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Swiss food and beverage giant Nestle is investing about ₹5,000 crore to add capacity at existing plants and in green-field expansion over the next two years. Nestle India‘s chairman & managing director Suresh Narayanan shared his broad insights about the sector in a chat with ET’s Mrunmayee Kulkarni & KR Balasubramanyam. Edited excerpts:
Tell us about your investment plans.
We have invested about ₹7,000 crore in 60 years, a sign of our commitment to India. We are now doubling capacity at our coffee factories and building a confectionery unit in Sanand, where we already have a facility. We are adding manufacturing lines to the chocolate factory in Pallavaram. We are also setting up our 10th factory in Odisha.
When will these units be operational?
The new factory in Odisha will take about two years to build. The other investments will start coming into effect from the first half of next year.
How many jobs would these investments add?
The new factory will have at least 400 members; existing units will also add about 200 employees at least. So we are looking at adding about 600 jobs. But the more important aspect of Nestle is that we have created good vendor jobs and auxiliary manufacturing jobs. So for every job that exists within, the company creates about two jobs outside.
What has been the impact of commodity inflation?
Inflation this year has been slightly lower compared to last year, but still there are worries about availability of some commodities that we deal with. The one that is of concern is coffee; coffee prices are extremely high. Wheat prices have also gone up substantially. Packaging is relatively stable, but with the uptick in crude oil prices, that also can be impacted. So overall the food inflation basket continues to be a matter of concern.
Any plans to increase the price of your products?
As a company, we have a very strong cost efficiency mechanism because of our size and economies of scale. If that cannot counter headwind from commodities, then we will have price increases, which we make as minimal as possible.Ultimately the core strategy of the company is penetration-led volume growth. We grow only when consumers either buy more or buy more frequently. Otherwise we don’t. We can’t grow by just increasing the price.
How is your ‘rurban’ market strategy working?
It’s been working well. In fact, we set ourselves a target to accelerate the number of distribution touch points. We have looked at covering 120,000 villages with a population in excess of 2,000. As of December 31, 2022 more than 91,000 villages with a population in excess of 2,000 have already been covered. We are getting good traction in rural markets. The growth for us has been very positive, except that the pace has moderated.
Tell us about your new products and millet initiatives.
You are going to see an increase in the number of brands. As we expand into newer categories, like pet-care, breakfast cereals, you will see more brands coming in. In Nescafe for example, the business has very successfully taken the brand from the popular Nescafe to Gold. So we will be one brand, but there will be new avatars of that. That is the strategy that we will be looking at more closely, rather than just indiscriminately launching new labels.
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