Nestlé Aktie

Okay. All right, everyone. Well, glad everyone can make this afternoon session. And it's my pleasure to sit here and introduce Philipp Navratil, the CEO of Nestlé to the conference. And Philipp, thank you very much indeed for coming to Paris and joining us this year.

You've obviously been CEO for 9 months now, but you've been with the company for 25 years. There's an argument that perhaps culturally Nestlé hadn't modernized as quickly as it should have done over that time period. As you came into the role, what -- maybe you could give us some insights of the aspects of performance that needed improving in the company? And what is it in the culture that you're trying to instill that was missing before?

Yes. So first of all, thanks for having me, Tom. So it's a pleasure to be here. And look, when I joined Nestlé, more or less, 9 months ago as the CEO and have been at the company for 25 years. And what was definitely necessary in what we're doing as a team. So that is all progressing. We're focusing on growth, and that is RIG led growth, which RIG is the mix between volume and mix. So that is what we're focused on.

And that was not so clear at the beginning. So we had some distractions, which were businesses that were not really making sense. We were doing some efforts to tweak margin on the side. But the view is really RIG led growth will solve most of the metrics that we want to drive into the right direction and will also generate most shareholder value going forward. So think about growth, solving for cash, think about growth, solving for market share, losses that we suffered from. Think about cash also driving profit into the right direction. So growth is really the metric that we follow on.

Then we also took efforts in simplifying and making clear we're more focused as a company. So I said at the full year, so we're focusing basically on four big businesses that we embark on for Coffee, where we have a strong and we'll talk about Coffee later on. We have Pet Food, we have Nutrition, and we have Food and Snacks. So these are the four businesses. And as you all know, we are disposing of waters, we're disposing of ice cream, we're disposing of mainstream vitamins, minerals and supplements because those are parts of the portfolio that don't fit into our strategic priorities anymore, on return, on cash intensity on just being a distraction.

Then we're simplifying how we are organized as well at Nestlé, because Nestlé is a big matrix and we have often being called as to too complex in many ways. But at the end of the day, what we really want is to push everything that has to do with the consumers and everything that has to do with the customers into the markets.

We cannot drive execution from -- way from the lake of Geneva, when it comes to the Philippines, when it comes to Mexico. So that needs to be in the market. But what we will take above market is anything that needs to be at scale and that makes sense that we do it the same way in each and every market, like, for example, content generation, like, for example, how do we run end-to-end workflows that makes sense that we -- it makes sense that we run those the same way in each and every market that we are operating or for example, science or technology-led innovation that single markets can just not do. So those will be done at -- from a central level.

And then on culture that you asked as well, Tom, on culture, there's definitely more competitiveness that we need to do. So Nestlé we have been losing market share for a long time, and that's for me, it's just not acceptable. Losing market share, it might be a great excuse, and it's always an excuse if you're the leader. So if you have high market shares, there's only way down. And I just don't accept that because if you accept that losing market share is okay, then you accept to be losing and that's not okay in our business. So we need to be competitive. And that comes, obviously, through a focus on innovation and focus on better marketing and also how we measure people in the company has changed in terms of really measuring outcomes and making sure that delivering those outcomes lead to excellence. So target setting is important, and that is also how people progress in the company.

So in 3 years' time, what your question is, so Nestlé should be a company that is more focused. Nestlé should be a company that is more agile, more innovative, definitely a better marketer and delivering value to consumers and obviously then also shareholders.

Thank you, Philipp. One of the aspects of change, which to me seems fundamental is this pivot towards younger consumers, both in your product launches and in your marketing. Why was that needed? Why did that have to be something that was a need to focus on that? And what does best-in-class marketing now mean?

That was not looked like, I mean, obviously, brands age with their consumers. And so if you look at some of our brands, definitely, there is a need to rejuvenate those. And all of our brands have that capability.

If you take Nescafé, for example, is a brand that obviously, the consumer base has aged. But as you innovate into that space and as you communicate around that space, you can rejuvenate that and bring young consumers back into the franchise. And that means innovating into the space like we have done, for example, with Nescafé cold coffee concentrates, that is a space that younger generations take up and actually experiment and rebuild their coffee -- favorite coffee beverages at home.

But it's also how we communicate. It's more digital, it's more through influencers. And it's more modern, it's more organic in a sense. So it's not a big TV campaign and you just do that the same way everywhere. And so -- while we think about that, we are also upgrading our marketing muscle and our machinery around marketing. And I've been very vocal to say we're not the best brand builders out there. And when we say we are a company that is a consumer that is driving consumer driven. We want to be a company that actually drives consumers and drives trends.

And so -- hence, innovation needs to do that. So innovation when you think about it, rejuvenating innovation is the one that creates new spaces to tap into within your categories. It is a space where you drive new excitement, bring new consumers in, like we have done, for example, with Dua Lipa on Nespresso. So that is that engagement brings in new younger consumers to the Nespresso franchise that have never ever thought about engaging with Nespresso. And that is how we think about marketing.

And when we look at what marketing really needs to do is we're just not known as the best brand builders in the industry, and we need to become the best brand builders in the industry. And that has to do with using data, using AI, using great content, really building that muscle, and this has to do with bringing in new talent.

And I would say I always -- it's a soft metric. But really, we will get there when we will be having a struggle to hold our marketing talent back because they're being poached by competition. And today, it's not the case. And so we're building that as we speak.

And you've seen maybe some of you have seen one of the good examples is what we have done with KitKat in the past few weeks with that truck that has been stolen and you've seen it was a huge digital viral campaign, and that is how marketing should be, it should be more entrepreneurial. It should be more organic and it should be much faster to really be able to set trends and not only to follow trends.

Okay. So perhaps we can dig a little deeper into the growth platforms that you outlined. So you state that the growth platforms account for about 30% of sales. Maybe if we start on Coffee and Pet, which together in total account for about half of group sales and operating profit.

So in Coffee first, I think many were concerned that some of the growth drivers like cold coffee weren't being captured by yourselves and perhaps some might see it as a stretch of how do you go from cold coffee, RTD to buying a Nespresso machine. What have you done within Coffee to reinvigorate the growth. And obviously, Q1 was strong, but do we need to see pricing come down to see that continue to be strong?

Yes. So if you take a step back on how we decided to drive growth at Nestle is these growth platforms that you alluded to. So we decided that we have growth platforms that are structured in a way that there is underlying higher growth there because they tap into existing consumer trends. One of them is cold coffee, for example.

And across those platforms, we have great brands, great capabilities, science and technology-driven innovation and also good execution muscle in the markets. And so those platforms are 30% of the group sales, and they should be driving high single-digit growth. One of them is cold coffee.

And cold coffee, you have to see as a platform. So what we have done there is really not only having a single innovation that we drive forward, but the whole platform is interesting. And in Coffee, as we have the three best brands that you can have in the industry in terms of coffee. So we have an Nespresso, we have Starbucks, and we have Nescafé. Across those brands, we're building out the cold coffee platform. And so you have executions like the coffee concentrates that we have launched under Nescafé but also under Starbucks. We have launched some products that are soluble that are designed for being soluble in cold water, so you can do cold coffees at home. We have the designed capsules for Nespresso that actually that are flavored that you can play around with and really drive cold coffee. We have ready-to-drink coffee that we're rolling out across the globe through different brands.

And then also, we are expanding need states in Coffee. So Coffee is not A few years ago, when I started in Coffee, coffee was a hot beverage that would wake you up in the morning. Today, coffee has become a very varied way to play around. So you compete with indulgent desserts as you do with refreshment on the other side or energy on the other side, and we have just launched inspired by what Starbucks is doing out of home as well refreshers that are colorful, that are fruit-based and have a coffee concentrate -- green coffee concentrate base.

So Coffee has become a real playground to expand need states. And that is what -- exactly what we're doing across all of those brands. And hence, Coffee is a place that I see long-term structural growth. So it's not -- you have seen our RIG was 2.5 -- 3.5% in Q1, which is strong on top of that, came pricing. And we were able to drive that RIG despite double-digit pricing in some of the markets that we have done. Coffee prices are coming down now. But I believe that driven by innovation, driven by good execution and the power of the brands that we have, we will be able to drive RIG while still capturing some opportunities that we still have in terms of pricing. And then the portfolio helps us actually to be able to cater to any consumer that is out there from very premium to very, very affordable great coffee cups. So I don't think that we will have to wait for prices to come down for volumes to pick up there in coffee.

Thank you. So perhaps then on Pet Care, maybe you could start with highlighting some of the trends we're actually seeing because it's been one of those that has been perhaps held back over the last few years, maybe just looking at U.S., Europe and in EM. And is that a better backdrop to be putting investment into now?

Yes, absolutely. So Pet is another great category for us. And absolutely, there is good structural growth. And I'll go a little bit to the growth drivers across the category and then we can go into some of the geographies you mentioned.

In terms of structure, so pet adoption is still there. So we are leading the Cat segment, and we're #2 in the Dog segment. Dog is a place, I would say it's stable. There's still pet adoption coming in. But what happens there, what you see is that households that have several pets or had several pets, they're not replacing the #2 or #3 when it dies. So that's sort of coming down, but there is still pet adoption coming in.

And you have a trend to smaller dogs in general. But we have seen also Pet coming back slightly. But it's definitely a place that is there's less growth versus Cats. In Cats, we have seen good structural growth in Cat. We have been capacity constrained in Cat for a long time. We're building capacity back as we speak, specifically in the U.S. and Cat is a growing segment. Cat adoption is up.

As people go back to work, cat is just an easier animal to hold at home, and cats are growing in that sense. And so we like cats a lot because cats are also picky eaters in a sense. And so you need more science and technology to actually cater to that successfully. And we see generally three trends also when it comes into Pet.

So in the world, you see less babies and more pets. So that's just an overarching trends, and that's true. People look for companionship. And if you have people that get older and are more lonely also, they look for pets and cat is always a good companion there. And then you see a trend that helps us a lot as well. If you look at how our portfolio is structured, we play in the premium segment, there is this personification of pets, and they're part of the family and people are actually making the extra efforts to treat them well and just spend extra money on their pets. And that's a trend that helps us as well.

And if you look at it in the U.S. for us, we're building back capacity, as I said. So that will also enable us to drive innovation that we have not been able to do because we were capacity constrained, also some more promotion as that category comes down from a very high inflationary led period into more normalization. In Europe, we are much more skewed towards Cats, and we were not capacity constrained and growth is doing just fine.

And in emerging markets, there is opportunities, same as I said before, on Pet adoption. But also there is what we call caloric coverage, which is the percentage of the food intake that the pet takes through pet food is very low. So look at it through a lens of penetration or frequency of consumption. And so there is -- those trends will lead into that, and we're investing into emerging markets where we see pet adoption and the opportunity coming up as well. And that is also skewed more towards Cats, especially in the Asian markets.

Okay. And perhaps one adjacent area or an area within a pet that you've previously highlighted was therapeutics supplements. What is your scale in therapeutics, supplements? And is that somewhere you'd expect to be allocating a bit more capital for M&A?

So Pet Therapeutics is one of those growth platforms I was alluding to before. These are highly specialized products that we normally sell only through veterinary channels or highly specialized. And normally, when consumers go there, their veterinary would prescribe that product to them. So the brand that we talk about is Pro plan. We have that on Cat and on Dog. And normally, that becomes a lifelong subscription. So people would not change that out if they're happy with those products. And those are products that piggyback from our science and technology backbone from the Nutrition division that we have. And they're really smart in taking some of those benefits that R&D comes up with into pet food into driving pet food with health benefits, but also healthy longevity, weight management, all these kind of -- even memory management, et cetera, like that. So these benefits.

And what's interesting there is why -- how do we invest into that? It's obviously classic marketing, but how you grow that area is actually putting more boots on the ground in terms of sales force because we need more people visiting more vets and more vet clinics to actually drive the leads to be able to then have them talk to potential customers that are considering or already bought a pet to give some Pro plan. So it's highly specialized. It's premium and it's scientific products, and we believe we have an edge there, and we're going to invest there. It's high growth.

Okay. Thank you. So if we put Coffee and Pet Care together, how confident are you that either or combined together can outperform staples overall?

I think both. I'm very confident in both of those. I mean both of those have an underlying growth of 3% to 4%, if you ask Euromonitor. And I think we will -- on both of those categories will be definitely growing at the upper end of those. And then if we accelerate, as I said before, through growth platforms like, for example, soluble coffee in emerging markets, cold coffee, portioned coffee in the U.S., those growth platforms, they grow high single digits, some of them grow double digit. We will definitely be able to elevate that growth rate.

Same on Pet Food, very skewed to a premium segment. We do not play in mainstream or economy in Pet Food. That is growing faster than -- so our premium portfolio grows faster than economy and mainstream. And then again, underpinned by additional investment, additional growth in Pet Therapeutics, for example, but also wet cat food where we see a really strong structural growth, we will be able to outperform the market on both of those. I'm confident long term on both Pet and Coffee.

Okay. Thank you. So looking at Nutrition now, which in your presentation was the area you gave the highest -- put the highest growth rate, potential growth rate on of category growth of 3% to 5% for the full year. It's not been running at 2% RIG, as you stated, seeing pressure on birth rates. And then there is the impact of the product recall this year.

Maybe to begin with, you could cover off, are you seeing any lasting impacts of the recall. And I guess the category overall hasn't done quite as well as you might have expected given the pivot towards Health and Wellness. And perhaps why is that?

Yes. And what's the opportunity? Look, first of all, on the infant formula recall, that's one of the things that should not happen in our industry, and we definitely have to get better, and that's very clear. The learnings are there and we're working on those.

What we have done really well is to get the product back on shelf and to reestablish confidence and trust with consumers, health care professionals hospitals, associations, et cetera, and that is what we're doing. So I do not see a long-term impact on the brands. The category is also such that it recruits every day and every day you lose consumers because this is a category where consumers normally are very short, depending on how many children you have, but it's between -- for one child, normally, it's between 6, 7, 8 months they're in that category, and then you get out of the category, you don't consider it anymore. And then new mothers with their babies come in every day. And so that is what we are rebuilding now.

And obviously, having been off shelf for some time, you lost the cohort of babies that to take through that product range. And we're rebuilding that. We're tracking it. So we're we're seeing it nicely coming back, and we will be back fully recovered by the end of the year for sure.

We're also investing in the brand in terms of bringing influencers, health care professionals into our factories to show them our capabilities in terms of safety and quality, obviously, and also, we're investing in behind marketing campaigns behind the brands that is highly science-driven and also we invest in innovation. So that should go -- that should come back.

But then again, you said it these -- you go into a place there is lower birth rates, and so there is less growth in drinking formula. What I'm excited about in the nutrition space is really adult longevity space, health in general. We have brought -- you have seen we have brought together the Nestle Health Science and the Nestle Nutrition divisions. And that is not moved to drive efficiencies, et cetera, but it's a move to really unlock growth. And we were having two divisions that were playing on the same field. So two divisions playing on protein, two divisions playing on fiber, two divisions playing on creatine, for example. And there are plenty of brands that we had on the Nestle Health Science that are only U.S.-based, and we never managed to leverage those across the borders into Europe.

Think about brands like -- or gain that you would know if you live in the U.S., but you would not know if you live outside the U.S. Vital Proteins is a fantastic brand that has much more leeway and much more growth to go. And so we have these capabilities that we bring together, joined up R&D capabilities, joined up muscle in terms of execution. And then we have beautiful businesses that already drive high single-digit growth like medical nutrition, for example, that are really highly science-based and are very specific to a treatment of post cancer treatment or during the hospitalization, what can you eat and those are tube fed but also can be normally ingested. And these are highly specialized products where we can really make a difference.

And so long term, I see despite lower birth rates, I see the Nutrition space being an exciting space for us to innovate. And this is the core of what Nestlé actually is about and it's about regaining that space. And I believe we can grow that the upper part of that rate.

Okay. Well, you're giving yourselves the funds to invest. You're generating CHF 3 billion of cost savings by the end of 2027. In 2026, you'll have perhaps the most significant incremental funds to spend it must be good for the business to be proactive rather than reactive, I guess, as it has been potentially in the more recent history. Is it just as simple as giving people more money and to spend on A&P and seeing the growth? Or what's the kind of oversight and what's the level of returns that you're expecting to?

Yes, it's not as easy. So the -- what we do is the efficiency generation is an important part of the program because the efficiency generation enables us to actually take additional funds. This year, it's going to be CHF 600 million of additional A&P funds people want like that to be reinvested into those growth platforms to really drive those to high single-digit growth. And that's important.

So it's not about putting those savings through to margin recovery, margin recovery for us come through driving RIG-led growth. So it's a function of driving the growth, which is really important.

And so once we have that money, we deploy it on to those growth platforms. And this is done obviously through smart and discerning target setting, which is important. In the past, Nestlé would set targets, and everyone will get the same target, exactly the same target, which would maybe be right for your business, maybe would be wrong because you would then not lean into driving some of those growth platforms because they might be dilutive at the beginning, but you need the right target to be able to lean in. And then you need the right funds to put against and we're tracking that. So we're tracking that as an Executive Board. And obviously, we then take decisions that we say there's spaces you could invest more and get more growth, great. We do that.

Or there is a space that actually something is not doing right, and we did -- we don't see the growth coming through. So we shift that money to somewhere else. So it comes obviously with the money we give you, but it comes with an app that you deliver against the promise.

And then also what we have done at Nestlé, which helps a lot, we have focused our media spend, for example, from 400 brands that would get media to 100 brands, and it can -- you can say that's still a lot. But we have over 30 brands that have more than CHF 1 billion retail sales. And so they need media and then some other local or regional brands that are big enough to support media, but media campaigns need to be sufficient and they need to drive some results and spreading the money thinly has not turned out as being a good investment.

So we concentrate those additional funds on less businesses. We concentrate those additional funds on less campaigns and get a better ROI on our marketing spend. And that doesn't mean that the 70% of the core business that we call core business doesn't get anything. They will still get money to drive promotions to drive some innovation, but they will just not get additional funds that come from those efficiencies to drive additional growth. But that 70% needs to grow at cruising speed of those categories. And that is how we attach some strings to those additional funds we give out to markets.

Okay. Thank you. So if we look at the external cost environment, you're seeing have been seeing Coffee come down. You're seeing things like energy obviously go up. What are the overall raw material dynamics for you currently? And does that at all affect the net cost savings that you can make? And should we expect some pricing across categories in H2 and into next year?

Yes. That's a big question, look, the -- so if you look at -- if you take a step back and look at our cost structure, 2025 was highly impacted by increasing coffee and cocoa prices, at least for us. And that has somewhat come down. So you have seen cocoa prices come down. You have seen coffee prices come down somewhat.

And so if you look at 2026 for us, net-net commodity price or input cost is actually favorable. So if you compare it to 2025. And so that's why we have said -- you should expect 2026 margin to be higher than 2025 margin and sort of improving through the year as those better costs on those two commodities are coming through.

Now you have obviously some inflationary pressure from other places like the Middle East crisis that we will still have to see. I mean we are hedged. So we are through H1, we are hedged, and some are hedged larger, some are hedged a little bit shorter, but we will have to see how those inflationary pressures come through and then see what that means in terms of pricing that we need to do.

And that's going to be different. It's not going to be, we're going to increase prices just like that. We -- when we do pricing, at Nestle, we take this really responsibly. So it's really done market by market, category by category, depending on competition, depending on the consumer, depending on our capabilities as well. And this is a muscle we have really built during the last years because we have had several rounds of price increases, and it's not about just increasing the list price. It's about using price and pack architecture using our portfolio to drive the mix into the right direction and really drive it in a smart way to make sure we take consumers along and don't lose consumers just because we increase price too much.

And where we see that we increase price too much, we go backwards and make sure we correct that because it's much more expensive. It turns out to win back consumers once we lost them and they walked away because the price value equation was broken. And so we take that responsibly, but we take price where we can take price and we give back price where we need to give back price. And that equation has worked so far and the muscle is a strong one that we have.

And in terms of the conflict in the Middle East, is that something that's at all affected the supply of any key commodities? And is that affecting any demand either in the Middle East or the emerging markets, which might be affected by energy prices going up?

Yes. So in the region itself, so the region itself is about 3% of our sales. we have not seen a lot of demand changes there. The team is really resilient. This is a really resilient team there based in Dubai, but they're basically in that region, which is the whole Middle East is constant crisis. They're really good at managing that.

They have resilient supply chains. We have resilient supply chains everywhere because we normally produce 90% of what we sell locally. So we have really strong relationships with suppliers, et cetera. So we have not seen disruption in the region itself.

But obviously, if you take a step back from that conflict, you will see there is a risk of having supply disruptions or physical supply disruption, I don't -- which I don't see a big risk for Nestlé to be very honest. As far as I can see, again, back to that local anchoring of supply chains and strong relationships where our scale is important.

Then there is obviously the consumer, and that will have to monitor carefully. We have not seen a big shift so far. But as you mentioned, some emerging markets, definitely in markets where fuel prices and fuel has a bigger share of wallet of people, people react.

And for example, in the Philippines, you see consumers staying more at home, they will not take transport or their vehicle to go to the office or working from home. Shopping closer to home, eating more at home. And these are all things that, although it will suppress some of the growth, but this should all lead into our portfolio and enable us to gain market share in those markets because when people eat at home and when people shop closer to their markets, that is where we are present, and that is where we -- our brands play a role. And again, this is a playbook that we have played many, many times, and we're good at that. And normally, in those moments, we gain share.

And then you have the other pressure, which is more input cost pressure when you have beyond fuel packaging materials for the secondary effects of packaging material, fertilizer cost increase that will have an impact not this year and probably started to come in next year. But there will be an increase in input costs depending on where fertilizer ends up in terms of costs. So you will have that and that you have to put in the scale when you think about your margin.

But then again, where we can increase price where we can increase -- we increase price where we can increase price. And then we're also always driving efficiencies that will also help us further offset some of those costs. So it's something we monitor really closely, especially the consumer part, because this can change quickly, but I believe with the portfolio that we have and the capability that we have to price correctly, we -- and also have the right product assortment, we should be well equipped there.

Okay. Thank you. Well, perhaps in the time that we have left, we can pivot towards AI and the use of it within Nestlé. If you look at the investments that you've made so far, what areas are you making those in? And is that more in cost savings operations or demand creation?

Look, it's definitely both. I mean it definitely was a shift from using AI to drive efficiencies and to disrupt some of the processes into how do we actually make sense of everything that we have, and pivot to drive growth. And that's exactly what we're doing. So we're connecting. We have a really strong database. 20 years ago, Nestle, put one ERP into the whole company. So we have over 90% of the business run through SAP. And that gives us a really strong unified database, and we have -- we're really data-rich in that sense. And so what's now up is to use AI and to really drive those end-to-end workflows, making sense of that data foundation to really make sure we have the right data foundation to use AI to actually accelerate the business and to drive processes more uniformly and more efficiently, more -- in a more agile way using above-the-market shared service centers.

And so AI is enabling that internally, really connecting the data and making sure we can leverage that, not only to drive efficiencies, we'll do that as well. But to take better decisions to spend time on those things that really make a difference in driving the business forward and generating growth.

And it would be very interesting to hear your observations on the use of Agentic AI either on the side of procurement by retailers or on the side of product discovery by consumers. How do you see that impacting your business?

It's going to be a big impact. It's a big change. And if you think about sort of two aspects to retailers are using it, obviously, to make a better consumer experience for their shoppers. Shoppers are using it to purchase goods and products.

And I think we have an advantage there. If you think about Agentic AI or LLM as a new consumer, because if you would do marketing in the past or still, you would think about film, visuals, influencers, that would sort of a person will respond to that and engage with the product or the service. LLMs don't react to visuals and don't react to that kind of impulse but what they consume very fast and very efficiently is huge amounts, vast amounts of data. And that is what we have.

So if you think about the advantage that I see for large companies like ours is we have tons of scientific literature and scientific information on our products. We have all of the information, how it's sourced, where it's sourced from how it's produced, where does it come from? So all of that information, you can actually use to have LLM consume that and then playing it back to consumers that ask LLM, can you buy me what's the best chocolate and buy that for me or a sustainable chocolate or whatever. You have to make sure you're in the right space there. But I think the information we can put out there is definitely there.

And we have products today in our -- how we produce them, we have products that have birth certificate. So each and every product that comes out, so for example, think about coffee pods. That has a unique code on it and you know exactly what the machine specifications where when it was produced, what is the input that went in. So you have all of that information that can be actually consumed by LLM and inform the consumer better.

And I think Agentic, if you look at retail as well, I mean that's maybe a dream, but going forward, as we deploy agents and retail -- our retail partners deploy agents to make the experience better. In the future, I believe, and we're testing that at low scale, but that's going to come that those agents actually, they will work together to work for a better assortment for a better consumer experience for a better supply chain for a more efficient supply chain to making sure the promotions are executed the right way. So those agents should and must at some stage, work together, especially if some of our retail partners will share the same data platforms.

And that will become the common way of working, I think, going forward. And we're testing that using our relationships with our technology partners as well.

Thank you fascinating and obviously going to continue to be ever more important. We're unfortunately running out of time. But Philipp, thank you very much indeed. Are there any closing remarks you'd like to make about Nestlé's potential...

Look, very quick. So what you would have heard today and what you hear me say is our actions are starting to work. You've seen strong Q1 so far. These are early green shoots. And so there is still much to do, so actions are working. We have a clear strategy that we are deploying clear priorities, and we're really focused on RIG-led growth. And I think that is what the team is focused on and what we are relentlessly following.

We are accelerating our execution in the markets but also everywhere that we can execution is important. So we need to execute that strategy. And our performance is improving. So we expect some of the actions that you have seen focus on less priorities, but priorities that really can make a difference and accelerate the growth rate of the company expect the company to grow and create value for the consumers and obviously U.S. as our shareholders.

Thank you very much. Always a pleasure, and thank you very much.

Good morning, and welcome to Nestlé's 3-month 2026 Sales Update. I'm David Hancock, Head of Investor Relations, and I'm joined today by Philipp Navratil, CEO; and Anna Manz, CFO.

Before we get started, please take a moment to review the disclaimer on Slide 2.

Let me quickly take you through our short agenda. We'll start with an overview of the key messages from Philipp before Anna reviews the 3-month sales in more detail. We will then open up the lines for Q&A.

With that, I'll hand over to Philipp.

Thank you, David. Good morning, and thank you for joining us today. We have started the year well. Our performance demonstrates that our RIG-led growth strategy is delivering in a complex and uncertain environment.

Before turning to the details, I would like to thank our people around the world for their continued dedication and focus as well as our customers and consumers for their trust.

Let me start with the key messages for the quarter. Growth momentum continued with organic growth of 3.5% and RIG of 1.2%. Our performance is broad-based. RIG was positive across all zones and categories, except infant formula within Nutrition, which was impacted by the recall. By category, coffee was the star with recovering volumes and positive mix. Emerging markets also continued to stand out, driven again by RIG.

The infant formula recall impacted performance in the quarter as expected. We acted quickly, product availability is back to normal, and we are seeing new parents coming to our brands, as they enter the category. So Q1 was a quarter of focused execution and good momentum. At the same time, it is clear that geopolitical and macroeconomic uncertainties have increased. Taking these together, we're maintaining our full year 2026 guidance.

Here is a reminder of our strategic priorities. As I have said before, my highest priority is RIG-led growth. There is still much to do in order to drive this sustainably. Let me talk about what we have done in Q1. We are accelerating investments behind our growth platforms. These are areas where structural growth drivers, competitive advantages and our strong innovation pipelines come together, driving high single-digit organic growth or better.

Elsewhere, we are addressing affordability and driving premiumization by sharpening our price pack architecture. We are investing more behind fewer, stronger brands, and our marketing transformation is a key enabler. Winning portfolio is another priority. We are making progress on the Waters and VMS disposals, and we have announced this morning that we have reached an agreement to sell Blue Bottle Coffee. All this is underpinned by disciplined execution.

I have talked about clear accountabilities and aligning incentives with delivery of sustainable, high-quality growth. To support this, we needed to strengthen our KPIs and performance management system, and this is now fully rolled out. Taken together, action on these priorities positions us well to deliver our plans for this year and beyond.

And with that, I will now hand over to Anna to go through our Q1 performance.

Thanks, and good morning. We delivered 3.5% organic sales growth in the quarter, with RIG of 1.2% and Pricing of 2.3%. Sales were significantly impacted by foreign exchange. Last year, the Swiss franc strengthened sharply in early Q2. So assuming current spot rates, the year-on-year impact will reduce significantly from now on. We currently expect a full year currency headwind on sales of around 5%, which is a little less than we expected in February as the Swiss franc has weakened since then.

Looking at organic growth in a bit more detail. On RIG, we maintained our second half momentum despite the infant formula recall and the U.S. Petcare phasing, both of which I called out at the full year. The chart on the right shows RIG for the first quarter by category. The impacts in Nutrition and Petcare were compensated in particular by coffee. You see the standout performance Philipp mentioned with 3.5% RIG in Q1 compared to less than 1% last year. Food & Snacks also improved, delivering RIG above 2% for the first time since 2021.

Let me get into a bit more detail. Performance in Coffee was very strong. Pricing continues to contribute positively, although its impact will ease as we progress through the year. RIG momentum is improving, supported by the strength of our brands. Take Nescafé as an example. In the U.S., we had very strong pricing and double-digit RIG in Q1, even in a more difficult consumer environment. This reflects smart price pack architecture and strong in-store execution as well as occasionally expanding innovation like Nescafé Gold Espresso.

Overall, Petcare growth was subdued during 2024 and most of 2025, but has showed signs of improving momentum over the last 2 quarters. Q4 and Q1 are distorted by customer order phasing in the U.S., which boosted growth in Q4 by a bit more than 1 percentage point, and that reversed in Q1. Over the 2 quarters, the effect is neutral. The improvement in Petcare is largely coming from the U.S., and this is driven by additional capacity coming online, allowing us to finally service unmet demand in wet cat, where the market is growing. And we see that same strong demand for wet cat in Europe, too. And here, we have greater skew towards cat and fewer capacity issues and so continue to deliver strong RIG-led growth.

As expected, our performance in Nutrition was largely driven by the impact of the infant formula recall, and I'll cover this in a bit more detail later. Outside of this, Medical and Adult Nutrition performed well and the combination of Nutrition and the former Nestlé Health Science business will help us unlock further growth.

And finally, Food & Snacks. Overall organic growth has been relatively stable over the last 5 quarters, but the quality of that growth has been improving. RIG was negative in Q1 and Q2 last year, but has been improving progressively in the last 3 quarters to reach more than 2% in Q1. A major factor has been our confectionery business returning to growth, as we've moved through our pricing actions.

Before moving to our zones, here's a view by geography. In developed markets, growth is a bit lower, reflecting the softer macroeconomic environment and weaker consumer confidence, but our performance versus our categories is improving. On the other hand, as Philipp mentioned, we're seeing good growth in emerging markets. Excluding China, OG is close to 7% with almost 3% RIG. In most of these markets, momentum in our categories is supportive, and the actions that we're taking are driving growth and share gains.

Turning to the zones. In AMS, we delivered another good quarter with an improving momentum and positive OG across all markets and categories. RIG has strengthened as a result of our focused investments despite the difficult consumer environment in the U.S. Many of the category dynamics I mentioned for the group are playing out in AMS. I'll highlight Coffee and Petcare in particular. I referenced Nescafé in the U.S., but the strength in Coffee is actually really broad-based. In each of our other large coffee markets, including Mexico, Brazil, Chile and Canada, RIG was mid-single digit or better.

