Nestle sets sights on doubling India revenues in 4-5 years5 min read . Updated: 16 May 2016, 01:53 AM IST
Nestle India chief Suresh Narayanan says firm strengthening its offerings, coming up with new categories
New Delhi: Inside the office of Suresh Narayanan, chairman and managing director of Nestle India Ltd, there is a Ganesha idol—neatly decorated with fresh flowers.
A packet of Maggi noodles shares a square crimson mat with Ganesha that is kept just opposite Narayanan’s workstation at the local headquarters of the Swiss food company in Gurgaon.
For the past 10 months, the packet of Maggi noodles and the Ganesha idol stayed side-by-side—both at bad times and good.
Narayanan was brought to India to bring Maggi noodles back to store shelves after government laboratories claimed to have found high lead content in the noodles, and the popular snack was subsequently ordered removed from stores in many states in June 2015.
Maggi is now back on retail shelves for some time after a six-month gap because of the ban imposed by the country’s food safety regulator and Nestle has reclaimed leadership in the instant noodles market with more than 50% market share.
The Nestle India chief and the man who is often referred to as the consistent crisis manager has already set his sights on doubling the company’s revenue in India over the next 4-5 years, according to two people within the company who asked not to be named.
Narayanan declined to confirm the target.
But how realistic is it?
“Nestle India has the potential to reach that level. But things change fast. As a company, we could not exploit the true potential of India as a market. There is not a reason why it should not happen. If you can’t make this in India, where else?" Narayanan said.
For 56-year-old Narayanan, the past 10 months have been anything but easy. “This has been the toughest assignment I have ever had in my career," Narayanan said.
On the day he took over the Indian operations of the Swiss packaged foods company in August, Narayanan said that Nestle needed to reduce its dependence on Maggi noodles—a product that accounted for 30% of Nestle India’s sales in 2014.
During the past few months, Nestle India has launched a bunch of products in categories other than Maggi.
“We are trying to strengthen our offerings and coming up with fresh new categories," said Narayanan.
For Nestle India, sales have improved. Not just Maggi, but also other products which were impacted because of the noodles row, he said.
“What we are doing now is relatively simple. Increase our penetration, not only in food category, but across the portfolio. There’s a clear strategy on improving penetration, focus on innovations and renovations. We are trying to broad base things," he added.
At present, Nestle India is working on 20-25 products which would be launched over the next 18 months or so.
“Milk and nutrition has clearly got traction, chocolates and confectionery also got some interesting propositions and, to a certain extent, coffee and beverages. More will be seeded in. There will be some hits and some misses. But, overall, the pace of innovation will be accelerated. We would increase the size of footprint that Nestle India has now," Narayanan said.
Besides, there will be products from the global portfolio in milk, chocolates and confectionery.
Narayanan, however, would like to stick to urban India.
“Nestle’s products are relevant to a particular lifestyle, income group, and urban centric. Rapid urbanization is a huge opportunity—increasing participation of women in decision making, in work force... We need more products that are convenience-based, nutrition-based and some in the on-the-go category. We need to segmentize and bring products relevant for every segment," said Narayanan.
“If something needs pricing game, we would rather keep that out of our focus. This is something that has helped us as an organization globally and we would replicate that in India as well. But, overall, product mix would be larger, supported by strong marketing," he added.
The focus on marketing has worked, analysts said.
“Online promotions and launches, coupled with special promotions across categories—something that the company has never done in the past two years— worked in favour of Nestle India in increasing volume," said Abneesh Roy, an analyst with Edelweiss Securities.
On the other hand, Narayanan has tweaked the operational structure of Nestle India, especially when it comes to engagement with the regulatory authorities, state governments and consumers.
The next would be realigning commercial structure.
“We are trying to simplify our commercial structure, increase engagements with state governments, environmental sensing, and also interfaces to get to know issues in real time—something we learnt from the Maggi issue," he said.
While analysts did not want to comment on the long-term projections, they maintained a positive outlook on Nestle India.
“The slew of new launches is a step in the right direction in our view. However, in the coffee and beverages segment, we believe the move is behind time, given the company has lost its leadership position in terms of value share to HUL in the category. The uncertainty of the outcome of the legal proceedings against Nestle in the hon’ble Supreme Court of India is also key to our thesis of exercising caution on the stock," Sunita Sachdev, an analyst with UBS Securities India, said in a note on 12 May.
During the period when Maggi was off retail shelves in India, ITC Ltd’s Yippee noodles and Wai Wai noodles from Nepal’s CG Foods gained market share, filling the void.
Yoga guru Ramdev’s Patanjali Ayurved also joined the race for a share of the market by launching atta (wheat) noodles.
While Narayanan expects it to be a “tough ride" to reclaim its pre-ban marketshare position (around 80%, as Nomura said in a report in May 2015), he believes that the “disruptive competition is always good to have".
“Competition energizes me. I firmly believe every company play on its strengths. Our strength is nutrition, science, health and wellness. That’s what we are all about. We are good at these, and we’ll be playing to it. Let’s focus on what we need to do and get that right. My sleepless nights are more on how much more I could achieve," Narayanan said.