March 2, 2021
Nestle is all set to tighten its hold on fast-growing the rural market as it plans to reach around 1.2 lakh villages with each having population of over 5,000 over the next two-three years, supported by distribution expansion and some portfolio tweaking. To support the move, Nestle is also planning a communication thrust for messaging and advertising, which will be more rural-centric.
Nestle is not only expecting the urban markets to grow but also evaluating Direct-to-Consumer (D2C) channels to reach its customers at their doorsteps. According to Narayanan, a revival of the urban market is also important as a third of Nestlé’s business clearly comes out of the large cities and metros, and there are signs of improvement as enterprises open up.
Nestlé’s chairman and managing director Suresh Narayanan said, “The target is to reach 1, 20,000 villages. That is all villages, with more than a 5,000 population is really the kind of reach that you would like to establish in the next two to three years. And this will be done, not only through distribution expansion but relevant parts of the portfolio will be tweaked. The work is on in terms of, renovating and innovating some products that we will be putting out in semi-urban and rural markets.
While talking about the rural reach of Nestle, Narayanan said in 2017, it was covering roughly about 1,000 odd villages in the country, and in 2019, that number was almost 89,000.
Small rural and semi-urban areas of tier II, III, and IV have shown a greater resilience against the pandemic and have performed better than the big metros, which are still struggling. In the last couple of quarters, the company is witnessing normalization in sales after pantry uploading during the sever periods of the pandemic.
Narayanan has ruled out any immediate price hike due to higher costs and said it has plans in terms of procurement and cost efficiencies to mitigate some of the commodity cost increases. While talking about D2C, a sales channel evaluated by several FMCG companies, Narayanan said it is an interesting space providing competitive offering over other channels.
Narayanan said it had launched almost 80 new products in the last 4-5 years and there are 40 to 50 projects which are on the anvil, on which work is being done. Even during the pandemic year, we did launch new products but the pace was not aggressive as before.