Powdered and liquid beverages: sales of CHF18.9 billion, 12.8% organic growth and 7.4% real internal growth. The EBIT margin declined by 30 basis points. This excellent sales performance confirmed the dynamism of Nestle's billionaire brands Nescafé, Milo, Nespresso, Nesquik and Nestea. These brands benefited from a strong pipeline of nutritionally enhanced products, including new PPP offerings for lower-income consumers. In Asia and Australia, soluble coffee benefited from its continuous focus on products with improved nutritional profiles such as Nescafé Body Partner, Nescafé Protect and Nescafé Greenblend. The successful roll-out of Nescafé Dolce Gusto continued and allowed Nestle to increase its market share in Europe in the fast-growing portioned coffee segment. Following a successful launch in Mexico, Nescafé Dolce Gusto was extended to Japan and the US. Nespresso continued to achieve an outstanding performance with more than 30% organic growth. The decline in the product group's EBIT margin reflected increased support for the accelerating Nescafé Dolce Gusto launch and raw material cost pressures.

Milk products and Ice cream: sales of CHF20.6 billion, 9.2% organic growth and 1.2% real internal growth. The EBIT margin increased by 40 basis points with both milk products and ice cream contributing. The dairy category benefited from a multi-tier strategy with products adapted to different affordability levels and nutritional needs, reflected in the Nestle Nido Nutrition System. Ice Cream's organic growth was impacted by the decision to discontinue less profitable products and distribution routes. The super-premium portfolio with brands such as Moevenpick of Switzerland and Haagen Dazs performed well, as did health-focused offerings such as Skinny Cow in the US.

Prepared dishes and cooking aids: sales of CHF18.1 billion, 6.1% organic growth and 1.1% real internal growth. The EBIT margin declined only slightly, by 20 basis points, due to a strong recovery of the category over the second half of the year, particularly in frozen food, in spite of cost pressures. Culinary products in Asia and Eastern Europe achieved double digit organic growth, especially the Maggi brand. In the US, the three billionaire brands Hot Pockets, Stouffer's and Lean Cuisine accelerated during the course of the year. In Europe, the Wagner and Buitoni pizza business continued to perform well, as did Herta in France due to launches of products with nutritional advantages.

Confectionery: sales of CHF12.4 billion, 8.0% organic growth and 1.4% real internal growth. The EBIT margin improved by 150 basis points reflecting in part the successful reorientation of the European business. The relaunch of the "Best Ever" KitKat and the launch of KitKat Senses continued successfully in Western Europe. These initiatives, as well as a continued strong performance in emerging markets, resulted in this product category's strong performance. The category continued to focus on both the lower income and the premium and super-premium segments. The upmarket move resulted in the roll out of dark chocolate products and a new range of chocolates designed by Pierre Marcolini sold exclusively in Nespresso boutiques in Switzerland and France.

PetCare: sales of CHF12.5 billion, 12.1% organic growth and 5.2% real internal growth. The EBIT margin increased by 20 basis points with a strong second half performance. Strong organic growth was driven by resilient demand for key premium and super-premium brands across all Zones which benefited from new product launches such as Fancy Feast Elegant Medley's, Cat Chow Healthful Life and ONE Natural Balance.

Pharmaceutical products: sales of CHF7.5 billion, 8.8% organic growth and 8.4% real internal growth. This was the result of high single-digit growth by Alcon and double-digit growth by Galderma and Laboratoires innéov. The EBIT margin increased by 80 basis points to 34.1%.

Popularly Positioned ProductsNestle's Popularly Positioned Product (PPP) strategy, one of Nestle's four growth platforms and a specific business model which focuses on lower income consumers by offering them relevant and high-quality nutritious products at daily-affordable prices, is proving particularly beneficial in these turbulent economic times. Nestle's Food and Beverages business in emerging markets achieved organic growth of 15% on sales of CHF35 billion. With an increasing number of consumers trading down in the current economic environment, PPPs and other initiatives providing lower-priced products are proving particularly popular, also in developed countries. PPPs achieved organic growth of 27% overall, with hundreds of separate initiatives worldwide.

Nestle Professional

Nestle Professional, the company's division dedicated to the out-of-home food and beverage market, was organised as a globally managed business unit in 2008 with full profit and loss responsibility as of 1 January 2009. In 2008, Nestle Professional achieved organic growth of 6.1% with sales of CHF6.2 billion.

Outlook

The global business environment in 2008 was affected by a number of unforeseen events, especially in the latter part of the year. Economies around the world have significantly weakened over the last few months and it is likely that developments could further impact consumer demand. However, Nestle believes that it will once again be one of the industry's fastest growing companies of this year, in line with the long-standing Nestle model. For 2009, Nestle is committed to achieving organic growth at least approaching 5%, as well as a further improvement of the EBIT margin in constant currencies.

L'Oréal

The conditions of Nestle's agreement with L'Oréal are public. The main point of the agreement states that the Bettencourt family and Nestle will keep all of their L'Oréal shares until at least 29 April 2009 and not increase their respective stakes in L'Oréal during the lifetime of Mrs. Liliane Bettencourt and six months after that. This is a commitment which Nestle will honour whatever the circumstances. Consequently, Nestle does not need to take any action or decision regarding its stake in L'Oréal next April.

The future of Nestle's participation in L'Oréal is an important topic for the Group which the Nestle Board of Directors is addressing with great attention in the framework of the Group's global nutrition, health and wellness strategy. Nestle's participation in L'Oréal has been beneficial to both companies for many years and Nestle will continue to take a long-term strategic view in shareholders' best interest.

Appointment to the Executive BoardThe Nestle Board of Directors has appointed Petraea Heynike as Executive Vice President in charge of Strategic Business Units, Marketing and Sales, and Nespresso, effective on 1 March 2009. Mrs. Heynike, currently Head of the Chocolate, Confectionery and Biscuits Strategic Business Unit and a former Nestle Canada CEO, has more than 36 years of experience with Nestle in 6 countries and, over the past three years, was responsible for the successful reorientation of Nestle's confectionery business, giving the category new strategic direction and delivering strong business results. Her international experience combined with her deep product, market and communications expertise make her ideally suited to help define the strategic direction of Nestle's different product categories.

Board proposals to the Annual General MeetingThe strong performance in 2008 will enable the Board to propose to shareholders a dividend increase of 14.8% to CHF1.40 per share.

The mandate of Professor Guenter Blobel, who first joined the Board in 2005, expires in April 2009. The Board wishes to express its gratitude to Professor Blobel for his highly-appreciated services over the years. Finally, the Board will propose the individual re-elections of Ms. Carolina Mueller-Moehl as well as Messrs. Kaspar Villiger and Daniel Borel.

Company Web Site: http://www.nestle.com

-Zurich Bureau, Dow Jones Newswires; +41 43 443 8040; zurichdjnews@dowjones.com