Covid impacted pace, channel, frequency of FMCG consumption: Nestle India CMD

NEW DELHI: Packaged food company Nestle India Ltd’s June-quarter revenue growth of about 2% year-on-year fell short of analysts’ estimates. The company maintained its sales were adversely impacted because of the lockdown and the ensuing production disruption. In an interview, Suresh Narayanan, chairman and managing director, Nestlé India, spoke of the increasing value of digital engagement with the consumer. Edited excerpts:

Do you see an uptick in consumer sentiment and mobility?

Covid-19 is not just a health challenge, but also a humanitarian call to redefine the way in which humans live, engage and work innovatively. I do believe that companies that are better placed to react to the new normal will naturally be preferred more by consumers.

Food companies need to leverage their in-depth knowledge of food habits, nutrition, quality, and safety to innovate and renovate and adapt to this new normal. Companies need to respond to the new demand, reset their defining relationships with consumers and reconsider their product portfolio in the post-covid era to make products healthier while also allowing consumers to make pleasurable indulgent choices.

What is your outlook for the Indian economy in the short and medium term?

India’s economy is showing signs of recovering after withstanding the impact of covid-19. Some sectors were impacted more than the others. With the easing of restrictions on economic activities, businesses are slowly getting back on track. The government has announced several measures to ensure business continuity and sectoral revival.

What else can the government do to drive demand?

The government has taken measures to increase liquidity. I am hopeful that these will help economic climate and push up demand. The Mahatma Gandhi National Rural Employment Guarantee Act inputs have been an income source for a large number of people in rural areas and helped maintain demand.

A good monsoon also helps. While we do see an increase in rural demand, as the economy starts opening up it should create jobs and help build urban demand as well. A strong focus on infrastructure development will revive the job sector and demand.

Which markets are driving demand for Nestle, the metros or the smaller towns?

We have witnessed better growth in Tier 2/3/4 cities, semi-urban areas than urban areas during the lockdown. Rural consumption continues to be stronger than urban demand.

We delivered strong performance in the ‘e-commerce’ channel. The demand in all ‘Out of Home’ consumption channels experienced a sharp decline because of the lockdown. However, Nestlé brands enjoy trust, credibility, and strength as far as “in home consumption” is concerned and this boosted sales of our dairy whitener, milk and coffee, all of which performed well this quarter. Maggi also witnessed solid growth towards the end of the quarter after initial supply constraints.

In which ways do you feel the consumer is set to change once the pandemic is contained and normalcy returns?

Covid-19 has had a profound impact on the pace, channel, texture and frequency of consumption, across a variety of segments in the fast-moving consumer goods sector. There is a redefinition of “Out of home consumption” in favour of brands and formats that are more “in home”.

The channel contexts have undergone sharp changes with a surge in e-commerce platforms. We ourselves have witnessed the contribution of e-commerce going up significantly, while the out of home sector has not done well. If you look at e-commerce channels, in the US what took 8 years in terms of penetration has been achieved in 8 weeks. Clearly, the e-commerce journey is here to stay and there will be re-calibration of channels.

The words “quality”, “safety”, “nutrition”, and “trust” have undergone sharper re-definition and consumers tend to favour “tried and tested” brands. There is a new word that has been added to the lexicon of consumer needs in the pandemic, which is “Immunity” for self and the family.

The type of categories that are in favour have changed and together with the economic pandemic that has followed covid-19, a re-calibration of the consumer wallets is taking place where “essentials” are taking precedence over “luxuries however affordable” they are.

How are you as a company prepared to adapt yourself to this change?

Our entire innovation funnel is undergoing a change. Every business is recalibrating in the context of newly relevant consumer behaviour that are coming in, that is, what innovations we should go with, what innovation should be left out. I am a great believer that in a crisis one should engage, not disengage. If we disengage, the consumer has other choices.

Consumers are going to be more digitally active than they were earlier and food companies with a strong digital-first capability are the ones that are going to hold the consumer's interest for a long time. Overall, we have accelerated our digital engagements across key parts of our portfolio and put out innovative digital campaigns to engage with consumers.