Saturday, May 18, 2024

Nestle India driving “rurban” expansion and premiumization agenda

New Delhi: Packaged foods company Nestle India said it was expanding its reach in small towns and village, a strategy it terms as “rurban”, which was helping the Maggi noodle maker secure a better reach into newer markets. The company was also driving its premiumization agenda to appeal to urban consumers.

In 2022, Nestle India delivered its highest double-digit growth in a decade led by sustained volume and mix, resulting in a strong value growth during the year.

“India is among the fastest growing markets for Nestlé. Innovation continues to be an important element of growth bringing diversified portfolio of strong brands,” Suresh Narayanan, chairman and managing director, Nestlé India, said in the company’s 2022 annual report.

Narayanan also pointed to premiumization as of one of the growth engines for the company that will lead to future acceleration of the business. However, he flagged stubborn food inflation as one of the challenges facing packaged food companies.

“As we look confidently at the year ahead, the storm clouds of food inflation, acceleration of war and indeed the drum beats of recession in parts of the world continue to surround us. At such times, ‘being boringly consistent’ matters more than being ‘brilliantly erratic’. Your company’s steadfast focus on building volumes, deepening rurban expansion, bringing innovations with the support of Nestlé Group’s Global Research & Development network, astutely managing ‘value’ and simultaneously nudging the premiumization trend that is driving economic recovery in parts will fuel momentum,” he added.

During the year 2022, the company reported an “acceleration” on the “rurban” thrust by going deeper into smaller towns and cities, scaling up on-ground activation, deploying more resources, and leveraging partnerships to expand coverage. The company added around 55,000 villages and 1,800 distribution touch points in 2022 and increased consumer connect through Haat activities and “rurban” smart stores, according to the company’s annual report.

“Increasing the reach in rural markets by putting sharper focus on increasing mind share and market share will be important. Companies would need to expedite their rural distribution strategy, keep consumers engaged with new offerings and drive the premiumization strategy to adapt to the changing landscape. Through the cluster-based approach, that is powered by data and technology, your company has made deeper penetration into newer markets, unleashed growth potential and created a transparent planning process,” the company said.

To be sure, Nestle India has among the lowest contribution from rural markets, estimated at 20%, when compared to other large staples companies. However, with improving consumer aspirations, Nestle has embarked on a journey to increase its rural presence. It has taken several initiatives to drive its presence in rural markets, analysts at ICICI Securities said in a report released 24 March.

Meanwhile, the company said that the rate of change of consumer preferences is set to increase sharply going forward as consumers access more information online. Nestle is “constantly upgrading” information dissemination on the labels, it said.

“Consumers progressively seek to know the transparent impact of their purchase decision, consumption and subsequent management of the product packaging by the organisation. Sustainability and societal concerns for the planet is paramount and they are demanding tangible action on plastic neutrality, zero emission and sustainable practices that go into the process of sourcing, manufacturing, transportation and handling of waste. The importance of label to bear critical information like nutritional composition of ingredients, sourcing details and proper disposal instruction are becoming a priority. Your company is constantly upgrading its information dissemination on the labels and via other brand communication mechanisms to provide all relevant details to enhance and enrich the consumer experience,” Nestle India said.

The company added that holistic health as a trend is set to accelerate. This, Nestle India highlighted as a opportunity for the company to tap into.

“With a plethora of information available on the various ingredients and product attributes, the consumer is seeking clarity based on science and validated efficacy. Your company is leveraging its vast resources and know-how of technological and scientific knowledge on food and nutrition by having access to global R&D network to meet the consumer requirements. It is utilising various platforms like the corporate websites, brand websites and even dedicated helplines for easy access and engagement,” it said.

For the full year ended 31 December 2022, the company’s revenue from operations grew to 16,896 crore. Profit for the year stood at 2,390.5 crore.

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