Nestle India: Commodity Inflation to Fall, Positive Outlook

New Delhi, Jun 26 (PTI) Commodity inflation, which impacted volume growth in the last few quarters, is coming down as prices are stabilising but the upcoming quarters should see things returning to normal, the company's outgoing India Chairman & Managing Director Suresh Narayanan said on Thursday.

However, commodities like coffee, cocoa remain at "decadal highs and that clearly puts an enormous amount of pressure in terms of managing the penetration-led growth and the bottom line (margins) of the company," said Narayanan, while addressing his last Annual General Meeting (AGM) for Nestle India.

Going forward, Nestle will not like to go for price increases wherever it can, however, it will also depend on the commodity prices, as coffee, which is up 60-70 per cent and is "very difficult to manage", he said, adding that overall the outlook is "a bit more positive" in the upcoming quarters.

Narayanan, who led Nestle during the Maggi crisis a decade ago, in a message to his successor Manish Tiwary, said "crisis is the new normal" and "adversity is the only thing that does not change".

Narayanan, who addressed his 10th Nestle India AGM as Chairman, will retire on July 31, 2025 after serving 26 years, while Tiwary, former Country Manager of Amazon India, will get the baton from August 1, 2025, as per the succession plan announced last year.

He said to mitigate the impact of food inflation, Nestle India took a series of cost-saving and efficiency initiatives. It also initiated price hikes, in a "responsible manner" to ensure that the volume is not impacted and category rules remain.

"There have been short-term pressures... But hopefully, we will be getting back to the normal stride in the coming quarters and months," he said.

Narayanan added that the commodity inflation clearly has "cast its shadow on the overall evolution of the company's volume".

"22 of the last 32 quarters, the company has recorded double-digit growth, which means 10 quarters it has not been double-digit," he said, adding, "that has been largely in the last couple of quarters".

"I am happy to report that things are stabilising. Sadly, we have had to make quite a few price increases, that really had a short-term impact on volumes," he said.

"So we were going forward not to use price increases wherever we can, but again, it will depend on the extent of the cost increases. Like coffee, costs go up 60-70 per cent."

Replying to another query, Narayanan said several new products launched by Nestle India are doing well.

Nestle India launched over 150 new products after the Maggi crisis in 2015, which have contributed to 7 per cent of its sales.

Moreover, Nestle, which gets around 8 per cent of total sales from e-commerce channels, and 6 per cent of them from hyperlocal delivery/quick-commerce platform, is taking a balanced approach between the channels.

"Several of our new products are doing well on e-commerce channels," he said, adding, "Our general trade (kirana stores) and (physical) retail is very precious for us because of their hard work."

Narayana will hang up his boots on July 31, 2025 after leading the company for 10 years. He joined the board of directors of Nestlé India as Managing Director on August 1, 2015, after the Maggi crisis.

Now India is among the top-10 markets of the Swiss FMCG major Nestle SA.

It is now the "largest Maggi market globally" and the second largest out-of-home business for Nestlé in the zone Asia, Oceania and Africa.