Nestle India Increases Prices By 1-3% As Commodity Costs Rise

Nestle India Ltd. increased prices across its product portfolio by 1-3% as commodities like milk and coffee continue to turn costlier.

“Because of the global context of raw materials and also because of large economies globally are opening up strongly, there would be pressures on raw materials going forward," Suresh Narayanan, chairman and managing director at Nestle India, said at a press conference. "The forward pressures are likely to be more acute than what we have been through at the moment.”

Globally, costs of commodities like coffee, milk and packaging have seen a 4-5% uptick, he said. That came as demand rose with economies opening up after vaccination picked up pace.

The maker of Maggi instant noodles saw rural growth outpace urban consumption for a few quarters. Narayanan said there could be some pairing of growth as urban areas open up.

Compared to its peers that get a higher contribution of sales from rural markets, Nestle India sees 20-25% of its revenue come from India's smaller town and villages.

“If I were to look at the Nestle experience, the bigger impactors are the so-called mega cities where the restrictions were the maximum,” Narayanan said. Consumption has been "fairly robust" in tier 1, 2 and 3 cities and it's expected to rebound in mega metros and metros, he said.

The economy, however, is still on the mend and recovering from the shocks of Covid. “I don't think we can say things are back to pre-Covid times. The unorganised and MSME sector is still finding its feet,” Narayanan said. There will also be constraints on household budgets in the next couple of quarters, he said.

That means essential items would dominate the consumer basket compared to discretionary and luxury products.

Nestle earlier announced that it would invest Rs 2,600 crore in India over three to four years and has already utilised Rs 1,000 crore. After the announcement of production-linked incentives for food processing industry, the maker of Nescafe is actively considering participating in it, Narayanan said.