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Nestle wants govt to allow food processing cos to work with 75% workforce

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Press Trust of India  |  New Delhi 

Nestle India on Tuesday urged the government to allow food processing industries to deploy 75 per cent workforce to ensure adequate production capacity utilisation in factories, saying without which there could be disruptions in goods supply.

The FMCG major at present is looking at production capacity enhancement through technologies and expressed concerns that under-utilisation of workforce will put pressure on the company and add to costs.

Nestle India Chairman and Managing Director Suresh Narayanan in a video conferencing with reporters said that under the social distancing guidelines, 100 per cent capacity utilisation is not possible and the company is taking help of machine capacity enhancement for meet productivity needs.

"Larger companies are trying to use technologies -- value analysis and value engineering -- to enhance productivity, but yes, if it persists for a long time then it would have an impact on the company," he said.

Narayanan, who is also the chairman of CII National Committee on Food Processing Industries, said food companies on behalf of the Confederation of Indian Industries (CII) have made presentations to the government asking for permission to increase the labour strength to 75 per cent in green and orange zones.

"This (social distancing) means that deployment of the workforce can never be 100 per cent. You can not have social distancing and 100 per cent workforce at the place at any point of time. Our exercise has shown that maximum of 75 per cent you can do that after realignment of lines," he said.

Presently, at most places, permissions have been granted to operate with manpower of anywhere at 50 to 60 per cent.

"So that's where my suggestion would be -- in the orange and green areas and we had requested this through CII as well -- that the food processing industries be allowed to enhance workforce to 75 per cent because otherwise we will have a situation where shortages (of goods) will persist because nobody will be able to produce at 100 per cent of what they have been doing pre-COVID," the Nestle India CMD said.

Stating that the company has now attained a production capacity utilisation of 70 per cent, he said if the manpower restrictions persist for a long time then it would have an impact on the company and may have an enhanced cost to its bottomline.

He further said that such easing now "would help mitigate some of the future shortages that might occur if we persist at operating at 50 per cent or below..."

Nestle India, which presently operates eight production units in India, also said that its workers are coming back.

At warehouses, where the company has a substantial number of contract workers, the situation has improved in the last couple of weeks, the company said adding that the availability of trucks and e-passes for workers has also increased.

"Fundamentally, things are getting under control but not perfect. They are not back to normal but much better than what they were a few weeks back," Narayanan said.

The company claimed it has been able to capture around 45 per cent of the universal distribution coverage.

"It is ramping up each week. Our smaller town distribution has been ramped up and did well. Smaller distributors have a much better coverage," he added.

On being asked about Nestle India's investment plans, Narayanan said that the proposals are intact.

"Focus of Nestle group on India is not diluted by an iota. Our investment plan continues and our Sanand facility is under the process of construction. There is little bit of delay because issue of migrant workers has also affected Gujarat but project wise, it will carry on as per schedule, Narayanan said.

While talking about the consumer behaviour during the pandemic, he said buyers are looking towards brands, which are trustworthy and provide nutrition.

Nestle India also expects premiumisation of the portfolio to increase as a segment of "fortunate people, who have been able to to hold their income line".

However, Narayanan said there would be a lot of trading down as well and "Nestle has prepared itself for both trading up and trading down as its portfolio has that intrinsic flexibility.

On being asked as whether Nestle would introduce some more brands to tap the growing opportunity in the premium segment, Narayana said: "We have some brands in the space and they would be tune up in consonance of need and requirements."


The FMCG major is also focusing on the e-commerce segment, which has suddenly become important during pandemic.

"The pace of growth (e-commerce) has dramatically shifted. Over the last 2-3 years, we have invested significantly in our digital and e-commerce capabilities. We would continue to ramp up as we go forward, with partnership with many players, he said.

Last year, Nestle got around 1.5 per cent of its sales from online, and now it has doubled, the CMD said.

Nestle India also expects an opportunity for the popular price products (PPP) in the market as the sales of value packs in the rural markets are going to increase where buyers are expected to hold their discretionary spends due to economic turmoil.

"It is possible that probably in the semi-urban and some rural market, you would start seeing smaller packs doing better. As many migrant workers have gone back to the states, they are people who have used consumer brands in cities and are aware of the brand," he said.

The opportunity of large size would also be there in the metro market as pantry loading by people is going to stay for a while, he added.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, May 19 2020. 20:53 IST
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