In Petcare, underlying momentum is improving, driven by a good category growth in cat and by our super premium brands ONE and Fancy Feast.

In AOA, there are a few moving pieces, and this chart doesn't quite tell the full story. The infant formula recall accounts for all of the slowdown in growth from Q4 to Q1. And overall growth is still impacted by the continued correction of trade inventory in China. That aside, we're performing well. This is especially true in some of our emerging markets, including India, Indonesia and Central and West Africa as well as developed markets such as Japan.

Market dynamics have generally been supportive, and we're outperforming. Take Maggi in India, which delivered strong double-digit OG and RIG. Maggi is a loved brand in India, and we've built on that by combining affordable price points and flavor innovation such as spicy noodles to capture rural and younger consumers.

In Zone Europe, growth was solid. Here, we are continuing to deliver great growth in Petcare, as I already mentioned, and Coffee is recovering nicely with growth still price-led, but with improving RIG. The growth in Pet and Coffee was partly offset by the impact of the infant formula recall and a competitive environment in food. And finally, but importantly, we've largely navigated the annual price negotiations in Europe with limited disruption.

Turning to the globally managed businesses. In Nespresso, growth is still led by pricing, which is expected to moderate as we begin to annualize increases from 2025. RIG recovered in the quarter, partly due to an increase in active consumers in Europe as well as the reversal of negative customer order phasing from Q4 last year. For Nespresso, the big news of the quarter was the launch of our new global brand ambassador, Dua Lipa. We've had a great response from a much broader consumer demographic.

This collaboration, along with others like KitKat with Formula 1, reflect our new approach to brand building, investing in the right partnerships, which elevate our brands and engage a broad spectrum of consumers and especially those younger demographics.

Finally, in Nestlé Waters and Premium Beverages, we delivered solid growth, led by our international brands of Sanpellegrino with innovations like CIAO! and the continued expansion of Maison Perrier.

Turning to the infant formula recall. The recall was executed rapidly during the first quarter. Our priority has been to replenish shelves and ensure parents have access to the products that they need. And as of April, product availability is back to normal. The overall impact of the recall in Q1 was around 90 basis points on organic growth, and about half of this reflected the direct effects of sales returns, temporary stock shortages and the subsequent replenishment. The remainder was driven by lower consumer demand.

Our teams have done a great job engaging with health care professionals, retailers and consumers to rebuild trust in our brands. And this is key to supporting a recovery with new consumers recruited continuously as babies enter the category every day. We estimate that our infant formula sales are currently down around 10% or so due to the consumer impact, and we're already seeing early signs of improvement and expect to fully recover by the end of the year.

Now turning to guidance. We're pleased with the Q1 growth performance, especially our RIG delivery. At the same time, we're clearly facing increased geopolitical and macroeconomic uncertainties. The conflict in the Middle East will have some impact on commodity and distribution costs and possibly on consumer behavior, but it's too early to know the full extent of this. Taking into account the momentum in the business alongside these uncertainties, our guidance for 2026 remains unchanged.

We expect organic sales growth to be in the range of around 3%, up to 4%, with accelerating RIG compared to 2025, driven by our focused growth plans. On UTOP margin, we expect to improve versus 2025 with strengthening in the second half. Lastly, we expect to deliver over CHF 9 billion of free cash flow.

And with that, I'll hand over to David to open the Q&A.

Thanks, Anna. So we'll now open the Q&A session. [Operator Instructions] And the first questions come from Tom Sykes from Deutsche Bank.

Firstly, just on the cost saving program. Sorry if I missed something, but could you just maybe outline when is the point that you reach the maximum run rate of cost savings or rather when is the point in the year or the next 2 years, where you have the biggest delta in cost savings, please? Is that sort of end '26? Or is it run rate in '27?

And then, just on the pivot towards younger consumers, both in your innovations and in your marketing, we can obviously see that in some of the materials, but what -- where on that journey actually are you at the moment? You've obviously spoken before about building out the marketing infrastructure and that taking some time. Could you maybe speak about the level of hiring that you've done there and the changing in the culture of marketing that you've had in the organization, please?

Yes. Thanks, Tom. Look, I'll -- thanks for the questions. I'll give the cost savings one to Anna, and I'll come back on the younger consumers right after.

Sure. Yes. And on the cost savings, Tom, run rate end '27 is when we fully delivered our CHF 3 billion goal. And we're working our way through that, and you will see us sort of progress in a steady way as we work through between now and then.

Good. Thank you. Thank you, Anna. And look, Tom, on recruiting younger consumers, I love the question, and you've seen Anna call out just before some of the actions we're taking in terms of influencers like Dua Lipa for Nespresso, where we actually see that we're speaking to a different cohort of consumers, younger consumers, new consumers that have actually never been in contact with Nespresso coming in to our website, to our stores and being interested about the brand.

You've also seen us last year already engaging with KitKat and Formula 1. And you have seen probably just a few weeks ago, a viral campaign called the KitKat Heist, where actually out of a stolen truck, we made -- the team made a huge viral campaign. And this is part of how we want to run marketing. So it's more led by the team. It's more bottom-up. It's on-tone, and it's more viral. And so we're changing this as we speak.

We have done a review of all of our agencies of all of our partners. We have a few new people in here that support us here. And it also links to innovation, how do we innovate and products like cold coffee, the concentrates that have seen ready-to-drink coffee, some of the air fryer recipes that we're launching, et cetera. These are all products that cater to a younger consumer and are more fun to use, and that's also how we communicate them. So I think we're on a good track. We're not done yet. This is just the beginning, but expect more of that to come because it is working and it starts to show results, as you can see in our Q1 numbers.

Thanks, Tom.

Thank you, Tom. The next question comes from Warren Ackerman from Barclays.

It's Warren here at Barclays. First one is on China. I'm sure you saw the FT article. I was just wondering where -- if you can give us an update in terms of moving to a consumer-led model from distribution push. Where are we on inventories? And how are you engaging with the e-commerce channels of the future like Douyin? And should we still expect that inflection in Q2 on easier comps in China? Or is there still any residual issues? I'm just trying to understand how you're feeling about China. There's obviously been reports that there's kind of delays on the border on infant formula because of enhanced cereulide testing. So just your feeling on that would be great, Philipp.

And then second one, perhaps for Anna, just really on pricing, Anna, you're kind of intimating that pricing will fade from here. Can you maybe share a little bit more your thoughts on where that might happen by kind of category and geography? Is it just kind of -- just rollover pricing, you're not planning to take any new pricing? Slightly surprised given the kind of inflationary comment that you won't see some new pricing. So yes, the first one, China, second one on pricing.

Thanks. Thanks, Warren. I'll start with China. Look, as you say, I mean, we have been making the changes that we promised to make to strengthen the overall business in China. I've been just there 3 weeks ago just to meet the teams and look through our businesses. And what the team is doing is redefining the growth model, as you called out as well. So we're relooking at our route to market, our distribution to really drive consumer pull. That obviously includes launching innovation. We have launched HMO. We have launched new variants under [ title ]. So we're leaning into innovation, into driving growth into new channels like the snacking channel, for example.

As you know, there is a new management team on the ground that is now fully in place to drive this change. And we're correcting the trade inventory and expect that to be done by the end of Q2. There is still some of it to be done, but also expect China to gradually improve during the remainder of the year, as we have said. So I see good progress there on all fronts to bring China back to a consumer-pull, marketing-led model led by innovation and by good marketing investments. And that includes, obviously, the e-commerce channels like Douyin and the others, where the team is launching specific innovations with the right price points that then don't compete with the rest of the offline channels. And that's exactly part of how we wanted to move China into a consumer-pull model.

In terms of your question specific to infant formula and the border, et cetera, remember that infant formula in China, we produce locally. So we have 2 factories in China that are producing for China. So we don't have any issues there. Those factories are running, are back on track. And in China, I saw that myself. The products are back on shelf and consumers are picking them up. So that performance on infant formula in China should improve more. And as I said, we have also launched innovation. During the infant formula situation, we launched HMO under illuma in China during the last few weeks, which should further help the recovery in China.

And I'll pass over to Anna on your pricing question. Thanks, Warren.

Sure. So how to think about pricing? In 2025, we took substantial pricing on coffee and cocoa-related products, so coffee and confectionery because we saw some very significant input cost increases. And so when we talk about rollover pricing, rollover pricing is largely driven by coffee and cocoa. Now, as you know, we didn't take price to cover all of those input costs in 2025 because we were very focused on getting our price points right for the consumer and making sure that we're driving that consumer demand for the long term.

So what you see, as we go into 2026, is we get the benefit of that rollover pricing. And we will continue to look as we do across all of our categories at where we can and should take pricing because the consumer can sustain it, and it's consistent with our momentum. So as we go into 2026, we will take price in different categories and in different markets. We were very clear on that, for example, around pet in the U.S., as we came into the year. And you see that -- us doing that across the board, both across developed and emerging markets category by category.

In terms of looking forward and the impact of the Middle East situation, I guess just maybe a minute on that, I see sort of 3 areas of potential impact, supply chain disruption, which we're seeing some of already; some commodity inflation possibility, which we're seeing some of, but we'll need to keep monitoring; and the potential knock-on impact on the consumer, depending on how things play out. How we think about those 3 impacts? Supply chain, look, this is something we're good at. The combination of our scale and the fact that we largely manufacture locally means that when there is global supply chain disruption, normally Nestlé gains share because we are more able to navigate that environment than others. And our teams are all over that.

With respect to commodity costs, we will monitor where that goes. And as you've just referenced, we're well practiced on the levers to manage commodity cost increases because we've been doing that heavily on coffee and cocoa through 2025. So you'll see us use those same levers of price pack architecture and making sure that we're delivering for the consumer.

And in terms of consumer impact, this is something that we will continue to monitor. We're not seeing too much at the moment aside from maybe in some markets like the Philippines where fuel costs mean that consumers are not leaving home as much. So they're shopping closer to home. And again, this is where Nestlé's proximity to the consumer and our really strong local market leadership is -- means that we're good at adapting to deliver on those changing circumstances.

Thank you, Warren. The next question comes from Guillaume Delmas at UBS.

Two questions for me, please. The first one is on Coffee. So strong performance in Q1. Could you maybe unpack a little bit this performance for us? So particularly, is it down to an improved category growth, improved elasticity? Or is it very much down to your significant market share gains? And still on Coffee, but creamers, can you talk about your performance in the U.S.? Because it seems you were flagging some soft development in Q1. So if you could shed some light on this?

And then my second question, it's on your underperformers. I mean -- maybe, Philipp, if you can provide a bit of an update on where you are with some of these businesses. It seems in Q1, Gerber was still challenged, U.S. frozen also under pressure. So what progress are you seeing? And where would you expect to be at the end of the year for all these businesses?

Thanks, Guillaume. Look, thanks for both the questions. Look, I'll start with Coffee. And indeed, we're very happy with our Coffee performance. You see 9.3% RIG -- OG, 3.5% RIG in that category, which is great. I'm particularly happy about the RIG coming through. And as we -- as Anna just said, we lap some price increases there. So see -- happy to see consumers buying into our category. Look, this is broad-based, the performance on coffee, and it's definitely based on performance across all zones, across almost all markets. And it's strong across all of our brands. So it's Nescafé, Starbucks and Nespresso.

Particularly, Nescafé was very strong. And that is, again, across the board. It's soluble coffee, it's cold coffee under the Nescafé concentrates, ready-to-drink coffee under Nescafé, but then also new launches like Nescafé Dolce Gusto, new innovation. So it's really broad-based. So look, we love this category because it's a category that is resilient. It's a daily habit. Consumers have a coffee habit, and we are able to cater to consumers at all ages across all economic strata and across the globe through our brands and also through our capability to cater to different price points. So that is really what played out here.

And also, we have invested behind those brands. So we have invested behind the 3 of those brands, and that has definitely paid out. Maybe one thing that is important for you as we have 9.3% growth in the first Q. So don't draw a straight line or don't extrapolate that into the future because comps are getting more difficult. And also, we're lapping, obviously, some pricing we have taken. So take pricing will come down. But really happy with that broad-based portfolio and also with the market share gains that came with that growth in many markets. So that's good.

On the creamers part of your question, this is one I'm personally less happy about because obviously, if you look at -- we're doing really well in the U.S. in Coffee, and Coffee-mate is a product that comes to life in coffee. So Coffee-mate has definitely a huge potential. In the U.S. specifically, we had some operational challenges impacting our supply that is due to some issues we had in our older factory there. We're working on it. We're on it, and we see great potential. We have a great Coffee-mate brand with good innovation potential as well, tapping into the growth that coffee is showing in market. So we're working on that to -- for it to come back, but positive about the underlying strength of the brand and the business we have in the U.S.

And your second question then on underperformers, generally, we're working on underperformers to improve their performance. So as you have seen in 2025, since we called out the 18 underperformers, we have made progress on all of those. Some of those have actually fully turned around. So they're not issues anymore. Others have improved, and others are still stubborn. Two of them you have called out. So Gerber is among those. And frozen is not an underperformer. I wouldn't call it like that. It's -- frozen is a category that is subdued in terms of growth. But look, we're working on them.

On Gerber specifically, the team is working on innovation on getting the products back on shelf and expect that to improve towards the end of the year in terms of Gerber. In terms of frozen, we have seen market share gains in some of the areas of our frozen business. As said, the whole category is subdued there. But again, there, we're innovating into the space. And as I said at the full year, we believe in the category. And so we focused on those underperformers, and the improvement on some of those underperforming areas have actually also leaned into the improved performance in Q1. So also the actions we're taking on those underperformers are starting to work.

The next question comes from Callum Elliott at Bernstein.

The first one is on the guidance, please. So very strong start to the year. Clearly, 3.5% OSG with sort of 4.4% underlying ex the formula. And if you just continued at that 4.4% for the rest of the year, you'd be above the high end of your guidance range. You also have, as you said, Philipp, China should get better by the end of Q2. That's probably 50, 60 basis points of contribution. You shouldn't have the pet food destocking beyond Q1. So that's another 20, 30 basis points that could get you to 5-plus, all of which makes the guidance look quite conservative. So are you just being conservative in view of the volatile environment? Or is there actually something concrete that you've seen in the business since the start of the war that's making you really expect a genuine slowdown? So that's the first one.

And the second one is a bit more strategic. You provided some very interesting data on growth by channel. E-commerce really stands out, over 20% of the business now and growing over 15%. So basically, the vast majority of your growth is coming from this one channel. So can you maybe talk a little bit about the dynamics of that e-commerce growth across each region? Obviously, it's a very different channel in different parts of the world. Can you touch on sort of market growth in e-commerce versus your own competitive performance? I presume that 15% is a decent amount of share gain. So just what you're doing to drive that, and any strategic initiatives to ensure that it can persist?

Good. Thanks, Callum. So I'll pass the guidance to Anna. I'll come back on your specific question on the channels. Thanks much.

Thanks, Callum. So we are pleased with the momentum that we have in Q1 and that the actions that we are taking are fundamentally improving our RIG. Equally, it is 1 quarter. And so it needs to be seen in that context. A couple of things to bear in mind as you think about guidance. Firstly, we did take some very significant price last year and -- on coffee and cocoa, and we will not be taking price on coffee and cocoa in the context of commodity increases there at the same level. So that is something to bear in mind.

Also, you asked, are there any sort of specific or obvious significant distorters that we know about? No. There's nothing particularly funny in the Q1 numbers. Otherwise, we would have called it out. But the external environment is uncertain. And our guidance reflects that uncertainty. And while I feel actually that we're very well placed to navigate whatever the external environment is and gain share because actually uncertain external environment is something that we generally outperform in because of our local manufacturing. And because of our deep market knowledge, our local market teams, we'll have to see how all of this plays out from a consumer perspective. And so we've taken all of that together in reiterating our guidance today.

Thanks, Anna. And I'll come back quickly to your questions on channel. So look, e-commerce, also pleased with the performance in e-commerce. This is a growing channel for years now, and it's slowly taking more and more and more of -- in terms of percentage of our sales, and that's broad-based as well. So it's with brick-and-mortar partners, but also with pure players and also growing on in our direct-to-consumer efforts, for example, on Nespresso. And this is due -- there's a few factors playing into that. So we were able to innovate well into the channel, and that includes the right packs that -- you have mixed packs, for example, you have the right outer packs, the right pack size that has worked well.

And we're also collaborating with many e-commerce partners on supply chain and leaning into retail media, which has been working really well because then consumers are on the website or on their phone and then retail media in that sense is a good investment, has good returns on investment there. But there's 2 more channels that I see good growth given where consumers are, so discount channels are definitely doing well. That's across the board, U.S. and Europe, particularly strong growth in discount channels as consumers buy more often and maybe with lower tickets. And we're leaning into -- the same way, we lean into the e-commerce channel with the right assortment, right price and pack architecture there.

And the other one, which is worthwhile calling out is convenience, which is, again, playing into that desire of consumers to shop closer to home, to be able to maybe shop daily, and that works really well. And that is obviously underpinned by our underlying strength in mom-and-pop stores in emerging markets, where we are very well distributed and where the strength of Nestlé's execution and power of brands really comes to play as we showed in -- at the full year results.

So these are the channels where I see growth, but obviously, e-commerce is one of the focus areas, and we're improving as we speak on those channels and customers.

Thanks for the question, Callum.

The next question comes from Celine Pannuti at JPMorgan.

So I would like to come back first on the outlook question. You reiterated, so, around 3% to 4%, and you started very strongly in Q1. How is the -- and Anna, you mentioned that you're not planning to take more pricing in cocoa and confectionery and coffee. But how is the lower cocoa and coffee prices changing potentially the outcome on the full year on pricing? And I appreciate maybe you don't have a crystal ball about cost inflation, but probably I'm sure you've done some scenario analysis. So like, Q1, it seems will be peak pricing. Please correct me if wrong. And then, what should we think about as you look at the RIG comp H1 versus H2 and pricing decelerating? Like could it be that H2 OSG is slower than H1 OSG? So if you could help on the pace of your growth through the year.

And my second question is as well on margin outlook. So to what I was saying, we have lower cocoa and coffee prices. Is that going to help in any shape or form in the first half? Are you still expecting gross margin to be down? And you say that margin will be more weighted to the second half, but could we have EBIT margin up in the first half?

And then, again, on scenario analysis, how should we think about potential cost increases? And where do you see that, if there's any way you could quantify? Let's say, with oil prices, let's say, of $100, what would that mean for you?

Thanks, Celine. I think, Anna, that you're...

Yes. So just to step through those. So starting with Pricing. So we did take significant price on coffee and cocoa because we saw significant inflation last year. That rollover pricing will obviously benefit Q1 and then erode as you go through the year. As I said, we will continue to take price where we feel that we are able to do that. And you see us do that, but it will be on coffee and cocoa, more muted because we have less significant commodity increases.

Equally, it won't be 0 because we didn't cover all of our inflation last year because we were really focused on delivering for the consumer. So where we see those areas where the consumer can tolerate price, we will obviously adjust. And it is very, very much a by market, by category choice that we are monitoring all of the time. So I can't give you an exact shape because this is the power of Nestlé, this is the power of the teams in the markets that are looking at the competitive position locally and the promo position locally, and they are taking agile decisions based on where the consumer is at a point in time.

And frankly, in a macroeconomic environment like this one, that is really, really important. So what that means for the shape of the OG through the year, I won't guide on, but you know the moving pieces of pricing, RIG and comps.

In terms of margin, so -- putting the Middle East piece to one side for a minute, maybe just the moving pieces around our margin, so yes, we have the benefit of lower coffee and cocoa prices as we move into 2026. But remember, we were hedged. And so that benefit will come through the year weighted towards the end of the year, and really, we see the full benefit in 2027.

Also, remember that tariffs continue. And so in the first half, tariffs are a headwind until we lap the tariff environment as we move into the second half. Of course, we're still focused on cost efficiencies, and they come as we find them. So it can be lumpy, but they come through the year. And I've just talked about the pricing piece.

So all of that taken together would say that our margin should improve as we move through the year, as I said at the full year. Now, what are the implications of the situation in the Middle East? Well, they're changing daily. And therefore, it is unhelpful to quantify them. But as I said, supply chain disruption, we're managing that absolutely fine. And in many ways, it's -- we are better at it than many. And so we should outperform the competitive set in that respect.

In terms of commodity cost inflation, again, it's varying. It's not just fuel. We see it on some agricultural commodities, too, particularly the ones that can be used swapped out for fuel. But again, this is currently the normal course of our business, and we're managing movement in commodities all of the time, and we have the playbook to manage that as it happens. So taken all together, that's why we're comfortable reiterating our guidance today, including our margin guidance.

The next question comes from Jeremy Fialko at HSBC.

A couple from me. First one, coming back to the guidance, at the full year, there was this rider you put on the guidance saying additional impact from the IMF recall is uncertain and could drive OG towards the lower end of the range. Now, it seems though you've gone through Q1, you know what the situation with the recall is. It seems kind of as you had anticipated it was going to be. So does that mean you can kind of take away that sort of rider to the guidance, which means that you'd be at the lower end of the range, even if you're not doing anything else with the guidance?

And then secondly, just on the IMF recall, perhaps you could just go into a bit more detail about which of the markets where you've seen a good recovery, you're back to kind of sell-out of consumer off-take roughly as it was before? And which are the markets where perhaps it's taking you a little bit longer to get back to where you were previously?

Thanks, Jeremy. I'll have Anna start with your guidance question. I'll come back on IMF recall.

So, in the context of guidance, yes, at the full year, we said around 3%, up to 4%, and we said that there was, at that time, uncertainty around the infant formula recall, which could drive us to the bottom of the range. Our guidance is unchanged. It's still around 3%, up to 4%. We are now more certain on the infant formula recall. So we've taken away the sentence that specifically addressed the infant formula recall. Equally, in the current macro environment and the current geopolitical environment, there's significantly increased uncertainty. And so taken all together, our guidance is unchanged.

Yes. And Jeremy, in terms of the infant formula recall, I mean, you have seen us acting quickly on the recall. And the teams have been focused on getting the products back on shelf, which is done basically. So we're back on shelf and in consumers' reach with all of our brands. And that's true across all countries. So I would say the statements that we make on infant formula that's certain for all of the countries that we have recalled and have had the recall.

And in all of those countries, we have been working closely with health care professionals and institutions, hospitals, et cetera, to make sure products are back on shelf and also are back in their trust. And so that has been the focus, and that's true for all of the impacted countries. So no difference there, and we're tracking that. And as I said, we should see that normalizing through the year, and we should recover every day as consumers come into that category every day.

The next question comes from David Hayes at Jefferies.

So 2 from us. Just firstly on the emerging market strategy and the performance step-up. We obviously see in India the details there, you spent a lot more money in A&P spend, I think, up 50%, which is clearly working there, great performance from a top line perspective. But just understanding, is that kind of indicative of what you're seeing in terms of allocating more money to those growth opportunities? And I guess, if that's working, the A&P spend uplift, could we see it moving up ahead of that sort of 9% of sales level as that kind of gains momentum and starts to reward?

And then the second question was just around the growth platform, growth versus the core non-growth platforms. Obviously, you gave that indication of relative performance for the full year. Just wonder whether you can give us that split. I don't think I've seen it at least for the first quarter.

Yes. Thank you, David. Look, exactly. I mean, in performance like India, or places like India, this is -- you can call India growth platform in itself. And so this is definitely places where we will invest the right amount, and you have seen the results that, that drives. So India definitely is a place where we have great brands, as you have heard Anna talk about, for example, Maggi in India, the importance of Maggi in India. We have the route to market. We have the distribution, and as said, the brands and innovation as well to invest behind. So that is definitely places where we will step up in investment. And you see it definitely shows results.

So will that be -- we expect those results coming through going forward? Emerging markets, I have called out emerging markets as a strong performer for Q1. But those markets will also be -- and they're already feeling the pressure on the situation in the Middle East. So we'll have to see how the consumer reacts, but we're really well positioned in those markets to win and keep gaining share and keep overperforming and outperforming in those markets. But India is definitely a place that we see huge potential going forward.

On the growth platforms, in general, what you have seen us do, and we have said that since a few months now that we have stepped up the percentage of sales that we're accelerating. So that's now 30% of sales that is accelerated through the growth platforms program, as you can call it. And these are places, as you know, that we see higher structural growth and where we also have the brands and innovation and the capabilities to deliver more growth. And those growth platforms in Q1 have also delivered high single-digit organic growth, and they're growing faster than the rest of the company. So what we have started to do is actually working.

And I'm happy to see that the step-up from accelerating 10% of sales to 30% of sales is also showing results. So where we put our money, we see the acceleration, and that is the strategy that we're driving with focus going forward, 2026 and beyond, as we keep on innovating and delighting consumers across the world.

We take the next question from Olivier Nicolai at Goldman Sachs.

Two questions, please. First of all, could you comment on the underlying trend you're seeing in Petcare in the U.S.? I remember you mentioned at the full year results, some early sign of an increase in cat adoption. Are you able to comment on this further since we are in April now?

And then secondly, I think, Philipp, in your -- at the beginning of your presentation, you mentioned a few potential disposals. Could you perhaps just summarize the various current process in place in terms of also the timing and how advanced they are? I think you mentioned the Water at the last results, you mentioned the remaining ice cream business. And now, obviously, you added the mainstream VMS. And then, specifically on Blue Bottle Coffee, are you selling the entire business and not only the cafes? Or are you considering keeping the brand?

Yes. Thank you. Look, the underlying trend on Petcare, I'll give to Anna because she likes to talk about the cat adoption. So I'll give that to Anna. I'll come back on the disposal specifically.

Yes, I like pets. So yes, this is an area I follow closely. So in the U.S., since post-COVID, we've seen an increase in cat adoption because it's much easier to go back to work and have a cat at home than a dog. And so where we are currently is we're seeing cat adoption growing between 2% and 3%, which is strong. And actually, for the first time in a decade, the number of cats as pets in the U.S., has surpassed dogs, which is an interesting data point. So yes, good underlying momentum in pet care in the U.S. And even more importantly for us, we need the capacity in order to be able to deliver on that opportunity. And as you're seeing the capacity that we have been building coming online through the first half, you're seeing our performance accelerate in the U.S. driven by that performance in wet cat.

Good. And on the disposals that you mentioned, look, on Waters, you have seen us going out and looking for partners. So we're looking at that as we speak. And that business is still -- we should expect that to be consolidated by 2027. So Waters has been launched.

Same for mainstream VMS that we are engaging on that one. So progress on both of those. And as you know, these have been -- these are -- these have been difficult or complicated carve-outs. And so I'm happy with the progress we have made on that.

Same on ice cream. So we're progressing on those as well. So expect some of those during 2026 as well. And specifically, on Blue Bottle, you've seen us -- we sell the whole business, but we also -- you see -- and that has been launched on Nespresso. We have Blue Bottle branded capsules on Nespresso that are quite successful, and we intend to keep that business sold through Nestlé. But all the cafes are obviously in the perimeter of the sale.

The next question comes from Jon Cox at Kepler Cheuvreux.

The question -- I'm going to keep coming back to the guidance question, but maybe catch it in a different way. Anna, you mentioned this is only 1 quarter, and you've done excluding what happened with formula, above 4%. We've had now 3 quarters where you've been 4% and above.

And then, in terms of volume mix, again, if you exclude formula, now suddenly, we're at the 2% plus mark on volume mix. Philipp, I know you're saying there's still work to be done. I'm just wondering, where you think you are in this journey to be able to consistently deliver that, somewhere around 2% RIG and the 4% organic? It looks like you're getting pretty close from where I think a lot of us are sitting.

Then a couple of more technical questions. Just on formula, you mentioned a 10% sales decline currently, which is obviously a 60, 70 bps headwind base today. I know it sequentially will improve. I wonder what gives you confidence it will improve? And I wonder if you could break out the areas because I guess, for example, China probably we're down more than 10%, Europe may be doing a bit better.

And then, just a last technical question, just on plastics. There's -- plastic prices are up quite substantially, shortages of PET in Asia. Just -- can you just remind me where we are on plastics as a share of COGS? I tend to think it's somewhere around 10% plus or so. And are you seeing any disruption on plastics in Asia at all at this point? Or do you have sort of long-term agreements? I guess, you do anyway? So anything on plastics would be helpful.

Good. Thanks, Jon. I'll pass guidance to Anna. I'll come back quickly on infant formula overall and then on plastics as well.

Sure. So with respect to guidance, so yes, we have done 3 quarters now that have had good underlying performance. And we have had quite a lot of price benefit in those 3 quarters. And so what we had said to you is to get to a sustainable 4-plus growth, we needed to consistently accelerate our RIG growth to 2% plus. And you see that the actions that we are taking are working and that our RIG performance is improving. And so I think we feel good about that, and it makes us feel comfortable about the delivery of our medium-term guidance. There is a good, clear path that the strategy will get us to delivering on that.

Of course, we've got to navigate a period of falling price, and we've got to continue to accelerate that RIG. And as time goes by, we'll lap stronger and stronger comps. But I think what you can see in our strategy is the actions that we're taking are working and that our medium-term guidance is the right one.

Good. And then maybe overall on infant formula, and you let me know if that answers your question or you need more specifics on numbers from Anna. But on infant formula, how we see consumers coming back is what we -- the actions we have taken in infant formula working closely with health care professionals, hospitals, institutions as well, obviously, brings trust back into our brands and into the quality of our brands.

Also, it's important to remember the category is such that consumers come into the category and out -- go out of the category every day. This is a category where consumers, they stay in the category or they use infant formula between 6 to 9 months. And so the game really where we are successful is recruiting every day everywhere in the world when mothers consider feeding their baby with infant formula. So that is how we see this coming back. And we see this already happening.

And as I said, we are back on shelf. Consumers can pick up our brands, and doctors are prescribing those brands to our consumers. And that is consistent across the world. And as we are on shelf, we see this coming back step by step, as we recruit new consumers every day into our brands. And so -- and when we say we expect this to be back to normal by the end of the year, this is the recovery we're seeing and tracking every month.

I don't know if you have specific numbers Anna to add to underpin this.

Maybe one piece of context. So it does vary by geography, but it varies by geography around out of stock. So what we're seeing actually is a very -- and we look at the sellout data and the consumer data for all of our big markets, actually incredibly regularly. And so what we're seeing is a very consistent trend back once we're back on shelf. And so the markets that have had a slightly bigger impact is where we've been off shelf a little bit longer, and that's more to do with manufacturing and supply. But I think the important point from here is we are back on shelf everywhere now. And so we should see that consistent improvement as consumers come into our brand month-on-month through the end of the year.

And just -- I'm sorry, I haven't answered the plastics point. Should I just do that one?

Yes, you can.

Yes. So, again, this is a place where our scale and strong supply chain network and local presence means that we are not worried about any disruption here. And just to frame it for you, plastics are about 6% of our COGS.

We have time to take one final question from Jeff Stent at BNP Paribas.

Just one question, particularly in sort of Asia. There appears to be a lot of work-from-home mandates. And obviously, we know from COVID that your business sort of benefits more when people are at home. So I'm just wondering, has there been any sort of impact of any sort of decent quantum that you can discern from those work-from-home mandates in Asia?

That's in Asia specifically. Yes.

Yes.

Yes. Look -- and I'll pass that to Anna because she has spent some time in Asia lately. So look, in -- that's in Asia, but in all emerging markets, but specifically in Asia, when you see first impact of actually people moving less, going less out of home, eating less out of home, eating in home and shopping closer to their homes, we obviously are really well positioned in all of those emerging markets because we are really well distributed. All of our brands are really close to where people live and move and then also eat. And obviously, that favors us.

