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PROFILE OF THE COMPANY

Nestlé with headquarters in Vevey, Switzerland was founded in 1866 by Henri Nestlé and is today the world's biggest food and beverage company. Sales at the end of 2004 were CHF 87 bn, with a net profit of CHF 6.7 bn. We employ around 247,000 people and have factories or operations in almost every country in the world.

The Company's strategy is guided by several fundamental principles. Nestlé's existing products grow through innovation and renovation while maintaining a balance in geographic activities and product lines. Long-term potential is never sacrificed for shortterm performance. The Company's priority is to bring the best and most relevant products to people, wherever they are, whatever their needs, throughout their lives.

BACKGROUND
Nestle was promoted by Nestle Alimentana, Switzerland, a wholly owned subsidiary of Nestle Holdings Ltd., Nassau, Bahama Islands. Nestle is one of the oldest food MNC operating in India, with a presence of over a century. For a long time, Nestle India’s operations were restricted to importing and trading of condensed milk and infant food. Over the years, the Company expanded its product range with new products in instant coffee, noodles, sauces, pickles, culinary aids, chocolates and confectionery, dairy products and mineral water. Nestle was incorporated as a limited company in 1959. In 1978, the Company issued shares to the Indian public to reduce its foreign holdings to 40%. Its name was changed from Foods Specialties Ltd. to the current name in 1981.The parent held 51% stake in

the company as at 2000 end. It has FIPB approval to hike stake by 10% and has been gradually acquiring shares from the open market. Parent stake in the company as at 2001 end stood at 53.8%. The parent plans to continue hiking stake through open market purchases. Nestle India Ltd, 51% subsidiary of Nestle SA, is among the leading branded food player in the country. It has a broad based presence in the foods sector with leading market shares in instant coffee, infant foods, milk products and noodles. It has also strengthened its presence in chocolates, confectioneries and other semi processed food products during the last few years. The company has launched Dairy Products like UHT Milk, Butter and Curd and also ventured into the mineral water segment in 2001. Nestle’s leading brands include Cerelac, Nestum, Nescafe, Maggie, Kitkat, Munch and Pure Life.

PLANT LOCATIONS
Nestle started its manufacturing operations with Milkmaid in 1962 at Moga factory. Manufacturing of Nescafe started in 1964 at the same factory. The company set up another factory at Cherambadi in Tamil Nadu, for manufacture of infant foods, coffee etc. For almost two decades there were no new additions of manufacturing facilities due to restrictive policy environment. The company set up its Nanjangad (Karnataka) factory in 1989 and the Samlakha (Haryana) factory in 1992. The Ponda (Goa) factory started operations in 1995. The Company set up its sixth manufacturing unit in 1997 at Bicholim in Goa

BUSINESS PRINCIPLES
Since Henri Nestlé developed the first milk food for infants in 1867, and saved the life of a neighbor’s child, the Nestlé Company has aimed to build a business based on sound human values and principles.

While our Nestlé Corporate Business Principles will continue to evolve and adapt to a changing world, our basic foundation is unchanged from the time of the origins of the Company, and reflects the basic ideas of fairness, honesty, and a general concern for people.

People first Employees, people and products are more important at Nestlé than systems. Systems and methods, while necessary and valuable in running a complex organization, should remain managerial and operational aids but should not become ends in themselves. It is a question of priorities. A strong orientation toward human beings, employees and executives is a decisive, if not the decisive, component of long-term success. Quality products Our focus is on products. The ultimate justification for a company is its ability to offer products that are appealing because of their quality, convenience, variety and price -products that can stand their ground even in the face of fierce competition. Long-term view Nestlé makes clear a distinction between strategy and tactics. It gives priority to the long-range view. Long-term thinking defuses many of the conflicts and contentions among groups -- this applies to employment conditions and relations with employees as well as to the conflicts and opposing interests of the trade and the industry. Of course, our ability to focus on long-term considerations is only possible if the company is successful in the struggle for short-term survival. This is why Nestlé strives to maintain a satisfactory level of profits every year. Decentralization

