Nestle India rural sales grow 9% but inflation remains a worry: CMD

The country’s largest pure play food company Nestle India has managed to expand its business in the rural market that is otherwise showing signs of distress and poor consumer confidence. During the October-December quarter, the firm’s sales in villages grew by nine per cent.

While its sales growth in rural market relatively slowed down last quarter - from 10 per cent in July-September and 21 per cent in the April-June quarter, it was much higher than most of its peers in the industry.

The maker of popular packaged foods like Maggi instant noodles and KitKat wafers, performed well in semi-urban markets as well. In the Tier-II to Tier-VI towns, its sales grew by 13.7 per cent year-on-year during the December quarter - little lower than 16.6 per cent in September and 17 per cent in June quarter. While, growth in the metro (with population of 1-4 million) and Tier-I (1 lakh to 10 million) remained in mid-single digits - between 4.3 to 6.3 per cent.

The company’s superior performance in the otherwise mundane rural and semi-urban markets lifted its quarterly performance. The Gurgaon-headquartered firm reported a 8.4 per cent y-o-y increase in its net sales to Rs 3,706 crore from Rs 3,418 crore. Its net profit, however, plunged 20 per cent to Rs 387 crore due to a one-time charge under exceptional items towards its new pension plan.

Suresh Narayanan, chairman and managing director of Nestle India, warned of the resurgent fear of inflation across commodities during an earnings call. “As far as the food inflation is concerned, let me mention that it is here now. This is not a futuristic statement that we are talking about. Between December quarter and now we are seeing distinct storm clouds and, in fact, the storm is upon us…so this is what we are facing today. This is what my team and I are trying to mitigate as best as we can”, he said.

Citing commodity price data, Narayanan pointed out that prices of key products like edible oil, sugar, wheat and widely used packaging materials like aluminium, tinplate, plastic, paper and glass is hitting a decadal high. Nestle India effected a two per cent average price hike during the December quarter.

“It is important to note that food inflation and commodity inflation is here to stay for a while at least”, Narayanan added.