Nestl Pakistan

Nestl has been serving Pakistani consumers since 1988, when our parent company, the Switzerland-based Nestl SA, first acquired a share in Milkpak Ltd. Today we are fully integrated in Pakistani life, and are recognized as producers of safe, nutritious and tasty food, and leaders in developing and uplifting the communities in which we operate. We at Nestl Pakistan ensure that our products are made available to consumers wherever in the country they might be. Convenience is at the heart of the Nestl philosophy, and our aim is to bring products to people's doorsteps.
Mission Statement Nestl

we believe that research can help us make better food so that people live a better life.

Good Food is the primary source of Good Health throughout life. We strive to bring consumers foods that are safe, of high quality and provide optimal nutrition to meet physiological needs. In addition to nutrition, health and wellness, Nestl products bring consumers the vital ingredients of taste and pleasure. As consumers continue to make choices regarding foods and beverages they consume, Nestl helps provide selections for all individual taste and lifestyle preferences. Research is a key part of our heritage at Nestl and an essential element our future. We know there is still much to discover about health, wellness and the role of food in our lives, and we continue to search for answers to bring consumers Good Food for Good Life.

The Nestl global vision is to be the leading health, wellness, and nutrition company in the world. Nestl Pakistan subscribes fully to this vision. In particular, we envision to: Lead a dynamic motivated and professional workforce proud of its heritage and bullish about the future. Meet the nutritional needs of consumers of all age groups from infancy to old age, from nutrition to pleasure, through an innovative portfolio of branded food and beverage products of the highest quality. Deliver shareholder value through profitable long-term growth, while continuing to play a significant and responsible role in the social, economic and environmental sectors of the country. We have profitable and diversified high quality food and beverage product portfolio, delivering 60:40+ advantage to consumers, available across all sales channels. Our brands are the preferred choice in their categories. Consumer insight drives all aspects of our marketing and communication efforts. Our communications to the consumer are relevant, cutting-edge, and adhere to the highest standards of responsible communication. Our company is seen as the No. 1 career destination for talented, motivated and ambitious professionals. Our result-oriented organisational structure ensures effective communication and empowered self-management. Our milk collection and agri services will continue to play the primary role in development of the dairy sector in rural Pakistan. Our proactive innovation and renovation culture is the key to our success in the marketplace. Fully integrated systems (Nestl Pakistan, suppliers, customers) ensure efficient business processes.

Non-strategic activities and products are outsourced or discontinued.

Objectives of Nestle Pure Life: The main objective for the SBU was to be number one selling bottled-mineral water in Pakistan. This objective was hoped to be accomplished by settingthe following further subobjectives. i) Safety: To provide the consumers with a safe drinking water: Consumers want reassurance. The Nestle name on the product is an assurance of quality for the consumer. Also related to safety is the fact that the water is captured in a safety environment and undergoes rig orous treatment to meetuniversal quality standards. The water is de-mineralized by distillation. Mineral salts are then added, in accordance with a strict formula developed.The bottling line is also subject to strict sanitary regulations: an air-controlled room houses the filing machine, and the bottles and caps are sterilized.Quality is a continual process and is monitored during each production phase - some 200 controls. Packaging also receives special attention. EachNestle Pure Life bottle and the 5-litre PET jug have a special cap and tamperresistant band. This way, the consumer can tell immediately whether thebottle has come straight from the plant or if it has been tampered with. 2. To offer consumers a healthy product: Remineralization let Nestle offer consumers a balanced, refreshing and healthy product, the product's second key objective. The formula developed for Nestle Pure Life contains minerals such as calcium, which is essential for bone development; magnesium, which is recommended for muscles and thecentral nervous system; bicarbonates, which are particularly useful for digestion; and sodium, which helps regulate hydration in the human body. Overallmineralization is light (200 mg per liter) and suitable for the whole family. iii) To offer an affordable mineral water: As well as being pure, safe, healthy water, Nestle Pure Life is affordable and convenient. No matter what theformat, Nestle Pure Life is sold consistently at popular prices affordable for a large portion of the population. The 1.5-L bottle is offered for Rs. 22 --cheaper than most of the other water brands of the same size. The 0.5 L bottle was initially offered for Rs. 8 but now is sold for Rs. 12. The increase inprice has been caused mainly due to inflation and competition. iv) To make the product as convenient as possible: This was the product's fourth objective. Due to its well-balanced mineral content, Nestle PureLife can also be used for cooking and to prepare tea or coffee. The brand is available in several formats suited to a variety of consumption patterns (50cl, 1.5 litre, 5 litre). The idea is clear: to be close to the consumer. In other words, Nestle Pure Life must be available in all sales and restaurants outletsand anywhere else consumers young and old are likely to buy or drink water.These objectives can be very well matched with the mission statement of the organization. Consider the following mission statement:Nestle is dedicated to providing the best foods to people throughout their day, throughout their lives, throughout the world. With our unique experienceof anticipating consumers' needs andCreating solutions, Nestle contributes to your well-being and enhances your quality of life.Referring to the first part of the mission statement, Nestle did provide the consumers with the best bottled -mineral water, as it is number one in thebottled-water market in Pakistan. According to their claim that they

