Inflation will hurt us for sometime, says Nestle CMD Suresh Narayanan

New Delhi: Chairman and Managing Director Suresh Narayanan on Wednesday said the current high inflationary trend is a cause for concern and almost 9-10 of its 13 raw materials have been witnessing 10-year highs in terms of prices.

"Geopolitically, it looks like this phenomenon is going to last for a while. Inflation will hurt us for sometime. How we are going to deal with inflation still remains a concern," he said.

"We are looking at efficiencies. However, with such inflation levels, there will be a short-term impact on volume growth that we like to measure, and value growth will be relatively better... If it continues for the next couple of months, there could be more prices (hikes)," Narayanan said.

Wholesale price-based inflation spiked to a record high of 15.08 per cent in April on rising prices across segments from food to commodities.

The WPI-based inflation was 14.55 per cent in March and 10.74 per cent in April last year.

Asked whether the company will opt for a bridge pack strategy or grammage cut to keep margins intact, he said, "Bridge pack could be one of the way-forwards but grammage reduction is unproductive after a point."

The bridge pack is a strategy under which a company introduces product packs priced between the existing highest and the lowest prices.

Nestle India is looking to tap opportunities in new categories such as 'healthy ageing', 'plant-based nutrition’ and 'healthy snacking' to boost growth in the country.

He also said the company's existing businesses, ranging from nutrition, breakfast cereals and beverages to chocolate and confectionery, have "headroom for penetration".

Narayanan said he is optimistic about the consumption scenario of the country, even though the current high inflation print is "likely to last for a while".

"The growth strategy of the company continues to be aggressive. Our categories have headroom for penetration. There are new opportunities whether it is in healthy ageing products, plant-based nutrition, healthy snacking and the toddler segment (for nutrition). All of these will be happening in the next couple of years.

"What we are looking at is new categories rather than new brands. Some of it could be under Nestle's name. We are looking at more platforms for growth," Narayanan said, adding, the company is focusing on premiumisation of products across its segments.

Nestle India has close to 20 brands such as Maggi, Kitkat and Nescafe in India, while globally, the FMCG giant features around 2,000 brands.

Of its annual sales, 20-30 per cent comes from the 'Maggi' portfolio, while milk and nutrition is the largest at 45 per cent, he said. The contribution of coffee and beverages has gone up to 13-14 per cent from 10-11 per cent, and the chocolate business “is growing well”.

He also stated that rural India accounts for 20-25 per cent of its domestic sales.

In the last five years, the company registered 10-12 per cent on-year growth in terms of sales. About 8-9 per cent of that came from volume or mix and 2 per cent from prices, he said on the sidelines of a programme organised by the Indian Chamber of Commerce here.

Asked whether the milk portfolio is under pressure, he said, "It is core to us and an important portfolio. There is competition from milk cooperatives. But we are happy with the progress that the company is making."