In an interaction with Dipak Mondal, chairman and managing director of Nestlé India Manish Tiwary discusses the company’s strong Q4 performance, drivers of double-digit volume growth, rural expansion, advertising push, cost pressures, and future strategy. Excerpts
FMCG companies have struggled to achieve double-digit volume growth in recent quarters. How has Nestlé managed to do so?
There are two key aspects. First, market momentum played a role, especially with GST-related tax relief last year, which benefited all players. What stood out for us was execution. Our team managed the GST transition smoothly without disruptions, and even during periods when others reported channel stocking issues, we continued to post strong growth. Execution discipline compounds results.
Second, we have remained sharply consumer-focused. In times of cost pressure—whether due to West Asia or raw material inflation—companies often take price hikes as the default route. We instead focus on improving internal efficiencies before passing on costs. If the consumer proposition is strong, the financials follow.
Your recent growth appears largely volume-driven. What is driving this momentum?
Growth has indeed been largely volume-led—around 17–18% in the December quarter and 23% in Q4. A big factor is sustained investment in brands. We increased advertising spend significantly, even when it temporarily softened EBITDA margins.
We believe brands need continuous investment—like feeding a baby. In Q4, despite a 52% rise in advertising spend and cost pressures, EBITDA remained strong at 26%, one of the highest in a decade. This shows the strength of the volume growth flywheel.
Will the GST-driven demand boost sustain going forward?
The benefit will last until base effects normalise. Lower prices drove higher consumption initially. Even after the base normalises, continued consumption depends on consumer preference.
However, external factors like fuel prices or input cost pressures could affect consumer spending. Ultimately, it depends on how much disposable income the consumer retains.
Can you elaborate on your rural expansion?
Rural contributes around 22–27% to our sales, but over 50% of our consumers are based there. We have significantly expanded distribution—from 25,000 to 45,000 points in a year—and now cover around 220,000 villages.
Earlier, distribution networks were stretched. Now, by placing distributors closer to demand clusters, we ensure fresher stock and better service. Rural growth is currently running at about twice the company’s overall growth rate.
What is driving the sharp increase in advertising spend – a 50% increase in FY26?
Innovation and communication are key. We’ve launched new products like spicy noodle variants, KitKat Pops, and ready-to-drink cold coffee. Consumers need to be informed about these innovations.
We reinvest efficiency gains into brand building rather than just improving margins. Around 60% of our advertising is now digital, which is particularly effective in reaching both urban and rural consumers.
How significant are e-commerce and quick commerce channels?
These channels now contribute nearly double-digit share of sales. Quick commerce, in particular, drives incremental consumption due to convenience.
For example, a consumer craving coffee may order it online rather than stepping out. Similarly, pet food sales benefit from these channels due to ease of delivery and product specificity.
What is the outlook on exports?
We have two export streams—diaspora-driven and efficiency-driven. Indian diaspora markets demand products like Maggi and Nescafe Sunrise. Additionally, our manufacturing efficiency allows us to supply global markets, such as coffee exports to the Middle East and noodles to countries like South Africa.
Both segments are growing well.
Will free trade agreements (FTAs) benefit Nestlé India?
Yes, FTAs can reduce import costs and improve access to global products like Nespresso machines. They also open up export opportunities. Overall, free trade benefits consumers through better pricing and product availability.
How is technology improving efficiency?
Technology is transforming operations. In manufacturing, digital tools help monitor and predict maintenance needs. In sales and distribution, data enables expansion without proportional workforce increases.
We also use AI for demand forecasting and have internal tools like “Midas GPT” for data access and analysis. This allows employees to focus on decision-making rather than manual tasks.
How are input costs trending?
It’s a mixed picture. Coffee and cocoa prices have softened, but milk, meat, utilities, and packaging costs have risen. Palm oil prices are also increasing.
Despite these pressures, our efficiency measures have helped absorb costs effectively.
What is your strategy for the pet food business?
Through Purina, we are building a premium, science-based pet food business. It is currently small but growing steadily. We are focusing on quality, working with veterinarians and breeders, and positioning it as a premium offering rather than a mass commodity.
What are your capital expenditure plans?
We are investing to expand capacity, including new production lines for Maggi and Munch. Both brownfield (existing facilities) and greenfield (new plants) investments are underway, including a project in Odisha. Capacity expansion is necessary as demand continues to grow.