Closely looking at Centre’s PLI scheme: Nestlé India CMD

Meenakshi Verma Ambwani New Delhi | Updated on November 18, 2020

Smaller towns and rural regions driving growth, says Suresh Narayanan

Nestlé India, which has announced plans to invest ₹2,600 crore in the next 3-4 years, will be using the capex to augment its manufacturing capacities with a sharp focus on productivity improvements. The company, which is setting up a new factory in Gujarat, said it is also recalibrating its innovation strategies in line with consumers’ changing preferences as they seek more nutritious and immunity-boosting propositions in pandemic times.

In 2019, Nestlé had announced its intent to set up a new factory in Sanand, Gujarat, which is under-construction currently. “The capacities are being ramped up and the investments are being made because we are reaching the threshold levels of maximum capacity utilisation of 80-85 per cent,” Suresh Narayanan, Chairman and Managing Director, Nestlé India, told mediapersons on Wednesday.

The new factory will add 15-20 per cent more to the noodle category capacity, he said, adding: “Similarly, in categories like coffee, chocolates and confectionery, anywhere from 15 to 20 per cent increments will get added in terms of capacity.”

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‘Boost for exports’

On the government’s production-linked incentive scheme, Narayanan said the policy initiative is expected to provide a boost to food processing sector exports. “We will be keenly looking out for the details of the PLI scheme. Once these policy initiatives are executed on the ground, it will be positive for food processing exports.”

The company, which returned back to double-digit growth in the July-September quarter, said smaller towns and rural regions were the key growth drivers, offsetting the “somewhat muted” growth seen in mega-metros and metros that have been more intensely hit by the pandemic.

Terming smaller towns as the “heroes of this pandemic,” Narayanan said the company doubled outreach points by setting up wholesale hubs and increased distribution coverage to 90,000 villages, from about 45,000 villages earlier, to improve access of its products. “In the third quarter, the urban growth was 6 per cent and the rural growth was upwards of 12 per cent,” he said, adding that the growth rate was higher in rural regions and smaller towns than bigger cities.

“We have now what we call as wholesale hubs in addition to distributors and re-distributors, which serve as auxiliary distribution points in smaller towns, to enhance the geographic reach of distribution and also to have the width of distribution in terms of outlets,” Narayanan said. He added that the company also tweaked its product portfolio in line with consumer needs and purchase patterns.

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Monitoring demand trends

On future demand trends, he said: “We will need to watch out for the next 2-3 months to see how things stabilise on the demand front with improved economic activity and industry performance.” FMCG companies are keenly monitoring demand trends and are hoping to see better recovery trends, especially in urban regions by next year.

“Our innovation platforms are also being tweaked. The original pre-pandemic intentions of some of the innovations were different in some categories... which have now changed in the post-pandemic reality of what consumers are seeking... We are looking at this opportunity to come up with products that offer better nutrition and also that offer a credible, scientifically established immunity proposition to consumers, besides convenience. These will be rolled out systematically in the coming months.”

Published on November 18, 2020

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