[LOGO] Nestle
[Logo] Friskies [Logo] Ralston Purina Company
CREATING A MAJOR
INTERNATIONAL PETCARE
BUSINESS
January, 17th 2001
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This presentation contains certain "forward-looking" statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on management's current expectations and are naturally
subject to uncertainty and changes in circumstances. Actual results may vary
materially from the expectations contained herein. The forward-looking
statements contained herein include statements about future financial and
operating results and benefits of the pending merger between Nestle and
Ralston Purina. Factors that could cause actual results to differ materially
from those described herein include : the inability to obtain Ralston Purina
shareholder or regulatory approvals; actions of the U.S., foreign and local
governments; the inability to successfully integrate the businesses of
Nestle and Ralston Purina; costs related to the merger; the inability to
achieve cost-cutting synergies resulting from the merger; changing consumer
or marketplace trends; the general economic environment; and the economic
environment of the pet food industry. Neither Nestle nor Ralston Purina is
under obligation to (and expressly disclaims any such obligation to) update
or alter its forward-looking statements, whether as a result of new
information, future events, or otherwise.
We urge investors to read the proxy statement and any other relevant
documents that Ralston Purina has filed and will file with the Securities
and Exchange Commission ("SEC"), because they contain important information.
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[Logo] Nestle
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AGENDA
Nestle in Pet Care
Ralston Purina
Pet Care industry
Clear strategic logic
Compelling financial logic
Conclusion
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[Logo] Nestle
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Nestle in Pet Care
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History of pet care at Nestle
1932 Carnation enters pet care market
1985 Acquisition of Carnation
including Friskies Petcare
1994 Acquisition of Alpo
1998 Acquisition of Spillers
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[Logo] Nestle
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Ralston Purina
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Ralston Purina : a high performance
business
Sales(1): $2,763M
EBITDA(1) : $657M
NORTH AMERICAN PET FOOD INTERNATIONAL PET FOOD GOLDEN PRODUCTS
Sales: $2,068M Sales: $447M Sales: $248M
Largest producer of dry Operations in Europe, Cat litter
dog food and dry and Latin America, business in
soft moist cat foods Asia and Oceania North America
(1) Year ended 30/09/00
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[Logo] Nestle
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Ralston Purina : solid market positions
and excellent management
o World's largest producer of dry dog and dry and soft-moist cat foods
o Leader in North America, No. 2 in Latin America
o Leading manufacturer of cat litter in the U.S. and Canada
o Management with proven track record in innovation, operational efficiency
and brand building
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[Logo] Nestle
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Ralston Purina : excellence in operations,
brands and communication
o 30 manufacturing facilities worldwide, including low cost industrial
structure in North America
o Strong brands and position in each channel and dry food segment including
premium and super premium
o Pet care professional (vet and breeder) credibility and communication
competence
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Ralston Purina : strong brand equity in
dog food
[Graphics Omitted]
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[Logo] Nestle
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Ralston Purina : strong brand equity in
cat food
[Graphics Omitted]
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[Logo] Nestle
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Ralston Purina : strong brand equity in
cat litter
[Graphics Omitted]
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[Logo] Nestle
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The Pet Care industry
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Pet care is a major global product category
USD bio.
Chocolate confectionery 41
Pet care 33
Sugar confectionery 31
Bottled water 30
Ice cream 24
Soluble coffee 21
Breakfast cereals 16
Source : Nestle internal estimates (1999)
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[Logo] Nestle
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Pet care market growth potential
Commercial
Pet care spend pet food
per household penetration
U.S. $115/year 67%
Brazil $28/year 20%
o Significant further potential in both developed and emerging
pet care markets
Source : Nestle internal estimates - 1998
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[Logo] Nestle
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Global pet care market
Growth in commercial pet food penetration (%)
[Line Graph]
50
46.5*
40
34.4*
30
26.9**
20.6**
20
10
0
1990 1992 1994 1996 1998 1999
** Cat Food * Dog Food
Source : Nestle internal estimates - 1999
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[Logo] Nestle
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The global dog and cat food market : $25 bio.
By region By product type
[Pie Chart Omitted] [Pie Chart Omitted]
North America Dry cat Wet dog Snacks and
43% 16% 15% treats
9%
Asia, Europe
Oceania Latin 38% Wet cat Dry dog
Africa America 24% 36%
13% 6%
o Dog and cat food accounts for 75% of the global pet care market
Source : Nestle internal estimates for 1999
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[Logo] Nestle
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Global shift from wet to dry food
Total volume growth 1996 -1999
[Bar Charts Omitted]
5% 16%
Dog Wet Dry
4% 15%
Cat Wet Dry
Source : Nestle internal estimates for 1999
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Customers value quality
Retail price per ton index - U.S.
