaccharides, providing additional benefits related to immunity and microbiome. On the right-hand side, you see an additional discovery, a complex lipid blend, functional lipids, which are accelerating myelination of the infant brain. That's a development process happening in the brain of an infant, and it's very important for cognition, language, motoric function. The cognitive abilities of the infant. We will launch this new blend in Hong Kong and China still this year. Two very important developments in the area of infant nutrition. Also very good progress when it comes to nutrition for aging people. You see here three examples. A bioactive blend to improve mobility in elderly humans. We launched it, for instance, in milk powder and functional milk powder in China. In the middle, you see a functional blend here, a functional food for pets and for dogs to improve heart health in dogs. On the right-hand side, you see here bioactives to restore mitochondrial function. With age, the cells lose the ability to create energy, so we found bioactives which are restoring this ability to create energy, and we launched it under the Celltrient plan brand, and the product's also available at the stand of Nestlé Health Science. Now, by doing all those clinical studies, we are exploiting also synergies between the clinical studies performed for our pet food business and for our human business. You see here, for instance, an example where we found that the aging brain is losing its ability to create energy and out of glucose. We replaced the glucose here, for instance, by some special lipid blends called MCTs. This solution works for pets and for humans, so we launched it in form of a Purina diet, but we launched it also in form of a functional milk powder in China, and we have now a supplement for Nestlé Health Science based on this functional lipid blends. We have other areas, benefit areas, where we exploit again those synergies between clinical research for pets and humans, for instance, gut and digestive health, glucose and pre-diabetes, mobility and muscle, and anxiety and stress. We are the only company who can exploit those synergies because we have a pet food and we have also a human food business. That brings me nearly to the end of my presentation. The question is, well, what's next? As a company, we will continue to drive growth through differentiated product concepts and technologies. We will continue to focus on accelerated translation of fundamental science into discoveries, into innovations which we will leverage across multiple categories and brands. Our R&D teams also continue to execute a comprehensive project portfolio to reduce recipe and production costs. That will be later explained by my colleague, Laurent Freixe, in the frame of Project Tasty. We have a very important contribution here from our R&D colleagues to Project Tasty. Going forward, our partnerships with retailers are key to test together highly differentiated product concepts. We will continue this journey. We will continue also to focus on technology and agricultural practices to improve sustainability of products and operations. Lastly, we started also to incubate certain discoveries requiring specific capabilities externally. That's a new journey for us. Sometimes you have discoveries you don't have in the company or the capabilities, to scale and to bring that forward. We also go now increasingly, external to excavate some of our discoveries. In conclusion, we have performed a general overhaul of our innovation engine. It works very well when it comes to speed to market and differentiation. While performing research and development, we exploit multiple synergies across categories and brands, which helps us to maximize impact. I will now hand over to my colleague, Bernard Meunier and Aude Gandon, who will explain to you how we accelerate our data-driven, digital transformation, and I thank you very much for your attention. Thank you very much. Good morning, thank you for taking the time to dive into our digital transformation journey. Together with my transformation partner, Aude Gandon, we will walk you through the roadmap that we introduced a year ago and reconfirm the ambitious targets we have set for ourselves. This presentation is about bringing in new data and tech capabilities to engage with customers and consumers at scale. It's about transforming a portfolio of nearly 2,000 brands. To drive sustainable and profitable growth. That's the agenda for today. Tomorrow, we'll take a quick tour of the growth supporting engine we are building and setting up at our tech and data hub here in Barcelona. First, let's look at some macro trends that have either emerged or been confirmed post-COVID. Four of those are actually an acceleration of trends that were at play pre-COVID. Food is first medicine, with consumers looking more and more for holistic health benefits. Second, Mark alluded to this, digital and e-com that got a formidable boost during the COVID years, gaining years of household penetration in the process. Third, increasing price polarization between affordable and premium, further exacerbated, of course, by the unprecedented inflation we are living through. Sustainability as a clear must-have now for about half our consumers worldwide. Two additional macro trends are more of a shift through and post-COVID. First is out of home to in-home during COVID, and then back to out of home, but still with sustained in-home consumption post-COVID, and through in out of home some more new emerging models. Last, local for local, with three key drivers behind this macro trend. One is local as a proxy for food security and sustainability. Second is economic patriotism or trade protectionism. Finally, also as a solution for the recent supply chain issues that we've lived through. As always, consumers want it all. They want affordable products. They want taste and convenience. They want, if possible, some holistic health benefits, and also some sustainable guarantees and reassurance. The breadth and strength of our portfolio remains one of Nestlé's key competitive advantages, especially through turbulent times. Nestlé is the only decathlete in the food and beverage industry, playing in more categories than any other player and with very solid growth over the last years. We play in large categories. You see here the size of our different categories. None of them is smaller than $100 billion or CHF 100 billion per year. Except for infant nutrition, all the others are larger. They are dynamic. They have been growing healthy over the last few years. Here we haven't even put 2022 in the compound because, first, we haven't finished the 2022, but also it's boosted by inflation. We also command leading positions in those categories. And we are investing continuously in the fastest segments, the ones that are fastest-growing within these categories, such as plant-based supplements, coffee capsules and pods, or cat food, in this to remain relevant and address key consumer trends. Coming back to one of the macro trends we've seen accelerating post-COVID. Our food and beverage industry is increasingly transforming into a tech and data-driven industry. What are the changes that are driving this digitalization of our industry? You have them on the screen. First, digital consumption is still on the rise, social media channels continue to be the fastest growing form of online and digital engagement, but with a new balance between the incumbent channels, think, of course, Facebook, and the emerging ones, think TikTok. Second, online shopping is pervasive. The growth in 2022, post-peak pandemic, is slowing down somehow, but there's no way back. We expect to rebound again from next year onwards, driven by shoppers' demand for convenience and elevated experiences. It is this demand for integrated and elevated experiences that is also a driver for the emergence of the new business models such as social commerce, expected to triple by 2025, or the new monetization models of retailers that are commercializing now their online real estate and their access to shoppers. We see at Nestlé data and tech as a source of significant competitive advantage. Consumers are seeking seamless digital experiences from browsing content such as recipes, diet and menu plans, or information, nutrition, nutritional information, to online shopping for their favorite brands. This presents us with a formidable challenge that is also a fantastic opportunity, which is building traffic on our branded digital engagement platforms and connect them seamlessly with our retailers' ecosystems or with our D2C options where relevant. To get us ready for a future where 25% of our sales take place online and 70% of our marketing investment is spent online, we are embarking on this transformation journey that was unveiled at the end of last year in our investor seminar. We have devised a comprehensive roadmap consisting of investing in people and tech, changing the way we operate across geographies and categories, adding new experts, and upskilling our entire teams so that we can raise the digital intensity in all categories, rejuvenating our core, in particular, the 31 billionaire brands that we have and account for about 70% of our sales, and amplifying our digital first brands, the ones that act as lighthouses for our organization worldwide. Now we will take you through the progress we've made since the announcement of the roadmap a year ago, and more importantly, the plans for the years ahead. This across the four strategic priority areas we have defined, which are direct consumer access at scale, next level content, channel-less commerce, and always on analytics. These four priorities feed off and amplify each other to reach one overarching objective, which is accelerate our digital transformation, build a competitive advantage, and lead the industry ultimately, of course, to accelerate our growth. Let's start unpacking our progress along these four strategic areas. For this, I'm calling to the stage, Aude Gandon, our Chief Marketing Officer, that has joined us from Google. Aude, please. Thank you, Bernard. Good morning. Good afternoon. As we shared in our last investor seminar in November 2021, we have now the ambition to double the amount of first-party data that we will acquire on our Nestlé properties. The way we do this is very simply on all our different kind of categories and all our different properties. Think, for example, our website, that enable us to really get first-party data of high quality, but also we make sure that we have the consent of our consumers to be able to leverage this data. This really help us to make our media investment with great ROI, but also, you know, making sure that we lower the acquisition cost. You've heard earlier this morning from Mark, we really have seen a real hike in acquisition cost on all the different digital platforms. Really securing our first-party data so that we can really have a one-to-one conversation with our consumers is definitely key. As an example, in the culinary category, we have amazing properties such as our recipe website. In Latin America, our recipe website called Recetas is actually the second recipe website used in all Latin America. We have more than 200 million visits a month, which means that we can really get understanding of what consumers are looking for, what recipes they are looking for. How do they play with our recipes because they engage, they start to post comments, they start to actually even sometime change a bit the recipe to make it their own and engage with communities. It really also help us to be able to scale what type of product we can sell to them and also kind of scale the size of the basket. The past year following our commitment on our digital acceleration and our, I would say, focus on first-party data acquisition, we've been obviously starting to also unpack and really pilot what are the different ways we can really leverage this data and what is the value of this data. Here are three example amongst quite a few that we have been piloting around the world, really showing you what is the value of this data. The first example is coming from the U.K., and it's on Felix, our cat food brand, and it's all about precision marketing. What we have done here is really getting very focused on which consumers are actually interested in cat food and making sure that we will only serve messages to, you know, to these consumers about our offering on Felix. This has really transformed the efficiency of our media investment as we've seen a 56% improvement on our cost per click. The second example is coming from the Middle East and North Africa, and it's on our bill of brand, Maggi, where here we've been on occasion-based marketing. Typically, you know, people are not looking for food recipes or for food ingredients all day long. Depending on what is your culture, you really have certain times of the day, certain time of the week, where we can see consumers really looking for ideas of what to cook for dinner or when they're really preparing for their weekly shopping. On Maggi, we have really gone into very specific message, a specific time of the day, of the week, where we would serve a Maggi messaging and recipes ideas. That enabled us to unlock a 25% improvement on our return on ad spend. Last but not least is Nescafé in Thailand. Here we've done into what we call content personalization. Obviously, Nescafé has a huge global footprint, and it's serving very different type of consumers, very different age groups. If we really want to make our messaging a lot more relevant, we want to make sure that we actually personalize the content that Nescafé is going to actually reach the consumer with. We have done so, and we've seen a 12% increase in ad recall, but I'm going to show you a video to explain in details how we've done this. Nescafé is market leader in the coffee category in Thailand. With digital investments across Thailand and the AOA region intensifying, we developed new machine learning and predictive modeling capabilities to accelerate our brand growth. We worked with our partners at WPP and Google to understand how to optimize the effectiveness and efficiency of our media buying at the world's largest video platform, YouTube. We ingested huge volumes of data of past campaign performance within Google Cloud and used machine learning to predict which creative messages and audiences would deliver the best results on the platform. Leveraging this unique technology, we improved media efficiencies by 17%, allowing us to reinvest to grow our reach to more valuable audiences, creating up to +12% ad recall and beating all market benchmarks. Following the successful initiative for Nescafé, we're rolling out this capability across other categories and scaling the technology to more regions. The beauty of this pilot process is obviously we have a breadth of different categories, we have a breadth of different brands, but we also have a lot of countries that we play in. We do a lot of pilots, so we can really learn. As soon as we've learned, obviously, what we do with our partners, as you've seen, obviously, it was on YouTube, that we scale it across all markets and different categories. Obviously capturing the first-party data is going way beyond content personalization and making sure that we get into occasion-based marketing. It's also the best way for us to be able to actually leverage this data and making sure that we're capturing more value across what we call our ecosystem. What do we call an ecosystem? This is a word which is being used more and more. We have a very specific definition for us at Nestlé. It's an interdependent, connected network of product and services that, you know, offer solutions to consumers. We will do that as well with partners, external partners when we need to do it. Here's an example on how we're going to do it and how we already started to do it on pet care. If you look at this graph in a way, it's an example of how we can actually really leverage the consumer understanding to be able to service beyond the product our pet care owners. Here's an example of a family who is going to be looking for a puppy dog. They can start on Petfinder, where we're going to help them to understand what is the best breed for their family, and also, you know, where to find a pet, being, you know, an adoption pet or a pet that you want to acquire. When they have found a pet, they will go to My Pup, where we're going to give them some examples of how to make sure that the puppy starts to feel at home and how to kind of start to actually train the puppy. Obviously, they're also going to go on purina.com, where they can also do trials on different type of food and also get some toys and other accessories that they will need for their pet. My Pup is going to continue the journey as the puppy is growing and getting into adulthood, you know, in terms of exercise and games to have with the pet, and so on and so forth. You continue into, obviously, Purina when the puppy is getting into adulthood because you need to start to change the food when you get a dog which is one year and beyond. We will of course, you know, we're also there if we start to have question on the health of the pet, as we have the VetDirect proposition, which is also kind of being held by Purina. We're going to continue the journey up to the end of the life of the pet. Think of the power of all the different kind of brands and ecosystem we have, as well as the data we have, so we can completely personalize and make sure that we're there through every moment of the life of the pet and its families. Of course, all this means that the way we're actually doing brand building is completely changing. Over the past five years, we basically have seen a requirement of developing content which has been multiplied by 10. If you have seen on the video that we had on Nescafé in Thailand, we had to develop more than 250 assets for this personalization content. The way we've done this obviously is, you know, and we're looking at our media investment going more and more online. You know, we're going to close the year at 55%. We have set an objective by 2025 to be at 70%. We really need to make sure that all our assets are actually highly efficient and fit for use, so we can get the best return on our investment. To do so, we have been partnering with a company called CreativeX, which is being used amongst, you know, a lot of different companies from CPG to auto to luxury, who are being powered by AI and machine learning, and basically enable us to track every single digital asset that we're currently producing. We have 500,000. We've already gone through the machines. What we've developed with CreativeX are very simple rules of what is really driving efficiency, being on YouTube, on Instagram, and on Facebook. As we have a proliferation of platforms, what we also need to understand is not all platforms have the same rules and behave the same way. If you have a ad on a reel on Instagram or on your feed, or if you have an ad on YouTube, it's actually requiring very, very different kind of rules in terms of behavior because, you know, it's not consuming the right way and it's not consuming the same way. This tool has really helped us to make sure that we have an amazing kind of effectiveness. We have increased our effectiveness on our digital asset by 66% over the past 18 months. Also we have been requiring all our teams around the world to make sure that all the assets are going through the tool. We now have a 72% of all our global assets who are actually answering these rules, which is way beyond the CPG average, which is currently at 43%. It gets into production. We have this proliferation. Some campaigns requires hundreds of assets, we needed to step change the way we're actually looking at our production content. We have developed a new internal content studios that we have around the world. We have more than 30 studios around the world, which have been replaced, which have been replacing all the different kind of partners that we had around the world. This has really driven efficiency of 50%, obviously in terms of cost, but also in terms of agility and speed. It's a 24/7 content studios running. A lot of them now are actually powered by automation, so we even do some automated translation because again, you know, we have, for example, taking a Nescafé or Maggi, you can have different assets being used in a lot of part of the world. Having all this content studio which are being more and more so automated really help us, where you can basically take different copy shots and make a six-second bumper ads on YouTube, you know, within one hour. It's not just content. We need more and more expertise today. What we also have decided to do is to internalize a lot of the marketing expertise across the whole digital value chain. Think website services. Now everything is centralized, which really help us because now we have one architecture of websites, so you can build a website in within four days if any market needs a new website, and we know that they are completely secure. We have all the right consent, which is being kind of earmarked on this website. Content services, obviously, I've already touched on. Think of CRM services, search services, but also digital commerce. We now have seven of these centers around the world. We are building more as we speak, which mean that we have now more than 1,000 experts across the world who are able to service all our teams in 186 markets. Back to Bernard. Thank you. Thank you, Aude. We are indeed leading the pack also on content studios. Now moving on to channelless. Channelless is a massive transformation, probably the biggest one since the invention of hypermarkets in the seventies and the emergence of e-commerce in the two thousands. What it is all about? We are moving from an omnichannel reality where big retailers have developed a presence across channels, including e-commerce, to this channelless reality where retailers are becoming ecosystems. It is not just Amazon and Alibaba, but it's also more and more the brick-and-mortar retailers that are building broad ecosystems that combine physical stores at the core, but with e-commerce, last mile delivery platforms, as well as media offers and many other services such as financial and health services. With this, retailers are capturing more value and more data from each shopper. In this channelless reality, consumers switch seamlessly across channels. With your phone on your app, you can order some goods and get delivered from the corner store in one minutes. You can also order online and go to a supermarket and pick up the goods. Conversely, you can go to a store, choose the goods there, and then get delivered home an hour later. For us, this transformation has three imperatives. First, as Aude mentioned, we need to build our own ecosystems to have direct access and engagement with consumers at scale. Second, there's more and more data, more and more granular and complex, so we need to develop our analytics capabilities to deal with this huge amount of data. The third implication is that we need to win everywhere. We need to continue winning offline, where we've always won, but also increasingly win online and across all channels, including these new emerging ones. Winning in e-commerce is more critical than ever. This is why we made public this ambition last year of reaching 25% of our sales in e-commerce. Between 2018 and 2020, boosted by COVID, the weight of e-commerce in our sales nearly doubled from 7%- 13%. In 2022, in the post-COVID era, we see a certain slowdown of that growth, but we still continue to see the growth coming, and we are above 15% in the first nine months of this year. Continuing on the same trajectory, we would probably achieve between 20% and 22% by 2025. What will get us towards the 25% objective is this emergence of new business models, such as last mile delivery platforms and B2B. On these new channels, our growth exceeds 40% this year. One thing is clear, we are leading the pack in e-commerce in the food and beverage era, and we are ahead of our peers. Indeed, we have a proven roadmap to win in e-commerce, and these great results have been built focusing on the four priorities you see on the screen. The first one is excel in execution on the digital shelves. This is about maximizing online product availability, delivering e-commerce fit for purpose SKUs. For example, at Amazon, we have already 600 fit for purpose E-com SKUs that are accounting for 60% of our sales, developed specifically for E-com. Most importantly, having best-in-class content and winning in search where the shopper journey starts. That is super important in the digital age, especially on mobile shopping. You need to be on the top of the page in search on all the retailers platforms. By this you get chosen, and in turn you become already bought, so you appear already automatically at the next purchase. Second is strategic partnerships with pure players such as Amazon and Chewy, who is a pure player in pet food. Also, of course, with the brick and mortars such as Walmart and with the new platforms such as Delivery Hero or Instacart. The third one is about winning in new business models, leveraging data and tech, and this includes the development of our own EB2B platforms such as Nestlé Cerca de Ti in Mexico, Atevocê in Brazil, or the launch of our Nestlé Shop online in several Asian markets. Through these, we are digitalizing the traditional fragmented trade, those mom and pop stores, but also the out of home trade that can now order online from Nestlé, pay online, follow the orders progression to their stores and point of sales. We will share more details with you on this tomorrow during your visit to the digital hub. All of this enabled by a comprehensive capability building exercise. You have heard before about our eBusiness Academy. We have trained more than 30,000 people in e-business and specifically on E-com must win and capabilities, we have upskilled 11,000 people. I think this is a great competitive advantage. Last pillar in our strategic roadmap, always on analytics. Earlier, Aude spoke about using consumer data to identify the right audiences and improve our media performance. This obsession with data is not just valid for consumer engagement, it's across all functions at Nestlé. When it comes to customers and consumers, we have access to an enormous amount of data. Store level data, e-commerce data, consumer behavior data. On a weekly basis, we speak directly with 200,000 consumers through our co-call centers. We are monitoring 500,000 product reviews every month. We listen to millions of online conversations. We have developed advanced data science capabilities to use all these data sources strategically, build predictive analytical models to make smarter decisions, surface insight in real time to identify growth opportunities, and build this culture of always on optimization. Let's see in the next couple of slides how we apply this to some specific areas. First, the advanced analytic solutions for SRM, for Strategic Revenue Management, with two principal applications, pricing optimization, and that is first in-house price elasticity studies. We used to do this with the likes of Nielsen or Kantar outside. We now do this in-house, real-time, more granular, faster for better decisions. Second, price pack architecture use cases to define the optimal pack sizes across customers and channels. That's one. The second one is customer investment management. That is to plan and manage our trade spend, including optimizing our very important trade promotion budgets. These optimal solutions are being implemented in many key markets, delivering great value and confirming the potential for these analytics options that allow for optimizing pricing and trade spend. The last one is our solutions for our sales operations. Route to market, sales forces, point of sales management. These analytics combine different data sources, internal but also external like, of course, retailers' data or market shares, making information easily available for our teams to drive better decisions and faster action. That includes descriptive analytics, so for example, sales forces dashboards, but also prescriptive use cases to improve our forecasting, for example. As well, predictive to improve our forecasting and prescriptive, such as, for example, defining the optimum assortment for a specific point of sales. These kind of solutions are already live in some key markets with large sales forces, for example, India, Mexico, Brazil. That allows, for example, in the case of India, you see an increase in average purchase per outlet, improvement in forecast accuracy and in demand planning accuracy. We have bold plans to roll out these solutions in the next few months to more than 20 markets, and that is both in the developed and in the emerging markets. We will see now a video from an emerging market, Central West Africa, that shows how these tools are used in practice. Tomorrow, you will get a demo when we visit the digital hub. Let's see Central West Africa video. My name is Hakim. I'm a Mini Fan Salesman. I have 151 point of sale in my route plan. I visit all my stores once a week and 4x per month. I cover 25 stores per day and sell on average of 12 lines per productive call. Let me now take you through my digital sales journey. I record my sales in DMS One. I do merchandising of Nestlé products in the Nestlé House to ensure the planogram standard maintained for the outlet grid. I take pictures of Nestlé House and Nestlé products on the hanger. I upload the pictures into Field Pro by Optimetriks. At the end of the working day, I replicate the data. DMS One captures the sales force performance. FieldPro looks at in-store execution. DVC, our data lake, connects the dots, runs reports, and allows for analytics at scale. I now get a report with the key sales metrics in the morning by email, which show me my performance for yesterday and the month so far. I know exactly where I stand versus my objectives. My supervisor gets those reports for the entire team. Together, we discuss where we stand and what is needed to achieve our targets. Today, we have 2,700 reps on DMS One in 14 countries, covering more than 280,000 points of sale, registering more than 1.3 million visits each month. We already have 1,900 reps on FieldPro from Optimetrics already in three countries using image recognition. The system analyzes more than 2 million pictures each month. Our journey is digital. We are first. We are creating competitive gaps. We are only just starting. We are CIWA. CIWA Rising. If we can do this in Central West Africa, we can do this around the world. This brings me to the conclusion of this part. The future of the food and beverage industry is tech and data-driven, and Nestlé will drive this transformation. Through this transformation journey that is led by our teams across categories and geographies, we will continue to deliver profitable growth while serving our purpose of enhancing the life of people and pets. As the leading brand company in the food and beverage industry, Nestlé will ensure that good food, good life remains a reality today and for generations to come. Now, with this, we announce a break, and we come back at 10:40. For those in the room, before we leave, we have a few commercials to share with you. Thank you very much. Good morning, welcome back, everyone. I hope you've all had your coffee 'cause we're going to enter the world of coffee now. Let me start by giving you a snapshot of our coffee business. We're a business of over CHF 22 billion, highly accretive from a margin point of view to the group. Our role within the business is very clear. Our role is to drive accretive growth over the medium and long term. To do that, as you see, we have very broad geographic scope. We're present and leading in every one of our zones, and we also have a very well-balanced product portfolio with particular strengths in the high growth and high margin categories within coffee or portion coffee and soluble coffee. Let's have a look at the coffee market in total. The total coffee market is worth roughly CHF 400 billion. Of that, 1/4 splits in-home, about CHF 100 billion, and 3/4 of the value sits out of home in cafes, workplaces, and bakeries. When you look at the cup consumption though, the picture is exactly reversed. 