Nestle India's business loss could be more than 30%, says MD Narayanan

Prime Minister Narendra Modi's call for swadeshi was misinterpreted by some. We are here for 108 years. We have 7,200 Indian employees. We work with over 100,000 Indian farmers, says Nestle India CMD

The country’s largest food company Nestlé has weathered many storms – from the Spanish Flu of 1920 to the Maggi noodle debacle in 2015. SURESH NARAYANAN, chairman and managing director of the FMCG major, believes the current storm is another opportunity to align with the changing needs of consumers. In a media webinar, he shares his views on a wide range of topics. Edited excerpts:

Q: What is the impact of the countrywide lockdown on Nestlé ’s business so far?
 

It’s difficult to assign a number as we have not been able to establish contact with all retail partners yet. We don’t have an exact count of the stock in trade channel. It is a fact that manufacturing has come to a grinding halt overnight and is gradually being ramped up to 70 per cent of total capacity. That gap (with normal level of operations) still remains.

Q: The loss of business since April 1 is at least 30 per cent?
 

It could be more. We will witness an impact in the current quarter.

Q: What is the impact Nestlé foresees from the latest wave of swadeshi products, given it has a Swiss origin?

Prime Minister Narendra Modi’s call for swadeshi was misinterpreted by some. We are here for 108 years. We have 7,200 Indian employees. We work with over 100,000 Indian farmers. Our brands are known for their Indian-ness and consumers have loved them for decades. Nestlé India is all about Made In India, Made For India, and serving India and the Indian consumers. We also contribute Rs 3,600 crore yearly to the Indian exchequer.

Q: What are the other changes you see in the coming days?
 

Consumer preferences and buying patterns are altering. With poor consumer sentiment, many may scale down – leading to a growth in popularly purchased products in essential categories. Some may scale up towards safer and more hygienic products. This shifting dynamics will leave many brands or products redundant and thus, plans will need to be revisited.

On the other hand, the ongoing reverse migration – from urban centres to rural areas – may boost growth in the rural market.

Q: Has Nestlé done the assessment of its portfolio?
 

It is a work in progress. We have taken into consideration all our brands and stock-keeping units across business clusters. We are identifying brands and products with a better prospect. The exercise is also helping us reschedule our innovation pipeline - some projects may not be relevant now, given the change in consumer preferences and buying patterns.

However, the pace of innovation will not slow down. We have launched over 50 products in the past three years and will continue to do so.

Q: What are the challenges that still persist and at what level is Nestlé operating now?

Initial challenges like arranging trucks have become less severe, but issues related to obtaining permits (e-passes) for interstate transport persist. We have managed to scale back manufacturing to 70 per cent of capacity, but are urging authorities to raise the limit to at least 75 per cent.

So far, only about 40-50 per cent of retail outlets have been activated. Interestingly, distribution in smaller towns and markets is better than the larger centres.

Q: What role has e-commerce played during the crisis?
 

E-commerce was growing fast, but this crisis has further accelerated the growth engine. We observed 90 per cent jump in business through e-commerce; its share (of total sales) has doubled (to 3 per cent), from 1.5 per cent a year ago. We are ramping up our presence on the platform and formulating long-term partnerships with all leading e-commerce players.

Q: How does Nestlé plan to reopen its offices?
 

As head of the family, my approach is to be extremely cautious and conservative. The branch offices – in Delhi, Mumbai, Kolkata, and Chennai - will remain closed for a few more weeks. Only the head office is functioning, with a dozen employees, compared to its capacity of 600. Work from home is working fine and there is no let-up in productivity. We have allowed our field executives to operate only in green zones.

A concrete plan has been prepared and offices are being prepared for a post-Covid world. It includes regular sanitisation of office premises, clear marking of areas and sitting arrangements, restriction on movement on the premises, and closure of cafeterias. All employees are being trained by human resources and training teams, and mock drills are being conducted.