Nestle India: Consumption Moderation, Inflation from West Asia

New Delhi, Aug 4 (PTI) Consumption growth in the food and beverages sector could see some moderation in the near term, FMCG major Nestle India said on Tuesday, flagging inflationary pressures stemming from the ongoing West Asia conflict and expectations of a weak monsoon linked to El Nino.

The company is already seeing " a little bit of slowdown in market growth", which "is a challenge", Nestle India Chairman & Managing Director Manish Tiwary said in his opening remarks during an analyst call on Tuesday.

"Consumption could moderate in the short-term," said Nestle India in its presentation for the analyst meet.

"Overall consumption and F&B growth a watch-out in the short-term" due to inflation in the raw material "impacted by the West Asia conflict and monsoon expectations due to El Nino", indicating that the food and beverage industry's growth trajectory will remain a key area to watch in the coming months."

Tiwary said the market environment has become somewhat challenging, with industry data indicating softer growth trends.

"There are a few things happening in the environment. The fact is, we are seeing a little bit of slowdown in market growth, as reported by Nielsen. Also, there is a little bit of impact on food inflation," he said.

Tiwary, however, said the company remains optimistic given the relatively low penetration levels across several categories, opportunities in rural markets and the ongoing premiumisation trend.

"While these are headwinds, inflation would be of concern. I just feel that given where we are on this journey in terms of penetration, in terms of the rural consumer, in terms of premiumisation, I remain quite confident of our ability to handle these short-term blips," he said.

He noted that the geopolitical situation in West Asia has created challenges through higher costs of energy, packaging materials and edible oils, besides causing shipping disruptions and currency volatility.

"Yes, it's a challenge. There are some costs which are going up -- things like energy, packaging, oil, shipping disruptions. There's volatility in the currency. Does it concern us? Yes," Tiwary said.


He added that the company is deploying value-chain productivity initiatives to mitigate the impact of such pressures and maintain growth momentum.

Despite the near-term challenges, Tiwary said Nestle India remains confident that its long-term growth trajectory will remain intact.

"I still believe the medium- to long-term growth story for us does not get impacted. The team has the resilience to work around and address some of these challenges while continuing to delight consumers in India," he said.

The maker of Maggi, Kit Kat and Nescafe last month reported a 48.26 per cent on-year jump in consolidated net profit to Rs 958.68 crore along with a 25.4 per cent rise in revenue from Sale of Products at Rs 6,363.27 crore for the June quarter.

Tiwary said Nestle is focusing on continuing volume-led growth, supported by strong brands, distribution width, and consumer preference. The company has delivered double-digit growth over the last five years, with resilient performance and accelerating growth in recent quarters.

Besides, Nestle is also expanding its rural distribution as it is "still having half of what some of peer group companies are", said Manish, adding its "a long way to go". He also acknowledged that rural is growing faster than urban.

Nestle is also focusing on premiumisation and E-commerce has been a significant growth channel, with quick-commerce. Nestle, which has positioned itself well for premium food and beverage categories, with strong brands and innovations, is leveraged e-commerce partners for targeted activations, consumption occasions, and off-platform collaborations.

"The premium portfolio has grown from 11 to 14 per cent, with premium growth ahead of overall growth," he said, adding, "I think together with our partners in e-commerce, these capabilities are helping us scale faster in urban markets, drive our innovations faster and premiumize much faster."

According to Tiwary, Nestle's household penetration for brands like Maggie, Nescafe, and Kit Kat is in the mid-50s, indicating significant headroom for growth. It has increased its distribution points by 4.4 times, with a focus on direct distribution to ensure fresh products reach consumers.

"Over the last five years, Nestle has added close to 500,000 retail outlets, achieving the highest ever expansion in outlet reach," said Tiwary.