Page 14 - ABFI March 19 issue

cover story

Nestle INdIa’s Core
strategy remaINs

volume-led growth

In many categories, penetration levels are relatively
low and we will focus on that, says the CMD. Sharply
positioning, resourcing and monitoring our activities
across the geographies will provide incremental
opportunities for growth, says Suresh Narayanan,
CMD, Nestle India. Edited excerpts:

As expected, you have the last couple of quarters, and sourcing capabilities to SEBI allows a royalty payout
delivered on top line in Q4. we should be able to have a mitigate some of these cost of up to 2% before you have
Will this kind of growth healthy performance this year increases. Only in the most to take approval from your
trend continue going as well. unavoidable cases, would minority shareholders?
forward? there be consequent price The royalty rates went
Fundamentally, three Most FMCG firms spoke increases because our core through elaborate study in
things are important for about benign raw material strategy remains volume-led 2012 after being static for
us to deliver. Number one environment. But we have growth and penetration-led about two decades. The study
is volume-led penetration. seen flattish gross margins strategies. was done by Mckinsey. It was
In many of our categories, delivered by Nestle, why is validated and independently
the levels of penetration that? You have invested a heavy validated by Bansi Mehta &
are still relatively low and Fundamentally, the amount in ad spends. While Company and also by KPMG.
that is something we will margin structure has been this could be an effort to It was put to vote at the board
focus on. Number two, we impinged upon by the maintain your double- meeting on the 22 of March
nd
have considerably cranked considerably higher level of digit volume growth, this 2013, where the executive
up our pace of innovation advertising and promotion is definitely going to hurt directors rescued themselves
and renovation and the last support that we have put your margins and bottom because they were interested
quarter was supporting these behind the new launches line. How are you looking to parties and the independent
renovations and innovations in the last quarter. Almost manage the same? directors agreed on the lower
very strongly. This will also 370 bps of extra A&P has We do not typically end of the recommendation
be a clear engine of growth been put to support new give guidance on what our of Mckinsey and of the other
for us. launches Nesplus, enhanced EBITDA margins would be. two organizations, to increase
The third element is performance in Nescafe If I am able to maintain my it from 3.5% net of tax by 20
that we have moved our Gold, our chocolates and average levels of profitability bps each year for five years.
organisation from pan confectionery portfolio and — the way it has been for So, this has gone from 3.5% to
Indian framework to a finally also on the Maggi the last couple of quarters 4.5% as on date and there is
cluster framework dividing range. This led to the drop in — I would consider it to be no proposal at the moment to
the country into 15 clusters. the operating profit margins. a terrific performance, seen increase it any further.
Sharply positioning, Also the benign era is together with strong growth
resourcing and monitoring gradually fading. Prices of on the top line that we hope to The contributions from new
our activities across the commodities are moving generate. products have significantly
geographies will provide northwards and our gone up. What else do you
incremental opportunities for endeavour would be to try What is the average have on your radar in terms
growth. If we are able to put and mitigate as best as we can current royalty expense as of new launches and what is
together these three things using our scale, science and a percentage of your sales the mix between premium
well, as indeed we have for technology, manufacturing currently? I understand that and the non-premium

14 March 2019 AgriBusiness & Food i ndustr y