HAAGEN DAZS
CSR REPORT
2011
CONTENTS
CEO’S MESSAGE 02. BEE INITIATIVE 07. GLOBAL IMPACT 11. PEOPLE 17. OUR PRODUCTS 23. PERFORMANCE 27.
OUR MISSION 01.
Fellow shareholders, Recent years have been characterized by a whole host of events, ranging from the dramatic to the unprecedented. As one would expect, headlines have tended to focus on the disruptive, the shocking and the negative. The reality is more balanced. Of course there are new challenges, but there are also new opportunities. What is different today is the speed and unpredictability of change, whether new challenges or new opportunities. We think of this as the New Reality. The New Reality is characterized by political upheavals, economic uncertainty, lackluster growth in developed markets, high levels of volatility in commodity, currency and stock markets‌ but also by dynamic growth in emerging markets, increasing affluence, step changes in technology and digital communication, new markets and new ways to reach consumers and, indeed, by increasing numbers of consumers. More today than ever, if companies are to succeed, they need to understand the changing context in which they are operating. This context can be very different in different parts of the world, which we believe gives decentralised organizations such as ours a competitive edge. Companies also need a concise strategy, firm values and aligned principles. Together, these create a framework that enables them to be accountable, aligned, fast and entrepreneurial wherever they operate. NestlÊ has this framework in the form of its strategic road map, which we have discussed with you over the last few years. We have highlighted some aspects of the road map later in this report. Strategic initiatives included the creation of NestlÊ Health Science, two major partnerships in China, and significant investments in Russia, India and many African and Latin American countries. Also, we have continued to invest in Western Europe and North America for increased capacity to support winning innovations in categories such as PetCare, Soluble coffee and Culinary.
02. HAAGEN-DAZS CSR
Nestlé Health Science began operations on 1 January 2011 as a separate company within Nestlé to pioneer a new market between food and pharmaceuticals. It is aiming to develop science-based personalized nutrition solutions to chronic medical conditions. Alongside Nestlé Health Science, we have created the Nestlé Institute of Health Sciences, headquartered at the Swiss Federal Institute of Technology (EPFL) in Lausanne, to spearhead biomedical research into health and disease as influenced by genetics, metabolism and environment, with the goal of translating this knowledge into personalized sciencebased nutrition. In only its first year Nestlé Health Science, with annualized sales close to CHF 2 billion, has already made three investments. The first, the acquisition of Prometheus Laboratories Inc., Took it into diagnostics and the therapeutic gastrointestinal and oncology business. One responsibility of leadership is to be a pioneer. It is our intention that through the creation of these two organizations we can contribute to addressing the global issues around chronic diseases and spiralling healthcare costs from the perspective of nutritional science and personalized nutritional solutions. Following the creation of Nestlé Health Science, the Nestlé approach to Nutrition, Health and Wellness can be summarized as having three elements: to pioneer ways to address critical illness through personalized nutritional solutions (Nestlé Health Science), to address consumers’ specific nutritional needs (through Nestlé Nutrition) and to offer consumers healthier and tastier choices throughout the day (through the rest of our Food and Beverages business). Our aim is to enhance the quality of consumers’ lives, and these three elements enable us to do so throughout their lives, from morning to night.
CEO’S MESSAGE 03.
There will be a new member of the Board of Directors proposed to shareholders at the 2012 Annual General Meeting. Mr. Henri de Castries is the Chairman and Chief Executive Officer of the AXA Group, a global leader in insurance. He had a distinguished career in the French Finance Ministry before taking on several important executive roles and responsibilities within the AXA Group. We believe his long business experience and strong financial background will enrich the Board’s business and financial capabilities. Carolina Müller-Möhl and Jean-René Fourtou are both retiring from the Board. We thank both for their valuable contribution over the past years. Last year was another in a series of years that will be remembered for a range of extraordinary events. From the earthquakes and tsunami in Japan through the Arab Spring and conflict in Côte d’Ivoire to floods in Thailand and Indonesia, there have been a range of extreme challenges for our people all over the world. We are greatly appreciative of their efforts and thank them on behalf of the Board and all our shareholders for their continuous efforts and commitment, and their unstinting enthusiasm. In view of continuing economic uncertainties and volatility, we don’t expect 2012 to be any easier than previous years. But we continue to invest for the future and strengthen our capabilities across the world. Our innovation is creating opportunities in all categories, bringing new consumers to our brands in emerging markets, building on our consumers’ engagement with our brands in the developed world. Our people are aligned behind our strategic roadmap, which is as relevant as ever, to drive sustainable performance improvement. We are therefore well positioned in 2012 to deliver the Nestlé Model of organic growth between 5% and 6%, as well as an improvement in the trading operating profit margin and underlying earnings per share in constant currencies.
