CREATING SHARED VALUE SECURITY THROUGH SUSTAINABILITY

Nestl Malaysia Agriculture Services ASEAN REGIONAL CONFERENCE on FOOD SECURITY 8-10 October 2013, Penang
CO-AGR

AGENDA

1.Creating Shared Value 2.Nestle Supplier Code 3.Nestle Sustainable Agriculture Initiatives 4.Nestle Paddy Club 5.Conclusion

CO-AGR

Creating Shared Value

At Nestl, we believe that to have long term business success, you must simultaneously create value for our shareholders and for the public. We call this Creating Shared Value and this is a fundamental principle behind the way we conduct business at Nestl.
Mr. Paul Bulcke CEO, Nestl S.A.

Nestl in Society: Creating Shared Value and Meeting Our Commitments

17 October 2013

Rural Development Highlights

Working directly with more than 690,000 farmers Employing more than 1,180 agronomists and 12,000 support staff Providing financial assistance to 44,000 farmers worth USD 37.8 million 89.5% of our suppliers complied with the Nestl Supplier Code In Malaysia, projects involving chillies, rice, oil palm etc
Nestl in society: Creating Shared 5 Value and meeting our 17 October 2013 commitments

The Nestl Supplier Code

The Nestl Supplier Code establishes certain non-negotiable minimum standards that we ask our suppliers to respect and adhere to when conducting business with Nestl Business Integrity Compliance with applicable laws and regulations Sustainability We support and encourage operating practices, farming practices, and agricultural production systems that are sustainable Labor Standard - Prison/forced labour, child labour, working hours, non-discrimination in employment Safety and Health Safe & healthy work condition. Product & services supplied must meet quality & safety standards as required by applicable law Environment Suppliers must operate with care for the environment and ensure compliance with applicable laws and regulations.

How do we achieve our CSV and NSC goals?

by implementing Sustainable Agriculture Initiative Nestl, SAI-N, practices to impact Food safety Quality Assurance Farm income generation Crop and yield improvements Cost improvements Animal health Transport and logistics Water use & irrigation Technical extension Corporate Communications Certifications Etc
CO-AGR

Fresh Chilli Contract Farming - Spicing Up the Community

Project Objectives: Commenced in 1985 to create new income opportunities for local farmers, and ensure a supply of reliable, controllable, traceable and sustainable supply of chilis for Nestle. Through transfer of technology on GAP, farmers improve their yield and quality of crops to meet strict Nestle standards. Approximately 80% of the chili produced under this scheme is purchased by Nestl, which is estimated to meet 60% of Nestls fresh chili requirements for its products.

CO-AGR Nestl (Malaysia)

Berhad

Nestl Initiative on Sustainable Rice

Nestl Malaysia Agricultural Services

TPM - AM Pillar

17 October 2013

10

About Nestl Paddy Club

Project initiated in May 2010 in Kerpan, Kedah, north Peninsular Malaysia
Started with 20 farmers over 40 has as pioneer pilot batch

No. of farmers increased to 59 in May 2011 over 110 has, and today membership stands at 320 farmers over 842has
Nestl Paddy Club was officially launched on 16 Feb 2012
JL 25.8.11

Objectives of Nestl Paddy Club

Commercialise Semi Aerobic Rice Intensification (SARI), a Nestle developed innovation, to deliver triple people-planet-profit wins. Procurement of a reliable, controllable, traceable and sustainable white rice for Infant cereals manufacturing. Ensure and maintain quality of rice produced to be in full compliance throughout the supply chain. To increase yields and/or reduce unit costs by using environmental friendly and natural/organic based approaches, and encourage ecological farming practises among farmer members. Reduce environmental impact of rice growing, especially in terms of lesser water usage and decrease in methane emission. Optimise the use of chemical based fertilizers and pest control.

Communicate Nestls commitment to Sustainable Agriculture Practises vis a vis an effective Creating Shared Value platform.

Expected PPP Benefits

People : Easy and environment-friendly way to increase yields and/or rationalise costs, safe handling of agri-inputs, pride in effort and network. Planet : Water conservation (30-40% less), methane emission reduction, reduced environmental footprint, natural augmentation of soils. Profit : Better potential for farmers to get extra real income rather than from outright price difference. Nestl has access to a reliable, controllable, traceable and sustainable source of rice for infant cereals manufacturing.

Nestl Paddy Club Supply Chain Flow Chart

Nestl Agricultural Services
Provision of Agri-Organica (AO) @ RM500/ha (charge to ROH Cost) Technical support and organization

Supply AO with 40% discount of market price to Nestl and product technical support.

(Secondary Cleaning) 2nd process and cleaning prior delivery to Nestl.

Last season- 289 farmers over 784 has, ave. yield 5 mt Current season-320 farmers over 842 has. Final target of 900 has to produce 9000mt paddy/ year

Ban Eng Hin & Chuan Huat (Primary Milling) Appointed miller with dedicated storage for NPC Paddy is paid at market price

Nestl Cereal Plant

Final inspection of rice prior to use for production

Market
Recycling of used HDPE container Field School Food Chain Partnership

Alternative Miller (future/BCP)

Finished goods and ready for consumption

Conventional Contract Farming with Premium vs Nestl Paddy Club

Conventional

Nestl Paddy Club

Targeted to increase 25% of average yield of 4mt ie 1mt extra Potential to receive additional income of RM1100 based on 1mt incremental yield Provision of AO by Nestl @ RM500/ ha vs RM800/ha market price Inculcate farmer loyalty via direct and close engagement Platform to educate farmers on GAP & sustainable agriculture

Expected price premium 10cents/kg Average yield is 4mt/ ha, hence farmer will receive only RM400 based on above premium Impersonal No control on farmers if other VS miller offer at higher price Difficulty on engaging the farmers on GAP and sustainable agriculture

What is Agri-Organica?
Formulated and made in Japan using advanced fermentation technology.
Contains live beneficial food grade microbes, microbial enzymes and trace elements enabling faster and stronger growth of plants. 100% natural, non-GMO, absolutely without antibiotics and any other chemicals. Totally safe to use, supports traceability and sustainability. Has a very high microbial count of live microbes.

