Walmart entry to boost local online grocery business: Nestle India CMD

Nestle India Chairman and MD Suresh Narayanan shares his thoughts with BS about Nestle's opportunities and challenges

While in recent quarters Nestlé’s comeback has gained pace, macroeconomic developments pose challenges as well as present opportunities for its business. 

Three years after the Maggi fiasco, Nestlé India Chairman and MD Suresh Narayanan shares his thoughts with Arnab Dutta in an interview. Edited excerpts:

After years, Nestlé has managed to grow (by volume) all its product categories in 2017. What are the factors that worked?

In the past two years, we have managed to cut down the product development cycle to less than a year from two years. We have expanded the number of SKUs (stock keeping units) by 10-15 per cent. While earlier we have had periods when a flurry of products were launched and then pulled back, now the strategy is to back the new launches sustainably. We have launched close to 30 products since 2016 and about a fifth of our growth is now coming from these. Consequently, the all-round growth is imparting aggressiveness and a sense of competition among different teams. This is a healthy competition that lifts the areas that are growing at a slower pace.

How do you plan to leverage the hype that Starbucks enjoys here?

It’s too early to say anything specifically. The deal is on and a lot of nuances are yet to be cleared. At the moment, the clear focus markets are the US and China. We have to first assess how it pans out in these markets. Yes, Starbucks is a big name and consumers aspire to get associated with it. And I am sure all major markets will have a share of the action.

Crude oil prices are going up, the rupee is depreciating, and the MSP is expected to go up by 50 per cent. Also, the government is expected to spend more ahead of the general election. How does macro-factors impact business prospects?

I am cautiously optimistic. Increased spending should help. Rising oil prices and a depreciating rupee will require us to manage costs better. But I am deliberately staying away from calculating the impact of any big surge in the MSP.

What is the contribution of the FSSAI in Nestlé’s comeback?

The FSSAI proactively worked to better the product approval system by listing the required ingredients for each product category. The simplification of regulatory processes has benefitted the food processing industry, including Nestlé. The work that the FSSAI has done is appreciable.

How Walmart’s backdoor entry in Indian retail landscape may impact the packaged food sector and Nestlé?

I am sure there will be a positive exertion and it should be good for the overall online grocery business. Walmart is capable of developing the backward linkages – from farm to fork – which is lacking in India’s food logistics and retailing space. While e-commerce plays a relatively small role in packaged food business, we are seeing traction in smaller towns. The opportunity for Nestlé is in placing suitable premium products on the platform.

Nestlé has been asked to deposit transition amount for not passing on tax benefits under the GST to consumers. What are the other GST-related issues you are still facing?

There were two issues. During the November deadline, we were holding some stock for which the credit returns were paid. But everything else was due for a reordering, including new packaging materials, which took some time. Thus, we went forward and explained to the anti-profiteering authority about the operational delay. They asked us to deposit the transition amount in the consumer fund. The amount is now being calculated. Overall initial glitches related to the GST are getting over and the anxiety among trade partners is fading. While initially wholesale went defunct, it is now ready to embrace the change.