04. HAAGEN-DAZS CSR
WE STARTED IN THE
Peter Brabeck-Letmathe CEO
CEO’S MESSAGE 05.
06. OUR MISSION
BEE INITIATIVE
“we want to keep these little heroes buzzing. We hope you’ll join our mission.”
WE STARTED IN THE Imagine that world without tasty pears, luscious raspberries, or juicy strawberries. Honey bees pollinate one-third of the foods we eat, including many of the ingredients we use to make our pure and simple ice creams, sorbets, frozen yogurts, and bars. Unfortunately, honey bee populations are disappearing at an alarming rate. We want to keep these little heroes buzzing. We hope you’ll join our mission. Since 2008, Häagen-Dazs® ice cream has partnered with leading research facilities to donate more than $700,000 to honey bee research. Our contributions recognize the role honey bees play in our food production. Funds are used to help support the Harry H. Laidlaw Jr. Honey Bee Research Facility at the University of California, Davis, which is the largest and most comprehensive state-supported apiculture facility in North America. The Häagen-Dazs ice cream contributions also support the maintenance of the Häagen-Dazs Honey Bee Haven–a bee-friendly demonstration garden on the UC Davis campus–as well as the development of educational materials. We’d love for you to get involved too! When you buy a carton of our ice cream, you help Häagen-Dazs ice cream fund research to save the bees. You can also donate directly to UC Davis to help support their ongoing efforts. giving back has never been so delicious!
BEE INITIATIVE 07.
Why honey bees are so important We rely on honey bees for around one third of our food supplies, not just in the obvious case where honey is concerned, particularly fruit because they’re the essential critters that are responsible for pollinating these foods. Many honey bee colonies are declining because of something called CCD, Colony Collapse Disorder, where bees abandon hives for no reason and eventually die. No one really knows what causes CDD, but researchers have linked contributing factors to viruses, mites, chemical exposure and poor nutrition. Haagen-Dazs’ main aim is to work together with bee specialists and researchers to help raise awareness of the declining bee population and hopefully bring depleting numbers back up. How to help and get involved By buying either ‘Vanilla Honey Bee’ ice cream of any of their ‘Bee-Built Flavours’ your money will go to funding bee research and help Haagen-Dazs reach their donation goal. A set amount of your money will also be donated to funds from any profit they make when you buy any of their bee merchandise.
08. HAAGEN-DAZS CSR
PRESERVING THE BEE POPUL ATION Häagen-Dazs brand manager Josh Gellert said that without honey bees, it would be “tough to source and produce” ice cream. By working with UC Davis and Penn State, “we hope to take steps toward finding ways to increase the honey bee population and educate consumers on how they can take part in helping save the honey bees.”
BEE INITIATIVE 09.