We are much more in-home skewed than out-of-home skewed where we sell. And obviously, we love people at home cooking and enjoying our products. And so we're well positioned there. And this is where the power -- the local power and the local execution muscle of Nestlé comes to its best, where we really can deliver products close to where people are, close to where people shop and close to where people consume our products. That's where we are at our best, and that has shown through the performance of emerging markets in general, but also in Asia, Philippines, Indonesia, India, et cetera, during the first Q. So we are where people are and shop, and that's a competitive advantage that we have. But Anna has seen that firsthand in the Philippines during a recent trip.

Yes. So in terms of -- in the numbers, the numbers in Q1 have very little impact of these changes at this point. Yes, I was -- I've been in a couple of Asian countries in the last few weeks, including the Philippines, which is perhaps the most impacted at this point where there are fuel shortages, and we are absolutely seeing consumers stay at home more, shop closer to home and all of those things. And this is a moment where Nestlé is really good in that what you've seen us do is focus on our key SKUs, the ones that really matter, the ones that drive the vast majority and make sure that our key SKUs are being prioritized into that mom-and-pop route to market. So we're getting them as broadly and deeply as possible because where consumers are walking to the local shop and purchasing locally, we need to be there with our -- all of our highest running SKUs.

And we did that during COVID. And you saw the market share gains that we got in markets like the Philippines and other markets then. And we're deploying all of that learning, again, in adjusting our route to market, where we're already seeing that behavior change, but also preparing for these sorts of behavior changes in some of our other Asian markets. So very much front of mind and something that we've got good experience of and a super route to market to really make sure that we deliver for our consumer, and we are where we need -- we are where they need us to be at this time.

Thank you, Anna. Thanks, Jeff. I'm afraid that is all the time we have for questions. So I will hand over to Philipp to close.

Yes. Thank you. Thank you, David, and thank you all for your questions. Let me leave you with a few just closing remarks. As you have seen, we started the year well with broad-based growth, which was RIG-led. Our performance demonstrates that our RIG-led growth strategy is delivering in a complex and more and more uncertain environment. We have clear strategic priorities, which we are executing with focus, and this positions us well to deliver our plans for this year and beyond.

Thank you very much for your questions and your continued interest in Nestlé. Thank you very much.

Welcome to our media Q&A for full year results 2025. Thank you for joining us this morning. This is Christoph speaking. I'm joined by Philipp Navratil and Anna Manz this morning. I trust you have all had a chance to watch the investor Q&A this morning in the presentation. So we will move straight into your questions. But before we begin, please take a moment to review the disclaimer on your screen. Thank you.

[Operator Instructions] Now we're waiting for the first question to come in. First question is from [ Matthias ] [indiscernible].

Can you hear me?

Yes, perfectly.

Right. So thanks for your time. I have a question on Nespresso. As Nestle Health Science will disappear as a separate unit. Should that not also mean that Nespresso will actually disappear as a globally managed business because it's integrated into the new coffee pillar. And then the second question would be, as you now focus more on these 4 pillars [Audio Gap] of product categories, will there be new heads for these 4 pillars?

Yes. I'll take those. Matthias. Good to have you. Look, on Nespresso and should that be folded in, in some way to coffee. Look, no, it's not the case. Nespresso, if you look at it, Nespresso has a very distinct business model in that sense. So Nespresso is a direct-to-consumer business, since the very beginning, it's 40 years now this year Nespresso and since very beginning, it's a direct-to-consumer business. It is a business that is based on a system. And so there is many reasons to keep this business as a globally managed business.

Also, if you look at it how it is set up from the very beginning, all of the production is here in Switzerland, and then we drive a successful global -- true global brand that looks the same in each and every market from Switzerland. For the time being, we don't see any reason to integrate that. And then there is anyway a very good collaboration with coffee already.

If you look at it, what we have launched in the Nespresso factories to produce also the capsules that are branded on the Starbucks and on the Nescafe. And so there is obviously already an overlap that we collaborate from the Nespresso part with the broader coffee business to drive, again, a category growth, not only the brand Nespresso but the category, which is the portion coffee which we are, by far, the #1 company and Nespresso is the #1 brand in this space. So that's on Nespresso.

And then the 4 pillars. Looking now the 4 pillars, they don't have P&L responsibility. The 4 pillars, you can look at them as strategic business units as we have had up to now. So there will be a head of the coffee strategic business unit. There is 1 person in place the position that I have had in the past. There is a head of the strategic business really for pet food. There will be a head of the strategic business unit for the unified nutrition one.

And then on food and snacks, each 1 of those has a head of the strategic business units. And the head of all of that is David Rennie, who leads strategic business units and sales and marketing at Nestle. So it's not a case to build a new structure around this. It's about driving clarity and focus for driving growth in the company.

Thanks a lot. The next question is from Alexander Marrow, Reuters.

Just on the sale of the remaining ice cream businesses, can you give an idea of how much -- how valuable these assets are that you're looking to sell? And any more clarity on the sort of timing of a deal? And does this mean that you're not planning to exit the JV with Froneri or are you doubling down on that?

Yes, I can give you some of those numbers. Look, the ice cream business, we have said it's in 6 markets. It is shy of CHF 1 billion in terms of sales. And we'll get that -- it's a staggered approach, so because it's 6 markets in different geographies, we will get those integrated into Froneri during this year and the beginning of next year. This is what the plan is. And there is no plans to exit the JV with Froneri.

We are really happy with the performance that Froneri is driving and selling the remaining ice cream business of Nestle into Froneri is -- our strong belief that Froneri is the right owner for those businesses and will drive a better performance that we will do going forward. And we own half of Froneri and we are happy with the job they're doing so far.

Very good. The next question is from [indiscernible].

So my question is also regarding the new strategic pillars. Can we assume now that your assessment of the portfolio is now kind of finished? Or do you have further adjustments in mind given there are some -- still some weak businesses in your portfolio? Or should we assume that -- I mean, looking forward, you're constantly are you viewing all of the businesses as you did in the past couple of weeks?

Yes. Look, it's a good question. Look, it's never finished, is it. And what we are doing, I mean, we're not constantly looking at it, but periodically with Anna and the team and the Board we are looking obviously at the whole portfolio and look if we need to take action. What we are doing is quite substantial if you look at it, ice cream, we have mainstream VMS that will move forward soon. Waters, we have announced that this is now -- has now been launched. And all of these processes, obviously, it's quite a distraction for the company. So for the time being, there's nothing new to announce.

We will periodically review our portfolio, and we will shape it to make sure we have the right profile to deliver the growth. But the company is really what we are focusing on at the moment is truly on growth which we believe is the largest opportunity we have to drive shareholder value going forward. And each of those processes is a distraction. So we take them step by step. But for the time being, there's nothing new to announce. And we're periodically reviewing where we need to review, and we'll take the decisions quickly without a lot of -- with a data-based approach if we need to action something.

Perfect. We're moving to CNN, Hanna Ziady from CNN.

Can you hear me?

Yes. We can hear you.

I'm afraid I didn't -- I wasn't able to join the investor call this morning. So apologies if this will be a repetition for you. But 2 questions, if I may. One is on ice cream, just whether the sort of push by consumers towards healthier lifestyles and the rise of these GLP-1 drugs. Does that have anything to do with the sale of this? Or does the sort of sale process along predate that? Can you just comment on whether that's played any role in your thinking?

And then just 1 question, if I may, on the infant formula recalls. I realize that there's an ongoing process there at least in France, which -- with French health authorities investigating the deaths of 3 infants, who were believed to have consumed the recalled products. Can you just speak to -- is Nestle in contact with French health authorities? Is the company implicated potentially? I realize there's no link yet been made, but was it Nestle's products that are implicated or another company's products? And then just any new developments with regard to the formula recall and any ongoing investigations would be great.

Yes. Good. Thanks for the question, Hanna. Look, on ice cream, no, it has nothing to do with GLP-1. Interestingly enough, the ice cream category shows still mid-single-digit growth consistently, so that category has not yet been affected. And I believe while GLP-1 patients, they might eat less ice cream, they will change how they will eat it and how often. And Froneri is focused on that category and will be the best owner.

But GLP has not been thought for us. It's really we have 6 remaining businesses. We have sold all the rest to Froneri and those 6 have been or are a distraction for us if you look at the rest of our portfolio, and that was behind it. And we believe Froneri will be the right company to drive the right focus and the right marketing to drive this to growth. So not GLP-1 connected.

Look, on your question on infant formula. First of all, we obviously -- we're saddened by the news that 3 babies have died. There is no link today to any infant formula product nor to Nestle nor to anyone else's. There is an investigation ongoing and we are, as far as we need, we have not been contacted by the authorities, and we'll obviously collaborate and inform as we go. But today, there is no clear link and Nestle has not been implicated. And as I have said before, our main focus is quality, safety and health of -- quality of our products and the health and safety of our consumers, and that has always been at the center of what we do.

Also during that -- this recall as we were the first in the industry to recall our products and the industry followed suit almost a month later. So we were always guided by the principle of consumer safety at the center of everything we do.

The next question is from Thomas Oswald, AWP.

I have a follow-up to the infant formula recall. Are you taking any legal action against your supplier in China? And maybe did you -- have you made any provisions for potential legal cases, which you're may be facing?

Yes. Thank you, Thomas. Look, we will obviously reserve the right to take legal actions. We have not done that so far. Focus of the company is -- has been on the recall and is now on replenishing the stocks. That is where we're focused on, and then we will see what needs to be done on the legal side. And we have not done any provisions so far. So we'll work that through as we need, but focus is really on getting the market restocked. That is where we're focused on at the moment.

An additional question from Madeleine Speed, Financial Times.

I wanted to ask what the focusing on 4 businesses means in practice. What in concrete terms, will that change? And then the second question is on the L'Oreal stake. There's obviously a lot of questions from impatient investors about that. What's the rationale for staying in there?

Thanks, Madeleinel. I'll talk to 4 businesses, and I'll have Anna talk to L'Oreal quickly. Look, the focus on 4 businesses is truly that, so it's focus for the company. It's focusing on Coffee, PetCare, Nutrition and Food and Snacks. This is where we play. And also what it drives is clarity of how we play in the market. And how we play, and I don't know if you had the chance to listen to our investors presentation, there was one photograph in there where we showed a store in the Philippines, where all of those 4 categories or 4 businesses come together as one in one store, executed in one store.

And what's very clear is that when you look at how we execute at Nestle, the execution, the P&L ownership, the connection to consumers, customers is intrinsically located in the market. So it's owned by the market, close to the consumer. And anything that has to be global needs to be centrally driven from here, look at brand stewardship, look at long-term brand strategy, ways of working, end-to-end workflows, science-based and technology-based innovation pipelines, et cetera, are globally driven through our strategic business units that are now managed under those 4 pillars.

And that gives clarity and focus to the company as a whole. And it's obviously in service to drive our ambition to get the company to back to 4-plus organic growth, which should be real internal growth driven. And on L'Oreal, Anna, if you can give a bit of color to that one.

Yes, just quickly on that one. Our L'Oreal stake is a financial stake, and we are very dispassionate about it. That said, it's performed very well for us over the years and for our shareholders. From our perspective, it's not the biggest route to driving shareholder value right now, nor do we need to dispose of it to deleverage as we're deleveraging irrespective. So our big focus right now is on the biggest driver of shareholder value, which is growth. And everything we're doing is around accelerating growth.

I think we are -- we continue with Benjamin Weinmann, CH Media.

I also have a question regarding the infant nutrition recall. During your presentation, you mentioned that, obviously, there's also learnings despite the high standards of quality and safety. Can you, in simple terms, explain what are these learnings? What concrete measures are you taking to make sure this won't happen again?

And how also would you explain to nervous parents how could this happen in the first place? And second question regarding the brand stewardship of the new 4 pillars that you mentioned. You gave the example of Nescafe that it should look the same way, whether it's in Mexico or Switzerland. So would you say until today, there were too many liberties in the local markets being taken?

Yes. Two good questions. So look, I'll start with the infant formula recall. Look, the learnings, I think, are twofold, and it's very clear, and it's something we have consistently done in the past. But clearly, when we look at our own facilities and everything that we do internally, we have very high quality standards everywhere in every factory, each and every factory you go. Many times and in many, many places, those standards are higher than would be required by the law or by any local regulation.

And obviously, our clear actions is that those same quality standards apply everywhere that where we have suppliers or people producing for us. And that is true. In this particular instance, obviously, this supplier that supplied this ingredient to us, this was not the case. And it was also not the case because having Cerelyte in oil is a very rare occurrence, and that was -- that's why it was not on our radar and not on the industry's radar.

We found this issue because of our good manufacturing practices and quality standards that go beyond good manufacturing practices, and we're the first in the industry to find the issue. And it was also, as you have seen, it was not something that was regulated by anyone, has then been regulated by the European Union, and there is now a level that has been put in place from a regulatory point of view.

So it's something the learning there is these risks move, and we have to be one step ahead of identifying these risks. But obviously, I'm very clear, Cerelyte has nothing to do an infant formula, and this is not something that should happen. What I can assure you that Nestle is -- has always been and is laser-focused on the quality of its product and the safety and health of consumers, especially when it comes to infant formula.

And to parents out there, I apologize for the inconvenience that this recall has caused, and we are shipping safe and utterly controlled product since the recall has done. And as I said, we have recalled 1 month earlier than any other company out there. And our product that is out there is safe to consume. And we will keep it that way.

The Nescafe...

Then on Nescafe, look, was there too much liberty out there? Yes, look, there was because -- and I can talk to this quite well. When I took over the Nescafe strategic business unit, you would look at Nescafe across the world, and it was Nescafe written, but it was not looking the same. It didn't have the same look and feel. And what then a centrally driven unit can do is to have one design that has now been rolled out across the world. And the Nescafe logo and the Nescafe design looks more or less the same everywhere without obviously losing the local specificities.

So it might have freedom in a framework that local markets can still apply. But a global brand, in my view, has to show up as a global brand. The best expression is Nespresso that it looks the same across the world without any freedom in any framework, but then all other brands have some freedom in the framework to make it look local, but it should be recognizable as a Nescafe. And these are the things that make a lot of sense to have at the global level, while local markets have the freedom to execute the brand as they wish.

The next question goes to Daniel Hugli, Cash. Daniel, can you hear us? -- doesn't seem to work. We will come back to you afterwards, and we move to...

Can you hear me?

Yes, we can hear you.

Sorry. I have some technical problems here. I have a follow-up question on L'Oreal stake. I was not able to follow the investor presentation either. I just saw some headlines saying that the sale of L'Oreal stake doesn't have any priority. Can you give us a scenario where this sale of that stake has a priority?

We are very focused on delivering shareholder returns. And we start from a perspective of what is the fastest way that we improve returns for our shareholders. And so our #1 priority is doing exactly that. And therefore, our focus absolutely uniformly across the group is around accelerating RIG because that is what gets our products being eaten and drunk more globally. And accelerating RIG is what also drives margin, it drives cash flow and it drives returns. So what we said on the call was that was our #1 focus.

Next question is from Alain Detra, [indiscernible]. Otherwise, we will come back and go first with Fabienne Kinzelmann, Bloomberg. Fabienne? It seems to be a technical issue. Fabienne, can you hear us?

Yes. Do you hear me now?

Yes.

So regarding the Ice Cream business sale, and thanks for confirming the Bloomberg scoop. So did I get it right that the ownership structure of Froneri will not change and that you will keep it like it is today? Or is like will the ownership structure change? And then the other question I have, I looked at the corporate governance report and saw Philipp that your predecessor received no compensation upon termination other than his pro rata base salary until September 1. So what I would like to know, is there still any legal issue to solve with him? Are there -- is there anything still has to be -- which has to be settled?

Yes. Thanks, Fabienne. Look, on Ice Cream, so there's no change to ownership structure at the moment, nothing at all. So Froneri will be a JV as it is today. And we just transfer those 6 Ice Cream businesses. We sell that to Froneri. So nothing will change. On corporate governance question, look, I don't know about any legal action. It's not honestly something I spend my time on.

Then next question is from Nathalie Olof, AFP. Nathalie, can you hear us? If not, we will come back and go to [indiscernible].

To the Nestle Water business, you're looking for a partnership. What kind of partnership exactly -- is that also going to be a joint venture? Is it also an option to sell the whole business? And regarding the water brands, I think you still have around 30 water brands all over the world. Will you drop some of them, some of the local brands? Which one will you keep and bring into this partnership you are working on to establish?

Yes. Look, in terms of the partners, we said we initiated the process of a partnership. The partnership can take many forms, so it's not defined yet, but we're looking for a partnership in some way. In terms of brands, it comprises all of the brands. And it's then to the new partner or owner to determine the future of any brands. But it's -- the perimeter is all of the water brands, global and local.

Next question is from [ Claudiaim ].

I hope you can hear me. That Nestle has good manufacturing practices and above standard. I mean this is -- this has been written and it's all over the place, right, even higher safety standards. So I still wonder how come that a supplier did not have the same high standards as your own factories? And how can consumers trust that -- I mean, this is not happening elsewhere in another factory where you also have another standard. I mean, how can you assure consumers? And how do you explain that it didn't have the same standard?

Yes. Look, it's a good question. I understand the anxiety around it. Look, obviously, all of our suppliers have to have the same standards as we have. In this particular case, as I have explained before, it was a not known risk that this particular toxin could be found in oil. It was new to us. It was new to the industry. And hence, when we found out due to our superior quality and safety practices in our factories, we immediately then went to recall the product and we acted swiftly and we were first to find out and work closely with authorities, health care professionals and also industry associations to make sure this is known by the industry.

And still then, it took the industry -- the rest of the industry to recall almost a month after we did. And that is not an excuse. And obviously, we will take these learnings and make sure this doesn't happen again. But it's important to understand that also testing methods and these risks evolve, and we will be one step ahead to make sure we identify these risks everywhere and apply those learnings everywhere. But you can be assured that our quality and safety practices are intact within our factories and within all of our suppliers, we're sourcing products at the moment.

The next question is from Christian Kolbe, Blick.

Sorry, I've got some technical issues to get in the call. Maybe I ask a question for the second time. But the question -- the first one is Nestle says you are estimating about CHF 200 million impact of the baby formula issue. Other estimates say about CHF 500 million. Why are you so sure that the costs won't go up for Nestle more than the CHF 200 million? And the second one, Michael Bayer, the [indiscernible] says that he's not happy how the companies, not only Nestle, but all companies reacted on the issue. And my question is, why took it so long until it was clear that Switzerland was affected or not?

I'll leave the first part to Anna on the size of the recall, and I'll take the other one on the speed of the recall.

So on the first part, what we said on the call this morning was there is a direct impact of the recall. So that is the cost of the recall or the sales impacted by the recall itself and the sales or the lost sales due to out of stocks of 20 basis points for the year. So that was a very specific statement. We also said that the broader consumer impact was uncertain. We'll learn more as we go. That said, it's a sector that we know a lot about. We work very closely with doctors and also regulators. And so that's what has given us confidence to wrap all of that potential impact together in a guidance that we're giving today of around 3% to up to 4% organic growth.

Good. And then when it comes to the speed of the recall, look, I want to be very clear. We were very fast in recalling when we found out about the issue. And we not only found out about the issue, we also informed authorities and we informed health care professionals and industry associations to make sure this knowledge gets beyond Nestle because we knew that the supplier that we source this ingredient from was a supplier that would also source to other companies. But that's then -- that's another story.

What we have done over the holidays when we found out about the issue, we immediately worked together with authorities and recalled as fast as we could. So -- and that includes Switzerland. So there was no delay that I'm aware of that we have waited and seen when the issue was detected, we immediately recalled and we informed authorities to make sure these products are off shelf and consumers are informed and are kept safe.

So we moved fast. Others didn't. And maybe the critique is on that side. But Nestle was really fast, and I'm proud of this. And I'm proud of how our team reacted to recall swiftly and always with the consumers' health at the center of everything we do.

We can take 3 short questions. First, [ Klaus Bonomi, SRF ]. Klaus please go ahead. Klaus, we will get back to you. It looks like we have a technical issue. We are back to Matthias Benz and then Hanna Ziady and then go back to Klaus, if he's around, and then we need to close. Matthias, please go ahead.

I have another question on the German supplier of this ARA oil. Why did you choose him in the first place? Was that for cost reasons? And the second question would be, was it the only supplier you had? Or are there -- or were there different suppliers for that product?

Yes. Thanks for the question. Look, and they're linked because there was in the past only one supplier and which is a risk, obviously, in such an ingredient. And we chose the supplier that then generated the issue to have a second supplier in place. The supplier was checked and audited and was vetted and was cleared by quality assurance. And obviously, what happened then that they somehow in the process didn't have the process in control, but it was not about the cost reason at all. It was about making sure that we have -- that we can ensure supply of this important ingredient to produce infant formula.

And there are several suppliers. So now we have stopped sourcing from that concerned supplier, and we source from other suppliers. And all of the ARA oil that comes into our factory is now tested. So we test the oil before it goes into production and we test during production and we test when it comes -- when the product comes out of production. So we are 100% sure that all of our products are 100% safe to be consumed by babies out there.

I'am going to take a question from Hanna Ziady, CNN.

Just to go back to Ice Cream. You mentioned that it was a distraction. Can you say just a little bit more on why it is that you're actually selling this business? Because it sort of echoes a little bit maybe the reasons that Unilever gave several years ago, which kind of came down to, I think Ice Cream as they call a distinct characteristics. So it's season dependent, the supply chain can be more complex because it needs to be able to support frozen goods. Is that -- are your reasons some of the same? Is that -- can you just sort of spell out a little bit more why sell ice cream?

Yes, sure. Look, it is a distraction when I say it's a distraction, is something that we're not focused on because we only have 6 scattered business across the world. And this is an ice cream business, as you said yourself, it's seasonal. It's frozen supply chain. It is highly brand driven, and you need some scale to drive this. And Froneri has exactly that. And that was when -- in the first time when we set up the Froneri business, that was the idea. And we held on to those 6 businesses because we thought we could drive growth.

And looking at it now, we have these 6 businesses, which they don't have any global scale. We cannot drive this the same way that Froneri can. And that's why we think because all of that, Froneri has all of those capabilities, they know exactly how to drive seasonal business. They have scale, they have the knowledge and they have the brands, and they have shown this in all other markets where we have sold them our business that they can drive great growth and success.

And so the same should happen with those 6 businesses. So that's what I mean with the distraction. So we will not invest more in those businesses where we don't have the capabilities and the scale that we need to be successful and Froneri has. And so they are the right owner for those great 6 businesses because they're great 6 businesses, and they have a lot of potential.

Thank you. Before we conclude, let's try Klaus Bonanomi again, whether we can connect. Klaus? -- doesn't seem to be the case. There seems to be a technical problem. Sorry for that.

Thank you so much for your participation this morning. Our lines are open. If you have any further questions, call our media relations number. We're happy to assist, and we wish you a great day. Thank you so much.

Good morning, and welcome to Nestlé's Full Year 2025 Results Conference Call. I'm David Hancock, Head of Investor Relations, and I'm joined today by Philipp Navratil, CEO; and Anna Manz, CFO. Before we get started, please take a moment to review the disclaimer on Slide 2.

So let me quickly take you through the agenda. We'll start with an overview of the key messages, review the 2025 financials and then move on to a strategic update. We will then open the lines for Q&A.

And with that, I'll hand over to Philipp.

Thank you, David. Good morning all, and thank you for joining us. And a special thanks to those of you joining from the CAGNY conference in Florida. I know, for you, it's very early.

I'll start with the key takeaways. First, our actions are working. Growth is improving. Market share trends have turned. Key now is to make the impact bigger and to move faster. Second, our strategy is clear: a focused portfolio, defined priorities, expanded growth investments, upgraded marketing. Third, execution is accelerating. Simpler structures, a performance-driven culture with clear KPIs, faster decisions, real accountability. And fourth, performance is improving. It's a difficult environment, no doubt, but we have so many of our own opportunities. This gives us confidence in delivering sustained improved performance. Overall, I am encouraged by our progress in 2025, but we are far from done. We will continue to push with urgency to deliver stronger performance and long-term value creation, and to do that consistently.

In 2025, our financial results were in line with our expectations. The performance shows progress across the business. The RIG trend is positive. Our UTOP margin was 16.1%, and we delivered a solid free cash flow. The Board is proposing a dividend increase to CHF 3.1. The actions we are taking are working, and we need now to go bigger and execute faster.

At the 9 months, I talked about 4 focus areas and also the importance of cash and capital allocation. Together, these are the 5 priorities that we will be focusing on relentlessly. It starts with a winning portfolio. This is the foundation for delivering superior RIG-led growth. This is our most important priority.

Next comes transformation and efficiency. Here, we have a lot of opportunity, which is why I already increased our ambition in October. Next and really important, strengthening cash generation and allocating our capital for long-term value creation. And underpinning all of this, a strong performance culture to make sure we deliver.

I'll expand on all of these in a few minutes. But first, I'll hand over to Anna to go through the 2025 performance.

Thanks, Philipp, and good morning. Here are the key messages to take away from our full year performance. We delivered solid top line growth, with positive RIG and improving momentum from the first half to the second. We continue to invest in growth, and we over delivered on our cost savings program. This meant our UTOP margin was in line with guidance despite increased headwinds. We also delivered free cash flow well above our guidance, and our net debt to EBITDA was broadly stable. And we'll get into more detail on the recent infant formula recall shortly.

However, as I go through the 2025 numbers, there's no impact on OG or RIG, but profit includes an impact on gross margin and UTOP margin of just under 10 basis points.

Turning to 2026. We expect underlying momentum to continue. We expect OG to be in the range of around 3%, up to 4%, with RIG accelerating versus 2025. UTOP margin is expected to improve, and free cash flow generation will be over CHF 9 billion.

Taking a step back, external factors have had a significant impact on our business in recent years, as you can see here. And whilst for some categories, the operating environment has normalized, in 2025, we've seen significant inflation in coffee and in cocoa, which we're currently managing through.

Now let's get into 2025. On full year sales, we delivered 3.5% organic growth, with RIG of 0.8% and pricing of 2.8%. Sales were negatively impacted by foreign exchange, and that's due to the strengthening of the Swiss franc. And as things stand today, we're set to have a further headwind in 2026, in the region of minus 6%, assuming today's spot rates.

Looking at organic growth by half. You can see we accelerated in the second half, driven by improved RIG. And this was also against a tougher comp than in the first half. This acceleration is broad-based across brands and geographies. China is the one exception as we work through the ongoing model change.

More than half of our growth acceleration was driven by our investments behind priority growth opportunities and the actions to improve performance in our key 18 underperforming businesses. On the right, you can see that growth has improved consistently as we've focused on these 2 areas.

Turning to market share. We've been making good progress. At a total group level, we've reduced our rate of value share loss by 60% over the last 12 months. Here, volume share has performed even better than value share, and we're now growing volume in line with the market. And this is driven by 2 key areas of our business. First, our billionaire brands are back to being share neutral for the first time in nearly a decade. And second, we've seen a large improvement across our 18 underperforming sales, with the majority either back into positive share territory or on an improved trajectory towards that. We're making good progress, but there is still much more to be done.

Turning next to profitability. I'll cover most of the margin slides quite quickly, starting with the usual bridge. You can see that the 110 basis points decline in UTOP margin comes mainly from gross margin and increased advertising and marketing spend. So let me get into those in a bit more detail.

Our gross margin last year was significantly impacted by input cost inflation in coffee and confectionery. The major impact was in the second half of the year, and that's due to the phasing of commodity cost increases flowing through the P&L given our forward cover. As we look to next year, we expect the full year to be up on 2025.

In terms of phasing, the underlying gross margin will begin to improve sequentially in the first half. But overall, the degree of progress will depend on the infant formula recall. And of course, FX will also play a role.

I showed already that we're improving momentum, both on top line growth and on market share. And this is in part because we're investing more behind our brands in a more targeted way. Advertising and marketing was up 50 basis points to 8.6% of sales for the full year. This was similar across the halves. The numbers here are net numbers after additional cost savings, and these incremental savings totaled 20 basis points for the full year, largely in the second half. For 2026, we'll continue to increase our A&P spend in absolute terms and as a percentage of sales. But we're not fixating on this single number. It's just one component of our growth investments.

The other big driver of margin is cost savings. In 2025, we delivered CHF 1.1 billion in cost savings from our Fuel for Growth program. This is more than CHF 350 million above our target. Roughly half of this outperformance came from accelerated delivery of operational efficiencies from our business transformation program. The other half came from procurement savings. And I should also point out that this Fuel for Growth savings comes on top of delivering more than CHF 1 billion of additional efficiencies from our other ongoing initiatives.

This slide shows UTOP profile by half year. The second half decline is a consequence of the gross margin dynamic, along with an increased impact from FX and tariffs.

This slide brings together all the moving parts. You can see here that we experienced over 300 basis points of headwinds, mainly from input cost inflation, but also tariffs, FX and some other items. This was more than we anticipated coming into the year. In addition, we invested 70 basis points more in A&P on a gross basis before savings. Despite this, the UTOP margin was down only 110 basis points. We were able to offset more than 2/3 of the cost increases through thoughtful pricing and cost savings as well as growth leverage.

During the year, we were often asked if our margin guidance would constrain our ability to invest. And as you can see, it hasn't. We invested both in price and in marketing, which helped to drive our improved growth and share momentum. What the margin guidance did do is bring the required focus on efficiency. And this has helped us accelerate our transformation towards a simpler, more agile organization. Looking forward to 2026, UTOP margin is expected to improve versus 2025.

Now let's turn to our segment performance. In Zone Americas, despite a challenging and uncertain environment, growth has improved throughout the year. In Q4, we saw particularly strong sales in U.S. PetCare as new capacity came online. And that's after supply constraints in wet cat had limited growth in the first 9 months. Growth was further supported by some customer buy-in ahead of a January price increase. In all, this benefited Zone organic growth in the quarter by a bit more than 50 basis points.

Turning to AOA. In China, we're continuing to change our model. This impacted growth for most of 2025 and will begin to ease as we get into the second half of 2026. In the remainder of AOA, growth has strengthened through the year with broad-based RIG improvement and market share gains. In the second half, OG was 8%, with a RIG of 5%. In Q4, there was some benefit from the timing of Ramadan, but even without this, our Q4 RIG in AOA ex China was the strongest since 2020.

Turning to Europe. The overall environment remains competitive, with retailers focused on providing value for consumers. Here, we saw price-led growth in coffee and confectionery, and PetCare grew nicely, with mid- to high single-digit RIG across most major markets, partly reflecting the fact that we're less capacity constrained than in the U.S. Across all zones, you see that the group margin dynamics are playing out relatively consistently.

Turning to our globally managed businesses. In Nestlé Health Science, our growth was led by RIG, thanks to a strong focus on execution and also portfolio optimization. These measures were a key driver of the UTOP margin improvement.

In Nespresso, we delivered strong growth, driven by pricing, but while maintaining positive RIG. Q4 was particularly impacted by retailer destocking in Europe and some short-term price elasticities. Margin was down significantly in the second half due to the lagged effect of the increased input costs and the impact of tariffs.

In Nestlé Waters and Premium Beverages, we achieved solid growth across the board. We continue to see strong demand from Maison Perrier and Sanpellegrino.

Turning to our category performance. Powdered and Liquid Beverages, which is mainly coffee, continues to grow strongly, led by price. In Q4, our RIG slowed as we saw the initial reaction to pricing taken at the end of Q3 in North America. But overall, elasticities have been slightly better than our expectations.

