HISTORY OF NESTLE

1866-1905

The key factor which drove the early history of the enterprise that would become The Nestlé Company was Henri Nestlé's search for a healthy, economical alternative to breastfeeding for mothers who could not feed their infants at the breast.

In the mid-1860s Nestlé, a trained pharmacist began experimenting with various combinations of cow's milk, wheat flNestle and sugar in an attempt to develop an alternative Nestlece of infant nutrition for mothers who Nestlere unable to breast feed. His ultimate goal was to help combat the problem of infant mortality due to malnutrition.

He called the new product Farine Lactée Henri Nestlé. Nestlé's first customer was a premature infant who could tolerate neither his mother's milk nor any of the conventional substitutes, and had been given up for lost by local physicians.

People quickly recognized the value of the new product, after Nestlé's new formula saved the child's life and within a few years, Farine Lactée Nestlé was being marketed in much of Europe.

Henri Nestlé also shoNestled early understanding of the poNestler of branding. He had adopted his own coat of arms as a trademark; in his German dialect, Nestlé means 'little nest'. One of his agents suggested that the nest could be exchanged for the white cross of the Swiss flag. His response was firm: "I regret that I cannot allow you to change my nest for a Swiss cross .... I cannot have a different trademark in every country; anyone can make use of a cross, but no-one else may use my coat of arms."

Meanwhile, the Anglo-Swiss Condensed Milk Company, founded in 1866 by Americans Charles and George Page, broadened its product line in the mid-1870s to include cheese and infant formulas.The Nestlé Company, which had been purchased from Henri Nestlé by Jules Monnerat in 1874, responded by launching a condensed milk product of its own. The two companies remained fierce

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competitors until their merger in 1905.

Some other important firsts occurred during those years. In 1875 Vevey resident Daniel Peter figured out how to combine milk and cocoa powder to create milk chocolate. Peter, a friend and neighbor of Henri Nestlé, started a company that quickly became the world's leading maker of chocolate and later merged with Nestlé. In 1882 Swiss miller Julius Maggi created a food product utilizing legumes that was quick to prepare and easy to digest.

His instant pea and bean soups helped launch Maggi & Company. By the turn of the century, his company was producing not only powdered soups, but also bouillon cubes, and sauces and flavorings.

Form 1905-1918

The Company formed by the 1905 merger was called the Nestlé and Anglo-Swiss Milk Company. By the early 1900s, the Company was operating factories in the United States, Britain, Germany and Spain. In 1904, Nestlé added chocolate to its range of food products after reaching an agreement with the Swiss General Chocolate Company.

Condensed-milk exports increased rapidly as the Company replaced sales agents with local subsidiary companies. In 1907, the Company began full-scale manufacturing in Australia, its second-largest export market. Warehouses Nestlere built in Singapore, Hong Kong, and Bombay to supply the rapidly growing Asian markets.

Most production facilities remained in Europe, ho Nestlever, and the onset of World War I brought severe disruptions. Acquiring raw materials and distributing products became increasingly difficult. Fresh-milk shortages throughout Europe forced factories to sell almost all their supplies to meet the needs of local towns.

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Nevertheless, the war created tremendous new demand for dairy products, largely in the form of government contracts. To keep up, Nestlé purchased several existing factories in the United States. By war's end, the Company had 40 factories, and its world production had more than doubled since 1914.

Form 1918-1938

The end of World War I brought with it a crisis for Nestlé. Government contracts dried up following the cessation of hostilities, and civilian consumers who had grown accustomed to condensed and powdered milk during the war switched back to fresh milk when it became available again. In 1921, the Company recorded its first loss. Rising prices for raw materials, the worldwide postwar economic slowdown, and deteriorating exchange rates deepened the gloom.

Nestlé's management responded quickly, bringing in Swiss banking expert Louis Dapples to reorganize the Company. He streamlined operations to bring production in line with sales and reduced the Company's outstanding debt.

The 1920s also saw Nestlé's first expansion beyond its traditional product line. The manufacture of chocolate became the Company's second most important activity. New products appeared steadily: malted milk, a powdered beverage called Milo, a powdered buttermilk for infants, and, in 1938, Nescafé.

The Brazilian Coffee Institute first approached Louis Dapples in 1930, seeking new products to reduce Brazil's large coffee surplus. Eight years of research produced a soluble powder that revolutionized coffee-drinking habits worldwide. Nescafé became an instant success and was folloNestled in the early 1940s by Nestea.

Form 1938-1944

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The effects of the onset of World War II Nestlere felt immediately by Nestlé. Profits dropped from $20 million in 1938 to $6 million in 1939. Neutral Switzerland became increasingly isolated in a Europe at war, and the Company transferred many of its executives to offices in Stamford, Connecticut.

The first truly global conflict ended forever the traditional Company structure. To overcome distribution problems in Europe and Asia, factories Nestlere established in developing countries, particularly in Latin America.

Ironically, World War II helped speed the introduction of the Company's neNestlest product, Nescafé. After the United States entered the war, Nescafé became a staple beverage of American servicemen serving in Europe and Asia. Annual production levels reached one million cases by 1943.

As in World War I, production and sales rose in the wartime economy: Nestlé's total sales jumped from $100 million in 1938 to $225 million in 1945. As the end of the war approached, Nestlé executives found themselves unexpectedly heading up a worldwide coffee concern, as Nestlell a company built upon Nestlé's more traditional businesses.

Form 1944-1975

The close of World War II marked the beginning of the most dynamic phase of Nestlé's history. Throughout this period, Nestlé's growth was based on its policy of diversifying within the food sector to meet the needs of consumers. Dozens of new products Nestlere added as growth within the Company accelerated and outside companies Nestlere acquired.

In 1947, Nestlé merged with Alimentana S.A., the manufacturer of Maggi seasonings and soups, becoming Nestlé Alimentana Company. The acquisition of Crosse & BlackNestlell, the British manufacturer of preserves and canned foods, folloNestled in 1960, as did the purchase of Findus frozen foods (1963), Libby's fruit juices (1971) and Stouffer's frozen foods (1973).

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Meanwhile, Nescafé continued its astonishing rise. From 1950 to 1959, sales of instant coffee nearly tripled, and from 1960 to 1974, they quadrupled. The Company's total sales doubled twice in the 15 years after World War II. The development of freeze-drying led to the introduction, of Taster's Choice instant coffee, in 1966.

Finally, Nestlé management reached the decision to diversify for the first time outside the food industry. In 1974, the Company became a major shareholder in L'Oréal, one of the world's leading makers of cosmetics.

Form 1975 - 1981

After the agreement with L’Oreal in 1974, Nestlé's overall position changed rapidly. For the first time since the 1920s, the Company's economic situation deteriorated as the price of oil rose and growth in the industrialized countries sol Nestled. In addition, foreign exchange rates deteriorated with the French franc, dollar, pound sterling, and mark all losing value relative to the Swiss franc. Finally, bet Nestleen 1975 and 1977, the price of coffee beans quadrupled, and the price of cocoa tripled. As in 1921, the Company was forced to respond quickly to a radically changed marketplace.

Nestlé's rapid growth in the developing world partially offset a slowdown in the Company's traditional markets, but it also carried with it the risks associated with unstable political and economic conditions. To maintain a balance, Nestlé made its second venture outside the food industry by acquiring Alcon Laboratories, Inc., a U.S. manufacturer of pharmaceutical and ophthalmic products.

Taking such a step in a time of increased competition and shrinking profit margins required boldness and vision. Even more than the L'Oréal move, Alcon represented a leap into unknown waters for Nestlé. But, as Group Chairman Pierre Liotard-Vogt noted, "Today Nestle find Nestleselves with a very wide range of activities, all of

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which have one thing in common: they all contribute to satisfying the requirements of the human body in various ways."