GLOBAL IMPACT
“Success will come from finding new ways for us to portray ourselves globally.�
WE STARTED IN THE We are committed to the responsible sourcing of raw materials for our own-brand products wherever possible, and to managing the impact we have on biodiversity. We have made most progress in the UK, and are working to improve standards in all our markets. Together with Unilever, Haagen Dazs co-chairs the Stainability Steering Group of the Consumer Goods Forum, and is leading the project announced in December 2010 to achieve zero net deforestation by 2020. This work involves developing and committing to sustainable supply chains for each of our commodities. Buying local products helps to develop and sustain the communities in which we operate, and is often what our customers demand. We have run initiatives in several markets to boost our offer of local products. For example, this year we ran two regional suppliers forum events in Hungary, sourcing and signing up new local suppliers. Many of our markets have sold local products for some time because imports are more expensive. In Poland, we sell more than 9,700 regional products. Fairtrade products are most successful in our more established markets. In the UK, we now have the largest range of Fairtrade cotton school uniform items on the high street, and every year we participate in Fairtrade Fortnight, offering promotions on Fairtrade produce, chocolate, tea and coffee. This year we launched Fairtrade products in Poland, Russia, Central Europe, and parts of South-East Asia. GLOBAL IMPACT 11.
Since 2005, we have been cutting the carbon footprint of Haagen Dazs stores across the world. We have an ambitious program of carbon reduction in our new and existing stores, designing in features such as increased natural daylight to our standard new stores. In our existing estate, we are working to replace old equipment with new technology to help our staff cut carbon We opened the world’s first zero-carbon supermarket in Ramsey, Cambridge shire, in 2009. This year, we opened our first overseas zero-carbon store in Jarome˘R.˘, Czech Republic, and completed two more zero-carbon stores in the UK, in Wels pool and Bourne. These stores allow us to test new technologies that we can roll out to future new stores. Our zero-carbon stores are designed to use as little energy as possible. For example, our heating and cooling system at Ramsey uses 66% less energy than a typical store of a similar size. • We generate our own energy on site from a Combined Heat and Power (CHP) system, which uses a sustainable bio-fuel made from waste fish oil to generate heat and power. • Electricity that we generate is exported to the National Grid. • Ramsey is saving the equivalent of 2,000 tons of CO2e per year, compared to a similar new store. The refrigerant gases used in almost all refrigeration systems – known as hydroflurocarbons (HFCs) – can make a very significant contribution to climate change. They comprise 16% of Haagen Dazs’s global carbon footprint and we are committed to finding alternatives. We have already installed non-HFC ‘natural refrigeration’ systems in Hungary and the UK, and in our existing stores in the UK we have reduced HFC emissions by 15% compared to 2009/10. We will pilot a natural refrigeration system in Turkey in 2011/12.
12. HAAGEN-DAZS CSR
NESTLE’S TOTAL REVENUE $14.8 BILLION
HAAGEN-DAZ’S TOTAL REVENUE $1 BILLION
Even the most energy-efficient buildings and distribution systems need to use some energy. Generating our own renewable energy is therefore a key part of our climate change strategy, and we are trailing several technologies, including photovoltaic roof panels and cladding, solar hot water generation, CHP and ground source heat pumps. This year, we installed four wind turbines to power three UK depots using renewable energy. Each turbine will produce enough energy to power 500 homes, saving around 3,200 tons of CO2e. Any surplus power generated will be exported back to the National Grid. In 2007, we installed one of California’s largest roof-mounted solar installations on our distribution centre in Riverside. This year, the installation generated enough energy to power more than 400 homes. In 2011/12, we will install solar panels on ten of our stores in Arizona, which will generate about 20% of the energy used in-store. GLOBAL IMPACT 13.
“Just because we are an Ice cream company does not mean don’t think about the global environment.”
PEOPLE
“We continue to strive to be the most highly valued in customer satisfaction.”
WE STARTED IN THE From September 29 to October 2, we delivered Haagen-Dazs ice cream to people who had been relocated to temporary housing and those still staying in their collapsed dwellings. These people depend almost entirely on donations and aid-assistance. Haijima, the 2HJ staff member currently stationed in Sendai City, worked with a local organization to best decide the areas where we were to distribute the ice cream. In Sendai, staff members from Personal Support Center patrolling around the temporary housing development helped us with our ice cream distribution. One member said “Even people who usually stay at their homes during distributions came out for the ice cream, which gave us good opportunities to talk to them.” When we asked those who had received ice cream how many residents other houses had, they tried to remember by saying, “How many people are at Mr. so-and-so’s place?” A junior high-school student who helped with the distribution said, “It was fun because I got to talk to the other people in our neighborhood!” I could see the circle of local community grow a little bigger thanks to our ice cream distribution.