provide the best food throughout the world, Nestl Pure Life is available throughoutPakistan in a number of outlets because of the intensive distribution strategy of the firm. Secondly, Nestle was very successful in identifying the need for safe and pure drinking water, and thus came with the wonderful solution of providing the Nestle Pure Life water. Referring to Nestl Pure Life, it has allthe essential minerals, which a human body needs, as well as, it is pure and safe. Thus it improves one aspect of our lives. By drinking healthy water,people can escape different fatal diseases like Hepatitis B and C (one of the causes of which being the contaminated water). Ultimately, the quality of life is enhanced as portrayed by the mission statement.

Objectives of nestle Marketing objectives are compatible with the overall corporate objectives of nestle. Companys objective is to be the worlds largest and best branded food manufacturer while insuring that nestle name is synonymous with the products of the highest quality . Its chief objectives are: To achieve compatibility with international voluntary standards on environmental management systems To build mutual trust with consumers, governmental authorities and business partners. To ensure continuous improvement of nestles environmental performance. Conservation of natural resources and minimization of waste. Total compliance with the laws. To establish the benchmark for good business practice. Employing new technologies and processing. By committing to resources, both human and financial. Measuring the cost and benefits to business of its activities. Monitor progress.

Audit results. Review targets.

Our Vision Nestls global vision is to be the recognized leading Nutrition, Health and Wellness Company. Nestl Pakistan subscribes fully to this vision of being the number one Nutrition, Health, and Wellness Company in Pakistan. In particular, we envision to; Lead a dynamic, motivated and professional workforce

proud of our heritage and positive about the future. Meet the nutrition needs of consumers of all ages from infancy to old age, from nutrition to pleasure, through an innovative portfolio of branded food and beverage products of the highest quality.

 Deliver shareholder value through profitable longterm growth, while continuing to play a significant and responsible role in the social, economic, and environmental sectors of Pakistan. Our Mission To positively enhance the quality of life of the people of Pakistan by all that we do through our people, our brands and products and our CSV activities. Our Ambition GOOD FOOD GOOD LIFE To be the leading Nutrition, Health and Wellness Company in Pakistan.

Financial Performance 2009 was indeed another year of instability in social, economic,

energy, and security terms. However, despite these issues, for Nestl Pakistan it marked a solid recovery from the much deeper challenges of 2008. Local inflation in key commodities still had an impact in 2009 particularly in fresh milk where supply constraints continued and lead to cost increases of +16%. the Company continued to expand its dairy development initiatives aimed at accelerating production of good quality milk in the country. i believe the key elements to our performance in 2009 were effective cost management, more investment behind our brands, and diversification of our product portfolio based on deeper consumer insights. the major new product launches this year included: LaCtogen neSQuiK milk enhancer, niDo bunYaD,

goLD, and CereLaC fruit cereals. Sales for the year surpassed pKr 41 billion, and the growth of 20% was split relatively even between real internal growth and pricing movements. export sales rose dramatically by +48% to pKr 3.3 billion as we continue to leverage our brand strength in other markets. although gross profit (gp) margin shows a significant improvement vs. 2008, it is only slightly better than our 2007 results. the recovery in gp allowed the business to focus more efforts in brand building increasing our spending on consumer initiatives by +66%. resulted in a slightly this added investment profit margin.

lower improvement in operating

net profit and margin for 2009 increased due to lower financing costs and foreign exchange impact compared to the turbulent market of 2008. With

these healthy results, and in addition to the interim dividends for the year, the board of Directors has recommended to pay a final cash dividend of rs. 20 per share.