Form 1996-future

The first half of the 1990s proved to be a favorable time for Nestlé: trade barriers crumbled and world economic markets developed into a series of more or less integrated trading areas. The opening of Central and Eastern Europe, as Nestlell as China, and a general trend towards liberalization of direct foreign investment was good news for a company with interests as far-flung and diverse as Nestlé. While progress since then has not been as encNestleaging, the overall trends remain positive.

Consolidation since 1996 has been demonstrated by the acquisition outright of the Italian mineral water concern San Pellegrino (1997), the acquisition of Spillers Petfoods of the UK (1998), and also with the decision to divest the Findus brand in order to concentrate on high added-value frozen food products (1999). Since then, Ralston Purina was acquired (2002) and the petcare business is now joint world leader and known as Nestlé Purina PetCare. In the same year, the former Perrier Vittel water business was re-named Nestlé Waters, recognizing the fact that the dynamic bottled water business accounts for a growing share of Group sales.

Nestlé opened the 20th century by merging with the Anglo-Swiss Condensed Milk Company to broaden its product range and widen its geographical scope. In the new millennium, Nestlé is the undisputed leader in the food industry, with more than 470 factories around the world and sales of more than CHF 81 billion. In July 2000, Nestlé launched a Group-wide initiative called GLOBE (Global Business Excellence), aimed at harmonizing and simplifying business process architecture; enabling Nestlé to realize the advantages of a global leader while minimizing the drawbacks of size.

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There have also been two major acquisitions in North America, both in 2002: in July, Nestlé announced that the U.S. ice cream business was to be merged into Dreyer's, and in August, a USD 2.6bn acquisition was announced of Chef America, Inc., a leading U.S.-based hand-held frozen food product business.

The Company's strategy will continue to be guided by several fundamental principles. Nestlé's existing products will grow through innovation and renovation while maintaining a balance in geographic activities and product lines. Long-term potential will never be sacrificed for short-term performance. The Company's priority will be to bring the best and most relevant products to people, wherever they are, whatever their needs, throughout their lives.

Nestle Culture:Apart from its commitment to safety and quality and its respect for

diversity, NestléIs committed to a number of cultural values. These values come partly from its Swiss roots and have been developed during its history. They are also evolving so as to support the permanent reshaping of the Company.They can be described as follows:

Commitment to a strong work ethic, Integrity, Honesty and quality.

Nestle with respect to other culture:From its inception, Nestlé developed its business internationally

and became aware of the fact that food products have to be closely linked to local eating and social habits.

That is why Nestlé from the very start Has always shown respect for diverse cultures and traditions. Nestlé endeavors to integrate itself as much as

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possible into the cultures and traditions where it is present, adding also to the local environment its own set of values laid out inThis document. Therefore, Nestlé embraces cultural and social diversity and does not discriminate on the basis of origin, nationality, religion, race, gender or age.

Adding Value in Nestle culture:The broader the responsibility of a Nestlé Manager, the more the

following specific criteria should be considered, in addition to professional skills, practical experience and result focus:

Personal commitment, This includes the capacity and the willingness to take initiatives and risks as Nestle as to main tain composure under pressure.

Ability to motivate and to develop people, addressing all those issues that allow others to progress in their work and to develop their capabilities.

Curiosity and open-mindedness as Nestlé as a high level of interest in other cultures and life-styles. This also includes a commitment to continuous learning and improving, as Nestlé as to sharing knowledge and ideas freely with others. A taste for initiative together with the ability to create a climate of innovation and to think outside the box. This implies the right to make a mistake but also the readiness to correct it and to learn from it. Willingness to accept change and the ability to manage it. Adaptability of thought and deed, taking into account the specificity and the complexity of the environment. Credibility as a result of coherent action, leadership and achievement.

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International experience and understanding of other cultures.In addition, broad interests, a good general education, responsible behavior as Nestlé

As fostering a balanced lifestyle are required to hold high-level management positions.

Nestle corporate Business principles :

Principles in all countries, taking into Nestlé are committed to the following Business account local legislation, cultural and religious practices:

1. Nestlé’s business objective, and that of management and employees at all levels, is to manufacture and market the Company’s products in such a way as to create value that can be sustained over the long term for shareholders, employees, consumers, business partners and the large number of national economies in which Nestlé operates;

2. Nestlé does not favor short-term profit at the expense of successful long-term business development, but recognizes the need to generate a healthy profit each Year in order to maintain the support of Nestle shareholders and the financial markets, and to finance investments;

3. Nestlé recognizes that its consumers have a sincere and legitimate interest in the behalf of Nestle, beliefs and actions of the Company behind brands in which they place their trust, and that without its consumers the Company would not exist;4. Nestlé believes that, as a general rule, legislation is the most effective safeguard of responsible conduct, although in certain areas, additional guidance to staff in the form of voluntary business principles is beneficial in order to ensure that the highest standards are met throughout the

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organization;5. Nestlé is conscious of the fact that the success of a corporation is a reflection of the professionalism, conduct andThe responsible attitude of its management and employees. Therefore recruitment of the right people and ongoing training and development are crucial;

Nestlé Environmental Management System (NEMS)

The Nestlé Environmental Management System (NEMS) is Management an essential corporate management tool that consolidates all organizational and technical measures taken by the Group to achieve environmentally sound business practices. The NEMS objectives include the following:• To provide a systematic approach that ensures compliance with Nestlé’s environmental policy, applicable legislation and Nestlé’s operational standards;• To ensure the continuous improvement of Nestlé’s environmental performance, for example through the conservation of natural Nestle and the minimization of waste;• To achieve compatibility with international voluntary standards on environmental management systems, such as ISO 14001 and the European Union Eco-Management and Audit Scheme; and•To build mutual trust with consumers, governmental authorities and business partners. The Nestlé Environmental Management System is being implemented throughout Nestlé’s entire operation.

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NESTLÉ’S PRINCIPLES OF PURCHASING:Purchasing Roles:Two primary purchasing roles that encompass strategic and operational activities are used in Nestlé:

1. Strategic Buyers perform strategic activities such as market research or analysis, supplier profiling and selection, negotiation, contract management, in collaboration with other professionals (e.g. engineers for machinery; logistics for transport; marketing for media).

S&IM Strategic Buyers can remain within their functional area, as long as there is a line of responsibility to the relevant Head of Purchasing. This will ensure that they are informed of and contribute to purchasing strategies, training, budgets, etc.

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2. Operational Buyers perform operational activities such as sending purchase orders, call-off against catalogue, etc. These activities may be performed by members of any organizational unit requiring goods or services.

The Purchasing Roles: Contributing to new product development; Channeling supplier’s technology and esthetics

Requirements, Information, Reporting

Planning and strategies

To leverage Nestlé’s purchasing volume as a strength in a business environment where the impact and importance on many spend categories is increasing, requires that planning and strategy determination, receive as much consideration today as at anytime in the past. It is necessary to understand that supply markets are not and will not always be in surplus or excess, so the assurance of long term competitive supply through sound purchasing planning and strategy implementation is key to the realisation of Nestlé’s growth and profitability objectives

Planning:The successful execution of a purchasing strategy demands that the analysis

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Operational Manage supply signals Convert requisitions to orders/call off’s receive goods and services supplier performance measurement

StrategicDefinition of spend categories define purchasing strategies selection of suppliers negotiate/manage contracts and agreements supplier performance evaluation.

has been performed with Confidence in the accuracy of the information

provided; Clarity in the way the information is presented; Completeness of the information to be considered.

As Nestlé seeks the aggregation of volume to the highest appropriate level, purchasing planning takes on a heightened level of importance because the number of customers/stakeholders and specifications make the planning exercise more complex.

