FMCG Major Nestle India Expects Double-digit Volume Growth This Year

FMCG major Nestle India on Friday said there could be a downward revision in prices as the inflationary pressures have started coming down, and expects a double-digit volume growth this year.

Nestle India is expanding its retail network in the rural areas and expects more than 20 per cent of the sales to come from those areas. Besides, it is expanding in the pharmacy space with 'Nestle Health Science' products.

"Unless there is an adversity because of the El Nino effect, which is being talked about on the monsoons, I would expect the demand position will be fairly stable for us going forward and we should be able to continue on the path of double-digit growth," Nestle India Chairman & Managing Director Suresh Narayanan told PTI.

The company has reported volume growth in the last 20 out of the 25 quarters.

"I think inflationary pressures are starting to come down. So I do hope that the pricing pressures would also start to come down," he said.

"We are now seeing volume growth come back. First quarter (growth) is 5 per cent Going forward, if there is a moderation on the inflationary pressures, I think we will be able to get back into the regime of a more balanced growth between the value and volume," he noted.

According to him, in the last 6-7 years, the company's CAGR (Compound Annual Growth Rate) has been about 10 to 11 per cent.

"Out of this, about 2 to 3 per cent has been pricing and 7 to 8 per cent has been volume. Last year, the volume came down. The volume growth was lower at about 4 per cent and the balance was price growth," he said.

On whether Nestle would pass on the benefit of cooling inflationary pressures, Narayanan said, "we will look at appropriate measures".

"Today, we have not reached a stage where the release of inflationary pressures is giving us the benefit of relenting as far as pricing is concerned.

"But going forward, if there are significant benefits that we see coming out of the procurement prices of raw materials, most certainly in terms of value delivery, we will look at and making adjustments to the mix and to the pricing," he said.

He also said that price of milk is "on fire" and hinted at some actions with respect to its milk-based portfolio.

"We are watching the space to see how it pans out in the coming months. Unless it is absolutely necessary, there will be no play on pricing... the price increases are fairly sharp and there is also an availability issue," he added.

Nestle is also expanding its presence in the rural market and aims to cover around 1.2 lakh villages, above the population of 2,000, in the next 12 to 18 months.

Currently, Nestle India is present in 90,000 villages and gets around 20 per cent of its sales from rural areas and expects this to go up by around 25 per cent.

"... the smaller packs are certainly gaining traction in rural markets. Actually, there is an up-trading happening.

"For example in our Maggi Noodles, some of our multi packs, the sales proportion in rural markets, is starting to go up," he said, adding that brands like KitKat and Nescafe are also starting to see traction. "Nutrition brands are also starting to see traction."

Now, the aspiration of rural consumers is towards better brands, more trustworthy brands, more quality-oriented brands, he added.

When asked about the pet care and health science portfolio business, Narayanan said Nestle India is "quite optimistic" about it.

"We are operating with a world class brand in health science. New launches are being proposed, he added.

Nestle also has products in the diabetes and therapeutic segments.

"We are also looking at other supplements that we can come out with. So that's an encouraging part because the country does have a number of health challenges as well. And this is something that we have the expertise for as a company," Narayanan said.

Nestle India already has a strong presence in the pharmacy channels through its milk and nutrition business.

"We have a fair presence in the organised pharmacy and e-pharmacy, which is now becoming larger... The health science portfolio of 11 products are all largely hospital or physician recommended and they also go to the chemists channels. So this is what we are leveraging and playing to our strength in the pharmacy channels." he said.

In the e-commerce sector, which now contributes 7 per cent of Nestle India business today, quick e-commerce is going to be big growth driver.

"E-commerce will continue to be a robust channel for us. Having said that, the organised general trade will still be a majority of the business, more than 80 per cent of our business, which will continue," he said.

Nestle India is a subsidiary of Swiss FMCG major Nestle and had a revenue of Rs 16,896.96 crore in 2022.

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