Good run for packaged food & beverage firms in third quarter

15 March, 2018
 
Country’s top food and beverage companies appear to be putting the rough sales patch behind them as consumer spending kicks in. For the October-December 2017 period, companies, such as Nestlé India, Britannia, Varun Beverages, GlaxoSmithKline Consumer Healthcare, Heritage Foods, Parag Milk Foods, and Manpasand Beverages, reported good top line numbers. The good run is likely to continue in the coming quarters.
Net sales growth for these firms hovered between 13% and 39% for the period under review, the highest in four quarters. Analysts said top line growth in this period was high because of a lower base in the year-ago quarter. The note ban crippled growth during the three months ended December 2016, said Sachin Bobade, senior analyst at Mumbai-based brokerage Dolat Capital.
While performance at the bottom line level was mixed for these companies in the period under review, analysts said this could go up as companies reined in overall expenditure to improve net profit growth. Nestlé, Britannia, GlaxoSmithKline Consumer and Manpasand Beverages saw double-digit net profit growth between 19% and 65% for the quarter under review.
While net profit growth for Heritage Foods declined 19%, Varun Beverages reported a loss and Parag Milk Foods reported a profit after a loss in the year-ago period. Abneesh Roy, senior vice-president, research (institutional equities), Edelweiss, said the broader trend of growing packaged food and beverage penetration in India remained intact, presenting an opportunity for these companies. 
Both small and large companies in the sector, therefore, would take advantage of this as consumer sentiment improved. Last week, Nestlé said it was decentralising its decision-making procedure to have better consumer insights, focused offerings to different sets of people, and to revamp market penetration.
The aim was to double turnover in the next two to three years from Rs 100 billion now. For this, the company has been setting up 15 virtual teams for different clusters, launching local variants of its established brands and coming out with targeted communication and regional distribution strategies, according to Suresh Narayanan, chairman and managing director, Nestlé India.
The move, said Roy, came as Nestlé eyed growth in rural and semi-urban areas, the regions where it has a limited presence. Nestlé is targeting 100 towns in the country. Britannia is also widening its distribution network through a focus on direct reach, targeting rural areas, and investing in its brands to achieve profitable growth, managing director Varun Berry said. Britannia would introduce 50 products under existing as well as new categories by 2020 from 16 now.
 These launches would be supported by in-house R&D and marketing as well as manufacturing in new and existing factories, Berry said. The firm would also reduce wastage and improve efficiencies in the supply chain to achieve its target.

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