Nestle India expects a growth in demand for FMCG products this year on the back of government’s investment push and a more benign inflation. Speaking at a media roundtable on Thursday, chairman and managing director, Suresh Narayanan, however added that there are some stress points in the sector and the last festival season was not as buoyant as expected.

“I think overall headline inflation is certainly down but food inflation continues to be choppy. If there is stability in some of the commodity prices then actually you might start seeing the uptick in consumption taking place,” Narayanan said.

He also hoped that as the general election approaches, there would be economic activities, which would give a fillip to demand.

Narayanan added that uptick in consumption of premium products would continue, which is mainly led by the wealth effect on the upper and upper middle class, but the common man is still impacted.

On rural demand, Narayanan said, for Nestle, rural isn’t extremely muted and is building up. However, there is a polarity of booming premiumisation, which is tepid in the main streets. “If you are the most expensive product in the market and you own certain standing and a certain brand and a certain equity, it gets lapped up very quickly. But if you are a mainstream product, there you are facing the vagaries,” he said.

Narayanan said that Nestle will never become a majority rural company. “Our products are very middle to upper middle to lower middle-class and don’t access the bottom of the pyramid,” he said.

Of the over Rs 19,000 crore sales in 2023, which Nestle recorded, around 20% came from the rural market. Narayanan expects rural markets to contribute around 25% of total sales in coming years.

“If you look at urban penetration now for the company, which five years ago was about 80%, today it is about 93% and similarly, rural penetration also has gone up significantly to rate to about 30-odd per cent, which was in a mid to high single digit a couple of years ago,” he said.

According to Narayanan, Nestle still has a long runway for growth in both urban and rural markets.

On Wednesday, Nestle India reported a 4.4% year-on-year rise in its net profit to Rs 655.6 crore during the October-December quarter, missing Bloomberg consensus estimate of Rs 806 crore.

Revenue from operations during the period was up 8.1% to Rs 4,600 crore, again below estimates of Rs 5,037 crore.