75% of all of the cups that are consumed are consumed in-home, with roughly 25% of the cups consumed out of home. That gives you a good sense of the very different value that a cup of coffee in a Starbucks has versus a cup of Nescafé in-home. Now pre-pandemic, the category was growing at a reliable 5% compound annual growth rate every year. During the pandemic, we saw some shifts in consumption, which are obvious and you know well. In-home consumption saw a massive increase, strong double-digit growth in in-home coffee consumption, as out-of-home coffee consumption, particularly in offices and cafes, took a major hit. Already in 2022, as we see the categories begin to rebalance, we're very confident that the outlook for this category is going to be at and around that 5% compound annual growth rate going forward. What's driving that growth going forward? Bernard gave us the macro trends within the industry, and you'll have heard there was often around how consumers are adapting and changing their habits, particularly post-COVID. For us in coffee though, there are three very clear drivers of growth for us going forward. The first is the coffee shop at home experience that consumers are increasingly looking for. You know, so many consumers are coming into coffee and being educated coffee through their experiences in coffee shops, and that has really risen the bar and expectations of what consumers are looking to experience. Where the coffee comes from, the terroir, the area of the world that the coffee is developed in is becoming increasingly important. Connoisseurship, what sort of coffee is it? How's it brewed? How's it roasted? Very important. Different types of coffee consumption. Many people drinking not just a cup of black coffee in the morning, but some cold coffee or flavored coffees at different times during the day. All of that increased expertise and expectation from consumers raises the premium offerings and the consumption occasions available for coffee. The second one is out-of-home. The out-of-home business took a big hit during COVID, but in-home, obviously, we saw some very big consumption occasions. Coming back out of pandemic, we see two particular things happening. One is as out-of-home recovers, particularly in developed markets, and let's take offices as an example, to get people back into offices, many employers are offering an upgraded coffee experience and want to bring big brands with coffee corners into their office to encourage, their employees back in. That's giving us huge opportunities in brands like Nespresso and Starbucks to capture that occasion. In developed markets, the notion of hybrid working, so while people are returning to work, even if you're spending one or two days extra at home, those are extra in-home occasions for consumption that didn't exist pre-pandemic. As this settles down, premiumization in out-of-home and also increased consumption, albeit maybe one or two days extra a week, all add up to a very buoyant volume proposition. The last one, this is the big driver for me. Half of the world today still drinks no coffee or very little coffee. Roughly 3 billion consumers for whom coffee is not a natural part of their daily beverage drinking. China, India, large parts of Africa, all of these markets have huge potential as we introduce coffee as a category into those markets to have increased consumption. It's also a very resilient category. You see this chart, this is from 2000 to today and then projecting forward. You know, this is a category that can weather turbulent times. Frankly, people love coffee. They need coffee. It's a ritual, it's an affordable pleasure in most consumers' days, it's not something that they're gonna give up even in tough times. Let's have a look at our business in a little bit more detail. We are clear market leader in coffee globally with a global share 2% of CPG. That's almost three times bigger than our next biggest competitor, JDE. We have leading positions in every zone within which we play. All five zones we have a leading position. I may be calling out the U.S. in particular. In 2018, we were a distant number four in the U.S. We now, with our Starbucks partnership and license, are a clear number one. We've really completed in the last four years a geographical footprint to have a strong presence in every one of our markets. We've also been growing share consistently over the last three and half years, so strong share performance across all of our different brands and across all of our different regions. Put simply, one in every five cups of coffee that are drunk globally today are going to be a Nestlé coffee, which is an impressive but also daunting statistic because it gives you a sense of the responsibility we take for continuing to delight consumers and build out this category. To do that, we have these three iconic brands, the world's three biggest and best-loved coffee brands. Nescafé, the world's favorite coffee. One in seven cups of coffee drunk globally is going to be a Nescafé. It's approachable, it's versatile, it's universal, and it spans all sorts of price points and all sorts of consumer experiences from a $0.02-$0.03 single stick pack all the way up to our Nescafé Dolce Gusto machine that you've seen already highlighted. Nespresso, the leading premium coffee brand in the world, delivering superior taste in a highly sustainable way with sophistication and precision. That brand continues to grow and roll out across the world. The last member of the family, Starbucks. We only had Starbucks for four years. Four years' worth of our Starbucks relationship has really rounded out our portfolio. Starbucks is the definitive coffee shop experience brand, and it's defined coffee for a whole generation of the world's global consumers. With these brands, we have a unique ability to play and capture value at every single price point. As I said, you can buy a single stick of Nescafé between $0.02 and $0.04 a cup in Lagos, in Nigeria. All the way at the top of the profile, we have a Blue Bottle Coffee cup of cappuccino, which is gonna set you back $5. At every price point in the coffee chain, we have a brand and an offering that can delight consumers and customers. We also have a very unique ability with our different distribution models to capture value and segment the market in different ways. You know, Nespresso is direct to consumer, a large business that doesn't play in retail. Nescafé is almost exclusively retail. As we split our different brands up across geographies, categories, and distribution channels, we have a unique ability to compete and win. When we last met, which was 2019, I outlined our global business strategy. That's the strategy that really guides everything that we do in coffee, and it served us very well over the last four years. Four very simple pillars of growth and two key enablers that we take across all of our businesses. The first is we continue, and Stefan showed you great examples of this, to work to innovate and renovate our core brands on our core product formats. That's 80% of our business, and it's where 80% of our growth is gonna continue to come from continuing to reinvent and innovate on the core. We're also, though, gonna continue to drive innovation within this category. You know, it was Nestlé that invented soluble coffee in 1938 with the creation of the Nescafé brand. We created the portion coffee segment with Nespresso in the seventies into the early eighties. As you've seen, and as you will see, we are committed to continuing to bring breakthrough category-defining innovation into coffee to build out the value proposition. The third area is accelerating our cold coffee offering. You know, most of the coffee that's consumed in a Starbucks today, over 50% is a cold beverage. When you go to China, one of the biggest emerging markets for Starbucks, you find it's up to 70% or 80%. Simply, there's a whole generation of young people entering this category through cold, and many of them will consume cold all of their coffee drinking days. Capturing that cold opportunity, being relevant there, is a big growth driver for us going forward. The last area of growth is driving our out-of-home business. I'll explain later how we do that, it's a massive area of existing business. As you know, 75% of the value of the category is there. We only have a 15% share of that business today. 15% of our business is in out of home, we have huge potential to drive that and add value in that area as we go forward. Underpinning those four growth strategies and our two enablers, leading in sustainability, I'll take you through that, and then unleashing the power of digital across our entire portfolio. Let me spend a minute on Nescafé. As I said, the world's favorite brand. It's in 170 countries. We serve over 6,000 cups every second of Nescafé. One in every seven cups of coffee drunk is a Nescafé, so truly the world's favorite brand. You see also in this chart the stat I gave you about how little coffee is consumed in the markets of China, India, and Africa. Roughly 32 cups per annum drunk of coffee against a global average of over 200 cups per annum. Huge growth potential in all of these markets. To unleash our Nescafé strategy is very clear. We're gonna premiumize the brand and continue to delight consumers and customers on Nescafé where it's already strong and developed. I've got a couple of examples, and you may have had a chance to taste them at the break. If not, please do. We have our Nescafé Roastery, which is the premium expression of soluble coffee in Nescafé. Rolled out first in the U.K. and now all over Europe over the last 18 months and doing extremely well. Premium offering on Nescafé with a great taste based on that roastery connoisseurship. A Black Roast. That's a coffee which you may need tomorrow morning. It's a coffee with a very strong kick and ideal for getting you started in the morning. Against a big consumer insight of people for their morning cup really wanting that uncompromising, strong, bold taste. The last one I have on this chart is one that Stefan also mentioned, which is a great example of how we're introducing the world to coffee through locally relevant tastes, locally produced. These products are manufactured with coffee and malt from the region and allowing consumers in those markets to get a taste they love at a price they can afford and introducing the Nescafé brand to them. Let me move now onto Nespresso. Nespresso is a brand that was born direct to consumer. From its very earliest days, this was a brand that had a direct relationship with the consumer, and it's now fully digitally enabled from bean to cup. We've got three big drivers on the Nespresso business. The first is the rollout and the fast expansion of our Vertuo system. I hope, again, you had a chance to see it in the break. This is a part of the business that's growing incredibly quickly as we put real focus on building out the in-home penetration of the Vertuo system. Almost half of all of our new consumers to Nespresso are entering the brand through Vertuo. You probably saw on the stand we now have Vertuo Pop, which is our most affordable, most accessible Vertuo machine. It retails at or less than CHF 100 or $100, That's really opening up whole new avenues of in-home penetration to consumers. It's a very special coffee because it's not a different size of capsule. It's an entirely new way of enjoying Nespresso coffee. Because of that centrifugal design, the coffee that comes out is smoother, richer, and creamier with that unique crema. Because the capsule is recognized by the machine, you get a real customized coffee from that machine. It reads the capsule and knows exactly how long to brew for, how hot the water should be, and also how long it's gonna take to extract. Very versatile system, and it's a big area of growth for us. We're now in well over 50 markets and expanding fast. The next area for Nespresso is driving in-cup preference through really sourcing and giving consumers the rarest coffees imaginable. You'll have seen our Reviving Origins work over the last five or six years. We go to places that used to produce coffee and for drought or famine or war have been unable to produce coffee. We go into those areas, work with farmers, and basically resurrect coffee-growing areas. That makes the coffee very rare. It makes the coffee expensive. Because of our value chain in knowing exactly who those farmers are, there's a benefit for those farming communities and families because they get a market for their coffee. Delights our Nespresso consumers by giving them the rarest, least accessible coffee among all. It's a real value creation in every sense of the word story for Nespresso. The last thing you'll see, and you'll have examples of this, tomorrow when we're together, in our digital hub, is how we're really expanding our ecosystem in Nespresso to get the most value out of all of this data that we have. Constantly innovating with AI, to know our consumers better, anticipate our consumers better, and offer them what they, what they need and what they want even before they've told us. A few minutes on Starbucks. Starbucks, when we last talked, was very new to us, and I can hardly believe myself it's only four years since we signed the deal with Starbucks. This is much more than a deal. What we've done is forged a very deep and vibrant partnership with Starbucks as we have rolled out all of our in-home propositions for them. We govern this relationship against the Global Coffee Alliance. That's what Starbucks and ourselves have forged, and that is a relationship from the very top of our house all the way down to our salespeople that values the brand and values the relationship immensely. We have done some very good business on the back of forging that relationship. We've almost doubled the size of the business that we bought in 2018. We've added one and a half billion Swiss francs worth of incremental business. We've gone from launching 24 SKUs in March 2019 to having 190 SKUs available in over 80 countries around the world. In terms of consumers that we've touched with our in-home offering, we've connected 14 billion individual purchase occasions for our products over the last four years. 14 billion individual purchases of our Starbucks products at home. We continue to co-create and drive this relationship strongly for the future. What's the next wave of growth? Look, we're going to continue to fuel innovation on this brand and attract new consumers at different times. I think you've seen on the stand, you certainly get to take home with you some of our seasonal offerings on Starbucks. The idea of doing these seasonally appropriate ranges, in and outs, that create huge buzz and excitement and tie very much into the Starbucks culture, are a great way to introduce consumers to the brand, get them in, and then hook them to the experience. We also have lots of strong innovation across different formats. Maybe the one I would call out is what we're doing on our soluble coffee business and our mixes business, where we're introducing real super premium experiences in those areas. The next is expanding out of home. I mentioned this. As the out of home business, it transforms itself. As people are looking for more and more added value coffee experiences in work and on the go, the ability of our Starbucks business to really compete there is strong, and you'll see strong plans on that going forward. Then the last area we're working with Starbucks on is building out our ecosystem. Making sure that where we have data and we know where our Starbucks consumers are, we work together to enhance the consumer experience and drive the value of the brand through those links. Unique innovation. Stefan talked quite a lot about this. I will not spend too much time on it. We're very proud of the work of our R&D and commercial teams as we pulled together some real breakthrough innovation on our core businesses. On Nespresso, the launch of paper capsules to sit alongside our aluminum capsules is super important. It's something that consumers have been asking for, and we're delighted we'll be able to start rolling that out in France and Switzerland as of Q1. We're also delighted to be rolling out our Nescafé Dolce Gusto brand new system, Neo, which is premiering as we speak in Brazil. It's on sale now. That is the next generation of Nescafé Dolce Gusto machines. It's a connected, sustainable coffee machine where the capsule and the machine talk to each other to get great cups of coffee. It's a highly sustainable offering because of its paper-based packaging. The last one on the slide, and we'll see this tomorrow, those who are with us, is Roastelier, which is a brand new coffee system that is at the very top end of our out of home offering. That offers cafes and small bakeries independence, the ability to get their own bespoke roasted coffee available for their consumers. It makes available that roastery experience for even the smallest of retailers. It's rolling out fast. It's a super connected machine, it allows us to track that machine's performance, which allows the cafe to get the very best service from us, and you'll see that in operation tomorrow. Next strategy is ready to drink. I said ready to drink or cold coffee is a huge growth platform. You may not know we are number one in ready to drink coffee in China with the Smoovlatté brand. We have over 50% of the market in China, so big emerging market, growing fast, and we're number one. We're also number one in a number of Asian markets. Building out where we're strong is an important part of the strategy. Last year we also forged an additional relationship with Starbucks as part of the Global Coffee Alliance on taking their ready to drink coffee to market in Asian markets, Oceania, and in Latin America. We're rolling out again over the last quarter of this year, so it's live in market in Australia and in many Asian markets, the first of our ready to drink offers on that platform. Big growth engine for us going forward. The last one on the slide is not just ready to drink. Cold coffee is not just ready to drink, it's the ability to get a great cup of cold coffee prepared in home. Again, I hope you have the chance to see, we have across all of our brands and all of our formats, products that are specifically designed to be consumed cold in home and prepared cold in home, which give that out of home coffee experience that people love in their own homes. Let me move to the last growth driver, which is our out of home portfolio. This chart really just shows the journey we've been on over the last five years. If I'd shown you this chart five years ago, on the left you would have seen we had lots of fairly basic coffee offers. Basic coffee machines selling mainly soluble or instant coffee, then large tins of Nescafé and small sticks of Nescafé. Over the last five years, we have transformed our ability to play with the brands across all price points and all service solutions. That has been largely enabled by the machines that we have available. Brand new machines that sit in all locations offering great coffee, great value, and great service for our out of home operators. Let me finally just switch gear and talk about sustainability. On sustainability, one of our core drivers, you heard from Stefan a lot of the agri-science that's going into developing this category for us. To put it in perspective for you, there are about 125 million people around the world who rely on coffee for their income. In the Coffee Belt, in Equatorial Coffee Belt, we've got millions of farmers who rely exclusively on coffee for their income. With climate change and rising temperatures, 50% of those farmers' incomes are in real peril if we don't tackle climate change, because in 30 years, coffee will not be produced in those areas. For us, sustainability isn't a nice-to-have, it's an absolute imperative. As leaders in the industry, we take that responsibility seriously, and we're driving real change with real commitments to make a difference to coffee over the medium and long term. That's why you see we've got impactful commitments that we're going to deliver around regenerative agriculture and CO2 reduction on green coffee. In addition to the plant science and all of the work that we do to develop the future, we've got feet on the ground, over 700 agronomists working with farmers every single day to make a difference in their skills and their life chances. Let me finish by giving you an insight in what we're going to see to tomorrow when we're together. The first is you're going to see a whole range of connected machines that we have from our Momento machine, which is the out of home Nespresso machine, Nescafé Dolce Gusto, and Ricoré. You're going to get a chance to see those in action and actually see how they work and the difference that they make. You're going to have a deep dive into some of the groundbreaking work that we do on Nespresso and meet our CEO, Guillaume Le Cunff, who's gonna take you through a really inspiring case study of how we add value from bean all the way through to cup for every single person in the supply chain, and that could only be possible because of our digital activation. The last section you'll see tomorrow is a deep dive into each of our brands and how they are using AI and predictive analytics to get innovation faster and more cost effectively to consumers. With that, let me just give you some key takeaways from the presentation that you've seen. We are leading and proud to lead in the world of coffee with our three iconic global coffee brands. Our objective is to outperform our category, and our category we see growing at about 5% over the medium to long term. We're gonna build those growth against our three key brands, with each brand playing its own and unique part in the value chain. Rest assured, we will continue to move at speed to capture all of the growth that we see available, and we'll be using our digital capabilities to really underpin that growth. With that, thank you very much. I'm now gonna hand over to Laurent Freixe, who's going to take us through our efficiency and effectiveness programs that we're driving to fuel the growth. Thank you. Laurent? Thank you, David. Good morning to all. Let me bring you back, the time the presentation comes, 18 months in time when we saw this massive inflationary wave coming at us. At that time, early on, we recognized that we had to do something specific about it to be able to mitigate that cost pressure. This is how and when Project Tasty was born. What do we aim at with Tasty and Agility? It's about value creation, of course. This is about mitigating that cost pressure, and I'll come back to that. It's about Agility, speed in decision-making for Project Agility. Back to Tasty. It's focusing on SKUs, stock keeping units, the individual product items. It's looking at recipes and packaging optimizations opportunities, with including the impact of technologies, as highlighted by Stefan Palzer earlier on. We will achieve this year, we know it's just a few weeks to go. We'll achieve CHF 1 billion in positive P&L impacts, and we aim at another CHF 1 billion in 2023 with a high level of confidence as we got already a large part of that mapped for next year, and we already see some benefits for 2024. There will be a net positive impact on the top line for next year. There was a small negative in Q3, and there will be some more in Q4, as indicated in zoning way. That was related to the discontinuation of entire subsegments of dilutive businesses. Of course, that cannot be replaced quickly by other brands and products so that there is a net negative. But longer term, we expect, and I'll explain that in detail, a net positive on the top line. Building up on Tasty, we decided and saw that, you know, speed and agility was of the essence. We are the largest. I guess, we are showing so tremendous adaptability in the last years. But we recognize that raising our game in a context where technology is also changing everything in the ways of working and we are now in the world of real-time management, raising our game in terms of speed and effectiveness was critical. That's why we kicked off Project Agility a few months ago. Efficiencies is not new, of course. That's why I was highlighting that this goes above and beyond recurring efforts. This is the start. Achieving efficiency is the start of our strategic virtuous circle of value creation. To a large extent, this is the make or break. Unlocking efficiencies, productivity unlocks resources that we can use to mitigate the inflationary pressure or invest behind brands, innovation, technology, and then drive a virtuous circle of value creation. There is a lot we have to handle, like, I guess, everyone in the business those days. There are multiple tension that we have to handle. The impact of the COVID has broken the global supply chain, which is coming back, hopefully. We got on top the geopolitical tensions. All of this created this or strengthened this inflationary pressure that we see that translate now into the labor costs, and that is what will likely extend the inflationary impact into 2023 and possibly beyond. The decarbonization is critical for us, critical for society at large and, of course, the energy agenda is part of that. We have shown again a lot of adaptability, agility, in that context, and productivity of the portfolio has been center stage. You know about the more than 20% portfolio rotation to divest dilutive businesses and invest into more promising areas like Health Science, for instance, or pet, or coffee. You have seen as well the reorganization of the center from three-five zones to get even closer to the consumers and to the customers, and make sure that we take the decision as close as possible to market reality. Of course, the digital transformation has been embraced with an end-to-end perspective, front to back, from farm to fork and beyond. That's about Tasty. Tasty is to drive productivity, efficiencies, and ultimately value creation. We want to save costs with a view to protect margins and at the same time, protect market shares and unlock growth. The scope is group wide. All BUs, all zones, all markets, all functions, R&D included. Of course, we review all SKUs, recipes, packaging in that framework and include the impact of technologies. This is data-driven. This is where the SAP backbone with GLOBE is helpful, of course. This is cross-functional, everyone on board. Sustainability is embedded. We made it very, very clear at the start of the project that there is no way back in our decarbonization journey or in reducing virgin plastic. That's core, and we keep it as a must. Of course, a few non-negotiables, quality, 60/40 consumer preference is of the essence. This is the backbone of our success, and this is why, by the way, we call the project Tasty, because we don't want to do anything that would impair the consumer preference. Taste is absolutely critical, and we want to win on taste at all times. Safety, of course, and regulatory and compliance, absolutely a non-negotiable. The project is led and steered by the Nestlé Executive Board, but everyone in the business is involved. All markets, again, all strategic business units, all globally managed businesses, functions, everyone is contributing. As a matter of fact, we got more than 1,000 projects in the pipeline. A few of them, of course, with a greater impact, and I will highlight some of them. There is a lot which is contributed from the ground up, to make that project, the contribution it is bringing to the company. This is the way it's structured. There are fundamentally two streams. One is the SKU stream, the stock keeping units. The second one is the recipe and the packaging stream. We look at the cost savings opportunities, but we look also at the value up opportunities. It's not only about cost savings, there are value up opportunity that we want to capture. When it comes to the SKUs, as you can see, this is not just about cutting the tail, which has been focus in the past. We believe that there is a lot we can achieve through cutting the tail, creating the space for innovation, creating the space for the more important SKUs. Equally important, if not more, is growing the head, pushing those core SKUs that are making a difference for Nestlé, and I'll explain that in detail. What are the benefit that we see coming? We see CHF 300 million coming from the SKU stream. We see CHF 700 million coming from the recipe and packaging stream, including the impact of new technologies, that makes the CHF 1 billion. This is more or less what we envision for 2023 as incremental impact to 2022. On the SKU front, I know that there are lots of questions, so I just would like to share a few data point. As you will see, the Pareto principle absolutely applies. That's how our portfolio looks like. We got more than 100,000 SKUs that we manage across the organization. Looking at it, we recognize that roughly 1/3 of the SKUs account for 1% of sales. But at the same time, and that's why I want to highlight that so strongly, 11% of the SKUs account for 80% of the sales. Not all SKUs are born equal. Not all SKUs have the same relevance for the organization. It's 1/ 100 or 1/ 1,000 maybe in some cases or more. Of course, addressing the tail brings a lot of benefits because those SKUs are mobilizing resources that are not justified. If you can cut those SKUs, we create space and energy to be focused on the core SKUs, what Pareto used to call the vital few. This is really the concept. Those are the vital few, this 11% of the SKUs that account for 80% of the sales. Let me show what we can do in this respect. Highlight there a few of those jewel SKUs, of those A SKUs, those vital few that account for 80% of the net-net sales. We can give them priority for resource allocation. That sounds obvious, but we want to do it systematically. We want to make sure that they got VIP treatment in the system. Those are the jewel SKUs. Those are the critical SKUs. They should get perfect supply. They should get perfect distribution. We should make sure that they are on shelf available at all times. The reality is that, on average, we would get probably 95% on shelf availability. If we can move from 95- 96, make sure that those products are available at all times, we make a significant difference on distribution, on supply, for instance. If we got 97%, 98% case fill rate on average, I would like that we get on those SKUs close to 100%. That makes a big difference, of course. In supporting on shelf availability, those SKUs we want to see everywhere. Every time we enter a store, these 11% SKUs we want to see in the store. There should be no point of sale where they are not made available. There as well, there is some room for improvement, of course, right pricing, right support, in terms of marketing investments and commercial investments and right tracking and monitoring. Those are the core SKUs. To take a proxy, which would be the way airline companies handle their customers, if those SKUs are our customers, we want to give them platinum treatment. They have to be in priority at all times. we would even like to be able to produce them with more frequency. Ideally, if we could produce them every day, then we can keep the products freshest as possible, we would see co-benefits in terms, of course, of inventories and working capital. that's the spirit. Those are critical to us. We want to nurture them and give them the best possible support. This is complementing the strategic planning process. you know that we are prioritizing business sales, sub-sales. Nescafé Mexico, for instance, would be one business sale and happens to be a great one. We got sub-sales then as part of Nescafé Mexico, like Nescafé Dolce Gusto is a sub-sale, the coffee mixes and so on and so forth. Tasty is addressing the lower level, which is the stock keeping units. Even in Nescafé Mexico, you would find jewel SKUs and maybe some of those what we call ESKUs, those that do not contribute any value to the business. To show you a few examples, and that they come from across the organization, we got five different business units featured there. Those five examples account for CHF 150 million in cost savings. We got those five, and we got a few big ones, and we got many then smaller ones that make the bulk of the CHF 1 billion. The beauty of the initiative is that we have seen lots of benefits as well on sustainability. Not systematically, it depends of course, but in some cases, we see also some benefits. We got the case of dairy replacing some dairy ingredients with fibers or with other or plant-based ingredients for instance. We can reduce cost, but we got also a benefit in terms of greenhouse gas emission. In that case, those three examples, there is a saving of CHF 40 million compounded, and we save also 300,000 greenhouse gas in the process. There is a value from a sustainability standpoint. Plastic reduction as well. Two examples. One is the Gerber container in the U.S. We save CHF 6 million in removing the cap, but we save as well 2,300 tons. Other interesting example, Vittel, in front of the bottle, we reduce the size of the cap. We save CHF 1 million, and we save also 700 tons of virgin plastic. We got some of those where we see co-benefits in terms of the sustainability impact. Of course, they are well taken, and they are important in the process. Talking about co-benefits, there are many of those on the SKU optimization. We believe that we can use a lot better our capital deployed, our manufacturing assets, dedicating them more towards the critical SKUs and eliminating the dilutive ones to create space. That improves, releases capacity and improves freshness. The work on packaging optimization is good for us, of course, is good for the planet if we can reduce our footprint, improve our palletization and the container fills, for instance. There is a co-benefit for our customers. What is good for us in that case is good for them as well and good for the planet. Optimizing the recipes, we do it in a way also that intends to simplify specifications, so we build up resilience. We try to build up, also strengthen the local supply chains. Of course, we got the consumer preference embedded, and we make procurement more efficient. Enhance technologies. There