PetCare continues to normalize, with softness in dog balanced by resilience in cat, and we see growth gradually accelerating as capacity improves and pricing steadies. And as already mentioned, Q4 benefited from additional capacity in the U.S. and some preprice increase buy-in.

I've already touched on Nestlé Health Science, and Nutrition continues to be impacted by Gerber in the U.S.

Performance in prepared dishes and cooking aids largely reflects ongoing category softness. Within this, our U.S. Frozen business has made market share gains. And globally, Maggi is driving solid growth.

In Milk Products and Ice Cream, 2025 growth was positive, with coffee enhancers and ambient dairy driving RIG.

And finally, in Confectionery, growth remains strong. We're starting to lap our initial price increases and RIG trends are improving as our targeted actions to manage elasticities are seeing good returns.

Now let's look at a few of the items below UTOP. Restructuring costs were roughly flat in 2025 compared to last year. Impairment of assets increased, with write-downs in The Bountiful Company and Gerber in light of recent performance. Tax improved year-on-year on a reported basis as we lapped several one-offs, but the underlying tax rate in 2025 was 22.1%, in line with expectations and very similar to last year.

Next to underlying EPS. In constant currency, this decreased 1.8%, driven by our operating performance. At actual exchange rates, underlying EPS was down 7.3%, reflecting the strength of the Swiss franc.

Turning to working capital. In 2025, inventories were a key component in working capital, given the commodity price inflation in coffee and confectionery. This was the biggest driver of the profile across H1 and H2. Aside from that, we've seen good progress in our continued efforts to optimize our supply chain, which will benefit free cash flow.

CapEx has also been an important focus, and reduced significantly as a percentage of sales to 4.8%. In part, this is because we've come out of a period of elevated investment in new capacity, and it reflects greater discipline on capital investments, with a strong focus on maximizing returns from our existing asset base. CapEx will normalize within the range of 4% to 5% of sales going forward.

Return on invested capital decreased slightly, largely reflecting the reduction in operating profit.

On free cash flow, we delivered CHF 9.2 billion, ahead of expectations. EBITDA was lower, reflecting the margin reduction and the FX headwind.

On working capital, we had a negative impact due to the higher cost of inventory. But as I mentioned, we're making good progress on the fundamentals. And lastly, as I already touched on, CapEx reduced in 2025, resulting in a net benefit.

Net debt reduced by CHF 4.6 billion. Free cash flow was the major driver. In addition, we received an extraordinary distribution of CHF 2 billion from our Froneri joint venture. Net debt is the one area where the Swiss franc strength helped us, with FX movements reducing net debt. And all of this meant that despite the reduction in EBITDA, our leverage at year-end was 2.85x, that's slightly lower than the year before. We're working to reduce this further to the middle of our 2 to 3x range over the coming years.

Before we go to 2026 guidance, we want to cover the infant formula recall. Philipp?

Thank you, Anna. I know there's been some concern about the product recalls across the infant formula industry at the beginning of this year. At Nestlé, our top priorities are quality, product safety and compliance. And let me assure you, there is no compromise on that.

I'll quickly summarize what happened. At the beginning of December, we detected low levels of cereulide in some products in one of our factories in Europe. The detection was thanks to our strict quality protocols that go way beyond good manufacturing practices. As a precautionary measure, we recalled effective batches of products linked to this factory.

As you're likely aware by now, cereulide is produced by bacteria. I want to be clear about an important point. There was no bacteria in our products, and the contamination was not caused by bacteria on our production lines. In fact, our investigations identified that the root cause was a contaminated ingredient sourced from a global industry supplier. We promptly notified the supplier and informed the relevant industry associations, mindful that other infant formula producers would likely also be impacted. We then issued a broader precautionary recall in early January.

Weeks later, in late January and February, several other infant formula manufacturer chose or were required to recall some of the products after confirming that they had the same issue with the same contaminated ingredients sourced from the same supplier. In early February, the EU provided formal guidance. This specified approved testing methods and issued an action limit for cereulide in infant formula. This limit of 0.43 nanograms per gram of powder formula is now being used by all authorities across the EU.

At Nestlé, we have used a stricter limit for recalls of no more than 0.2 nanograms per gram, so well below the limit adopted across the EU.

With the recall complete, we're now fully focused on replenishing stocks. This is even more important given the scale of the more recent recalls across the industry. Our production is back at full capacity, using alternative ingredient suppliers, and with extensive testing before, during and after production. Supply has largely been restored, and we expect to be fully stocked across all markets in the coming weeks.

Throughout all of this, our approach has been simple: to act swiftly, responsibly and fully transparently to protect parents and babies. Our actions have been guided by this commitment at every step and in close alignment with authorities.

To wrap up, we will continue to be transparent and listen to parent, health care professional and other stakeholders. Ensuring food safety and the well-being of infants remains our highest priority, and we work to maintain parents' and caregivers' trust. We know trust needs to be built and sometimes rebuilt, and we're committed to doing just that.

I will now hand back to Anna to talk more about the impact of the recall on our financials.

Thanks. And as Philipp described, the recall occurred substantially in 2026, but it concerned products sold in 2025. And as such, in the 2025 results, we've included the estimated impact of customer returns and the write-off of inventory. The impact on UTOP was CHF 75 million or close to 10 basis points of UTOP margin. No impact on OG and RIG was recognized in 2025 due to the difficulty in estimating the effective volume of returns. This will be recognized in 2026.

In Q1, we'll see a one-off sales impact from customer returns and stock shortages. And we estimate that this will be approximately CHF 200 million, so an impact of around 90 basis points for the quarter and 20 basis points on a full year basis. In addition to these direct impacts, there could be some indirect consumer impact. And this is hard to assess, particularly as other infant formula manufacturers have recently begun substantial recalls.

Now turning to the overall guidance. We're continuing to drive change in the context of what is clearly a particularly uncertain period. The guidance we're providing today is based on current information as macroeconomic and consumer uncertainty remains. That said, our self-help measures and strengthening execution gives us confidence.

We expect organic sales growth to be in the range of around 3%, up to 4%, with accelerating RIG compared to 2025, driven by our focused growth plans. This range includes the expected impact of sales returns and stock shortages of approximately 20 basis points from the infant formula recall. Additional impact is uncertain and could drive OG towards the lower end of the range.

On UTOP margin, we expect to improve versus 2025, with strengthening in the second half. Last, we expect to deliver above CHF 9 billion of free cash flow. And a full summary of our modeling guidance is provided in the appendix.

So to summarize, we delivered a solid performance in line with our guidance despite increased headwinds. We accelerated growth with momentum building through the year, and we continue to invest meaningfully behind our brands. All of this sets us up well for 2026.

And with that, let me hand back to Philipp.

Thank you, Anna. 2026 is a very important year for Nestlé. We have had some challenging events in recent times. But I've seen the company come together around our values in a way that makes me both proud and inspired. We do the right thing: focus on consumers, prioritize quality, safety and compliance, show leadership in the industry and act for the long-term success and growth of the company. Building on those foundations with an updated focused strategy and new energy, I'm excited about the opportunities ahead.

I want to focus now on our 5 strategic priorities. It starts with a winning portfolio. This is the foundation for sustainable growth. It is about clarity on where we want to play, then focusing on our winning positions and brands. A winning portfolio needs winning businesses. I have told you that I look at this through 4 lenses: Does the category have an attractive structural growth? Do we deliver strong returns and cash flow? Are we positioned to win? And four, are we actually winning, meaning gaining market share?

In addition, our portfolio needs the businesses to be a winning combination, bringing competitive advantages. This means commercial synergies in consumer insights, in route to market and customer relationships, in negotiating with suppliers. It also means shared capabilities, leading science and technology, manufacturing know-how and the ability to attract the best talent. And a portfolio is not static. It needs to be actively managed. We will keep an open-minded view, assessing regularly based on data and not emotion.

We have a fantastic portfolio with 4 focused businesses: Coffee, PetCare, Nutrition and Food & Snacks. Coffee, PetCare and Nutrition are truly global categories. In Coffee, we are the clear #1, leader across all the main products with the top 3 brands in the category. In PetCare, we are the #1 in cat, #2 in dog, with strong brands and everything we need to be #1 in overall position. In Nutrition, we have all the elements, leading positions and great brands, but we do have an opportunity to increase our focus and drive real synergies and scale by bringing Nutrition and Nestlé Health Science together. Doing this will create a single integrated global powerhouse like we have in Coffee and PetCare. I will talk about that more in a moment.

Finally, Food & Snacks. Going forward, we will look at these categories together. As for consumers, the boundaries are blurring. These categories are also less global. We have strong regional positions and leading brands, but we still have some work to do to focus within this business and maximize our strength.

Last, not shown here is Waters. As you know, we are working towards a partnership for that business. The formal process of engaging with potential partners kicked off earlier in Q1, and we expect Waters to be deconsolidated for 2027.

Turning to Nutrition and Nestlé Health Science, two really strong businesses in an attractive category, lots of opportunities. For example, we are very strong in specialized infant nutrition, with differentiated science and room to grow further. In medical nutrition and premium VMS, we have opportunities to expand geographically. And we are already pioneering new demand spaces such as women's health, health longevity and weight management.

As we developed our strategy for capturing these opportunities, it became clear that having a single business would accelerate our position and performance. So we have decided to integrate these businesses and remove the structure of globally managed business. This will drive focus and simplification. Operational ownership, execution and P&L accountability will move fully to markets. Multiyear strategy, innovation and brand management will be led centrally as it is for other global categories. This combination magnifies our advantages and brings top line and bottom line benefits. We'll strengthen our route to market and execution muscle, better leverage shared expertise and our leading R&D competence and remove duplication.

We also have overlap in operational capabilities and will unlock efficiencies to allow us to invest for growth. We continue with the carve-out of mainstream VMS The noncore brands have been identified, and we're working on the operational separation plan, and the formal sale process will commence shortly.

This is a quick look at the shape and potential of our combined Nutrition business, a strong brand portfolio, covering prevention and treatment across all life stages. You can see also the distinct geographic profiles across the different categories, which is a strength and an opportunity.

In Food & Snacks, we're also acting to strengthen our portfolio position. This is a really interesting space where the consumer habits are changing. Eating is becoming more fragmented, meals more portable and consumption occasions much more varied. Boundaries are blurring for consumers. The fastest growth value pools now sit between traditional meals and snacks. The breadth of Nestlé's offerings across Food & Snacks makes us perfectly placed for this convergence. That is why we will now be looking at Food & Snacks holistically.

Alongside global brands, Food & Snacks also has a stronger local dimension than, for example, Coffee or PetCare. We have leading global brands like Maggi, KitKat, Milo and Nestlé Confectionery. This account for 1/3 of sales, and we will prioritize these. We also have unrivaled local hero brands with real scale. Think about Totole or Garoto or Thomy. These are not global billionaire brands, but they are very important in their local markets, and we will support them in a targeted way. And we need to focus our resources to ensure we have the sufficiency to really drive growth. This means that outside the strategic brands, we will not support the remaining small brands with paid media.

There are times when we decide that focusing means executing businesses. This is the case with our remaining ice cream business. It's strong but small, and it's a distraction for us. This business is a great fit for Froneri, and we have agreed to sell the business in a phased way.

I want to also take a moment here to talk about the business we don't have plans to exit, and that is U.S. Frozen Foods. Frozen foods does not get a clear tick on every box on the 4 lenses I mentioned earlier. The key open question is the first, is this a growth category? Currently, it is not. The space where we play frozen snacks, meals and pizza was flat in 2025, with growth in snacks, with small declines in meals and pizza. There are areas with good growth, such as high protein and global flavors. So we do see the potential for growth, but there are also growth headwinds.

On the other 3 lenses, the answers are positive. On returns, Frozen delivers strong profitability and excellent cash flow. On position, we have leading brands, a scale business and #1 or #2 market positions. And on performance, the changes we are making are driving a turnaround. Frozen also brings wider benefits to our business, high consumer and customer relevance and increased strength in our route to market. Overall, the category has some challenges and questions, which we need to keep an open mind. But the business is not a significant growth drag for the group. It strengthens our overall competitive position in the U.S. and generates strong cash flow. We are innovating and strengthening our business, making it more valuable whatever the future may hold.

My priority right now is focusing Nestlé on the things that drive the most shareholder value over the next 12 to 24 months. And those are actions to accelerate growth, and I will come to talk about them now.

How to deliver our medium-term goal of 4% plus organic growth led by RIG? Our portfolio is well positioned for the 4 key customer trends within the industry. I won't go through each of them, but I will talk on one only, affordable and premium. Today, demand is becoming more polarized, with families seeking value while others trade up for superior quality. This is a must-win trend for us, and our broad portfolio positions us to meet those divergent needs and capture the underlying growth.

We have taken tactical actions to remain price competitive and we'll continue to do so where necessary. One way to address affordability in developed markets is through price and pack architecture, adapting pack sizes and price points to meet consumer needs without compromising value. In the U.S., Hot Pockets is a great example of this approach. By introducing new pack sizes at key price points, we made the product more accessible to families and regained momentum in frozen snacking. We have the brands, the technology and the innovation engine to fully leverage these structural shifts and convert them into sustained profitable RIG-led growth.

We are confident in the growth outlook and the advantaged category exposure of our portfolio. The industry has gone through exceptional dynamics over the past 4 to 5 years, impacting volume growth and RIG, as Anna outlined earlier. But over the coming years, we see a return to more balanced growth, with less extreme inflation. Coffee and PetCare category value growth is expected to be 3% to 4% over the coming years, with overall Nutrition a bit higher and Food & Snacks a bit lower. These are averages with different areas in each category growing above or below this average. That's important.

We have shown in the last year that when we focus and invest behind the areas with more growth potential, we can drive an acceleration in organic growth. Key for us is to accelerate group growth is to expand the scope of these priority growth areas. Last year, we began this journey by identifying priority growth opportunities and concentrating resources behind them. This was the right direction. But the scope was too small, representing only 10% of our sales.

We have expanded the scope to include a broader set of opportunities, accounting now for 30% of sales. The criteria is simple: clear structural drivers, real competitive advantages for Nestlé, strong innovation pipelines and focused action and investment plans. We expect these growth platforms to deliver high single-digit organic growth in the coming years.

In 2026, this will be supported by CHF 600 million in additional investment behind these platforms. And of course, we continue to drive delivery in the core with more investment behind fewer brands, further actions on underperformers and positioning the trends discussed earlier. Taken together, this gives us confidence in achieving above 4% OG and 2% RIG over the medium term.

I want to give a flavor of some of the growth platforms we will prioritize. In the interest of time, I will just talk to cold coffee, but I'm very happy to expand on any of these in Q&A. One reason we are so excited about cold coffee as a platform is the clear structural drivers it represents. Cold coffee serves new need states, refreshment, functionality and indulgence. It taps into a clear need for convenience. And it brings new consumers to coffee, driving true category expansion. It plays strongly with millennials and Gen Z, often led by influencers, capturing the suitability of cold coffee for experimentation.

Nestlé is uniquely placed to capture this opportunity. Our global leadership position and deep coffee expertise give us an advantage in innovating and scaling in this space. You have all heard about Nescafé Espresso Concentrate. And cold coffee is so much more than that. We are bringing cold coffee to consumers across our top 3 brands in all formats, portioned, soluble, ready-to-drink and concentrates. We have launched new products across multiple markets through the last year and have a strong multiyear pipeline, including concepts like the fruit-based Starbucks Refreshers, which expand the category even further.

In 2025, OG was very strong double digit. This was supported by A&P level, more than double the group average, clearly demonstrating how we are committed to investing behind these opportunities. Strengthening our marketing capabilities is a key enabler of our RIG-led growth. It will help drive the growth platforms and the core of the business. We call this transformation marketing of the future. The environment is shifting fast, consumers decide quicker, customers are raising expectations. The complexity of capturing consumers is rising. Brand building is more critical than ever. We have a great starting point, over 30 billionaire brands, many leading local jewels, very high brand equity, and we have a clear headroom to strengthen differentiation and competitiveness.

To do this, we need to build systematic excellence at scale. Marketing of the future focuses on 3 priorities: first, reestablishing world-class brand building, supported by a company-wide upskilling program with consumer insight and analytics at the center of what we do. Second, fewer bigger priorities, moving from more than 400 brands with media support in early 2024 to 150 in 2026. And third, a transformed marketing operating model, scaling the use of shared services, strengthening our content studio and using technology to improve quality, consistency and speed. These changes will connect deeper consumer insights, innovation and marketing. They will also drive a clear financial impact, unlocking resources to be reinvested behind our growth platforms.

I'll pass over to Anna to take you through our third priority, which is transformation and efficiency.

Thanks, Philipp. As part of our transformation and efficiency agenda, we're fundamentally changing how work gets done across Nestlé. We're simplifying our operating model and clarifying accountabilities. Let me give you an example. Our business runs on 9 end-to-end processes such as procure to pay, the process of procuring goods through to paying suppliers, and hire to retire, which is the process of managing employees through their life cycle with Nestlé. Each process is made up of a number of activities, underpinned by a largely consistent IT infrastructure and data infrastructure. Today, we still operate many local versions of the same activities and shared services are used unevenly across geographies.

Take the consumer claims process in Europe. For 9 markets, it's done in shared services, and for 5 others, it's largely done in market. All 14 countries operate a different process today, making automation costly. And it's this type of complexity we need to fix as it slows us down. We have opportunities in 2 areas. First, we're expanding the scope of today's shared services by a factor of around 3. Second, once activities are in shared service, we must standardize and automate, and the impact is significant.

In marketing, we did exactly this with content adoption, delivering up to a 75% cost reduction and over 70% increase in speed of delivery. And these levels of efficiency are not unusual and is the power of eliminating fragmentation and automating. With a largely standard group-wide IT backbone and data structure, we're well positioned to deliver a simpler, more agile, more productive operating model.

Now let me give you an updated view of the efficiencies coming through our Fuel for Growth program. In 2025, we delivered a strong start with a clear step-up in the second half. This increased pace of delivery means we now expect cost savings to reach CHF 2 billion in 2026, more than targeted when we first launched the program. An important part of this comes from our operational transformation program. By the end of 2027, we target CHF 1 billion of annual savings from white collar operational efficiencies, and we're already making good progress, with CHF 200 million of savings achieved in 2025 and ahead of plan. This transformation is all about increasing efficiency and reducing complexity to accelerate our business and deliver sustainable, profitable growth.

Turning to cash generation. Our performance is improving as we embed discipline backed by the right data. To bring this to life, better data has helped us reset finished goods levels and avoid unnecessary buffers. We're now applying the same discipline to raw and packaging materials and to areas that historically had little scrutiny, like spare parts and semi-finished inventories, where data is exposed large inconsistencies factory to factory. Better governance means clearer escalations on receivables and payables and tighter oversight of all inventory classes, and that reduces variability and improves control. With more and more of our activities in shared service, we can scale these benefits faster. And finally, CapEx discipline has tightened. We've increased the rigor and review of business cases and are directing investment where it creates returns. And here, I want to be clear that in CapEx decisions, safety and quality are nonnegotiable.

And now to our capital allocation. We've consistently said that our first priority is investing to drive RIG-led organic growth, although we see room for selective bolt-on acquisitions where they accelerate growth, particularly supporting our growth platforms. We remain committed to the dividend. And clearly, to grow the dividend and improve cover, we need to grow our free cash flow in Swiss francs faster than the dividend on an ongoing basis.

Returning surplus cash to shareholders through share buybacks remains a potential use of excess cash when available. And that brings me to leverage. No change to our current policy. We're sitting at the upper end of our 2 to 3x net debt-to-EBITDA range. And I've noted before, we prefer to move back towards the middle.

And with that, I'll hand back to Philipp.

Thank you, Anna. And finally, let's look at how we are embedding a performance culture, our fifth strategic priority. Nestlé's culture has a lot of positives. We do the right thing. We don't cut corners. We treat our employees well and deliver shared value. And at the same time, we need to push a culture of high performance, a culture where winning is recognized and rewarded, where teams act as accountable business owners and with no complacency around underperformance. This is enabled by a clear organizational structure, providing empowerment and accountability. In the areas where there is ambiguity, we are correcting this. And to ensure incentive support delivery of the priorities, we have modified annual bonus metrics and our performance and development system. I will quickly expand on these last 2 points.

Earlier, I explained that we are focusing our portfolio on 4 businesses: Coffee, PetCare, Nutrition and Food & Snacking. This gives us clarity on where we play. But despite what you might have read, we're not embarking on a big reorganization to manage the group by global categories. One of our great strengths is the power of what we call Nestlé in the market. This is a true differentiator. This photo of a store in the Philippines gives a flavor of that. Side by side, you see Milo, Bear Brand, Nescafé, Nestea, Maggi, each with multiple SKUs stocked and displayed. Together, that's Coffee, Nutrition, Food & Snacking. And I'm sure that somewhere out of shot, Purina pet food is present.

It's Nestlé's local DNA that gives this unrivaled strength of route to market and share of customer shelf and consumer wallet. We need to preserve this local strength while we also bring clarity to our global portfolio. This means clarifying responsibilities, removing duplication, making sure decisions are taken at the right level, with full ownership for outcomes.

At the above-market level, I wanted to focus only on what benefits from global coordination and scale, like multiyear category strategy, brand stewardship, global innovation, functional expertise. Everything else sits firmly with the markets. They own execution, consumer and customer relationships, scaling innovation, and they own the operational P&L without ambiguity. This fully empowers market leaders and market teams. The decision to create an integrated Nutrition business reflects this approach. It will be run locally under the geographic zones, with the globally managed business of Nestlé Health Science removed.

Another example is the reorganization in Zone Europe, back to a market-led model with market empowerment at its core. This all makes us simpler, sharper Nestlé, global scale where it creates value, and local agility where it drives growth, margin and market share. This clarity of accountability and ownership is key to building a true performance culture.

Another part of strengthening performance is incentives. We have updated our incentive framework to ensure it drives the right behaviors and accelerates delivery. We have introduced a RIG gatekeeper into the bonus. This is a minimum level of RIG to be achieved. This ensures that we are delivering high-quality, sustainable growth, fully aligned with how we plan to reach our 2026 organic growth and market share targets.

Bonus for functional leaders is now linked to group performance, bringing the entire Executive Board and their teams behind one set of business KPIs. This drives more cohesive execution across the company. Our new company-wide performance system provides sharper expectations and clear priorities for every employee. Together, these changes reinforce a performance-driven culture, accelerate delivery of our goals and build the discipline we need for sustainable value creation.

Finally, as part of performance culture, I would like to talk for a moment about our Board of Directors and some important developments there.as the Board of Directors and the relationship with the Executive Board plays a key role in delivering performance.

As you know, very shortly, after I became CEO of Nestlé last year, Pablo Isla, took over as the Chair of the Board. It's now almost 6 months that we've been working together, and I'm really happy about the relationship that we have established personally and more broadly between Board and the executive team. The level of engagement, challenge and support is something we, as a management team, value very much.

At the next AGM, 2 outstanding new directors will be proposed, Fama Francisco and Thomas Jordan, bringing world-class consumer goods and macro financial expertise. Our governance framework is stronger than ever, with an independent Chair and reinforced leadership structures that ensure accountability and alignment with shareholder interests. The committee structure is being revised, including a strengthened Audit and Finance Committee and an expanded Science, Technology and Sustainability Committee to better leverage directors' expertise. These enhancements ensure more informed debate, strong recommendations, and the Board fully committed to acting in the best interests of Nestlé and its shareholders.

We covered a lot of ground. So I'll come back to a reminder of the key messages. Our actions are starting to pay off, and the growth trends are improving. We have a clear strategy with 5 priorities. The portfolio focus is defined, and we are putting investment in the parts of the business that matter most. Execution is accelerating. The organization is becoming leaner and more performance-driven, which is helping translate strategy into real results. And we are on track for sustained progress. The building blocks are in place for continued improvement in 2026 and beyond.

And with that, I'll hand over to David to begin the Q&A session.

Thank you, Philipp. So we'll now move to our Q&A session. [Operator Instructions] And we will take the first question now from Olivier Nicolai at Goldman Sachs.

Two questions, please. So you're seeing improvement in pet food in the U.S. that was driven by cats. What gives you confidence that this bounce in cat food demand is sustainable beyond the prebuying effect that you mentioned? And more generally, what do you see in terms of adoption of cats and dogs in the U.S. but also your key regions?

And then secondly, on the debt reduction. So first, on the free cash flow, how much benefit can we expect this year from the lower working capital linked to the lower cocoa and coffee prices? And then in terms of potential disposals beyond the ice cream businesses that you mentioned, could you also monetize some of the joint ventures that you have? And which one do you consider core or not?

Yes. Thank you, Olivier. Look, I'll give the first part over to Anna, and I'll come back on the ice cream disposal question that you added.

Sure. So the question was pet food in the U.S. So in the quarter, there was -- in the context of total pet food, RIG overall for Q4 was about 5.4%. The impact of the more one-off element, which is associated with a preprice -- sorry, preprice increase buy-in and also the pipeline fill was about 1 percentage point for total pet food RIG. So overall, pet food had a really good Q4 with strong RIG at over 4%. And that's coming from momentum both in the U.S. and also in Europe as well.

So if I maybe just spend a moment on the U.S., where we're seeing strength is in cat food and specifically wet cat food. As you know, we've been capacity constrained for 9 months of the year. We're starting to get the capacity online, and we're delivering on that demand. We'll be able to accelerate further as we move into 2026 as we get even more capacity online. But also -- and this was pleasing, we saw an improvement in dry dog as well in the quarter in the U.S.

If I look across to Europe, which is a much more cat skewed market for us, as you say, we're seeing really good momentum. And again, particularly in that wet cat space. So really pleased with the performance there. So overall, good to see pet starting to be a bit more where it should be.

Debt reduction. So yes, we've made good progress this year. Our guidance for free cash flow for 2026 is more than CHF 9 billion. And that comes from our focus on continuing to reduce working capital, irrespective of commodity costs. And yes, commodity costs do help us as we work our way through it as well. But of course, there's also sort of movements in FX and other things that will move us as we go. Confident of more than CHF 9 billion. And as you see, with the work that we've laid out that we're doing across working capital, we will look not to stop at more than CHF 9 billion. We look to continue to improve because there's quite a lot of opportunity here. JV cleanup.

Yes. I'll do the JV cleanup. Look, and to the question of ice cream, look, ice cream is not the only business we're actioning on. So that was announced as the new one, but we also have seen some progress on Waters, which is now in process. And also, you can expect the mainstream VMS business that we have announced earlier that will be processed in the next couple of weeks or shortly.

Also, with that, we've always said, we are ongoing, and we regularly look at our portfolio. So we have done 10 smaller transactions during last year, including the Herta disposal. And as I have said, we look at our portfolio regularly through those 4 lenses that I have explained. We do this. This is ongoing. But what is very clear for the organization as well, that every time we dispose of those operating units, it's a distraction for the company, and we really need the company fully focused and undistracted from driving what drives most shareholder value, which is RIG-led growth. So that's what we are focused on, but we're reviewing our portfolio regularly going forward.

We'll take the next 2 questions from Guillaume Delmas at UBS.

First question is on your supply chain. I mean I appreciate the infant milk formula recall is not Nestlé-specific, but more of an industry-wide issue. But nevertheless, I mean this comes after a relatively long list of challenges like Buitoni, Perrier, VMS in the U.S. So my question on this is, how confident are you that you can ensure you're not going to get any additional supply chain issues going forward, while at the same time, you are driving quite an ambitious program of productivity gains and of CapEx optimization? So any color on that would be interesting.

And then my second question is on your pricing outlook for '26. We've heard a lot from your U.S. peers recently about the focus on affordability. In Europe, it seems not unusual, but negotiations with retailers are particularly challenging this year. So curious to hear how you see your price growth playing out in '26? And I guess related to that, if you're seeing a greater level of price elasticity at the moment across your portfolio? I think you mentioned a bit more price elasticity in Nespresso in Q4.

Thanks, Guillaume. Look, I'll start with your infant formula question, give a few color then on the pricing, and I'll pass it back to Anna for some color on the numbers.

Look, on your question on infant formula, look, I'm very confident we -- at Nestlé, we have the highest standards when it comes to safety and security in terms of quality for our products. And I have said that, and I'm not getting tired to repeat it that the quality of our products and the safety of our consumers come first, and we do not cut corners here. When we talk about CapEx reduction or head count reduction, it's definitely not in the spaces of quality or safety of our consumers and safety of our own people for that means. And so that's definitely not to be read in that context.

And what we have done, we have -- due to our quality capabilities and standards that we have in our factories that are in many, many ways, more stringent and go further than regulations or even the law requires. We have found that issue that the cereulide issue on infant formula, we're the first company that found the issue, and we worked really closely with authorities, health care professionals and industry associations to make sure always with this idea and value in mind that consumers must be kept safe. And obviously, a recall is not a great thing to have, but you have to do that and you have to work through it flawlessly, and the team has done that exactly that. And I'm proud of how we reacted to it.

Obviously, there's learnings to be had, and we will apply that across all of our processes. But I'm confident we have safety and quality really on top of our agenda, and we comply with that everywhere.

Look, in terms of pricing outlook, and I'll just give a few comments first U.S. and then Europe. On pricing, and we have seen a few of our peers talking about pricing softness, consumer softness in the U.S. We have not seen this so far where we are. We're obviously monitoring this very closely. There is clearly a consumer that prefers quality and trades up. And we have -- we see that especially -- for example, Nespresso is a good example. We still have good growth, RIG-led growth in the U.S.

But there is obviously the consumer and more and more of those consumers that have a stretched budget and they're looking for value more and more. And you see that also with discounter channels, convenience channels growing, smaller portions growing. And what we do there is 2 things or 3 things. We have -- first of all, we have a really strong portfolio that is wide enough to cover the premium space and the lower tier space.

Look at our coffee portfolio, for example, we have a Nespresso, Starbucks and Nescafe that can really cater to all price tiers. We're taking back pricing where we went maybe too far with pricing. So we adjust that. We have done that in 2025 as well. And at the same time, we have great capabilities in terms of price and pack architecture to make sure price points are accessible and affordable for those who want to access our products, our brands at accessible price points. And at the same time, I believe it's important we keep investing in our brands. We keep investing in innovation because through all of that, consumers still buy brands, and they love our brands, and we have to make them loved by our consumers.

And in Europe, also, I mean, these retailers negotiations, it's the time of the year where these happen. The retailers as us our focused to give value to consumers, and we're working through those negotiations as we speak. We always look at this in the long term. And the best way to go into these negotiations is having great innovation that not only are good for market share for our products, but are good for driving category growth for our retailers. And that's what we focus one.

But maybe, Anna, you have some numeric color on this?

So firstly, your question on price elasticity. Have we seen any difference? No. The comment on Nespresso is more that when you initially take price, you see a very short-term reaction, but there's no underlying difference in elasticity that we're seeing today on coffee than we were seeing through 2025. And as I said, coffee has continued to positively surprise us in terms of its lack of elasticity.

I think the other point to note with all of this is we didn't -- and you see it in the margin bridge, we didn't act to price to cover the commodity cost increases we saw this year. We acted to price at the level that the consumer could take. And that is something that we monitor consistently. But as we look forward to price for 2026, that's also in our mind that there is some carryover price, but we will look to continue to take price in those categories and country combinations where we feel the consumer has the capacity to take it, and there are a number of those.

