Nestle India profit up 8.3% in Sept qtr, net sales growth at five-year high

Strong growth in e-commerce channels driven by emerging formats such as 'quick commerce' and 'click & mortar'; E-commerce contribution to sales at 7.2% in the quarter

Nestle India reported an 8.3 per cent surge in net profit to Rs 668.3 crore in the quarter ended September, on the back of a surge in net sales, which rose 18.2 per cent year on year to Rs 4,566.6 crore. This is the highest sales growth during the quarter during the past five years.

Nestle India follows January-December as its financial year.

“I am delighted to share that we have witnessed the highest sales growth in a quarter during the past five years. This achievement has been on continued strong volumes and mix evolution, with broad-based double-digit growth across all categories,” said Suresh Narayanan, Chairman and Managing Director, Nestle India, in the company’s release.

Narayanan added, “Growth has been very strong in the large metros and mega cities and continued to be robust across smaller town classes including rural markets.”

In its commodity outlook for the short and medium term, Nestle India said, “We are witnessing early signs of stability in prices of a few commodities such as edible oils and packaging materials.” The company said, however, that fresh milk, fuels, grains and green coffee costs are expected to remain firm with continued increase in demand and volatility.

During the quarter, Nestle India's e-commerce channels witnessed strong growth, driven by new emerging formats such as ‘quick commerce’ and ‘click & mortar’. E-commerce's contribution to the food and beverage firm's quarterly sales stood at 7.2 per cent.

The organised trade channel continued to post strong growth across customers and categories in the wake of high footfalls, Nestle India said. Its out-of-home channel grew at a robust pace, driven by faster channel reopening and business led initiatives.

In its domestic prepared dishes and cooking aids business, growth was fuelled by large-scale distribution expansion of Maggi Noodles, supported by an extensive media campaign.

The entire product group performed well in the milk products and nutrition segment. The company pointed out that Milkmaid showed strong growth in the quarter.

Its confectionery products also put up a strong show on the back of aggressive media campaigns, festive season sales, consumer promotions and focused distribution drives.

Nestle India beverage business showed robust growth in Nescafe Classic, Sunrise and vending mixes.

ICICIdirect said in its report on the company, “Nestlé India is experiencing robust growth across segments driven by ad-spends & distribution expansion specifically in rural regions.”

The brokerage believes that the packaged foods category in India has huge potential to grow given lower penetration levels. Moreover, foray in newer categories, expansion of ecommerce channels & increasing manufacturing capacities is also helping in increasing volumes.

Phillip Capital said in its report that Nestle India’s management is now focused on volume driven growth compared to its prior obsession with profitability only.

It also pointed out that premiumisation in core categories (for e.g., launching different variants of Maggi) and the maker of KitKat is also launching lower unit packs to gain traction in rural markets and is also expanding its distribution in hinterland.