Semi-urban & rural to be new growth areas, to focus on premium offerings; Nestle India CMD

New Delhi: For Nestle India, semi-urban and rural markets are going to be the next growth area, where the company is expanding its base with relevant product portfolios, its Chairman and Managing Director Suresh Narayanan said on Friday.

Nestle is focussing on 12-13 states to grow its distribution footprint in semi-urban and rural markets and offering relevant packs. It is also increasing the number of distribution points, which have gone up significantly in the last couple of years, he added.

"The next phase of growth is not just going to come from strengthening our portfolio in urban India but also in semi-urban and rural India. We are seeing growth not just in mega towns and metros but also in Tier 1-6 towns," said Narayanan in a media roundtable here.

Semi-urban and the rural market currently contribute around 20 per cent to Nestle India sales.

Besides, Nestle India is also enhancing its portfolio of premium products, catching up with the growing aspirations of the consumers, he said.

The company is upping its play in the premium segment of categories such as chocolates and coffee.

"While a third of our portfolio is price-point-led, wherever we have opportunities for premiumisation, we are doing it aggressively,” Narayanan added While talking about inflation, Narayanan said though it's softening but it is still present in the food segment.

"In the first half of this year, we have combated roughly about a 10 per cent inflation, the same last year was 15 to 20 per cent. so that inflation is coming down," he said.

The prices of milk and wheat have been stable so far and packaging materials and oils have been fairly benign, he added.

"I think food inflation would continue to wobble for a while, not just because of expectations on crops but also the whole climate piece. With the kind of torrential rains that are taking place, What impact will this have on the winter crops? Its any body's guess," he said adding "spectre of food inflation is going to remain. It is not something that we can wish away that quickly," he said.

Nestle under its RURBAN strategy, is increasing its distribution footprint with a relevant portfolio, in semi-urban and rural markets achieving higher penetration.

When asked about growth from those markets, he said: "Journey has been encouraging so far." "We are seeing upticks happening across geographies and hopefully they start contributing 100 to 100 basis points of increased contribution in the next two, three years. I will be happy with that because food brands, usually take some time to build resilience," Narayanan added.

Now people in rural India have become aspirational and asking for the Nestle brand products. Now more than 10 to 15 SKUs are available in small towns and rural markets.

"Now people are asking for these brands. So that tells you how aspirational brands have become over a period of time. And also with the improvement in infrastructure, the other thing which is playing up very well is the improvement of highways and improvement of infrastructure is easing the distribution load on companies, making access easier," he said.

E-commerce accounts for almost 6.5% of Nestle India's sales, of which half is from quick-commerce.

Over its health science business, Narayanan said he is very excited about the prospects for the specialised products in the segment.

"Our pet care business, which we integrated into Nestle India a couple of quarters ago, has also a great start in Nestle portfolio," he said.