A quick point on the U.S. because I realize that we are different than some of our peers, and we've been -- we're not seeing maybe the pressures that they're talking about, although we monitor it. And that might be because nearly 70% of our portfolio, over 60% of our portfolio is Coffee and PetCare. And we've talked about the resilience of Coffee. And you see that even in our affordable brand, Nescafe, that's growing double digit. And PetCare where our constraint hasn't been pricing so much as the capacity to deliver on wet cat demand. And yes, I think that was my build on that.

The next question comes from Warren Ackerman at Barclays.

Philipp and Anna, it's Warren here. It's very early here in Florida at the CAGNY Conference. So excuse me if I sound a little bit sleepy, but I've got 2 questions for you and it's a lot to digest. The first one is really on the guidance. The 3% to 4% for this year, can you maybe elaborate what's embedded in terms of category growth? And specifically, what are you building in for the underperformers and the innovation impact on the expanded growth platforms in '26?

And I guess I'm just wondering whether you considered giving yourself more flex on the guidance or a wider range or a lower number just given the uncertainty out there? And then I know you don't like giving quarterly guidance. But given there are so many moving parts, could you at least confirm, Anna, that Q1 RIG will still be positive despite the 110 bps impact on infant and pet? So a little bit around the guidance.

And the second one is on the organization. I'm still a bit unclear how this is going to work in practice. So you've got 4 categories. How is that going to be an unlock? Are you moving to a matrix structure? And will the reporting change? I'm just wondering whether you consider going to 4 end-to-end categories? And how do you optimize the local versus global? So maybe if you can just clarify a little bit more what this actual 4-pillar change means in terms of the kind of day-to-day and why you think it's an unlock?

Yes. Thanks, Warren. And I'll let Anna start. First of all, thanks for being up so early. And I'll let Anna start with the guidance, and I'll come back on the question on the structure and the 4 pillars.

I am sorry, and I do hope you have coffee. So our guidance of around 3% up to 4% is underpinned by 2 factors: one, the diversification that we have in our portfolio; and secondly, the actions that we are taking, the self-help measures that you see us taking that are accelerating growth. And so maybe just to kind of build on those 2 thoughts a little bit. So in terms of diversification, I think we have really good category diversification. I mean, we were just talking just now around the U.S. where there is a lot of category concern out there, but more than 60%, nearly 70% of our business is in Coffee and PetCare. And those are 2 categories which have good growth fundamentals, I think that gives us confidence. But also the geographic piece as well.

We have great geographic diversification. And if you look at the emerging world ex China in H2, our organic growth was 9% with RIG of 3. Now that's 36% of our business with really good structural geographic momentum. So again, that's another reason why I'm confident.

In terms of the self-help actions that we're taking, moving the areas that we're investing in from 10% of sales to 30% of sales and putting significant focused investment behind it also will help us really accelerate those high single-digit growth areas. So what's encompassed in our guidance is our view of how the infant formula issues could play out and what we know of the world. But that's why we feel confident about it.

And in terms of Q1, and you're right, I don't guide on RIG quarter-by-quarter. But you're also right that the 2 things that you should be adjusting for as you think about Q1, which will be a slower quarter because of them, is the infant formula impact, which will all be RIG. And that's 90 basis points approximately of the specific one-off and out-of-stock impact. And then the other one is the sort of more one-off element of the PetCare, which we've called out at 20 basis points, which is also all RIG. And of course, the rest of our portfolio, we've got good momentum, and you'll see us continue to take the actions that we're taking. And the pillars?

And the pillars. Look, Warren, the question to the 4 pillars. So you've seen -- it's a question of focus. And you have seen us talk 4 clear pillars where we have Coffee, PetCare, now Nutrition, which is the merger of Nutrition -- Nestlé Nutrition and Nestlé Health Science, and then Food & Snacks, which is a less global business I have mentioned in the video as well.

So what we're doing here is really giving clarity what needs to be clearly in the market. And in the market is meant by -- you've seen this photo that we showed in the video. And the best example is this picture of the sari-sari store in the Philippines, where all of these categories come together in one place. And we believe this is really the power of Nestlé in the market. And what the 4-pillar strategy gives is clarity of who is responsible for execution, who holds the P&L, who holds execution with customers, with clients, with the consumer. It's clearly the market. That stays in the market and it's undoubtedly and ambiguitly so. So this is very clear. And it's clear enough for all of the businesses, Coffee and PetCare has always been managed like this. Nutrition will now be managed like this. And then Food & Snacks is also a local business. So execution in P&L ownership is clearly local.

And we keep at the global level, what needs to be truly global, which is brand stewardship, brand long-term strategy, ways of working. What really needs to be global should stay global because it makes the company more efficient and more agile as such. So we're not doing a retooling and a restructuring and reorganization of the matrix. The market's still will report into a zone, but we will be clear about who does what in terms of local execution and P&L ownership and global long-term strategic ownership.

And if -- and one example is a good one, just to remember, we had Zone Europe that was organized in a category structure from out of Vevey. And Guillaume has done a really strong job with his whole team to move that structure back into a market-led structure. And you see the results already. You see the positive RIG that the zone is driving and the growth momentum that we're having. And also the share is back into green territory. And I believe this is really due to the capacity and the local execution muscle of these teams being close to consumer and owning the relationship with the customers in the market. So it's about focus and clarity and at the same time, simplification.

So we'll take the next question from Celine Pannuti at JPMorgan.

Maybe my first question, Philipp, on your strategic review, I think when you came in October at the first conf call, you mentioned that you were not necessarily satisfied with the overall innovation and marketing at Nestlé. I see your new categorization and the focus on some key cluster of innovation, if I may call it like that. But I'm a bit surprised that we've not heard how you maybe want to revamp the innovation and whether you -- the funnel of innovation that goes to market. So if you could talk about that?

And likely on marketing, I understand you want to improve the organization, but do you think 8.6% A&P to sales is enough? And what exactly it means to create the marketing of the future at Nestlé?

My second question maybe building on the previous question on the guidance. I just wanted to understand the sequencing of improvement through the year. So it seems that gross margin will still be constrained in the first half of the year, if I understand right with margin pressure, and then an acceleration of margin in the second half of the year. Anna, can you talk about the building block on that margin acceleration in the second half and the visibility, obviously, probably on cost inflation? You may have some visibility given your hedging, but the visibility of overall the pricing environment as you think about second half?

Thanks, Celine. So I'll start with the first question on innovation and marketing and pass over to Anna for the guidance.

Look, you're right, I called out my insatisfaction with marketing and innovation, the speed of it at Nestlé. And a lot has happened and is happening here in this regard.

When we talk about marketing of the future, it includes innovation because there is no marketing without innovation in that sense. And so what the team is doing is really looking at those best practices we have in the company. We're not starting from scratch here. We obviously have marketing capabilities here, but it's not unified and it's not driven as a global program. So what the team has done is really a program of upskilling our people, making sure we have -- we get the best marketing talent, and we have the best marketing talent within the group. That has started already last year.

We are building also an operating model around marketing. What is marketing of the future in terms of brand building, what is marketing in the future in terms of getting those best insights using technology, using the data to really not only build great communication, but build great products, turning those insights into exciting innovation for our consumers, using our R&D backbone to drive science and technology-driven innovation into those pipelines, which is really important.

And then I think what's also new and important is the focus that we're driving. And that links a little bit to your second part of the question on, is 6.8 or is any number enough to invest in marketing? And I believe it is enough because we also focus where that money is put. You have seen me talk about 400 brands being supported by paid media in the past. And we're focusing now on really putting money behind those brands and those platforms and those innovations where we can see we can drive growth. And hence, our upgraded growth platforms that are now 30% of sales with additional investment that should drive high single-digit growth going forward. That's not only 1 year of growth, that is sustained growth because it is powered by a great marketing program and a great innovation program.

And when we talk investment, that's also an important point to point out here. It's not only about marketing investment. It's also -- we invest in sales force, for example, where it's important to drive growth, look at sales reps that visit veterinary clinics for pet food or medical delegates that visit hospital or health care professionals. We invest in sales force when it comes to driving leads on our professional out-of-home business, et cetera. So the investment is not only marketing, but wider in terms of commercial opportunity to drive RIG let growth.

And for guidance, I'll pass over to Anna on the sequencing.

Yes. So on the gross margin, let me give you the moving pieces. So in terms of raw materials, overall, for the year, where we stand today, and of course, things may change, flattish, but that benefit or the cost of our raw materials will definitely be weighted as a benefit towards the second half as we work our way through our hedged volumes. Obviously, there's still then inflation on our conversion costs.

The other thing to have in mind is tariffs because there are still tariffs enacted. So that, from a cost perspective, will disproportionately impact the first half because we're lapping a period where there were no tariffs in the prior year, less so the second half.

Equity, pricing is the other way. We'll have the carryover pricing from the quite high levels that we've seen this year. And while we will continue to look for pricing in those areas of company category opportunities, so we will still take price. You would expect pricing to likely be higher, benefit us more in the first half.

Efficiencies, we're very focused on efficiencies. So you will see us manage that throughout. And of course, FX has a bit of an impact on margin as well. And obviously, if you just look at today's spot rates, that is weighted towards the first half just when you look at the year-on-year FX rates.

So I say all of that to say those are the moving parts. Equally, if I reflect on last year, there was so much change during the year that this is a set of assumptions at a moment in time, and we'll have to watch how it moves. Equally, if you look at last year, there was enormous change through the year on FX, tariffs, commodities. And we were able to take the right actions to manage that to deliver our guidance irrespective.

The next question comes from Tom Sykes at Deutsche Bank. Tom, are you there? Okay. We'll have to come back to Tom and move on to take the next question then from Jeff Stent at BNP Paribas.

Two questions, if I may. The first one is, if I look at the midterm category growth expectations that you put out, those seem to average meaningfully below 4%. So can you quantify the magnitude of the share gain that's implicit in your 4% plus midterm guide? That's the first question.

And then the second question is, from my perspective, it's not obvious that the performance in Nutrition really improved when it moved from being globally managed to being locally managed. So I'm just wondering why that should be the case with NHS?

Yes. Thanks, Jeff. Look, I'll start with the second question, and I'll pass over to Anna on how much of the share is in the growth.

Look, we have 2 great Nutrition businesses. And we have not been working together in the most optimized way. And you've seen the success we have been able to drive with the setup we have in coffee and in pet food so far. And my thought was when we looked at the strategy of the Nutrition business as a whole, bringing those 2 businesses together made a lot of sense. And having it managed like we do, like I just explained before, with very clear clarity on who does what in terms of execution and go-to-market and a global view on the strategy, long-term strategy, the long-term innovation and brand stewardship.

If you take just an example, why we can say globally managed business, but then it was not as global as we would think it was. So take a brand like Orgain in the U.S., which is a power brand when it comes to nutrition, especially protein. But somehow we were not -- as we were not linked the right way, we're not collaborating the right way, we were unable to launch this brand beyond the U.S. So it's a brand that doesn't exist beyond the U.S. And that is what the new structure will definitely be able to do in a much better way to take great ideas and great brands from one place and bring it to another, and then drive true category growth when it comes to infant nutrition, when it comes to adult nutrition.

And also our vitamin business, I believe, has much more potential to grow outside the U.S. And I think by having a global view of these strategic aspects will help us to drive growth, innovation, but also category growth into the future. So that's why I think it's a good idea. And it's based on growth. And by the way, it will also drive some simplicity, some efficiency, some synergies to make us, again, leaner and more agile as a nutrition-focused company.

And on the category growth -- and David, correct me, I think it's Slide 42 that has the category growth. I call it out because I think it's a helpful slide, but you can tell me if I've remembered the slide number right.

That's the right...

When you know the slide numbers by heart, you're doing well. It's a useful slide because what it says is that 70% of our portfolio is solidly growing in that 3 to 4 territory, and has got good growth momentum. And then there's 30% of that -- of our portfolio, where we are seeing really high levels of category growth. So where we would expect to be growing high single digits. And that's not because of share gain. I mean some of it is share gain, but really, it's because we're driving the category or it is a pocket of the category that shows disproportionate growth.

So some examples, therapeutic pet diet, RTD coffee, cold coffee, air fryers, the new cooking areas. So they're structurally much, much faster growing. And so what's implicit in our -- and why we're confident of our more than 4% guidance is the fundamental strength of our categories, but the degree of effectiveness that we're seeing that when we focus on these faster growth areas, we really made good headway.

And you've seen us do that in 2025, around 10% of sales. We entered at about around 30% of sales with significant increased investment in 2026. And that collectively underpins the more than 4%. So it is the category growth rate, but it is also about making sure we're playing in those pockets that are growing much faster and accelerating them. And we hold ourselves to the bar of also gaining share, not losing it.

We'll take the next question from David Hayes at Jefferies.

So 2 from us. First, on the business units and then a question on the recall. So just on the business use, just to dig gain into this. Should we understand that the operational overlaps of the 4 business units are reducing that the IT systems are getting a little bit more stand-alone as we're almost reversing some of the global IT investment over the last couple of decades, I guess? And I guess what I'm going with that is, is there a view to try and upgrade these businesses to be relatively stand-alone, so there's optionality or maybe spinning them off?

And then that leads on to the second part of the question is, have you review whether Nestlé is a little bit too big still now? I guess that's a question that comes up over the years. And what I'm thinking is are you putting more pressure on the business units to deliver in a more challenging environment, maybe they're taking more risk and, let's say, 10 years ago, is that more difficult to control centrally as the business is being asked to do more and be more kind of agile? So is that where this is kind of providing optionality?

And then the second question, more of a micro question just on the recall. As of now, the last few weeks, can you give us a sense of what you're seeing in terms of retailer repurchasing, consumer offtake, just in terms of whether you are seeing a brand equity demand drop at the moment and how you think that plays through from today through the rest of the year?

Good. Thanks, David. Look, I'll start with the recall question and -- look, the recall, you have seen what we have done. I mean, we were first to recall. And what the whole company is focused on now is to replenish the market. So our factories are working 24/7 since weeks now to recover stocks and to get shelves restocked. Also given the fact that this has been an industry-wide issue. And obviously, these are essential products for mothers and babies, obviously, that have to be restocked. So we're focused on that.

Look, consumer offtake, it's early to say. This is the uncertainty we have, but we're very confident that the consumer will come back. It's one of those categories where you recruit every day. Every day, you have new consumers, new mothers coming in. We are confident that through the actions we have taken, swift action, fast action with the concern about the safety of our consumers in -- at the center, we have really good trust by health care professionals and authorities. And we're investing in the brands. We're investing in, in explaining to health care professionals why our products are great quality superior and why it's a great choice for the babies. Obviously, all needless to say, everything that we are shipping is safe, and is of great quality and is fully tested.

I don't believe personally that we will have a long-term issue on the brand equity here. I think this will come back. It might take some time, but this is a trust that we have to rebuild, and we have the brand, and we have the capacity to do so. There's also innovation coming in, in infant formula that we're launching, and so I'm confident it will come back. And so that's how I see that. We're investing, as we speak, and we should build confidence as we speak.

Then maybe quickly to the second part of your first question, and I'll give the IT one to Anna, I know she's passionate about that one.

Is Nestlé too big? No, it's not -- and again, that's why I love this photo of the store in the Philippines. This is where Nestlé is at its best, when those 4 businesses that we are focusing on come together in the market. And then the size does matter in the market because you will not be able to execute a small store in a way if you are a small company. And if all of those businesses come together, we use our common route to market. We use our common capabilities, our negotiating power in the market. This is how the execution looks in the store.

And this is not only the Philippines. This happens across the world. This can also be in a modern trade aisle. And this is where we have the power of these businesses coming together, these brands coming together. And it's not about centrally controlling anything. It's really giving the empowerment to the markets to execute flawlessly, like that store in the Philippines. But obviously, respecting global brand guidance, stewardship, the brand, when it's Nescafe. Nescafe shows up in a similar way, in the same way in the Philippines than it does in Mexico than it does in Switzerland. It's a Nescafe, and that is driven here by the center.

So it's not about control. It's about pulling into the center what really matters in the center, which is global alignment, global strategic alignment and also ways of working, which then brings me to your IT question. We have -- you can say global ways of working, it might be -- it's the most efficient way that you design workflows in a way that is efficient for the company as a whole, and it makes a ton of sense that we have workflows that are driven the same way in each and every country we operate. And that is what brings me then to why Anna is passionate about our IT backbone.

And I am. I joke that one of the reasons I joined Nestlé was that we have a wall-to-wall single instance, SAP ERP infrastructure. But what it gives us -- and we do have a single tech backbone that sits across the entire group for the vast majority. And we're getting much more disciplined around that. What it gives us is an absolutely fabulous group-wide data structure, which is allowing us to move much faster on things and have much greater relative understanding of things.

So to give you some examples, why are we getting better at managing our working capital because we can see exactly where it's sitting everywhere all of the time, what some of the issues are. Why are we getting better at resource allocation, because that data set allows us to really see where we're investing and it's working well versus we're investing, and we're not quite seeing the returns that we would expect.

And it's interesting with respect to the infant formula recall. We can see what's going on with the consumer, both our sell-in and increasingly our sellout across those brands and all other brands, more or less real time. And it's this insight that allows the group to really react with pace to serve the consumer because it allows us to see what's working. So yes, I'm passionate about that data structure and tech backbone, but it's incredibly valuable to us.

The next question comes from Sarah Simon of Morgan Stanley.

On IMF, just -- sorry, back to answer the David question. But if you can see in real-time, Anna, what's going on, can you just talk about, based on what you're seeing now -- and you've caveated that OSG could be towards the lower end of the range. Is that based on an assumption that what you see now sort of persists? Or what are the kind of factors that would get us towards the lower end of the range?

And then the second question was around ingredients. So Chinese ingredients obviously have been impacted sort of the cause of recalls in other products historically, not just at Nestlé but at other companies. And we've also had COVID, obviously. So the question is whether you have reconsidered any of your ingredient sourcing to be a, more local, so you don't get quite the same kind of global impact; and b, whether you feel more comfortable about sourcing kind of outside of China?

Yes. Thanks, Sarah. I'll give the first one to you Anna, on the guidance. I'll take the ingredient one afterwards.

So with respect to the infant formula recall, maybe just some color. It varies hugely by geography. It depends on whether we're back on shelf fully, which we're increasingly achieving, but not everywhere quite yet. It depends on whether the competitive set are also recalling. It also depends on -- we've got some markets where literally, it was a tiny, tiny volume. And so the recall has been sort of not even visible. And some markets where the stock was under our control. So while we've recalled it, it's not actually been something that's been felt or experienced by the consumer.

So the experience varies very differently by market. And therefore, we are monitoring and understanding at that level of granularity. Our insight both around the category, and that is broader years of knowledge around how parents make decisions about what formula to feed and where they go to for advice and the medical community and our relationships with them. It's all of that data that we put together, which has informed the guidance that we give today.

Good. And as far as your question on ingredient, look, I don't believe it's a geographical issue here on where we're sourcing ingredients from. What needs to be important is that all the ingredients we source independently of where we source ingredients from have to be of the highest quality. And that we have to ensure. And we have to ensure that when they're coming to our factories, but also when they are produced in suppliers, as was the case with the infant formula case. That is my view. So it's not about where we source ingredients from. We just need to ensure that they're of the best quality to produce flawless products in our factories.

And in this particular case, it was not an obvious one, as we have said. It is not cereulide in oils. It's not something that was prevalent. And this is obviously also -- moving forward, as risks become different and testing methods advance, we just have to be one step ahead on this one. But it's not about geography and where we source from. It's really about ensuring the best supply, and that is what we're doing at Nestlé. We have -- our quality assurance in our factories goes way beyond what you can call good manufacturing practices. And as I've said before, our quality standards are, in many, many places, much more stringent than the legal or the regulatory requirements. So it's not about geography. It's about having great quality everywhere that we produce.

The next question comes from Fulvio Cazzol from Berenberg.

So my first one is on -- regarding your strategic review. Can you highlight why you haven't taken the decision to, say, monetize the L'Oréal stake and maybe use the proceeds to buy back some of your own stock and maybe pay down some debt?

And then my second one is on the cost savings. So you're delivering these at a faster pace. And I was just wondering, with the new organizational structure and high simplification coming in, shouldn't there be more cost savings for you to go after, i.e., is there a potential for you to deliver more than the 2028 CHF 3 billion saving target that you highlighted back in October?

Yes. Thanks for this question. So look, I'll start with L'Oréal. I'll pass over to Anna afterwards. But look, we have spoken a lot about L'Oréal. My view and our view is that the best way to create shareholder value, long-term shareholder value is to grow the company. And that's where we focused on. That's my and the team's #1 priority. And obviously, as with all of our investments, all of our businesses, we look at the L'Oréal stake periodically.

We have said many times, it's a financial investment. We are a happy holder. But today, it's not on my #1 priority list. We have a lot of -- you have seen some actions we've taken on the portfolio. There's more to be done in terms of balance sheet cleanup, as we have said with Anna at the 9-month call, that's what we're working through, and we're focusing fully on growth.

But Anna, you might have some more color on the financial outcomes?

Yes. So on the cost savings. The removal of the globally managed business does create some cost savings of, call it, 10 basis points, give or take. And that is -- that was not foreseen or not included in the CHF 3 billion that we guided to in terms of cost savings. So it does come on top equally. And from our perspective, it's important that it comes on top because it's important that we hold ourselves accountable to delivering.

Equally, in 2026, I don't expect it to be a big benefit to the group at all because you've heard from Philipp, that this is around accelerating growth. And so what you'll see us do is be very thoughtful around working our way through change in order that we are grabbing those growth opportunities as fast as possible and delivering on them.

And as I look forward, actually, by the time we get to 2027, we will have -- be moving into disposal of that other piece of the VMS business. And of course, there'll be some stranded costs, which will take a little bit of time to take out. So we'll see the benefit, but also we'll have to work through removing those stranded costs. But that's how I think about it.

And I guess the other thing I would say is we're not limited by the targets we've given. What we are trying to do is find the right level of simplicity, agility and efficiency for the organization, and we will keep looking at that and update you as we go.

Yes. And absolutely, Anna, I think when there is opportunities to drive additional cost savings and simplification, we will obviously do that. That's part of performance culture, and that's what we will do, but there's nothing new to announce here today, but we'll take any opportunity that comes.

The next question comes from Jeremy Fialko at HSBC.

A couple of questions from me. So the first one is on the gross margins in coffee and confectionery. You put that slide up showing how they're still a long way below their pre-pandemic levels. So could you talk about, firstly, just if you think about the price rises that are currently sort of in the market or planned plus where some of these commodities have moved, how much of that you think you'd be able to close in 2026? And then what do you think you need to do in order to get those gross margins sort of back to where they were previously?

And the second question is on China. Perhaps you could talk a bit about where you are in terms of the reset of that business model, what you're seeing in terms of sort of sell-out trends there and how you think that could perform in '26?

Brilliant. Anna, you take the gross margin on coffee and confectionery. I'll talk to China in a second.

Yes. So I mean, look, we'll have to see how commodity prices play out, and we'll have to see how the consumer environment plays out. And I'm not going to prejudge any of that. But what I would say is we're very good at recovering our gross margin over time. And we do it through innovation, through price pack architecture, where we're making sure that the pack size is at a price point that is affordable to the consumer, but we innovate at a margin that works.

We also look very hard at the customer and channel mix and how we're making sure that we've got the right consumer offering in each of the channels. And by working our way through this and really leveraging innovation, we recover our gross margin over time. And that's what you've seen us do in the other categories. And it's quite a proven path.

What you'll see us do in coffee and confectionery is work our way through exactly that. And where there are those geographic pockets where we can take price, we will. But otherwise, we'll be working our way through making sure that we've got absolutely great offerings, but at the right margin. And this is where having a great R&D organization is also really helpful.

Good. And on China specifically, look, if you take a step back in China, China is still a place where the underlying category growth of where we play is negative. And that sentiment has not been improving. So that's where we stand. But regardless of that, the team is laserly focused on destocking the market. So we're drawing down stock levels, as we have announced. We are rebuilding the marketing muscle. We're rebuilding the innovation muscle, and we're rebuilding the route to market and trust of our distributors. And this is still ongoing. So expect this to be fading out throughout H1, and then we will see a gradual improvement throughout H2.

But then again, this is against a negative category growth in China. I'm confident we will be able to rebuild this and rebuild our brands, but it will take time to get those categories back to growth. And we have great brands in China, local brands, global brands and great capabilities. And the team is renewed with a lot of energy. And obviously, we all want China to come back to be a growth driver for the company, but it will take some time.

And we'll take the final question from Patrik Schwendimann at ZKB. And this is a final question in several senses because I think this is Patrik's last call with us after covering Nestlé for many years.

Much appreciate. It's Patrik Schwendimann, ZKB. Philipp, Anna, all the best for the future and the coming years.

So my first question is on the gross margin again. Gross margin was above 49% in the years '17 to 2020, so for several years. In '25, it came down now to 45.6%. What do you think is the new structural gross margin level in the midterm? Has there been -- anything changed here?

Then second question regarding the portfolio management. You mentioned more focus in Food & Snacks. At the same time, frozen is not for sale. Where do you see more focus in Food & Snacks? And regarding portfolio management in Nutrition, is Nestlé still the right owner of Gerber?

Yes. Thanks, Patrik. Look, I'll start with the portfolio one and then have Anna close with the gross margin question.

So your 2 portfolio questions. Look, in Food & Snacks, the focus you've seen, I mean, one simplification is obviously the sale of our remaining ice cream businesses that was in that business. The simplification is also that those 2 businesses, we can innovate in the space where these 2 businesses converge, so Food & Snacks, given the new trends of eating more often, eating smaller portions, eating more on the go, there is innovation there.

There is also focus on less brands. You have seen that we have less global brands in this portfolio. KitKat is a very good example that is in there. This is a truly global brand in over 100 countries and markets. We're investing heavily behind these brands. It's one of those brands that has a 10% CAGR over the last 10 years. And there's so much innovation that we can drive there.

And the focus is really putting more emphasis on less brands. And that includes some of our local jewels or regional jewels like these great brands, Totole, we mentioned. We mentioned Garoto in Brazil. That is really -- that are really local jewels and can drive local relevant revenue growth. But it's not about a complex portfolio, spreading the money thinly on many priorities. It's really prioritizing on where we can drive most growth. So that's when we talk about simplification and focus in -- within Food & Snacks.

And then is Nestlé the right owner for Gerber? And look Gerber is -- I'm unhappy with Gerber still. This is still a drag in terms of market share, and we're still not where we should be. The team is working relentlessly to get innovation back on shelves and to revive the brand. And I have said, I'm not infinitely patient, but we have to give it a try to drive growth in this category. I believe in the category. It's an essential category when you think about our nutrition portfolio for kids and toddlers.

So we'll innovate within the space. We also can bring other brands. That's another advantage of bringing Nestlé Health Science and Nutrition together. Could other brands play in the space where Gerber plays and can they join up forces. So we'll give this a try. We'll give it a try to grow there to drive category growth. And then I'll come back to your question when -- later on to see if we are the right owner or not. But I want to believe we can drive growth in this exciting space and this exciting brand that has a long heritage. And -- but we'll give it a try, but we'll not wait forever to make it successful. On...

Yes, gross margin. So I don't see that there's been any structural change in our business. We should be able to recover our margins to where they were previously. As I say, when we have commodity price increases, you see our margins dip and then you see us take actions to recover them.

More generally, over the medium term, I think one of the things that supports robust gross margins is the strength of the marketing and the innovation. And that's why you hear us so focused on upskilling and driving the quality of our marketing and innovation because where you've got a really strong pipeline and you've got brands that are growing share, that is what supports great gross margin over the medium term.

Thank you, Philipp. Thank you, Anna. We will have to close there, and I will hand over to Philipp for some concluding remarks.

Yes. Thank you. Thank you, David. And just to quickly wrap up the call, you've seen a lot of material, and really thank you for being up so early to be with us.

Look, you have seen, our actions are working. Our growth is improving, which is exciting. The strategy is clear. Our execution is strengthening across the globe. And we are really confident that with the structural changes we are taking, we will drive continuous growth for 2026, continuous growth and improvement for 2026 and beyond. And I really thank you for being with us today, the interest, the questions, and I'm looking forward together with Anna to see many of you in the coming days and weeks as we travel to get more details to your questions. Thank you very much.

Good morning, and welcome to Nestlé's 9-month sales call. I'm David Hancock, Head of Investor Relations, and I'm joined today by Philipp Navratil, our new CEO; and by Anna Manz, CFO. As you know, this is Philipp's first earnings announcement as CEO. To keep the call focused, we filmed a short interview with Philipp where you can hear more about his background and experiences. The video will be posted on our website at the end of this call, and I encourage you to take a look.

Now moving to the call. Please take a moment to review the usual disclaimer. So a quick overview of the agenda. Philipp will share his key messages on strategic priorities and how he sees the business. Anna will take us through the 9-month results in detail, and we will then open up for Q&A.

And with that, I hand over to Philipp.

Thanks, David. Good morning all, and thank you for joining our 9-month results presentation. Over the last few months, our organization has gone through a lot of changes. Despite all of that, we have delivered a good Q3. I want to thank our people for staying focused on the business and embracing the transformation journey ahead of us.

It is a privilege to lead this great company. We have strong foundations to build on. But let's be clear, we have a lot of work to do. I am very focused on how we move faster with our transformation to accelerate our growth momentum. And the action we are now taking will secure Nestlé's future as a leader in our industry. We have been making good financial progress with a strong Q3. Our investments in growth are starting to show results. We are determined to deliver on our commitments, and I am confirming our full year 2025 guidance. We are moving in the right direction. Now we need to move faster.

As CEO, I want to share with you my 4 big priorities. Driving RIG-led growth is the most important. We will be bolder in investing at scale and driving innovation. Second, we must have a winning portfolio. I'll be looking at everything in a rational way. Where we aren't performing, I will act and act with urgency. Third, it is critical that we build a culture that delivers and rewards performance. Last, we are accelerating our business transformation and our cost savings plans to build a stronger company. Doing all of this will deliver improved performance and shareholder value.

Driving RIG-led growth is the #1 priority for us. We have seen stepping up growth investments, and we are seeing positive results. Our organic growth year-to-date is 3.3%, up from 2.0% this time last year. That's an acceleration of 130 basis points. Out of that, 60 basis points has come from an acceleration in the areas we have prioritized for growth investments and 40 basis points has come from improved growth in our 18 key underperforming sales. These 2 areas are driving the majority of growth acceleration.

Our increased investment in priority opportunities doubled the growth of these businesses from 7% to 14%. And our key underperformers, the growth rate improved from minus 2.5% to flat. And excluding the sales that are in Greater China, the underperformers grew 1.5%. So what we are doing is working. What I'm not happy about is that these priority growth opportunities are only 10% of our sales and flat growth in our underperformers is nowhere near good enough.

So now we need to go bigger and bolder, investing at scale behind the highest return opportunities. This means being rigorous about which opportunities have the best returns and then significantly increasing the resources we give them. During this year, we have increased investment in a number of areas to accelerate our growth. These are largely right, and they are working well, as I just showed. But they are a bit of a mix of products, platforms and brands, and they are not big enough.

To drive growth at scale, we must go beyond individual innovations and do this in a structured way. Start with the big strategic consumer platforms, build multiyear innovation pipelines for these platforms and execute flawlessly with high-quality marketing through our billionaire global brands. Take the example of Nescafé espresso concentrates, 1 of our 6 big bets. The strategic consumer platform here is cold coffee, an incredible growth opportunity. We built a strong multiyear innovation pipeline for that.