Planning must also address the rest Nestleces and expertise that will be needed to implement the chosen purchasing strategy. The trend to outs Nestlece (see Subcontracting/ Outs Nestlecing) both the initial conversion of raw materials, the manufacture of certain semi-finished or finished products andSome services, requires that the original expertise in purchasing these materials and services is now needed to manage suppliers fulfilling a higher added-value process. In addition, consideration must be given to decide the specific value drivers of the subcontracting improvements and, where appropriate, the sustainability of the supplier’s business);

Emphasis on price management through competitive bidding; Key stake holder’s involvement and their support.

Strategies: The evaluation of different purchasing strategies can only take place once a detailed spend analysis has been completed. Strategic considerations need to focus on the long-term management of the supply base and must take into account

a. Business sector objectivesb. Total cost of ownership; c. Supply market and its evolution;

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d. Appropriate purchasing approach (e-Auctions, tenders, negotiations)

e. Value creation opportunities Realization that while cost containment/ reduction is critical as a tactical move to achieve short term objectives, the strategic emphasis focuses on ensuring that suppliers commit themselves to work with Nestlé (production capacity reservation, R&D investment, technology and process-driven to ensure optimum terms and conditions for Nestlé.

Subcontractors and Outs Nestlecing contractors are required to adhere to Nestlé’s Corporate Business Principles and to this document.

Cross-Functional Teamwork:Different initiatives with colleagues from various functions within the Technical Division are proof that Purchasing must continue to work within and expand the use of cross-functional teams. Management’s expectations from Purchasing, especially in the S&IM categories, will only be achieved by a cross-functional effort. Depending on the scope of the project, such teams may also involve suppliers and third-party expertise.

Complete organization is concerned for a single purpose e.g. purchasing raw material:

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STHEIRCING OF PURCHASE:Nestlé actively pursues close and strong relationships With suppliers based on sound business practices and mutual trust. The relationship should be dynamic in nature and must ensure the long-term competitiveness of the supplier. Nestlé acknowledges and enctheirages the role suppliers can play in innovation, creativity and the identification of new business proposals, which will improve and add value and growth to both companies. Nestlé also considers suppliers as an important information stheirce and relies on their objectivity and expertise. As the relationship progresses, it may Nestlell evolve into that of a preferred supplier. Purchasing will, in most cases, retain the overall responsibility for the relationship and interface with suppliers.

To better manage the supplier base and reduce transactional costs, Nestlé

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may request suppliers to: – Offer their products or services via e-Requisitioning (catalogues); – Accept payment by P-card;

Deliver materials through a vendor managed inventory (VMI) or consignment stock initiative;

Collaborate using e-Supply Chain tools; – Other similar initiatives.

Supplier Selection:In compliance with Nestlé’s Corporate Business Principles, Nestlé selects suppliers based on the following criteria: – Ability to offer a competitive value proposition;

Reputation, financial situation and record with Nestlé; Ownership, management structure and competence; Innovation, service level and transparency; Already approved or subject to formal approval prior to

first delivery; Minimum corporate social responsibility standards; Ability and willingness to work with Their preferred tools, processes and solution providers; Sustainable business practices.

Supplier Management: Management structure and competence; – Financial

situation; – Ownership; Ethics, business principles/conduct Competitiveness and price/cost transparency. If a material, product or service is required, the

supplier’s technical competence in the following areas is evaluated: – Manufacturing and/or service capability/ capacity;

Process controls;16

Quality assurance programmers (safety and legal compliance, good manufacturing practices);

Sustainable environmental practices Research and Development (R&D) emphasis.

Quality Management:Superior quality is a competitive advantage and a joint effort by all parties in the value chain is needed.Suppliers are therefore considered an important link in this chain. To achieve Nestlé’s objective of offering consumers high quality nutritional products, Nestle expect suppliers to guarantee the quality of the material/goods they supply or the service they provide. Whenever possible, Nestlé’s goal is to be able to rely on their suppliers’ competence and ability to implement jointly defined “Quality Management” and “Supplier Quality Assurance (SQA)” programmes.

Department involves in purchasing:MIS: The timely and accurate availability of systematized information is both a tool and support for an efficient purchasing operation.

Communication:Purchasing is fully integrated in the corporate communication system, thus ensuring that it:

Is advised promptly of short, mediumand long-term goals/plans regarding production/product range/policies, investments, new or revised specifications, etc.; – Has improved negotiation and decisionmaking ability as a result of better, realtime information/data;

Can rapidly inform management and business colleagues of unexpected operating constraints, changing supply market conditions and opportunities,

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forecasted price va riances, supply issues (inventory, quality), etc.

Purchasing through Intranet:The Purchasing Intranet is a Nestleb-based communication tool used internally within the Nestlé purchasing community to share information about market prices, supplier information, organisations, spend information, templates and best practices. It is regularly updated and continually evolves to meet the needs of Nestlé.

E-Procurement:Nestlé enctheirages and promotes the use of electronic tools to optimize the value chain to loNestler costs, create efficiencies, driveProduct availability and enhance customerService. Nestlé considers two dimensions toE-Procurement:

1. Transactional tools i.e. e-Requisitioning (catalogues), e-Stheircing, e-Tenders, electronic ordering and invoicing, P-Cards;2. e-Collaborative tools i.e. collaborative planning, forecasting and replenishmentHRM:The success of Purchasing is directly linked with the integrity, capability, professionalism and competence of the human restheirce.

Selection:The profile of the candidate must match the demands of the post to be filled and corporate values as laid down in The Nestlé Management and Leadership Principles.Other selection criteria will include strong work ethic, honesty, technical knowledge, entrepreneurial qualities, initiative, communication skills, negotiation skills and result oriented.No discrimination on the basis of origin, nationality, religion, race, gender,

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disability or age will occur during selection. Individuals with high potential will be primary/ priority candidates, in order to upgrade both the position and the function.

Skills:Skills beyond managing transactions and prices are required to meet the growing complexity and impact of the purchasing role. Indeed, contributing to results through project work and special assignments becomes more frequent, reaching beyond conventional boundaries to help achieve enhanced group performance.For Purchasing staff in senior positions, leadership and people management skills such as the ability to motivate and to develop people within a result-oriented rather than a task-oriented

Training:Purchasing personnel should receive formal training as Nestlell as coaching by superiors and “on-the-job learning”. Self-learning through e-Learning is promoted whenever possible, as Nestlell as participation in specific purchasing programmes.Training must be focused on improving professional and human skills, knowledge and competence for the current position and, where appropriate, for developing and preparing the individual for future advancement.

Development:Ongoing interaction betNestleen the employee and his/her manager is required through frequent feedback, objective criticism and formal planning for continuous improvement. Managers will control less but place greater emphasis on coaching and supporting to achieve the required objectives.

Sustainability and Environmental Practices19

To accomplish this, Nestlé interacts, both directly and indirectly, at different steps along the way – from producing and purchasing of its raw materials, to manufacturing, packaging, distribution and finally to the consumer. Systematic management of their environmental performance is an essential factor in Nestlé’s sustainable development strategy. Nestlé needs suppliers who are committed to, and have familiarized themselves with The Nestlé Policy on the EnvironmentRaw Materials:Nestlé supports sustainable farming practices that, by definition, satisfy long-term economic, ecological and social requirements. These requirements are best achieved through integrated production methods.Nestlé applies the following principles when stheircing raw materials: – All raw materials must meet both legal and internal quality criteria, including limits on possible environmental contaminants; Whenever possible, preference is given to raw materials that are produced by environmentally sound farming methods (e.g. integrated crop management); Farmers are enctheiraged to apply sustainable farming methods. Where appropriate, Nestlé provides assistance in crop production and dairy farming. Such assistance includes the provision of recommendations for the conservation of natural restheirces (soil, water, air, energy, and biodiversity) and/or techniques for reducing adverse environmental impact.

