The FMCG sector is facing sluggish demand as it is becoming polarised with the middle class shrinking but simultaneously there being high demand for premium products, Nestle India chairman and managing director Suresh Narayanan said on Tuesday. He added that in bigger cities, a channel shift is also being noticed with people preferring e-commerce and quick commerce.
Speaking to a select group of reporters at the company’s Samalkha facility, Narayanan said, “there used to be a middle segment which used to be the segment most of us FMCG companies used to operate in, which is the middle class of the country. That seems to be shrinking. And there is a completely, purely price-quality-be-damned-led segment, which also seems to be doing reasonably well”. As a result, companies offering fair to reasonable value in the middle segment are finding their fortunes temporarily shrinking, he added.
Nestle’s demand pattern also reflects this. Narayanan said that the company’s chocolate business was among the worst hit due to the slowdown. Yet, its premium chocolates were among the best performers in terms of growth.
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He said that earlier this situation used to last for a quarter and then bounce back, but now it has lasted for two-three quarters.
Last week, Nestle India, reported its slowest quarterly growth in eight years. The company said it was primarily due to weak demand and high raw material costs.
“The pressure points are coming from mega cities and metros,” Narayanan said. “It is almost like we operating in two Indias,” he added.
The categories that have taken the biggest hit are milks & nutrition, and chocolate and confectionery. However, its core products like Maggi, KitKat and Milkmaid continue to grow at double digits.
On raw materials, he said that the cost of coffee has increased by around 60% in the last one year. To cater to this, the company has increased the prices of its coffee by 15-30%. However, if the inflation continues to remain high, the prices of coffee products may be hiked further.
During the quarter, Nestle India’s e-commerce segment was among the fastest-growing at 38%. Out of the total e-commerce volume, almost 50% alone comes from quick commerce.
However, Narayana said that the company will keep a balance between all the channels. “We always maintain that all channels are important to us,” he said.
In the current festive season and the quarter, however, Narayanan said that he hopes more growth comes from organised trade.
“General trade is doing reasonably well. E-commerce is going extremely well. Organised trade has had a decent growth but still can do with more growth. I hope we’ll be able to see the benefits of the festive season,” he said.
From: financialexpress
Financial News
