New Delhi: Nestle India Ltd, the local arm of one of the world’s largest packaged foods company, may introduce new products such as pet food and bottled water in India as it tries to revive growth in the domestic market, according to brokerage firm Edelweiss Securities.

Nestle, which sells Maggi noodles and Kit Kat chocolates in India, is struggling to overcome slow domestic volume growth that’s touched a decade’s low on account of urban consumers trimming their monthly expenses because of the economic slowdown.

Nestle already sells pet food and bottled water widely in other markets.

Edelweiss analyst Abneesh Roy, who met Nestle’s top executives earlier last week, said in a note on Wednesday that he expects the company “to eventually enter pet foods and the water portfolio, though not in the medium term".

Nestle will hold back on introducing new products as the company awaits a revival in urban demand that could help boost its domestic volume growth, he said. “They are still looking at reviving demand, fixing the current rate of growth before they go strong on new product launches," Roy said.

In the near term, Nestle has to ramp up rural distribution, increase its sales force, and accelerate product innovations, he said.

At the financial analysts meet, we have only stated that we are not foreclosing any options as various opportunities are being evaluated which could even include water or pet foods for example, said a company spokesperson.

Additionally, Nestle through its global alliance with General Mills, which runs the world’s second largest breakfast cereal joint venture, Cereal Partners Worldwide, established a presence in India by registering its cereals or breakfast unit in 2012. Globally, the joint venture sells cereal brands such as Cheerios.

Nestle is yet to start operations of the joint venture, Cereal Partners India Pvt. Ltd, in Asia’s third largest economy where companies have tried for decades to alter breakfast habits.

However, a Nestle spokesperson said the company was unable to comment on this since the JV was between Nestlé S.A. and General Mills and that the India unit was not privy to their plans.

India’s slowing economy has muted growth for most consumer companies across the country. While consumers are cutting back on discretionary spending, companies are turning away from innovations.

Product launches across fast-moving consumer goods categories declined by 2.5% in 2012 and by 6% in 2013, according to market researcher Nielsen India.

In the fourth quarter of fiscal 2013, Nestle India had a tepid volume growth of 1% as certain brands across its confectionery, milk products and prepared dishes categories have been under pressure.

Net profit in the quarter ended 31 December rose to 281.7 crore from 278.9 crore a year earlier. Net sales increased by 4.6% to 2,252.3 crore.

Nestle is also in the middle of rationalizing its portfolio, according to another brokerage Anand Rathi Securities. The company has withdrawn low growth and low margin products such as the 50 paise Nestle Eclairs and Nescafe Mild, the brokerage said in a note issued on 2 April.

To focus the spotlight on its corporate brand, the company has launched a slew of campaigns, including its very first “corporate campaign", signalling the changes being made by Nestle India’s new chief executive Etienne Benet.

In Nestle’s latest quarterly earnings statement on 14 February, Benet indicated the company would take “tough decisions" as it moves towards building a premium portfolio with a strong focus on wellness and nutrition.

“It may require bold changes, swift adaptation and tough decisions that we are ready to make, especially for evolving to a product portfolio that is more focused on premium and value-up ranges, while protecting our current business base," Benet said.

Nestle India stocks ended up 1.73% at 4,919.90, while the benchmark Sensex closed at 22,343.45, down 0.07% on Monday. Nestle India has fallen 7.44% year- to-date.

My Reads Logout