Health tops new Nestle MD’s agenda

Mumbai, April 02,2014 – The attention in the new financial year will not only be on Saugata Gupta and Varun Berry , newly appointed managing directors (MDs) of Marico and Britannia, respectively. Another recently appointed MD is vying for attention — Etienne Benet of Nestle.

Benet, who took over as MD from Antonio Helio Waszyk in October 2013, articulated his priorities for the Rs 9,061-crore Indian unit at a recent analyst meet, saying these would be health and wellness, followed by noodles, where the company would make a few key launches this year (Nestle follows a January-December accounting year). Benet, a French national who has worked in Indonesia and Africa, among others, and is said to have a sound understanding of emerging markets, also stated that water and pet foods were areas where the subsidiary of the world’s largest food company could consider stepping into in the future. Analysts who attended the meet say the company’s expansion into water and pet foods is not likely to happen in this calendar year. “We expect Nestle to eventually enter pet foods and water, though not in the medium term,” said Abneesh Roy, associate director, research, institutional equities, Edelweiss.

Analysts say the entry into water and pet foods could happen in about two to three years after the company stabilises current operations.

Benet, who joined Nestle in 1989 as an internal auditor, also said the company was rationalising its chocolate and beverage portfolios, trimming low-margin products such as 50-paise eclairs and single-serve Nescafe sachets, in a bid to improve profitability. Together, the two categories give Nestle 24 per cent of its revenues. The move comes as Nestle struggles with low volume growth across segments, including milk foods and nutrition and prepared dishes and cooking aids, which together give the company almost 76 per cent of its revenues.

Nestle reported a 3.5 per cent and 2.2 per cent decline in volume growth in milk foods and nutrition and chocolates and confectionery, respectively, in 2013, though prepared dishes and beverages grew 3.8 per cent and 3 per cent, respectively. This mixed performance was unable to pull Nestle out of the sub-one-per-cent overall volume growth zone that the company has been trapped in for the second straight year in a row. For 2013, overall volume growth stood at 0.6 per cent, while in 2012 it was 0.8 per cent. Nestle last saw double-digit volume growth in 2010 at 17 per cent, slipping to 6.8 per cent in 2011.

Gautam Duggad, vice-president, research, Motilal Oswal Financial Services, said, “They have tried arresting the volume decline in categories such as noodles with aggressive brand-building and smaller packs. This helped them to some extent. But in other categories (such as chocolates and beverages) they have been scaling down their portfolio to improve profitability. This has hit sales growth.”

Benet reiterated at the analyst meet that the company would continue to keep its attention on profitable growth as consumer demand remains tepid. New products or variants that would be launched would be in keeping with its health and wellness agenda, Benet added. Business Standard