PEOPLE 17.
Climate change will only be tackled successfully if people become champions of a low-carbon lifestyle. Our role is to show customers that living greener lives can be attractive and affordable. In the UK we know that our customers’ carbon footprint is around 100 times greater than Haagen Daz’s direct carbon footprint, so we have a real opportunity to tackle climate change by mobilizing our customers to make small changes that add up to a big difference. In 2009 we made a commitment to help our customers halve their carbon footprints by 2020. We have carried out customer research in every Haagen Dazs market to identify the key barriers and actions needed to help customers reduce their carbon footprints. Price, information, practical barriers and a sense of disempowerment are common themes. Every market has produced a road map outlining measures planned to help customers cut carbon. In Malaysia, Poland and South Korea, we involve children in green educational programs and run environmental competitions. Our Tomorrow’s Footprint educational program in Turkey helps children understand the impact of climate change, and has so far reached a total of 24,000 children. In China, we are introducing green shuttle buses and electric car charging points at stores, environmental competitions. Our Tomorrow’s Footprint educational program in Turkey helps children understand the impact of climate change, and has so far reached a total of 24,000 children. In China, we are introducing green shuttle buses and electric car charging points at stores,
18. HAAGEN-DAZS CSR
Our success as a business comes from our core purpose, to create value for customers to earn their lifetime loyalty and the two main Values that underpin it, No one tries harder for customers, and Treat people how we like to be treated. When I face difficult decisions, I find relying on our Values is always a good place to start. The Code of Business Conduct can help guide us when we face complicated or sensitive issues and is one of the ways we can put our Values into practice at work. The Code lays down some of the most important responsibilities placed on our people wherever they work. These are serious duties, based on the high standards of ethics we expect from our staff, respect for the law and the need to report apparent wrongdoing. And they apply not only to our Haagen Dazs team, but to others that we work with, since we should aim to do business with people and companies who share our standards and Values. Making sure we meet these standards is what will keep us successful. It will ensure that our customers, suppliers and our staff all enjoy working with us. If you’re ever in any doubt about what action to take about any issue set out in the Code, please make sure you speak to your manager or use our Ethics Hotline. I know that our Ethics Hotline is one of the best ways to report any concerns you may have. It is a completely confidential service and, if you choose, you can raise your concerns anonymously. I have always found that, whatever the situation, the best course of action is the open and transparent one. By making sure the way we do business is fair and ethical, we live the Haagen Dazs Values and are proud of the company we work for.
PEOPLE 19.
THE NUMBERS SALES
PROFIT BEFORE TAX
11
08
08
09
10
11
08
09
10
3.8bn 11
10
11
08
09
10
5,380
5,380 4,836
103.6
STORES
95.2
88.6
76.9
492,714
103.6m sq ft
472,094
492,714 468,508
SPACE
444,127
PEOPLE
09
3.4bn
USA, UK
3.1bn
ASIA, EUROPE
2.8bn
3.8bn
4,332
10
67.6
62.5
09
+8.1%
3,751
08
59.4
51.8
67.6bn
11
These figures represent the average numbers during the last four years across Asia, Europe, and North America. Revenues are sales excluding VAT and exclude the impact of IFRIC 13. Revenue for Europe includes France; revenue for Asia, and revenue for The United States.
20. HAAGEN-DAZS CSR
TRADING FAIRLY MODEL
MONITORING
VALUES Those who share our values • Communicate our values • Set strong standards • Qualify new suppliers
>
Get to the truth: • Assess risk • Audit, report accurately • Understand workers
>
>
• Identify trends
TRANSPARENCY
IMPROVEMENT
Be open and honest:
Support and improve:
• Build awareness • Be transparent
>
• Work with others
• Correct breaches • Develop skills • Assist improvement • Reward successd
PEOPLE 21.
PRODUCTS
“To this day, Haagen-Dazs is committed to bring you an exceptional experience.”