[Bar Chart Omitted]
209
106
100
Dry Dog Food Purina Dog Chow Purina ONE
Average
Source : A.C. Nielsen, Grocery + mass merchandisers
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[Logo] Nestle
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Shift to premium food adds value to U.S.
volume growth engine
% Change 12 months to Dec. 2000
Volume Value
Dry dog 5.1% 7.0%
Dry cat 9.8% 12.6%
Wet dog -0.5% 2.6%
Wet cat -1.3% -0.4%
Source : A.C. Nielsen, Grocery + mass merchandisers
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[Logo] Nestle
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Clear strategic logic
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Key success drivers
1. Strength in both dog and cat food
o Marketing and R&D synergy
o Industrial efficiency
2. Strength in both dry and wet food
o Enhanced customer delivery of nutrition and pleasure
o Enhanced sales and margin per serving
o Required for leadership across regions (Europe 60/40 wet/dry, Latin
America 13/87 wet/dry)
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[Logo] Nestle
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Key success drivers (cont.)
3. Strength globally
o Marketing and R&D synergy
o Developed markets for scale and R&D innovation leadership
o Emerging markets for rapid growth
4. Strength in both grocery and non grocery
o Required to reach customers wherever, whenever, however
o Required for scale economies
5. Strength in both standard and premium
o Standard for scale economies
o Premium for margin, growth and credibility among influencers
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[Logo] Nestle
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Friskies & Ralston Purina : fast track
integration
o Implementation plan to be finalised before closing
o St. Louis to be headquarters for North America Pet Care (US + Canada)
o Combined North America management team under Pat McGinnis committed to
achieving business objectives
o John Harris, President Friskies U.S., to be global integration manager to
bring speed to integration
o International (non N. Am.) operations to be integrated rapidly within
existing structures
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[Logo] Nestle
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Friskies & Ralston Purina : superior R&D
expertise
Nestle Ralston Purina Shared expertise
o Wet food core o Dry food and o Pet nutrition
competence treats core expertise
o Human food competence o Palatability/
technology and o Heska flavor
nutrition strategic expertise
expertise alliance for
functional
foods
o Assures long term, proprietary product innovation
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[Logo] Nestle
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Friskies & Ralston Purina : complementary
global manufacturing presence
[Graphic of Map Omitted]
Nestle
Ralston Purina
Source: Ralston Purina, Annual report
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[Logo] Nestle
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Friskies and Ralston Purina
o World class pet care brand portfolio
o Strong credibility with pet owners and key influencers
o Excellent geographic fit
o Broad coverage of the key pet care segments with strong market positions
o Low cost, global product supply base
o Strong management with proven track records
o Significant financial upside
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[Logo] Nestle
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Compelling financial logic
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Key transaction terms
o Definitive merger agreement approved by Nestle's and Ralston Purina's
Board of Directors
o Merger consideration $33.50 per Ralston Purina share in cash
o Enterprise value of $10.3 billion
o Closing expected before the end of 2001
o Subject to Ralston Purina shareholder vote and customary regulatory
consents
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[Logo] Nestle
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Financial implications
o Deal has a positive net present value even on conservative assumptions
o Cash EPS positive at end of first full year
o Solid single digit cash EPS accretion after full synergies
o Positive impact on Group profit margins
- Nestle 1999 EBITDA margin 14.7%
- Ralston Purina 2000 EBITDA margin 23.8%
o $10 billion (CHF16 billion) in goodwill and intangibles(1) to be
amortised over 20 years
(1) Including existing $0.4 billion from Ralston Purina
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[Logo] Nestle
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Friskies & Ralston Purina : significant synergy
potential
o Minimum $260 million annual cost savings identified, representing about
4% of combined pet food sales
o Revenue synergies from sales expansion outside North America through
Nestle / Friskies global organisation
o "Soft" synergies include brand extensions, transfer of industry know-how,
patents and R&D expertise
-- Compelling synergy story compared to recent industry acquisitions
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[Logo] Nestle
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Friskies & Ralston Purina : cost savings
