Nestle India considers 'minimum' price hike due to rise in commodity, oil prices; mulls expansion

New Delhi: FMCG major Nestle India is considering a mild price hike “selectively in some categories” to offset rising prices of base raw materials such as wheat and milk, a top company official said. Although Nestle is trying to mitigate cost by enhancing cost efficiencies on manufacturing, sales etc, it may go for a “minimum” increase as other inputs costs such as packaging are on the rise led by high crude oil price and falling Indian rupee against the US dollar. Besides, Nestle India is also now gearing up for the “next wave of capacity expansion” after having a volume driven growth in last 18 months. The company is mulling expansion of its existing production facilities besides venturing into new locations. “Yes, the exercise is on to look at next phase of capital expansion,” said Nestle Chairman and Managing Director Suresh Narayanan. He further said: “It’s an active subject seeing the sustained performance.” However, Nestle did not share any input about it. Over rise in cost, Narayanan said, “Headwinds on commodities have already started. As the combination of issues rupee and oil price, some of the domestic raw material prices are starting to increase,” Narayanan said. Nestle, which operates in segments such as beverages, breakfast cereals, chocolate and confectionaries, milk products and prepared dishes and cooking aid - said that it is watching trends and does not want its volume-led growth story strategy to be impacted. [caption id=“attachment_2973304” align=“alignleft” width=“380”]  Suresh Narayanan, Chairman & Managing Director Nestle India. Reuters[/caption] “If there is a sustained impact on wheat, packaging material and possibly on milk going forward, it would affect quite a few categories in the company,” he said adding “selectively in some categories, there could be some price increase.” However, on being asked about the quantum, Narayanan said: “It’s not for me to speculate right away. We have bands which we follow to decide upon what extent we are able to mitigate price increase with other elements of cost efficiencies.” On being asked for the timing of increase, he said, “It is very difficult to specify the timings but all these are moving in tandem. We just have to see to the extent to which these pan out will determine the extent to which we will absorb it or not absorb it, it will determine the time.” Nestle India presently has eight manufacturing units at – Choladi (Tamil Nadu), Nanjangud (Karnataka), Samalkha (Haryana), Ponda and Bicholim (Goa), Pantnagar (Uttarakhand) and Tahliwal (Himachal Pradesh). In 2017, Nestle on a comparable basis reported a domestic sales growth “estimated at 11.8 percent due to increase in volumes including rebuild of Maggi Noodles.” Nestle, typically expands its footprints in existing locations, as its factories allow the capacity to expand, said Narayanan. “Expanding in existing factory amortises the services cost in setting up infrastructure but there could be other sites as well, we could look at,” he said. Besides, Nestle which controls half of the instant coffee market through its brand Nescafe also launched a smart compact coffee machine called Nescafe E in India, in a bid to expand coffee consumption. Nescafe E, priced at Rs 6,499 consists of a travel mug and coffee machine, which are connected through a smartphone and is controlled through a mobile app. Nestle has launched Nescafe E in Cyprus and India is the second country, where the company is introducing it. This would be the first consumer appliance product by Nestle in the B2C segment in India. The company would retail this through leading online channel Amazon and some modern electronic retail stores as Croma and other in top cities.