Nestlé India chief Suresh Narayanan said Monday that 2022 is likely to be a “difficult year” as commodity prices are expected to rise and create the specter of food inflation for manufacturers.
Nestlé has seen an average price increase of 1-3 percent over the past six to eight months, Narayanan said. According to him, the first half of 2021 was relatively safer and more subdued in terms of commodity prices as milk and wheat prices remained broadly stable, with the exception of packaging materials and crude oil. “For the future, 2022 clearly looks promising to be a difficult year.
There is clearly an upward trend in milk prices, ”Narayanan told reporters during a virtual media round table. Aside from the disruptions caused by the coronavirus pandemic and the failure to replace milk stoves across the country on time, this has also led to exhaustion Narayanan said that the pandemic and disruptions there had been detrimental.
“So the specter of food inflation will stare at us,” he said, adding that raw material supplies will come under pressure in the future as large economies open up quite a bit. Worldwide there is an increase in raw material prices of around 5 percent, he added. “I think the forward pressure is likely to be more acute than what we’ve been through at the moment,” he said. Although Nestle India is largely a local economy in terms of commodities, Narayanan said there will be “definitely” an impact and this is an area the company is looking out for.
“There wouldn’t be any immediate reactions we’d have other than, of course, making sure our pencils are sharpened in relation to the coverage of the raw materials, taking positions to ensure the best and best prices are being fetched.” the table of sustainable sourcing, “he said. With commodities likely to get more expensive, Nestlé India expects to mitigate some of the impact by capitalizing on its size as a big player in the industry.” The only silver lining I see in the context of India is that the Rabi harvest will be decent because the monsoons have been quite robust across the country … as far as this inflation goes “.
In terms of demand, Narayanan said, there are three big trends in the market – the middle class and urban consumers are clinging to trusted brands, products that provide some nutritional and immunity benefits, and there is pressure on that too entire household budgets. “The exuberance is unleashed. The last festive season was so to speak rooted for many of the other players. Going forward, there is strong expectation that this Diwali will definitely be much better than the last Diwali,” he said. Nestle India is also expanding its rural coverage, aiming to cover 1.2 lakh villages with 5,000 residents. It currently comprises around 90,000 villages and around 25 percent of total sales come from rural markets.
There is going to be a pretty strong comeback in consumption in mega metros and metros. Even if the urban market is perfectly normal, “rural markets are not going to collapse anytime soon, there might be some growth,” he said. Nestlé India saw strong growth in the e-commerce segment during the pandemic, and the segment contributed nearly 6 percent of the company’s total sales.
Narayanan noted that sales through other channels are also expected to stabilize, but e-commerce would remain relevant to many consumers who have now become used to shopping online. Nestle India, which plans to invest around Rs 2,600 billion in India over the next 3-4 years, has also applied for the government’s production-related incentive scheme for the food sector.
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