Mr President, Dear Shareholders, Ladies and Gentlemen, 

It is with great pleasure that I introduce you to the fascinating world of the Nestlé Chocolate and Confectionery, areas which are very dear to me and I hope for you as well. It is here, in Switzerland, that Nestlé Chocolate was born when Louis Cailler launched CAILLER which is today the oldest brand of chocolate in Switzerland. 
But let's not forget that the quality and the specificity of the raw materials are important. It is milk that has made the reputation of our Swiss chocolate what it is today.

Our factory is set in the heart of Gruyere where we have used fresh milk from the surrounding fields all these years. 

Globally, our sales in 2007 were 12 billion Swiss francs, which represent an increase of more than 5% compared with 2005. 

Our presence in the Biscuit and Confectionery business is concentrated in several strategic markets, but by contrast our Chocolate business is worldwide.    

In South America, for example, we are the leaders in biscuits.

And our position in Sugar Confectionery is strong, for example, with the brands such as BON PARI in Czech Republic, ROWNTREE in the UK, and POLO in India, Indonesia and UK.  

The chocolate market worldwide represents 90 billion Swiss francs growing by 5% per year between 2001 and 2006. Nestlé holds the second position, just behind Mars.

Please be aware that the figures are the prices paid by the consumers and we do not have yet the official figures for 2007.

Nestlé is the only company of the 3 leaders that has had an increase between 2001-2006.

This increase can be explained by 3 consumer trends:

• Products at an affordable price - we call it PPP
• Healthy and light products
• Premiumisation of products (trend for top of the range products)

PPP products are affordable and accessible but, not of a low quality.  For example our premium chocolate SAHNE NUSS is available in both large and small sizes for everyone to enjoy in Chile.

Or also, MUNCH which is sold in 1.5 million outlets in India for only 2 rupees which equates to 6 Swiss centimes. Yes, we do as a matter of fact, make money with this product, at that price. 

The second trend to lighter, healthier eating manifests itself in the growth of wafer based products such as KIT KAT and aerated chocolates such as AERO and RAYON and chocolate tablets where consumers can break off a piece without having to eat the whole bar.

The growth of dark chocolate is not only due to knowledge of different varieties of cacao, to the subtlety of the product or the percentage of cacao, but also because the consumers are aware of the high levels of antioxidants, of polyphenols and its beneficial action for our health.

We are number 1 globally in dark chocolate and over the past 2 years, we have launched more than 200 new dark chocolate products.

As part of Nestle, the Nutrition Health and Wellness Company we encourage lighter balanced eating and portion control in our communications and products.  

The consumption of chocolate provides pleasure and well-being, as long as it is part of a balanced diet. I will come back to the third trend later

There are two different marketing approaches for chocolate and confectionery at a worldwide level. 

The first one is to have global brands and products which are the same anywhere in the world.  Some of our competitors follow this strategy.

The Nestlé approach on the other hand, is local, local, local! We have different brands in our 61 markets. And that is our strength!
70% of our sales are with local brands with only KIT KAT and Nestlé as our global brands.

Furthermore, we have 6 research and development centers dedicated to our many brands.

Although product tastes are different from country to country, the same technology and competency are applied everywhere.

For example, our Cocoa centre in Tours (France) has focused on plant growth and selection allowing us to improve resistance to diseases and to increase cocoa production. 

Here is a view of our experimental cacao farm in Ecuador.
Nestlé is the biggest global buyer of fine cocoa beans.
And Ecuador produces more than half of fine cocoa beans in the world.

We pass on this knowledge to the farmers, so they can become more competitive and produce cocoa which meets our very high expectations in terms of quality.

The third trend is Premiumisation. I will show our worldwide presence thanks to our many brands.

To note our sales of premium chocolate bars and gifting products are 4.4 billion Swiss francs.

• BACI and PERUGINA in Italy,
• The No. 1 brands ALPINO in Brazil and TORONTO in Venezuela,
• BLACK MAGIC in the UK, recently re-launched,
• Lanvin in France,
• NESTLE NOIR in Canada and in France,
• COMILFO, the Russian brand, our latest acquisition in 2007,
• and finally our Swiss brand, CAILLER.

As I said already, these brands represent total sales of 4.4 billion Swiss francs.  For example, Perugina, Quality Street, NESTLE, After 8, Garoto, Nestle Noir, Extrafino & CAJA Roja, and CAILLER which, as you can see, represents less than 1% of our sales and finally many other brands

Luxury chocolate is the top of the premium category.

That is clear, and as you might know we have recently established a partnership with the Belgium confiseur Pierre Marcolini, one of the best confiseurs in the luxury chocolate segment.

The red heart, which is the signature of Pierre Marcolini, is my favorite product.

Finally, as the President has already said, we are going to inaugurate our new Chocolate Center of Excellence in spring 2009 in Broc (Switzerland), in the heart of Gruyère.

We want to put under the same roof: all our competencies, the know-how of top confiseurs, of sensory experts in cocoa beans, packaging experts, and even the creations of our chocolate makers.

The inspiration of all these specialists will allow the creation of innovative products, and also premium and luxury products for the pleasure of our customers.

I hope we will continue to delight our many consumers

Thank you very much

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.