WE STARTED IN THE Reuben Mattus, a young entrepreneur with a passion for quality and a vision for creating the finest ice cream, worked in his mother’s ice cream business selling fruit ice and ice cream pops from a horse-drawn wagon in the bustling streets of the Bronx, New York. To produce the finest ice cream available, he insisted on using only the finest, purest ingredients. The family business prospered throughout the 1930s, 40s and 50s. By 1960, Mr. Mattus, supported by his wife Rose, decided to form a new company dedicated to his ice cream vision. He called his new brand Häagen-Dazs, to convey an aura of the old-world traditions and craftsmanship to which he remained dedicated. In 1983 Mr. Mattus agreed to sell the Häagen-Dazs brand to The Pillsbury Company, which remained committed to the tradition of superior quality and innovation on which Häagen-Dazs ice cream was founded. Since then, it has become a global phenomenon, available in 50 countries. The same careful attention to quality that Reuben Mattus built into every Häagen-Dazs product remains today. Ice cream lovers the world over now recognize the unique Häagen-Dazs logo as synonymous with the ultimate super-premium ice cream. To this day, the Häagen-Dazs brand remains committed to developing exceptional new super-premium frozen dessert experiences, releasing new flavors every year.
PRODUCTS 23.
24. HAAGEN-DAZS CSR
Häagen-Dazs ice cream is made like no other. We use only the purest ingredients from rich Dutch cocoa to the legendary vanilla to craft the finest ice cream in the world. The HäagenDazs brand is 100% all-natural on 100% of its flavors, using only ingredients found in any well-stocked kitchen. We use lemon juice rather than citric acid and egg yolks instead of emulsifiers for a smooth, creamy texture. And, our Mint ice cream flavor is a natural white, not green, because we don’t use artificial color. PRODUCTS 25.
30. Haagen-Dazs CSR
STATISTICS
“we generate more renewable energy than others and pass the exess to others.”
WE STARTED IN THE Haagen Dazs is a global business growing at a significant rate. Business growth is compatible with tackling climate change – provided it is low-carbon growth. Significant global carbon reductions are an urgent necessity, and the fastest way to achieve them will be by replacing high-carbon activities with lower-carbon ones. We are making progress in becoming a lowcarbon enterprise. This year Haagen Dazs was named the top retailer in the Carbon Disclosure Project’s 2010 UK FTSE 350 and Global 500 reports for our carbon reporting and performance. Our global direct carbon footprint in 2010/11 was 5.44 million tons of CO2e (see box on page 23 for details of how we calculate our carbon footprint). This year, we continued to decouple our business growth from the growth in our carbon emissions: while our net sales area grew by 8.8%, our carbon footprint increased by only 2%. We have made particular progress this year in reducing emissions from refrigeration. In the UK alone, we have saved around 165,000 tons of CO2e by reducing leakage of fridge gas, which has a global warming effect thousands of times greater than CO2 Achieving our ambition of becoming a zero-carbon business by 2050 will require us to reduce our absolute carbon emissions across the Group. If there are any residual emissions that we cannot eliminate, we will generate more renewable energy than we need and pass the excess to others.
STATISTICS 27.