I know this well because we did some of it while I was running the Coffee business. The espresso concentrate actually came out of that pipeline. We are bringing it to the market globally under the Nescafé brand, the world's #1 coffee brand. We now need to take it to our other 2 leading coffee brands. We need this structured scaled approach across all of our categories. To be successful with that, we need to step up our marketing capabilities across the organization. We are not strong enough, and that needs to change.

At Nestlé, I really think that our portfolio is a huge competitive advantage. There are very significant benefits to scale, for example, negotiating with customers, innovation capability, brand trust and access to talent. But we only get the scale benefits if we are winning in the individual businesses. I will consistently review every part of our portfolio with an open mind, unconstrained by preconceived ideas. I look at assessing business on 4 key questions: Is this a growth category? Is the returns profile attractive? Are we positioned to win? And are we actually winning?

Across most of the portfolio, the answer to these questions is yes, although we are not yet winning as much as we need to. But if our assessment concludes that one or the other business does not meet the criteria I described, we will act, whether that means fixing, partnering or selling. Just to confirm, we are continuing with the strategic evaluation of Waters and mainstream VMS. Delivering on our strategy requires a relentless focus on execution and a culture that drives high performance. Nestlé's culture has many strengths, and there are areas where we must evolve. Accepting that we lose market share is no longer an option. This mindset has to change.

Until this year, we did not have a common set of KPIs worldwide. This has changed, and we now have forward-looking indicators focusing on innovation and execution. This is a big step forward. Now we need to use them consistently across the group. Most importantly, compensation will be driven by performance. This ensures rewards reflect achievement. And personal objectives will be much more rigorous, measurable and consistent across the group. These steps will help us build a culture that recognizes and rewards excellence across the organization. The fourth focus area for me is our business transformation; how we work better, smarter and faster and with a lower cost base.

Getting this right is fundamental to creating value in our business. Our scale and breadth bring advantages, which I touched on earlier, but they also can bring complexity, and this creates inefficiencies. I have started to look at this, and we will spend more time on it over the coming months. It is clear that we can get more agile in how we work with simpler structures and roles. We have made great progress in the last year in mapping our processes across the organization, so we don't look at them in silos.

This gives us the basis to simplify, digitalize and automate our processes and get full value out of our shared services. This will give us a better, more agile business. We will take hard but necessary decisions to reduce headcount. Historically, we have avoided being fully transparent about these changes, and I want to be transparent. We plan a reduction of 12,000 white-collar professionals across functions and geographies over the next coming 2 years.

In addition, we plan a further 4,000 headcount reduction as part of our ongoing productivity initiatives in manufacturing and supply chain. This will drive cost savings, and we have increased our "Fuel for Growth" savings target by CHF 500 million by the end of 2027. So in conclusion, my 4 priorities: RIG-led growth, winning portfolio, performance culture and transformation and efficiency. I will drive all of this with urgency to accelerate our growth performance and deliver improved shareholder value.

I will now hand over to Anna, who will take you through the detailed financial results for the period.

Thanks, Philipp. Good Morning. Moving to our 9-month sales. We delivered 3.3% organic sales growth with RIG of 0.6% and pricing of 2.8%. Sales were negatively impacted by FX movements with the strengthening of the Swiss franc. For the Group, organic growth strengthened in the third quarter to 4.3% with a good recovery in RIG. And within this, there are a few different dynamics. Firstly, it's helpful to pull out China and Nestlé Health Science on the right-hand side of the slide. And that's because the issues and corrective actions in these businesses are different, and we've talked about them in detail last quarter.

Looking at the middle chart, you see what's going on within the other 88% of the business. For the last 4 quarters, up into Q3, organic growth has accelerated as we have taken pricing given input cost inflation in coffee and confectionery. Despite increased pricing, we were able to hold RIG broadly flat. And that is because we are delivering a growing impact from both our investments in priority growth opportunities and improvements in our 18 underperforming sales, as Philipp took you through a few minutes ago.

After 4 quarters of stable RIG, Q3 saw a marked improvement, and that's is due to 3 factors. Firstly, the benefit of actions, which I just talked about, continuing. Secondly, we benefited from an easier comp in Q3, both in terms of RIG and OG. This will get harder again in Q4, especially for OG. And finally, we have taken some selective actions to manage a small number of areas where our pricing had moved out of reach of the consumer. At the beginning of the year, I said we would be front-footed about pricing to protect our structural profitability, but that we would be nimble and adjust to our consumers' reactions. And that is exactly what we are doing, optimizing price where it has gone too far. And it is working. We're getting pricing whilst improving RIG and market share. An example is the introduction of the promo packs in a confectionery product in Brazil.

So stepping back, as you heard from Philipp, there is a lot for us to do to accelerate performance. But in Q3 overall, we see that things are moving in the right direction. Now let's get into a bit more detail on the segments. And here, I'm going to focus on the third quarter.

In Zone AMS, growth has been accelerating, helped by softer comps in Q3. The acceleration was driven by LatAm, while North America held its momentum as we gained market share across most categories. By category, Coffee and Confectionery drove the growth. This was led by pricing, but supported by good RIG in Coffee and an improving RIG trend in Confectionery as we acted to manage price elasticities. Growth in Pet reflected ongoing category softness, but was stable from Q2 to Q3. And in Food, we continue to improve our market share trends in U.S. Frozen.

Turning to AOA. In Greater China, the organic growth decline in Q3 was similar to that in Q2 as we reduced trade inventory levels and shift our focus to generating consumer pull. In the rest of AOA, growth was broad-based, and there was good sequential improvement, particularly across the larger markets in Asia. RIG was strong across markets and categories, and we gained market share across much of the business.

In Europe, we saw a nice improvement with RIG of 2% in Q3, helped by a softer comp. The biggest drivers were Coffee and Confectionery. And again, this was a combination of pricing and targeted actions on elasticities. The other important growth driver is PetCare, where RIG was strong, driven by good market momentum and strong performance of our innovations. Growth was solid across most geographic markets.

Turning to the Globally managed businesses and again, focusing on the third quarter. In Nestlé Health Science, we are still lapping tougher comps, but we saw good performance in premium VMS, improvement in Nature's Bounty and innovation driving strong growth in Orgain. Nespresso continues to perform well with another quarter of solid growth in both price and RIG. Q3 benefited from a particularly successful limited edition summer campaign.

In Nestlé Waters & Premium Beverages, we continued to see solid growth in Waters, but the category softened towards the end of the summer due to cooler weather in Europe. In premium beverages, our investments are driving double-digit growth.

Turning to our categories. Powdered & Liquid beverages, which is mainly coffee, continued to grow strongly, driven by pricing and with RIG of over 2% in the quarter. The PetCare category is currently sluggish, but stable. And overall, we are holding or gaining share. We remain positive about the medium-term growth outlook, and we're focused on accelerating category growth through innovation and investment in fast-growing areas such as therapeutic diets and supplements. I have already covered Nestlé Health Science.

And in Nutrition, performance continues to be impacted by Gerber in the U.S. This is one of our more stubborn underperformers. We are taking the right actions across brand, innovation and cost, but given U.S. retailers have annual shelf reset cycles, we won't see results improving for another few quarters yet. Prepared dishes and cooking aids was predominantly driven by Frozen, where we are taking share despite ongoing category softness.

In the rest of the category, incremental investment in Maggi is driving strong results. Milk products and ice cream growth was positive with price-led growth in ambient dairy and strong RIG in coffee creamers. And in Confectionery, growth remains strong, and we are starting to lap the price increases that began last year and RIG is on an improving trend.

Our Fuel for Growth program is on track to deliver CHF 700 million of savings for 2025. As you know, the largest portion of savings in the program come from procurement, where we are making good progress. Philipp has just talked about his focus on operational efficiencies. The business transformation he has described will lead to a planned reduction in our white collar headcount of 12,000. This will deliver CHF 1 billion of annual savings, which is CHF 500 million more than our original plan and takes our Fuel for Growth savings target to CHF 3 billion by the end of 2027.

These additional savings will be reinvested, more fuel for driving growth. For the headcount reductions, there will be a restructuring cost of about 2x the annual savings, so expected to be around CHF 2 billion. In short, we are increasing efficiency and reducing complexity as we accelerate business transformation.

Turning finally to guidance. We are maintaining our full year guidance despite increased headwinds since the beginning of the year. Our organic sales growth is expected to improve compared to the 2.2% in 2024, and we are well on track after the first 9 months. As we look to the rest of the year, we continue to have good growth momentum, but do keep in mind that we have a tougher comp in Q4 than we had in Q3. The UTOP margin is still expected to be at or above 16% as we invest for growth. And this assumes tariffs currently in place today, including the higher tariffs in Switzerland that came in after the half year.

The guidance also reflects today's FX rates. While we are continuing to execute with focus, macroeconomic and consumer uncertainty remains. And as we navigate these headwinds, I want to be clear that we won't compromise on investing for the medium term.

And lastly, let me comment on cash flow and dividend. Generating free cash flow is a key focus for us, and we expect to deliver at least CHF 8 billion of free cash flow this year. We are committed to our long-standing dividend practice, and this means we have to grow our free cash flow in Swiss francs faster on an ongoing basis.

To pull together everything you have heard from Philipp and I this morning, we delivered a good performance in Q3, and we are on track to hit our guidance for the full year. Our results demonstrate we are making progress. But as Philipp said, there is much more to do, and we need to accelerate. We are clear on our priorities. We will drive RIG through investing boldly. We will transform the organization and accelerate efficiencies, and we will improve cash flow. In short, we will move faster and act with urgency to deliver improved shareholder value.

And with that, I will hand it over to David for Q&A.

Thanks, Anna. So we'll now begin the Q&A session. [Operator Instructions] The first question we have comes from Guillaume Delmas from UBS.

First question on margin. Philipp, you mentioned in your 4 priorities, you didn't touch explicitly on future margin development. So just wondering if you remain committed to some margin improvement in 2026 and a return to 17% plus over the medium term? Or I mean, as you flagged, the additional CHF 0.5 billion in savings will be reinvested. Are you signaling that RIG is the #1, 2 and 3 priority that the cost of doing business in packaged food is rapidly increasing and therefore, margin should be more viewed as the, I should say, byproduct of above industry average RIG rather than a clearly defined numerical target?

And then my second question is on the leadership at Nestlé because again, this morning, you're flagging the need for accelerating Nestlé's transformation with a particular clear focus on evolving and strengthening the group's culture. But my question is, do you think you have the right leaders in place across functions, regions or categories to successfully drive this ambitious change agenda? And here, I guess what I'm getting to is curious to hear your view on this. And despite the fact it's only been a few weeks, how you're planning on assessing the key leaders of the firm and whether we should expect some personnel changes over the coming months?

Thank you very much for the two questions. So to the first one on margin. So I'm absolutely committed to the guidance of getting back to 17% and above. What keeps me positive here is that we are generating the fuel to invest behind our growth platforms and to generate the growth to do this. So I remain committed to that. In terms of the leadership, which is a good question. So what we said we want to accelerate the transformation of the company. So we want to become a company that works faster, that is more agile, that is bolder in its decision-making.

And I do think we have the right leaders in place. But I also have said that we want to drive a performance culture within the company. And the performance culture means that we are all being measured on the same key performance indicators, and we will drive this through the company. And so it will be quite easy to assess who is performing and who is not performing.

And part of the performance culture is obviously making sure that the ones that perform are the ones we keep in the company and the ones that don't, they don't. And so this is what the performance culture means. And so I think today, we have the right leaders in the company, but we will be ruthless in assessing our talent, our people, and we will be driving performance throughout our organization as we have indicated.

The next question comes from Warren Ackerman from Barclays.

David Warren here at Barclays. Two from me as well. The first one is, Philipp, in your prepared remarks, you said the marketing spend is going to be a really big focus for you. I appreciate it's early days. But when you step back, what are your observations on the quality and quantity of the marketing spend? Is 8.5% or 9% the right level? And how do you feel about the returns that you're getting on marketing spend? That's the first one.

And then the second one is, can you talk a bit more about the underperformers? Obviously, quite a big inflection in them. They are improving, I think, you said flat overall for the quarter, but flat is not good enough for underperformers. What is good enough? And maybe can you explain what targeted actions you've taken? It sounds like there's a few places, a few spots where you're rolling back pricing because pricing got out of sync. Can you maybe elaborate on what you're doing, which areas? And has that been part of the reason why these underperformers are improving?

Thank you, Warren. Look, in terms of marketing spend, what we have said is that we want to invest more behind the biggest opportunity to drive sustained growth. And that is the prioritization we're going to do in really, really committing to invest more. But when I say investing more, it's not only marketing spend per se. When I see a growth opportunity, I think we have to think about investing behind those more broadly as well. So think about it, obviously, marketing, but then also about investing in taste and quality, formats, packaging. You mentioned investing in pricing is one part. We can invest in if the pricing was too much. Price and pack architecture is another one or think about investment in distribution and capabilities or digital capabilities when it comes to marketing.

So the investment I see is broader, but we are committed to investing more behind those areas. And that's important because I believe we have the right brands that can take this investment and generate growth.

And I'll pass to Anna quickly just on the specifics of the numbers that you asked, Warren, so to give her point of view on that one.

Thanks, Philipp. Yes. So just a couple of comments. I mean, based on what Philipp just said, I think one of the things we will look at going forward is whether marketing as a percentage of sales is the right individual metric, but that's something we will come back to over time. In terms of how you think about year-on-year, we're not guiding specifically for 2026 at this point, but you should expect marketing to be up on 2025 and 2026.

Thanks, Anna. And on your question on underperformers, where I'm unhappy with going back to flat growth. Obviously, what we want these underperformers to do is to generate more growth than they do today. And there are various levers that we're pulling to make this happen. It's not only pricing or any one lever. So these are real, sometimes complicated marketing plans where we need to get everything right. Some of it, we need to invest into having a better tasting product out there. Some of it is pure marketing capabilities. Some of it, we have not the right price and pack architecture in place or the brand is too weak to be performing. So there's many levers, and there's a lot of work going into these 18 underperformers that we have seen what we're doing is working, but it's not good enough and it's not fast enough.

And you mentioned some marketing capabilities, what will we change? And I think we just need to become the best marketers in the industry. And we have not been there in the past, and we're not there yet. And it's all about reading these underlying consumer trends correctly, being the best in driving these insights into winning meaningful innovation and then driving that into the market with a strong marketing plan, that is an overall marketing plan, but also we need to step up our capabilities in how we communicate digital capabilities, et cetera. And we have some good examples there, but it's not there across the board. And you can expect an update on that specifically by the full year what we're doing.

And back to Anna on that point specifically.

Just a specific point on the areas where we've adjusted pricing to just manage elasticities in the shorter term. That wasn't actually really around the 18 underperformers as such. Just as a piece of context for you, Warren, the improvement we've been making in our underperforming sales has been really consistent quarter-on-quarter. It's not a Q3 thing. It's been the actions that we've been taking over this last year. So it's been a very consistent change.

The next question comes from Olivier Nicolai at Goldman Sachs.

Congratulations on your results. Two questions on my side. First, on Nespresso. Could you quantify the phasing effect you mentioned in Q3? And then more specifically on the U.S., how much room for growth do you see for Vertuo? And then secondly, for Anna, perhaps considering your guidance on free cash flow of at least CHF 8 billion, and I believe you're also going to receive a dividend from Froneri. How should we think about Nestlé net debt to EBITDA in full year '25? Will you be able to be below 3x net debt to EBITDA this year? And when would you expect to go back towards 2.5x, assuming obviously, Swiss franc staying roughly where it is?

So I can take the Nespresso ones, I know this one well. So the third quarter was a really strong quarter. It was driven by a strong marketing campaign and strong innovation also that we had over the summer, which led to this growth. And as you point out rightly, most of the growth still comes out of the U.S. on the back of our winning Vertuo system over there. I believe there is ample avenues of growth still there.

There is -- if you look at it from a penetration point of view, portion systems is the way the U.S. drinks coffee, and we are underpenetrated still with the Nespresso system compared to our competitors. So there is -- what we're really doing is driving penetration-led growth, and it's working. And so the Vertuo system, I think, has still ample ways of growing there also because we are playing with 2 winning brands there.

We're playing on that system with Nespresso and with Starbucks, and this is working really well. And we have also tuned up, as I said before, our marketing capabilities there. You have seen the collaboration with The Weeknd, et cetera. So we're tapping into a younger consumer base as well, which is working too. So very positive on Nespresso going forward.

And over to you, Anna, on free cash flow.

Sure. So the CHF 8 billion of free cash flow guidance does not include the Froneri dividend, which doesn't impact free cash flow, although it does impact net debt. And to quantify the Froneri dividend for you just so you've got it, it's CHF 2.1 billion, and that benefits net debt. In terms of how we think about consistently bringing down our leverage, and we're very focused on that, the #1 way to do it is RIG-led growth because as we drive growth and improve our margin, we increase our EBITDA and our cash flow.

And so that is our single biggest focus. And related to that, we're very focused on all of those other elements that impact cash flow, so specifically working capital and CapEx to consistently bring those down. And of course, if we move into a partnership model with Waters and things like that, those will all help net debt over time.

The next question comes from Celine Pannuti at JPMorgan.

Philipp, maybe if I start with a question, you mentioned many times in your prepared remarks that you are focusing on faster transformation with a sense of urgency. Can you give some example of what you are planning to do? Like, I mean, what exactly it means that faster transformation? And you also mentioned in some of the prior questions, the need for reinvestment, not just in A&P, but across the different capabilities and marketing is one of those. Are you still committed? I think that was a commitment that was made during the road show this summer to increase margin in 2026, given those investments needed.

My second question is maybe more back to like Q3 performance. AOA was -- saw a strong step-up in RIG, 3.6%. And I looked it was the last time you did that was 2021. So while I understand it was broad-based, can you explain what happened from like a run rate that was much lower to such a step-up in RIG? And is the kind of like 2 to -- I mean, 3-ish percent RIG in that region a sustainable level?

Thank you very much, Celine. Look, on the business transformation and on the sense of urgency, is really about how we want to work. And Nestlé has not been the most efficient company in the past. And what we want to do today, and hence, also the announcement we have done today on headcount is really become an agile company, a company that takes decisions fast, a company that drives impact and a company that leverages its scale as well when it comes to how we work. So what we have said what we want to do is to become more digitalized, become more automated, become more fast in decision-making and also leverage our above-the-market capabilities in our shared service centers. That is a way to drive speed and also consistency across all markets.

And in the past, this has been more of an optional view if markets want to tap into those areas, but we want to make this how we work. And so we want to really scale those shared services and drive world-class services throughout our markets. So when we talk business transformation, think about it on how we want to become a faster, more nimble company that is driving growth. It's all about growth.

And in terms of your question on reinvestment and capabilities, as I said before, we are committed to go back to 17-plus percent of our margin in the medium term. And that means going there step by step. And while we invest in those capabilities, the best way to get to that margin improving is through driving, again, back to RIG-led growth. So the margin improvement comes through RIG-led growth, investing behind those growth opportunities that we think deliver the best returns. And specifically on your question on AOA and the RIG step-up, I'll pass it over to Anna.

Sure. So on AOA, maybe just to sort of firstly talk about China and then outside of China. I think we've talked about China a lot in the last quarter results. Quarter-on-quarter performance in China was similar. We'll continue to see China weigh on our growth for another quarter or so. And then we'll sort of see that demand generation come through and that we will see further acceleration in AOA.

Outside of China, we've got some really good momentum, and that's because of the investments that we've been making in those high priority investment areas. It's because of the work that we've been doing on consistently improving share loss sales, and it's because of some tactical elasticity adjustments we've made. But we're really seeing that show up strong performance across Malaysia, Indonesia, India, Pakistan. And I would say across the region, in most businesses, we're growing share. So good momentum.

Now as you think about what that means going forward, the fundamentals of what we're doing don't change. But in any given quarter, you've got to look at the comps. And as I look forward to Q4, you've got to be thoughtful about Chinese New Year timing because that impacts a number of markets in the region. And Chinese New Year is a little bit later next year.

Our next question comes from Tom Sykes at Deutsche Bank.

You've obviously generated 1.5% RIG in this quarter. There's flagging the comps in Q4. But when you look at the macro environment and where the business is now, do you think that 1.5% RIG is sort of the minimum or the level that should be expected? Or is what you're outlining something that progressively gets you there consistently? And when will the U.S. get to that sort of level, please, because you should have got a benefit from creamers, obviously, in this quarter.

And then just on the free cash flow, you've outlined getting over CHF 8 billion. I mean, is there any sort of way you could size the ambition in free cash flow, i.e., would it be greater the improvement in free cash flow than, say, the restructuring costs so you can delever excluding further disposals, please?

Anna, do you want to take those?

Yes, sure. So maybe first to just talk about RIG. So -- maybe I'll start with the medium term. So our medium-term guidance is to be growing over 4%, and that's because of the strength that we see in our medium-term categories. In that world, when we get there, we need to be delivering sustainable, strong RIG-led growth. We need to be delivering at least 2% RIG growth to sustain that kind of momentum. So what you're hearing us do is put the actions in place to consistently improve our RIG performance.

Now maybe just to unpick a little bit Q3 because there is strength in Q3, but maybe how to think about Q4 in that context as we are on our journey to accelerate towards a consistent. So really good Q3. There is a lot that is going on an underlying basis well with the business. And that's the work we're doing to improve our share loss sales, the work we're doing in those selective investment areas and the momentum that we've got there. And also the work we've done to look at some of those short-term elasticities and make sure that we're in the right place. So that all continues. But as we look forward to Q4, there's a couple of technical factors, which will impact us. So there is a tougher comp and Chinese New Year, which impacts a number of Asian markets is a little bit later. So that's the shape of it.

And I guess the other thing I would have in mind as you think about it is also we'll have to see how the consumer plays out over the holiday period in the current sort of macroeconomic environment. Now if I think about Q4 U.S. because I think that was your other question. U.S. RIG growth has been a little bit lower in Q3 and has been at the lower end for a little bit. And just to sort of give you a little bit the shape of that, 2 categories are weak and are holding us back there, frozen food and pet, although our share performance in both of those categories is strong. And actually, we've got good share performance across the U.S. So the big accelerator going forward, particularly will be pet coming back and frozen stabilizing a little bit.

In the quarter, just as a piece of context, we took price in Starbucks, and that slowed coffee a little bit just as we've taken that price, but I fully expect that to come back. So as you think about the U.S., as momentum in coffee comes back and as we see more innovation and capacity come into the pet category that allows us to innovate, that's what's going to drive the RIG acceleration there over the medium term.

And then in terms of free cash flow, so CHF 8 billion, we have said that we would expect free cash flow to improve from CHF 8 billion in 2026, and that stands -- CHF 8 billion or more. And that stands irrespective of there will be a cash cost associated with the restructuring. And for your models, you'll have had some restructuring costs in there. But of course, as we've announced a bigger restructuring, there's CHF 1 billion more restructuring costs that will be cash over the next couple of years probably than what you had before. I expect cash flow to improve irrespective of that in 2026 because of the actions that we are taking to accelerate the business and also manage all the levers of cash flow, specifically working capital and CapEx, and we'll be continuing to do that.

The next question is from Jon Cox from Kepler Cheuvreux.

Yes, congratulations on the print. And I think the commentary, Philipp, has been broadly welcomed by the market. Philipp, maybe the first one for you. What about accelerating the winners? I was actually quite surprised to see it's only 10% of the portfolio. You mentioned this step-up from 7% to 14% as you put resources behind that. How can you actually broaden that part of the portfolio? I know a lot of focus is on sorting out the ones that are underperforming. But just wondering what your thoughts are on that, how to expand it? Is it tapping into what opportunities? There's a lot of things going on in the world, GLP-1s and a lot of different things out there, what your thoughts are on that? And then as a bit of an add to that, I'm just wondering if you could give us a rough idea of how the volume mix equation was in that 1.5% in the quarter.

And then maybe a question for Anna. Just back on the free cash flow. You've mentioned some levers. I wonder if you could just give us a bit more examples on that because free cash flow has never been great on a very long-term basis. The growth of free cash flow has not been great at Nestlé. What your thoughts are around CapEx to sales, which always seems to be much higher at Nestlé compared to peers. trade net working capital to sales, what you can do there.

And I'm just wondering, do you think aspirationally, you can come back to some of the bigger numbers we've seen over the years? I think you were close to CHF 12 billion, for example, back in 2019. Is this sort of directionally where you think you can go with free cash flow over the next few years? Any sort of granularity on that would be appreciated.

Thanks, Jon. I'll start with your acceleration question. And as you pointed out, when you look at our big bets and priorities that we have stated in the past, and we invested behind those. I said I was not happy with that the fact -- I'm happy with the fact that they are growing. So what we're doing is actually working. I'm really happy about that. But I'm unhappy with the size of those priorities, how much they add up, as you pointed out, it's only 10% of sales.

And how I'm thinking about it -- and I'll come back to you with more thoughts generally about this at full year. But how I think about it is winning consumer platforms. So I can give you 2 that we're already working on, and I think they're showing really good results. So one is, for example, cold coffee. Cold coffee is a huge consumer platform, and we have started to tap into that one in different ways. So we have launched those Nescafé concentrates that you have seen.

That is one way to tap into that. And that's one example, and it's actually one of the big bets. But as it is just one product, it's too small to be big enough to be a consumer platform. So I think about it as cold coffee. Cold coffee includes those concentrates, but also includes ready-to-drink coffee, for example, which is a growth category for us and also includes recipes -- cold recipes that you can prepare through Nescafé Dolce Gusto or through Nespresso, for example.

So think about it as big platforms that we will invest more broadly behind it. And then we have the right brands to play on it. So on that cold coffee platform example still, we have 3 fantastic brands to play on. So we have Nescafé, we have Starbucks and we have Nespresso. So we should be really being able to have a big impact. The other example I have there is, we call it modern cooking, and we have had a very good example where we tapped really early into a consumer trend, which is the growing penetration of air fryers at homes all over the world.

And we have launched specifically on the Maggi, but also other brands, mixes that can be used to prepare delicious dishes with air fryers. And we were fast in doing this. We had the right brand. We rolled it out, the right execution. But then modern cooking can be taken to other ways of cooking, and we're looking at that as well. So think about those platforms as being really larger consumer-driven platforms, and we're looking at those very thoroughly, and we'll come back with more details on more of those at full year -- around full year.

Then the second question was more -- well, I'll give those to you, Anna, on the volume mix equation in the RIG and your follow-up on free cash flow, Jon.

Sure. So I think the volume mix question was referring to the share loss sales. And I would say we're seeing both volume and mix. And it depends on the sell and the actions that we needed to take. So for example, I'll give you an example, in frozen -- for example, in frozen pizza, it was about getting our brands back into the consumers' repertoire. And so there, you saw volume-led share improvements before you saw the value-led ones.

So good volume -- we've seen good volume shift there, whereas something like confectionery in the Latin American market, for example, it's been more about mix because it's been about the right mix of choco bakery in some places to make sure that our products were tasting delicious, but at an affordable price point in a world of commodity increases. So it's a mix of both, and it's a thoughtful mix of both depending on the problem that we needed to solve for the consumer.

In terms of free cash flow, you're right, we've never been great at it, and that is a wonderful opportunity, and we need to get better. And it's also something that takes a little bit of time to get better because working capital is touched by many people across the organization, and we need to improve it at every one of those touch points. So to give you some sort of sense of that, so let's just start with working capital. What sorts of things are we doing? And why will it deliver sustained changes?

Well, historically, we've given targets on inventory that sort of reflected existing inventory levels and maybe a small improvement rather than looking at what's the optimum inventory level for the factory footprint that we have. And that meant that as we've added factories, we haven't always optimized how we're moving product around the network to really make sure that we're optimizing the cash that is there. So we're working through all of those things.

And actually, if you go back to what Philipp said, it is around having the right KPIs at the right level in the organization to drive these shifts. That's why I'm comfortable that there is an opportunity for sustained improvement. CapEx to sales is another interesting one. Yes, we are higher than the competitive set. And some of that is the nature of our categories and the fact that we manufacture more locally, and we need to do a better job of rightsizing our investments and making sure that we're getting the returns on them. And that is something that, again, there's a lot of work going into and will give us a sustained improvement in CapEx as a percentage of sales over time. So those are sort of sustainable improvements that we can and will deliver over a couple of periods.

The biggest driver of free cash flow and what will see us elevate our free cash flow levels to the levels that we should be at over the medium term is driving RIG and improving margin. And as you drive volume and improve margins, you drive EBITDA and providing you are improving your cash conversion on top of that, you see a healthy acceleration. I know I'm stating the obvious, but that is the single biggest driver. And so there's no reason why we shouldn't get back to some much stronger medium-term cash flow generation. I say that carefully because in the shorter term, there is a restructuring cash that we just need to work through over the next couple of years. But that is to drive a more nimble, sustainably better organization.

The next question comes from Sarah Simon at Morgan Stanley.

We will have to come back to Sarah. So we will take the next question from Patrik Schwendimann at ZKB.

We have seen an overall broad-based improvement in RIG and organic growth. The prominent exception was PetCare. What needs to be done that PetCare will be back on a mid-single-digit organic growth path? That's my first question.

Secondly, in infant nutrition, we have seen an improvement, but RIG was still down in quarter 3. I know the environment is not easy. But what needs to be done to get the infant nutrition business back to growth despite lower birth rates? Is this still an attractive category for Nestlé in the future?

Yes. Thank you, Patrik. I'll give some -- more midterm statements, and I'll give those then at the end to Anna. So on pet generally, we think the fundamentals of the category are really strong. So we see that the number of pets are increasing. Pets are more and more treated like members of the family. And also, we see caloric coverage increasing. So that is that is definitely a place that we see growth going further. And then on your question on infant nutrition and then Anna will be able to give a bit more numbers or more color to both of those.

I think I know that the birth rate is going back, but we believe this is a very attractive category for us still because this is where -- if you think about it, this is where Nestlé was born, and we have plenty of opportunities to grow the category further, and we have plenty of opportunities also to recover market share in markets where we have not been performing as we should. So we're looking forward to drive growth on both of those categories going forward. But Anna will be able to give you a bit more color to both of those.

Sure. So maybe let me start with Pet. And actually, maybe let me just talk about Pet in Europe for a moment because Pet in Europe is delivering mid-single-digit growth. And that sort of helps ground us, I think, in the potential of the category. And then we should talk about the U.S. and maybe why it isn't. So in Europe, we are there, and that's because there is good category momentum, particularly in cats. So across the board, we're seeing more cats being adopted and category growth is skewed there. And in Europe, we're very much a cat skewed market.

So we are benefiting from the category momentum. And actually, we're driving the category momentum, which is where we should be because we are innovating well into that category and the innovations are performing strongly. So that is an example of how pet should be working where we are using innovation to deliver on the consumer desire to feed their pets really lovely premium offerings.

So the U.S., we're not seeing that level of growth. The category momentum is much slower. Again, it's better in cat and much weaker in dog. We're seeing more cats being adopted, but dogs are flattish to a slight decline in the shorter term. And again, in the U.S., we are lapping a period where there was no promo. And so that has also had a sort of deflationary impact on growth a little bit. I think the opportunity in the U.S. to see category acceleration and our acceleration comes back to more driving innovation harder in that cat area where we're seeing good growth.