Switzerland is home to Nestlé's Swiss subsidiary, its international headquarters and the registered office of Nestlé's holding company, but Nestlé does not regard its Swiss headquarters as the center of the universe. Decentralization is a basic principle of Nestlé. Our policy is to adapt as much as possible to regional circumstances, mentalities and situations. By decentralizing operational responsibility, we create strength and flexibility and are able to make decisions that are better attuned to specific situations in a given country. Policies and decisions concerning personnel, marketing and products are largely determined locally. This policy creates stronger motivation for Nestlé's executives and employees and a greater sense of identification with Nestlé's business. It is not Nestlé's policy to generate most of its sales in Switzerland, supplemented by a few satellite subsidiaries abroad. Nestlé strives to be an "insider" in every country in which it operates, not an "outsider." Uniformity A very important concern at Nestlé has to do with uniformity: how consistent Nestlé's principles, policies, rules of conduct and strategies should be, and to what extent they should differ depending on the country, subsidiary, region, branch or group of products. In general, Nestlé tries to limit the uniformity of its policy to a requisite minimum. This minimum is then systematically enforced, unless there are compelling reasons in a given market that justify deviation from policy. Diversification Nestlé does not want to become either a conglomerate or a portfolio manager. Nestlé wants to operate only those businesses about which it has some special knowledge and expertise. Nestlé is a global company, not a conglomerate hodgepodge. We regard acquisitions and efforts at diversification as logical ways to supplement our business, but only in the context of a carefully considered corporate marketing policy. Nestlé is committed to the following Business Principles in all countries, taking into account local legislation, cultural and religious practices: • Nestlé's business objective is to manufacture and market the Company's products in such a way as to create value that can be sustained over the long term for shareholders, employees, consumers, and business partners. • Nestlé does not favor short-term profit at the expense of successful long-term business development.

Nestlé recognizes that its consumers have a sincere and legitimate interest in the behavior, beliefs and actions of the Company behind brands in which they place their trust and that without its consumers the Company would not exist.

Nestlé believes that, as a general rule, legislation is the most effective safeguard of responsible conduct, although in certain areas, additional guidance to staff in the form of voluntary business principles is beneficial in order to ensure that the highest standards are met throughout the organization.

Nestlé is conscious of the fact that the success of a corporation is a reflection of the professionalism, conduct and the responsible attitude of its management and employees. Therefore recruitment of the right people and ongoing training and development are crucial.

Nestlé continues to maintain its commitment to follow and respect all applicable local laws in each of its

Research and development The Nestlé research and development centers have two main tasks: to create new products and manufacturing processes and to improve those that already exist. These centers play a key role in product safety and quality and also have their role in conserving resources and protecting the environment. Environmental concerns are an integral part of any development process to ensure that our future commercial operations meet the desired criteria. The Nestlé Research Center provides the scientific support needed to prevent and solve environmental problems arising in the development groups as well as manufacturing. In addition, studies are carried out to find new ways of using industrial residues to create valueadded byproducts. This will reduce total emissions and effluents. The Nestlé development centers prepare environmental impact studies for new products and manufacturing processes. These cover all aspects, from raw materials, through processing, to the final packed product. These analyses provide additional elements for use in deciding whether to commercialize a new product, or to introduce a new or modified process. Foresight

