Nestle India’s Chairman and Managing Director, Suresh Narayanan, said that the government’s infrastructure spending, moderating inflation, and the upcoming elections are likely to boost consumption and lessen the polarities in consumer trends where premiumisation has been booming amid tepid mainstream demand.
Narayanan stated that the government’s commitment to invest INR 11 trillion in infrastructure in the recent vote-on-account budget will drive job creation and increase household incomes. He emphasized that a significant portion of these incomes will be directed towards the consumption of essential goods.
Highlighting the polarisation in consumer demand, he said, “If you are a mainstream product, you are facing the vagaries of a combination of job losses and food inflation which continues to be choppy.”
He said there are some stress points and “the Diwali festival demand wasn’t as buoyant as expected”.
“Many people bought more cars and more luxury items but the (demand) for the common man’s products was relatively muted.”
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However, Narayanan added that the long-term growth outlook remains positive, and the company aims to achieve revenue growth of 11-12% in 2024, building upon a strong base.
“The underlying growth fundamentals continue to be strong… You can have short-term wobbliness but the long-term sustainability of the trajectory is what we are confident about,” Narayanan said. He said the demand outlook is “fairly positive despite some slog overs”.
The maker of Maggi noodles and KitKat chocolates is investing INR 6,500 crore on capacity expansion over five years – its highest investment in such a timeframe, he said.
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Erratic monsoon rains, an extended rural slowdown, and food inflation have contributed to a slowdown in sales across FMCG categories in the October-December 2023 quarter.
In a report released on Tuesday, researcher NielsenIQ predicted that following two years of expansion, the FMCG sector’s value growth could decrease by half to 4.5-6.5% this year, compared to 9.3% in 2023 and 8.4% in 2022.
Narayanan said that despite the general decrease in inflation levels compared to 2022, the stability in commodity prices should result in an uptick in consumption.
“We also have a lot of hope for economic activity to pick up around the elections,” he said.
For the December quarter, Nestle India reported a 4.4% year-on-year rise in net profit at INR 655.6 crore impacted by one-time service costs, while domestic sales grew 8.9% on the back of pricing and strong momentum in ecommerce and out-of-home channels.
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