And as you know here, we are capacity constrained on wet cat. We've got more capacity coming on in Q3, which will help us and help us to deliver against that opportunity. And we've got then further capacity coming on stream towards the end of Q4. And in a market that is led by innovation and premiumization, that is really important because it's very hard to innovate without capacity to put through the plant. So that's Pet. A shorter-term comment on Nutrition. I think we're seeing an improvement in momentum in AOA and LatAm. So there's an acceleration there.

I think what's holding back our performance on infant nutrition at the moment is our performance in Gerber. And we've talked a bit about that. We're taking actions to improve Gerber's performance in the U.S., and that is both around brand innovation, distribution and cost. But we won't see the benefits of those actions come through until into next year because, as you know, in the U.S., retailers have an annual cycle around shelf resets. So we won't be able to win our distribution back until into next year. So it's going to be a drag for a little bit in the shorter term.

We'll take our next question from David Hayes from Jefferies.

Congratulations, Philipp, on the new role. Just related to that, I wonder if you could just give us a bit of a sense from your perspective, what the process was for you to get the role? And I guess, specifically, what you feel was your key pitch to the Board in terms of you getting that role? And then in that context, just almost playing back some of the answers you've given so far this morning, it sounds like your teams reviewed and/or is comfortable with the medium-term guidance that's not likely to change come February, but it sounds like maybe your team under your leadership is now still looking at reviewing some of the business units. Is that a reasonable summary about where you are in terms of you looking to sort of take the leadership on from here?

And I guess the second question, just to again, can always come back to what you talked about, a lot of moving parts on the RIG for the fourth quarter, you talked about on comps, et cetera, Chinese New Year. Can you give us a sense in terms of the scale of slowdown sequentially that you'd still be positive RIG would be expected when you net all those elements off?

Thank you very much, David. Look, on the process, how I got the role, obviously, this process was run by the Board, and there is a thorough succession planning and I was obviously on the list. But what my context was, and I think what I pitched and what I was advocating for is that I would be able -- I mean, I still have almost 24 years in the group. So I cannot say I'm not a Nestlé veteran. But I'm able to look at things with a fresh look, unconstrained by preconceived ideas.

And this is also when I talked about the portfolio, this is how I look at things. So I'm not really taken back by what we would have as dogmas and not taking decisions because we don't take decisions. So what I am standing for and you can really -- what you can expect from me is really transparency. You can expect accountability. This is what I also said many times, and you can also expect that I will drive and inculcate a sense of urgency throughout the organization. And I think as a company, we have to move faster.

We have a fantastic fundamentals to build on great scale, great company, great people, great brands, but we just need to move faster and we need to start winning out there. And that is also why I was quite clear in saying that we don't want a culture where losing market share is okay. It's not acceptable, and we need to win -- everywhere we play, we need to win. So you can expect also some competitiveness to be brought back to the organization and love for our brands because at the end of the day, that's what we sell. We sell great brands, and they're made of great products that we sell out there. So expect more of that.

And in terms of your question about RIG, I guess that was for Q4 RIG. I'll give that to Anna to give a bit more color on that, David.

Sure. So good question, David. We absolutely expect all of the actions that we are taking to continue to improve our underlying RIG momentum. And it's important that you hear that. And there are some technical factors, so comps, Chinese New Year. Are we going to have positive RIG in Q4? Absolutely. Now I'm not guiding on RIG, but we're absolutely -- there's a big difference between negative 0 RIG and 1.5. So we're not guiding on RIG, but it absolutely will be positive. And there are some -- it is just a slightly higher comp technical base for Q4.

I'm afraid we're at time, so we have to conclude there. Thanks for the questions and the interest. I'll pass over to Philipp for his concluding remarks.

Yes. Thank you. Thank you, David, and thanks all for attending the call. I'd like to conclude with a final message. And as I said, and I will repeat it many times, you can expect for me to focus on those 4 key priorities we have been calling out. The first and most important one is RIG-led growth, a winning portfolio, a performance culture throughout the whole company and transformation and efficiency. I will drive that with urgency, accountability and transparency to accelerate our performance and to deliver improved shareholder value. And I really thank you for your interest, your questions, and I'm looking forward as I go on to the road to meeting many of you in the coming days and months. Thank you very much.

[indiscernible]

So thank you, everybody, for joining the Nestlé fireside chat. The eagle eye amongst you might have noticed a slight typo on the holding side. Parry is changed outside, but just not in here. And good morning, Anna, and thanks for being here. And I think given the sudden change of the CEO, it's really appreciated that you've fronted up on the meetings yesterday and been as transparent as you can be. And you're now happy to sit down and talk to me and your investors sitting in the audience and those analysts and investors who are listening online or during the playback. So thank you.

So let's get into this. So I'm going to ask you the elephant in the room question. Can you maybe just outline as best as you can what happened with Laurent? And can you give us some context as far as you're able?

Sure. So back in May, we received a speak up through our internal channels, alleging a romantic relationship with an employee and improper favoritism and that was investigated through an internal investigation overseen by the Board. And no evidence was found at that point. And it was at that point that Laurent also made a personal statement stating that there had been no such thing.

Subsequent to that, we had a number of other speak-ups making slightly different allegations and with slightly different information. And on the back of that, the Board initiated a second broader external investigation, and it was that, that triggered information that led to the Board believing that there have been a breach of conduct and that they needed to act to change CEO.

In terms of the speed of change, why did it happen so quickly? Can you maybe explain a little bit around the succession planning? I think some people have been a bit surprised that perhaps there hasn't been a full internal, external process? What was the thinking?

Sure. I mean -- and it's interesting, I thought we've had lots of questions about succession at Nestlé. And Laurent was 62, I mean, he's 63 now. And so of course, the Board have been focused on succession considerably anyway. And a lot of work have been going on in the background looking at both internal and external candidates.

Now we didn't expect to find ourselves here now. So timing has come earlier. But I think the reason you don't see us do an external search now is because the Board felt that actually they've done all of the work and we're well placed, therefore, to appoint the best candidate that they have identified, which is Philipp. And in many ways, given that, that work has been done, and they can move quickly to appoint Philipp, it allows us to keep real momentum in the business.

Can you tell us a little bit more about Philipp or is it Phil or Philipp?

Philipp.

Why he's the right CEO for Nestlé and his background? It does seem to me a bit of a break from the past. He's a bit younger, 49, makes me feel old. He only joined the Executive Board, I think, in January. Am I right in saying that?

Yes.

He's led Nespresso, but he hasn't really had wider Nestlé experience. So just a little bit about him and his biography, I guess.

Sure. So Philipp has been with Nestlé for more than 20 years. He's done a broad range of jobs. He's run the global coffee business for Nestlé. And so it was Philipp that drove the rollout, for example, of Starbucks into 90 countries around the world. And more recently, he's led Nespresso.

He's a really strategic, thoughtful leader. He's also very pragmatic and executionally focused. And I've seen that working alongside him since he's been in Nespresso. He's really come into that job fast, and I've seen him act to invest to drive growth boldly whilst driving simplification across the organization. So I absolutely see why the Board have made the choice that they've made. And I think he'll bring a freshness of perspective and I think a pace to change at Nestlé, and I think that's one of the reasons that the Board has made this appointment.

And when should we expect Philipp to present to markets and meeting analysts and investors?

Well, I'm aware there's a lot of demand. So for sure, you'll see him at Q3. And we're looking at ways to introduce him to the investment community ahead of that. So we'll come back to you on that one. But we've heard the demand.

So maybe segue in terms of like your time at Nestlé. I'd be very interested to understand how the performance management of Nestlé has evolved over time on the KPIs. Maybe you can give some examples. Is there a common set of metrics now that everybody is aligned on and maybe what they are?

Yes. So as we focused on delivering organic growth, the focus is about running the business better. And what we've done is describe the KPIs that you need to run the group. And actually, if you look across all functions, it's about 50, that cover things from media efficiency across to on-time and full deliveries.

They are a common set of metrics and they are cascaded all the way down the group and most of them are now automated. And I say that because the shift is a move from management by PowerPoint, where you can pick and choose the metrics that you're using to describe performance to a described set of metrics that are informing all of our performance conversations, and we talk to those metrics, both at an Executive Board level monthly, but also then at a business level and then down to a country level.

So I think that is one dimension of the shift. I think the other dimension of the shift that we've been driving is a focus. So rather than focus on everything equally being really clear where those areas are that have been detracting from growth. So the 18 share lost in sales and very specifically performance managing them, but also identifying those areas that will really accelerate growth.

So those platforms like RTD coffee and pet therapeutics that will really accelerate growth and again, performance managing them. And this concept of focus and not managing to the law of averages is a really important one as we really raise that executional sharpness.

And at the CMD, you mentioned the underperformers. I think you said 18 underperformers, 21% of revenues. We don't know every single underperformer. We've got an idea what they are. Can you give us an idea -- an update, I guess, on since the CMD, how's progress looking on those underperformers? Because it's been quite material in terms of growth. I think it's been a 100 bp drag.

Yes, exactly. So good progress. So we have closed the share loss drag associated by those underperformers by more than 1/3 in the last 6 months. Some of them, actually 3 or 4 of them are now in what I would call sustained share gain and sustained is an important word because anybody can gain share in a given month. It's got to be on an MAT basis to meet the sustained test.

So we've got sort of 4 of them that are there, so things like Milo, which is a very important product in ASEAN; biscuits in Brazil. So good 3 or 4 of those. 80% are moving in the right direction. So you've got things like creamers and frozen food, all moving towards share gain.

And then there's a couple that are stubbornly not yet making progress. One of those would be Gerber, for example. But there -- we're taking the actions. It just takes a little while for those actions to flow through.

And you mentioned Gerber. Can we maybe touch on that? Because I'd be interested to understand the philosophy, where it's more difficult, like Gerber, it's been an issue for a long time. How do you actually reimagine Gerber? What are you actually doing to fix something that you've tried to fix before to give us confidence that this time you can actually...

So really, it's a good question. And it starts with metrics because metrics allow you to describe the problem clearly. So that clear description of -- do we actually have taste preference -- do we have product preference, so taste packaging, consumer need preference. Are we at the right price point versus the competitor set? Do we have distribution, share of shelf? And do we have our share of voice?

When you do that diagnosis, it's quite clear that we've lost some distribution. And we've been losing some distribution because we haven't been delivering against the value proposition. And then we've done more work to really describe what it takes to deliver on that value proposition and what our consumer really wants versus what we might think that they want.

So there, that soup to nuts work has been done and it's been heavily reviewed. The reason it takes a little while to work through is having identified the proposition shift, you then need to act on it. And acting on it means working it through with our customers because to get our distribution back, our customers need to believe in why they are going to give the shelf back to our proposition. And that's the process that we're working through at the moment.

I want to talk about the changing competition in the coffee landscape. If the KDP, JDP deal goes through, KDP share in coffee will go from 5% to 16%, right? So that will close the gap significantly against Nestlé as the global leader in coffee. That would be a seismic change in the coffee industry landscape. How can Nestlé adapt and go even faster when you've got 2 companies coming together to create a pure play?

Yes. So I mean, we are the leader in coffee and we've got phenomenal brands. I mean, Starbucks, Nescafé, Nespresso are super. And they are performing and they're gaining share. So we start from a good place. This -- we compete with both of the companies today effectively. So the fact that they are coming together to form a good competitor actually should be good for the category as a whole, strong competitors, strong category or both price. But you can be sure that in the [indiscernible] where there may be a bit of distraction, we will be absolutely out there making sure that we take every advantage of that opportunity.

And I guess related to that, I mean, what we're seeing in the industry at the moment is the creation of a lot of pure plays, whether it's [indiscernible] ice cream Magnum, we just talked about the new Keurig coffee company and other disruptors. It just seems like in a world where the consumer is so choppy and channel shift, the giant supertanker like Nestlé, how can a giant supertanker like Nestlé, keep up with these kind of speedboats of pure plays in different categories when they eat and sleep single categories? So what is the advantage still of that scale, I guess?

So what blew me away when I arrived at Nestlé is the route to market. The power we have in be it Portugal, Chile, as you go around Indonesia, as you go around the world, and I have been of the power of our categories playing together, we're in every aisle in the supermarket and that allows us to have a really different conversation with our customers and really have an amazing route to market and a deep, deep understanding of the consumer.

So I think there's a huge advantage there. And this is the end. What the pure players are good at, and we need to be equally good at is that execution focus. And so that's where you see us focusing, driving that by category execution focus, so we deliver just as well, and we have the power of our amazing route to market.

And where that would come together to give you an example would be, for example, in AOA, where we've got fabulous market presence, largely underpinned by dairy and nutrition. In countries where coffee is a fast-growing category, and pet care is, in many places, quite nascent, that route to market that we have is the really powerful, profitable cash-generating business with the real category focus on top to really drive those categories, that's where you see us competitively.

I guess that's a good segue into the question around data. How are you going to go about leveraging data and using your global IS/IT platform, Globe has been in place for 20 years now, right, or 25 years? Nestlé has got reams and reams of data, but maybe you're not using it optimally to drive consumer insights or better resource allocation and maybe the demand supply signals. How can you step change the use of data to actually work for you?

So this is a journey that we are well and truly on. And actually, I think Laurent has really accelerated in his time as CEO, and that momentum will continue. So we do have -- I mean, we are 1 of 3 companies in the world that has a single instance ERP across the group. So we have amazing data. I mean I can see pretty much anything anywhere, anytime and I look.

And we also have an enormous amount of -- we have 0.5 billion records of first-party consumer data as well as customer data. And we have the tools now, the digital tools that put that together to give us the insights to manage our business better and faster. So be it marketing return on investment tools, real-time promo tools as well as some of the supply chain planning and forecasting tools. The shift at Nestlé is moving from allowing markets to pick and choose what tools they take and develop their own if they fancy it to having -- taking that data, taking the tools that we've got developed and driving them down the organization because actually, we can go much faster at digitizing if we use our scale to go once. And that's exactly what we're doing.

That's super interesting. I want to get into a couple of the categories and a couple of the key cells. I mean the biggest single cell in Nestlé is U.S. pet food. I think it's about 12% of group revenues, if I'm not mistaken. What is the current category growth in the U.S. pet maybe if you have a number, cat versus dog? And how much capacity are you still to bring on? Yes, I'll leave it there, and I have 1 follow-up on it. But yes, just in terms of the market -- the category growth and capacity.

Yes. So let me talk around it a bit because I think context is important here. So firstly, what I would say is the fundamentals of the pet care category that underpin a sort of medium-term trajectory of mid-single-digit category growth are really strong. And they are increasing pet adoption, which we're seeing globally, an increasing desire to humanize pets and treat them as members of the families, less babies, more pets and that drives premiumization.

And then the third one in the emerging world is increasing [indiscernible] coverage. So the U.S. is at 90%, but Mexico is at 60%, India is at 20%, actually, Eastern Europe is sort of 70%-or-so. So that's the opportunity.

Now in the U.S., there is also great fundamentals in that we're seeing growth impact. Actually, we're seeing really good growth in -- good growth in cats. Dogs are flattish. But actually underneath that, families with multiple dogs are not replacing a third or a fourth dog when they pass away, but more families are coming into dog ownership, which from a category fundamental thing is a good thing.

And the desire to treat dogs as members or pets as members of the family absolutely is very present and stronger in the younger generation, and that's who we see coming into pet ownership. So the fundamentals are good. But the -- it's been a lumpy category for a number of reasons.

Firstly, in COVID, we saw significant pet adoption accelerated into the period. And that probably has meant that we've seen slightly slower pet growth since even though it's growing.

Secondly, because of that, we have seen capacity shortfalls. And because the category has been lifetime capacity, we haven't seen the innovation and innovation is what drives premiumization. That humanization of the pet that I want a new experience to give my pet, and its innovation that drives me to try.

So that has held the category back. And then thirdly, you've seen a period of extreme price inflation through '22 and '23. So we were taking about 25% pricing over that period. And then in 2024, you've seen all of this come together. So less price inflation. Through the year, we then saw the return of a more normal promotional environment.

By normal, I mean, less deep than prior to COVID, but we have promotion we didn't have in those previous 2 years. That was deflationary and coupled with the lack of innovation driving the premiumization. By the end of 2024, the category was flattish, which is felt quite subdued.

As we've moved into this year, and we're sort of coming through that promo period, and we've got a little bit more capacity and coming into the category, we've seen it in a 12-week window, probably the highest about 2.5% category growth. It's been a little bit slower in the last few weeks, but pets eat less in hot weather, these things come and go.

So that's the sort of shape of things. Where are we, though, on that capacity journey. We still do not have enough capacity in wet cat food. And the growth in the category, the acceleration that we're seeing is in cats, which is wonderful because pet cats are wonderfully picky eaters.

And somebody told me, a cat can go for nearly a week. If it doesn't -- if it isn't like the food, not eating, whereas a dog gets a matter of seconds. So cats are good. So we're seeing that nice growth in wet cat food, but we don't have the capacity that we need to meet it in the U.S. at the moment, and that is holding us back.

We get more capacity this quarter in Jefferson. And then we've got some more capacity coming at the end of the year, which will be really helpful in terms of reigniting growth and category growth as we then bring more innovation.

There's also a new chambers -- new segments like refrigerated is a segment. We've seen General Mills are now making a big push into that area. You talk about pet therapeutics as one of the big things at the CMD. Maybe you can sort of touch on those 2.

Yes. So those are both faster-growing segments. And of the 2, if I just to compare them a minute, the one that we are really focused on growing is therapeutics. What is therapeutics? It's specialty diets, often prescribed by a vet to help with Pet Nutrition and Health. And actually, you can do a lot with pet health with the appropriate diet.

And there, we have the R&D. It's very technical. The investment that we are making is to work with vets and veterinary schools around nutrition and educate them in this space and educate them in our products and how they solve problems. And it's an area where our share is 10% of the sector for the category, which is significantly lower than it should be given our share elsewhere and our capabilities.

And so the reason that we're very focused here is it's a high-margin, fast-growing area, and we have the R&D capability. So what do we need to do? It's the investment in the footfall to get to those vets. I am more excited about that as an investment because I am very clear on the returns than I am about fresh.

Now fresh is also growing, and you've got different types of fresh. You've got frozen, you've got chilled, you've got some ambient offerings. Now we know a lot about frozen and chilled and frozen and chilled route to market and the complexity and the margins in frozen and chilled route to market.

And it's a harder place to sustainably win profitably. And so what you see us doing there is making some smaller scale investments. So we've had a stake in just food for dogs for a couple of years now to really explore the space. We're also -- we have a number of innovations in this space that we are learning from. But we want to be really clear how that investment will scale before we put significant funds behind it.

I want to switch gears to China because it was a big topic in the second quarter. You're making quite a big change to the model in China. You're moving much more to kind of consumer pull from a distribution push. You also, as part of that, taking inventory out, you got new management in. So my question really is it's that -- how easy is it to actually make that pivot? Because it is quite a fundamental change?

And given the speed of change in China is dizzying so quick, you're trying to do that whilst the market is so dynamic. So just interested in the concept of how you go about doing that?

Yes. So it's an important change. And while 1 level, 3 to 4 weeks, too much stock is not a dramatic number. It's the difference between having control of your distribution network, and therefore, the pricing of your products through that network so that everybody is seeing your products as profitable and therefore, behind them and not. And the other thing is it gives you freshness. So that's why it's really important that we get it right.

Now in terms of driving consumer pull. This is about capability uplift in the market. Now there are areas where we're doing a really good job. So for example, NAN, which is the Nestlé Infant Nutrition brand as opposed to Illuma, which is the Legacy Wise One. It's doing really well. It's consistently gaining share because we've absolutely got that consumer offering right.

And that consumer offering is a special diets or special formulas for babies that have allergies or specific intolerances, and we have the R&D and we're delivering on that. And because we're delivering on the consumer need that we've got really nice growth.

We need the same quality of consumer-led growth on the Illuma side and sharing the capabilities there is one of the ways that we will raise our game on consumer pull on Illuma. Another area where it's working well, and we need to learn from is in out-of-home, where back to your speed piece, I think we've cracked the speed piece and it's working well.

We're working with a customer that knows the consumer well. So in out-of-home, we are a big provider of the dairy products that go into Luckin coffee. For those of you that have been to China, Luckin is the really big coffee chain growing really fast and has a dizzying pace at which new products are launched, new -- 2 new products each week, and they're fascinating products. I mean last time I was there, I had a cheese cappuccino and a prune one.

Sounds delicious.

Actually, they were, genuinely, genuinely they're absolutely delicious. But there, we've got the R&D pace and the product development working really well, and we are delivering on what is a weekly innovation, ideation, innovation cycle with Luckin. So we know how to do it. What we need to do is build that capability across the organization, and that's around uplift of capabilities.

And that's exactly why we brought a great leader in across from the Philippines, who's been doing it there very successfully to lead the Chinese business and support with the uplifted team.

Can I ask you about the pricing rig dynamic?

Yes.

I think you said that most of the pricing is done in chocolate. Is there still more to do in coffee? And are you seeing actually new pockets of food price inflation emerging again? Some countries are starting to see it pop up again as a topic.

Consumer price inflation.

Yes.

Yes. So the 2 categories where we are seeing consumer prices move, and that's because of the commodity cost is a coffee and cocoa. In terms of where we are on that, we have, as we've said, largely taken the price that we need to take this year on confectionery. There's a little bit more to go, but not much.

And on coffee -- and by the way, that was 10% pricing. And on coffee, where we've taken about 5%. We've taken the majority of price, but there's a little bit more in the second half.

And the elasticities that you're seeing?

Yes, where we expected them to be. So it's worth just saying on elasticities. There's 2 elements to elasticity. There's the absolute price point and whether you go over a price -- sort of psychological price point for the consumer, but there's also elasticity vis-a-vis the competitor set.

So elasticities can be a bit distorted if you take price, but your competitor doesn't. And so you have a period until they do that it distorts things. I say that because I think we have led on pricing in both coffee and confectionery. And so generally, we go first. Actually, I'm aware that there's been quite a significant number of announcements around price increases more broadly by other players in confectionery in H2, which we won't be taking.

But largely, so confectionery, we're seeing what we expected to see. It's a little bit more price elastic than coffee. That's to be expected, but playing through. It's a bit more elastic in LatAm than it is in Europe, but where we thought it would be.

Coffee, performing well. Actually, we've been slightly positively surprised with the price elasticity on coffee. Coffee is a deep, deep habit, and I say that smiling knowing that it takes an awful lot for me to shift by coffee behavior.

And I think that is true for many people. We're seeing some sort of interesting things. So obviously, pricing has come up more on roast and ground just because there's more green coffee in it. And that's moved people a little bit into soluble, which is good. Pricing is less elastic on soluble and even less so on portion where that the pricing impacts also have been...

What about Nespresso because that's obviously a different cycle in terms of people don't buy it as often. Is there any kind of concern about some maybe delayed elasticity?

It's a good question. I mean people don't buy it as often. And while we see no evidence of that yet, we continue to watch it closely. But actually, Nespresso has been very -- we've taken our price increase as well and that's partly because we're investing behind our brands at the same time.

Historically, in Nestlé, for the last few years, when we've taken significant price increases, at the same time, we've been reducing marketing spend. I think the difference this year is we're increasing marketing spend where we are taking pricing, and I think that's helping us.

And on the 6 big bets on the innovation, obviously, it's quite a big change in terms of focusing bigger, bolder innovations. I think you want to build CHF 100 million platforms over multiyear. Can you give us maybe an update on how those big bets are doing? Any of them that you'd call out, any of that you're scaling more quickly? That would be really helpful.

Yes. So we've got 6, we said they'll reach CHF 100 million. We've already collectively got CHF 200 million in the first half, and we've got good momentum. I would say all of them are on track. We've got kind of 3 that are a little bit ahead, some more than others, 3 that are there or thereabouts, but usually, it's because we've been a little bit slower to execute because we wanted to get the proposition right rather than any kind of consumer response.

Where have we got really good performance? Fancy Feast, the pyramid cat food. And so this is one where it's all about scaling up manufacturing and actually, at the moment, we can sell more than we can make.

The Sinergity is the infant nutrition brand with 6 HMOs and probiotics, which together really build gut health for the infant and very discernible health benefits, is doing very well. And that sort of innovation, these are the ones -- the thinking behind big bets, which goes broader than these 6 actually, it's about really making sure that where we have a winning proposition that should work everywhere, we roll it out with pace.

Because as I've looked backwards on what's been the single biggest reason we've underperformed our innovation business cases, it's because we haven't launched the brand in the countries that we expected to launch in when we wrote it because when we got there, the parties have moved on. When you've got a winning proposition that is going to work in all countries, we should roll it out.

And that's what you see us doing, both around the ones we call big bets, but there are also the same level of focus and clarity at the zone level. So for example, KitKat Tablets in Europe, is going Europe-wide. So that sort of clarity is what we're driving clarity and focus.

Slightly surprised you didn't mention ice coffee as one of the big bets. I mean in terms of the rolling out quicker. I mean, it's a great product. And if you can -- can you maybe double-click on that? Where are we that liquid roast? And how many markets is it in? Is it doing what you want it to do? Can you go quicker?

Yes. No, no, it's doing what we want it to do, and it's a great product. It's interesting, if you just compare it with Sinergity and Fancy Feast for a minute, the consumer behavioral change is bigger because Fancy Feast you already feed your cat -- wet cat food, this is a different, more interesting better one, which the cat loves.

Same with infant formula. How to consume infant formula is completely described, it is a better one. Nescafé Espresso concentrate is a bit of a new concept. And so it takes a little bit longer to communicate to consumers what it is and how to consume it. So it will naturally be a slightly slower build, but it's building really nicely, and we've rolled it out.

I don't know exactly how many countries because it's changing by the day, but we're exactly where we want to be.

I'll ask a final one just on margins. I think -- I mean, you outperformed in the first half, 16.5%. I think you said the second half will be 100 basis points lower than the first half. So 15.5%. You still reiterated your full year margin guidance importantly. Can you maybe walk us through a little bit of that step down from H1 to H2? How much of that is tariffs? How much is, if you can, but give us buckets -- how much is just higher COGS and currency, that would be helpful?

Sure. So -- and again, maybe just to step back a bit, our margin guidance for the year was to be at or above 16%. And we gave that margin guidance before we've seen significant increase in commodity costs before tariffs happened, and before the U.S. dollar weakened. And I say that because a lot has changed. We're holding our guidance, and we're holding our guidance because we're doing 3 things.

We're driving efficiencies hard in the business. We have been a bit quicker to take pricing, and we worked very hard to mitigate the tariff impact through changing footprint, supply footprint, ingredients, but also making sure that we moved product into the U.S. ahead of tariffs. That has all benefited the first half.

Now as I look forward to the second half, actually, the big shift between the 2 is, yes, we have some bigger tariff impact. But the large shift really is the fact that the commodity cost because of the timing of our hedging are very much weighted to the second half. So we'll see that flow through to the second half.

But as I look forward to 2026, we've got cost savings, which will continue to come. You'll see us continue to act to improve our gross margin through innovation and pricing. You'll see us -- you'll also see that depending on how commodity prices play out, we should be in a slightly better commodity environment given how coffee and cocoa are moving and all of that will be allowing us to see a margin improvement.

I think we're in the buzzer, Anna, sadly. So I think we're going to have to cut it there. Thank you for your time. I'm going to figure out from, David, whether there's a breakout or not. Okay. No breakout. So thank you, Anna, for your time. Always appreciated your support at the conference. Thank you.

Thank you.

Good morning and welcome to Nestlé's Half-year 2025 Results Conference Call. I'm David Hancock, Head of Investor Relations, and I am joined today by Laurent Freixe, CEO; and Anna Manz, CFO. Before we, begin please take careful note of the disclaimer on Page 2 of our presentation.

So for the agenda today, after Laurent shares the key messages, Anna will take us through the results in detail, then Laurent will provide an update on our strategic progress. We will then open up for Q&A.

And with that, I will now hand over to Laurent.

Thank you, David, and good morning to all. We delivered a good performance in the first half of 2025, in a difficult environment. Thanks to the focus of our teams, we are continuing to execute our strategy and transform our business. Our growth foundations are improving and we are beginning to see the results. Looking ahead, we have maintained our guidance for 2025 despite increased headwinds. And we remain confident in delivering our medium-term guidance.

In the first half, organic growth reached 2.9%. This reflects broad-based sales growth across geographies and categories, with a slight improvement in Q2 compared to Q1. We delivered a solid UTOP margin, as we increased investment and faced COGS and ForEx headwinds. These results demonstrate our ability to manage short-term dynamics while staying focused on long-term value creation.

I will hand over to Anna to take you through the results in detail.

Thanks, Laurent, and good morning. Here are the key takeaways. We delivered broad-based organic growth. As expected, pricing accelerated and RIG slowed. UTOP margin was slightly better than our expectations, even though we stepped up growth investments and faced some headwinds from tariffs and FX. In the second half, our margins will be significantly lower due to these headwinds and the delayed impact of higher input costs. For the full year, we are maintaining our guidance on organic growth and UTOP margin. We delivered 2.9% organic sales growth in the first half, with RIG of 0.2% and pricing of 2.7%. Sales were negatively impacted by foreign exchange movements, especially in Q2, when the Swiss franc strengthened by 10% against the dollar, and similar amounts against other currencies.

Turning to sales growth. As expected, pricing accelerated and RIG has slowed during the half. Pricing improved across all our categories in the quarter. The largest increases were in confectionery and coffee in response to input cost inflation. Most of our price increases took place during Q1, so Q2 saw the full benefit. On RIG, there were two main drivers of the deceleration in Q2: Firstly, Greater China, which had a positive impact of 20 bps on group RIG in the first quarter, but a negative impact of 40 bps in the second quarter. At Q1, we said our growth in China had been driven by sell-in ahead of underlying consumption, and that we expected that to reverse, and in Q2, we have seen that reversal.

Secondly, we saw an impact from elasticities in response to pricing, particularly in confectionery. In coffee, we saw a different trend with lower elasticity and positive RIG in the first and second quarters despite more pricing. Going forward, we expect group RIG to improve over time as consumer behavior and the competitive environment adapts to higher prices.

Turning next to profitability. We delivered a 16.5% UTOP margin in the first half, down 90 basis points. Gross margin decreased by 60 basis points, and we stepped up advertising and marketing spend by 50 basis points. Distribution and admin costs were small positive. Let me get into a bit more detail. Generally, input cost inflation has a negative impact on our margins in the short term, as price negotiation cycles mean we can't price immediately and we can't always price to fully cover margins. However, over time, consumer-led innovation and further pricing sees our margins recover.

And you can see that on this slide. The spike in inflation in 2022 impacted all categories. Since then, we recovered margins across our categories, illustrated here by PetCare and food. But coffee and confectionery are below and that's as we manage a new wave of input cost inflation. The margins of coffee and confectionery will get worse before they get better, as commodity cost increases impact the P&L in the second half. Looking further forward, we expect gross margins in these categories to recover over time and that's as a result of the actions that we are taking. The pace of that recovery will depend on what happens with commodity prices.

Turning back to this year, gross margins declined 60 basis points in the first half against the same period last year. Forward cover partially delayed the increase in commodity costs hitting the P&L, and the impact of tariffs was small due to short-term mitigation efforts. In the second half, we will see a larger reduction in gross margin as the impact of commodity costs and tariffs increases. We said we would step up investment in our brands. Good progress in our brand value proposition has meant we have done this faster, and A&P reached 8.6% of sales in the first half.

