Elections, infrastructure push to boost consumption: Nestle India CMD

Narayan said consumer market sees polarities of booming premiumisation and tepid demand for mainstream products

Fast-moving consumer goods (FMCG) major Nestlé India on Thursday said it expects an uptick in consumption on the back of government's infrastructure spending, moderating inflation and the upcoming elections.

However, the FMCG sector is witnessing some “stress points”, Suresh Narayanan, chairman and managing director, Nestlé India said, adding that the festival season was not as buoyant as expected with luxury trumping common, everyday products.

“While overall headline inflation has gone down in 2023 as compared to 2022, food inflation continues to be choppy. A lot is hoped for the economic activity around elections. Hopefully that will give a little bit of a fillip to companies,” he said during a media roundtable.

Narayanan hoped that the government’s Rs 11 trillion infrastructure spending announced in the Interim Budget 2024 and stability in commodity prices will also provide an impetus to consumption of essentials.

“Milk is fairly stable now, and wheat too, hopefully, will also be stable. However, coffee prices are becoming a little illogical. This year looks more benign as far as food inflation is concerned. And therefore, we expect that with an infusion of investment and incomes into the economy, there will be signs of an uptick,” he said.

Narayanan also said the consumer market is witnessing a phenomenon of polarities of booming premiumisation and tepid demand for mainstream products.

“The uptick in consumption of premium products continues. Going forward, our offerings will be a mix of both mass market and premium. We see an opportunity in the premium category,” he said.

About rural growth, he said: “I would not say that rural is extremely muted, because rural, for us at least, is holding up.”

While rural consumption contributes to 20 per cent of the FMCG major’s business, Narayanan said, he expects this to go up to 25 per cent in the coming four to five years.

The maker of Maggi noodles and Kitkat chocolates announced its December quarter results on Wednesday. It reported a 4.4 per cent year-on-year surge in net profits to Rs 656 crore while its net sales rose 8.3 per cent to Rs 4,584 crore from Rs 4,233 crore in the year ago period.

Narayanan told reporters that the company’s volume growth during the year 2023 came in at 4-5 per cent, contributing to the total sales growth of 13.3 per cent in the year.

Responding to a question on joining the government-backed e-commerce platform Open Network for Digital Commerce (ONDC), he said the company is in “fairly advanced level talks” with the platform.