ICO World Coffee Conference

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    ICO World Coffee Conference


    A Global Brand 'Opening Up' New
     and Increasing Coffee Demand
                 Presented by
               Gordon Gillett
      Senior Vice President Nestec Ltd
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                                      World Coffee Consumption (Mn's Bags and Billions
                                                         of Cups)
                                110                                                                    800
                                105
                                                                                                       750
                                100
       Millions of 60 Kg Bags




                                                                                                       700




                                                                                                             Billions of Cups
                                95
                                90                                                                     650
                                85
                                                                                                       600
                                80
                                                                                                       550
                                75
                                70                                                                     500
                                      1980 1990 2000         1993 1994 1995 1996 1997 1998 1999 2000


                                                       Millions of Bags     Billions of Cups


    • 2000 105.5 Mn bags = 760 Bn Cups
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                                               % Change in Coffee Demand (yr-yr) and Real Price Index
                                                             Long Term Average 1.5%
                           15.00                                                                                                                                                                                                       250.0


                           10.00
                                                                                                                                                                                                                                       200.0
      % Change in Demand




                            5.00
                                                                                                                                                                                                                                       150.0




                                                                                                                                                                                                                                               Price Index
                            0.00    6 6 /6 7   6 8 /6 9   7 0 /7 1   7 2 /7 3   7 4 /7 5   7 6 /7 7   7 8 /7 9   8 0 /8 1   8 2 /8 3   8 4 /8 5   86/87   8 8 /8 9   9 0 /9 1   9 2 / 93   9 4 /9 5   9 6 /9 7   9 8 / 99   0 0 /0 1


                                                                                                                                                                                                                                       100.0
                            -5.00

                                                                                                                                                                                                                                       50.0
                           -10.00                                    Annual % Change                                                   Historical Average
                                                                     Real Coffee Price Index
                           -15.00                                                                                                                                                                                                      0.0




    • 1-2% Long Term Growth
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• Nestlé
    – 1980 Green Usage = 6.5m bags
    – 2000 Green Usage = 12.2m bags


• World
    – 1980 Green Usage = 80m bags
                                     +32%
    – 2000 Green Usage = 105.5m bags
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    Roast and Ground 69%, Soluble 29% and Ready to Drink (RTD) 2%

                      Consumption By Location
               100

                80

                60
           %




                40

                20

                0
                     Soluble       R&G          RTD         Total

                      In Home (Retail)   Out of Home (Food Service)


• In-Home 72% and Out of Home 28%
6   World Coffee Market % Volume Growth
                (1990-1999)
                      R&G    Soluble   Total
      Prod/Emerging    24       47      30
      E Europe         3       417      70
      Tea Culture      17       -3       1
      N America        -3      -24      -8
      Cont Europe      -4       13      -1
      Total            6        23      10

• Soluble in Producing/Emerging Markets and
  Eastern Europe is leading the way.
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                     1980                                           2000

                                      28%         30%                                           34%
    35%



                                             4%

                    25%                 8%
                                                    17%                                 9%
                                                                          10%

    Prod/Emerging   E Europe      T ea Culture
                                                   Prod/Emerging   E Europe      T ea Culture
    N America       Cont Europe
                                                   N America       Cont Europe




• Producing/Emerging Markets now the
  largest share
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            U.K
            USA
            Japan
            Russia
            Mexico
            South Africa
            Philippines
            France
            South Korea
            Germany


• Top 10 Account for 60% of Sales
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                                              Green Coffee Prices and UK Retail Soluble Prices(Adjusted for Inflation)
                                     160                                                                                                                                    250.00


                                     150




                                                                                                                                                                                     Composite Coffee Price (c/lb)
                                                                                                                                                                            200.00
     UK Retail Soluble Price Index




                                     140


                                     130
                                                                                                                                                                            150.00

                                     120

                                                                                                                                                                            100.00
                                     110


                                     100
                                                                                                                                                                            50.00

                                         90


                                         80                                                                                                                                 0.00
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                                                       UK Retail Coffee Price Index (Real Terms)                                        Composite Coffee Price (c/lb)



• Lower Retail Prices Follow the Green Decline
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                                   Coffee Consumption and Income Per Capita
                                         (World Average 1kg pc, $6,800)
                     16.0


                     14.0
                                                                      Finland

                     12.0


                     10.0
     Coffee Kg p.c




                      8.0


                      6.0
                                             World
                      4.0                                                                    USA


                      2.0


                      0.0
                            0   5'000   10'000   15'000      20'000        25'000   30'000   35'000   40'000

                                                          Income $ p.c



• World p.c Consumption room for Growth
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• The Mature Markets
     – Opening Up the Young Consumer
     – UK
• Eastern Europe
     – Opening up Accessibility
     – Russia
• Producing and Emerging Markets
     – Opening Up Opportunity
     – Philippines to China
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• Appealing to the Younger Generation in the
  UK
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• Increasing Availability in Russia
14




 • Affordability and Convenience for China
   and the Far East
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                     (Mil 60 KgBags)
     Region/Group             2000     2005
     Consumers
     N & S America            22.2     23.0
     W Europe                 37.0     38.0
     E Europe                 7.8      10.0
     Asia/Oceania             9.8      12.0
     Africa                   3.3      3.5
     Total                    80.4     86.5
     Producers                25.1     28.5
     World                    105.5    115.0

• World Demand at least 115m bags in 2005