Source Savings driver Contribution
Shift Nestle dry food to Lower conversion costs 15%
Ralston Purina supply chain Lower distribution costs
Consolidate dry factories Reduced factory 15%
overheads
Reduce production Reduced SG&A costs, 70%
costs including sales/
marketing, R&D, fixed
distribution and
administration
o $260 mio. annual savings fully
achieved in three years (25%, 50%, 100%)
o Costs to achieve estimated
at $250 mio. over 2 years
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[Logo] Nestle
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Valuation parameters
o Transaction value $10.3 billion (CHF 16.5 billion)
- $10.0 billion equity value
- $1.2 billion net debt and other liabilities
- $(0.9) billion of financial investments(1)
o Multiples in line with precedent transactions
- 15.7x EBITDA pre-synergies, 11.2x after full synergies (2)
- 18.6x EBIT pre-synergies, 12.6x after full synergies (2)
o Superior growth trend to continue
- Ralston Purina stand-alone sales growth 6-7%
(1) Ralston Purina investments in DuPont, Conoco and Interstate Bakeries
(2) Pro forma 2000
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[Logo] Nestle
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Financing the transaction
o Acquisition initially financed through use of existing cash and bank
bridge financing facility
o Refinancing through commercial paper and bonds
o Group net debt/EBITDA ratio falls to less than one at the end of the
second year
o EBITDA/Interest ratio moves up to the high teens in the second year
-- Seek to maintain best of breed credit rating
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[Logo] Nestle
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Reinforcing Nestle pet care
o Pet care increasing from 7% to 12% of Nestle Group sales(1)
o Pet care increasing from 5% to 13% of Nestle Group EBITA(1)
o Pet care increasing from 5% to 16% of Nestle Group EBITA(1) after
achieving the cost savings
(1) Based on 1999 figures as reference
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[Logo] Nestle
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Conclusion
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Nestle's strategic evolution
Strategic Expansion Consolidation Leader in Growth Areas
o Broadened o Focus on financial o Excellent strategic
product range and returns and value fit
geographical creation o Focus on internal
scope- o Development of growth and strong
acquisitions of framework for financial rationale
Carnation, strategic direction o Ralston Purina:
Friskies, Buitoni, and operational complementary
Rowntree, Perrier, efficiency and transforming
Spillers Petfood
1980s - early 1990s 1997 - 2000 2001
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[Logo] Nestle
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Nestle acquisition strategy
o To be category No. 1 or a strong No. 2
o Generate positive value for shareholders
o Focused approach
o Value-added growth categories, e.g. health-oriented/wellness
o Strong brands in leadership positions
o RIG, cash flow and earnings enhancing
o High degree of certainty of successful integration
o Maintain strong credit ratings and financial flexibility
-- Ralston Purina meets these criteria
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[Logo] Nestle
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Low business risk
o Nestle/Carnation - over 60 years experience in pet care
o Ralston Purina - over 100 years in pet care
o Ralston Purina - 100% pet care
o Friendly deal - highly regarded Ralston Purina management committed to
the combined business
o High quality, predictable growth
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[Logo] Nestle
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Nestle and Ralston Purina market
leadership
100% of Ralston Purina contributes to Nestle's core business
Nestle Global Number One Market Positions
o Pet care o Powder and condensed milk
o Soluble coffee o Frozen prepared dishes
o Mineral water o Dehydrated seasonings
o Chocolate drinks o Infant nutrition
o Chocolate & confectionery
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[Logo] Nestle
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Nestle is the leading processed food Group
1999 food & beverage sales
(alcoholic beverages excluded)
[Bar chart omitted]
($ in millions)
50,000
45,000
40,000
Ralston
35,000 Purina
30,000
25,000 Nabisco BestFoods
20,000 Slim-Fast
15,000 Nestle Quaker Oats
10,000 Mars Pillsbury
Coca-Cola General Mills Parmalait
5,000 Kraft Unilever Pepsico ConAgra Kellogs Keebler
Danone SaraLee Heinz
0 Schweppes Cambell's
Source: Annual reports/estimates
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[Logo] Nestle
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Nestle & Ralston Purina : A major player
o Global leadership in the pet care market
o Stronger, more balanced product portfolio
o Geared for faster growth
o Significant cost savings
o Proven management team
o NPV positive on conservative assumptions
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[Logo] Nestle
<PAGE>
[LOGO] Nestle
[Logo] Friskies [Logo] Ralston Purina Company
CREATING A MAJOR
INTERNATIONAL PETCARE
BUSINESS
42
