'Nestle will emerge stronger from slump'

Sep 09, 2009 (The Economic Times - McClatchy-Tribune Information Services via COMTEX) -- NEIXF | Quote | Chart | News | PowerRating -- Come October 1, Martial Rolland will hand over the reins of Nestle India to Antonio Helio Waszyk, and pack his bags for Vevey, the headquarters of the foods giant.

When he took over Nestle India five years ago, the company had revenues of about Rs 2,200 crore and a bottomline of Rs 250 crore. By the end of this year, Nestle India is expected to clock more than Rs 5,000 crore in revenues and a net profit of Rs 700 crore. In an interview with ET Now, Mr Rolland explains what keeps Nestle India's growth engine humming, and why he thinks Nestle has not even scratched the surface of the FMCG market.

Excerpts:

QUESTION: Nestle India's second-quarter results were pretty robust. Do you see the double-digit growth continuing for the rest of this year and perhaps next?

ANSWER: The past three-four years are a good indication of the future. We do hope that things continue as they have. That's very much the intention.

Q: Do you see poor rains impacting Nestle India in any way?

A: We'll have to see... it's still a little early... it may have an impact as rural or semi-urban area has been fairly good for companies like ours. At least for the rural area, if the monsoon is bad, this might have an impact in terms of offtake.

Q: Nestle is largely dependent on urban and semi-urban market. How much of your sales come from rural markets?

A: It would be very small. But it's pretty much small for everybody. In India, there are a few branded food categories that have a wide penetration. But all other categories are strong in what I would call urban and semi-urban areas.

Q: Is Nestle looking at rural markets at all? Or do you feel you don't have the appropriate products for them at this point?

A: The challenge is to have the right products for the right markets. For us, the focus is and will remain urban and semi-urban markets. The six-lakh villages are of interest for some of our products, which are priced fairly low. For example, dairy whiteners. But as a whole, we are a semi-urban, urban-centric company. We are working on some products that better fit rural markets.

Q: In what ways are these products going to be tweaked?

A: It's more about what can we bring to the party. India has all the diseases of the first world. By this, I mean obesity and diabetes. But at the same time, the country has a fair bit of micro-nutrient deficiency. And rural is one area where the micro-nutrient deficiency is prevalent. Here we can enrich some of our products with some fortification to help alleviate micro-nutrient deficiency. The product that will address this micro-nutrient deficiency has to be relevant to the consumers in rural areas.

Q: When can one expect the first set of products tailor-made for rural India?

A: It could start towards the end of the year or early next year.

Q: But how big a challenge is meeting the price points that rural consumers demand?

A: I would say that's a challenge not just for rural consumers, but consumers at large. The Indian consumer is value conscious and rightly so. If you look at a product, such as Maggi, we have been at the 5-rupee price point for the longest period of time. We are aware of the fact that this has some benefits. So, it is a challenge, it obliges you to stay on your toes, to ensure that you remain price competitive.

Q: Your profit rose 27 percent, much more than the 20 percent increase in domestic sales. What would you attribute the jump to?

A" The focus of our company has been on topline growth and that's what I would say we've been doing for many quarters. And I am a strong believer in the fact that if the topline grows healthily, the bottomline grows automatically. During times of cost inflation, one has to be very aware of one's own costs. So, that's what we've been doing... tightening loose ends. And I have no doubt that coming out of a slowdown, a company like ours will emerge even stronger.

Q: Do you expect to maintain the profit margins in the quarters ahead?

A: We don't give any forward-looking statements. But we operate in a certain (profit) band and really, the intent is to remain in that band. Clearly, our focus is going to remain on the topline.

Q: You have broadly four or five categories in India. Which of these are going to drive your growth going ahead?

A: If you look at our numbers, our revenue (from these categories) is fairly balanced. This is a very favourable position to be in, because if there's any issue with one category, the other four balance it out. So, all our categories are going to grow and that's clearly our intent. There's potential in each and every category we operate in and we'll work towards it.

Q: How do you look back at your past five years in India?

A: With lots of pleasure. For me, it's been most satisfying, personally and professionally. India has been pleasurable not just because of the economic environment, but to work with an extremely strong and engaged team has been very satisfying. Ultimately, the result one sees are the results of the team. So, it's not without regret that I will leave India.

To see more of The Economic Times, or to subscribe to the newspaper, go to
http://economictimes.indiatimes.com Copyright (c) 2009, The Economic Times,
India Distributed by McClatchy-Tribune Information Services. For reprints, email
tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax
to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave.,
Suite 303, Glenview, IL 60025, USA.

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index