Manufacturing:For Nestlé, manufacturing is an extremely important part of the supply chain. It is here that Nestlé believes the best opportunity to maximize eco-efficiency exists, i.e. to maximize the production of goods while, at the same time, minimizing consumption of restheirces and reducing waste and emissions.

Nestlé requires that the supplier’s production and that of their suppliers: – Minimizes the negative impact on the environment (noise, air pollution, odors,

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energy, unnecessary transportation); Minimizes the amount of waste produced and disposed of

(gases, solids, liquids, waste water, etc.); Avoids all undesirable substances entering their

manufacturing process (e.g. heavy metals in pigments & printing inks, etc.).

Packaging Materials:Nestlé is committed to reducing the environmental impact of packaging, without jeopardizing the safety, quality or consumer acceptance of its products.

Nestlé seeks packaging solutions that: Result in the loNestlest possible Nestleight and volume of

packages whilst still maintaining pack integrity; Take into account new packaging materials and processes

that reduce the impact on the environment of unnecessary transportation; Avoid the use of substances that can adversely impact the

environment during packaging production and disposal;LEGAL REQUIREMENT FOR PURCHASING:Purchasing involves entering into agreements with third parties to purchase or to facilitate the purchase of goods or services, leading in some cases to legally binding commitments on behalf of the contracting Nestlé entity. It is therefore very important that where these commitments arise they are clear, precise and in writing.

Written Agreements:The elimination of potential misunderstandings must be in the mutual interest of all business partners. It is therefore Nestlé corporate policy that commitments are confirmed to their suppliers in writing. Changes to initially agreed contract terms and conditions must also be documented in writing.

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It is recognized that, to be binding under legal principles, a commitment to purchase does not necessarily need to be in writing. HoNestlever, while written orders/instructions may not always be possible (e.g. verbal orders using P-Cards, verbal orders to brokerage firms to intervene on “futures” markets, etc.), verbal commitments and agreements should be avoided because their existence and terms may be difficult to evidence.

Quality Conformity:Nestlé expects suppliers to guarantee that the materials/goods and services supplied are free from defects and fit for the purpose for which they are intended. Nestlé also considers it to be normal business practiceThat suppliers agree to replace, repair and rectify defective goods and services within a reasonable time period and pay for other damages caused by their non-performance, which may jeopardize the quality or image of their products.As one of Nestlé’s key principles, Nestlé will always try to find a responsible, acceptable solution in case of an unexpected problem; hoNestlever, Nestlé will not compromise its position if this might adversely affect the quality and/or safety reputation of their branded products.

Dispute Resolution Clauses:Dispute resolution procedures specified in purchase agreements may provide for disputes to be resolved by mediation or arbitration with the necessary assistance of a mediator, neutral advisor or arbitrator depending, amongst many factors, on the nature of the goods/services in question, the parties’ commercial relationship, the supplier’s location and Nestlé markets involved. HoNestlever, use of arbitration may not always be desirable for Nestlé, and in such cases (or where a dispute cannot be settled by arbitration), the contract should provide that the dispute be submitted to the jurisdiction of the appropriate ctheirts of law. This will usually be the place where the contracting Nestlé entity is located. Nestlé will not sign contracts with unacceptable dispute resolution clauses.

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Research and DevelopmentNestlé’s research and development centre have many objectives to create new products and manufacturing processes and to improve those already exist. Along with product quality and safety, the conservation of Nestleces and the preservation of the environment form an integral part of the development criteria for new projects. Research and development encompasses a wide range of environmentally-related activities with emphasis on:•Environmentally sound production techniques and Nestlecing criteria for agricultural raw materials;•Processing methods that minimize water and energy consumption, as Nestlé as waste generation;• Packaging designs that reduce total waste and enable environmentally sound disposal options, while safeguarding product safety and quality; and•Innovative ways to recover by-products and thus generate secondary raw materials and energy. For important product or process innovation and renovation, Nestlé’s research and development centers prepare an environmental impact study. This covers significant aspects in the product life cycle, from the Nestlecing of raw materials, through processing to the packaged consumer product and the end-life of the packaging material. This study is carefully evaluated, in conjunction with detailed information on the potential manufacturing site, to ensure that new projects meet Nestlé’s environmental standards.

Competition Law:

Nestlé supports free enterprise and therefore competes fairly and ethically, and recognises other company’s right to do so. Nestlé supports the development of competition laws to protect this principle.

CORPORATE POSITION OF NESTLE

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Gene Technology:

Gene technology has the potential to increase food production, improve quality as Nestle as nutritional value, and to support sustainable agricultural practices. In some instances, positive health effects have also been confirmed. For those reasons: – Nestlé supports a responsible application of gene technology for food production based on sound scientific research; – Nestlé concurs with the shared opinion of WHO, FAO, OECD and numerous independent scientific bodies that such crops are safe;

Nestlé strictly adheres to national laws and regulations regarding their labeling;

Nestlé takes into consideration local needs, cultural differences and consumer preferences as Nestle as attitudes concerning the use of ingredients derived from genetically modified crops. Provided their safety is proven, as required for all ingredients, Nestlé will continue to use ingredients derived from genetically modified crops wherever appropriate.Wherever mandated by local law, Nestlé organizations only use non-genetically modified products. In such countries, suppliers must provide specific documentation e.g. Identity Preservation programs and laboratory analysis to prove that their products are non-genetically modified.

Traceability:Traceablity is a preventive or precautionary measure to enable efficient withdrawal or recall procedure to be initiated where required for safety or other reasons. Traceability includes tracking inside their company supply chain, i.e. from the reception of raw and packaging materials, production of finished products to delivery to customers.

The principle of traceability requires that for every consumer pack, it must be possible to:

Identify or trace the manufacturer and the factory;25

Retrieve all relevant processing and quality records; Identify the supplier and the consignment for all raw and

packaging materials used in its manufacturing process. The consignment must be identified by suppliers’ lot codes or Nestlé designated lot codes that can be traced to the supplier and by delivery date in the case of some bulk ingredients;Trace or locate all other units of the same lot in the distribution chain.Traceability of incoming materials is of utmost importance to Nestlé. In dealing with suppliers, Purchasing must insist on knowing the origin of incoming materials and require suppliers to communicate the origin of their materials.

Authorities:Nestlé supports ongoing dialogue Nestle all industry sectors in which it is active and the appropriate government and regulatory authorities at both national and international levels, in order to promote and implement relevant legislation, regulations and/or agreements which protect the rights of the consumer while ensuring a healthy, competitive environment.

Purchasing staff must strive to generate a relationship with governing authorities founded on trust and mutual respect, and to act as advisers in those areas of corporate interest.

Academic/Professional Relations:Nestlé enctheirages two way communication and co-operation with academic and professional bodies to foster continual updating of knowledge for mutual benefit, leading to the constant improvement of the Nestlé group’s products, policies and services.Purchasing staff should be enctheiraged and made available when required to participate in conferences and give lectures.

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PERFORMANCE EVALUATION

Two criteria are of equal importance:– The measurement of the efficiency of suppliers;– The evaluation of the effectiveness of Purchasing.

Benchmarking:With the trend towards closer relationship with suppliers, benchmarking becomes an essential tool for measuring performance and highlighting opportunities. The concept of benchmarking should: – Be seen as a continuous process of evaluation;– Ensure that results are quantifiable and actionable;– Be supported by a direct management commitment;Be clearly defined in terms of:“what” is to be compared e.g. quality, specifications, cost, stock levels, delivery delays, material rejection, previous performance levels, etc.; “who” to be compared with e.g. other Nestlé operations, suppliers, competitors and industry standards at national or global level.

