Nestle India eyeing ₹7,500 crore premiumisation opportunity across categories

Nestle India is sharpening its focus on premiumisation eyeing a ₹7,500 crore revenue opportunity across categories. Nestle India Chairman and Managing Director Suresh Narayanan on Tuesday expressed concerns regarding sluggish urban consumption and stated that high prices persist in select agro-commodities despite headline inflation moderating.

He added that the recent steps announced in the Budget in terms of tax relief is likely to fuel consumption and savings among consumers.

Speaking at an investor call on Tuesday, Narayanan, “The overall premiumisation opportunity that we see in our categories is roughly ₹7,500 crore. The growth of this premium portfolio is growing at a CAGR of 16 per cent since 2015. Premium products are outpacing the category growth. We are not seeking to build a premium portfolio. We already have a premium portfolio, which we can leverage and grow to fruition. Even rural India is having a taste for premium products. As part of our urban strategy, we will also tap into the premiumisation trend.”

He said the company has a strong premium product portfolio in place to meet evolving consumer needs as they seek variety in taste and nutrition. ”Power and liquid beverages, premium coffee including Nespresso are defining the coffee experience and offer a greater opportunity for growth. In confectionery too, premium is still a small part of the portfolio but is powering ahead and will give us growth and profitability. We are leveraging our global competency and have significant ambitions in the petcare space,” Narayanan stated.

Key challenges

Talking about challenges, Narayanan pointed out that food inflation is continuing to hurt consumption. He flagged continuing concerns about coffee prices and to some extent even cocoa and wheat prices. The company said it is leveraging procurement and manufacturing efficiencies besides calibrated price hikes to mitigate this pressure.

Narayanan stated that rural consumption continues to outpace urban. He added that slowdown in urban growth continues to be visible due to factors including urban unemployment and tepid growth in wages. However, he added that the steps taken in the Budget including tax relief of about ₹1 lakh crore will fuel consumption. “Some of it might go into consumption, while some of it will go in savings and paring debt. Consumption spends will be beneficial especially for midstream companies,” he added.