are many things coming from R&D or coming from the digital front. Recognizing that some are game changers and doing it in that framework allows for speed, alignment by design and speed in implementation. We got many good examples in this respect. And of course, we through that enhance the ways of working. This is led and owned by the business, but everyone on board, there is a sense of urgency. We declared that this was a priority. We mobilized the organization to make it happen. There is internal inspiration. I like to share one of the examples. It's maybe not huge, but it's illustrative. Our water business unit came with the idea that they could probably do a better job in filling up the containers. You can imagine that it's important. Transportation costs are very critical component for them. At the time of the pandemic, we had scarcity of containers, and the price of the containers went up through the roof. Optimizing the fill was a big opportunity for us going forward. We came up with that idea. When we saw that there was an upside possible, we decided to review all categories to make sure that the learnings of waters would be applied to the rest of the business. There is really the spirit of trying to find the pockets of excellence or the good ideas and seeing if they can be applied in other parts of the organization. This is technology-powered, this is data-powered, of course, and I talked about the data backbone that we got. There is this agile mindset. Believe it or not, we will achieve that with very few FTs, full-time equivalent dedicated. The people doing it is the people running the business or running the operations, and they dedicate part of their time to that. R&D, Stefan, dedicates 10% of his resources to support the projects, reprioritizing some activities. Bernard is commenting often that 30% of the SBU time is dedicated to support the project, you will see the same across the organization. Just a few people dedicated essentially for data crunching and preparing the decisions. The rest is run by the organization end-to-end from procurement down to commercial. The beauty, maybe one point important of having cleared the priority SKUs is that now we got one set of priorities which is valid across the organization. Sales force has got a list of priority. This is the same for the marketing people. This is the same for manufacturing. This is the same for procurement. It's not that everyone have got their optimization list. They all work on the same, of course, that is providing tremendous alignment, tremendous critical mass, and makes an impact. This is building up and strengthening the resilience of the organization. All those elements are, of course, very important in terms of strengthening our impact as an organization. Building upon that and seeing lots of the positives of the ways of working on Tasty, but also recognizing that we are at a time when speed is of the essence, and recognizing also that we are a large and complex organization, we want to do the things well, compliance is important, of course. But we need always to find the right balance, and we believe that, and Mark pushed that, of course, that we could be, and review the organization to make sure that we are agile, we are efficient at all times, we are adaptable, of course, that we eliminate duplications to make sure that we can make decisions in real time. That's the spirit of launching Project Agility. This is the same. This is run by internal resources. We kicked off the project in August. We completed phase one, and we should get conclusions by the end of the Q1 for implementation during 2023 and beyond. That's basically the second pillar of those productivity, efficiency, effectiveness efforts from across the organization. As a conclusion, key takeaways, of course, we need to adapt to a changing environment. I guess everyone realized that the theory of evolution was right. In times of tremendous changes, this is not necessarily the strongest or the fastest that will survive. This is the one the most adaptable. We want to strengthen that as a feature of our organization. We want to be adaptable at all times. We want to be agile. Tasty is a testament of that. Tasty is helping us mitigate this inflationary pressure and frees up resources. We are generating CHF 1 billion in P&L benefits above and beyond what we were used to do across the organization, and we plan another CHF 1 billion in 2023. This had positive impacts above and beyond, and we will not stop in 2023. We are already mapping 2024 benefits, and we want to keep it up because this is the way we want to work going forward. If we will have had a negative impact on top line in Q3 and Q4, you will see a positive impact materializing in 2023, second part of the year, in particular. The time we can organize that, we get rid of those dilutive SKUs, the ESKUs, and that we put instead in store and across the operations, those core SKUs, the ASKU, the vital SKUs, to make an impact. If you replace. It's kind of obvious, you replace a low rotating SKU, a dilutive SKU, by a high rotating SKU, and there are opportunities always because not all of those ASKUs are distributed 100% of the time and available 100% of the time. If we manage that translation, then the top line impact comes, not to mention, of course, the contribution to the P&L, but this is already captured in the CHF 1 billion I highlighted. This is also enhancing the ways of working, makes the organization agile on its toes and with this mindset to try to find opportunities and to learn from each other and build up from each other. Agility will be working in that same spirit. We want to sharpen the focus, effectiveness, and efficiency of the headquarters and the spirit that we see in Tasty, we would like to see embraced across the organization in every decision-making process, making sure that we go to the essential, identify the opportunities, decide, and move on. That's the spirit of Tasty and Agility. Thank you very much. My colleagues will join me now for the Q&A session of the morning. Thank you. Let us now start with the Q&A. We will cover the second of the morning. I suggest that if you have specific question to Mark Schneider, we may address that in the later stage in the later session that we have between 4:30 and 5:30. If you would like to ask a question, please raise your hand. When asking a question, make sure to turn on the microphone, state your name and company, and please remember to ask no more than two questions. Patrik, I see that your hand is raised, so please go ahead with your question. Thank you, Luca. Patrik, Zürcher K antonalb ank. I have a question regarding the ready-to-drink coffee category. You have a strong position in Asia, in some Asian markets. What about Europe and the U.S.? What's your strategy here? The question related to this one, is there a chance to get also the Starbucks license for the U.S. and Europe for ready-to-drink coffee, or is there also an opportunity to launch Nespresso as a ready-to-drink coffee brand? Thank you. Goodness. We've got some good ideas there. We'll write them down. The ready-to-drink category in the U.S. is a Starbucks category. Starbucks is the market leader. In Europe, it's a very mixed category and quite a young category in Europe. You see some growth, but it's relatively underdeveloped. Asia, where we are strong, is the second most developed region for ready-to-drink coffee in the world. We're very, very pleased with the strength that we have in that market. Look, in terms of. What are we going to do in Europe or the U.S.? We continue to build our business, and we have a number of tests already going in Europe with Nescafé as a strong brand in large parts of Europe. Turkey, for example, we have a very strong ready-to-drink business there. The key to ready-to-drink, though, isn't just the brand, it's the route to market. You've got to make sure that you have the right route to market. What we're not gonna do is sort of rush in with half-baked solutions and spend a lot of money not making impact. On your last point, look, we have a very strong relationship with Starbucks. Starbucks have a very strong relationship with a number of partners. You know, we're not projecting forward beyond where we are, but we're very pleased to be, you know, be working with Starbucks in Asia, and we're gonna work on making that a big success, and then we'll see what happens next. What about the idea of Nespresso? That's a great idea. I've written it down. We rule nothing out. I think the thing about our portfolio is we have a terrific portfolio. All of our brands potentially at time could potentially play in that space. I rule nothing out, but for the moment, no immediate plans in that space. Okay. Thank you. Any other question? John, please go ahead. Yeah, John Ennis from Goldman. My first question's for Laurent on the SKU program. Maybe a bit of a clarification to start with, am I right in thinking that for next year, there will be a 50 basis point drag on performance as you cut some of the SKUs before the 20 basis point uplift thereafter? How did you calculate the 20 basis point uplift? Is it simply a case of removing the growth drag from the SKUs that you're cutting, or is it also thinking about redeploying that capital in the higher growth SKUs? My second question's for Stéphane. I guess the reduction in the time to launch a product, so the 60% reduction seems very impressive, but how does that compare to competitors who I imagine have also gone through a very similar process? If you're benchmarking that six-nine months launch time, maybe if you could give us some context in how that compares to both your big competitors and also smaller competitors, that would be helpful. Thank you. Yeah. Let me explain you the math. You're right that by eliminating the low rotating SKUs, these small dilutive SKUs, the ESKUs that we qualify, there is by definition a net loss immediately when you stop them. If you manage to push the core SKUs, the ASKUs, and if you manage to do that more or less at the same time, then you will see a net benefit. If you can gain 1 percentage point, let's take it as a theoretical assumption. You manage to get 100 basis points improvement in on shelf availability, which is good for us, which is good for the consumers, good for the customers. By the way, there is a significant upside on SKUs that account for 80% of your sales. It's a theoretical calculation, but I want to show you and highlight the power of making the most of those core SKUs. Those core SKUs are not optimized to the maximum. We are talking about 12, 13 thousand SKUs. Not all of those are distributed 100% of the time and 100% of the time available. If we can raise our game and put more focus on those, just looking at the availability side of it, in distribution, there is a significant upside. The calculation is that short term, of course, as we started pruning, we saw the negative impact as we highlighted. In the course of 2023, we might see a small negative at the start of the year, but for the full year, we will see a net positive, because we will have the time and the plan is basically to eliminate the ESKUs by midyear, and start to push the core SKUs at the same time. We will see the net positive for the full year and beyond. Concerning your question, average project duration. I told you we moved from 33 months to 12 months, and the 12 months is an average time. It's a mix between food and beverage and longer duration projects which we have, for instance, nutrition, but also in medical nutrition with Nestlé Health Science. If we zoom into food and beverage, six-nine months is fairly quick. You find hardly any startup which is meeting that, which is able to bring a product which is safe for consumption, which is compliant, which tastes great, which is nutritious, and which is sustainable to the market. We achieve that by leveraging, first of all, our expertise, because we have this very broad and deep expertise. I showed you that. Ranging from the raw material expertise, agriculture, until even packaging. along the whole entire value chain. Then we achieve also some of the acceleration due to the synergies which we have. We can synergize between the different business. I told you, for instance, we do the clinical study, sometimes valorize it for our pet food business and for our human business. Six- nine months, I doubt that you will find other companies which are matching that. Now, on the nutrition side, it's still pretty much different. There, the differences are much smaller because here the time is determined mainly by registration processes. There are still To compress this timeline. On nutrition, projects in the area of medical nutrition, infant nutrition, there you will find much smaller differences. In food and beverages, I think we are very competitive. Pleasure. Good morning. It's Guillaume Delmas from UBS. Two questions from me. The first one is for Aude and Bernard on digital. You alluded to the fact that Nestlé is basically leading the way in food and bev when it comes to consumer data records. Wondering where you've seen this data fueling a nice pickup in market share gains for you. If you've got broad category or country examples you could share with us. Related to that, as you're making your way to 400 million consumer data records by 2025, I'm assuming widening the gap relative to peers, should we almost expect a continuously improving share momentum at Nestlé? In other words, all else being equal with the same category growth, should Nestlé by 2025 deliver toward the top end of the mid-single-digit organic sales growth target? My question is on the vertical integration trend. You talked about vertical integration in marketing capabilities with a lot of in-house capabilities. I guess my question here is more for David. Is there an opportunity to also have more vertical integration when it comes to supply in coffee, given how supply has been absolutely key, becoming more and more a source of headache and challenges? Is there a temptation for Nestlé to also go more into farming, at least for some categories like coffee? Thank you. Maybe I'll start with your question on market shares. Yes, I think we have a few poster children in our ranges. I would mention pet care and coffee probably as the two examples where we've seen leveraging first party data at scale has helped us gaining market share over the last few years. This is also a virtuous exercise, right? Because the more you leverage those first party data, the more use cases you develop with these first party datas, the more impact you will have on sales and market share. Now, let's be careful also about how we measure market share and the amount that is out there. Market shares increasingly are difficult to assess across all of the channels, especially the emerging channels that we've seen growing very fast. There's very little coverage of some of these emerging channels. Of course, D2C is not included in the public market shares that that are circulating. This leveraging of first party data is actually more valid on eCom, on these new business models, as well as on D2C. We will have to increasingly look at ways of reporting better quality market share data with the outside partners that we are using, because for the moment, it's quite patchy. Aude, if you want to add? Of course. On the first party data acquisition and where we are. Yes, you know, we believe that we are leading the way. We've been pretty aggressive on setting our objective. Everybody obviously is catching up, and I'm sure you heard how the environment, you know, the tech environment, the platforms are actually all getting more into what we call walled gardens. There is a need now for all of us to make sure that we have our first party data that we can really leverage across the different platforms. That is really key for us, and it's going to be key for everybody because the world is shifting. It's shifting in walled garden, it's shifting in terms of multiplication of platforms as well. We need to be able to first use this first party data that, you know, we create, for example, what we call look-alike, you know, when we work with our platform, so we can give guidance on what type of consumers we're looking for, and then they can create a better pool of similar audiences, for example. We're going to continue to accelerate because as the world is going to move more and more into digital, you know, it's at the end of the day, it is going definitely to be a mobile first world. We have more and more countries as well, and consumers getting on digital. It's going to continue for us as well. On, on coffee farming, just for perspective, we have a direct relationship with every single one of our Nespresso farmers. We know who those farmers are, and we have a direct relationship with them. On Nescafé, we have a direct relationship with roughly 20% of the volume that comes into Nescafé. We know precisely the farmer and the farmer community. In terms of integrated supply chain, where we know where the beans come from all the way through to the final cup, that is very much part of our business model going forward, and digital enablement is one of the key ways that you track that coffee. In terms of us getting into the coffee farming business, that's not fundamentally part of our model. It's not to own the farm, but to be well integrated and really understand that chain from the bean and the farmer to the cup is very much part of our journey to regenerative agriculture and sustainable coffee farming. Céline, please go ahead. Yeah. Celine Pannuti, J.P. Morgan. The first one will be for Laurent. I wanted to understand on the CHF 1 billion cost savings Then there must be a gross margin benefit of focusing on the best SKU. Is the gross margin benefit of the mix on top of the CHF 1 billion? I wanted as well to understand how now that you are doing that big exercise, this is an embedded, and, you know, recurring exercise within the organization. My second question would be for Bernard Meunier and Aude Gandon. I wanted to understand in terms of the cost of data, you talk about data acquisition, you also talk about trade spending and how the retailers themselves are trying to monetize this data. If you could talk about how meaningful that is in within your budget. Is this on the ANP line in the P&L or is it in the transpen? Where, where is it sitting? Thank you. On the margin impact, there is clearly a mix effect. If you eliminate a lower contribution SKUs and you focus more on the high, high growth, high margin SKUs, by definition, there will be the mix impact that you highlight. That's included, of course, as part of the CHF 1 billion. What we anticipate and what we ambition for next year with again a very high level of confidence. Because imagine that when we entered last year, we kicked off the project in October, so we had empty, we were empty-handed. We had some ideas, but we had to fuel the pipeline, we managed to get the CHF 1 billion. Many of the decisions we have been taking in 2022 will have an impact on 2023. We start 2023 with already maps significant part of the CHF 1 billion benefit. The level of confidence super high, but that includes everything. You're right about the embedding. It goes down to including the principles of Tasty as part of the training for all functions at all levels of the organization, because we want that to be understood and embraced by the people joining the company or the people getting trained to lead the company. We are in this process now to embed Tasty also as part of the training, we will see benefit 2024 and beyond, undoubtedly. Next question. Warren? Please go ahead. There was one on trade media. Okay, please go ahead. On trade media, what we talk about here, it started first, of course, on Amazon, Alibaba, but now it's expanding as well to the brick-and-mortar retailers as they develop their online platforms. What we talk about is banners typically or search, and this is very similar to what we're doing on social media or on Google. It is indeed treated as marketing spend. The same optimization, the same negotiations that we can do with the big digital companies such as Google, Facebook and so forth, we also apply then to our retail partners. These negotiations are, of course, distinct from the ones on you were asking about promotions. This is a separate discussion. It's usually, by the way, different teams as well, at retailers that are managing, on the one side, pricing and promotion, on the other side, monetizing their access to shoppers. Warren, please go ahead. Hi, sir. Warren Ackerman at Barclays. I've got a couple for David on the topic of coffee. The first one is, I was slightly surprised you didn't mention the Seattle's Best acquisition. I was just interested if you can explain the rationale for that deal, what the potential of it is. I know it's not as big as Starbucks, you've obviously done it for a reason, and how it will be priced versus Starbucks. It seems like it's gonna be slightly lower priced. If you can maybe talk about that as the first one. Secondly, on Vertuo, can you tell us what% of Nespresso's total sales are now Vertuo? Kind of related to that, what are you seeing in the European market for pods? I mean, it seems like there's a lot more competition. Are you seeing trading down? How does Nescafé pods play into that potential risk? Just interested to know what's going on in Europe in the category. Thank you. Seattle's Best is a deal that we concluded just a few months ago. It was actually, Seattle's Best is a business that was part of our original relationship with Starbucks as part of the Global Coffee Alliance that we did in 2018. We've now done is taken full ownership of that business, and it worked for Starbucks, and it worked for us. Seattle's Best was a brand that they had, but they were not using at all. It was really only a brand that was in out of home and in home in North America, a North American brand. So it was of good strategic fit for us to have 100% ownership. For Starbucks, it was a good opportunity for them to really focus on their core business and on their core brand. It worked for both parties. We're very happy to have it. What it allows us to do is have end-to-end running of that business. It is now completely in our control. When we look at recipes, sourcing, distribution, our ability to do all of our loads together through our own distribution centers, that makes a huge amount of sense. When we think about pricing, it is today a successful brand in the U.S. It's priced slightly underneath Starbucks. It always has been. We see going forward this offering a great value proposition for U.S. consumers in retail and in out of home, a great deal for both businesses. In terms of the pods market, I'm not gonna get into the specifics of our business split by Vertuo and OriginalLine in any of our given markets. As I said in my presentation, VertuoLine though is a sector of the business, a part of our brand that is doing extremely well. We have rolled it out very quickly over the last three and a half years to many new markets. You see it now becoming nicely established into Europe as well as in North America. Maybe the last point, you asked about just how competitive is this segment. Look, the pods market is a highly competitive market, which is good for the industry because the single serve capsule is something consumers love, and it's a format that we see real growth potential in. There's competition. The OriginalLine system is an open system. As you know, we launched Starbucks by Nespresso as one of the first big launches when we did our Starbucks deal. That SKU, that Starbucks by Nespresso business now is 20% of the retail market. We've captured 20% of that market on top of all of the business that we retain in Nespresso OriginalLine. Nescafé, you'll see outside, that's a brand that we've launched in a few selected markets where we see the opportunity for that to add to our portfolio and strengthen our offer in those markets. It is allowing us to compete harder. We have it in about five or six markets, and we watch you know, all of the time to see where it might go next, but no plans that I'll be announcing today. Maybe Bruno. Please go ahead. Morning. Bruno from Bernstein. First one is for you, Stefan. You mentioned that you kept the R&D spending flat and did a lot more with the money. That sort of assumes that the R&D level spending was right. If you have positive return on investment, is there a case to spend more on R&D? If it isn't, you know, why don't you spend less? The second question is back to Bernard, please. You're talking about unbundling of the trade negotiations and advertising spends within an industry of unbundling and a sophomore tier read in reality. Are you really telling me when you're sitting down with Walmart negotiating next year's pricing, your salesperson won't be saying, "Hey, don't forget the few hundred thousand, the few million dollars we spend on advertising." Do you really believe you can keep those negotiations separately? Thank you. To your first question, of course, in R&D, you always have to have more ideas than money. Mm-hmm. That's the golden rule in R&D. Otherwise, your R&D is not working. We did some benchmarking with major competitors, and we are more or less at the same level in the different categories, with a few exceptions. Indeed, our approach was to improve at this budget, which we kept flat, on, first of all, effectiveness of R&D, so working on the right things, and efficiency of R&D. These are two different things. Effectiveness means, for instance, we are focusing now much stronger on plant-based. We are innovating in coffee systems. Strong focus on pet nutrition, science-based pet nutrition, and then what I showed, all the nutrition solutions for the different stages of life. While still maintaining a very strong program for our core business. That's effectiveness. Efficiency said also, yes, we improved speed to market, we kept our pipelines, executing our pipelines, as planned. I think we have the right spending. Compare ourself with competitors, we are exactly at the same level. I do believe we get much more out because we are able to leverage those synergies, and we are getting much quicker. You saw us now accelerating innovation. I think we are doing fine. We are doing fine. When it comes to our negotiations with the retail partners, first of all, as I said, it's different teams at the partners, at the retail trade, but it's also, and more importantly, different teams at Nestlé. On the one hand, you have the salespeople that negotiate the assortments, the listing of new products, the promotional budgets, and then you have the marketing teams led by Aude, who is negotiating the media spend, which is a different line of the P&L and a different pot of money. By this, we can really measure what is the best way to maximize our dollars, be it in trade promo or in media. This being said, these media opportunities are very valuable, and we see that the whole industry is spending more and more in retail media. On one of my charts, I think there was the figure of 20% as a prediction by 2025 of total media. Some people say that over time, this will be more important than social media, even in terms of investments from fast-moving consumer goods. There is definitely value there. We have to use it correctly. We are applying the same optimization tools that we would use in social media on retail media. We believe that it's a fantastic way actually for us to build competitive advantage. As I was saying before, if you win in search, and people more and more search directly on Amazon or Walmart even before going on Google, if we win in search, this gives us a huge advantage versus competition. Just to follow up on that, could it actually the money flow differently where you decide that it's more effective to advertising on search and spend less on promo? Could you move monies between the lines? Absolutely. That's something that we do, that we track. You know, all different kind of retailers currently obviously at a different level of development in terms of the tools they have, but we absolutely do that. We look constantly, we track whatever is more efficient, and again, it will depend on what product, what SKU, what audiences as well, then we will play for, you know, we will transfer from one part to the next. Pinar, please go ahead then. Thank you all very much for your presentations today. First, a very quick follow-up to Bruno's question. Does this whole new dynamic change the way you work with advertisers? Then one for Stefan and Laurent probably, but if any one of you have any views. I mean, what we heard today is increasing, accelerating innovation enabled by digital transformation. Is it fair to assume this is increasing the SKU complexity the business has? How do the business units manage that coming on top of the SKU rationalization program you're running for the next, you know, in the future? Thank you. I'll start. Yes, it is really changing the way we're working. It's changing the conversation we have. It is changing our processes completely. You know, obviously this is a constant evolution right now, so I think on both sides, actually, of the spectrum, we are learning. As I said, we're developing tools, they are developing tools. We also actually have a lot of discussion which are about piloting on, you know, what we can leverage, what do we learn, being extremely clear on what are the KPIs, what are we trying to track together. That's a completely different conversation we're having, and again, constant evolution as well. You're right about the increased complexity in a way, innovation will bring new SKUs. That's obvious. There is a call also for channel customization and offering more formats to the consumers. That's also one of the ways we mitigate the price inflation. It's better to offer different formats so that the consumers can still trade down inside the brand and not move elsewhere. We need the SKUs as highlighted by Bernard, for the Amazons alike and for e-commerce and so on and so forth. There is increasing complexity. That's exactly the reason why we need to do the cleaning and eliminate those SKUs that do not pay their fee and do not deserve to be part of the portfolio. If we eliminate those one set of the SKUs that are not adding to the equation, then we create the space for innovation and for customization across the board. It's a very, very good point. It's not because, you know, we will end up with necessarily a much simplified portfolio, but we want the structure different. We want customization. We want innovation. It's absolutely critical to our success. Just for that, to make the complexity manageable, we want to eliminate decisively everything that doesn't add to the party. We can take two more questions before we break for lunch. Maybe Tristan. Look like I can add to that. Sorry. Please go ahead. You addressed the question as well, to me. Look, in innovation, we have also distinguished between the two phases of innovation. The first phase where we test launch and we pilot innovation, where we have a natural proliferation, so we act like a startup. Once the test launch is successful, then we bring it to scale. We bring it to the market. There, the new SKU is then often replacing existing ones. We do, like Laurent said, a certain cleaning there. In the test phase, yes, we have more, and we need to have more to get better stuff, which we bring then to a multi-market rollout. Yeah. I think we still have time for two more questions. Maybe Tristan, please go ahead. Thanks. As said, Tristan van Strien from Redburn Partners. Just a question for David. You spoke about the 3 billion of consumers that don't drink coffee. I guess, what are the barriers you need to overcome to create a coffee culture in places like India and China? What are you guys doing? What does that journey look like over the next decade, realistically? Thank you. There are two ways that we're gonna convert people to coffee. One is a well-proven way that the industry has seen many times, which is introducing young consumers and consumers of all ages to soluble coffee. Okay? If you saw the video, we have many consumers who get their first taste of coffee through a single stick of Nescafé, and that's how they get into this category and develop a taste for coffee. The reason you get in that way is, especially in tea-drinking cultures, it's a very easy way to get into the habit of having a cup of coffee because it mimics in many ways how you drink tea. That is still a very big driver of the way that people will come into coffee, and we see this in China, in India, and in Africa. That first cup of the day, fueled by a soluble stick of Nescafé, is a growth driver. The new way into coffee, and this is very exciting for us, is through the coffee shop experiences and cold coffee consumption. In China, you know there is a massive explosion in coffee shop experiences, and that's not just tier one and tier two. It's getting into tier three, four, and five cities. Consumers in China are getting their taste of coffee through coffee shops. Tends to be cold, tends by nature to be ready-to-drink. The other vector that will introduce people to coffee is through coffee shop experiences, cold and ready-to-drink, which is why in these Asian markets and African markets ready-to-drink you become really important