AGRI-ORGANICA CONFORMS TO THE FOLLOWING ORGANIC CERTIFICATION AND IS CERTIFIED 100% ORGANIC

2nd Paddy Trial With Nestle

NESTL PADDY CLUB 2011/2012 (SAMPLE COPY OF NPC MEMBERS INFORMATION) FARM SIZE (RELONG) 21 Planting date No. of AO issued (2L bottle)

M NO. 00001

MEMBER DETAILS SABRI BIN NAYAN I/C : 670219-02-5871 Tel : 012 - 4699 864 NO. SUBSIDI : K011 / 2626 KHOSIM BIN MD DAUD I/C : 571112 - 02 - 5683 Tel : 017 - 4269 572 NO. SUBSIDI : K011 / 1825 ISMAIL BIN HASHIM

FARM Matang Bongor

Comments

00002

Matang Bongor

00003

Matang Bongor
I/C : 691211 - 07 - 5199 Tel : 017-420 3108 NO. SUBSIDI : PPK K011/2737 ABU HASAN BIN DIN I/C : 481022 - 02 - 5795 Tel : 04 - 7944 061 NO. SUBSIDI : NAZARUDDIN BIN KAMIS I/C : 750404 - 02 - 5291 Tel : 016 - 4619 779 NO. SUBSIDI : K011 / 04284 CHEW HOCK CHAI I/C : 550728 - 02 - 5419 Tel : 012 - 5641 882 NO. SUBSIDI : K011 / 131

00004

Matang Bongor

12

00005

Matang Mahang

00006

Matang Mahang

00007 CHEW LOK TIN @ CHEW TONG TIN I/C : 420109 - 02 - 5019 Tel : 04 - 7947 455

Matang Kenanga

NO. SUBSIDI :

Average yield of Nestl Paddy Club

8 7 6 6 6.85

Yield (mt/ha)

4.48 4

NPC Target National Average Yield

National Yield

Main Season (2011) 59 farmers/ 109 has

Off Season (2011) 104 farmers/ 274 has

MainSeason Season2012 (2012) Main 170 farmers/ 475has

Off Season (2012) 289 farmers/ 784has

Yield Gap of Nestl Paddy Club

14

12

12.1

10

10.3 9.22

Yield (mt/ ha)

Highest Yield Lowest Yield

4 3.3 2 2.1 1.31

Main Season (2011)

Off Season (2011)

Main Season (2012)

SARAWAK RED RICE PROJECT

After 4 years of R&D and field trials, the first commercial plantings of red rice for Nestl Malaysia commenced Feb 2011, covering 5 different growing regions in Sarawak and involving some 100 smallscale farmers over 50has.

CO-AGR Nestl (Malaysia)

Berhad

Traditional Farming Practises are still very much the norm And Nestl focus is on marrying the old and new

Nestl Paddy R&D

researchown and with UTAR small box trial for new innovation 4 replicates per treatment

0 day

15 days

30 days

Nestl E&D Farm

located in Sik, Kedah started in year 2000 semi-commercial trial on field 15 plots (~1 ha/plot) 4 cycles (seasons) for each treatment

DuPont / Bayer FCP

Collection center for used HDPE container Training on Good Agricultural Practises (GAP) focus on PAT, Safety and Environment Networking & knowledge sharing

Nestl Man on the Ground Quality begins from the Farm

Moving ahead
Continue strong focus on looking for new Nestl rice innovations to address increasingly difficult rice growing conditions. Closer interaction with member farmers and come up with a Best Practice Manual. Reduce yield-gap between high and low producing member farmers. Maximise network to advance NPC objectives eg SRP, IRRI, Nestle AgriNet etc

Oil Palm Smallholder Engagement

Objective to engage with oil palm smallholders in the Kinabatangan region, with a view to acquiring Certified Smallholder Sustainable Palm Oil status and channel into the Nestle palm oil supply chain

First pilot scheme of 30 oil palm smallholders met on 6th Dec.2012, and active engagement since Jan.2013 onwards, and target to acquire CSSPO in two years.

CO-AGR

Oil Palm Smallholder Showcases

Two Best Practise demofarms in place using a Nestl approach of integrating conventional and holistic approaches to oil palm growing, particularly suited for smallholders Innovative experimentations on creating additional income from the conducive canopy cover afforded by their matured oil palm trees

In Conclusion
. . .
There is no conclusion, because sustainability is not about concluding, but about continuing

While we are still a long way from solving all shared problems, SAI has shown us that if the food industry unites around sustainable agriculture issues, it can be an effective catalyst for change. As we look ahead to the next decade or so, it seems wrong to talk about the future of sustainable agriculture because simply put, there is no future without sustainable agriculture!

Peter BrabeckLetmathe, Chairman, Nestl S.A.

CO-AGR

 after the last grain is harvested and consumed, after the last fish is caught and eaten, only then will man realise that he cant eat money...
THANK YOU
CO-AGR Nestl (Malaysia)

Berhad