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Nestle SA, the world’s largest food company, will spend 5,000 crore to build factories and research centres in India till 2025 as the growing middle class in Asia’s third-largest economy steps up spending on food and beverages, chief executive Mark Schneider said on Friday.

The new investments will also be used to build brands, said Schneider, who was on a week-long visit to India, one of the top 10 markets for the Swiss company.

“The investment I talked about—that’s capex, that’s us putting money into our facilities, be it factories or research centres. On top of that, if we see interesting opportunities for mergers and acquisitions, we would be very, very happy to explore those," he added. “When you look at the investment in this country and the investment plan through 2025—we’re talking about 5,000 crore, and that compares to 8,000 crore over the last 60 years when we started manufacturing in this country," he said.

Nestle is doubling down on India, the world’s fastest-growing economy, as it confronts sluggish demand in Western markets hit by decades-high inflation. While food companies are more resilient to price shocks, sustained high inflation may force consumers to trade down to cheaper products.

“Globally, we are facing a bad situation of continued inflation. You saw just this week from so many central bank decisions that clearly, inflation continues to be a pretty major concern. And obviously, what we watch country by country, market by market is to what extent; continued inflation at some point has an impact on people’s willingness to buy, and the answer to that is different by country and by category," he added.

The fresh investments in India point to the company’s “accelerated" plan to ramp up its presence and give it the ammunition to compete with rival Unilever’s India unit as well as local giants such as ITC Ltd and Tata Consumer Products.

Nestle began trading as Nestle Anglo-Swiss Condensed Milk Co. (Export) Ltd in 1912 in India, importing and selling finished products in the market. It was in 1961 that the company set up its first factory at Moga in Punjab. However, in 2015, the company faced its worst crisis in India after its popular brand of Maggi noodles was temporarily banned.

The company has since recovered, with net sales of Nestle India climbing to 14,633.72 crore in 2021 from 8,123.27 crore in 2015.

Nestle India, which operates nine factories in India, said the proposed investments would also help it create “significant" direct and indirect employment.

“It (investment) is going to be secular across categories. These are the ambitions that we have as a company, in terms of making it across categories, probably looking at new locations for factories as well," said Suresh Narayanan, chairman and managing director, Nestle India.

Narayanan said the investment plans involve accelerating the company’s core business sustainably.

Nestle India will also leverage new growth opportunities—be it the emerging consumer shift towards plant-based proteins or healthy snacking. In addition, Schneider said the company intends to develop its pet food business in India over time.

He said despite concerns around inflation worldwide, underlying demand in India remains strong.“Globally, we certainly have inflation concerns right now, and I think those are real. But, at some point, they also have a dampening effect on demand. So I think India is in a very advantaged position. Of course, there are inflation concerns, but you see such a strong underlying volume demand from a rising middle class and just people reaching higher levels of income that kind of overpowers some of the concerns that may come from inflation," he said.

Overall, as a company, Nestle is committed to responsible pricing, keeping products affordable for all strata of society, Schneider added.

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