Food inflation, commodity prices remain a challenge: Nestle India

Company declares interim dividend of Rs 2.75 per equity share, final dividend of Rs 8.5 per equity share

Food inflation, coupled with volatile commodity prices, remains a major challenge facing Nestlé India, the packaged food major said during its 65th annual general meeting held on Monday.

“Food inflation continues to remain fairly high — almost double the overall headline inflation in the country. This leads to increased spending on staples like rice, wheat, oil, and other commodities, leaving little money for discretionary expenses. This is a challenge we also face in the context of fairly rampant unemployment,” said Suresh Narayanan, chairman and managing director of Nestlé India, addressing shareholders.

“The huge volatility in commodity prices also influences our plans as it directly affects the cost-revenue equation. However, our focus has been on penetration-led volume growth, which will be a long-term driver for the core categories of the company,” he added.

Looking ahead, Narayanan highlighted the company’s focus areas including its joint venture with Dr Reddy’s Laboratories, its pet care business, and the launch of its premium coffee brand Nespresso, which are set to become new pillars of growth for Nestlé India, known for products like KitKat chocolates and Maggi noodles.

Currently, the company’s pet care business holds less than 5 per cent market share.

Having announced an investment of Rs 7,500 crore from 2020-2025, Nestlé India reported spending Rs 3,963 crore from this earmarked fund until March 31, 2024, with plans to utilise the remaining Rs 3,537 crore by June 30, 2026.

“Capacity creation, distribution, and new portfolio expansion will be primary drivers of asset intensity and overall growth and profitability,” Narayanan added.

Speaking about the toddler segment, which saw the introduction of the Gerber brand, Narayanan noted strong double-digit growth in this extension of the baby food and formula segment.

These developments come amid allegations against Nestlé adding sugar and honey to its infant milk and cereal range sold in low- and middle-income countries, alleged by Swiss non-governmental organisation Public Eye.

The company’s e-commerce business has been a fast-growing segment, contributing 6.8 per cent to total sales, with quick-commerce now accounting for 2.1 per cent, the fastest-growing component within e-commerce, outpacing traditional mainstream players.

Nestlé India remains a leader in its market across most categories, including instant noodles, instant coffee, white wafer chocolates, infant formula, and cereal products.

The company also declared a total dividend of Rs 11.25 per equity share, comprising an interim dividend of Rs 2.75 per equity share and a final dividend of Rs 8.5 per equity share. Shareholders will receive the total payment of Rs 11.25 on August 6, 2024.