Nestle India sees ₹7500 crore premiumization opportunity across markets | Company Business News

Nestle India on Tuesday said premiumization remains a ₹7,500 crore opportunity for the company, giving it space to expand its coffee, chocolates and pet care business in the country across rural and urban markets—a theme highlighted by several consumer companies as they tap changing consumer preferences and aspirations across markets.

The company, for instance, is set to open its first upmarket Nespresso coffee store in Delhi over the coming months. Its petcare portfolio reported double-digit growth during the December quarter.

“The overall premiumization opportunity we see in our categories is roughly ₹7,500 crore. The growth of this portfolio has been about 16% (on a CAGR basis) since 2015. Premium products are outpacing the category growth. That’s what you hear from most companies, and that’s what we also report,” Suresh Narayanan, chairman and managing director of Nestlé India, said during the company’s analyst and institutional investors meeting held in Gurugram on Tuesday.

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“The premiumization trend is universal across urban and rural markets, so it’s no longer true to say that only the urban rich or the urban middle class consume premium products. Even consumers in rural India have a taste for premium products,” Narayanan, who is set to retire from the local arm of the Swiss food and beverage company later this year, said.

More companies are chasing growth to tap aspirational consumers by bringing global brands to India while adding premium categories such as body wash, sunscreens, serums, muesli and energy drinks to their portfolio.

Last year, fast-moving consumer goods maker Hindustan Unilever Ltd (HUL) unveiled its road map for the next couple of years, highlighting a significant shift in Indian consumer preferences. The company highlighted categories such as premium face care, premium hair care, body wash, home care liquids, condiments and mini meals, and wellbeing as “long-term bets”.

While companies aren’t abandoning mass-market products like ₹10 noodles or shampoo sachets—which remain crucial for reaching rural consumers and budget-conscious middle-income households—they are expanding into previously untapped categories.

For example, Nestlé’s portfolio now includes cereals, flavoured yoghurts, cat food and pricey coffees, demonstrating this diversification.

For the 15 months ended 31 March 2024, the maker of Maggi noodles reported sales of ₹24,275 crore and a profit of ₹3,932.8 crore.

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Citing examples, Narayanan said “premium coffee” defines the coffee experience. “This does offer a greater opportunity for growth. Confectionary is still a small part of our portfolio but is powering ahead quite well and will give us incremental growth and profitability in the future. Pet care is a relatively small category for us, but it’s a category that offers considerable promise because we have global competence here. And the ambitions on this are also fairly significant,” he said.

Rural and urban markets

Meanwhile, Narayanan said demand for packaged goods in urban markets has tapered downwards while rural demand remains strong. “We are not completely out of the woods—urban unemployment, tepid real wage growth and post-covid moderation remain,” he added. Additionally, food inflation continues to impact household budgets. “Research after research, the consumer is telling us that we are buying more expensive but consuming less. Hopefully, some of the changes that have been made will mitigate the situation,” he said.

However, Narayanan said announcements in the recent budget around lowering personal taxes across income slabs could aid recovery. “Some of it might go out into consumption and some into savings and paring down debt,” he added.

Within its portfolio, coffee prices continue to be high. 

The company has taken price hikes on products such as coffee and noodles.

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“Coffee has seen hyperinflation. Point to point, between this year and last year coffee prices are up 75%. If the coffee prices are unrelenting, then there will be a little bit more pricing. We will try to reduce it as much as possible through efficiencies,” he said. Meanwhile, milk prices have been “stable” while cocoa prices have been rising, too.