Mumbai: Nestlé India flagged potential price increases if input costs remain elevated, even as it continues to prioritize volume-led growth.
“We did see some commodity inflation like milk and wheat… The fuel part is a curveball,” chairman and managing director Manish Tiwary told Mint. “Of course, if it persists, while we do want more volume-led growth, we might have to make some price adjustments,” he added.
Nestlé India, the maker of KitKat and Maggi, has leaned on volumes to drive growth, but Tiwary acknowledged that pricing could return to the mix depending on how commodity costs evolve. “So, from almost a complete volume-led growth, we could have some pricing (-led growth), depending on how the commodity and prices move,” he said.
For the March quarter, Nestlé India reported its strongest quarterly growth in nearly a decade, driven by double-digit volume growth. And Tiwary clearly knows the advantages of volume-led growth. “When we grow on volumes, it leads to far better efficiency. The brands grow by volume, and you get all the leverage.”
Nestlé India’s consolidated profit jumped 27% year-on-year to ₹1,110.9 crore in the fourth quarter of fiscal year 2026 (FY26). Its revenue from operations for the given period jumped 22.6% to ₹6,747.79 crore.
Tiwary added that management is focusing on controllable factors, such as cost optimization, rather than on factors like the weather and fuel prices.
“When you invest more behind the brands, the brands grow by volume, and you get all the cost leverage,” he said.
So far, demand trends remain steady. “We are not seeing downtrading; consumers are cautious, but demand for our trusted brands remains resilient,” Tiwary said.
Hindustan Unilever Ltd (HUL), India’s largest fast-moving consumer goods (FMCG) company by sales, has of 2–5% and is adjusting packet sizes to deal with raw material inflation.
Nestlé India is steering clear of shrinking pack sizes to offset costs, distancing itself from so-called shrinkflation. “Our approach is to offer consumers transparent choice through thoughtful pack and price architecture, while protecting quality, trust and long‑term brand equity,” he said.
Even so, the near-term outlook hinges on input costs. A forecast of below-normal monsoon rains, driven by the possibility of El Niño conditions, could pressure agricultural output in a country where a majority of farmland depends on rainfall.
Wheat has already been hit by unseasonal rains, delaying harvests and affecting quality, while edible oil prices are climbing as producers such as Malaysia divert supply towards biodiesel.
Milk cooperatives in states including Kerala, Odisha, and Madhya Pradesh have implemented price hikes or are planning to do so soon. Some relief has come from softer tea, coffee and cocoa prices, which have retreated from peaks seen last year.
Analysts also hinge their predictions on raw material price movements. “We believe if inflation does not pick up drastically, margin profile should improve in the coming quarters, supporting operating performance along with a lower base,” said analysts at Yes Securities Institutional Equities in a report after the March quarter results.
Rural potential
Growth ambitions are increasingly tied to rural markets. Historically urban-heavy, Nestlé India has been expanding distribution into smaller towns and villages. “We then went into smaller towns over the last year or so. We are now pushing into rural,” Tiwary said. “If you go five years back, we were largely an urban company. Most of our products would be sold in urban India,” he said.
Tiwary sees major headroom for growth in rural India. He estimates that 23–26% of Nestlé India’s portfolio is sold in rural areas, compared with as much as 48–55% for many consumer packaged goods peers, leaving significant headroom for expansion. “Now, obviously, it clearly shows there is headroom for growth,” he said.
Nestlé India is present in about 216,000 villages. “We had around 25,000 hubs, maybe a year back. We now have 45,000… So, we have distribution points closer to these retailers,” he added.
Meanwhile, the company’s pet-care segment is being bolstered by the acquisition of Purina Petcare India’s business and a minority investment in Drools. Though he acknowledges it is a small business, he is keen on its growth. He noted it is “growing at very, high double digits. I feel very, very good about the portfolio globally.”
The company has also rolled out Nespresso in the country, targeting premium coffee consumers through boutiques and online channels. It plans to tailor offerings further for local tastes as the business scales. “As we settle down, we will have more and more unique flavours for Indian, so I think the start has been really, really good,” Tiwary said.
Tiwary succeeded Suresh Narayanan as the organization’s India chief in August. He spent most of his career in HUL and later at Amazon.