recruiters for that in-home coffee consumption. Those are the two vectors, we continue to build out household penetration, points of trial, points of consumption, week in, week out, month in, month out, year in, year out. With what we're doing and what the coffee shop culture is doing, these markets will continue to adopt and get into coffee. I mean, that's for certain. We take one last question. James, yeah, please go ahead. Hi. Thank you. James Targett from Berenberg. Just a quick one on plant-based. You mentioned 12 categories across which you've launched your 100 innovations in plant-based over the last two years. You know, could you help us understand what do you think are gonna be the most material of these subcategories to Nestlé's growth over the next few years, and which are the ones where you've really got an edge over the other food companies or these sort of specialists in these areas? Thanks. I do believe we have very competitive offers in each of those categories. where we are differentiating a bit more from competition, we are going now also into very affordable offers. if you look at the global level, yes, there's a market in the developed world, but there's also a market in developing world. the reasons why people consume there plant-based is totally different. we have much broader offer here than many of our competitors. We are not only selling chilled meat analogs, like I said, but we go also into ambient meat replacements, which we offer at 50% lower price points. we are going into fish, which you saw. there is not many competitors active there. we have also now in the meantime, all our major brands, this plant-based line extensions. I mentioned the Kit Kat, you can go in each of our brands and you will find plant-based line extensions. We think they have great potential there. If they have a billionaire brand and you're coming with a plant-based line extension, well, there's potential. There's potential for growth. This concludes our Q&A morning session. Please reconvene here at 1:30 sharp, and we will restart with the Nestlé Health Science deep dive. Thank you very much. Sure. All right, welcome back. Good afternoon, everybody. I hope you enjoyed your meal and product experience. I'm Greg Behar, CEO of Nestlé Health Science, and I'm very pleased to take you through a deep dive on Nestlé Health Science. I'm joined here with Don Kerrigan, who leads our U.S. business, and Anna Mohl, who leads our international business. Both Don and Anna are very knowledgeable and lead consumer care and medical nutrition in their respective geography. As we're going to do some deep dives today, I've asked them to focus on consumer care for Don, and Anna Mohl will focus on medical nutrition. For those who are here in the room, I hope you had time to enjoy our booth and experience the very special matcha latte collagen protein, and then that you also experience the very specifically designed Jennifer Aniston collagen bar. If you wanna look like her, it's the ultimate opportunity. We also have great-tasting, plant-based Orgain ready-to-drink smoothie. We also have plant-based bars from Orgain. We have great-tasting jelly beans with multi and immunity solution. We have the ultimate Meritene clinical. This is the ultimate nutrition in a 200 ml. This was designed for elderly people to have an optimal nutrition in a 200 ml. We are able to put in a bottle literally 32 grams of proteins and a full meal in 200 ml. I'll give you a little secret, which very few people are actually aware of, you can only keep it for yourself, of course. Because we are in World Cup fever, I wanted to share that Ronaldo is a big user of Meritene. It's not drug, this is fine. You will get, as you leave this room today, some goodies also. As we want to give you the opportunities to experience the Jennifer Aniston bar, you will get a Jennifer Aniston bar, some Vital Proteins collagen, but also we want you to stay hydrated with Nuun hydration. After a long day, we wanna make sure you can have a very nice sleep with our Nature's Bounty Sleep 3. With that, let's jump right in and talk about Nestlé Health Science and our strategy. Our journey to leadership is well on the way. We have been focusing on delivering through three strategic imperatives, that's growing our core. It's driving and differentiating through insight with great expertise in research and development and deep insights about consumer and patient needs. Last but not least, unlocking growth through our M&A strategy, and we'll talk more about that. This leads us to be able to deliver over the next three years, continued significant value through an objective of driving our top line growth at high single digits, continuously beating the market, but also driving synergies and consolidation, delivering more than 400 basis point of bottom line improvement and driving our underlying trading operating profit above 18%. Nestlé Health Science benefit from 10 significant trends that have been here for a long time and will continue to be here. We focus our strategy on these 10 trends in terms of driving our innovation, but also driving our M&A strategy. This is about aging population. You're all well aware of it. More people are focusing on their immunity, on their general health and well-being. We see more and more people in this room around you, around the world, following specific diets, which also means that they require specific supplementation and needs. We've seen an increase in demand for preventative solutions as well as self-care. We see continuous rise of chronic disease such as metabolism, as well as increased prevalence of food allergy. We see also externally a continuous need to find better, lower-cost of care solution, including care at home where we provide great solutions. We'll deep dive further through the day on these 10 long-term trends. We're focusing at Nestlé Health Science on two key segments. First of all, consumer care, we are focusing on vitamin, minerals, and supplements. This is a very large, fragmented category, CHF 140 billion, growing at mid-single-digit growth rates. We have great products. We lead in the mass with Nature's Bounty, we have also great specialty brands such as Garden of Life. We've been gaining significant share in that segment, reaching our peak share in the U.S. at 14%. Active nutrition is also the second pillar to our consumer care portfolio. This is composed, as per your monitor, of meal replacement, supplement nutritional drinks, as well as sports protein in ready-to-drink and powder. This is also a 6% CAGR growth rate in terms of the market. We have great brands with Vital Proteins, BOOST and Orgain in this category. We've been growing share, we've reached last year, our peak share in the U.S. at 18%. Medical nutrition is fairly different in terms of its structure. It's a more consolidated business at CHF 12 billion with four key players. We are a very strong number two with great brands, and we've been gaining share also in this segment. We've been strengthening our leadership in the last six years, growing the company in a significant way, and we are on path of reaching more than CHF 6.5 billion in 2022. We've been driving our growth, and we're planning to continue to do so, beating the market, at high single-digit growth rate, compared to the mid-single-digit growth rate that I mentioned just a few seconds ago. We've been investing, seeding, the future growth and the base of the company. Hence, we are in the average teens currently in terms of margin, but our plans is to drive more than 400 basis points of bottom line improvement, driving our top line underlying trading operating up a profit above 18%. While we've been growing significantly organically and inorganically, we've also done a lot of acquisitions, and we'll talk more about this. There was one that was mentioned this morning that hasn't gone according to plan, and we'd like to deep dive a bit more now into Palforzia. We've decided to place Palforzia under strategic review. Palforzia is the first treatment indicated to help reduce the severity and frequency of allergic reactions due to peanut ingestion in children. It actually has very good data in both children and adolescents, as well as toddlers. The product delivers on its profile. The feedback that we've got through market research and qualitative input from healthcare professionals, but also from parents, is that the product is doing actually very well, better than our clinical data. What is challenging for us as we launch the product is our penetration in the U.S. market. We've seen, first of all, a fairly low penetration in terms of the motivation for patients to adopt the product. We've been fighting, I would say, against the standard of care, which is continued peanut avoidance. The motivation for parents to switch has been fairly low. Where we have really seen more challenges is in terms of the adoption with healthcare providers. During COVID, we've seen, obviously, we had a limited access with physicians, and that we thought was fairly normal during the COVID times. We went through double efforts to accelerate our growth post-COVID. What we've seen is that it's a product that requires fairly heavy hand-holding as you implement the treatment in a physician office at the allergist. In a fairly restrained staff supply in the United States, physicians have been slow in adopting Palforzia in their practice. We've also launched the product in Europe in a few markets. We're now reaching reimbursement, and it's too early to tell if we'll face the same slow uptake or a better uptake in Europe. When you put all this together, we're not delivering on our business case, which was to be on track for a blockbuster status product. It's more of a niche allergy product, and hence, we believe that we cannot extract sufficient synergies and productivity in our footprint to maintain the product efficiently in our portfolio, hence our decision to place Palforzia under a strategic review. This also means that we are expecting a significant impairment from our books. We're looking at potential partners or a straight sell of the asset, and we expect to complete this work by H1 2023. This doesn't take away our commitment in food allergy, through our nutrition, medical nutrition, and consumer care portfolio. We're also taking the learning from this experience very seriously, hence we will increase our focus in medical nutrition and consumer care, and we're not planning additional M&A in our pharma portfolio. Let's take a step back now and return to our strategy and what really seeds the success of our strategy, and that's our expertise and capability across nutrition and metabolism. We can deliver great solution from wellness to prevention and treatment. That's done through our consumer care and medical nutrition portfolio. We have great product for this. In terms of wellness, we focus on providing overall health and well-being for people, allowing people to be the best they can be. Also we provide great solution and products if you want to prevent future health challenges. In medical nutrition, we are designing specific products for specific medical needs, and we deliver this product across multiple diseases. What is really special at Nestlé Health Science is this knowledge and expertise in nutrition and health, in metabolism across our portfolio. Let's dive a little bit deeper in terms of each of the segments we're focusing on, starting with consumer care. We have great expertise and deep leadership in everyday well-being. We have great leadership in mobility, also in gut health, prebiotics, probiotics. We are building our footprint in weight management, pre-diabetes, diabetes. We have leadership position in collagen, plant-based, healthy aging, and we play selectively in sports nutrition. In medical nutrition, we focus on specific diseases such as malnutrition, surgery, cancer supportive care. For example, if you have family members or friends that unfortunately had to go through a chemotherapy, we know that their taste buds are influenced and change, and they require specific nutritional solution. We're providing the products and we design the products specifically for these needs. We also play in food allergy, pediatric solution, and we have a portfolio also in nutritional related disorder, focusing on gastrointestinal as well as metabolic disorder, inborn errors of metabolism. We also define very clearly where we're not playing. I think that's very important. We don't play in multi-level marketing, such as door-to-door selling models. We're not in general OTC, personal care, such as foot care or toothpaste. We're not in diagnostic, and we're not planning to build a broad-based pharma. What's really special and unique about Nestlé Health Science is this ability to deliver great synergies across consumer and medical. Let's take a very specific example with BOOST. We apply the same model in our portfolio worldwide, for example, with Nutren or with products like Compleat, Impact, or Pure Encapsulations, or Solgar. What we do is starting with healthcare professional, our ability to build great clinical evidence, provide omni-channel solution in terms of face-to-face selling and direct to consumer digital marketing, but also providing great educational tools. Physicians then recommend our product to patients or consumers who repeat as they enjoy and have a positive experience. We reach consumer through our great direct-to-consumer capabilities. We have extensive retail distribution, great e-commerce capabilities, and we gather continuous consumer and patient insight through our execution. This has allowed us to gain significant market share and growth with BOOST growing double-digit in 2022, and growing more than 330 basis points with BOOST in the U.S. This was achieved through 3 key pillars. First of all, continuing to hone this spin model I just described to you, especially increasing our investment in digital, as was highlighted this morning. We believe that being able to impact omni-channel digital allow us to increase effectively our share voice, which we have done. Also delivering in a constrained market. We've been delivering great supply and distribution in the U.S. when a lot of our competitors have faced significant challenges. Last but not least, we also created significant top-line synergies through our M&A. We have a great distribution and sales team at Nestlé Health Science. Adding the capabilities of The Bountiful Company sales and distribution team allowed us to gain distribution and achieve this share increase. We've been growing significantly over the last 3 years with an acceleration during COVID, where we benefited from the focus on immunity. Our vitamin, minerals, and supplement business has seen explosive demand as we have a lot of products focusing on immunity. Obviously, when you start comparing this growth, as we go into 2022, we see now a slight deceleration in comparable, growing at low single digit, which we expect to continue through the second half of 2023, returning to high single digit growth rate in the second half of 2023, continuously beating the market as you can see here. Doing business and delivering health through nutrition is something that everybody at Nestlé Health Science is passionate about. We want to do it responsibly and sustainably. Just like Nestlé, we have the same commitment in terms of environmental footprint, climate, packaging, and ingredients. Let me just give you a few examples of what we're doing. In packaging, we're also focusing on having more and more of our products designed for recycling, making it easy for recyclers. We're also reducing our dependency on virgin plastic. We're lightweighting some of our bottles. We're switching more of our packaging to paper. We're also, for example, removing plastic straws. We've removed all our plastic straws from our medical nutrition portfolio. We were the first to do this between 2020 and 2010-2021, removing more than 200 million plastic straws from the system. We're also making great progress in developing ingredients that consume less carbon, switching to plant-based, just like Nestlé is doing in food and beverage. For example, we've acquired Orgain, a leader in plant-based solution in active nutrition. We're also switching to plant-based in our tube feeding portfolio with products like Compleat, which you can see at our booth. A lot of the companies that we have are now switching also to B Corp. We have many joining in 2023. We're very proud to have more than 50% of management led by women in our company. Let's dive a bit deeper in terms of the strategic imperatives that drive the ambition I highlighted in my opening statement. Don and Anna will follow the same structure for consistency. First of all, boosting growth, differentiating through insight, and then unlocking opportunities, growth, and synergies through M&A. As I highlighted before, we have this unique capability of delivering omni-channel synergies between consumer and medical. We have a unique ability to reach our customers at the hospital physician, but also deliver throughout the store and channel. You can see that actually our channel footprint is quite evenly split, and this is quite unique. We've been growing our e-commerce footprint in a big way. In the last 6 years, we've grown our e-commerce sales, and we are now on path to get as close to 25% as possible already. You can see very impressive e-commerce position across the marketplace. We are holding the number one position on Amazon with Garden of Life, but we're not only the number one. We have four additional brands in the top eight at Amazon. We have leading position across multiple subsegments in e-commerce, including internationally and direct to consumer. Growing the core also includes geographic opportunities. We have a fantastic leading U.S. position, as you saw before, and we are present in more than 70 countries with great local know-how and deep nutrition and health capabilities, including omni-channel. With the Nestlé also broader local capabilities, our plan is to have more than 100 brand rollouts in 40 geographies in the next five Years. The second pillar to our strategic imperatives is to drive insight, and innovation is a key pillar to do this. You heard this morning from Stefan Palzer how speed of innovation is key. We've implemented exactly the same mindset, driving the accelerator concept within Nestlé Health Science. For example, we've launched the great collagen gummies and chocolate powder from Vital Proteins within six months, great-tasting products. We're also embedding ecosystem solution within that innovation framework. For example, with weight management solution, OPTIFAST, my OPTIFAST journey, or for Crohn's disease patients with ModuLife. That allows us to embed a great diet solution so that patients can benefit not only from our product, but from diet recommendation in a simple way. We have also unique expertise and capabilities in research and development, in regulatory, medical, and clinical. We have built a unique leader center of excellence focusing on liquids, powder, solid dose, as well as gummies. Being a leader in nutrition and health allows us to build great partnership to further hone and grow this ecosystem I described before. We've been able to drive our growth through innovation in a big way, reaching close to 50% of our growth coming from innovation with launches in the last two years. Just a few example of how we deliver on the great insights we get on the needs from consumer and patients. For example, with the launch of Nutren GlucoSmart, this is a great simple solution that we launch in Asia so that consumers can add to a high carbohydrate meal, GlucoSmart and reduce the glucose spike post-meal. We've launched a great innovation in gastrointestinal with a three-in-one whole biotic solution with a pre, pro, and postbiotic. The postbiotic is unique. It was the first introduction. It comes from our manufacturing footprint, and basically allows to enhance the performance of the probiotic in the gut. Another great example is how we've leveraged Nestlé's R&D with human milk oligosaccharides that Stefan mentioned this morning. This is a great solution for our food allergy portfolio. With Alfamino, which is an amino acid formula that's targeting severe cow's milk protein allergy. We've launched Alfamino with two HMOs, which allows children to basically build a better immune profile and microbiome. Then we're also continuously innovating in personalization. Personalization made easy with Persona, where we integrate a simple, convenient solution for people who want a recommendation with on vitamin, minerals, and supplements, but also much more advanced solution with Pure Encapsulations and PureGenomics. Here, we take actually genomic data from consumers, add micro, macronutrient information, provide this in a simple way to healthcare providers so they can better recommend our product to their consumers. The third pillar to our strategy is unlocking growth and opportunities through M&A. First, our strategy was built on a very solid base business. Second, we've designed and built our strategy around M&A, focusing on the trends that I spoke about in my introduction. We've been focusing on transformational M&A activities that would give us leading position in mass and specialty with Atrium Innovations, as well as The Bountiful Company. We've also added unique assets which we believe that we can grow and expand geographically and through distribution with, for example, Vital Proteins, Nuun, and Orgain. Last, we've added further local regional capabilities with very targeted M&A acquisitions. For example, with Puravida in Brazil, allowing us to build our capabilities in Latin America further, as well as accelerating our capabilities in Southeast Asia with The Better Health Company based in Oceania. We've built this very specific capability to integrate those acquisitions in creating efficiency, but also taking care of the differences of each of these companies. We build and keep very specific brand capabilities in terms of marketing, digital, e-commerce, product innovation. We add a layer of very large and broad-based capabilities across the company in R&D, retail sales with one team, operations, manufacturing, supply chain, and then also back office efficiencies. This is supported by backbone technology from Nestlé, as well as creating a single leadership in the U.S. and international to create a very simple execution model. With this, we've allowed us to create a repetitive model where we can easily and effectively integrate future additional M&A into our portfolio, bolt-ons to create fast synergies on the top and bottom line. That takes me to the cost synergies opportunity that we have at Nestlé Health Science. We're planning to deliver more than 300 basis point of bottom line improvement in the next three years. We are seeing this ramping up in 2022, reaching full scale in 2024 with a full year impact. Focusing on manufacturing efficiency, supply chain, and SG&A. You heard Laurent talk about Project Tasty, where we apply the same model and the same learnings across our portfolio in terms of rationalization of raw and packed material, as well as SKU and recipes. We have great opportunity also to insource into our manufacturing footprint. Second, we leverage the supply chain opportunity, eliminating duplication of warehouse, for example, in consolidating more shipments, and of course, leveraging our scale. Last but not least, leveraging the Nestlé system to be able to remove and rationalize overlapping overheads, as well as create further scale in our sourcing. With that, I'm gonna stop here, hand over to Don, who will take you through our Consumer Care business, and then return for the conclusion and Q&A. Thank you. Thank you, Greg. I'm Don Kerrigan. I'm the CEO of the US business for Nestlé Health Science, and I joined Nestlé Health Science from The Bountiful Company, where I was the president of North America. I spent three or four years with The Bountiful Company, and then prior to that, spent most of my career in the consumer healthcare space at Pfizer Consumer and Bayer Consumer. I'm excited to be here today to talk with you about the Consumer Care portion of our business and give you a view as to both the opportunities and the prospects that we see for the future. As Greg mentioned, these are very attractive categories. They're very large in scale. VMS is CHF 140 billion, Active Nutrition is nearly CHF 30 billion, and both have been experiencing very robust growth, which we also expect to continue in the future. The underlying trends that are driving that are that they're incredibly consumer driven. It is a fragmented market, which creates opportunity for consolidation and scale. Innovation matters to the consumer here, and I'll come onto in a minute, brands really matter to the consumer here. There's a holistic consumer trend towards wellness and self-care that is really motivating consumers to participate in this category, and that's only been strengthened with COVID. The category, as I said before, is very brand centric. If you look at the performance of the category over the last several years, brands have outstripped private label quite considerably in terms of market performance. Part of the reason for that is that the consumer leverages brand as one of the core reasons that they choose a product within the category, and they look for the brand that they know that they can trust, that delivers quality, and that delivers science and technology. We see that as a significant opportunity that we can continue to bring into the market. As I said just previously, COVID only strengthened this category. We have seen increased usage rates, so the volume of which the consumer uses the category has increased quite dramatically. We've seen increased numbers of households and people participating in the category, as reflected there. VMS saw, in the U.S. alone, over 5 million new households coming in. Active Nutrition has seen even more during this period. Frankly, we've seen increased penetration over the last several years in this category that is unheard of to grow that level of penetration in such a short period of time, nearly six points on Active Nutrition and three points on a very well-penetrated category of supplements. The underlying motivation in consumers today is only as strong as they continue to look for ways that they can take more control of their health and do more for themselves, even amidst some of the challenges of the global recession. During this period, we've also, as Greg mentioned, outperformed the category. You've seen very strong growth performance by Nestlé Health Science and our brands, and that's continued through the COVID period and into this post-COVID period that we're experiencing now. While we are cycling some very significant volumes from COVID, Omicron, Delta spikes, we are still in a category that is exponentially larger than it was pre-COVID, and the volumes that are in this category today are much larger than they have ever been. Nestlé Health Science is kind of uniquely positioned within this segment. We are the leading global consumer care company focused on nutrition, and what really differentiates us is that we are solely focused on nutrition. If you look at the other companies that are represented on this slide, many of them have leading brands and positions within nutrition, but they also play in oral care or OTC medicines or other segments that differentiates them from us in that their focus is distributed across those different categories. I like to say that in the U.S., but certainly on a global basis, in the U.S., we have 6,000 colleagues and associates that wake up every day thinking about nutrition and advancing nutrition for consumers and patients in the U.S. That really is our sole focus as a business. Our brands are distributed across all aspects of how the consumer shops. If they're premium down to value, we have offerings within the Nestlé Health Science portfolio. If they're self-selected or they're leveraging an HCP or an influencer to help guide them in their selection, then we're well penetrated in all of those channels. In the U.S. and around the world, wherever the consumer or patient is interacting with nutrition, Nestlé Health Science is in a leading position. We have driven substantial growth, as you just saw, and we continue to drive not only growth, but value in this category by adding increased innovation or technologies that deliver increased opportunity for the consumer to invest more and get more value out of the category. There's two examples that are there. The first is a product called Sleep3, which we will talk a little bit more about. It's an improvement over base melatonin and as a result of that, commands almost a two-time premium in terms of the average price per pill for the consumer to get the increased benefits that come with Sleep3. As Greg mentioned, I think you'll find both in the back of the room and in your gift bags, you'll have the opportunity to sample Sleep3 yourself and decide whether or not it delivers on the promise that we make with this brand. We've done the same thing with Orgain as it has come in. We've not only continued to drive growth on the base powder business, which is an incredibly strong and well-performing business today, but we're adding a complete meal product into the market as we speak, which has a much higher ring for the consumer, but they also get significant increased benefit from that product. Excuse me. The U.S. market, as Greg said, is the largest part of our total business. Right now, we've seen strong growth. I'll walk across the slide just to ground us. The VMS category growing at almost 8%, we have a leading share at 14% within the market. Obviously, we've continued to take share. We have the great privilege of having brands that are in leading positions across all aspects of the market. That includes Garden of Life, that includes Nature's Bounty, et cetera. We're really well-positioned with those brands in the U.S., not only to continue to drive growth, but to expand those brands outside of the U.S. Adult nutrition with Boost. Boost commands a number two Position within the U.S. market, has taken significant share over the last year and continues to be a growth driver within that adult nutrition Healthy Aging segment. As I mentioned, Orgain joined our family earlier this year and has been a significant addition in the plant-based protein segment, driving meaningful growth, meaningful share, and really one of the preeminent brands in the plant-based arena of protein. Then, of course, Vital Proteins, which we'll share a little bit more on here shortly, but largely has created the collagen market and commands better than a 50 share, still growing share, still driving growth in the market. We have this great privilege of amazing brands within the U.S. business that continue to present opportunities for continued growth, but we also know that there's significant growth opportunity as we boost the core to bring these brands into other markets. When we look at the U.S. market versus the rest of the world, we see that the per capita spending in the U.S. is much higher. The consumer is spending exponentially more on nutritional supplements within consumer care. There are significant value in the markets around the world, particularly in some of the ones that are referenced there, and there's greater opportunity for penetration of these categories into those markets. We see the same trends in terms of global health and wellness. We see the opportunity to capitalize on the market potential that exists and further develop those markets in the future. We can leverage our science and innovation to be a leader in those markets as we are in the U.S. Our ambition with the U.S., I'm sorry, with the brands, is to drive significant growth. You'll see that my colleague in that runs the international business is positioned to deliver over $1 billion of revenue from the international business through the expansion of these global brands throughout the rest of the world. We'll do that in a prioritized and focused way, which I'll share in just a moment, but really leveraging both the expertise, the knowledge, the collateral materials, the content that we have developed and used in the U.S. market and adapt it appropriately for the ex-U.S. markets. This gives you a view for how we'll look to prioritize that. There are clearly some must-win markets, places where there's significant revenue opportunity, where there's per capita spending that we can capitalize. Greater China, Japan, and South Korea are the notable countries referenced there. We also have market positions today that we can build on where we're penetrated, but perhaps not as deeply penetrated as we would like. You'll see us focus on Canada, U.K., Brazil, and the rest of Oceania as well. We'll selectively invest to develop into other markets that have meaningful opportunity that can drive growth for us as a business. One of the brands that's referenced there is Vital Proteins, and we've begun the journey of rolling Vital Proteins into the market. Before I talk about the success and the approach for Vital Proteins, why don't I let you see a little about who Vital Proteins is through the video that I'll run right now. Three, two, one. Y'all ready to go? Come