Nestle India Faces Challenges Amidst Sluggish FMCG Demand

The FMCG sector, particularly F&B, is witnessing a decline in demand, with growth reducing to 1.5-2%. Nestle India is affected by inflation and rising prices in key ingredients. Despite challenges, premiumisation and innovation offer opportunities for growth, pending more favorable economic conditions.

The Fast-Moving Consumer Goods (FMCG) sector in India is grappling with a noticeable dip in demand, as highlighted by Nestle India Chairman & Managing Director Suresh Narayanan during a recent media briefing. The growth rate in the Food and Beverage (F&B) segment has plummeted to a mere 1.5-2%, a stark contrast to the double-digit growth observed in previous quarters.

Narayanan attributed this slowdown to escalating food inflation, coupled with a significant rise in fruit, vegetable, and oil prices, warning that unmanageable cost spikes could lead to further price increases. Even amid these challenges, Nestle's strategy of maintaining premiumisation alongside innovation offers a beacon of hope, especially as the company deals with increased costs for essential commodities like cocoa and coffee.

Despite the pressure from major urban centers, tier-one and rural areas remain stable. Narayanan remains cautiously optimistic that favorable monsoon conditions could rejuvenate consumption. On pricing, Nestle India is focusing on economies of scale, opting for selective adjustments to preserve volume growth. This approach is essential to sustain its long-term model of penetration-driven expansion.

(With inputs from agencies.)