Enhanced penetration in semi urban and rural markets will drive growth from here on, Nestle India chairman and managing director Suresh Narayanan said on Friday.
“The growth that we are seeing is not just in urban centres or just in mega cities and metros where the growth has been very strong, but also in the TC 1 to TC-6,where the growth has been in double digits and continues to be strong,” Narayanan said.
“Also in rural India, growth has been strong,” the MD said adding that currently 20% of company’s revenue comes from rural areas.
“Our base is relatively lower at about 20%, but it’s not small. It’s still a fairly large business that we have and what I’m happy to see is the kind of acceptance that consumers have for our brands.”
According to Narayanan, the company has identified 12-13 states in which it will increase its penetration into the rural markets with relevant products, infrastructure and enhanced manpower. “So we have not gone to all 29 states… We are playing on the portfolio and the SKUs that are relevant to these (12 to 13 states’) geographies and we are creating increasing the number of distribution points.”
Narayanan spoke to reporters a day after the FMCG major reported a 37% rise in its net profit to Rs 698.34 crore for the second quarter of 2023 from Rs 510.24 crore reported in the same period a year ago. Net sales increased 15% to Rs 4,619.50 crore during the period under review from Rs 4,015.98 crore in the corresponding period of last fiscal.
On the question of food inflation, a key cost for the F&B major, Narayanan said: “We still have a phenomenon that we have to be concerned about and we would want to price (products) well.”
“If the commodity prices remain as we think… then I would not be compelled to do anything as far as pricing is concerned,” he said citing that wheat and milk costs have remained relatively stable, however, coffee is up by almost 50-60%.
“There are not so many commodity plays in the southward direction for me to make those bigger adjustments (price cuts).”
Rs 4,200-crore investment planned by 2025
Narayanan also said the company has “strong commitments” for local manufacturing, with plans to invest Rs 4,200 crore by 2025, including in setting up its 10th plant in the country in Odisha.
“The investments done are fairly significant… till the first half of 2023, about Rs 2,100 crore already been invested on capital investments,” Narayanan said. “Another Rs 4,200 crore is being spent between 2023 and 2025. This includes around Rs 900 crore for a new factory in Odisha,” he said.
(With PTI inputs)