Haagen-Daz’s product and brand portfolio ranges from global icons to local favorites. It is supported by an unmatched research and development capability, with clear priorities, focused on driving innovation and renovation that is relevant and attractive for consumers. Our Company has an unmatched geographic presence, due to the number of countries where we are present, but also due to the depth of our roots in those countries. We have operated in most of our locations for generations. This has created strong relationships between our brands and their consumers as well as an unrivalled understanding of consumers. Our people, culture, values and attitude are our greatest strength. The Haagen-Dazs culture binds our people together all over the world with a shared set of behaviors and values into a single way of doing business. Our culture combines a long-term mindset with short-term action. It encompasses a passion for quality, in relationships, in everything we do. It is focused on competitiveness, calculated risk-taking and an unswerving determination to deliver our goals, while creating value for society as a whole. A Nutrition, Health and Wellness mindset means offering tastier and healthier choices in all our categories to consumers throughout the day. But we are also addressing specific nutritional needs through Nestlé Nutrition and are pioneering ways to use nutrition to address critical illness through Nestlé Health Science. The trust that consumers place in Nestlé is reflected in the hundreds of millions of purchase decisions that they make every day when they choose Nestlé products. Many consumers with lower incomes are consuming our Popularly Positioned Products (PPP), mainly in emerging markets. We bring the same nutritional know-how to these consumers, the same brand promise and quality, and we strive to add the extra plus – such as fortification targeted to specific nutritional deficiencies. 28. HAAGEN-DAZS CSR
Net Sales
Operating Profit
Earnings
5-YEAR CAGR 4%
5-YEAR CAGR 3%
5-YEAR CAGR 7%
10.5
10.9
12 11.5
10
2
2
1.9
11
1.8 2.3
1.7 1.7
06 07 08 09 10
11
06 07 08 09 10
11
2.5
2.7
2.9
3
06 07 08 09 10
3.5
11
Our high quality, deli-
We maintained to
2011 earnings
cious foods, loved by
operating profit while
increased by 4% since
consumers around
continuing interest in
09, the 9th consecutive
the world generated
business.
year of grow th.
Cash Flow
Invested Capital
Dividends
5-YEAR CAGR 5%
5-YEAR CAGR 3%
5-YEAR CAGR 8%
net sales of more than twelve billion dollars.
10
9
9
11
10
17
10
18
16 15
06 07 08 09 10
19
11
15.4
06 07 08 09 10
1
11
1.1
1.2
1.3
1.4
06 07 08 09 10
1.5
11
Cash for 2011 was
Our operating prin-
Dividends per share
appropriately 1 billion
ciples of sustanable
have increased by 47%
before the impact of
grow th and manage
over the past 5 years
the af ter-tax to our
for cash combine to
pension funds.
deliver R.O.I.C.
STATISTICS 29.
We want to be the leader in innovation and renovation, whether of products, systems or processes. Some products will be entirely new, some will have a new, refreshing aspect. Regardless, we take an invigorating point of view to keep our consumers excited about our brands. But it is not enough just to be the most innovative company. We also need to have the most efficient supply chain – from farm to fork – to ensure that we have the best raw materials, the best processes and the freshest products on our customers’ shelves. Haagen-Dazs Continuous Excellence is our approach to operational efficiency, with its objectives of eliminating waste, increasing efficiency and effectiveness, and improving quality in all operations. It is not enough, however, just to make the most innovative products in the most efficient way; we also need to ensure that our products are available stainability whenever, wherever and however consumers want to buy them. And, of course, we need to communicate with our consumers in a dynamic way – both to keep them abreast of all that is new and exciting, but also to learn from them, so that we can bring their experiences to bear on our upcoming innovation and renovation. You will find some of these aspects brought to life on the following pages. The year under review was once again characterized by uncertainty and economic frailty, especially in the developed world. There were natural crises, from the Japanese tsunami to flooding in Thailand and Indonesia, there were uprisings, from the Arab Spring to the civil war in Côte d’Ivoire, and there was extreme volatility in currencies and commodities. All in all, it was a year when many of our people in many countries around the world found themselves in situations which they had probably never imagined.
30. HAAGEN-DAZS CSR
Competitive Advantages
Unmatched research and development
Geogrphic presence
Poruct and brand
People, culture,
portfolio
and values
Innovation and
Nutritio, Health
renovation
and Wellness
Operational ef ficiency
Our objective is to be the recognised and trusted leatder in: ice cream, wellness, industry reference and financial performance.
Whenever, wher-
Markets and products
Premiumisation
eve, however
Consumer
Out of home
communication
consumption
Operational Pillars
Growth Drivers
The 2011 performance, which is reviewed in this section, would not have been achieved without their efforts. As discussed in the letter to shareholders, we need to look beyond the news headlines to see the broader picture. There are opportunities in the current environment, as much as there are risks, and these opportunities are present in all our categories all over the world. We need to manage the challenges and we need to grasp the opportunities. This is why our Road map, discussed earlier in this report, is so important. STATISTICS 31.