Nestle India - Encouraging Volume Growth Trends; Cost Inflation A Key Monitorable: Motilal Oswal

Motilal Oswal Report

Nestle India Ltd. held an analyst call to provide a business update.

Here are the key takeaways:

Volume growth trends for all three quarters reported this year were encouraging. Nestle's volume and mix growth was 9.1%/13%/8.9% in 1Q/2Q/3Q CY21 (on 10.2%/13.7%/10.1% domestic sales growth). Volume growth was not disclosed as part of the company’s quarterly results. With this, the trend of positive volume led-topline growth seen in recent years continued.

Management commentary on volume-led, double-digit sales growth has remained unchanged since Suresh Narayanan took over as CEO six years ago, and was reiterated during the analyst meet. In view of the $40-50 billion opportunity in the Indian packaged foods, the commitment is encouraging.

Total reach and rural expansion is also encouraging. From a total reach of 4.5 million outlets before the ‘Maggi crisis’, Nestle's reach saw a sharp reduction only to gradually return to the earlier levels. From this point, the company went on to increase its total reach in the last two years and currently reaches 4.9 million outlets. Nestle now covers nearly 100,000 villages from 52,000 in CY18 with a target to reach 120,000 villages by CY24. Rurban (semi-urban and rural) sales are now evidently growing faster than overall sales.

For more key takeaways read the report.

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