Investment Projects total capital expenditure for the year reached pKr 2.3 billion, with the most significant projects listed below: Project description PkR million Sheikhupura extension and Capacity increases 873

Kabirwala Capacity increases 618 Sales, Distribution & infrastructure 137

Milk Collection Field Development 149 investments in 2010 of approximately pKr 2.6 billion are planned for milk collection field development, and upgrading of existing production facilities as part of our long-term infrastructure plan.

Financial Performance 2010 was another challenging year for the country; energy crises, security situation coupled with devastating floods had exerted significant pressure on the economy and cost of living. However, despite all these challenges, the Company achieved a strong growth of 25% which was mainly contributed by volume/ real internal growth. Ongoing cost saving and controlling initiatives were taken to partially offset the negative impact of escalating input costs. Higher inflationary pressures continued impacting key commodities in 2010 particularly in fresh milk where supply constraints led to a cost increase of +19% compared to last year. The Company continued to expand its development

infrastructure aimed at accelerating procurement of good quality fresh milk. Effective product mix management, containment of fixed overheads & financial cost, focused investment behind our brands, and diversification of our product portfolio based on deeper consumer insights remained the key elements in the achievement of our results in 2010. Nestl Pakistan is committed to enhancing its product base by diversifying into low cost high quality products with good financial returns, that we call Popularly Positioned Products (PPP), which focuses on creating products that are both highly nutritious and affordable on a daily basis for lower income consumers. Innovation & renovation remained an integral part of the companys operational strategies and our vision for growth. The major new product launches during 2010 included: MAGGI Umda Maza, MAGGI Noodles (Bar-B-Q, Masala &

Karara), NESTL Peach Nectar, LACTOGEN low lactose, & NESTL Pure Life5 liters.

Financial performance of the Company is summarized below: PKR Million 2010 2009 Change Sales 51,487 41,156 +25% Gross Profit margin 27.0% 28.9% -190 bps -20 bps

Operating Profit margin

13.3%

13.5%

Net Profit margin 8.0% 7.3% +70 bps Net Profit 4,1 1 3 3,005 +36.9% Earnings per share 90.69 66.27 +36.9% Total sales for the year grew by 25% exceeding PKR 51 billion. This growth was split between Real Internal Growth (RIG) and pricing movements which contributed 15% & 10% respectively. Export sales went up by +24.5% to PKR 4.0 billion (2009: 3.3 billion) as we continue to leverage our brand strength in

Afghanistan. The increase in input costs of fresh milk, sugar, fuel and energy have adversely affected our Gross Profit (GP) margin, which slipped down by 190 bps as compared to last year. This negative impact of input cost was, to some extent, off-set by efficient product mix, fixed cost containment and lower financing cost which resulted in an increase of 36.9% in Net profit over 2009. Keeping in view the strong financial performance of the company, in addition to the interim dividends of PKR 45 per share paid during the year, the Board of Directors has recommended to pay a final cash dividend of Rs. 30 per share.

Investment Projects Nestl Pakistan believes in a market driven approach and stands committed to invest to meet our consumers needs. Total

investments in expansion & development projects for the year reached PKR 4.3 billion, with the most significant projects listed below: Project Description PKR Million Sheikhupura - Extension and Capacity increase Kabirwala - Capacity Increase Karachi Port Qasim 652 77 2,102

Capacity Increase

Sales Distribution & Infrastructure 522 Milk Collection - Field Development 253

As part of our long term strategy, major investments of approximately PKR 8 billion are planned in 2011 for milk collection field development, upgrading of existing production facilities and increase in production capacity