InvestorQ : Is it true that Nestle is planning a major thrust on rural India in the months ahead?
Dilmini Mercia made post

Is it true that Nestle is planning a major thrust on rural India in the months ahead?

Dawn Cherian answered.
7 months ago

With robust agriculture growth in the last few quarters and a spurt in rural income and rural spending power, Nestle India plans to join the bandwagon of FMCG majors who have been betting on the rural market. Rural focus in nothing new. FMCG players like Hindustan Unilever, Godrej, Britannia, Parle have all been heavily investing in the rural market for a very long time now and it has paid rich dividends. Obviously Nestle cannot be far behind.

Now Nestle has laid out elaborate plans to reach out to around 1.2 lakh villages, each having average population of over 5,000. This rollout is expected over the next 3 years and it will be supported simultaneously by distribution expansion as well as some portfolio tweaking in order to specifically appeal to the rural population. Nestle is also planning a focused rural-driven communication strategy where messaging will be rural centric.

That is just one part of the story. In addition, with greater technology and greater outreach of smart phones, Nestle is also evaluating Direct-to-Consumer or D2C channels to effectively reach out to customers at their doorsteps. In fact, Suresh Narayanan is quite confident that Nestle will be able to successfully implement its rural-focus policy across 1.2 lakh villages comfortably over the next 3 years. Of course, communication will be a challenge.

Nestle also clarified that work had already begun on innovating and appropriately rebranding some of its products that will be targeted at the semi-urban and rural markets. According to Narayanan, small rural and semi-urban consumers in tier II, tier III and tier IV towns have shown a greater resilience against the pandemic and their response to the FMCG products was a lot more refined compared to urban centres and metros.

Nestle has clearly ruled out any immediate price hike to counter higher costs and said it would rather focus on fine tuning its procurement and cost efficiencies to offset some of the commodity cost increases. Nestle also wanted to deepen their product penetration. Globally Nestle has about 35 billionaire brands that sell more than SFR1 billion per year. In India there are only 9 such brands.

Nestle has been working on the rural story for some time now. For example, in 2017 Nestle was covering just about 1,000 odd villages across the length and breadth of country. However, by 2019, that number has risen to nearly 89,000 villages. Hence growing to 1.2 lakh villages may not that tough after all for Nestle.