Inflation-wary shoppers are still pulling back as they feel stressed about their budget, hindering India’s consumption story, according to Nestle India Chairman and Managing Director Suresh Narayanan. The ongoing Lok Sabha election being held in sweltering heat is only adding to the challenge rather than acting as a boost to consumer spending, he said.
“There’s still a tendency to postpone discretionary purchases,” Narayanan told reporters during a post-earnings briefing on Monday. “We expected a consumption boost during elections, but the way the weather gods are treating, April-June might turn out to be just another quarter,” he said, adding that the market is now pinning hopes on a good monsoon to revive growth.
Narayanan also said that a fresh injection of money into the market by the incoming government is likely to give a fillip to an otherwise flagging consumption scenario. “Only when the country’s private consumption begins to kick in it is then we can expect companies to be beneficiaries.”
Nestle India has sustained robust growth in a tough environment, marked by rising food inflation and volatile commodity prices, mainly due to lower product penetration in key categories and higher growth in small towns and villages—a strategy the company terms “rurban.” Nestle’s rural sales, at 22%, are underindexed.
In the March quarter, Nestle India clocked 9% domestic sales growth. But its volume growth stood at 4–5%, which is lower than its historical growth rate of 8–9%. Narayanan said that the company will be prioritising volume growth going forward in a bid to return to its previous growth pace.
The KitKat maker is also pressing ahead with its premiumisation strategy.
The premium category for Nestle contributes 12–13% of sales. “I would like that number to get to 15–16% in the medium term and 20% in the longer term, driven by pet care, Nespresso coffee and health science,” he said.
With its recent joint venture with Dr Reddy’s Laboratories Ltd. for nutraceuticals, Nestle India expects to triple its health science business to Rs 150 crore in 4-5 years.