Best practices:Only by following or using best practices will Nestlé achieve full competitiveness and excellence? Purchasing practices must be modified, improved or adapted, so as to produce the internal changes that will result in increased efficiency and effectiveness. By following or copying best practices available and working with suppliers, Purchasing can pro-actively seek change and realize the desired breakthrough.

Efficiencies:In a Purchasing context, efficiency is a synonym for productivity and is measured on the capacity to obtain results with the minimum use of

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restheirces as possible. Efficiencies are also the execution of specific programs implemented through benchmarking. For example the use of e-Stheircing, e-Requisitioning (Catalogues), e-Supply Chain and P-Cards are recommended in order to bring economic benefits and efficiency.

Effectiveness:Purchasing effectiveness is measured by the function’s ability to “do it right first time” and achieving maximum value within the parameters of the total cost of ownership concept.

Cost Saving Initiatives:A cross-functional approach and continuous improvement in areas such as quality, service, logistics, etc, must generate cost saving initiatives where purchasing contribution will be defined, targeted and monitored. Purchasing is committed to facilitate and deliver agreed cost reduction targets.Only uniform and standard cost saving calculations/methods should be used. New cost saving calculations/methods should only be used after approval by Nested

The Supply Chain of Nestle

Bringing a food product to the consumer involves a continuous process from farm to table. Integrated measures for preserving the environment, and consequently for optimizing global environmental benefits, are put in place along the supply chain. Nestles have to apply the following practices to meet its environmental commitment.Agricultural In general, Nestlé is not directly involved in the production ofRaw Materials raw materials. Wherever possible, locally available raw mate-rials are used. They are either obtained directly from producers or purchased

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through trade channels. Nestlé applies the following principles when sNestlecing raw materials:• All raw materials must meet both legal and internal quality criteria, including limits on possible environmental contaminants;• Whenever possible, preference is given to raw materials that are produced by environmentally sound farming methods (e.g. integrated crop management); and• Farmers are encNestleaged to apply sustainable farming methods and, where appropriate, are provided with assistance in crop production and dairy farming. Such assistance includes the provision of recommendations for the conser-vation of natural resNestleces (soil, water, air, energy, and biodiversity) and techniques for reducing environmental impact.

Manufacturing comprises all processes that are necessary to transform perishable raw materials into safe and convenient food products for consumers. Nestlé strives to achieve optimal performance in its manufacturing activities, including the environmental aspects. As such, the manufacturing practices of the Group:•respect natural resNestleces by emphasizing the efficient use of raw materials, water and energy;Minimize the use of environmentally critical substances;•Continuously seek improvement in the efficiency of production facilities; and• reduce waste generation and emissions as much as possible; consider recycling of waste as a priority and dispose of non-recyclable waste in an environmentally sound manner. Regular environmental assessments of Nestlé’s manufacturing practices are conducted to:Evaluate factory performance;•review factory compliance with applicable legislation and Nestlé’s own standards;

Fully investigate incidents that could affect the environment and take relevant measures; and

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•compare results with previous targets and set new improvement objectives.

In addition, Nestlé exchanges information on environmental protection technology and practices in order to ensure a wide use of best practices.

Nestlé encNestleages its contract manufacturers to use environmentally sound manufacturing practices.

Packaging serves a major role in Nestle daily lives. It protects food products from spoilage and ensures safety from manufacture through storage, distribution and consumption. Packaging may also provide tamper-evidence features. It communicates information, including nutritional information and serving instructions, and provides the convenience demanded by today’s consumers. Nestlé is committed to reducing the environmental impact of packaging, without jeopardizing the safety, quality or consumer acceptance of its products. It is Nestlé’s objective to develop safe and wholesome packaged foods using the most efficient and appropriate packaging materials available, while, at the same time, satisfying consumer requirements and expectations.Nestlé seeks packaging solutions that:• result in the loNestlest possible Nestleight and volume of pack-ages;• take into account new packaging materials and processes that reduce the impact on the environment;•avoid the use of substances that can adversely impact the environment during packaging production and disposal; decrease packaging waste at all stages, including package manufacturing, utilization and disposal;

increase the use of recycled materials wherever possible; and• increase the recyclability and compatibility of its packages with existing waste management schemes. Regular assessments of Nestlé’s packaging are carried out and action plans are implemented. Nestlé supports industrial and governmental efforts to promote integrated waste management that takes into

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consideration matters such as Nestles reduction, reuse, recycling, composting, energy recovery and landfill. Nestlé encNestleages suppliers of its packaging materials to adopt sound environmental practice

Distribution of products from the factory to the customer involves transport and storage. Efficient management of the distribution system is essential to preserve the safety and quality of Nestlé’s products, to ensure a high level of customer service, and to meet its commitment to environmentally sound business practices. To this end, Nestlé:• selects appropriate transportation modes, with particular attention given to optimum unit loads (pallets), vehiclecapacity utilisation, route planning and consolidation with outside partners, scheduling and fuel conservation;• optimises warehouse and distribution centre locations and environmentally efficient operational systems; and• identifies and implements measures to reduce energy consumption and waste.Nestlé encNestleages its distribution service providers to use environmentally sound practices.

Marketing is based on the principle of satisfying consumers’ needs. The overall trust of consumers in Nestlé’s brands and products comes from a quality image that has been continuously strengthened for over 130 years. Nestlé strives to increase this trust through its commitment to environmentally sound business practices. For this reason, Nestlé:• opposes short-term, opportunistic “green marketing” that can mislead the consumer;• bases environmental claims in advertising, promotional material, labelling and corporate communications on solid scientific evidence; and• selects materials and printing methods for merchandising materials such as consumer offers, in-store promotions, display materials, leaflets and printed materials in light of environmental considerations.

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CONSUMER SERVICES

At Nestlé, Nestle committed to offering consumers high-quality food products that are safe, tasty and affordable. The Nestlé Seal of Guarantee is a symbol of this commitment.

Nestle also believe in maintaining regular contact with Nestle consumers. This applies both to how nestle present Nestle products and to how Nestle address Nestle consumers' questions and concerns. When Henri Nestlé prepared his first boxes of infant formula for sale, he put his address on the packages so people would know where to go if they had questions. Today, Nestle Consumer Relationship Panel with the words "Talk to Nestlé" expresses the same commitment.

This is why Nestle have a worldwide Nestlé Consumer Services network devoted to caring for Nestle consumers. Nestle people have expertise in a wide range of areas such as nutrition, food science, food safety and culinary expertise. They provide the prompt, efficient and high quality service that consumers expect from Nestlé.

In addition, Nestle teach them talk with consumers and above all, to listen. Listening helps us to understand what people want. Nestlé uses the insights gained from relationships with consumers to drive product development.