on. Let's do it. Y'all ready now, I'm making my move. Better stand back 'cause I'm coming through. Can't hold me down, can't vital this heat. I'm burning up like a 1,000 degrees. Watch it, post it's getting wild, man. All eyes on me, keep it dialed and swipe it, like it, look I made it. Hashtag, yep, I'm the greatest. The game don't stop 'til I get on top. Are you ready now? Whoa. Yeah. I'm making moves. Whoa. I'm ready to go. I'm making moves. Whoa. Yeah, I'm good to go. I'm never gonna stop. Until I'm on top. I'm gonna do what I do. I'm making moves. Whoa. I'm ready to go. I'm making moves. Whoa. Yeah, I'm good to go. I'm never gonna stop. Vital Proteins has been making moves. Many of our brands have actually, we have about four brands in the portfolio today that are on the verge or on the path to become the next billionaire brands within the portfolio. Vital certainly thinks that they're gonna be the first one there, although Nature's Bounty, Garden of Life, and Orgain are all gonna fight to be in that position as well. Vital Proteins is off to a great start because in the first year of the acquisition under Nestlé's ownership, the business doubled. We grew from $225 million to $450 million in 2021 alone. That was done through leveraging, as you saw, the incredible marketing efforts and development work that's done to help build this collagen segment within the U.S. We know that that has resonance that can be built and leveraged outside of the U.S. That starts with capitalizing on the globally recognized partner that we have with Jennifer Aniston. She is an ambassador for the brand. She's been a long time Vital Proteins user, and she's passionately committed towards developing not only the brand, but the collagen segment with us. We will localize the campaigns and the materials to better reflect or reflect the needs of the individual markets, but we'll obviously capitalize on the materials that we have coming out of U.S. and Jen's involvement. Then we'll obviously continue to build on the infrastructure that we have in the markets to bring Vital Proteins as well as all the brands into the selected markets that make sense for the respective brands in the portfolio. I mentioned before, Greg referenced that we spend a lot of time figuring out how we leverage insights to deliver greater value into the market. I referenced to you before that you'll have the opportunity to use Sleep3 hopefully tonight or at some point here. In the sleep category, there's been a real need. There's lots of products in the market that help you get to sleep. There's not that many products in the market that help you stay asleep through the night. If you're like me, and many people probably suffer as I do, with waking up in the middle of the night, and then it's more difficult to get back to sleep than it was to even fall asleep in the first place. We created this product, which is, first it has a layer of herbal blends that kind of calm you down, get the mind to stop racing a little bit, an immediate release of melatonin that kind of helps kick you into falling asleep, an extended release melatonin that through technology delivers a constant stream of melatonin throughout the night so that you can stay asleep. We've done clinical trials to support the product, we've seen that we've been able to maintain blood levels of melatonin at a level that maintains that sleep performance throughout the night. An exceptionally well-crafted, great product. I use it myself. I'd encourage all of you to try it. It's had a huge amount of commercial success. A great way that we've tried to focus on what was the consumer need, how do we deliver it through technology and differentiate the product, as you saw before, with premium pricing to deliver something that's very substantial right now within the portfolio. Orgain Kids has done the same. You know, they can see the need with consumers, with moms that want low sugar, convenient options for good nutritional gap filling. They created a product that is 40% less sugar, has an upgraded grass-fed protein, supported by its organic and non-GMO positioning. This product has already become the number one selling kids RTD on Amazon and is outpacing a very entrenched competitor within the RTD space of kids nutrition within the U.S. Again, focusing on the insight of what the consumer is looking for and delivering that through either technology or a better quality product is a continued way for us to bring differentiation to this category. In the spirit of unlocking potential, with portfolio management, the Bountiful acquisition was a transformational event within Nestlé Health Science. It brought capabilities that frankly didn't exist or weren't fully developed within Nestlé Health Science, notably manufacturing, but others as well. Greg referenced sales and other commercial expertise that existed within the Bountiful organization in addition to the brands. That has really allowed us to take an even stronger leadership position in the market, certainly in the US, but even on a global basis. That means, and we're deep now in scaling the portfolio into other segments. Taking formulations that exist within Garden of Life or Pure Encapsulations or the existing Bountiful portfolio and leveraging them into other brands within the business. We have become the undisputed nutritional lead within the US retail environment. Retailers, this is a category, these categories are very important to retailers today, and they're looking for somebody that's more consolidated to help them guide and direct where they're going to go with the wellness solutions in their stores. That leverage, as the leader, allows us to increase the productivity of our marketing investment as well as our trade investment and use more of our brands within a portfolio to bring solutions not only to the retailers, but to consumers. As Greg also mentioned, we're working hard to expand our margins through the efficiencies and synergies that can come from the scaled organization that we now have. We have a manufacturing organization that has leading position in pretty much every format that the consumer looks to for nutritional solutions. We have a supply chain that we continue to optimize and leverage our increased size and scale for raw ingredient sourcing benefit, as well as just the efficiency that we can get from insourcing. We've started to consolidate our SG&A and our marketing and merchandising functions such that we can capitalize on the scale of this very large business that we've created. The benefits of that have already started to be realized. We've seen a significant improvement in our ability to deliver to customers, our ability to bring formats to market across gummies, powders, liquids, solid dose, where we have scale and we have leadership. We have an organization that really is in a position to capitalize on a very substantial scaled nutrition business within the U.S. and on a global basis. That brings me to the end of the consumer care portion of the presentation. We're going to take a break right now, and I think we've asked that everyone be back at 2:50. Before we do that, we're gonna run some commercials for you as well on the consumer care business, so you can get a better sense for the brands within the portfolio. Well, a very good afternoon to everybody. How many people went and sampled some things over at the Nestlé Health Science booth? I see a few people who are not yet immune, don't have collagen, and don't quite look like Jennifer Aniston. I think you'll have one more shot afterwards. Good afternoon. My name is Anna Mohl. I lead the international business for Nestlé Health Science. I have the great privilege of talking to you today about our medical nutrition business. Now, I could stand up here and tell you how fantastic our products are and the incredible impact that they have on the lives of our patients and their families. I think it would be better for you to hear directly from them. Zach has had Crohn's disease. He was diagnosed with Crohn's disease when he was an infant. He has a unique genetic variation, and the only one of this type documented in the world. The combination of symptoms were like, alarm signs for me to think about causing glycogenosis. Lisa started having these symptoms of gastroparesis. The day that I got the call at work that he had Crohn's disease completely changed our lives. I just felt like a failure as a mother if I could not feed my child. Emotionally, it was tough because I didn't know anybody that lived this way. I just couldn't imagine him being on medication the rest of his life. Just the thought of a feeding tube, it sounded like it was last resort, and it ended up turning into something so much better. Now he interacts so much more, and just his overall health is just fantastic. I remember getting up one morning, and I had been on full-strength Peptamen for about a week. I remember getting up one morning, I laid there in bed, and I thought, "Wow, there's sunshine," and I meant sunshine in me. The symptoms started to disappear one by one. After three weeks, we had full improvement of all of the symptoms. You keep my lovely little wife alive every day. Is what you do important? Absolutely. It's over the top, off the charts important. Thank you, because there's a lot of other Lisa's in the world, and there's some little bitty Lisa's that maybe are six months old that you make a difference to also. I just wanna say thank you to all of you because you come to work every day and don't realize the impact you have on families like us. Like, we depend on you. Truly extraordinary families. We offer a broad and deep portfolio that covers a wide range of medical conditions, both acute and chronic, with both oral and tube-feeding products. Oral meaning that you would drink it, take it by mouth. Tube-feeding meaning it's a tube that's connected directly to your GI tract or to your stomach. We look at our products across five different categories. Acute medical care offers solutions for adults in the areas of immunonutrition, pre and post-surgery, oncology, disease-related nutrition, and malnutrition. Our pediatric portfolio offers solutions for cow's milk protein allergy, failure to thrive, and disease-related malnutrition. Our Vitaflo portfolio addresses inborn errors of metabolism or rare metabolic genetic disorders that have very specific nutritional needs that can have quite significant consequences if not managed properly. Metabolic health addresses obesity and diabetes. Our gastrointestinal portfolio addresses gastrointestinal impairment in the areas of malabsorption, maldigestion, and microbiome dysfunction. We have a long history of using our nutritional expertise to improve lives. It goes all the way back to our founder, Henri Nestlé, who developed the world's first infant nutrition product for infants who couldn't breastfeed. Nearly 100 years later, we quite literally launched a highly specialized product into space to help astronauts make sure they could get the right level of protein and nutrition while out in space. Now, back here on planet Earth, we have patients still today who are using this highly specialized formula for if they're not able to digest whole proteins. Our portfolio today really came together with the acquisition of Novartis Medical Nutrition in 2007, and then in 2011, Nestlé Health Science was formed. The medical nutrition category is large and growing at CHF 12 billion with a three-year CAGR of 5%, and we expect that growth level to continue into the future. It's a relatively consolidated category, as Greg mentioned, with four global players and then local players market by market. Nestlé holds the number two position globally. We look at the category, as I mentioned, split between oral and tube feeding and adult and pediatric. Medical nutrition is used as part of medical treatment under the care of a healthcare professional, either with a recommendation or a prescription, depending on the specific market. Products are typically started in the hospital or in a clinic, as I mentioned, under the care of a healthcare professional, and then may be continued after discharge, either to home, to nursing homes, or to rehab centers. When in the hospital, the product is typically accessed and administered by the hospital. At home, the patient can access it through pharmacies, specialty stores, e-commerce, or home care companies that will deliver the product and also provide additional healthcare services. Medical nutrition is classified as a medical food under the regulatory framework and has different requirements and regulation than general food supplements, or pharmaceutical products. Medical foods are defined as specialized products for the nutritional management of diseases to be used under medical supervision. The frameworks and regulation have very specific requirements, as I mentioned, in terms of allowable claims, scientific substantiation, and required market registration, which differs country by country and therefore requires both local and global expertise as well as the ability to manage a high degree of complexity. Medical nutrition is covered by a range of payment models, from fully reimbursed by public or private insurance to fully self-paid by patients, and it varies by country and by care setting. Typically, there is more frequent and broader coverage in the hospital than outside the hospital. The level of reimbursement, I should say, for medical nutrition, is far lower than for pharmaceuticals. Rather than be reimbursed as a separate line item, it's typically part of the per diem in the hospital or the daily rate to cover the full episode of care. That places a greater burden on the cost of the medical nutrition product as well as the importance of demonstrating the benefit of the product. Medical nutrition addresses critical healthcare issues that have a great impact on the cost of care and the quality of life. Greg mentioned some of these earlier, but I wanna highlight three of them just for emphasis. Globally, we see a rise in chronic conditions. You can see the figures here for the U.S. Just to mention two other countries, in China, over 140 million people have diabetes, and in Mexico, more than 75% of the population is overweight or obese. In many countries, we have an aging population. In China, over 160 million adults are over the age of 60. In the U.S., over 50 million, 28% of the population in Japan, and over 20% of the population in many Western European countries. We see continued pressure on healthcare spending as healthcare costs have risen 13% faster than the GDP over the last 20 years. Medical nutrition can make a meaningful difference in addressing these healthcare issues, as I'll show you in just a moment. I wanna take a moment to define malnutrition in the context of medical nutrition. Malnutrition, also known as undernutrition or disease-related malnutrition, occurs when patients are not getting the right level of nutrition, the right nutrition in the right amount to sustain their health or their life, and they cannot get this through their diet alone. In this case, the goal of medical nutrition is to fill those nutritional insufficiencies. You can see that the rates of malnutrition are quite high among hospital patients, cancer patients, and the elderly. Why is this important? It's important because the impact on the cost of care and the quality of life is quite significant. You can see that there's significant impact in terms of comorbidities related to malnutrition, including increased complications, higher mortality rates, and potentially longer hospital stays. The cost to treat a malnourished patient can be 3x higher than treating a properly nourished patient. If we take a look at the numbers in a little more detail, and we look at the impact on the cost of care and quality of care, the results really are quite astounding. There is a 52/ 1 return on investment for using an oral nutritional supplement in the hospital. For spending just $90, the system can save $5,000. We're here at an investor conference, so I don't think I need to explain any more about the ROI for that. If we look at more specialized products, we see that the impact is quite similar. If we look at cow's milk protein allergies, we look for cancer patients and for wound healing, the results are quite similar. Now you might say it's a total no-brainer to use medical nutrition if we see the results like this. The challenge that we have is that often the budget for the cost of the product and the savings for the treatment accrue to different budgets. What that means or the savings might actually be a cost avoidance, such as a prevention of an infection rather than a hard cost reduction. The way we overcome that is we need to make sure that we're selling the clinical and the health economic benefits at the right level of the system so they can see what the full picture benefit is. Our business model is multifaceted and puts the patient and the caregiver at the center. We've talked earlier about the importance of the healthcare professional. We engage with healthcare professionals in three ways. Our medical and scientific teams collaborate with key opinion leaders and healthcare professionals to develop clinical and health economic data and also develop feeding protocols. Our R&D team collaborate with healthcare professionals and key opinion leaders to understand those unmet patient needs to lead to differentiate and leading-edge innovation. Our medical sales teams located in countries around the world educate healthcare professionals on the value of medical nutrition as well as our products in order to drive usage and prescriptions. We engage directly with patients and caregivers, both online and offline, to provide education and resources, to understand the insights, to understand the patient journey, again, to, in order to provide additional education, resources, and innovation, and also to assure proper access to product. We have many relationships with customers across our multiple routes to market, as we discussed earlier, including hospitals, homecares, distributors, pharmacies, e-commerce, and modern trade. We partner closely with local health authorities and regulatory authorities, industry association, healthcare professional associations to assure product access, and to assure patient access, and to assure reimbursement wherever it's possible. Both Don and Greg mentioned this earlier. Our medical and consumer portfolio is highly synergistic and provides solutions across the continuum of care, putting the patient and consumer at the center, regardless of the route to market or the regulatory classification. This is powered by our insights, our innovation, our digital, our medical and scientific credibility, our HCP, our healthcare professional recommendations, education, as well as our commercial execution across channels. We hold a top three market share, leadership position in many markets and segments around the world with plenty of opportunity for us to continue to grow and continue to gain share. Unfortunately, we don't have market share in all of the markets and all the segments in which we compete, so we're sharing some of the ones that we have right here. What I'd like to do now is talk a little bit about how we activate the strategic imperatives that Greg shared earlier for our Medical Nutrition business. Our medical sales teams located in countries around the world are the key drivers of our demand generation. We're shifting from a primarily face-to-face model to an omnichannel model, leveraging digital emails, webinars, and remote detailing to increase our reach, frequency, and quality of our calls. Our omnichannel strategy is supported by data and technology that allows us to personalize engagement with the healthcare professional to improve the quality and to improve the impact. The result has been an increase in sales, share, prescriptions, and also effectiveness of our account coverage around the world. External partnerships with research universities, with key opinion leaders, and with policymakers allows us to shape the industry and develop leading-edge innovation. Our Vitaflo team has had a long-standing partnership with the University College London and Great Ormond Street Hospital that has led innovation all the way from concept to launch. It started several years ago with a hypothesis about the impact of the ketogenic diet on drug-resistant epilepsy, went through several rounds of pre, preclinical and clinical trials, which ultimately showed a 49% reduction in seizures during the duration of the study, and it resulted in the launch of KeVita in the U.K. earlier this year. In the early days of COVID, during the early waves, when the hospitals and the intensive care units were filling up with very sick, mechanically ventilated patients, we needed to work quickly and partner with healthcare professionals and key opinion leaders to figure out how to feed these patients to support their treatment. We very quickly worked with key opinion leaders to do a thorough literature research, review of the literature, and we quickly developed protocols and feeding recommendations that were rapidly rolled out across Europe. They leveraged many of our highly specialized products, including Peptamen, which you may have seen over at the booth, and I'll talk about in a little more detail. We found that they were particularly suitable to feed these very sick patients because of their high protein content and very specialized product composition. That led to double-digit growth of our specialized products during these early waves of COVID. We also successfully partnered with policymakers, with industry associations, and with patient associations to include nutritional support in the European Union Beating Cancer Plan. We're now working locally with associations in the different markets for the implementation to assure patient access and reimbursement where it's possible. We see great growth potential in China, and we've been investing there for over 10 years in people, capabilities, product pipeline, and routes to market. The market dynamics are ripe for medical nutrition. There's an aging population, there's a rise in chronic disease. There's been a regulatory shift of medical nutrition products which were previously classified as a drug to a medical food status. We've also seen a change in medical practice from parental nutrition, which is via tube into the bloodstream, to enteral nutrition, as I just described, tube feeding into the gut. We invested heavily in scientific data and clinical trials to allow us to locally register our product as what is called a FSMP, a food for special medical purpose. By registering as a food for special medical purpose, it allows us to have a specific product composition and make specific health claims. The registration process is very long, it's very cumbersome, and has a lot of regulations that change frequently, and it can take up to three-five years to register every product. We also invested in manufacturing and product development, building a factory and an R&D center, the first of its kind in China. That has allowed us to launch the first liquid food for special medical purpose in China, and the first oral cancer food for special medical purpose in China. We have an incredible team on the ground driving the business there. We have a fantastic medical sales team that is building relationships with key opinion leaders. Key opinion leaders is working closely with healthcare professionals to educate them both on the new products and the new practices. We have a sophisticated online, offline demand generation model that leverages our presence in the hospital and in the stores surrounding the hospital, along with e-commerce and digital, with strong partnerships with JD, Tmall, and TikTok. We have an omni-channel strategy where we connect and engage directly with healthcare professionals as well as with patients. The result has been continuous growth over the last 10 years and a 40% CAGR over the last three years with continuous market share gains and market leadership position in the segments in which we compete. We continue to invest to grow in medical nutrition, and we're also investing for growth in consumer care, where we're leveraging our medical and scientific credibility, our digital capabilities, our team on the ground, while also building new capabilities. As you saw earlier, Greg mentioned that we currently hold the number three position for probiotics in the VMS segment, and we continue to grow and to make inroads into other segments as well. I'd like to mention two other examples, two other markets, one mature and one developing, where we are winning in the marketplace driven by local expertise and excellence in execution. In France, we leverage local insight and clinical data to partner or to work with health authorities to get differentiated reimbursement on two specialized products. ThickenUp Clear is a product for dysphagia patients who have difficulty swallowing. Nutren 2.0 is a high-calorie, high-protein tube feeding product that is frequently used for home care patients. We're the only products in these segments that are currently reimbursed, and as you can see from the chart, it has led to rapid sales and share gain, allowing us to have a leading market share position in both of these segments. We've also launched in Turkey, we've invested and we've launched the first locally produced and reimbursed medical nutrition products in Turkey, first through a co-manufacturer and now through our own factory. You can see there, we've seen sales, share, and volume gain, and we now hold the number one market share position in adult medical nutrition. Greg talked earlier, and Don also talked earlier about our science-based, insight-based iterative innovation process, which we use to drive growth and to launch innovation for disease-specific innovation to meet very specific patient needs. I'd like to discuss a few of those with you right now. I mentioned Peptamen, and hopefully you saw it at the booth, which is a highly specialized proprietary tube feeding product for patients with GI impairment. What we do is we hydrolyze or we break down the protein to allow for better tolerance and absorption of the nutrients. What that means is patients are better able to metabolize the nutrition so that their bodies can benefit from it. We also avoid GI distress, such as diarrhea, which is both unpleasant and also causes the use of healthcare resources, particularly nursing care. We've seen, we continue to see strong growth on Peptamen and also accretive profit. The second product that I wanna mention, and Greg talked about this, hopefully you've had a chance to try it at the booth, is Meritene Clinical Extra Protein, also called Resource Ultra Plus. It is the highest concentration of protein on the market. It is an oral nutritional supplement. We talked about the importance of oral nutritional supplements in the hospital to address both the quality of care and the cost of care. One of the challenges that we see, and we've launched this in a variety of flavors and a great taste, again, hopefully you've tried it. One of the challenges that we see with oral nutritional supplements is what we call patient adherence, the patient's ability to continue to use the product. It is often very difficult when you're sick to consume as much product as you need in order to get the nutritional benefit, sometimes patients get what we call as taste fatigue. They're literally tired of drinking the same product and the same flavor. By offering a product with high concentration of the nutrition and protein, they're able to consume a lower amount with a great taste and a variety of flavor, they're able to get the benefit. We launched this earlier this year. We're seeing incredible trial and adoption, we're looking forward to seeing great success in the market. The third product I'd like to talk about is our Compleat brand. Again, hopefully you've seen it over at the booth. Compleat and Compleat Pediatric is a range that we continue to expand, of real food products, non-GMO. We also offer organic, free from allergen, plant-based, vegan and vegetarian options. This meets the consumer growing preference for more natural and also plant-based products, and also offers excellent tolerance and absorption, particularly for long-term tube feeding patients. Now, while innovation in products is critically important, it is also our innovation beyond products that really helps to differentiate us and provide a holistic ecosystem, as Aude Gandon talked about earlier, for patients and healthcare professionals. We launched the SpikeRight feeding technology, which I'll show you here in a moment. This is a proprietary cap that allows a patient to feed directly from the package rather than need to use a pump. It's called bolus feeding. It's particularly prevalent among home care patients. What it does is, as I said, it allows the patient to feed directly from the package, which provides them freedom, flexibility, and also time savings. It also saves the healthcare system money because you don't need to use pumps or bags, and it also reduced waste. We've seen great incrementality since we've launched this product. We've also won some tenders because we're the only manufacturer on the market that has this. I also wanna mention our Mini Nutritional Assessment for the Elderly. This is a clinically validated instrument for quickly assessing malnutrition, and it's used as a standard of care for hospital admission. We talked earlier about the high rate of malnutrition, both among the elderly and among hospital patients. This allows the clinician to quickly assess the nutritional status and include nutrition as part of the regimen in the hospital and often leads to the prescription of an oral nutritional supplement. The last two programs I'd like to mention are our ModuLife program for Crohn's disease and the cerebral palsy program, both of which offer education, resources, and digital tools along with product recommendation for a holistic approach for our patient and for healthcare professionals. Again, we've seen incremental growth where we've implemented this product. Hopefully you're as excited about our Medical Nutrition portfolio as I am. Now I'm gonna turn it back to Greg for some closing remarks. Thank you. Thank you very much, Anna. Wonderful. I hope that these two hours that we just spent on Nestlé Health Science provide greater depth and understanding in what we do at Nestlé Health Science. Let me just summarize for you and wrap up. First of all, we are making great progress to creating a leading company in nutrition and health. We're focusing on three strategic imperatives to deliver. First of all, boosting growth in our core. This is establishing opportunities, driving distribution, geographic expansion, driving category leadership with our brands, and building great customer partnerships. Second, driving differentiation with great expertise. You saw some of the fantastic innovation that we have. Expanding that throughout our portfolio, building ecosystem. Third, continuously unlocking opportunities through M&A and portfolio management. That's about delivering our synergies and M&A acquisitions plans, also creating future additional opportunities with bolt-ons. That means overall driving long-term value by continuously, through 2025, driving high single-digit growth rate and also driving our bottom line with more than 400 basis point improvement, driving our underlying trading operating profit above 18%. As you leave today, here is what I'd like you to remember and take away. We're operating in a fantastic, attractive category with great trends that are here to stay for the long term. We have a portfolio which has and delivers great benefit in nutrition and metabolism with fantastic expertise. We have a unique scale and now have created that scale to drive further our leadership with great talent and great brands. Last but not least, we have a model where we can create significant synergies between Consumer Care and Medical Nutrition to drive efficiency in top and bottom line. With that, I'll stop here, and Anna and Don will join me here on stage, and we'll take your questions. Thank you. Mm-hmm. We now do the Q&A session. As you did this morning, if you could please raise your hands to ask a question. You know the routine, give your name and company name and limit yourself to no more than two questions, please. Guillaume, please kick us off. Good afternoon. It's Guillaume Delmas from UBS. Two questions from me, please. The first one is on the VMS category. We've been hearing from many of your competitors that the category has slowed, but they think it's not just down to a post COVID-19 normalization. They also see some elements of consumers just trending out of the category because it's viewed as more discretionary. Would like to hear your view on how defensive and resilient the category is in a recessionary environment. Related to that, a point of clarification, Greg, you were talking about a return to high single-digit growth from the second half of 2023 in your presentation? Okay. The second question is about your portfolio today. Where are the gaps from a regional or subcategory standpoint, where do you see the most obvious gaps? For the time being, are you gonna be focusing on integrating the recently