Nestle keen to expand in rural markets

Nestle has plans to reach around 1.2 lakh villages with each having a population of over 5,000 over the next two to three years. This would be supported by distribution expansion and some portfolio tweaking, says Suresh Narayanan, Nestle’s chairman and managing director.

The FMCG major is also planning a communication thrust for messaging and advertising, which will be more rural centric. Expecting a rebound in urban markets, Nestle is also evaluating Direct-to-Consumer (D2C) channels to reach its customers at their doorsteps.

Narayanana said their target is to reach 1,20,000 villages. “That is all the villages, with more than a 5,000 population is really the kind of reach that you like to establish in the next two to three years,” he highlighted. “This will be done, not only through distribution expansion but relevant parts of the portfolio will be tweaked. The work is on in terms of renovating and innovating some products that we will be putting out in semi-urban and rural markets.”

Small rural and semi-urban areas of tier II, III and IV have shown a greater resilience against the pandemic and have performed better than the big metros, which are still struggling. Narayanana pointed out that a revival of the urban market is also important as a third of Nestle’s business clearly comes out of the large cities and metros, and there are signs of improvement as enterprises open up.

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“So, I see urban markets opening up and starting to see the signs of improvement. And I do hope and pray that nothing goes wrong and there is no second COVID-19 wave,” he said. “I think urban markets also will start to come back in the next one or two quarters.” He  also said that it was difficult to say as to whether it would hit a double digit growth as the pandemic is still there. In the short to medium term, in the last couple of quarters, the company is witnessing a normalization in sales after pantry uploading during the sever periods of the pandemic.

Narayanan has ruled out any immediate price hike due to higher costs and said the company has plans in terms of procurement and cost efficiencies to mitigate some of the commodity cost increases. Nestle globally have 35 billionaire brands, which sell more than a billion Swiss francs per annum and in India, it has only nine of them.