Nestle sees strong rural growth in Q3

Nestle India, which returned back to double digit growth in the third quarter, witnessed stronger growth trends in rural region compared to urban region.

In an analyst meet last week, Suresh Narayanan, CMD, Nestle India, said the company witnessed a sharp uptick in rural growth in the July-September period and that growth in rural region was twice the rate of growth in urban.

Rural distribution

He added that the company has also strengthened its rural distribution and now covers nearly 90,000 villages. Rural India contributes about 20-25 per cent to the company’s sales.

Narayanan said the company witnessed strong recovery trends and is back to pre-Covid levels in terms of, throughput sales, which are sales from distributors to the market, in the third quarter. The company is also focussing on cost savings and as part of its strategy to reduce manufacturing complexities, it is prioritising on key pack sizes across its portfolio and also leveraged on different transport networks such as railways and waterways, he added.

“The company is expanding rapidly with the same white-collar headcount. It has launched Project Shark, which targets cost savings of ₹70 crore this year across cost items,” a report by brokerage firm Motilal Oswal Institutional Equities noted.

Overall in the January-September period, the company’s milk products and nutrition business grew by 10.2 per cent, prepared dishes and cooking aid segment grew by 7.9 per cent, confectionery segment grew by 5.1 per cent and powdered and liquid beverages grew by about 1.4 per cent.

“Milk and nutrition was the biggest contributor to sales growth in the nine months of calendar year 2020 (47.1 per cent). If this momentum sustains in fourth quarter, it would be the highest growth for the category since 2014. The recent trend in Prepared Dishes (Maggi), particularly post the supply-chain issues experienced in second quarter of calendar year 2020, is very encouraging,” the Motilal Oswal report stated.

In a bid to navigate the challenges in the pandemic times, the company said it has set up a market committee headed by the CMD, to monitor regional level risks, ensure business continuity, and take informed decision on footfalls in factories besides implementation of SOPs to ensure safety of its employees.

“We are focussing on reducing manufacturing complexities by prioritising on key pack sizes across our portfolio. Hence, we are also focussing on 100 SKUs during the current times to simplify the supply chains. We also leveraged on alternate transport networks like waterways and railways when road transport was crippled. All these measures helped us bounce back,” Narayanan stated.

In-home consumption

At a time when in-home consumption is rising, brand Maggi witnessed significant increase in penetration with the addition of new households across the portfolio of noodles, sauces and seasonings.

The company said that this led the “prepared dishes and cooking aid” segment to register a growth of 19.1 per cent in the July-September quarter. The packaged food major has also been focusing on new product and variant launches under brand Maggi.

It has recently launched a range of Maggi Fried Rice Instant spice mixes and new variants of Capsica, Chatpata Tomato and Desi Cheesy in the noodles segment among others.

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