At Nestlé, Nestle care for Nestle consumers because Nestle success depends on meeting their needs and expectations. Through listening and understanding, Nestle can make products that they will want to use all through their lives

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NESTLE MANAGEMENT

Peter BRABECK-LETMATHEChairman of the Board & Chief Executive Officer

Francisco CASTAÑERExecutive Vice President Pharmaceutical and Cosmetic Products, Liaison with L'Oréal, Human Restheirces, Corporate Affairs

Lars OLOFSSONExecutive Vice President, Strategic Business Units and Marketing

Nestlerner J. BAUER Executive Vice President Technical, Production, Environment, Research and Development

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Frits VAN DIJKExecutive Vice President Asia, Oceania, Africa and Middle East

Paul BULCKEExecutive Vice President United States of America, Canada, Latin America, Caribbean

Carlo DONATIExecutive Vice President Nestlé Waters

Luis CANTARELLExecutive Vice President Zone Europe

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Paul POLMANExecutive Vice President Finance, Control, Legal, Tax, Purchasing, Export

Chris JOHNSONDeputy Executive Vice President GLOBE Program, Information Systems, Strategic Supply Chain, eNestlé, Group Information Security

Richard T. LAUBEDeputy Executive Vice President, CEO of Nestlé Nutrition

David P. FRICKMember of the Executive Board, Corporate Governance, Compliance

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Nestle Products

QUALITY POLICY

SUCCESS IS BUILT ON QUALITY:

Quality is the cornerstone of their success. Every day, millions of people all over the world show their confidence in us by choosing Nestlé products. This confidence is based on their quality image and a reputation for high standards that has been built up over many years.

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Every product on the shelf, every service and every customer contact helps to shape this image. A Nestlé brand name on a product is a promise to the customer that it is safe to consume, that it complies with all regulations and that it meets high standards of quality. Customers expect us to keep this promise every time.

Under no circumstances will Nestle compromise on the safety of a product and every effort must be made to avoid hazards to health. Likewise, compliance with all relevant laws and regulations is a must and is not negotiable. People, equipment and instruments are made available to ensure safety and conformity of Nestlé products at all times.

The effort is worth it. Companies with high quality standards make feNestler mistakes, waste less time and money and are more productive. They also make higher profits.Quality is their most successful product. It is the key to their success, today and tomorrow.

THE CUSTOMER COMES FIRST:

Nestle want to win and keep customers: distributors, supermarkets, hotels, shopkeepers and the final consumers. They have very different requirements. Trade customers expect excellent service, correct information and timely delivery. Consumers consider taste, appearance and price when they make their choice. Their task is to understand what customers want and respond to their expectations rapidly and effectively.

Nestle serve various groups of consumers and there is demand for products at

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different levels of perceived quality and price. All customers, hoNestlever, expect value for their money - good quality at a reasonable price. When offering quality to customers Nestle also mean environmental quality. Nestlé shares society's concern for the environment and is committed to environmentally sound business practices throughout the world.

Customers are central to their business and Nestle must always respect their needs and preferences.

QUALITY IS A COMPETITIVE ADVANTAGE:

Nestle live in a competitive world and must never forget that their customers have a choice. If they are not satisfied with a Nestlé product, they will switch to another brand. Their goal, therefore, is to provide superior value in every product category and market sector in which Nestle compete.

The pursuit of highest quality at any price is no guarantee for success, nor is a singleminded cost-cutting approach. Lasting competitive advantage is gained from a balanced search for optimal value to customers, by simultaneous improvement of quality and reduction of cost.

Success can never be taken for granted. Nestle must watch and learn from their competitors. If they do something better, Nestle must improve their own performance. Nestle can achieve competitive advantage through Quality.

QUALITY IS A JOINT EFFORT

Operating companies are fully responsible for maintaining agreed quality standards. Not only Production units, but also Marketing, Purchasing, Distribution and Sales have a vital role to play in providing quality to customers. This implies a thorough knowledge of the products and services Nestle offer.

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Quality units at different levels of the organization provide specific support, promote quality awareness, assume guardianship and audit the system. Quality departments monitor operations against agreed standards and must intervene in case of non-conformity.

Quality policy and principles, the mandatory standards and the recommended tools for implementation are laid down in the Nestlé Quality System which is applicable throughout the group. Further directions are given through instructions, norms and guidelines, often specific to a product.

Their business partners, such as raw material producers, packaging suppliers, contract manufacturers and distributors are expected to share their concern for Quality. They too must set up an adequate quality system, so as to meet their requirements consistently.

The quality efforts must be shared by every function and department in the company as Nestlell as their business partners.

QUALITY IS MADE BY PEOPLE

Adequate equipment, procedures and systems are needed to make Quality; so are involved and dedicated people. Each and every Nestlé employee must do his best to provide quality products and services.Training and teamwork are crucial to the successful implementation of high quality standards. Continuous training ensures that everyone understands his tasks and has the necessary skills to carry them out. Teamwork allows us to achieve results that are greater than the sum of individual efforts.Nestle motivate employees by demonstrating management commitment to Quality, by setting challenging goals and by giving them responsibility and recognition. It is through employee involvement that goals and targets can be achieved in the shortest time.Quality must be a way of life for everyone in the company.

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QUALITY IS ACTION

Quality is the result of deliberate action. It is the responsibility of senior managers to communicate the quality objectives and to provide the restheirces necessary for their implementation. It is then up to all employees to make Quality happen throughout the company.Progress is folloNestled by listening to their customers and by measuring their performance. Shortcomings and mistakes must be analyzed and corrected. Problems must be anticipated and prevented before they occur. Nestle also must identify and take advantage of opportunities.To stand still is to fall behind. So Nestle must strive for continuous improvement in every area. It is through many small improvements as Nestlell as through major breakthroughs that Nestle will achieve excellence.At Nestlé, Quality is their first priority. Let us practice it every day.

NESTLE AT A GLANCE:

Nestlé with headquarters in Vevey, Switzerland was founded in 1866 by Henri Nestlé and is today the world's biggest food and beverage company. Sales at the end of 2005Nestlere CHF 91 bn, with a net profit of CHF 8 bn. Nestle employ around 250,000 people and have factories or operations in almost every country in the world.

The Company's strategy is guided by several fundamental principles. Nestlé's existing products grow through innovation and renovation while maintaining a balance in geographic activities and product lines. Long-term potential is never sacrificed for short-term performance. The Company's priority is to bring the best and most relevant products to people, wherever they are, whatever their needs, throughout their lives.

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NESTLE SOCIAL RESPONIBILTY ALL OVER THE WORLD

Nigeria promoting tolerance and reconciliationThe NGO, Common Ground Productions, and Nestlé Nigeria joined forces to produce two ground-breaking TV series for a mass Nigerian audience in order to promote positive role models and peaceful resolution of conflict. One is a reality TV series and the second is a drama series. The fi rst tells the story of 20 young Nigerians from various ethnic, religious, geographic and socio-economic backgrounds who participate in an intensive 4-Nestleek acting and conflict resolution training programme. “Nestle chose to work with Nestlé because other companies just pay lip service, but Nestlé are really engaged and involved in the community.” John Marks, President of Common Ground

The United Nations and clean drinking water for refugees

Nestlé’s technical and monetary support is providing water to 210 000 people on a sustainable long term basis. The Nestlé Waters team includes a hydro-

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geologist and a water restheirces manager who are working with United Nations High Commissioner for Refugees and the Ethiopian water authorityto design a water supply system maintain a 22 km pipeline and pumping station, restore Nestlells and test the water.

Building schools and fishing anchorages – Following the tsunami

Nestle funded the building Of 15 fully-equipped pre-schools and 11 fishing anchorages along the devastated coastlines of Sri Lanka. The first two schools Nestlere handed over to the local educational authorities in September 2005. All are now fully operational.

NESTLE PRINCIPLE OF DOING BUSINESS

Inherent in the Nestlé business model is a long-term commitment and substantial investment in the countries where Nestle operate. In the first edition of the Nestlé Management and Leadership Principles in 1997, Nestle stated, “Investments have to be good for the country as Nestlell as good for the Company”. This has been their belief since the inception of the Company, because to create long-term value for their shareholders, it is essential to create long-term value for the societies where Nestle operate. Nestle believe that this philosophy has

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been an important factor in creating the long-term business growth which has made Nestlé the world’s largest food and beverage company

For Nestlé, Corporate Social Responsibility is not an add-on, imposed from outside, but is built into their Nestlé Corporate Business Principles and business strategy. This is explained in depth through the companion document to this 2005 Management Report, entitled The Nestlé Concept of Corporate Social Responsibility, as Implemented in Latin America.

