Nestle’s net sales were reported at ₹5,644 crore. Domestic sales grew to ₹5,400 crore, with the best volume growth in several years. Exports grew 23 per cent year-on-year to ₹240 crore. However, margins were under pressure due to raw material inflation. The gross margin contracted 70 basis points year-on-year to 55.7 per cent. The operating profit margin contracted 170 basis points year-on-year to 21.7 per cent.
Operating profit grew 10 per cent year-on-year to ₹1,230 crore, while adjusted net profit grew 12 per cent year-on-year to ₹770 crore. Reported net profit stood at ₹1,018 crore, declining 46.2 per cent year-on-year. The exceptional items include a ₹312 crore benefit from the write-off of earlier tax provisions, as well as ₹35 crore for restructuring costs and ₹10.4 crore as a one-time cost related to the labour code. In 9MFY26, Nestle’s revenue and operating profit grew 12 per cent and 5 per cent, respectively, while adjusted net profit declined 2 per cent year-on-year.
Nestle’s marketing investments in pushing brands, strengthening its distribution network, and capital expenditure for capacity expansions are starting to pay off. A focus on R-URBAN has led to improved distribution, as packaged food has started to gain traction in tier-II and tier-III towns and in rural areas.
The company has also benefited from a broader market recovery following GST 2.0, with almost the entire portfolio benefiting. Management remains committed to growth rather than focusing on margins. In Q4, similar growth rates may be possible, given a low base effect. Guidance indicated that milk and edible oil prices would remain elevated in Q4, while coffee prices may be range-bound or ease given good harvests. Management is optimistic about the upcoming wheat harvest in April 2026. About 85 per cent of the portfolio has directly benefited from the GST reforms, apart from the general consumption boost.
Confectionery grew the fastest, supported by strong volume expansion. Prepared dishes and cooking aids also registered strong volume growth. The powdered and liquid beverages category recorded double-digit growth, while the milk products and nutrition group reported mid-single-digit growth. The pet food business posted double-digit growth.
While valuations remain high, with Nestle trading at over 65 times FY27 earnings, the growth performance was encouraging, marked by the best volume expansion in several years. Operating profit is likely to rebound with a 200–300 basis points margin expansion until FY28 as capital expenditure eases.
The growth strategy hinges on deeper R-URBAN penetration and innovation, with around 125 product launches over the past seven years. Nestle is also pushing premiumisation and moving into potential growth areas such as Nespresso, Purina Pet Care and Gerber’s toddler nutrition, while seeking to increase consumer engagement.
Brand building has been supported by higher advertising spends, investments in distribution and portfolio expansion, as well as improving quick-commerce penetration. Differentiated offerings in Maggi, KitKat and core coffee brands such as the Nescafé range were key growth drivers. The milk category saw improved performance, though growth rates were lower. The new pet food segment delivered double-digit growth.
The e-commerce channel saw sustained growth, with good offtake for new products and enhanced platform availability. While high valuations are close to historical norms for the multinational, an increase in competitive intensity could again impact margins, as this may force the company to absorb elevated marketing and advertising spends. Persistent raw material inflation would also be a concern for the entire sector.
Nestle has made a significant bet on rising rural and semi-urban demand, assuming that margins will recover once capital expenditure eases and raw material costs stabilise. This rests on several assumptions, including strong, sustained demand that allows for premiumisation. If these play out, revenue and operating profit could grow at mid-teens rates over the next two fiscals.
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