New Delhi, September 20 (PTI) NestlÃ© India chief Suresh Narayanan said Monday that 2022 is likely to be a “difficult year” as commodity prices are expected to rise and bring the specter of food inflation for manufacturers.
The main player FMCG, well known for brands like Maggi and Milkybar, anticipates an escalation in the prices of raw material inputs, including the prices of milk, coffee, cocoa and oil.
Over the past six to eight months, Narayanan said NestlÃ© had seen an average price hike of 1-3%.
According to him, the first half of 2021 has been relatively more secure and subdued in terms of commodity prices, because with the exception of packaging materials and crude oil, overall, milk and wheat prices were generally stable.
“Looking ahead, 2022 is clearly shaping up to be a difficult year. There is clearly a rise in milk prices,” Narayanan told reporters at a virtual media roundtable.
Besides the disruption caused by the coronavirus pandemic and the failure to replace the dairy herd on time across the country, this has also resulted in a depletion of the supply base.
Likewise, global coffee prices are also increasing “quite significantly” as there have been negative impacts in Vietnam, which is the largest coffee producer, due to the pandemic and the disruption there, Narayanan said.
“So there will be the specter of food inflation looming over us,” he said, adding that there would be pressure on the supply of raw materials in the future as major economies s ‘open quite strongly.
Globally, there is about a 5% rise in commodity prices, he added.
âI think the pressures forward will probably be more acute than what we’ve been through right now,â he said.
Although NestlÃ© India is largely a locally sourced economy in terms of raw materials, Narayanan said there would “definitely” be an impact and this is an area the company is monitoring.
“There would be no immediate feedback that we will have, except, of course, to make sure our pencils are well sharpened when it comes to commodity coverage, position locking is concerned to ensure the best, the best prices are brought to the table with sustainable sourcing practices, âhe said.
With raw materials likely to become more expensive, NestlÃ© India expects to mitigate some of the effects by using its size as a significant player in the sector.
âThe only bright spot I see in the context of India is that the rabi crop will be decent because the monsoons have been pretty hardy all over the countryâ¦ when it comes to the agricultural sector, there might be some attenuation that we have with regard to this inflation â.
Regarding demand, Narayanan said there are three major trends seen in the market – middle class and urban consumers are sticking to trusted brands, products that offer certain nutritional benefits and immunity, and there is also pressure on the whole household. budgetary.
âThere is an outburst of exuberance happening. The last holiday season was sort of entrenched for many other players. Going forward, there is a strong expectation that this Diwali will definitely be much better than the last Diwali, âhe said. .
NestlÃ© India is also expanding its rural coverage and aims to cover 1.2 lakh villages, which have 5,000 inhabitants. Currently, it covers about 90,000 villages and about 25 percent of its total sales come from rural markets.
There will be a fairly strong return to consumption in mega-metros and subways. Even if there is complete normalcy in the urban market, “rural markets are not going to collapse quickly, there could be some growth,” he said.
NestlÃ© India experienced strong growth in the e-commerce segment during the pandemic and the segment contributed almost 6% of the company’s total sales.
Narayanan noted that sales through other channels are also expected to stabilize, but e-commerce will remain relevant for many consumers who have now made a habit of shopping online.
NestlÃ© India, which plans to invest around Rs 2,600 crore in India over the next 3-4 years, has also requested the government production-related incentive program for the food processing sector. RAM PTI KRH
Disclaimer: – This story has not been edited by Outlook staff and is auto-generated from news agency feeds. Source: PTI