acquired businesses and extracting the synergies, or could you already add some more businesses? Thank you. All right. Thanks very much. I'll let Don start in terms of the VMS category and recession. Yeah. I think if you looked historically, the category has proven to be very insulated from downturn as a result of recession. Look back at 2008, you actually saw continued growth on the category in conjunction with, you know, the economic environment. I also think, and we've seen, that there's continues to be passion and commitment towards wellness and health, and sometimes that's even even more impassioned as a result of other issues going on around people. We're not seeing that. Certainly, we're cycling COVID, and we have some significant, as I said earlier, bumps from year ago, you know, in terms of volume created by Omicron and Delta variants, et cetera. We're definitely seeing immunity taking a little bit of a year-on-year comp decline, but not tied directly to the recession. To add to, so for your second question in terms of opportunities, as you heard us through the presentation, it's still a very fragmented market, which offers a tremendous amount of opportunities for growth. We believe that we have a great portfolio that we have built now, establishing that great leadership position where we can build on. Frankly, there is nobody that has our scale in terms of brand, in terms of manufacturing, R&D, and I think that's the starting point, which allows us to expand distribution and geographically, I think. That's the starting point where we're coming from. I think we continuously look at opportunities. We are diligent when we look at those opportunities. There are a few special technology, specific categories where we think we can build. As you will remember the slide where I showed you some of the segments where we're not necessarily yet leaders in the market, this would lead to potential additional opportunities to continue to build on those segments. Geographically, you saw that we're very exposed or leading in the U.S. market and hence there are plenty of opportunities for us to grow and build further geographically. That's where our focus on is. You know, there are many opportunities on the market. We're disciplined in how we look at them, and it has to make sense in terms of the trends, in terms of the strategic fit, but also in terms of the financial performance that we expect. Bruno, please go ahead. Bruno Monteyne from Bernstein. Greg, if I understood correctly, you're aiming to grow high single digits, so maybe eight, nine. On the market growth slide, most of the markets were between 4% and 6%, so make that 5%. You're aiming to outgrow the markets by 300- 400 basis points pretty consistently. If I also understood correctly, it's mainly about either white space filling and geographic expansion, probably market share gains. Am I missing anything? Clearly M&A wasn't part of it. Would you be able to sort of size, you know, is it mainly geographic expansion, mainly market share expansion? Could you sort of weigh up those two things? My second question is, in consumer health, obviously you have one of your competitors, Haleon, that had like this Zantac problem with medical liability. Do you feel you have any exposure to these kind of issues? If so, do you make enough excess returns to pay for that potential risk in your portfolio? All right. Starting with your first question, thank you, Bruno. In terms of the growth equation, I think you got it right, meaning that we intend to grow above market 200-400 basis point. This is what we are shooting for. You saw that we've been doing even better than this during the COVID period, but in a steady state environment, I think we can outperform the market. It's driven through share gain, absolutely, and we think that we have the momentum, the capacity to deliver on the share gain as well as geographic expansion. Also, I think, penetration is also a great opportunity for growth in terms of when you see the VMS level penetration or active nutrition. We see that we can create more momentum in the market in general to increase the penetration of the segment outside the U.S. The same applies to medical nutrition. I think in medical nutrition, the category is still under index versus its potential and can grow further. Being a leader, in both area, we think that we can create the momentum for additional growth. On your second question. I'm blanking now. Whether you have any risk? Oh, yes. Sorry. Yeah. Please, don't chime in as this was, this is a more of a U.S. case, but Zantac is an OTC product. I don't think the categories where we play in carry the same level of risk. You know, hence, we take a lot of very serious deep review with our medical, regulatory, clinical, and legal review on the claims and the product that we have. We have the proper level of reserve for any potential challenges, but we haven't seen in this category any significant legals challenges. Thank you. No, I would concur. Warren. Sorry. Just to follow up on your first point, if you're gonna boost penetration, does that mean you're planning to accelerate the market's growth because if penetration grows? I think, you know, as, when we look at the U.S. market, which is quite high, highly penetrated, U.S. is growing at 2%, 3% growth rate. Geographically, we're seeing more 6%-7%-ish growth rate. Obviously, that's part of the equation in the mid-single digit growth rate that we mentioned across the board. Thank you. John, please go ahead. Yeah. Thank you very much. John Ennis from Goldman. I've got a couple of questions on the margin guidance. It looks like 3/4 of the margin expansion that you're forecasting over the next three years are coming from effectively cost savings and efficiencies, at the same time you want to accelerate the top line growth. I guess the question is, how confident are you that you can deliver on both? Because sometimes there's a trade-off between those two components. The second part of the question links to some of the earlier points, from the outside looking in, this is a category with relatively low concentration and also low margin. There appears to be, again, a correlation there. To what degree can you sustainably improve the margin without the need for further consolidation in that industry? Maybe to help answer that question, could you give us a bit of a steer on the gross margin structure of this business unit? Thank you. Yeah. Thank you. I'll start with a second part because that's what I can remember now. Anyway, in terms of the growth margin and bottom line, in general, it's a category where we play that enjoys more attractive margin than you would find in food and beverage. More specialized, higher gross margin in general. As I mentioned, we are in an investment mode either for our growth and share gain in the U.S. and internationally, but also through M&A that comes with one-offs when we make the acquisition and also investment to create the synergies. As we cycle through this, we believe that we can continuously enjoy gross margin improvement through the synergies, through the efficiency that we're building, and also drive further efficiency all the way to the bottom line, hence driving improvement in our Underlying Trading Operating Profit. Someone needs to remind me the first question. The synergy component. Sorry? The synergy component of the margin. Yeah. I mean, you've kind of touched on it, but it was effectively, you know, to what degree you can deliver both such a high degree of margin expansion with an acceleration in growth. I think one element of the efficiencies that you mentioned was a reduction or efficiency in marketing spend. Yeah. Again, I think it comes to what I just said, we're driving size. It also definitely helping on continuous improvement in our margin. You know, the geographic expansion, we're not starting from scratch in every market. Every time we launch, we have now of a more established footprint. We can drive this in insourcing of manufacturing. All this when you add together, drives just a nice positive momentum on our ability to drive margins in the next three years. Thank you. Warren, I think that's you at the back. Please go ahead. Hi, it's Warren Ackermann here at Barclays. On the vitamin category, some consumers think there's a lot of kind of dubious science around the category. They don't really believe that, you know, popping pills actually really aids their health. What can Nestlé do from an R&D point of view with the money that you're spending on R&D to actually make the category more science driven so that when consumers find it tough from a cost of living point of view, they don't see it as such a discretionary category? That's the first one. What can you actually add, what value can you add on R&D in the category? The second one is, can these brands really travel? You know, I get that when you bought Bountiful, it was mainly a U.S. business. I get that Solgar is a brand that's in 50 countries. Other brands like Nature's Bounty, can that actually be a brand that's gonna work in Europe, China? If so, how do you go about doing that, and how quickly can you roll these brands out given some of the medical barriers around regulation as well? Thank you. I'll let Anna take the internationalization of the brands, to start with, and I will cover the R&D part. Yeah. The short answer is yes, and it depends. Overall, we're very excited and very bullish on the opportunity to roll out these brands geographically. And to your point, we do need to understand there are a couple of components that we need to look at. First, you know, as John described, we look at the different positioning of the brands and say, "Okay, you know, how does the portfolio fit based on the value proposition, the pricing, the channel, the consumer, the customer dynamics, competitive dynamics within the market and the regulatory framework? Which are the products that we can actually roll out, and in what time? What is the right sequencing of these brands so that we make sure that we can have multiple brands to give us a stronger portfolio to compete? Solgar, as you mentioned, is a very strong brand internationally. It's actually larger internationally than in the U.S. We're also seeing some of our other brands travel very well. You saw a little bit about Vital Proteins. We're starting to see some success with Nature's Bounty in a couple of the markets where we've also rolled out. We have Nuun in a couple of markets, and we're planning actually to roll out. There's a lot of excitement around Nuun, a lot of excitement around Orgain. It's really kind of what we call internally an embarrassment of riches. We have so many great brands, we need to figure out the right sequencing and approach to go into the market and make sure that the multitude of brands allows us to be more competitive. That's why we really need to look at the target consumer, the customer, the channel, and the claims that we can make. To your point, market by market, we do need to assess, you know, what can we say and what can the right formulation be, because you can't necessarily lift and shift an entire portfolio. Yeah. Just to add on this, each market is very specific, we don't necessarily plan to roll out every brand in every market. We look at the opportunities in each market. For example, where you have a market that's more pharmacy driven versus mass retail, a brand like Solgar or Pure Encapsulations is more adequate. We've rolled out very successfully Pure Encapsulations in Austria, in Germany, in Spain, in U.K., and we plan to further expand this. I think, you know, each market, but it takes time. It takes time to build this portfolio across the world. On the R&D question, the hypothesis that we made back when we started the whole strategy on the vitamin, minerals, and supplements back in 2014 is that we could leverage the great know-how and capability of Nestlé in R&D. There is many discovery and technology that we can leverage for Nestlé from Nestlé R&D, and that are not necessarily directly scalable into food and beverage, but that we can leverage into our in a portfolio like vitamin, minerals, and supplements. That was the hypothesis, and it turns out to be absolutely true and positive. For example, probiotics, we've been able to expand the probiotic portfolio in a big way, leveraging, for example, the manufacturing capability in probiotics that we are using from our infant nutrition business. The science, again, same example, but we see still many additional opportunities. We invest significantly into with the R&D into, for example, science in mitochondria, understanding further how you can impact people's aging process, what we call the cellular nutrition, and impacting, boosting the mitochondria in your body who are responsible for 80% of your immune system. This is part of the plan to continue to invest, bringing more science and educating both physicians, healthcare providers, as well as consumers about the benefits of what we have in the portfolio and some of the future innovations. Let's be clear, what we have in our portfolio are not pharmaceutical products, and we will never do clinical trial that are like a pharmaceutical product clinical trial. This is not the design of this category. On the other hand, we can leverage and create technology advancement, and develop available data on specific ingredient or if we feel the need to develop further evidence, then create that evidence. We probably have time for two more questions. Please go ahead. Thank you. Patrik Schwendimann, Zürcher Kantonalb ank. If I remember well, a long time ago, probably over ten years ago, it was mentioned that Nestlé Health Science could even have a 20% margin. Now you're aiming for 18%. Do you think that's still possible in the very long term to reach 20%, or has something changed? Nothing has changed. We continue believing that we can drive further the margins above 20% level. Remember, this is underlying trading operating profit. This is not EBITDA. Some of you might be comparing with people reporting EBITDA in some of similar categories, so I just wanna make sure this is clear. In general, we see further potential for improvement. Yes. Thank you. One final question, please go ahead. Thanks. Tom Sykes from Deutsche Bank. Two please. Just on Medical Nutrition, is pricing inflationary in Medical Nutrition, given that you said there were budgetary headwinds? Could you allude to what sort of level of pricing benefit that you see at the growth level within Medical Nutrition, please? Could you just clarify, please, on the consumer side, what manufacturing base you are going to be using to internationalize the business? 'Cause I'm still slightly confused by the different comments of synergies, insourcing, using your own manufacturing capability internationally. Are you gonna be using third-party manufacturers? That would be helpful, please. Anna, I think you can. Yes. As we mentioned during the presentation, you have different ranges, different payment models from fully reimbursed, partially, to not reimbursed at all. In markets where it's reimbursed, then the reimbursements are the reimbursement levels are relatively fixed by the government, and then there is typically, I'll call it a negotiation or a discussion each year with the health authorities to discuss whether there's going to be any adjustment in the reimbursement levels. We also have tenders, which are contracts either at the health system. It could be with the government or a state or a province or a region, or it could be with a specific hospital system. Those tenders can be anywhere from one-three-five years. Typically, those are then fixed prices for those years. As you know, there's a lot of pressure on healthcare spending. What we actually found during these last two years, because of the extraordinary inflation, in some cases, we were able to go back in and to negotiate the pricing, even within the tender, by demonstrating the higher cost inputs that we had. I would say that the Medical Nutrition business, the pricing isn't as impacted, or you're not able to adjust for inflation in the same way that you are in consumer pricing. In some of the markets where it's controlled by the health authorities, they will adjust. If I use Turkey as an example, they look at the inflation rate and in the country, which as you know, in Turkey is quite high, and then they will adjust the reimbursement rate. It will differ market by market and tender by tender. Those are discussions that we need to have with the health authorities. Regarding your, the manufacturing question you asked, I think, to summarize, we basically have the capacity to insource. Typically what you will find is that in the Consumer Care segment, there is a lot of players that are basically using co-manufacturing footprint. When we make the acquisitions, often the companies that we acquire come with a fairly large part of their portfolio that is coming manufactured. With the acquisition of The Bountiful Company, we added a top-notch manufacturing capacity at Nestlé Health Science. We now have the ability to bring and insource some of these co-manufacturing, get the savings, but also get top quality capability as we have in our manufacturing footprint. This applies, you know, obviously, shipping products from the U.S., when it's a lightweight product, like pills, it's fairly simple, and we do that. We also, in cases in some countries where import taxes are very high, then we look also for local production, and that was part of my comment on some local regional, M&A that we've done to add also this capability, in some certain region of the world. Okay. Now we're gonna take a break. We'll return at 4:00 P.M. for the final session of the day. Thank you. Thank you. Thank you. Thank you. Good afternoon. Good afternoon. Before discussing our value creating journey towards 2025, I will start with a short reminder of the significant transformation that Nestlé went through over the last 10 years. Today, Nestlé is much more focused category-wise than we were 10 years ago. If you look at Coffee, Pet Care and Nestlé Health Science, they do account now for more than 50% of our sales, while it was only a third 10 years ago. We start seeing the impact as well of new categories like plant-based, which is already contributing to 1% of our sales. We are much more premiumized than we were 10 years ago, with one-third of our sales today which are in premium products. We have largely walked away from commoditization. We are also much more digital today than we were 10 years ago, with 15% of our sales in e-commerce, while it was a very small percentage 10 years ago. I could mention there as well that we are much more digital, with almost 55% of our marketing spend in the digital space today. We are also much more exposed to high growth geographies like emerging market, like the U.S. Today, the U.S., we are much more American than we were actually 10 years ago, with 35% of our sales in North America. It was 28% 10 years ago. I could continue the list. We are far less capital intensive, far less labor intensive than we were, as illustrated by the fact that our sales per employees today in Swiss francs are almost 25% higher than they were 10 years ago. This resulted in a strong financial performance. You may remember that the three building blocks of our value creation models were the acceleration of our growth. We have met that with an organic growth over the last five years, which is on average at 4%. The second driver was improve our margin. There we have delivered as well with the underlying trading operating profit margin, which is up 140 basis points over the last five years, and underlying EPS growth, which has been on average in the high single digit. The third driver of our value creation model was the prudent capital allocation strategy. There we have improved our return on invested capital by 300 basis points over the last five years. We are not going to stop there. We intend to continue creating value in the future. I will cover during my presentation the four main levers of value creation going forward, starting with freeing up resources, which is absolutely critical, starting with the restoration of our growth margin. This will allow us to invest for future growth. We will continue to allocate capital prudently and to manage our portfolio in an active way. Starting with freeing up resources, we absolutely need to restore our growth margin. This year in 2022, we expect to have a growth margin which will be around 300 basis points lower than where it was two years ago. As you know, this is largely the consequence of the timing difference between input cost inflation on the one hand and pricing. Even if we have done a lot of pricing, we have not been able to compensate fully for whatever we have received, which is massive. We are very confident on the fact that we will be able to restore our growth margin where it was before, but the speed of recovery may be impacted by external factors. If we go into recession, commodity cycle, and many other factors as well. Once again, the confidence that we have to get there is very, very strong. The drivers in order to get there, we know what we have to do. Manage our portfolio efficiency, manage our portfolio actively, continue to premiumize our products, go for pricing, do expect, for example, to see a significant level of pricing again in 2023, we need as well to drive savings and efficiencies. We have a good track record there in terms of delivering saving and efficiencies. We look at the period 2016- 2021, we delivered on average CHF 700 million of recurring savings. Recurring, they are accumulating year after year. The key drivers there were production efficiencies, where we closed around 30 plants in addition to the businesses that we sold. We consolidated our activity, our procurement activities above market in three centers globally, really leveraging on scales and delivering hundreds of millions of synergies there. We have increased significantly our shared service penetration with now 6,500 people working in our shared services, and we have consolidated, for example, our real estate assets. Just as an example, in the Vevey region where we work in Switzerland, we had 14 main buildings. Today, we operate with only four that we entirely own. In France, for example, in Paris, we had seven different buildings. We worked only from one today. In the U.S., we have reduced the number of head offices that we have by half, and we are going to go even further in the U.S. Most of these drivers will continue in the future, but we are clearly raising the bar in terms of recurring saving going forward from 2022-2025 with an ambition to generate more than CHF 1.2 billion of recurring savings per annum, which means for the four years close to CHF 5 billion. Once again, the one that we executed from 2016 to 2021 will continue, but we have new ones as well. Laurent Freixe touched this morning on the project Tasty with SKU optimization and new recipe. Laurent Freixe touched as well of the last one on project Agility. In addition to that, we saw with Bernard Meunier and Aude Gandon this morning, digitalization. By the way, digitalization goes beyond marketing, it applies to my functions, it applies to HR, it applies to operations as well with connected operation, and my colleague, Magdi Batato, will cover part of it in one of the workshop tomorrow. Clearly, we have raised the bar in terms of savings going forward. Most of these savings have to do with variable costs, and we need to go even further than that by tackling as well fixed cost or what we call internally structural cost, which is a sizable bucket. It's about 14 billion,, 14 billion Swiss francs of value, which is around 15% of net sales. We have a good track record there as well, given that for the sixth consecutive year, we have been able to tightly control this cost that have increased at a significantly lower rate than our sales, generating between 60 and 70 basis points of margin improvement over the last couple of years. In the year of 2017-2020, we let that flow to the bottom line, which largely explain the margin improvement that I talked about earlier. Since 2021, we use it to compensate for inflation. We use it as well to invest in sustainability, for example. In 2022, just as an example, our sales will grow between 8% and 8.5%, our fixed cost will grow by around 3%. We have a very strong track record. Generating resources, delivering, saving, and efficiencies is absolutely critical so that we invest selectively and efficiently to support future growth. This is really one of the pillar of the growth strategy for Nestlé, starting with R&D. Stéphane talked about it this morning. We spent about CHF 1.7 billion a year in R&D. We are the largest spender by far in our industry. The objective there is not necessarily, as Stéphane explained, to spend more. It's about getting more out of it, this is what we have been doing with a lot of success over the last couple of years. The largest bucket of investment that we have is marketing and trade spend. We should not look only at marketing, by the way. We look at marketing and trade spend jointly because we arbitrate very often between these two lines of the P&L. Trade spend is obviously above net sales, and it has to do with customer discount and allowances as well as promotional rebates. This is even more important in today's world, where consumers are more and more looking for value for money. We look at both items together. There, clearly, we have a strategy to raise the investment because it is really driving growth, even if in the case of 2022, we had to reduce a little bit our marketing spend exceptionally this year, much more as a consequence of the fact that we were short of products for some categories, like pet care, due to an increased demand over the last couple of years. We invest a lot in CapEx as well, CHF 5.1 billion last year. I will cover that item later on. We want to invest as well a lot in digital, as we discussed this morning. A lot has to do with data analytics, really leveraging on all this data point that we have, and we can really create value. There again, we want to increase the investment. Sustainability is a sizable investment that we do. Most of it is P&L related, 95% is P&L related. We are talking predominantly of the two large part of these investments have to do with our zero carbon journey towards 2050, as well as sustainable packaging. Moving away from non-recyclable, non-reusable plastic, moving back into paperization, and so forth and so forth. Some of the topics that covered, that were covered this morning, as well. Sustainability, we spent CHF 0.5 billion last year. It was already 2x more than the year before. This year in 2022, we will probably spend a little bit less than CHF 800 million, and next year it will be north of CHF 1 billion, and it will be north of CHF 1 billion as well for the following years. We really look at that as an investment because we know that consumers are valuing sustainability investment. We know that today, more than 60% of consumers take sustainability as an important attribute in their purchasing decision. We make sure as well, since we treat it as an investment, we need to make sure that we get value for money to a certain extent. We have a clear objective to maximize the output, carbon reduction, plastic reduction, water reduction, whatever it can be, and to minimize the investment on the other hand as well. We go beyond investing into these businesses. We also want to create new categories. This is part of our DNA. We always invest for the long term. Nestlé has the depths and the widths in terms of both P&L and balance sheet to afford investing for the long term. This is what we have done successfully over the years. If you look at Nespresso, I mean, we lost money for 11 years before reaching a break-even. Today we have a business which is CHF 6.4 billion in size with a margin which was last year at 23%. The same happened more recently with Nescafé Dolce Gusto, where it took us seven years to reach a break-even. Last year, we had a business which was north of CHF 1.5 billion with a margin which is north of 20% as well. Even more recently, we did the same with human milk oligosaccharide or HMOs in infant nutrition. I remember when I joined the group seven and a half years ago, We had invested 200 million already in R&D only to develop these new technologies. Today, last year, we had CHF 1.3 billion of sales with a margin which is north of 20%. We achieved that in the third year of marketing, which is quite exceptional. The success has been even faster than what we could see with Nespresso and Nescafé Dolce Gusto. In the third year, we made it kind of a blockbuster. If we were a pharma company, we would call it a blockbuster. In the third year, without having the right to market it in our largest market, namely China, where the registration is still in process. Investing to create new categories doesn't work at all times. From time to time, we don't succeed. For example, with BabyNes, we tried with a technology relatively similar to what we have with Nescafé Dolce Gusto or Nespresso. We did not crack it. We tried and tried again, then we made the decision to stop. We talked a few times already about Palforzia as well. It doesn't work at all times. We continue to invest in new segments and growth segments to make a difference through science and innovation. This is what we do with plant-based food. Last year, we reached more than CHF 800 million of sales. We are still growing double digits this year in 2022. Allergy is another domain which is in between infant nutrition and Nestlé Health Science. Products are sold on both sides, with CHF 600 million of sales last year, growing at 30%. We do the same with LC Aging. half a billion of sales, growing double digits, really capturing the demographic trends of an aging population. What is important as well, when we develop these new businesses, I think it's extremely important, we always target to have a decent growth margin up front. For all of these new businesses, we try to have a growth margin which is north of 40% or 50% upfront to make sure that whenever we reach maturity, the examples I gave you before, we will have a good and attractive level of profitability. This is extremely important. Moving to the next lever of value creation, which is capital allocation. There we have clear priorities. First of all, we want to invest in our business. This is less risky to a large extent because we know our business. This is exactly what I discussed, investing in marketing, CapEx, R&D, sustainability, digitalization. This means also investing for inorganic growth. There, I'm talking of M&A with a search for assets that meet our expectation from a strategic point of view, cultural point of view, and financial point of view. What do I mean by strategic fit? I mean, for example, businesses that meet our ambition to be in the nutrition, health and wellness business as well, NHW. When I talk of cultural fit, I'm referring essentially to businesses that share the same values and purpose as we do. In terms of financial threshold, we are targeting at first delivering the acquisition plan that we build before buying this asset. We are looking at achieving a good return over time, which means a return on invested capital above the WACC of the acquisition. Beyond deploying capital for profitable growth, we also want to return capital to shareholders in terms of dividend. We don't have a dividend policy, but we have a dividend practice of increasing our dividend in CHF year after year. In a currency, the CHF, that tends to revalue year after year over most currencies. We have been doing exercising this practice for more than 27 years now. In addition to that, we want to return cash to shareholders through share buybacks. We have a policy there to use excess cash to return through a share buyback. You could ask me, what do you mean by excess cash? It is essentially our free cash flow, minus our dividend, minus or plus or minus bolt-on acquisition and disposals. Over a reasonable period of time, it does not apply to one single year, obviously, because share buyback programs are over a couple of years. In addition to that, we have returned historically proceeds from significant disposals, like what we have done with the reduction of our stake in L'Oréal last year or what we have done with Nestlé Skin Health a few years ago. Coming back to some capital allocation priorities, I just want to cover two specific topics where we have decided to temporarily allocate more capital. One of them is CapEx. We used to spend between 4% and 5% of sales in CapEx. It has been more last year, it will be more this year and next year. Next year will be probably the peak in 2023. This is essentially linked to the fact that we had significantly increased demand for some categories, more specifically pet care and coffee during the pandemic, and the demand is still staying and continuing at a high level, so we need to be able to meet demand. We are really investing in some of the projects like what you can see at the bottom of the page. After 23, it will start to decline, and we expect after that in 2025 and the following years to be around 5% of sales in terms of CapEx investments. Likewise, we have decided to do a temporary investment