Nov 11, 2020
India’s rural region has quite a big influencer to the market values of food industries. Just like Nestle India, which has showed double-digit growth in the third quarter saw stronger growth trends in rural region compared to the urban region.
According to Suresh Narayanan, CMD, Nestle India, the growth was very much better in rural zones in the July-September period comparatively to the rate of growth in urban.
Nestle had strengthened its rural distribution and now covers nearly 90,000 villages. Rural India contributes about 20-25 percent of the company’s sales. In fact, the company witnessed strong recovery trends and is back to pre-Covid levels in terms of, quantity sales, which are sales from distributors to the market, in the third quarter.
In January-September period, the company’s milk products and nutrition business grew by 10.2 percent, prepared dishes and cooking aid segment grew by 7.9 percent, the confectionery segment grew by 5.1 per cent and powdered and liquid beverages grew by about 1.4 percent.
A report by brokerage firm Motilal Oswal Institutional Equities shares the information that milk and nutrition was the biggest contributor to sales growth in the nine months of the calendar year 2020 (47.1 percent). If this impetus withstands in the fourth quarter, it would be the highest growth for the category since 2014.
The Swiss giant company is also concentrating on cost savings and as part of its strategy to reduce manufacturing complexities, it is prioritizing key pack sizes across its portfolio and also leveraged on different transport networks such as railways and waterways.
The Motilal Oswal states that Nestle is expanding rapidly with the same white-collar headcount. It has launched Project Shark, which targets cost savings of ₹70 crores this year across cost items.
Maggi has shown a significant increase in penetration with the addition of new households across the portfolio of noodles, sauces, and seasonings.
The company said that this led the “prepared dishes and cooking aid” segment to register a growth of 19.1 percent in the July-September quarter. The packaged food major has also been focusing on new product and variant launches under the brand Maggi.
It has recently launched a range of Maggi Fried Rice Instant spice mixes and new variants of Capsica, Chatpata Tomato, and Desi Cheesy in the noodles segment among others.
In a bid to navigate the challenges in the pandemic times, the company said it has set up a market committee headed by the CMD, to monitor regional level risks, ensure business continuity and take informed the decision on footfalls in factories besides implementation of SOPs to ensure the safety of its employees.
Narayan said that they are now focusing on reducing manufacturing complexities by prioritizing key pack sizes across our portfolio. Hence, we are also focusing on 100 SKUs during the current times to simplify the supply chains.
We also leveraged on alternate transport networks like waterways and railways when road transport was crippled. All these measures helped us bounce back,” Narayanan stated.