GURUGRAM: FMCG major Nestle India will focus on volume growth going forward, in a market that is "still impacted by inflation", to remain in top quarterly performance, the company's Chairman and Managing Director Suresh Narayanan said on Monday. .
The company, which will open the first boutique of its Nespresso premium range offering coffee and machines in Delhi later this year, aims to account for 20 per cent of its sales in the long term for premium products including health sciences.
Speaking to reporters here, Narayanan Sai said Nestle India is looking to increase its total touchpoints across the country to 60 lakh in the next 4-5 years, from the current 51 lakh.
Emphasizing the need to increase volumes, he said, "The future of consumer goods companies will depend on their ability to enter more homes with more opportunities and more products for use."
Nestle India clearly aims to accelerate volume growth, he said, adding that the company had "about 8-9 per cent of total growth or 11-12 per cent volume growth" from 2016 to 2022.He said the company recorded "about 9 per cent domestic sales growth in the financial year ending March 31, 2024. The underlying volume (growth) is about 4 per cent."
As part of the strategy to drive volume growth, Narayanan said Nestle Indi would look to reach "about 6 million" touch points in the next 4-5 years, down from the current 5.1 million.
“Only then will there be a reconsideration whether we need to expand further or we need to consolidate,” he said.
In terms of village reach, he said the company has currently reached 2 lakh villages, up from about 20,000 five years ago."Now we will start to stabilise, as the increasing cost of distribution will be met with increasing revenues. Therefore, now we will focus more on the depth of distribution rather than increasing the number of villages," Narayanan said.
Commenting on current market conditions, Narayanan said, "The market is still being affected by inflation. To this extent, there is some tendency to postpone discretionary buying."
Although there were expectations of higher consumption during the ongoing genera elections due to hot weather conditions, he said, "this may prove to be just another (normal) month".“The markets will be keeping an eye on good monsoon and when the new government is formed,” he said.
Asked about premium products, Narayanan said, "The category is delivering 12-13 per cent of our sales. I would like to grow that number to 15-16 per cent in the medium term and 20 per cent in the long term."
He said Nespresso and Health Sciences products also fall in the premium product category.
On Nespresso, he said, “We have a strong presence with Nescafe, Nescafe Sunris and Nescafe Gold.Now we are moving up the value chain. Nespresso will be one of Nestlé India's operating units and we hope to open our first boutique in Delhi by the end of next year and then in other cities as well."
Globally, Nespresso is present in around 90 markets with around 800 boutiques and an immersive premium coffee experience, he said.
"It has been in various forms, being offered to India in some form or the other and we have decided to take advantage of it," he said. The capsule has been included in the recently signed European Free Trade Agreement. Doing this will reduce imports.Reducing the fee from the current 100 per cent to zero over the next 10-year period also supports the company's move.
On Nestle Health Sciences business, he said the recently signed joint venture with Dr Reddy's will help it drive volume growth through greater reach as the pharma major has a strong presence in the segment.
"We found ourselves a little behind in terms of having enough channels to be able to tap into this huge opportunity of over Rs 23,00 crore to Rs 24,000 crore in the country," he said.
In the joint venture, Dr Reddy's will hold 51 per cent stake and the remaining 49 per cent stake will be held by Nestle and after a period of six years, Nestle will have a call option to increase its stake from 49-60 per cent with a minimum . He said that 40 percent help is being provided by Dr. Reddy's.“It will depend on how the business develops and how we take it forward,” Narayanan said, adding that for now the CEO of the joint venture will be appointed from Dr Reddy's.
The company, which will open the first boutique of its Nespresso premium range offering coffee and machines in Delhi later this year, aims to account for 20 per cent of its sales in the long term for premium products including health sciences.
Speaking to reporters here, Narayanan Sai said Nestle India is looking to increase its total touchpoints across the country to 60 lakh in the next 4-5 years, from the current 51 lakh.
Emphasizing the need to increase volumes, he said, "The future of consumer goods companies will depend on their ability to enter more homes with more opportunities and more products for use."
Nestle India clearly aims to accelerate volume growth, he said, adding that the company had "about 8-9 per cent of total growth or 11-12 per cent volume growth" from 2016 to 2022.He said the company recorded "about 9 per cent domestic sales growth in the financial year ending March 31, 2024. The underlying volume (growth) is about 4 per cent."
As part of the strategy to drive volume growth, Narayanan said Nestle Indi would look to reach "about 6 million" touch points in the next 4-5 years, down from the current 5.1 million.
“Only then will there be a reconsideration whether we need to expand further or we need to consolidate,” he said.
In terms of village reach, he said the company has currently reached 2 lakh villages, up from about 20,000 five years ago."Now we will start to stabilise, as the increasing cost of distribution will be met with increasing revenues. Therefore, now we will focus more on the depth of distribution rather than increasing the number of villages," Narayanan said.
Commenting on current market conditions, Narayanan said, "The market is still being affected by inflation. To this extent, there is some tendency to postpone discretionary buying."
Although there were expectations of higher consumption during the ongoing genera elections due to hot weather conditions, he said, "this may prove to be just another (normal) month".“The markets will be keeping an eye on good monsoon and when the new government is formed,” he said.
Asked about premium products, Narayanan said, "The category is delivering 12-13 per cent of our sales. I would like to grow that number to 15-16 per cent in the medium term and 20 per cent in the long term."
He said Nespresso and Health Sciences products also fall in the premium product category.
On Nespresso, he said, “We have a strong presence with Nescafe, Nescafe Sunris and Nescafe Gold.Now we are moving up the value chain. Nespresso will be one of Nestlé India's operating units and we hope to open our first boutique in Delhi by the end of next year and then in other cities as well."
Globally, Nespresso is present in around 90 markets with around 800 boutiques and an immersive premium coffee experience, he said.
"It has been in various forms, being offered to India in some form or the other and we have decided to take advantage of it," he said. The capsule has been included in the recently signed European Free Trade Agreement. Doing this will reduce imports.Reducing the fee from the current 100 per cent to zero over the next 10-year period also supports the company's move.
On Nestle Health Sciences business, he said the recently signed joint venture with Dr Reddy's will help it drive volume growth through greater reach as the pharma major has a strong presence in the segment.
"We found ourselves a little behind in terms of having enough channels to be able to tap into this huge opportunity of over Rs 23,00 crore to Rs 24,000 crore in the country," he said.
In the joint venture, Dr Reddy's will hold 51 per cent stake and the remaining 49 per cent stake will be held by Nestle and after a period of six years, Nestle will have a call option to increase its stake from 49-60 per cent with a minimum . He said that 40 percent help is being provided by Dr. Reddy's.“It will depend on how the business develops and how we take it forward,” Narayanan said, adding that for now the CEO of the joint venture will be appointed from Dr Reddy's.
