Home / Industry / Retail /  Nestle India’s top boss flags inflation
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NEW DELHI : Packaged foods company Nestle India is trying its best to mitigate the effects of high inflation, both for food and other commodities, and could look at pricing actions if inflation remains unrelenting, said Suresh Narayanan, chairman and managing director, Nestle India.

“It is important to note that food inflation and commodity inflation is here to stay for a while at least," he said during the company’s earnings call on Thursday.

The maker of Maggi noodles and Nescafe reported a 20% decline in December quarter net profit to 387 crore, while its operating revenue increased 8.93% to 3,739.32 crore. It also reported 8% year-on-year growth in domestic sales volumes, which was broad-based and largely driven by sales volume and price hikes. The company follows a January-December financial year. Nestle India hiked prices selectively up to 2% in the fourth quarter. Narayanan said prices of at least six commodities, including edible oils, arabica coffee and non-food items, such as plastic and paper, were at a decadal-high.

“As far as food inflation is concerned, it is here for now. This is not a futuristic statement we are talking about. Between the 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.

The company has been running efficiency programmes and cost-saving initiatives under project Shark, besides focussing on strategic acquisitions, to tide over the commodity headwinds.

“The company has got three or four levers that it uses (to mitigate high commodity prices). One is its portfolio. Another is economies and cost efficiencies. A third is leveraging the impact of scale and the fourth is pricing. How much we will have to touch upon each one of these only time will tell," he said.

Pricing could also be a lever if inflation remains at elevated levels in the future, Narayanan said.

The company surprised investors with 9% value growth in rural markets, even as many fast-moving consumer goods peers saw a dip in rural volumes amid the stress on rural income.

“We get 20-25% of sales coming from rural markets and villages actually have grown for us. We have closed Q4 at about 9% growth," he said.

Judicious portfolio management and pushing the right stock keeping units in the rural markets helped it sustain growth, the company said. Considering that the rural markets are stressed, with job losses and pressure on household incomes, the company will “pragmatically" but strongly enhance its semi-urban and rural distribution, he said.


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