Nestle India Chairman & Managing Director Suresh Narayanan said on Tuesday, October 22 that the FMCG sector is experiencing sluggish demand, with food and beverages (F&B) growth falling to 1.5-2 percent from double digits a few quarters ago.
F&B Sector’s double-digit growth drops to single digits
According to ET Retail, Outgoing Nestle CMD, Suresh Narayanan, said at a media roundtable that the decline is due to factors like food inflation. “The market is facing muted demand. It is extremely clear that the growth in the F&B sector, which used to be in double-digit a couple of quarters ago, is now down to 1.5 to 2 per cent,” Narayanan stated.
Continue Exploring: Varun Beverages achieves 24% revenue growth, 22% PAT surge in Q3CY24
Meanwhile, Narayanan pointed out the sharp rise in fruits, vegetables, and oil prices as a concern, saying, “because this clearly will lead to an increase of prices if they become unmanageable for organisations.” He added that Nestle is also facing challenges due to higher prices for cocoa and coffee, which are key ingredients for their products.
Further, Narayanan noted that while “pressure points are coming from mega cities and metros,” tier one and smaller towns, as well as rural areas, are fairly stable. He added that he hopes a good monsoon and crop this year will boost consumption, as the last quarter was affected by floods and natural disasters.
“I think ultimately one can look at modest increases in volume and value going forward. Premiumisation is fairly strong, and I think that gives us some cause for cheer, because as a company, we are also increasingly innovating and premiumising, and that is getting us good results in whichever segments we are operating in,” he explained.
Continue Exploring: Zomato’s net profit drops 30% to INR 176 Cr in Q2 FY25
Nestle’s Growth Slows majorly
When asked if Nestle India is planning a price hike, he said: “As of now we are not looking at a sharp price increase, because the philosophy of the company is to look at economies of scale.” He added, “There is some stability in milk, packaging, material and fuels, which are important ingredients for the company. So we will look at… if the increase in the commodity costs can be covered by efficiencies.”
Previously, Nestle India used to see 11 to 12 percent yearly organic growth in value and 6 to 7 percent in volume. “Now, obviously today, that volume growth has come down, but our model, long term, is penetration led volume growth, so we have to start getting back to it, and any more price increase that we do is going to sharply retract us from that path. So we would like to minimise it and take it very, very selectively,” he stated.