At present, the world faces daunting questions about its ability to provide enough wholesome food for everyone. Malnutrition and poor eating habits are still serious problems in many developing countries. By 2100, the world's population will double. Will it be possible to feed a world with so many inhabitants? At Nestlé, the big picture is all about feeding the world and providing food and nutrition for an ever-growing population. Our response to this situation is to intensify research, strive for innovations and improve quality. Flexibility and simplicity The public's sense of the power and size of a corporation is often inaccurate, for a company's power is limited by a host of factors including legislation, competition, regulatory bodies and publicity. From a business point of view, it is desirable for a firm to achieve the size best suited to a specific industry or mode of production. To be competitive internationally and make significant investments in research and technology, a larger company has an advantage. From a strictly organizational point of view, flexible, simple structures work best and excessively large units should be avoided whenever possible. In both respects Nestlé has a natural advantage: Although it is a big company, it is spread out over many countries and each of Nestlé's factories has its own management and responsibility. Handling of raw materials The Nestlé Group is in principle not directly involved in primary production of raw materials and other food ingredients. In general we use locally available raw materials and purchase them either directly from producers or through existing trade channels. Raw materials have to meet clearly established quality criteria and are checked for possible contaminants including environmental contaminants. Our purchasing specifications comply not only with legal requirements but go further to ensure highest safety and wholesomeness of our products. Whenever possible we give preference to those goods for which environmental aspects have been taken into consideration. In those cases where the required agricultural raw materials are not available locally, but the natural production conditions exist, we encourage local production and provide assistance for cultivation and dairy farm management. We support plant growing and livestock husbandry methods which:

• • •

preserve and improve natural soil productivity and economize and protect water resources allow the lowest, most appropriate and safe use of agro-chemicals use the least energy.

Packaging Manufacturing comprises all unit operations necessary to transform perishable raw materials into finished products, with the aim to make them safe and convenient for the consumers. The manufacturing activities of the Nestlé Group: • • • respect natural resources by efficient use of raw materials and energy minimize waste generation and emissions ensure environmentally safe disposal of all waste which cannot be recycled.

Regular assessments of processing practices are carried out. These assessments include: • • • evaluation of individual plant performance with regard to operations which have an impact on the environment definition of targets for improvement review of plant compliance with local government regulations, company environmental standards, as well as results achieved in comparison with targets for improvement • full investigation of incidents which may affect the environment. Information on developments in environmental protection technology and practices is disseminated as required to ensure that all plants are using the most effective environmental practices for their type of processing. This applies also for co packers. Marketing and distribution Marketing is based on the principle of satisfying consumer needs. This is the foundation also for the environmental marketing approach of Nestlé. Environmental product claims in advertising, promotional material and on packaging are in accordance with legal requirements, based on solid scientific evidence and used in a serious and reasonable manner. Our aim is to minimize wastage in communication, publicity and promotional material, in particular through more precise targeting of marketing activities.

Consumer promotions and merchandising material such as consumer offers, instore promotions, display material, leaflets, printed matter, etc. take environmental aspects into account. This means due consideration of environmental impact in selecting both materials and printing methods. In distribution, energy efficient and pollution controlled methods are encouraged wherever possible. Information, communication and education Nestlé's policy is designed to provide correct and coherent information on the activities of the Group. Activities related to the environment benefit from the same treatment and their communication is secured through all currently available means inside and outside the Group. It is furthermore Nestlé's duty to create awareness, to train and motivate employees on their personal responsibility with regard to the protection of the environment. Legislation and regulations It is the policy of the Nestlé Group to strictly comply with all laws and regulations relevant to our activities. We participate in discussions on food legislation and regulations between international organizations, government representatives, industry, the scientific world and consumer associations. We also apply this policy to environment related matters. In doing so, we cooperate with legislators through local industry associations in order to promote laws and regulations in the field of environment which are reasonable, rational, realistic, applicable and enforceable. We oppose unjustified bans and any other discriminatory measures. We favor the harmonization of food regulations in order to remove existing trade barriers and to avoid the creation of new ones. This applies also to environmental issues. We favor the exchange of information, of experience and of knowledge between the various interested parties. Thanks to all these synergies, we can contribute to valuable discussions and be recognized as an active partner in helping authorities to formulate comprehensive strategies in the field of the environment.

THE NESTLÉ POLICY ON THE ENVIRONMENT
Nestlé respects the environment and is committed to environmentally sound business practices throughout the world, thus taking into account the need to preserve natural resources and save energy. This commitment is put into practice by considering local legal requirements as a minimum standard. If these do not exist, our internal rules, adjusted to local conditions, apply. Research and Development and new investments include an evaluation to ensure environmentally appropriate products, packaging and processes. Management and personnel within the Nestlé organization worldwide are encouraged to help resolve environmental problems within their own sphere of influence.

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