Nestle India Ltd. doesn’t expect supermarkets and hypermarkets to drive demand anytime soon as the Indian economy reopens gradually and the maker of Maggi noodles focuses on online engagement.
“I think the big-box, ‘let’s have a great shopping experience’ kind of formats might have to recalibrate themselves because consumers might choose to go to smaller convenience outlets, where there are less crowds and where their assortments are available,” Suresh Narayanan, managing director at Nestle India Ltd., told BloombergQuint. “The luxury shopping habits that we have had will take a while to come back, especially in an environment that is still quite uncertain and seen as a bit unsafe.”
India has allowed malls and restaurants to reopen in a systematic easing of the world’s strictest coronavirus lockdown. But Covid-19 cases continue to mount—India now has the fifth highest number of infections in the world, surpassing Italy and Spain.
During the lockdown, Nestle India saw demand sustain for products such as Maggi noodles, dairy whiteners, packaged milk and coffee, Narayanan said in an interview last week, adding the consumption of other categories is also rising. The company, according to a statement mailed on Tuesday, said it launched new range of Maggi noddles in Delhi-National Capital Region, Mumbai and Pune.
Nestle India launched 71 new products in the four years after the Maggi fiasco, and new categories contribute 3.4% to its sales.
Narayanan said the lockdown caused downgrading in consumption, with people buying only essentials, postponing big-ticket purchases such as appliances and holding on to cash. But eventually, he said, they will look at affordable indulgences which would push up consumption of food and cosmetics.
Nestle India’s all eight factories are running at 80-85% of its capacity. The maker of Kit Kat was able to start two of its units in a day or two of Prime Minister Narendra Modi announcing the nationwide lockdown starting March 25, Narayanan said.
Other consumer companies took longer. Unilever Plc, the parent of Hindustan Unilever Ltd., had said there was no production and shipping in the last seven days of March and the company took four to five days to restart operations at its facilities. But HUL too has ramped up its production to 80-90% of its capacity now from 70% in April.
Focus On Online Engagement
In 2019, Nestle India’s ad spending stood at 6.7% of domestic sales, close to a 15-year high, and this supported growth and new launches.
Narayanan said Nestle India will be judicious in its approach now. Consumer engagement has been higher in the online space during the lockdown, he said. This is the area where it is investing, he said.
The share of online sales in Nestle’s India revenue more than doubled in the last one year, he said, without giving details. According to its presentation last year, the contribution stood at 1.5% as of June 2019.
The key shift in engagement for brands is from “out-of-home to in-home”, Narayanan said referring to companies trying to engage with consumers online. “This is the time for dialing up the level of [online] engagement.”
And consumers will look for quality, trust and safety of products while considering their impact on immunity and health, he said.
(Updates an earlier version after Nestle India corrected the MD’s comment to say that the company launched new versions of Maggi noodles in May)
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