in working capital in the context of significant supply chain disruptions lately. In the context of the energy crisis that we may be facing in Europe this year, we have decided to increase our inventory level temporarily. I think this was the right thing to do. By the way, it helped us a lot during the pandemic to gain market share. We want to make sure that this winter, we will be able to supply products even in case of energy shortages in Europe, for example. This is totally temporary. We had been for two years in a row at zero in terms of working capital after having been historically up to 8%, and we will go back to zero, I'm absolutely convinced of that, by 2025 at the latest, or even post 2025. We already have the building blocks in order to go below zero into negative territories. These two investments that we have decided to do in CapEx and working capital that are, once again, temporary, will have some negative impact, some, will put a little bit of pressure on our cash flow generation this year. Cash flow generation was historically between 10% and 12%, might be a little bit lower this year, but this is temporary, and we expect to go back towards 12% of sales by 2025. Just to give you an illustration of the fact that cash flow generation is absolutely intact. If you look at the cash generated from operations, which means before CapEx and working capital, you can see that this is very stable and dependable around 20% year after year. There is a little bit of a small decrease in 2021, which is linked to one-off contributions to pension funds, but so no concern on cash flow generation going forward. This will result all of this capital allocation, disciplined capital allocation into the pursuit of continuation of our return on invested capital after goodwill and intangible assets towards 15% by 2025. There was a little bit of a dip in 2021 which was linked to the acquisition of The Bountiful Company, and that's accommodates some bolt-on acquisition for a few billion CHF a year if needed. We will use all levers in order to secure an increase of return on invested capital. I mean, the numerator increased growth, increased margin, and denominator discipline on working capital, on CapEx, on asset intensity, on our industrial base as well. As you probably know, return on invested capital is also part of our long-term incentive program, which mean that the entire organization is very aligned there to drive ROIC up as well. One last item on our capital allocation, which is we want to have an efficient capital structure. We have been very active in terms of share buyback over the last years, since 2013, over 20 years. We did CHF 90 billion of share buyback programs with a reduction of our share count by 30%. On average, we created a lot of value because on average, we bought those shares for CHF 66 over since 2003. We want to have an efficient leverage and an appropriate level of leverage, which should be between two and three in terms of net debt to EBITDA ratio. The level should be around two point four this year, impacted by the high level of inventory and high level of CapEx. We are quite happy to be in the double A space where we are today. Our cost of debt is reasonable around 2.2% lower than what we have experienced over the last 10 years. It should not move too much in the near future because we have already 70% of our current debt, which is at fixed rates. We have taken the opportunity over the last couple of years with very low interest rate to expand significantly our average debt maturity, which used to be at two years, a few years back, and which is now almost at seven years. Now I would like to move to the last part of the value creation driver. The last one is active and disciplined portfolio management. We have been very active over the last couple of years. Since 2016, we made CHF 26 billion of acquisition, and you have the list there. We have done exactly the same amount in terms of divestiture. That exclude the disposal of the L'Oréal stake last year. We have been very active, but we have been very disciplined at the same time. During that same period, we looked at CHF 50 billion of potential acquisition. When I say looked at, we even discussed them with the board of directors. This is not just that we had a quick look and disregarded it, but we really looked at it seriously and decided to walk away by lack of financial return or in a certain number of cases due to negative due diligence finding. Just want to show you as well that the impact that we have generated on our operating metrics is quite significant. If we look at the impact of this acquisition of our top line, it has contributed on average since 2017 to an acceleration of organic sales growth by 50 basis points. It is not just about buying growth because it had a very positive impact as well on the bottom line, contributing to around one-third of the margin improvement since 2017 as well. We don't look at portfolio management purely in terms of M&A. We also look very actively at our own portfolio. Part of it is linked to Tasty that we discussed this morning, but it goes even beyond that. In a certain number of cases, we do not hesitate to discontinue some business lines because we still have some businesses that are either loss-making or with low margin businesses, and we do not hesitate even to discontinue some of them as we did, for example, for some commoditized dairy products that we discontinued at the end of the summer in the Middle East and North Africa, and we did the same in Brazil as well. Another example is what we did with D2C Japan. We like D2C in Japan, but it happened that we had quite a lot of SKUs with low volumes or with low margin, and we decided to discontinue 80% of our SKUs for D2C in Japan. Coming back to M&A, just want to share with you the way we look at M&A, the way we look at it before we sign any deal and the way we look at it after we have executed some deals and the way we look at it with the board of directors, because we present to the board of directors once a year a post-mortem analysis for any asset that we have bought for more than half a billion Swiss francs over the last few years. We look at it under two dimension. The first one, for the first three years after the acquisition, we assess our capacity to deliver the acquisition plan, which is a good discipline, but we want to make sure that we achieve or exceed the acquisition plan that we have set up, both on the top line, value-wise and organic growth-wise, and on the bottom line as well, both in terms of margin rate and margin in absolute value. After the three years after the acquisition, we look at the financial return that we get from this acquisition with a certain number of metrics. The main one is we want to secure that we have a return on invested capital above the WACC of the acquisition within five-seven years. Which is quite tough at the end. If we look at what we presented last time to the Board of Directors, we have eight assets that fall into that category. In six out of the eight cases, we did reach our target. Vital Proteins, Zenpep, The Bountiful Company, Essentia, Atrium Innovations, and Starbucks. Even for Starbucks and Atrium, we will reach the ROIC above the WACC in year five or at the end of year four, at the beginning of year five, which is really at the bottom end of the objective. We missed it for Palforzia and Freshly, as we discussed this morning. That mean that if we look at it globally, in terms of outcome, in 83% of the cases, value-wise, not number of assets, but value-wise, we have achieved or exceeded our acquisition plan. We also look at the way we created value. We look at the same methodology, we use the same methodology as what private equity is doing, which means we are taking the EBITDA, latest EBITDA that we have for 2022 latest estimate, for example. In this case, we use an EBITDA multiple, which we let the market, which in that case is lower than the EBITDA multiple we paid for the acquisition of this asset, so we are on the conservative side. We add the tax benefit, we have made a very conservative assumption in terms of impairment for the two assets that for which we missed our targets, Palforzia and Freshly. With that calculation, we arrive at a value creation, which is between CHF 7 billion and CHF 9 billion of value created, which is equivalent to a return per annum between 11% and 13% per annum, which is higher than our WACC. Just to conclude my presentation before we move to the Q&A session with Mark, just a reminder of our value creation model. This is clearly an extension of what we had before, but that shows to a large extent that we are working with continuity, stability, dependability of our model, of our financial model, even during turbulent times. We have these three buckets, operating performance with sustainable organic sales growth in mid-single-digit space. Underlying trading operating profit margin between 17.5% and 18.5%. The annual underlying EPS growth, that applies for each and every single years between 6%-10% on free cash flow, as I covered earlier, trending towards 12%. The second bucket is about capital discipline with working capital CapEx ROIC, already covered it earlier with very clear goals there. The third bucket is financial policy with dividend net debt to EBITDA ratio with a little bit more specific KPI there, as well as sha re buyback with very clear priorities. Thank you very much. Now we move to the final Q&A that I will do with Mark. Thank you. I see quite a few hands already raised. Maybe Pinar, let's start with you. Thank you. Pinar Ergun, Morgan Stanley. You're spending quite a bit of extra CapEx on categories that have seen very strong growth in the last two years, coffee, pet food. What gives you comfort that the demand will be there, say, two, three years or longer from now? Yes. Actually, I'm very confident about it because if you look at it, the situation as of today, take pet care, for example, we do invest because we can't meet even the demand. We continue seeing anywhere our volume, even we have difficulties to meet the demand, but the volume since the beginning of the year is still growing by almost 5%, and we can't meet the demand. We still have, I mean, ample needs that we cannot cover. If we look at it after that with more granularity by geography, by sub-segments, we clearly see that we really need to invest significantly in order to meet the demand. We are aware of the fact that some of our competitors are investing as well, the demand is very, very strong in these markets. For coffee, I mean, we continue seeing, I could say, exactly the same, where we see a very strong demand with very tight capacity on our side to be able to meet the demand. No, no real concern on the fact that we would have overcapacities in the next coming years. Next question is from Guillaume. Good afternoon. Guillaume Delmas, UBS. Two questions, both on your targets issued this morning. The first one on margin, the 17.5%-18.5% by 2025. I mean, this implicitly could mean either moderate margin expansion for the next three years or significant margin expansion every year. What do you think are the key factors which will determine where ultimately you land, whether it's moderate or significant? Related to that, do you think it's gonna be a linear development or it could be quite front-end loaded? Maybe, Mark, often you look at your targets and you say they are conservative. Would the 17.5% be a conservative guidance for 2025? My second question is, for 2022, you tweaked a little bit the top-line guidance to 8%, 8.5%. A month ago, you were saying around 8%. Just curious to hear what has changed in the last month, whether you've seen a better price elasticity than you anticipated or any countries or categories you would highlight. Thank you. Guillaume, thanks. Let me try and address both questions, and maybe start with the easier one and address the second one. Obviously the difference is a strong October rolling in. Remember when we reported, it was mid-October, we didn't know yet how October was unfolding. Also very good vibes when it comes to November. What we wanted to do here, given that it's late November, just a few more weeks left in the year, is we wanted to give you our latest and best thinking where that year's gonna come in to show you that it's gonna be above what we shared with you last, but also on the upside, to be sure that your expectations don't run away. That's our latest thinking, just a few weeks before the year is out. When it comes to the first question, look, in the spirit of trying to be as helpful as possible, I think we're already in this very turbulent time, quite daring giving you the return to that range as a target for the year 2025. At this point, it would be too early to handicap exactly when that range we're gonna fall down. The easiest time to tell you whether it's gonna be a conservative or daring scenario is in the year 2025. I think in this turbulent time, you'll be hard pressed to find companies that stick their necks out like this, and I hope you appreciate that. It comes from a large degree of certainty on how some of the underpinnings in our categories are doing. Just think back to what you heard, a few minutes ago in Nestlé Health Science, where clearly, you know, ahead of this integration step, everything is spring-loaded now for a margin expansion that comes from the various building blocks in our VMS business in North America being put together, and then one consistent supply chain manufacturing setup coming on stream. These are some elements that give us confidence. At this turbulent time now, three years ahead of time to handicap it when the range is gonna fall, I think would be a little bit too much. I hope, you know, that's understandable. Warren, please go ahead. Hi, sir. Warren Ackerman here at Barclays. Mark, at the beginning of the day, you talked about infant nutrition and water were still work in progress. They were two categories you called out. Can you elaborate what your plans are and what would success look like for those two divisions, say by 2025? Secondly, a question on your pricing strategy. You've been very thoughtful on pricing. You've done it gradually. The consequence of that strategy is it'll take longer to fully cover your inflation. It's good because you haven't been delisted very much, but it's also, could it be a risk because you still need to take pricing in the teeth of a recession? I'm just trying to understand, you know, how much more pricing do you need to take in 2023? Which categories or which geographies do you need to catch up on pricing? Is there a risk that as you keep taking pricing, where maybe others are rolling back pricing or doing more promos, that the RIG, which was negative slightly in Q3, will see a couple more quarters of negative RIG, into 2023? Thank you. Thanks, Warren. Let me also try and address both. Starting with the second one, I think in food and beverage, and especially given our geographic profile and given some of the categories we're in, the path we've chosen, in my opinion, is the only socially responsible one. Now of course, you're right. I mean, if there is a strong recession in some parts of the world, it won't be easy to do that pricing. Remember, on some other of our peers, it's the same situation. At the end of the day, everyone is hit hard by inflation. Everyone is trying to restore their bottom line and restore financial order. I feel over time, there is a good chance to restore, as François pointed out, the gross margin. With that, of course, comes also support for our underlying trading operating profit margin. Our situation in food and beverage is different from personal care or household care, where some of these purchases are more dispensable, and I think this just comes with the territory of being in food and beverage. On nutrition and waters, you saw some of the steps outlined this morning. Financially, what's the challenge? I think in infant nutrition, we haven't had much of a margin problem. It is about restoring growth, and by addressing the core, and then also by expanding at the fringes of where we are, this whole notion of pre-conception to preschool, we believe that over this planning horizon to 25, we can restore mid-single digit growth, which for a core and highly profitable category for us, will be success. Then for the waters business, at a very high level and barring any details, it's more or less the inverse. Growth is not the problem there. The problem is that this category was hit hard by the rising energy cost. What we need to work on there is efficiency, to really be sure that we restore the margin. Also, you know, functional water offerings, I think are so much more resilient, because typically they get produced closer to the point of consumption, and there's more value added. I think pushing functional water offerings, will be a good way to boost the profitability of this category for us. Celine, next question. Yes. Celine Pannuti, J.P. Morgan. I would like to come back. Is on? I would like to come back on the margin guidance. I think, you know, for two years in a row, your margin had been impacted by higher cost inflation. Are we at a point, because you still say that there is cost inflation in 2023 and that you will need to take prices? Are we at a point where you can deliver margin or is still going to be a constraint? Therefore, you know, the question earlier about, you know, when are you going to do the margin? My question is even whether 2023 will be maybe shallow performance. That's the first question. The second question is more a bit on the macro side maybe, but RIG was close to zero or zero point six, I think in the nine months. You have benefit normally next year, should benefit from some capacity investment. If I look at the macro side, what is your best guess? Are we going back to a RIG of two-three or is it a bit too premature to discuss? Yes. Well, for RIG, I think it's important to understand that the fact that our RIG is going down is predominantly the consequence of a high base of comparison last year in the context of the pandemic. I mean, if you look at volume last year, we grew by 5.5%, while historically we were around 1% volume-wise. You saw it very clearly, for example, in the presentation from Nestlé Health Science earlier. Next year, in terms of RIG, and more specifically on volume, we will lap a much easier base of comparison. The other thing is that in terms of inflation, we are not done in terms of inflation. It is true that you start seeing some cost item that are going down. I would mention oil, palm oil, wheat, grains and so forth, and some other one. On the other hand, I mean, you have significant increases still for energy, gas, electricity in Europe more specifically, but it happens elsewhere as well. We continue. There is one cost item on which we have not seen much yet, which is salary and wages. We have done a bit, especially for blue-collar workers in some geographies, but the bulk of it will come next year. Which is the reason why we need to continue in terms of pricing, and we believe that competition will have to do the same. What happens to us happens to competition, and it happens even if we talk, for example, of private labels. I mean, the level of price increases that they have taken is actually 2x higher than ours. What happens to us happens to all our competition, all our competitors as well. Sorry, my question was, at the time of inflation, can you raise margins? That, you know, like, you were saying that you were behind the curve and that. Are you still behind the curve? Are we get to the point where you're not behind the curve anymore? That was. I would say that things are stabilizing, anyway, which is what we had said as well, that in H2, our objective was to try to stabilize our gross margin. What I'm saying that, we are not done with inflation. We're continuing increasing pricing as well. Our pricing is increasing month after month. Which mean that we have probably reached, I would not say we are not to the point where it's going to decline, but we have reached kind of a plateau. That being said, things are extremely volatile today. You know, we have to navigate a little bit by sight to a certain extent because we don't know what trading terms will be tomorrow. Next question from Pascal in the last row, I think. Yeah. Hi. Pascal Boll from Stifel. Can you talk a little about geographics? Which markets are you more convinced for maybe next year, but also the years following? When we look at emerging markets, in the past, this was clearly the growth spot. Do you believe also now with, economic slowdown that these markets will hold up well? Excellent question. Let me start from the bottom up. Clearly, for the next year, the one region I watch with a lot of concern is Western Europe, maybe with the one exception of Switzerland. Western Europe and consumer behavior in Western Europe is gonna be key. As you know, science-wise, Switzerland is not gonna bail it out. Clearly, whether it's energy insecurity, cost of energy, cost of floating rate mortgages, the recession, unemployment, the effect of inflation on consumer behavior, it's a pretty difficult environment and one that, you know, in this combination, has not been seen for a long time. I feel from any data points I can gather that when it comes to the sell-in for this holiday season, it's still holding up very nicely. To me, the $64,000 question is, starting from January, what is consumer behavior gonna do? Because this is where some of the nasties are gonna kick in and actually hit consumers, and that's one that we watch with a lot of interest. That's also just building on some of the earlier questions about inflation and what it means to the margin restoration potential. This whole question about, you know, how quickly that process can progress has a lot to do with these assumptions. If they turn out to be quite negative, that makes it harder, and that means progress is gonna be somewhat more backloaded. If it turns out I'm a little bit overly pessimistic now and that 2023 is stronger than expected, then it can be more of a straight line, even kind of process. For North America, I expect some moderation, but still a lot more optimistic than for Western Europe. You have an excellent point. There are vast parts of the emerging markets that are holding up in a fairly resilient fashion. One other wild card to look at is exactly what the economic situation in China is gonna be like, which of course has a lot to do with COVID and the pandemic and also some of the policies regarding lockdown. Jeremy, next question. Jeremy Fialko from HSBC. I think you have to turn on the microphone. Hi. Okay. Jeremy Fialko, HSBC. A couple of questions from me. First one on M&A. You did around 20% of the portfolio that you churned over the last few years. Clearly, when you came into the CEO job, there were certain businesses that you, I guess, probably thought were ripe for disposal. Do you think that that's a kind of a good ongoing pace, or would you expect a sort of slower churn of the portfolio over the coming years? The second question, which is, in terms of the kind of like investing for future growth. Roughly what% of your business or what sort of quantum of sales are coming from businesses that you would classify as being kind of immature and still in kind of investment mode, where you're making a clearly sort of substandard return because of your investments in the future? Thanks. Thanks. I asked François to handle the second one, but on the first one, let me tell you that while clearly, in 2017 we were facing kind of a bonus situation, that's why, you know, looking back, we kind of overshot the initial estimate of 10% by a factor of two. I would also want to assure you that the process of buying and selling will continue and will have to continue. I mean, obviously it's not the only way to create value, and I hope we're not leaving you with that impression. There's a lot of portfolio management that we talked about that is internally driven by developing and bringing to market winning products and building brands and creating value that way. Sometimes when you have fast changing changes on consumer tastes and preferences, and when you have categories falling out of favor or ones that are gaining favor pretty rapidly, I think M&A is a good way to get into that with the initial scale right from the beginning. Sometimes if a category falls out of favor, it's a good way to disengage and not be burdened by it. One of the items this morning that you may have seen is, you know, recognize these situations quickly and move on. Don't spend too much time, you know, getting distracted from the proven winners in a portfolio. Rather say goodbye when, you know, the moment comes, when the insight comes, and don't delay it. I think that's important. What it translates to is, yes, there will be continued buying and selling, maybe not at that same pace, but portfolio transformation through M&A will continue. I hope you'll also appreciate it that a lot of the portfolio transformation on the selling side, some of the heavy lifting happened in those years, 17, 18, 19, which in hindsight, from a valuation point of view, were really good years, and, I think that really helped to improve the overall picture and the value we received for that. On the businesses in which we invest, I would not be able to give you a precise figure. This is the reason why I gave you some examples like plant-based, like Healthy Aging, allergies. I could add to that actually what we saw with Nestlé Health Science as well, collagen, for example. You saw that we doubled the business as well in the first year after our acquisition. I would not be able to give you a number, but it's a relatively, I would say, small portion. It's probably, I don't know, maybe around 10% of what we do in terms of net sales. What is important as well to understand is that to get there, we don't milk and, I mean the other businesses. You saw, for example, what David presented in coffee, what we do in pet care. We continue investing, big time in these businesses as well, huh? Because they don't run out of growth as could, as, you saw from David's presentation and as you know for pet care, for example, or many other categories. Bruno, next question. Bruno from Bernstein. The first one, Mark, is on ESG. There seems to be some ESG fatigue out there. COP27 hasn't done too much. Companies have been being criticized for having big plans and not delivering. The EU may sort of slow down regulation if consumers are hurting. I know none of that is the case for you. There's no ESG fatigue here. Your plan can't probably succeed if the rest of the world doesn't do its bit on ESG. Given your ambitious ESG targets, where do you think you potentially could be at risk simply because the wider systems around you isn't doing what they should be doing to help you get there? My second question is for you, François. I sort of raised my eyebrows when I saw the 3x net debt to EBITDA, kind of range, sort of magical three. That sort of suggests that the buybacks aren't just from free cash flow, maybe there's also some increased leverage in there. Is that really wise? Does it change the profile? You know, once you hit three, you probably can't go much higher, and then that will lead to reductions. Just wonder a bit more comment why you feel comfortable with that number three. Thank you. Bruno, let me start on ESG. Yes, watching some of the debates, frankly, it's hard not to develop ESG fatigue. You kind of feel that there is a political passing of the buck that's sometimes quite disappointing given that on this underlying subject matters, in particular greenhouse gas emissions, the clock doesn't stop ticking. More discussion doesn't gain you more time. It doesn't mean that, you know, these issues slow down. I mean, what's more convincing than just watching, you know, this last summer and where for the first time you were having heat waves on the northern hemisphere, not just in one part of the world, but North America, Europe, Asia, all across. You know, in Europe, I heard lots of people say, "Well, you know, we've had a hot summer before. Think about 2003, think about 1976, 1947, whatever. In all three essential northern hemisphere regions to have it pretty much concurrently, that's new. The rise of average temperatures, you know, that is an almost eerie correlation to the CO2 parts per million in the atmosphere. The underlying evidence and the scientific mechanism of action of why that is, you know, that one, frankly, is, it's pretty daunting. In any other management decision, you'd say, "No more time for discussion, time for action." Not surprising to me that when you talk to corporate leaders, the conviction is stronger than ever that something needs to be done. There's less of this in and out, but rather, you know, let's just see it through. It's gonna be humongous. It's gonna be expensive. It's gonna be a very fundamental re-engineering of how we do business and how we create value. At the end of the day, it is necessary. I think at the level of the policymakers, you see more of this in and out. Let me remind you, for North America, for example, during the times of the Trump administration, we were part of an organization called We're Still In, and I think that says it all about the Paris Agreement and its objectives. That says it all also about the way we approach that subject. Because if you now on a 20 or 30-year issue, basically, in a four-year cycle go in and out, I can tell you'll never get there. That's why I think consistent effort is what's called for. From a consumer point of view, what we need to do, and you know, this is a challenge that as a brand of company we're facing and that we have to live up to, we need to make our case with the discerning public. That's our job. And, you know, just like we tout certain product attributes, I think the environmental footprint, and in particular greenhouse gases, I think is one other product feature and product element that we somehow need to get across. And, that is a challenge that we have to pick up. That's a challenge that our marketing folks are very much committed to. On the consumer base, I think the openness and the readiness is there. The younger, the more affluent, the better educated consumers are, the more they care about the subject. Yes, there's lots of data out there that suggests that for certain categories, while consumers say this is important for them, they may not be willing to pay more for the product. That's true. Honestly, if all else being equal, I get the sale for one of our brands and competition doesn't, that results in an increase in market share, and that's another way of basically making pay for the efforts they're doing there. Whether it's R&D and the product features that R&D is driving or whether it's, you know, sustainability efforts and then hopefully making that case to the consumer successfully, I think both of these are, at the end of the day, depending on the categories, either ways to drive share or to drive premiumization or both. That's the job we have to do. It's a long-term undertaking, no question about it, but it's important for me, given the price tag, and particularly involved with greenhouse gas reduction. This is not an annual sustainability report exercise only. Okay. For that, it's too expensive. It's something that we believe is an essential contribution to society. It's one that, you know, increasingly then, as this problem gets more acute, will be valued by consumers around the world, and it's our job to make it something that consumers find easy to understand. Through that there needs to be a business case. By the way, the other level for the business case is for those countries that are still committed to climate protection, the increasing cost of doing nothing due to regulation. That's the other positive thing. In spite of the North-South discussion, the very intense discussion that we've seen as part of COP27, looking again at some of the leading countries around the world, for the very first time you have something that I would call roughly as, described as regulatory convergence between North America, Europe and some key economies in Asia. That didn't use to be the case. Europe had been interested for a long time. U.S., as I mentioned, during the Trump administration was not part of these efforts. Asia also took quite a long time to come on board. I think now, there's a strong amount of conviction that something needs to be done, which is great. I think, again, this may not be the best moment in time, to put major ESG cost high on the agenda, but I hope you also understand it does take this consistent effort. It's not something that can switch on and off basically by the quarter or by the year. Bruno, on the net debt to EBITDA and our leverage, if we look at it six-seven years ago, we were with a net debt to EBITDA of 0.7, 0.8. We saw that it was suboptimal, especially at the time when money was very cheap at that time. This is the reason why we decided to embark into share buyback programs in order to have an appropriate level of leverage. Okay? How do we define an appropriate level of leverage? We have been around two in terms of net debt. We need net debt to EBITDA over the last couple of years. We need a little bit of flexibility, which is the reason why we are