The government’s focus on capex, stability in commodity prices and economic activity around elections will help fuel an uptick in consumption for the FMCG industry, Suresh Narayanan, Chairman and Managing Director, Nestle India, said on Thursday. The packaged food major also said it is on track with its investment plans and will end up investing ₹6,000-6,500 crore between 2020 and 2025.

Speaking at a select media roundtable, Narayanan said, “I think in overall terms, this year looks to be more benign, as far as food inflation is concerned. And therefore, one is expecting that with an infusion of investments into the economy there will be signs of an uptick. The uptick in premium products continues. Middle and upper middle-class households continue to spend. But the common man is still hurting due to the impact of food inflation. Once that abates, I hope things will be much better.“

Pointing to the government’s announcement to ramp up capital expenditure in the interim Budget, he added that there is economic stability and there are a lot of public programmes focusing on infrastructure investments. “This will definitely add to employment and to incomes, and a lot of it will flow into consumption of essentials,” he said.

Stress points

Narayanan noted there are “stress points” when it comes to demand trends and the last festival season was not as buoyant as was expected. “There are polarities that are developing with a boom in premiumisation and tepidness in the mainstream products,” he said.

He added while the overall headline inflation is “certainly down”, food inflation continues to be choppy. “I do hope overall inflation levels are certainly down compared to 2023 and 2022. One hopes that if there is stability in some of the commodity prices, then you might start seeing the uptick in consumption. The economic activity around elections will hopefully also give fillip to companies,” Narayanan said.

Meanwhile, the company said its investment plans are on track. “If one looks at what we have already spent between 2020 and 2023 and what we are likely to spend in the next two-three years, the number is around ₹6,000-6,500 crore. This indicates the underlying robustness of demand for our products and our commitment to ‘Make in India’,” Narayanan said. The company last year announced that it will set up its 10th manufacturing facility in India at Odisha with investment of ₹894 crore.

Sales, strategy

The company’s total sales grew 13.3 per cent in CY2023, backed by 4-5 per cent volume growth.

Talking about the company’s “rurban” strategy, Narayanan said, “While metros and mega cities were always strong suits for the company, tier 2-5 markets are opening up now. We have increased the distribution, stocking points and activations for deeper penetration in these regions.”

He added that there is strong potential for growth for the company in both urban and rural regions, as penetration levels of its product portfolio are still “relatively modest”.