The importance of prepared dishes and cooking aids segment (that mostly comprises of Maggi) for Nestle does not only revolve around the fact that it contributes close to 30 per cent of the revenue for Nestle India but also because it is the only volume driver for the company. In the year 2014, PDCA was the only segment that witnessed a rise in volumes and thus contributed to its growth.
For the year ended December 2014, while the gross sales quantity (in metric tonne) for the food major contracted 0.6 per cent over that in 2013, the PDCA segment saw the sales quantity rise 3.7 per cent. The milk products and nutrition segment, which accounts for almost 45 per cent of the gross sales revenue, shrinked 2.3 per cent in 2014 and fell to 135,591 MT. The milk product and nutrition segment also witnessed a contraction in volumes in 2013 over the year 2012. The volume within this segment has been on a decline over several years and has now come down to 135,591 MT from 144,397 MT in 2010.
The volumes for the other two segments-— beverages and chocolates & confectionary-— contracted 10.9 and 12.1 per cent, respectively. Therefore, the only segment that was contributing to volume growth for the company has been PDCA and within that Maggi was the biggest growth item.
The overall volume shrinkage for the food major, barring the PDCA segment, comes at a time when the overall consumption of milk products has been on a rise in India.
Experts say that the volumes have been growing in the pouch milk segment and in cheese and butter where Nestle is not present and say that co-operatives and private dairies have gone ahead of Nestle in that segment. The gross sales revenue for milk production and nutrition segment has grown despite shrinkage in volumes and was up 12.4 per cent. Experts say it is a result of rise in prices. “While there has been a rise in price of milk products, the infant food segment is a high margin segment and the company has been making money despite decline in overall volumes in the milk product and nutrition segment,” said a sector expert.