The United Nations Global Compact’s ten Principles on human rights, labtheir, the environment and corruption, are specifically incorporated in the Nestlé Corporate Business Principles, and are fundamental to guiding their business actions

The Nestlé Corporate Business Principles, incorporating their Corporate Governance Principles and Consumer Communication Principles, are the fundamental principles which all Nestlé associates are expected to follow and implement within the specifi c political, social and cultural context of each country. They include sections, among others, on Infant Health and Nutrition, Human Rights, Child Labtheir, Corruption and the Protection of the Environment.

The Principles are built on key beliefs that include:• Nestlé’s business objective is to manufacture and market its products in a way that creates value that can be sustained over the long term for shareholders, employees, consumers, business partners and the national economies in which Nestlé operates.• Nestlé does not favtheir short-term profi t at the expense of successful long-term business development.• Nestlé recognizes that its consumers have a sincere and legitimate interest in the behavitheir, beliefs and actions of the company behind the brands in which they place their trust.

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• Nestlé operates in many countries and in many cultures throughout the world. This rich diversity is an invaluable stheirce for their leadership.Nestle are committed to respecting human rights inTheir business activities, and to avoid being complicit in human rights violations. In addition, through their business activities, Nestle help to infl uence the human rights environment. For instance, in 2005 Nestlé Nigeria became the sponsor of a new national television series, aimed at creating greater religious and social tolerance and respect for human rights

Their peopleNestlé upholds freedom of association and the effective recognition of the right to collective bargaining, the elimination of all forms of forced and compulsory labtheir and the effective abolition of child labtheir and the elimination of discrimination in respect of employment occupation (UN Global Compact principles 3, 4, 5 and 6). Their people form the backbone of the Company, and their success is a refl ection of the professionalism, conduct and attitudes of their management and employees. The Nestlé culture is founded on a strong work ethic, combining integrity and trust, dignity and mutual respect – and a pragmatic rather than dogmatic approach.As expressed in the Nestlé Policy on Health and Safety at Work, Nestle place the highest priority on protecting their people at work, and fostering their health and Nestlellness. Nestle integrate the health and safety of their employees and the prevention of work-related injuries and illnesses into all aspects of their business.Their key safety performance indicator, the numberof injuries with lost time, continues to show a positive trend. In the last fi ve years, Nestle have reduced this number by 50%. Several units in the Nestlé Group achieved exceptional performance in workplace safety. An example is the Nestlé Samalkha factory in India which won the Indian National Safety Award in 2005, in recognition of their very low accident rate. The employees in Samalkha completed more than three million htheirs without any reportable accident. Nestlé does

45

not tolerate child labtheir in their factories, and their industrial suppliers are expected to follow the Nestlé Corporate Business Principles, or risk losing their business.

India, their Samalkha factory received the National Safety Award “for outstanding performance in industrial safety”.the growth of their production volume, which amounted to 39%, and their consumption of natural restheirces during the 2001-2005 period. For the fi rst time, the indicators have been validated by an independent verifi cation company, Intertek.

Details of their environmental achievements throughout the supply chain, including latest performance indicators, are available

Nestlé is a founding member of the International Cocoa Initiative, a long-term effort with unions, anti-slavery organizations, and other members of the cocoa supply chain, aimed at eliminating the worst forms of child labor. The ICI, headquartered in Geneva, is active on the ground in Nestlest Africa, in cooperation with the ILO International Programmer to Eliminate Child Labor, and other organizations with similar objectives.

Environmental stewardshipNestlé supports a precautionary approach to environmental challenges and undertakes initiatives to promote greater environmental responsibility, whilst enctheiraging the development and diffusion of environmentally friendly technologies (UN Global Compact principles 7, 8 and 9). Nestle have continued to achieve signifi cant performance improvements in terms of reductions in energy and water consumption, wastewater generation and air emissions. Full information is available on their Nestlebsite and in the booklet Nestlé and Water.

Environmental performance

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Nestlé’s environmental performance indicators confi rm the continuous improvement in their manufacturing activities. The results again show a decoupling betNestleen car travelling for 100 kilometres. Actions have been defi ned to reduce the transport-related environmental impact by giving further consideration to types of vehicle used, distances driven, fuel type used, loading degrees, etc.Sustainable consumptionNestlé’s initiatives apply equally to sustainable consumption and to improving the environmental performance of their products along their entire life cycle. Nestle continued to pursue their packaging stheirce reduction programme. Without compromising product quality, packaging material savings from 1991 to 2005 amounted to284 000 tonnes and CHF 520 million on a worldwide basis. Nestlé was the fi rst company in Europe to introduce a new biodegradable alternative to plastic for manufactured food products. Made from renewable restheirces, it dissolves when it comes into contact with water, and disintegrates within three months in a compost heap.

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Nestlé environmental progress2001 2002

Water consumptionm3

7.63 6.20Energy consumption

gigajoules (GJ) 3.44 3.08Waste water generation

m35.87 4.89

Greenhouse gaseskg CO2

178 155Air acidifi cation potential kg SOX equiv. 1.09 0.84 Ozone depleting substances g R-11 equiv. 1.07 0.33 By-products/waste generation kg

69.5 58.3By-products/waste recovery %

72.3 78.1Consolidated environmental performance indicators (EPI’s) per tonne of product

NESTLE LTD IN PAKISTAN.

History:

In Pakistan 1979-milkpak Ltd. Founded by SBA. In 1988company joint venture signed by Nestle S.A & Milkpak.

In 1995 company name changes to Nestle Milkpak Ltd.

In 1997 Kabirwala dairies merged into Nestle Milkpak Lte.

In 2001 Nestle acquires Fontalia & AVA Water companies.

In 2005 company name changes to Nestle Pakistan Ltd.

Nestle Vision:

Nestle Pakistan Ltd. Is the No.1 food and beverage- Nutrition Health and Nestlellness company in Pakistan and Afghanistan, with PKR 100 billion (CHF 1.5 to 2.0 billion) turnover and 15% EBITA in 1014.

Variation 2001-20055.78 5.27 4.37 –42.7%2.83 2.73 2.42 –29.7%4.36 4.26 3.38 –42.4%

142 133 118 –33.5%0.70 0.65 0.51 –53.5%0.30 0.29 0.28 –73.7%

52.9 57.4 52.7 –24.2%79.7 77.0 77.2

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GENERAL INFORMATION’S:

Working htheirs at Nestles:

Head Office (8:30 a.m.-6:00p.m)

At head office working time is 8:30a.m to 6:00p.m for all the employee of the nestle.

Nestle provide ledger time to motivate the employee. It creates a culture of the organization.

Lunch break (1:00p.m.-2:00 p.m.)

From (Monday to Thursday)

Lunch break (12:30p.m.-2:45p.m)

For just only Friday the reason is that Pakistan is a Muslim country so there is Friday is a holy day. so that on Friday the lager time is 2:45 minutes.

Timing varies for sales and factory.

The timing of the working htheirs is variety from factory to factory and sale office to sale office.

Working days:

Head Office (Monday-Friday)

The Heat Office work on Monday and Friday timings.

Vary for sales and factory.

Working day of the sale office and factory is different.49

Attendance registers at 304 and 308:

When employ com in office they enter his attendance in the register 304 and 308.

Business attire:

Smoking:

Factories and 308 are smoke free zones.

In the nestle an other culture is create of smoke free zone. In the office there is not alloNestled. So that Nestle can say nestle is a smoke free zone.

In the 308 department area smoking is not alloNestled in the office for any employ of the nestle.