saying two-three. That being said, we expect to be at two point four at the end of the year. I mentioned in the context of an exceptionally high inventory level and higher CapEx as well, because it does have an implication in terms of level of debt. I mentioned as well that we are currently double A minus. We are quite comfortable to be in that space. We could accommodate probably to be in the single A space temporarily as well, which is something as long as we maintain our access to the CP program, we are quite happy with that. It's a fine balance. Once again, I mean the two- three aims really at giving us some flexibility can be impacted as well temporarily. This had been the case last year. At the end of last year, we bought The Bountiful Company just before the end of the year. This kind of thing may have an implication for this ratio at a given point in time. It's more a matter of flexibility than anything else. Bruno, fully agree with François' explanations. Let me just build on that in one particular point, and that is, don't see the 3.0 as something that we would just target through another buyback program, and lo and behold, there we are and have no more flexibility. See it more as a true upper threshold where we may get, because from the starting point where we are right now, we may use that because a transactional opportunity or something else comes up that is unexpected. Don't see it as something that we consciously target, but rather look at the full spectrum. As you know and as François explained, at two point four, we're pretty close, smack to the middle of the spectrum. James? Hi. James Targett from Berenberg. Two questions. Firstly, could you say what sort of category growth you're baking into your mid-single digit guidance through 2025, and how that has changed maybe since the previous five years, whether it's down to portfolio or fundamentally changed growth within your categories. Secondly, the sort of proliferation of small brands and new brand entrants was a sort of headache for a lot of CPG companies going in since the last sort of five years or so, had a bit of a respite during the pandemic. Are small brands back? The competition from small brands, is that something which is you're worried about in particular despite vast levels of innovation, et cetera? Are any parts of the portfolio you think particularly vulnerable? Thank you. Let me start with the second one, then hand it to François for the first one. I think the pandemic helped some when it comes to larger brands, reasserting their market shares and their shelf presence. I think the other aspect that's often overlooked is, as you saw this morning from our innovation presentation, I think the shaping up among the larger FMCG companies when it comes to fast-paced innovation also took away some of the cases that smaller companies had with the consumer. That used to be different, about 10 years ago, where driven by digital, with an amazing rate of innovation, I think some of the small to mid-sized companies were making a stronger case with consumers for why those brands should be picked. I think there's been a lot of catching up, and I think Stefan's statement here from this morning that with the timelines we have now, concept to shelf, we're pretty much at par, if not sometimes with a leg up, compared to some of these smaller competitors. I think that should be something that's tremendously reassuring to you. John, regarding the category growth assumption, what I suggest is that you refer to the one of the slide that Bernard presented at the beginning of his presentation that showed the growth profile of the categories where we are in. By design, by construction, by choice, we did not get there by chance, but by choice, we are in high growth categories anyway. Some of them are growing a little bit faster than others, and I would mention obviously, you know, the usual suspects like Coffee, Petcare, Nestlé Health Science as well. They will grow probably a little bit faster, but all of our categories are anywhere growing more or less in the mid-single digit space, and we aim to gain market share basically in all categories as well. There is no clear differentiation apart maybe from a slightly higher level for these three categories that I mentioned. Patrik? Thank you. Patrik Schwendimann, Zürcher Kantonalbank. On your transformation slide, you have mentioned that Coffee, Petcare and Nestlé Health Science, but Infant Nutrition was not mentioned there. How important is Infant Nutrition for you for the future? That's my first question. Secondly, what are the biggest risks for you internally and externally to not reach the 25 targets? Patrik, I think, devoting that extra slide to Infant Nutrition shows and underlines, and at least it was designed to show and underline how important that category is for us. That's why when we saw that over the last few years, we're not meeting our objectives there, we took this very closely to heart. As I indicated this morning, we really studied this one intensely, not just internally, but using outside consultants as well. We did one deep dive into the specific Chinese situation. With the help of Lauren Frecks, we also did a global study to try and help identify some of the growth opportunities that we could see on the fringes of what we're doing today. Clearly, you know, given that this is a category that the company got founded on, and a category where we believe we can live our purpose in better ways than in many other categories, because early life is so important, the nutritional choices that happen there are so important for what happens later, this is not something we wanna get let go of easily. Having said that, when it comes to the expected growth rates, the mid-single digit, while, you know, while that is nice, it is not something that compares favorably to what we believe we can do in Coffee and Petcare, Nestlé Health Science going forward, and that is something we need to recognize. Nonetheless, it's a core part of what we're doing. One of the things that François explained earlier, I mean, even if something is not at the very top of the pyramid when it comes to high growth, you need to be prepared at all times when it comes to the necessary R&D, the CapEx to have top-notch facilities and the go-to-market strategies. You need to be prepared at all times to give it what it needs to succeed in the marketplace. Because at the end of the day, each and every one of our categories is not competing with another one in our stable, okay? It's competing against other competing companies for whom this may be core. You know, one of the most humiliating positions in a large company is to be the CEO of a business unit that's deemed to be maintenance, okay? What does maintenance mean? No, I mean, you go for attack, you go for win. That's managerial instinct. You need to support that with some necessary growth spending. Infant Nutrition will get all the support it needs. Lots of labor put into it already, we will make this a very key part of our portfolio going forward again. Patrik, on the risk to fail to deliver our 2025 objective, first of all, there are several ones. If we provided this target, it's because we are confident we will reach them. Obviously, in turbulent times, there is a level of uncertainty there. I think that we have a reasonable chance to get it because, first of all, we are actively working on it, and we are extremely diversified by geography, by category, by channel. You can see the way we went through COVID, for example, or the way we go through inflationary times as well. I think that we have the capacity to manage the business in turbulent times. I'm very confident on the fact that we should be able to deliver our 2025 targets, and especially so that some of them are ranges, precisely to accommodate the fact that there is a certain level of uncertainty. I would say the risk is probably more on the innovation, renovation side, because we need to make sure that we remain relevant to consumers, which is the reason why it was very interesting to see the presentation from Stefan this morning, because we are extremely active there in order to make sure that we can stay relevant to consumers in terms of innovation and renovation. Thank you. Maybe Jon Cox at the, in the last row. Yeah. Hi, Jon Cox, Kepler Cheuvreux. Just a follow-up question actually on Patrik and infant nutrition. Are you looking at it as in fixing the sort of the base, or are you thinking there could be opportunities in M&A? Look in particular the situation in North America with what's happening there? You're obviously experiencing, I guess, a lot of growth because of, you know, what's happened there generally. Any thoughts on what may happen to that WIC program? Second question, just you spend a lot of time talking about Nestlé Health Science. It looks like that could contribute 40-50 basis points for that margin goal, given the fact they're gonna do over 400 basis points to get to 18%. Is that the best way to look at it, that really Nestlé Health Science is gonna do all the heavy lifting to get that margin goal by 2025? Thank you. Thanks. Let me start on infant nutrition, and let me confirm that what I was mostly focusing about is fixing the base, and that means opening the hood and doing what's necessary to make it succeed. The part that really gives me a lot of pride is what the team in China has done, because they've done exactly that. They looked exactly at the route to market, especially when it comes to tier three and tier four cities in China that we had talked a lot about reaching them, but somehow we hadn't cracked the code on how to make that happen with all these different distribution layers. I think now I'm seeing a lot more high quality work on actually making that happen and getting traction in that field. There was also a lot of confusion when it comes to the various price points and the brands we're offering. Now what we're having is a reduced number of SKUs, but a much more cleaned up price architecture between them. Here again, it results in greater clarity for our consumers. It's that sort of bottom-up work that we believe can make us stronger. I wasn't thinking so much of M&A. As you know, from the market share slide this morning, we do have a very large global market share already, so options are limited. Yes, for North America, that is one place where, as you know, we just sold a plant. With our marketing policies and also the fact that you have these WIC programs in the US, we find it very, very hard to compete, except for specialties, like, for example, some of the allergy products. As you know, we were deeply honored as part of Operation Fly Formula to be able to help. We'd always be there to help if need arises again. For the moment, short term, I don't see the regulatory framework changing in North America in such a way that all of a sudden it becomes attractive for us to compete there, and that's simply a fact of life. John, the way you look at it is interesting, but indeed that we would have a large dependency on Nestlé Health Science in order to drive our margin up. It doesn't work that way, because this is the reason why I presented that slide on the investment for growth. Don't forget that, okay, first of all, you're comparing against 2022 expected profit. In the meantime, we need to invest more in marketing. That's what we said. I mean, we have a depressed base to a certain extent because we did not have enough products to sell for some of our categories in 2022. We need to invest more than what we have invested in 2022 going forward. We need to invest big time in sustainability. We need to invest in digitalization. We are investing in CapEx, which has an impact as well on the P&L of a couple of 10s of basis points as well. We don't look at it necessarily by category, but more by needs of investments and in terms of resource generation as I presented it at gross margin level, for example. Any other questions? Nick? Hi. Thank you very much for the day. It's Nick Hartley from GIC. You put up a quite an interesting slide about the transformation since 2012, and the one thing that hasn't really changed that much is your exposure to other regions, using your definition of other regions, which is not North America and not Europe. Should we read into that? Also the fact that you've done a whole day capital market event where you haven't really talked about emerging markets, you haven't focused on China, you haven't focused on India, as a sort of subtle inference as to the priority or of those markets for your growth going forward? I would love to do more in those markets. I think what you're seeing here over the past decade is a confluence of a number of factors. One is, as you've seen from our M&A activity, we've also done a lot of buying, not just selling. When it comes to assets, suitable assets that came to market, a lot more of them were based in either North America or Europe. For all the organic efforts that we've been taking in China, India, and other emerging markets, I think when you then have step-ups happening in Europe and North America due to M&A, that seemingly then over a 10-year time horizon sort of puts them like treading water, even though there's been a lot of good organic progress. That's one. The other one is, as you know, the past 10 years to some emerging markets have not been kind from a macro point of view, that also precluded some of the progress. We're deeply committed to these markets. We've been there for many decades. We intend to be key players in these markets for decades going forward. As they continue to do better, I think we will also see increasing shares there. For the right opportunity, we'd love to open our purse strings and also do M&A there. Again, there's a lesser number of assets coming to market. Do not question our dedication to emerging markets and all the good things that they can offer to Nestlé and the good things we can offer to those markets. If I may maybe complement what Mark is saying. The reason why emerging market share has not increased is also largely impacted by foreign exchange. Actually, because usually in emerging markets, we have a much better profile in terms of growth. By the way, we have a higher margin as well, which confirms our interest, as Mark said, for emerging markets. The fact that the share of sales for emerging market does not increase is largely linked to foreign exchange over that period. I mean, if we were taking it maybe with a different period, it would be different. Well, next question is from Tom. Tom, by the way, is the investor with the highest number of participation to a Nestlé investor seminar. Thank you very much. I wanted to compliment you both, all of you on a terrific day, two days. On the mic. It's just wonderful. It's amazing how much technology h has come around since I first started to come. Anyways, thank you for a terrific couple of days. Then, Mark, for you. You have a really elaborate answer to the question about the kind of reception you get for the work that you do by public interest groups and whether and when you might start to realize premium pricing for your product because of the public's respect for your hard work as relates to sustainability and environment. You've been leaders in all of those areas. Does there come a time when you direct some of your marketing tools towards marketing, your own reputation for being an early leader and get some credit for it through in some ways, highlighting and finding groups of people who might wanna come along and praise you in some ways for your leadership on these important causes? Yeah, look, it's an area where we're all still learning. I think public awareness is rising, and depending on what geography, what market, and also what category you look at, I'm quite grateful for some of the support we're getting already. I think what we have to realize, maybe one aspect that didn't come across so well when I answered the question earlier, this is not a one-speed approach across all geographies and all categories. That would be wrong. It's very clear that some categories are more exposed than others. It's also clear that the public awareness and consumer awareness in some geographies is more advanced than in others. As always in life, being too late is just as bad as being too early. Picking that right moment in time when it's on the up and then going in lockstep with that or leading it slightly, but not too far, I think is the art of reading what that marketplace is like. That's how we determine things. That's no contradiction to where we wanna go, you know, as a group average globally. Clearly, that group average then needs to be broken down into different speeds inside the company by geography and by category. I meant that very humbly. I think this whole job of communicating our ESG aspirations and achievements in an easy-to-understand, quick, and intuitive way on pack or in some of our media communication, that's not an easy job. You know, clearly, you know, on complicated subject matters, the natural tendency is, you know, to give the long list, consumers don't have time for the long list. The next one is to try and offer a QR code and have a long list on your cell phone. Consumers don't use that QR code unless you really get them curious. Something needs to trigger that initial interest. Here's another one that I think Stefan Palzer, our Chief Technology Officer, has always been stressing, and that is ESG alone without some attribute that appeals to the consumer is sometimes not enough. ESG alone is good, but, you know, ESG alone, if it creates the perception that for the sake of the environment, I don't get something that otherwise I would get, is a hard sell. Whereas ESG, if it comes across as cool or linked to some other product attribute, I think is doing the sell. Think about Teslas that were not just environmentally friendly cars, but also incredibly cool cars, well-designed and giving people lots of other benefits over and above the fact that we're electric. What we have to do is to do that translation work. What does the Tesla approach mean for some of our food and beverage offerings so that consumers feel good about making that choice and happy about it, and something, you know, that becomes a talking item as opposed to just a hygiene factor. Any other questions? John? Hello. John Ennis from Goldman. I feel a bit bad now bringing it back to a more mundane question. On pet care, we haven't really spoken that much today about arguably one of your best categories. Can you just spend a bit of time talking to us about what you think the medium-term growth rate is for that segment? I appreciate you said it's greater than nutrition, but maybe a bit more specific would be brilliant. I wanted to come back to the pet capacity question. We can obviously track the dollar spend, but it's really hard to get a picture of volumetrically what that means. How much are you increasing capacity in volume terms for pets? Thanks. John, thank you. I suggest I'll share that answer a bit with François. Let me start with a high-level observation and then hand it over to François, and that is, Pet continues to be very, very strong. The only reason that we didn't focus on it today is that clearly we wanted to highlight some of the categories where we know that there was a lot of investor interest, and Nestlé Health Science was tops of the list. Also with coffee now at the end of the pandemic cycle, there were lots of questions about what is the next growth wave looking like and where is it coming from. We felt with pet, a lot of the core fundamentals are still in place. We feel very confident about it. So it was not in the spirit of, you know, just moving it to the side. I think the huge benefit here, compared to, for example, coffee, is that you don't have any end of pandemic slowdown related to the fact that all of a sudden consumption patterns are changing. Those pets that were adopted during the pandemic, for the most part, they're still with their happy owners. So all you're seeing then is a bit of a year-over-year lapping effect, but you're not seeing a consumption shift. Whereas with Nestlé Health Science, you heard, for example, that people are now focusing a little less on immunity post pandemic. With coffee, you know, with the return to the office, at least for a few days a week, that means less cups of coffee consumed at home. In addition to the lapping, you have some consumption shift that's creating a bit of a year-over-year compression. Pet doesn't have that. You know, that means you've seen a wonderful step up during the Covid period, and you see then some of the same growth drivers that were supporting the growth of this business, and that is caloric conversion in emerging markets and continued premiumization in developed markets. You see both of these continue unabated, and that is what makes this category so successful going forward. Going forward, on the growth rates, clearly it's important to stay realistic. While we see continued strong growth, it won't be the explosive growth that we have seen in 2020 and 2021. One of the quips, I've used frequently, you know, if that growth rate from 2020 and 2021 would continue, we would run into a massive pet obesity issue a very short time from now. That's not what's intended. You will see continued above par growth and certainly at the high end of, our various categories we're in. John, just to complement very quickly what Mark Schneider said, I mean, superb growth again this year. I mean, we go in pet care for the third consecutive year of double-digit growth. In addition to that, this is quality growth. What I mentioned earlier, it is made of 5% of RIG since the beginning of the year for pet care, which is quite amazing, especially so that once again, we can't supply the market. Really amazing growth. I wish I could have given you the volume, but we consider that this is a commercially sensitive information, so unfortunately, I can't share that with you. Eleanor, please go ahead. Hi. Eleanor Taylor Jolidon, UBP. I appreciate your honesty in sharing Freshly and the peanut allergy. What is interesting is we don't get much color about failures of your own R&D. Does that mean that you are more patient with what you develop in-house in the hope to discover another Nespresso? Or is it simply that we haven't gone over it today? Very important question. Look, the honest answer is they happen all the time. Honestly, they should, okay? I mean, whether it's M&A or whether it's R&D or whether it's marketing spend, not every dollar or Swiss franc you spend on some of these forward-looking investments is gonna pay off. The sad thing is, ahead of time, you don't know. One of the things, looking at the Palforzia therapy, for example. I mean, take Greg and me, between the two of us, we have 40 years of combined senior healthcare executive experience. We were drop dead certain on this therapy once it received the FDA approval. Unmet medical need, lots of patient interest, it was just... I mean, it was as close to a sure thing as it could get. The result, honestly, to this day, is very vexing to me because I see that continued unmet medical need. Clearly, you know, we tried very hard. We looked at reorganizing our sales force last winter and spring to give it another attempt and really worked hard at making it happen. We had to accept reality about the fact, as Greg explained, that it's more of a niche product, probably still one that does meet a true medical need and one that is very important, but as a result of that, not the right fit for us. Internally, you know, just like I'm completely transparent and straightforward with you about that situation, it's also important that all of us, as we run this company, we treat our forward-looking investments the same manner when we have our executive meetings and when we talk about our successes and failures. The one thing I want to avoid at all costs is what I call success theater. It is all about being totally honest and straightforward about what works and what doesn't. One of the things that I know Stefan has been preaching to his R&D troops, and I've been preaching it to the senior executive group, at the end of the day, it's one thing to talk about risk-taking, and then if you really mean it, you show your colors in those moments when something doesn't go quite right. Are you basically treating it as if someone had done a favor to the company and there are learnings, and then you incorporate these learnings and you move on, or you're treating it as something that is a major disaster. I think what you appreciate here, especially around Palforzia, but also to a lesser extent around Freshly, is that we gave you the stone cold sober analysis. There's also a strategic consequence, and I hope you appreciated that. There's some lessons learned here going forward. I think in that combination, this is fine. When it comes to the CHF 1.7 billion that we're spending on R&D, not every one of these Swiss francs is paying off great, but, you know, in order to get those great results, it takes that budget, it takes that effort. Jeff, please go ahead. Jeff Stent, BNP Paribas Exane. You talk about focusing on the long term, yet we've heard scant mention of India, which, you know, is more than 20% of the world's population, and some believe is, you know, the growth opportunity over the next 20 years. If you could just maybe say a few words on that and what your plans are for that market. Thank you. Yeah. You're taking the words out of my mouth. I'm huge fan of India and what it has to offer. tremendous growth at the present time, but also from, you know, all we can see looking ahead, significant growth in this economy going forward. We just actually had a field visit from our board of directors India in September. It was the first field visit of that type after the pandemic. I think the entire board and leadership team came away being very, very impressed with how the country has transformed. If I personally compare to my trips to India from before the pandemic, the one word that I would put on it is digital. Like, it's amazing how all of a sudden digital has gotten traction to all levels of Indian society. Not just in the metropolitan areas, but really all across, and how the entire economy is benefiting from that. Very bullish on it going forward. Very glad to say that, couldn't be happier with the operating performance of Nestlé India and how it's doing. Very consistent growth, ever since the Maggi noodle crisis in 2015. Also steering in fine fashion, through all the COVID issues that India had in the spring of 2021, and well-positioned for the future. Yes, I'd love to do more there, but in India, just like anywhere else, it comes down to investment opportunities. Do they come at the right price? Do they present themselves? Are they a good fit? We should be selective there, just like we have to be selective, anywhere else. Yeah, for the right opportunity, I'd love to do twice as much in India as we're doing today. Any other questions? We still have time for one or two questions. I don't see any hands raised. There's one more. Pierre, please go ahead. Thank you. Pierre Tegnér from Oddo. I have a question on the 2025 target in terms of margin, because you said, François, that gross margin will be three points lower than two years or three years ago. You want to restore gross margin. Have we to see the next three years in terms of P&L plus three points in terms of gross margin, and the guidance will depend on your opportunity to invest behind marketing and operational expenses, I would say, with the digital? Is it more a question of visibility on the gross margin? What is the difference between the bottom and the top of the margin? Is it depending from gross margin or is it depending on the ability to invest more in operational expenses below that? Pierre, we give a guidance in terms of margin only at underlying trading operating profit margin. We don't give a guidance at the gross margin level. I wanted to cover that topic during my presentation because obviously you can see it. As I said, in 2022, we expect about 300 basis points of decline versus where we are two years ago because of this timing difference between input cost inflation and pricing. It is absolutely critical that we restore that gross margin. I don't want to give you an exact timeframe because there we are. I mean, the speed of recovery is partly dependent on external factors like commodity cycle, which is part of what we have been suffering about from these last two years. It may be linked as well, what will be the impact of recession and so forth. I can't give you an exact timing about it, but I wanted to insist on that. This was my first slide because I want to insist on the fact that this is absolutely critical. This is a message that we pass on internally as well. We need to recover in terms of gross margin to be able to invest for future growth, be it in marketing, in CapEx, in sustainability, in digitalization and so forth. No other questions left. I leave it to Mark for some concluding remarks regarding the webcast. Look, I wanted to thank you all for spending this day with us, those who traveled to Barcelona, but also everyone who spent time with us out on the web today. We appreciate your interest in the company. We hope that this was a good collection of topics and deep dives to address some of the most prevalent questions that we heard from you from the investor community so far this year. Wanted to say for completeness, if a category did not get a detailed presentation or a geography didn't get a detailed presentation today, that's no lack of interest. That's no lack of exciting fundamentals. It's simply Luca and François and I, we huddled during the late summer, early fall. We're trying to collect, the most prevalent investor questions, and we wanted to be sure that those, we can address with the right amount of detail. What we wanted to avoid doing is a day where we cover the topics a mile wide and only an inch deep, and only get to a level that you could easily get to, with desk research. That was the spirit in which we approached, today. Then also some of the workshops that you will be seeing tomorrow for those who traveled to Barcelona. Hope you appreciated that. One of the messages here during the breaks I was getting a few times, and, I was quite grateful for it, was to say... Was the people said to me, "Look, what you shared today was quite reassuring." That is on the one hand a positive thing, but let me also very modestly and humbly suggest that hopefully you saw some nuggets in what we presented to you that go over and above being reassuring, and that they actually express some fascination about opportunities that this company has as we face now, this 2020s decade. You've seen, just picking as an example, in Nestlé Health Science, the tremendous strength here that comes from these two areas that we're focusing on with medical nutrition and consumer care. I hope you see how we're approaching both of these from a position of strength and how they offer very significant fundamentals, and those two will get all of our energy, all of our focus going forward. You see even around something that hasn't delivered in the past few years like infant nutrition, you see that tremendous effort now and the tremendous work that has gone into fixing and turning this around, and also some of the beginnings of that happening in China already. I think there are some very strong, very good upside cases, and it's not only related to the business and geographies we presented. It also relates to some of these transversal functions that we talked about today. I hope you shared some of the fascination from the digital opportunities, where clearly in food and beverage, as Bernard and Aude pointed out, we are seeing ourselves as among the leaders, and where we can easily borrow from some of the categories that are ahead of us and then apply that to build our leadership position and build a more connected food and beverage business and exploit all of these digital opportunities around the world. In all modesty, as I look at where the company stands, we're in the lucky position and the fortunate position that we're no longer having to do homework that we should have done in the last decade. We've done that, okay? Now the energy is look at that new decade, look at the higher highs, the lower lows, and make the most of that opportunity ahead of us. That is what this leadership team is focused on. It can do that because it has done the homework. It can look forward. It doesn't have to look back. That is what we're committed to making happen over the next few years. That, I think, is adding up to a very reassuring but hopefully also a very exciting business case. I hope some of that, in this very turbulent and sometimes, you know, frightening time did come across. There's a very good base case. There's also some very nice upsides, and hopefully that message resonates with you. Appreciate the day. Again, looking forward to any other questions, on other categories, geographies. As always, Luca is there to channel questions here to François and me. Always happy to schedule calls and sessions, to explore some businesses in deeper detail. With that, we call the meeting for today closed. For those who travel to Barcelona, we look forward to seeing you for dinner. Thank you.