Nestle India CMD Suresh Narayanan sees mega cities as pressure points

Rising food inflation leading to sluggish FMCG demand

Nestlé India on Tuesday joined other FMCG majors in declaring that food inflation was hitting urban areas the worst while the demand was recovering in rural swathes, as it reported a one per cent year-on-year dip in its consolidated net profit for the second quarter of financial year 2024-25.

“Pressure points” for the fast-moving consumer goods (FMCG) sector are now emerging from mega cities and metros, Nestlé India chairman and managing director Suresh Narayanan said on Tuesday.
 

“The market is facing muted demand as growth in the F&B (food and beverages) sector, which used to be in double digit a couple of quarters ago, is now down to 1.5-2 per cent. While the tier I and below towns and rural areas seem to be reasonably stable, the pressure points are coming from mega cities and metros…It is almost like we are operating in two Indias,” Narayanan told reporters.
 

 

Parle, Dabur and Tata Consumer have already said that stress in cities dragged the overall growth down in the September quarter.

Nestle India’s milk and nutrition portfolio saw the largest slowdown alongside the chocolate and confectionery segment, in which, while Kitkat saw a high single digit growth, the Munch brand witnessed regional competition and will be addressed fundamentally. 

Narayanan flagged soaring food inflation as a cause for concern, adding that “it will lead to an increase in prices if they become unmanageable.” 
 

He pointed to growing commodity costs — namely coffee and cocoa — which have reached 10 year highs. While coffee prices have jumped 60 per cent since last year, cocoa prices have risen by almost 2.5 times, leading to an average increase in prices for consumers by up to 15-30 per cent. “We try to protect the lower price points and take price increases on the larger packs. This has led to a subdued, but positive volume growth (in coffee),” he said. 
 

However, Narayanan ruled out any more immediate price hikes, saying, “Apart from coffee and coca, we have economies of scale in other commodities and there is some stability in milk, packaging material and fuel. We want to get back to penetration led volume growth and any more price hikes will sharply retract us from that path.”
 

However, Narayanan said that a revival in the demand scenario is possible in the foreseeable future, adding that a good monsoon would help agricultural incomes. 
 

“Mega cities and metros will go through their own pain points. Once they come back – which will also play a role in overall economic revival – and rural starts to improve, then I think we are reasonably on the road to recovery,” he hoped. 

On a consolidated basis, Nestle India’s net profit fell 0.9 per cent to Rs 899 crore in the September quarter, while net sales reported a marginal uptick of 1.3 per cent. 

Cerelac variant with No refined sugar launched

 

Nestlé India launched the ‘no refined sugar’ variant of its baby food brand Cerelac.  The company will expand its Cerelac range to 21 variants, 14 of which will be refined-sugar free. Earlier this year, Swiss NGO Public Eye had alleged that Nestle was adding 

sugar and honey to its range of infant milk and cereals sold in low- and middle-income countries but not in Europe and other nations. The company said it was researching the 'no refined sugar' variant for three years, and had cut added sugar in Cerelac by up to 30 per cent in the last five years.