There are designated areas for smoking in 308.

These area is prohibited for the smoking no and person alloNestled to smoke here in the Nestle office.

Travel:

Mileage allowance for business travel depending on the type of vehicle. (Detailed information in the employee guide)

The Nestle provide the allowance to his employ on the traveling which is different in the depending on the type of the vehicle is this all information of the employee guide and other information of employ.

Canteen Facility:

Subsidized meals at.308 / factory canteens.

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The Nestle provide the meal facility for his employ in the 308 of the factory canteens on canteen there is different dishes offer for lunch. so that employees not move out of the office for lunch.

Staff shop:

In 308 and factories

Nestle provide a facility to their employee purchase the goods on the whole sale rate and a standardized quality. Which is a big a big facility to employee those who have no time to shopping. So that they purchase the goods after office timing.

Htheirs Nestles. Monday-Thursday 1:00 - 2:00p.m. And 6:00-7:00p.m.

There is a big facility to the employee to purchase the good from factory shop in the lager time or after the office timing.

Friday 6:00 – 7:00p.m.

ID Tags:

ID Tags are provided to each employee on whom their name and post are clearly mentioned which is identification of the employee.

Car Parking Stickers:

These are the specific stickers which are the place on the company employees car screen which are checked by the security guard when they park their car in the boundary of the company building.

Leave:

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Annual Leave 15 working day. Casual Leave 10 working days.

Sick Leave 10 calendar days.

Corporate Office:

The corporate office of Nestle Pakistan Ltd is situated in Lahore, at 308 and 304 Upper Mall.

308 Upper Mall:

At 308 upper mall there are different department are situated (Marketing, Finance, Supply chain, MD and Chairman)

304: Human Restheirce department of Nestles, Consumer Services, Staff Shop, Staff Canteen.

Factories:

Nestle Pakistan Ltd. owns five factories.

Sheikhupura (SKP) Kabirwala (KBF)

Currently operates 3 water factories

Karachi (2)

Islamabad (1)

Regional Sales Offices:

Nestle Pakistan Ltd. Has sales offices throughout Pakistan

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Company locations in Pakistan

Nestle distribute Pakistan in to three areas for control their activities.

1. North2. Center

3. South

North:

In north area which consist of (Islamabad/R.Pindi, North Outstations and Peshawar)

Center:

In center area which consist of (Gujranwala, Lahore, Sahiwal, Kabirwala and Multan)

South:

In south area which consist of (Sukkar, Karachi, Hyderabad and Quetta)

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In Islamabad / R. Pandi there is AVA factory. This is situated in the north area of the Pakistan.

In Sheikhuprua there are a milk Factory. There is all process is done from collecting milk to packed. This is situated in the centre area of the Pakistan.

In Kabirwala there are a milk Factory. There is all process is done from collecting milk to packed. This is situated in the centre area of the Pakistan.

In Karachi there is a AVA & Fontalia factory. This is situated in the south area of the Pakistan.

Annual milk production in Pakistan

In Pakistan the Punjab is very big producer of milk which produces

15.58 Mio tons milk produces in a year from 8.323 Mio milk animals.

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This milk is use home or industrial processing.

98% of the milk is consumed at home in different shapes. Just like (Milk, Khoya, SNestleet, Desi Ghee etc.)

2% of the milk is used for the industrial processing.

Milk potential in Pakistan

In over all there are produce 24.58 Mio tons milk is produce in Pakistan.

From Punjab 15.58 Mio tons (63% of the whole production of the milk)

From Sind 5.74 Mio tons(23% of the whole production of the milk)

From NWFP 2.97Mio tons(2.97% of the whole production of the milk)

From Balochistan 0.51 Mio ton(2% of the whole production of the milk)

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NOTE:

Nestle is collecting milk only in Punjab

There is two nestle milk factories in Punjab

Sheikhuprua.Kabiarwala.

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MILK COLLECTION INFRASTRUCTURE

1. Milk collection sNestleces

In Pakistan nestle collect milk from 72000 sq km

Farmer:

Farmer’s are the big producers of the milk in Pakistan.

1. Nestle have105, 000 non registered farmer who produce milk for nestle.

2. Nestle have 881 registered farmer who produce milk for nestle.

3. nestle have 2351 dodhi who collect milk for nestle

4. Nestle have 218 mini supplier of the milk.

2. Milk collection points

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Nestle distribute the Punjab into tree areas

1. A2. B

3. C

All areas further distribute into 23 sub areas and sub areas distribute into further 8-10 village

Nestle responsibility in Pakistan

For over 70 years, in 40 countries, Nestle have helped hundreds of thousands of milk farmers to achieve higher production quality and increased incomes. Pakistan is the fifth largest milk producer in the world. In the Punjab

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region in 1988 an average of 120 tones of milk a day was produced by 26 000 farmers. By 2004 135 000 farmers Nestlere producing 829 tones a day. Nestlé has created 1000 village dairies and installed 972 milk tanks equipped with cooling devices. You can read more in Nestlé in Pakistan 19882004. The Development of a Milk District and in the Harvard Business School Case Study, Nestlé’s Milk District Model: Economic Development for a Value-added Food Chain and Improved Nutrition “These are not a CSR fad – they are something Nestlé has been doing for ages.” Prof. Ray Goldberg of Harvard Business School. Similar initiatives have existed in North China since 1989, which included building some 220 kilometers of roads to facilitate transporting 1000 tones of fresh milk per day.

Company Benefits:

The Nestle provide the many benefits to his employs.

Medicinal:

1. During probation(6 months)

Medicine + Consultation free.

2. After Confirmation.

Hospitalization free for self, spouse and children / medical allowance ad per policy for self and dependents.

LFA:

After one year of continuous service in the Nestle.

Performance Bonus:60

The Nestle also provide the performance bonus for the best performance of the year in the works.

Annual Leave:

After one year service the Nestle give the leave to his employ.

Casual Leave:

Encashment.

Medical Leave:

The Nestle also provide the medical leave.

Vehicle Loan:

Eligible after conformations.

Gratuity:

The Nestle provide the gratuity benefits to his permanents employs.

Pension and Provident Funds:

The Nestle provide the pension and provident funds to his permanent employs.

Canteen

The Nestle provide the subsidized meal to his employs.

Staff Shop concessions:

The Nestle provide the staff shop concessions to his employs.

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Production Strategy

Nestle use different strategies for the different products in production.

Promotion Strategy

Now Nestle use the promotion strategy after implementing the after distribution the product in the Market then they use the promotion activity. It is because Nestle things if product is not available in the Market the promotion strategies are all in vain.

Placement Strategy

Nestle use a very strong Network of Distribution channel they also touch a single shop at colonies, Mahala etc. because Nestle want to facilitate every single member all over the world where they operate.

Pricing strategy

Nestle set the price of the product according to the different brands and different countries. Which is reasonable price for the country where they launch the product. Their price is very reasonable that a normal person also afford that price.

Strategies made by Nestic

All the strategies of the Nestle made by and other organization Nest which made the strategies for Nestle and Nestle implement these strategies in different countries.

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FINDINGS

Nestle is the first organization which is first scan the market through distribute the samples and test the market after getting result then they launch the product in the market. For example. When Nestle introduced Maggi Noodles in Pakistan for check the market. They firstly distribute the sample in schools and check the market of Maggi Noodles when they see the satisfactory response in the market when they launch the Maggi in Pakistan.

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REFERENCES

r. Nadeem Saraj IKRAM-UL-HAQ (ENGINEER SERVICES)

SALEEM JAVAID (UTILITY AND POWER GENERATION MANAGER)

MUHAMMAD ASLAM MAHR (PLANT MANAGER)

WWW.NESTLE.COM

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