Nestle Considers Options To Directly Sell To Consumers

Nestle India Ltd. is exploring options to sell directly to consumers as the pandemic forced people to turn to the internet to buy everything from staples to medicines.

“We are actively evaluating (direct-to-consumer) at the moment because we now have a pretty wide portfolio across categories... I think there is still a lot of runway space that we have as a company, and D2C could be a good platform for some of these engagements,” Suresh Naryanan, chairman and managing director at the maker of Maggi noodles and Nescafe coffee, said in a press meet.

Nestle, however, didn't elaborate on the channel it will use to sell directly to consumers. To a query by BloombergQuint, the company said the plan is still at an evaluation stage.

While newbie consumer goods makers such as Meatigo, Beardo and Bombay Shaving Company have mostly opted to sell directly to consumers online, most incumbents still sell more than 80% of their goods through traditional trades or distributors. ITC Ltd. is one large player that that set up a portal during the lockdown.

Narayanan also expects the nation’s packaged foods industry to double in the next five to 10 years. In the short to medium term, Nestle India has witnessed a normalisation in snacking, which jumped 15-20% in the severe period of the lockdown.

Besides, tier 2, 3, 4 cities, he said, have shown accelerated growth during the lockdown as the number of Covid cases were lower.

Urban India, on the other hand, has started to see signs of improvement and will come back in one or two quarters if nothing goes wrong with the evolution of the pandemic, Narayanan said. He expects rural growth to outpace urban over the next few quarters.

That corroborates with NielsenIQ's forecast that after two quarters of decline, consumption is growing again in cities with a population of more than a million. Rural markets continued to grow in double digits and were up 14.2% in the quarter ended December compared with 10.6% in the preceding three months.

Nestle India also plans to increase its rural penetration over the next few years and targets to reach 1,20,000 villages by 2024. In 2017, the company’s products were available in 1,000 villages, which increased to 89,000 in 2019. In 2020, however, its rural footprint dropped on account of the pandemic.

Narayanan, without elaborating on price hikes due to higher costs, also said food inflation will outpace headline inflation for some time.