Our ‘Fuel for Growth’ program is delivering efficiencies that's allowing us to achieve more consumer impact from our spend. We are on track to reach our planned increase in marketing intensity earlier than expected and at a lower cost. So given the efficiencies, we expect second half A&P as a percentage of sales to be similar to the first half. At the full year results, we said that we had secured over CHF 300 million of ‘Fuel for Growth’ savings for the year. In the first half, CHF 150 million of savings were recognized in the P&L. The balance, plus additional savings secured since our last update, means that we now have over CHF 350 million benefiting the P&L in the second half. So we are firmly on track to deliver our CHF 700 million target for the full year.

Putting all of those pieces together, UTOP margin was 16.5%. Despite an acceleration of investment in A&P and some headwinds from FX and tariffs, this was slightly better than our expectations. We landed pricing actions early and mix effects partially delayed the impact of cost inflation in the P&L. As we progress into H2, pricing will be more than offset by the increase in input costs, we will see an increased tariff impact, and at current exchange rates, FX will be a further headwind. So we expect the second half margin to be significantly below the first half. For the full year, we still expect our UTOP margin to be at or above 16%. And I'll come back to this when I talk about guidance.

Now let's look quickly at the performance of our segments in the quarter. In Zone AMS, I'll focus on North America. Here the consumer remains weak. Despite this, we delivered positive organic growth and RIG in both quarters. And we are making continued progress on market share.

Turning to AOA, growth was broad-based with the exception of Greater China. In the weak economic environment in China, we need to shift our model from driving distribution to driving consumer demand. This transition will be a headwind for up to a year, but it will strengthen our business for the medium term. And in Europe, we saw both broad-based growth and market share improvement. The margin dynamic I just described can be seen playing out within each of the zones, with some differences due to category exposure.

Turning to the globally managed businesses, In Nestlé Health Science, performance was mixed. Our VMS business was impacted by the discontinuation of some private label business and weaker performance in our mainstream brands. This was a drag on organic growth, but contributed to an improvement in UTOP margin. Nespresso delivered another quarter of solid growth led by broad-based pricing, while still maintaining positive RIG. Margin development was positive in the first half, thanks to pricing ahead of commodity increases, which impact later in Nespresso due to the longer supply chain.

Turning to our categories, powdered and liquid beverages, which is mainly coffee, grew strongly, led by positive price and RIG. The growth of the PetCare category has come down from a year ago, but is now stabilizing. A return to a more normal promotional environment contributed to the slowdown. Despite this we have maintained or grown market share.

I have talked about Health Science already. In Nutrition, performance was particularly impacted by Gerber in the US. Gerber is a brand with great heritage, but it has been losing some of its relevance with consumers. We are working to address this. Prepared dishes and cooking aids was impacted by challenges within the Frozen category. Despite this, we are seeing improved market share trends, particularly in frozen meals. Milk products and Ice cream organic growth was positive, with price-led growth in ambient dairy and positive RIG in coffee creamers.

In confectionery, we took double-digit pricing to offset commodity inflation. We are now seeing an elasticity impact, which appears in RIG. We expect this to settle as consumers and competitors adapt. And finally, in water, we saw broad based growth, particularly with Maison Perrier and Sanpellegrino brands.

Now let's look at what sits below UTOP. On most lines, the change year on year is very limited, but I will call out two factors. Net financing costs were slightly higher this period, reflecting a higher level of average net debt. The underlying tax rate was slightly lower than last year at 22%. This is consistent with our full year guidance.

On the drivers of EPS, I have already talked to operating profit, interest and tax. On share buyback, we completed the program in December, so there is still some benefit to EPS in H1 from the lower share count versus last year. However, this was more than offset by the significant adverse FX movement.

On free cash flow, just a reminder that this is typically seasonally weaker in the first half, with much stronger cash generation in H2. On top of this normal seasonality, there were three main elements impacting cash flow this year. EBITDA was lower, reflecting the margin reduction as we invest for growth, and the FX headwind. On working capital, we had a higher negative impact in the first half of this year, mainly reflecting a higher cost of inventory. And these were partly offset by a reduction in CapEx. As normal, net debt increased in the first half due to the payment of the dividend in April. Partially offsetting this, our net debt balance benefited by CHF 2.5 billion from the strengthening of the Swiss franc.

Turning finally to guidance. We are maintaining our full year guidance despite increased headwinds since the beginning of this year. Organic sales growth is expected to improve compared to 2024, strengthening as we continue to deliver on our growth plans. The UTOP margin is expected to be at or above 16% as we invest for growth. This includes the increased negative impact from tariffs currently in place and today's foreign exchange rates.

While we are continuing to execute with focus, there is obviously macroeconomic and consumer uncertainty. As we navigate these headwinds, I want to be clear that we won't compromise on investing for the medium term.

And with that, I will hand back to Laurent to discuss our strategic progress.

Thanks, Anna. We have clearly set out our strategy: To accelerate performance and to transform for the future. To drive growth, we are accelerating our categories and improving our market share. We are doing that through implementing the Nestlé Virtuous Circle, delivering efficiencies and investing to drive profitable growth. We are also simplifying our organization, and digitally transforming our end-to-end processes. In doing this, we are leveraging Nestlé's scale, single ERP core, our enterprise data foundations, while expanding our AI platforms. This will further support us in improving execution, allowing us to run the business with greater agility and precision.

As I will show on the next few slides, we are implementing this strategy and it is bringing results. Driving growth starts with generating the fuel for investment. We are on track for the CHF 700 million in 2025 in our ‘Fuel for Growth’ program. I told you that procurement was the most important source of efficiencies. In the first half, we generated hard savings from rolling out AI tools to review invoices from increased use of e-auctions and from deploying global specifications catalogues.

Looking ahead to the second half of the year and beyond, we will drive further procurement gains and start to deliver savings from operational efficiencies and improvements in commercial investments. Investing this fuel for growth is not just about spending more on marketing. We are reinforcing our value proposition across four pillars: Unrivalled product superiority, unbeatable value, unmissable visibility, and unforgettable brand communications.

Let me go through two examples: On product superiority, we are stepping up our focus on ensuring we have the best tasting products. We are bringing back discipline in how we test them with consumers. Across 2022 to 2024, we tested 60/40 taste preference in less than a quarter of our top-selling products that account for half of our sales. By the end of this year, we will have tested 2/3 of these products, reaching 100% by this time next year. And of course, if we find products where we do not have taste preference, we will be acting quickly to correct that.

To achieve unmissable visibility, we are enhancing product performance across online channels. The digital shelf score tracks availability, discoverability, and attractiveness, three critical dimensions of execution, enabling faster interventions and more consistent retail performance. Finally, all four pillars are being enabled and scaled through the use of data and technology, ensuring we drive precision, speed, and measurable impact across the value chain.

We have talked about how we will drive growth through accelerating our categories and improving our market share, and the different ways we are doing this. With our six global big bets, we are following a “fewer, bigger, better” approach, concentrating our resources behind a small number of innovations and rolling them out at scale much faster. In the past, we would typically take an innovation to a handful of markets over the first couple of years. This has changed. Across our six big bets, we had 65 market launches in the first half of this year. This is driving impact. In the first half of 2025, we have reached CHF 200 million of sales with these six big bets.

In parallel, we have taken targeted actions to improve underperforming businesses focused around gaps in our 4U’s value proposition. The impact can be seen in the improvement of our market share trends. The aggregate growth gap to market for the 18 key underperforming business cells has reduced by 1/3, with most of the business cells improving their performance versus category. Take Coffee-mate creamers in the U.S. as an example. We resolved capacity issues, adjusted pricing, increased innovation, and reset shelves. Distribution is up, consumer engagement is back, and market share is improving. This is our value proposition in action, and it’s a blueprint we are applying across our business.

Greater China is our second largest market after the U.S., and we have a great business there. With a strong local presence, it continues to offer significant long-term potential. In recent years, we have grown the business through expanding distribution. The model has become challenged in a weaker economic environment. To deliver sustainable growth, we need a different approach. One of the first changes I made to the organization when I took over as CEO was to bring Greater China back under Zone AOA, to drive greater alignment and strengthen governance. Following that move, we have also changed the leadership of the Greater China business.

In March this year, I visited China to meet with our teams, our customers, and our partners. The visit reaffirmed my belief that speed and agility are critical to win in this market. The new team will focus on driving growth through delivering our complete value proposition. We are confident in our ability to rebuild momentum and capture the potential of the market.

Nestlé Health Sciences has built a leading position with a diverse portfolio of brands across VMS, Active Nutrition and Medical Nutrition. VMS is an attractive category with clear growth drivers. To us, the highest potential is at the premium end. Going forward, in VMS, we will focus on our global premium brands such as Garden of Life, Solgar and Pure Encapsulations, where our capabilities in science, innovation and brand-building give us a distinct competitive edge.

We have launched a strategic review of our mainstream and value VMS brands, including Nature's Bounty, Osteo Bi-Flex, Puritan's Pride, and U.S. private label, which may result in the divestment of these brands. All this is consistent with our approach across the group of focus and simplification, and it will help us to accelerate our performance in this important, high potential category.

So in summary, we delivered a good performance in the half, and our full year guidance is maintained despite increased headwinds. We have a clear strategy and we are focused on execution. We are taking the right actions today to strengthen our growth foundations for the future. And we remain confident in delivering our medium-term ambition.

And now let me hand over to David for the Q&A.

Thank you, Laurent. So now let's move to the Q&A session. [Operator Instructions]. We will take our first question from Guillaume Delmas from UBS.

Firstly, some very quick housekeeping. What is your guidance for COGS inflation for this year? Is it still very high single digits? And can you tell us how much it was in the first half of the year? And likewise, any quantification for the tariffs impact this year?

And then my 2 questions. So first one on pricing. Are you satisfied with your current prices? Or is there a scope or maybe even a need to implement additional pricing actions over the coming months? And is it still only about coffee and confectionery? Or are you starting also to see some pricing opportunities in other categories? I'm thinking in particular, PetCare, where we've had 4 consecutive quarters now of negative pricing.

And then my second question, going back to Greater China. I mean, curious to hear what prompted you, Laurent, to do this, what seems at least a strategy reset. And I guess, why, at least from the outside, it seems to be quite abrupt, because it's not something that was flagged at Q1 trading update stage. So why acting so decisively now? And should we expect a stronger drag at least at the organic sales growth and RIG levels over the coming quarters from China as you are in the process of fixing and adapting the business?

Thanks, Guillaume. And let me start with that last question, and then I will hand over to Anna for the COGS piece. China is a very, very important market for us, second largest. And since I took over the CEO role, I've taken action to bring back China into the broader Nestlé organization, having China as part of Zone AOA, getting the attention, the support and the focus it requires. So that has been the first move.

The second move has been and just happening right now, a new leadership appointed for a new phase of the development in China. And with the new leadership in place and with the oversight of Zone AOA, we realized that our model was probably too much focused on building up distribution and commercially driven. And maybe that's, by the way, the way China works primarily into a period where -- and very much like the government agenda, by the way, to support the consumption, to support the demand, the need to rebalance the model.

It's not to shift from one side to the other, but rebalance the model and having more investment in the consumer demand, in the consumer pool. So this is what's happening. It's an adjustment. This will have an impact in the next quarters, but controlled. And I'm confident that we will see a strong performance from China once adjustment has been made. We've got the right leadership. We've got the right organization. We've got the right structure. We've got the right brands. We've got the scale and the determination to grow China, and the market share position is in the right place. So I think it's more -- it's to be read more as an adjustment that we had to make and which we are making right now.

Maybe one word on the pricing. Are we satisfied with the pricing? Well, we faced an unprecedented scenario that 2 of our major commodities have reached historical highs. And we are not talking 10%, 20% increase, we are talking double, triple historical levels. So we obviously had to take action. We had to take action, being the leaders in the industry, quickly. It's a good idea to recover the cost anyway, but also to send a signal to the market. So I'm happy, satisfied with the way this has been implemented as we managed, especially in Europe, to do that without major hiccups and the pricing is getting implemented. Will we need a bit more? We might need a little bit more, but most of it is already done and will be seen reflected in the next quarters.

And let me hand over now to Anna for the COGS part.

Sure. And just before I turn to COGS, just to build a little bit on China, just a little bit of market context maybe. The overall market is quite flat given consumer demand is depressed, and it's a deflationary environment. So you've got a market environment before you start that is negative. And then what we've seen is some stock correction on top. And it's this underlying negative market environment that's going to take us a while to build the -- or up to a year to build the consumer pull to really outperform that underlying negative environment.

Now on COGS. So we said at the full year that our COGS guidance was high single digit. And that, on top of that, we had then the benefit of efficiencies that would offset that, the CHF 1 billion plus that François has always talked about delivering year-on-year plus the benefit of fuel for growth. And that was how we framed our COGS guidance at that time. That is actually unchanged for the full year.

In the first half, we saw slightly lower COGS inflation. That's really about the timing of these commodity costs coming through. We saw a bit of an FX benefit against that, but that's really a phasing issue. Full year, you'll still see the underlying input cost inflation coming through. And you'll see those efficiencies that we're driving that will offset it.

And on tariffs, small impact in H1, and that's really because we worked hard to mitigate the impact. As I look at the full year, I think about tariffs as a couple of tens of basis points impact for the group.

We'll take our next question from Victoria Petrova from Bank of America.

My first question is a continuation of Guillaume's one. On A&P, if I interpreted your comments correctly, you are talking about kind of flat A&P as a percent of sales at 8.6%. And previously, my understanding was that you expect it to kind of to go to 9% of sales towards the end of the year and hence, A&P as a percent of sales to be higher in the second half of the year. Could you comment on that? Maybe I just misinterpreted that.

And my second question, looking outside of 2 very inflationary categories, which are coffee and confectionery, and also putting aside VMS and China, in other categories, what we are seeing right now is underlying category growth significantly below the comments you provided during your Capital Markets Day or investor seminar in November. When do you think there is a path towards mid-single-digit 3% to 4% underlying category growth in such categories as, for example, pet care or prepared dishes and cooking aids? Or should we think about it differently given the current market environment, what you are seeing on the consumer side of things?

Thank you, Victoria. On the A&P, I just would like to highlight that the strategy is at play. It works. We are achieving efficiencies end-to-end across our Fuel for Growth program and have started to redeploy strongly, 50 basis points more than last year in a challenging market environment with inflationary pressures. So we are doing what we said we would do. And we see the impact. We had Q2 at 3%. So we were talking 3% to 5%, but we are at 3% in Q2 despite the hiccup in China. And while we were comparing with the strongest quarter last year, so I think in relative terms, the momentum is there, Q2 better than Q1, better than Q4, and strategy is at play and the strategy works.

On the investments for H2, we are determined to keep investing. This is part of the model. We just flagged that as we are getting increasingly efficient, effective through the way we invest, the investment will be there as planned, just reflecting in percentage of sales might be more around the 8.6% for the full year than maybe the 9% everyone was -- we are flagging towards the end of the period. But in the spirit and the quality and the quantity of investment, that will be very much in line with what we indicated. So it's more a reflection of the fact that we are getting increasingly effective in the way we spend and the way we invest. Investments will be there, and they are showing impact in the way the brands are reacting and our capacity to improve our market share position.

On the underlying category growth, we see, interestingly enough, a bit of improvement in terms of the category growth on average. So it's not that we are distant from what we indicated at the Capital Markets Day. We are pretty much in line. And the good news is that we are catching up and we are improving our market share position month after month as the strategy works and as our reinvestment in the core, investments in the growth platforms, investment in innovation big bets, and our efforts to improve our underperformance is paying off. So that's what I would like to highlight in broad terms, and Anna can complement in more detail.

Not much to add. I mean maybe just to clarify on the A&P point. What we'd said to you at the full year was that we would be ramping up through the year to be at 9% by the end of the year, and that meant on average, we'd be about 50 basis points more, so about 8.6% for the year. So actually, the fact that we're already at 8.6% at H1 is we're investing faster than we thought we were going to be going into this year. And that's because we've got plans that we feel confident of. So I think that's really good. We're still ramping up to the 9% in intensity terms. So the activity is still ramping up. But because we're starting to see those efficiencies flow through from Fuel for Growth, the actual reported number for the second half will be similar to the first, because you've got sort of 30 basis points or so of efficiencies coming from Fuel for Growth. So a good progress, actually, I think, on the A&P point. I think that's the only build I've got.

The next question comes from Warren Ackerman at Barclays.

I've also got one housekeeping and 2 questions. The housekeeping one, there's lots of market share numbers thrown out in the deck today. But can you tell us what percentage of your portfolio globally is holding or winning share? That's the housekeeping.

And then my 2 questions are, firstly, for Anna. On free cash flow, Anna, it's kind of halved in the first half to around CHF 2 billion working capital build. I hear your point about its H2 phase, but it's hard not to conclude it's pretty poor in H1, and it's certainly not helping your deleveraging when your balance sheet is already stretched. I mean the free cash flow is not going to cover the dividend, which obviously long term is not sustainable. So can you may be like just dive into free cash flow a little bit? What's happening to improve the fundamental free cash flow of the company? And could you maybe give us an idea of what the free cash flow could be for this year? And any kind of expectations on some of the key drivers of working capital and CapEx would be useful.

And then the second question is really on the VMS strategic review, maybe for Laurent. What is the revenue weight of the nonstrategic brands we're talking about? And maybe could you tell us what the EBIT contribution and what the book value of the business is? I'm just trying to figure out like how material is this? I mean you've obviously spent $6 billion buying Bountiful. It looks like you're reversing pretty much all of that except for Solgar. And are you looking at a straight divestment? Or would you be open to maybe a partnership or any other kind of imaginative solutions?

Warren, lots of questions in one or 2. On the market shares, it's great to see that we have significantly improved our position in the last 1 year, recovered a large part of the gap that we had to our categories. And we see that through the growth platform. We see that also, in a very spectacular way, on the underperformance. Out of the 18, we got already 2 in green territory on an MAT basis on a moving annual basis, which are biscuits Brazil and soluble coffee Europe. So those are big chunks and quite competitive business sales, and we got also Milo in ASEAN moving to also green territory. And a large part of those business sales are on an improving path. How many of the business sales are stable or improving? That's a bit more than half. So things are really moving in the right direction from a market share standpoint.

On the free cash flow, I will let Anna answer, but I will maybe continue with the VMS piece. So what we will do is really focus on where we believe is the space where we can win and where we can create value. And that's essentially the premium side of it with Garden of Life, with Solgar, with Pure Encapsulations, all of this in Nestlé Health Science territory, which is critical, which is strategic for us. When you think of healthy aging, healthy longevity, when you think of weight management, affordable nutrition, women's health, there are huge opportunities going forward. Our biggest play there is Nestlé Health Science. So that remains absolutely core. We just want to make sure that we focus, and focus is the name of the game, focus on where we can win, where we can create value. The size of the business, which will be in the review, is a bit more than CHF 1 billion, CHF 1.2 billion at low single-digit profit. And on the free cash flow?

Sure. So free cash flow in H1, as you say, is lower. Now seasonally, H1 is always a lower half for us because of the timing of both the seasonality of our business and also when our dividend payment occurs. That said, you're right, it is lower. And the drivers of that is, firstly, as you know, we've got a lower margin and some FX headwinds in the first half. Secondly, working capital has been an outflow, and I'll come back to that. And then thirdly, we've had a benefit from the reduced CapEx investment as we've come off of the big step-up investment that we did post COVID. So really, the thing that has flattened our cash flow or reduced our cash flow a little bit in the first half is working capital.

A couple of things going on there. Commodity costs are feeding through to working capital. And so that's why you see it a little bit higher in the first half. And also, we've taken some actions to manage tariffs. That's one of the reasons that you're seeing a small impact from tariffs in the first half, and you'll see that work through. As you know, I'm very focused on working capital, and we are, as a group, really managing our cash flow, but working capital is one of the big levers of that. So you'll see us working to reduce consistently the volumes of our inventory and really tackle that working capital number, although commodity prices a little bit will be what they will be.

And in terms of the full year cash flow, I think we said it when we guided at the beginning of the year that cash flow would be a little bit lower this year because we wouldn't see the levels of working capital improvement that we saw previously, but still on track to deliver good cash flow this year and a little bit subject to commodity movements and how they move around.

Great. Thank you, Warren. The next question comes from Callum Elliott at Bernstein.

Firstly, I wanted to circle back on China, if that's okay. So really, what I want to focus on is what are you actually doing. You talked a little bit about demand generation. You also talked about strengthening the value proposition. You spoke to Guillaume about strengthening the consumer pull. But you've highlighted in the press release that you expect this to hurt growth over the next 12 months. So my question is, how does strengthening the consumer pull impact growth in a negative way? What are you actually going to do? Are you talking about price cuts? Are you talking about exiting categories? Are you talking about exiting channels given all the comments about distribution? Just looking for a little bit more color on what you're actually doing in China.

And then my second question is on the really fascinating chart that you provided on gross margin by category, where I think coffee really stands out as being quite challenging for 3 or 4 years now on that chart, which is especially interesting in the context of the very good elasticity performance that we've seen in the first half of the year on coffee. So my question is, do you think there are lessons for you in that positive elasticity and whether you could maybe be more aggressive on pricing in coffee going forward?

Yes. On the first question on China, to give you the full picture, as we had a model more focused on building up distribution, and in the context that Anna described of a slowing down of the demand, and in a deflationary environment we ended up with, and that's our assessment, as we had the new leadership, that we had a bit too much stock in the trade. Not massive, but a little bit too much, and that has an impact on the way we manage pricing, promotional activities and freshness. So hence, the willingness to rebalance.

Of course, distribution is very, very important in a China context, but we need -- and again, that's silver lining in China, we need to activate more the consumer side. We need more consumer pull. We need to strengthen our value propositions. And this is what we have started to do, normalizing also the levels of stocks in the trade and moving from a push model to a pull model. That's, to make it simple, what we'll be doing. Nothing dramatic, but an adjustment that is necessary and that will position us well to win in the China context for the long term. On the pricing?

Coffee. So we've seen really good elasticity on coffee, because it's deeply established in consumer behavior. And you see us taking price at the moment and you see RIG momentum continuing. And I think that is very comforting. I think a couple of things on coffee. Looking forward, you'll see us continue to do what we've done actually across all of the other categories, which is to innovate into those right consumer price points at the right margin levels and continue to take price appropriately whilst maintaining medium-term consumer penetration. And so you'll see us do that. But also if coffee commodity prices stay where they are today, we'll, of course, get a bit of a benefit in margin terms as we move through 2026, this is not a 2025 benefit, associated with those some of those lower input costs coming through.

The next question comes from Olivier Nicolai at Goldman Sachs.

Just a couple of questions on my side, no housekeeping. Could you please give us an update on the pet food trends globally? And then more specifically for the U.S., if you are concerned about the increased competition in U.S. pet food and the lack of pricing in the category due to the lack of input cost inflation? That's the first question.

Yes. We strongly believe in the fundamentals of the category. We are still in adjustment mode after such a spike in consumption, that everyone forgets, during the COVID and post-COVID period, which is in the base. This is what we compare with today. And the category is still growing, though at a slower pace. But if you look at the long-term fundamentals, U.S. and way beyond U.S., there is a massive potential to grow. Population is aging. There are less babies, unfortunately, and more pets, fortunately, for pet food business. Population globally is becoming more urban, which goes also well with pet adoption. We see, by the way, pet adoption continuing.

Maybe this is the multi-pet ownership, which is a little bit under pressure in the U.S. And the opportunity to premiumize through science-based nutrition offering is there. You know that we are rolling out, for instance, our LiveClear, the cat allergy offering that we got under Pro Plan and now Purina ONE, just one example of the opportunity that we've got going forward to increase pet adoption and grow the category. And calorific coverage is a massive opportunity in Asia, in LatAm, in most markets actually, including the U.S., where it's around 80%. So still some potential to grow.

So the fundamentals, we should never forget the fundamentals. The fundamentals are extremely solid. And yes, you're right, there is little pricing because there is little input cost inflation. So interestingly enough, coffee and cocoa much impacted, but PetCare very little impacted, if any impact. And as we got more capacity like the rest of the industry, by the way, we can promote again, and that has an impact also on the pricing dynamics. But fundamentally, the category is healthy, and you will see the category returning to healthy levels of growth. If there is so much interest in the category, so many investments, it's because it's fundamentally healthy, offers tremendous potential for growth going forward.

And just a quick question, slightly perhaps more personal, but you celebrated your birthday recently. What kind of reassurance you could give to investors who want you to be CEO of Nestlé for the long term and well beyond 65?

Nutrition, you mean?

No, on your age.

Look, it's a question that has been coming a few times. It's a question I had with the Board. Being a Board member, there is no limit, 65 is not a limit, and provided the Board wants me to stay, which seems to be the case, and if conditions permit it, I'm there for the medium to long term.

The next question comes from Jeremy Fialko from HSBC.

So just a couple of questions from me. So I think the first thing would be very useful is just to get some clarity on the moving parts for RIG in the second half and the extent to which you can be sort of confident that, that will be positive in the second half? And then the second thing, I know it's a little bit far out, but just thinking on 2026 margins. Clearly, you're sort of 16.5% in H1. You're going to be somewhere in the upper part of 15% in H2. So that seems to be implying some sort of a drag as we get into next year. Or actually, do you think there is scope for the margins to sort of sequentially improve from here, or that will be a bit of a dare? Then the sort of the cost and the pricing will get more relevant as we get into the early part of next year. But I think it's just an interesting question given the sort of dynamics that you're painting today.

Let me start, and I will hand over to Anna. All our strategy is geared towards driving growth in all its components and RIG is part of it. Our investment in the core business, our investment in the growth platforms, our drive of the 6 big bets that are off to a good start is exactly geared towards that. And then we operate in the context, which is the context. But every element of our strategy is focused towards that, to gain the consumer, to drive the demand, increase penetration, increase intensity.

And by the way, the categories are responding. The resiliency of coffee is very, very impressive. And yes, we got some elasticity in confectionery, but as expected and as the rest of the industry. So I think it's quite remarkable. And especially if you take into account the comps on the one hand and the impact of China to see the momentum in the organic growth in all its components. But let me hand over to Anna for the rest of the question.

Sure. So we don't guide on RIG, but just some moving parts as you think about H1 and H2. As we look forward to the second half, of course, we would expect some of the consumer reaction associated with the confectionery price increases to settle down. So in a number of our big markets, we moved ahead of our competitors. They've then followed. The consumer has to react to that new pricing. And all of that just takes some weeks and months just to play through. So we should see that come through in the second half. Secondly, we've just been talking about pet care. We're now lapping the more normal promo environment. And we have the capacity coming online now that allows us to bring innovation back into this category, which drives RIG growth. So that is helpful to us.

And there's also a piece around comps. We are lapping some quite high comps in Q2, less so as we move into the second half. So those are just some of the moving pieces, as well as all of those actions that Laurent has laid out that we're really driving to focus on improving our share position, driving those big bets and really growing our categories. So we would be looking to drive RIG over the medium term.

In terms of 2026 margins, again, it's too early to get into 2026 margins, but there are a few moving parts that should shape how you think about it. Firstly, as you see, we're perpetually taking action to improve our margins through innovating into the consumer need at the right margin level and through adjusting our prices where appropriate against that consumer opportunity. And that will continue to help us from a margin perspective.

Now if you look at where commodity costs are today, particularly on green coffee and a little bit on cocoa, they've come down. And that, if they stay at this level, will start to give us a benefit as we move through 2026. Of course, we don't know what other commodity costs will do yet. But just as I look at where we are today, that should be helpful as we move into 2026. And of course, you see the work that we're doing on cost efficiency and what we've laid out with Fuel for Growth, there is absolutely no letup there. And we're very focused on driving those efficiencies again, which should be helpful to margin.

The next question comes from Celine Pannuti from JPMorgan.

So first one, you mentioned there was an increasing macro headwind you were flagging. Can you go through maybe the key regions where you are seeing these increased headwinds? That's my first question.

Yes. So maybe talking about the consumer sentiment, because I think this is what matters the most. And it's not completely new. We come from '24 where we had already a subdued consumer environment. So it's more of the same with a bit more uncertainties in North America. We see, of course, the ripple effect on LatAm, which is much connected to it. And we see remittances that for the first time in years have declined, and this is pure consumption.

We see Europe surprisingly resilient, although we got consumers seeking value and looking for promotions logically given the context. And when it comes to Asia to focus maybe on the 2 main geographies, we see a bit better India and China, which is a bit under pressure when it comes to consumption for the reasons that Anna flagged earlier.

And then maybe coming back to North America. Can you talk about your market share position in key categories? Obviously, you're doing quite well in creamers, but can you talk about the competitive performance there?

Yes. I think globally speaking, the momentum is back and performance is improving. You saw the creamers. We got solid positions in pet care. Coffee is also in a good place. We see improvement in the food part of the business, where we got some challenges is the Nutrition part with Gerber, but we are on top of it, addressing it with an end-to-end perspective. So globally speaking, I would say, we got a much more competitive North America in most of its components, maybe exception would be the Nutrition piece.

And just on North America, are you expecting more? Are you seeing big retailers? How do you feel about the stock levels and how you think that the retailer behavior is evolving?

Stock level is okay. We would have flagged if we would have any issue there. And on the retail environment, super competitive. Obviously, we see fragmentation of the channels. We see the dynamic behind e-commerce, and we are, of course, on top of it. So that drives retailers' behaviors. They are demanding. They are aggressive and competitive, but we play well in that context. And from recent discussions with key ones, there is real willingness to partner with Nestlé to accelerate growth. Those are fresh from the oven discussion that we had with some of the key ones. So that's the good news that there is the shared vision that more is possible and that working together, we can achieve more.

And in Q1, the only area where we flagged that we sold a little bit more was Nespresso. And we haven't seen that unwind, because there's just so much good demand for the Nespresso brand. So we did flag that as an area where we thought we might see some stock reduction in Q2. We didn't. And that's due to the great momentum that we've got in the brand at the moment.

We have time for one last question, which we will take from David Hayes at Jefferies.

Yes, so 2 from us. Firstly, just on the margin guidance. I know before you talked about direct impacts of tariffs, that has been dropped as wording. So is that just a reference to FX or the other indirect tariff impacts that are still not included in the guidance? Or is that now fully taking into account all factors as you guide today? And then secondly, just coming back to the free cash flow. From a working capital perspective, reverse factoring or vendor financing was up CHF 1.5 billion, I think, last year. Is that something that you've still got capacity to continue to increase to help working capital? Or is that actually something which maybe is slightly coming down because of the big increase that you saw during 2024 to help working capital metrics?

So on the guidance wording, so at Q1, we talked about the direct impact of tariffs, meaning the tariffs that were hitting us as opposed to FX and any potential consumer slowdown that could possibly come as a result of a changed economic environment because of tariffs. So what we've guided on today, to be super clear is, again, the FX that we see today, so current sort of spot prices, and the tariffs that are currently enacted. What we're not guiding on because we don't know what will happen in the future is any future change in tariffs or frankly, any change in consumer environment. So that's how we think about guidance.

And in terms of cash flow, the big opportunity for us is managing the group better, getting much tighter around the amount of stock that we have and where we have it as we manage our global supply chain. And I'm very focused on that because that is not just about cash. I mean it is about cash, but it's also about freshness, agility and ability to deliver for the customer. So that's my #1 focus. We do, at the edge, use some factoring and vendor financing. But in the overall context of the group, it's relatively small and isn't materially changing.

Thank you, David. Thank you, everyone. That brings today's call to a close. Thanks for your interest and your questions. We look forward to meeting with many of you over the coming weeks. Wish you a good summer, and we'll hear you again at the Q3 call in October, if not before that. Many thanks.