“Rurban” strategy: Will villagers embrace Nestle brands?

New Delhi: India will be a 'key driver of growth for the future' for Nestle which has "faith" in the market that offers a 'large consumption basket', according to Suresh Narayanan, the outgoing Chairman & Managing Director of its Indian arm.

The economic and political stability offered by India coupled with 'high consumer resonance' of the company's brands make it an attractive market, he told PTI in an interview.

The Swiss FMCG major, which had faced an existential crisis with the Maggi fiasco in 2015, has long left behind the chapter and is investing to enhance capacity, product innovations, expansion of sales network to digitisation for having a "value added journey", said Narayanan who will be retiring by end of July.

"I can foresee that even if I am not there at the helm, but the market attraction, the levels of investment and the future of Nestle will continue to be bright in this country," he said when asked how he saw Nestle in the next five years in India.

Elaborating, he said, "I think we will then become a much larger entity, a much more robust entity in terms of products that we have, a much more deeper entity in terms of the geographies and the manufacturing presence that we have, and overall, a much more impactful company than even what we are today. So by 2030 I think we will have a double-digit growth." Nestle India's compounded annual growth rate (CAGR) for the last 10 years has been about 10 to 11 per cent, and despite the current patch, which has not been good, particularly for most consumer goods companies in India due to consumption slow down in the urban market, Narayanan said, adding he expects to get back to double-digit growth path.

"Consumption will come back in this country and I think we will get back to the double-digit growth," he said.

Asked if he saw India becoming among the top five global markets of the Swiss FMCG giant Nestle SA in the coming years, Narayanan said, "India (market) is very well placed. India has had a very good track record." In the last 10 years, investment by Nestle India has gone up from about 2 per cent of sales to about 10 per cent of sales.

"So it's been almost dramatic. Almost Rs 6,000 crore to Rs 6,500 crore is the amount of money that we have invested in creating new capacities," he said.

This investment is because of two factors - the performance of the Indian market and, more importantly, the "faith in India" market of Nestle, he added.

India offers a large consumption basket with economic and political stability, and the relative stature of the company is high in the country, he said, adding, "the consumer resonance is high for our brands and therefore, we look at India as a very promising market".

He expects Nestle India to be a "more robust entity" in terms of its geographies and manufacturing presence, regaining its double-digit growth journey with a revival in the consumption cycle.

When asked about the next phase of Nestle's growth in India, Narayanan said it will look to accelerate its penetration-led volume growth journey, which has yielded positive results for the company over the last decade.

He expects Nestle India, which is now an over Rs 20,000 crore (nearly USD 2.5 billion) entity, to "become a much larger entity, a much more robust entity in terms of products that we have, a much deeper entity in terms of the geographies and the manufacturing presence" in the next five years by 2030.

India is among the top ten global markets for the Vevey (Switzerland)-based company. It is a globally leading market for food brand Maggi and the second largest for its confectionery brand KITKAT According to Narayanan, Nestle's "thinking globally and acting locally" policy helps to customise offerings and to customise products to the local context.

"A lot of investments are guided by three things, opportunity, salience and future growth and returns that you can get all these three, I think India satisfies the checklist extremely well. So that's why I have the confidence that India can continue to be like it is for many, for some companies, can be a key, key driver of growth for the future," he said.

Nestle India, which has been present in India for over a century, is now setting up its tenth factory, which is coming at Odisha. Narayanan expects it to be operational in next couple of years.

About the next phase of Nestle's growth in India, Narayanan said it will look at accelerating its penetration-led volume growth journey which has given positive results to the company in the last decade.

Nestle under its 'Rurban strategy" will continue to expand its presence in the small rural markets, as rural India is opening up. Nestle India is creating infrastructure for the portfolio in order to increase the penetration of its brands.

Besides, Nestle India is also increasing its play in the premium segment, which is having fast growth after the pandemic, with shift in consumer purchase behaviour towards more value-based products.

"Premium products, which have been growing at about 16 per cent for us in the last 10 years, will continue to accelerate. Therefore, whether it is Nespresso or Nescafe Gold or premium chocolates or premium food items or premium nutrition items, these will get accelerated in the country," he said.

Nestle will also amplify its activity in the digital and analytics side, which will take a "quantum leap".

"We have already made progress, but I think there is a lot more that can be done in this field. The company is preparing itself for it," said Narayanan.

Moreover, Nestle will continue to pursue innovation-led growth, which was paced up by the company after the Maggi crisis, which happened a decade ago.

"Innovation, which is today at about 7 per cent (of sales), we hope will reach about 10 per cent of sales," he said.