CEO's address by Mr Paul Bulcke

Thank you Peter, and good afternoon, Ladies and Gentlemen.

It is an honour and privilege to present our results from 2008 and to explain our business strategy for 2009 and beyond.

As you have heard, your Company has created a strong momentum and the results of 2008 reflect this.

In 2008, our Group sales grew to almost 110 billion Swiss Francs, representing 8.3% organic growth. As for profits, we achieved an EBIT of 15.7 billion Swiss Francs, with a margin improvement of 30 basis points, which is 50 basis points in constant currencies. Our EBIT margin has now reached 14.3%.

Net profit also climbed significantly to 18 billion Swiss Francs, including the profits from the sale of 24.8% of Alcon to Novartis. Our underlying earnings per share grew 10.9% in constant currencies.

The share buyback programme, launched in September 2007 is on track and will be completed, subject to market conditions, within the 36-month period originally planned. In 2008, the Group spent 8.7 billion Swiss Francs on buying back its own shares, which brings the total value of repurchased shares to 13.1 billion Swiss Francs. Combined with the 4.6 billion Swiss Francs paid in dividends in April 2008, we returned a total of 13.3 billion Swiss Francs to you, Ladies and Gentlemen, our shareholders, during 2008.

Since 2005, we have returned a total of 32.3 billion Swiss Francs to you, and it is likely that we will return an additional 9.1 billion this year.

In 2009, the Group is giving preference to the dividend, as evidenced by the 14.8% increase that we are proposing to you today. This differentiates us from present market trends. In addition, this year we intend to invest around 4 billion Swiss Francs in the repurchase of our own shares.

The Food and Beverages business was the key contributor to our performance in 2008, with 8.2% organic growth and a 40 basis point improvement in EBIT margins in constant currencies. For the second year in a row, most sectors contributed to this result. Each of our three Zones, our geographical areas, achieved good levels of organic growth as well as EBIT margin improvements.

This demonstrates the momentum in our business, and is one of the reasons why we remain confident for this year, despite the very tough environment.

The main force behind our performance is our brands. Their success is increasingly derived from their inherent nutritional credentials. Our Company’s commitment to growing our brands towards consumers is demonstrated by a 7.5% increase in consumer-facing marketing spend in constant currencies. The engine of these efforts remains innovation and renovation. Taken together, our annual R&D expenditure has increased by 10%, and we are constantly looking to maximise leverage of our R&D platform.

The billionaire brands, more than 70% of our food and beverage sales, remain the key drivers of growth. In 2008 many outperformed their markets, driven by our continuing focus on nutrition, health and wellness; by our accelerated targeting of the particular needs of consumers in different economic circumstances; by our significant presence in emerging markets; by around 10% growth with our top 10 customers; and by our multi-channel distribution and multi-price point strategies.

On the efficiency side, in 2008 we saw the benefit of our accelerated focus on cost savings. Earlier than others, we anticipated the increase in commodity prices and implemented rigorous cost controls. This helped compensate the impact of these effects on our cost of goods sold. It also benefited our distribution, marketing and administration costs. Through this anticipatory action, we were prepared for a more difficult environment, whilst concentrating our efforts on growth generation.

So, despite the difficult situation during the last months of 2008, as Peter mentioned previously, we not only achieved the Nestlé Model, we outperformed it.

In fact, our Company is constantly accelerating and evolving. We don’t wait for bad times to redeploy our resources, or to otherwise adapt, but we try to anticipate coming trends. This means that we are better positioned to face turbulence, and even storms, and see them through. We are constantly finetuning and engineering our organisation for optimal performance. Our focus is clearly on acceleration! Getting more done with the same resources, doing things quicker, faster and smarter, and with more impact.

Nestlé has 280 000 people who know that to achieve our ambition we must share one vision and be aligned behind a clear strategy. We are all aligned behind the same goal which is to be recognised as the world leader in nutrition, health and wellness, and to be the reference for financial performance in our industry.

We express this strategic alignment at our Company with a simple chart which we call the Nestlé Roadmap. This sets out the strategic and performance framework that will allow us to achieve our ambition. It is key to our continued growth and ever more relevant in today’s environment. This is why we explain this in detail to you, our shareholders, in our Management Report of 2008.

Our Roadmap shows what we want to be and outlines the way we are going to achieve this.

So what are our competitive advantages? They are our diverse product and brand portfolio; our industry-leading R&D capability; our unmatched geographic spread; and our people, values and culture.

What are the growth drivers? We have identified four. They are, firstly, nutrition, health and wellness; secondly, emerging markets and consumers, including popularly positioned products (PPP); thirdly, the out-of-home market; and fourthly, premiumisation.

Finally, we continue to work with our four strategic pillars which guide our actions on a daily basis. They are innovation and renovation; operational efficiency; global product availability; and consumer communication.

The strength of this roadmap is its clarity and simplicity. It allows our people to delegate and empower their teams with increased individual responsibility and autonomy across all levels of our company. This alignment permits more flexibility, more initiative, more creativity, more discipline and faster action and execution.

We believe that our strategy places us in a good position, and is all the more appropriate in difficult times. Not only does it give us excellent defensive characteristics, it also creates a platform for profitable growth that has proven itself to be one of the most vigorous in the industry. This will continue to guide and inspire our success through the present economic downturn.

With that, Ladies and Gentlemen, I hand you back to our Chairman. Peter.

Disclaimer

This speech might not reflect absolutely all exact words spoken.

This speech contains forward looking statements which reflect Management’s current views and estimates. The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments.