Though there is a big question mark over the performance of FMCG Companies in Indian rural markets, yet Nestle India is doing quite well in rural areas claimed the company’s chairman and managing director Suresh Narayanan.
In fact, the company is outreaching the combination of rural and semi-urban areas, which it calls “Rurban”.
According to Narayanan amid the big question on rural India and rural growth, I do admit that the rural play of Nestle is only 20 percent but you see the growth has been around 25 percent to 26 percent. Again, rural India for Nestle India is resonating and we are on a path to accelerated growth in rural markets as well. Narayanan said distribution will be key in achieving growth from the smaller markets, he added.
“The power and resonance of a consumer goods brand lie in the distribution… this is our single-minded focus. “By 2022, we will have accelerated our Nestle direct reach from 1.4 million to 1.5 million, with an overall reach of 5.1 million,” he said.
The Maggi crisis in 2015 had shrunk Nestlé’s reach considerably, but Narayanan claimed, “We have built back on these years, and now it is fully complete.”
Making it back in rural and semi-urban markets has been a challenge, as, in towns of less than 1 lakh population, the growth was still positive but has come down from 13 percent to 5 percent. This is where the pricing impact of some of Nestlé’s small packs, especially in rural categories, has some impact.
Nonetheless, growth continues to be in double digits in megacities, although there has been a decline, as we have seen a dip there from 23 percent to 12 percent. “I think this is the consequence of small pack sales,” he said, adding, “On a longer-term basis, I do not see a cause for concern.”
Metro continues to be strong. In terms of town class 1, with a population below 10 lakhs, the growth has been strong on the back of a strategy of increasing penetration focused on activities and activations.
High commodity prices continued to be challenging, but the company is confident of partially mitigating them. This had an impact, but this is not something that the company had not anticipated. However, the company is extenuating a part of it through relationships, partnerships, accelerated economies of scale, and a sharp procurement strategy.
“We are confident of mitigating a part of it.” We are confident of being taken care of by some additional opportunities for growth. Premiumization and upgrading would come too. “There is still considerable pressure on the bonnet in terms of wheat prices,” he said.
Nestle India has delivered its “highest double-digit growth in a decade,” led by sustained volume and price mix-led growth, leading to strong value growth, Narayanan added. In 2022, Nestle India’s total sales grew by 14.5 percent to Rs. 16,789.53 crores, and domestic sales increased by 14.8 percent to Rs. 16,097.60 crores, “with broad-based performance across all categories.” Nestle India’s net profit for the fourth quarter increased by 65.5% to Rs. 628 crores.