Nestle India plans to introduce new categories to drive growth

Nestle India Chairman and Managing Director Suresh Narayanan said  in a couple of years the company will expand into new categories including healthy ageing, plant-based nutrition, healthy snacking, and toddler segment (beyond 2 years).

"Nestle's growth strategy in India continues to be aggressive. In the last five years, we've had 10 to 11 percent growth in sales y-o-y. Of this, 8 to 9 percent came from volume or mix and 2 percent from prices," Narayanan said on the sidelines of an event organised by the Indian Chamber of Commerce (ICC) on Wednesday.

There is still headroom for growth in the existing categories and much of it is coming from smaller towns, he emphasised, adding that Nestle is looking at introducing new categories instead of brands to drive growth.

Nestle has a total of 20 brands in India, including Nescafe (coffee), KitKat (chocolate), EveryDay (dairy whitener) among others.

There has been a marked change in consumers' choices with a strong willingness for nutritional and immunity-building products from top brands that ensure efficacy and effectiveness, Narayanan said.

The demand for aspirational brands is no longer limited to the metros. People in Tier II, III, IV cities are also willing to pay more for premium products to get a taste of the good life from well-known brands.

Narayanan said the milk and nutrition category continues to be the biggest contributor to its turnover at 45 percent, Maggie range, including noodles, masala, sauces, etc stands at 25 to 30 percent, coffee and beverages at 13 to 14 percent while chocolate and confectionaries is at 40 percent.

E-commerce has enhanced the availability of Nestle's products with online sales contributing nearly 7 percent which is a big improvement from four to five years ago when it was just 0.6 percent, he said.

However, Nestle India hasn't set an online sales target, he said. "We will evolve with the channel and as the opportunity for quick commerce gets stronger, the company will be able to enhance its footprint," he said.

Narayanan underscored that traditional trade will continue to hold a strong position and won't be replaced by e-commerce and it is prudent to nurture all channels equitably.

Around 20 to 25 percent of Nestle's domestic sales come from rural market while the urban market accounts for the rest of the sales, Narayanan said.

He said the rural consumption will make a strong recovery with a good monsoon and government schemes aimed at boosting spending will push the growth in rural markets subdued by pandemic-induced pressures.

Narayanan said Nestle India may raise the prices of its products if the inflation continues to rise but did not state the quantam and the time for it.

"Inflation is a cause for concern. The cost of nine out of 13 raw materials used by us has surged to the highest level in the last ten years. In the last three years, inflation had been limited 5 to 6 percent but in the first half of 2022 raw material and fuel inflation has soared to almost 20 to 21 percent," he noted.

In order to keep the volume growth intact, the company is trying to mitigate impact of price rises using better raw material purchase efficiency, rationalisation and cost-saving programmes within the company as well as pricing.

Asked if the company is considering bridge packaging strategy and lower grammage to avoid hiking prices, Narayanan said while bridge packs could be the way forward, lower grammage is not acceptable as it hurts customer satisfaction if they don't get the value for the money paid.