Food inflation expected to be benign this year: Nestlé India CMD Narayanan | Mint

“I think in overall terms, this year looks to be more benign as far as food inflation is concerned. And therefore one is expecting that with an infusion of investment, of incomes into the economy, there will be signs of an uptick,” Suresh Narayanan, chairman and managing director, Nestlé India, told reporters at the company’s head office in Gurugram.

“Since there is economic stability and a lot of programmes are being put around infrastructure investment— ₹11 trillion has been committed in the last vote-on-account budget that we’ve had—all this will definitely add to employment and to incomes. A lot of it will be flowing into consumption of essentials,” he added.

Overall household consumption is seeing a duality—with more affluent Indians lapping up premium goods while middle-income households are showing some “signs of stress”, he added.

“Overall, if you look at demand, there are some stress points there. It’s fair to say that the last festival season wasn’t as buoyant as expected. People were expecting a lot more buoyancy in consumption. During the Diwali period, maybe people bought more cars and more luxury items, but the (demand for) common man’s products was relatively muted…I think there is a phenomenon that one is noticing—there are polarities now developing, that is, boom in premiumization and tepidness in the mainstream,” he said.

Nestlé India reported its full-year and fourth-quarter earnings on Wednesday. Its full-year revenue from operations jumped 13% year-on-year to touch ₹19,126.30 crore.

The company reported a full-year volume growth of 5%-6%. For the three months ended 31 December, the company reported an 8% jump in revenues to ₹4,600 crore. Net profit for the quarter rose 4.3%.

Meanwhile, commenting on commodity inflation, the company said coffee prices continue to be volatile and are historically high due to limited availability. Healthy milk flush in winter is expected to keep prices stable. Commodities such as wheat and rice are stable as of now. Rain deficit is expected to impact the production of maize, sugar, oil seeds and spices that may impact pricing, the maker of Maggi noodles and sauces said.

Narayanan said that while the headline inflation is certainly down, food inflation continues to be choppy. “I do hope overall inflation levels are certainly down as compared with 2023 and as compared with 2022. One hopes that if there is stability in some of the commodity prices then you might start seeing the uptick in consumption. A lot is hoped for on the elections, with the economic activity around elections. Hopefully, that will give a little bit of fillip to companies,” he added.

Narayanan’s comments come after market researcher NielsenIQ (NIQ) said in a forecast released earlier this week that makers of soaps to shampoos and biscuits to beverages are expected to grow 4.5-6.5% in value terms this year. The estimates are lower than 8.4% in 2022 and 9.3% in 2023.

Meanwhile, Nestlé continues to step up investment in the country, as it finds “robust” demand for its products. Between 2020 and 2025, Nestlé is set to commit ₹6,000 crore- ₹6,500 crore in investments in India. Last year, the company commissioned a ₹894.10 crore food processing unit in Odisha. “Today we are investing about 7–8% of our turnover on capex, which is much higher than what it ever was. In the last seven to eight years, it was in the range of about 2–3%,” he added.

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Published: 08 Feb 2024, 08:34 PM IST