March 5, 2018
2017 is the year that seen the twist in the economic structure as GST rolled in and the industry was coping with demonetization impact. But for certain companies in the food industry, the last three months of the year proved to be excellent in terms of sales. Some of India’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 like Nestlé India, Britannia, Varun Beverages, Heritage Foods, Parag Milk Foods, and Manpasand Beverages, reported good numbers. This is likely to continue in the coming quarters.
Net sales growth for these companies was between 13 and 39 per cent for the period under review, the highest in four quarters. 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. Nestlé, Britannia and Manpasand Beverages recorded double-digit profit growth between 19% and 65% for the quarter under review. While net profit growth for Heritage Foods was down by 19 per cent, Varun Beverages reported a loss and Parag Milk Foods reported a profit after a loss in the year-ago period.
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. Chairman and Managing Director at Nestlé India, Suresh Narayanan said it was decentralising their decision-making procedure to have better consumer insights, focused offerings to people, and renew market penetration. The aim was to achieve double turnover in the next 2-3 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. Nestle is targeting rural and semi-urban areas for growth as in these regions, it has a limited presence. Hence they are targeting 100 towns in the country.
Managing Director, Varun Berry said Britannia will also widen its distribution network through a focus on direct reach, targeting rural areas, and investing in its brands to achieve profitable growth. The company 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. The firm would also reduce wastage and improve efficiencies in the supply chain to achieve its target.