The Hindu Business Line : The world is our oyster, says Nestle India CMD

New Delhi, Nov. 22 FMCG major Nestle India has been posting impressive top and bottom line growth over the past few quarters. Business Line met up with the company’s Chairman and Managing Director, Mr Martial Rolland, to discuss the third quarter results, the category drivers as well as exports.

Nestle has been able to report a sharp improvement in top line growth in the recent quarters. Are you satisfied with the results? What are the individual businesses driving the growth?

Yes, satisfied I am. Very happy? Not yet. However, satisfaction is very relative. Depends on how you are doing and how the other players are doing. Actually, all the businesses have been driving the growth. There are small differences in terms of the growth between categories.

However, what makes me satisfied is that it is not one or two businesses that are driving the growth, but all categories. We grew by 21.1 per cent in the milk and nutrition category in January-September 2007 as opposed to January-September 2006. Beverages grew by 22.3 per cent, culinary products by 33.2 per cent and our chocolate and confectionery business grew by 27.4 per cent. It’s all fairly healthy kind of numbers.

What is lending to the fast pace of growth in Nestle’s culinary segment? Also, the foods category of FMCG companies, in general, has been seeing a fairly rapid pace of growth. Why?

At the end of the day, the processed packaged food segment is still small. And when it’s small, there is obviously going to be greater growth potential than the other categories. I’m not sure about the real growth figures as it’s all (different) explanations. But if you look at the figures published by the publicly listed companies, that is a very nice 15 per cent. However, the challenge is to see what is the growth in the top line and what is the growth in the bottom line. And there it gets a little tricky because sometimes the top line increases but the bottom line goes down.

In our case, however, the acceleration has been good in both the top line and our profitability. When it comes to Maggi, it is a business we are proud of. Because we think we have done a fairly decent job of it. We have been able to be ahead of what the consumer wants and have been able to offer quality food at reasonable prices.

What kind of percentage does Nestle spend on its R&D and product development activities?

We have an integrated system. In the past, we have restructured our company in India. And there is a different category head for each of our business verticals. These heads have application group persons who work at the factory, directly reporting to them. So, there is a good understanding in terms of product development. In-house, we have a product development team that is closely involved in consumer interaction, like conducting demonstrations and cooking classes for consumers. Also, we have separate teams conducting consumer meets, like one-to-one interactions at different centres such as Chennai and Delhi. And, then, there are connections with our international product development centres. This is all part of the expenditure. We take benefits of R&D from our parent company. There is no specific Indian R&D fund. For example, R&D for our Maggi rice instant noodles came from our centre in Singapore.

Are there any products that have been developed in India which have hit the global market?

Those products that have been developed specifically in India will be in the culinary sphere. One can find these in the US and Canada, but more in the realm of Maggi noodles and sauces, not in spheres like milk and nutrition. We do also export coffee and tea. These are products that are also doing well. Also, in terms of milk, we export to neighbouring countries.

The company’s exports have shown a drop in the third quarter. Why is that so?

We had some fairly large contracts on the beverage side that did not work out. We also export milk to Bhutan and Nepal. And as you would know, there has been a ban imposed on export of milk. So, our exports to those countries got affected.

Also, tea exports to the US have not been at the same level this year. However, we are looking for other markets. The world is our oyster. Though, honestly, only time will tell. We are looking at Japan for tea exports. Coffee has been traditionally exported to Russia.

In the future, which are the categories you plan to focus more on?

Well, having restructured the company there are different business heads running each of these businesses. It’s like running a race. So each business head is running the race in his category, with its competitors. Each category without any exception has good potential to grow.

The consumer is changing, the environment is changing and will grow. It depends on how one understands the consumer better.

The Indian consumer is a very positive consumer. The question is how we are able to manage this positively disposed consumer who has a fairly big amount of disposable income.

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