Suresh Narayanan, Chairman and managing director, Nestlé India
FMCG companies are feeling the pinch of inflationary trends. Nestlé, the maker of brands like Maggi and Nescafe, is no different. In an exclusive conversation with Storyboard18, Suresh Narayanan, Nestlé India’s managing director and chairman, talks about how the company is sustaining its momentum in consumption and meeting customer expectations, and trends like D2C and healthy-ageing. Edited excerpts:
Q. How has 2022 fared so far? How are you sustaining the momentum in consumption that came during the pandemic? One of the striking features of 2022 has been the unrelenting inflation on commodities. Nine or 10 of the top 13 commodities we procure have crossed their 10-year highs. The cumulative inflation in the last three years has met or surpassed the inflation we are facing today. How do you deal with inflation in terms of efficiencies, effectiveness and pricing are some of the concerns that one is combating at this point in time. On the other hand, demand for our mainstream brands has been robust. Most of our portfolio is doing well.
Q. How are you looking at unlocking the next level of growth for a brand like Maggi? Maggi is a classic example of a brand that has been mass-customised. Everybody has an association with it, everybody has their own version.
Today, the brand’s ecosystem is much bigger than the brand itself. The number of wheat farmers, factory workers, spices and packaging suppliers and vendors runs into hundreds of thousands, if not millions. The brand’s footprint is very big and growing each day. It is going from strength to strength; the strength comes from three platforms.
Number one is innovation across variants. Number two is digital. In the last two years, the digital connection with our consumers has become an important aspect of the brand. The third is our sustainability initiatives. As a brand we have been plastic-neutral for two years. We work across five states with 2,000 to 3,000 farmers on sustainable agricultural practices in growing spices. During the pandemic, we began the Apna Food Business initiative to incentivise and encourage women entrepreneurs, with training and seed capital.
Also read: Leadership will be all about seeing the bigger picture: Suresh Narayanan Q. What’s the strategy to handle challenges and meet expectations when it comes to Maggi’s pricing? It is definitely challenging because Maggi is almost a staple in many homes. Typically, as far as commodity inflation is concerned, there are two or three vectors that the company uses. The first is economies of scale in terms of buying at the right time, stocking at the right time and trying to minimise the input cost impact. Number two is a cost efficiency programme that contributes 1 to 2 percent of sales. We call it sharp savings, which is really operational savings, packaging savings and other related savings. Only if these two are not fully satisfied, do we touch pricing.
But the scale of inflation has been rather stiff this year; 2019, 2020 and 2021 have been more than offset by the impact of 2022. We’re trying our best to ensure we mitigate the impact as best as possible. And yet, we’ve had to pass on some of the price increase to consumers.
Q. How are you seeing the D2C brand space play out and how is Nestlé growing its presence in it? The D2C space is becoming interesting and challenging because you have to find a differentiator for the consumer experience between buying on organised trade or ecommerce or the general trade versus buying on a D2C platform. So the degree of differentiation has to be quite sharp for it to work. D2C is becoming attractive because consumers are looking at brands as not just products to be consumed but as a reflection of their lifestyles. So whatever they are looking for in terms of nutrition, health, wellness, advice, tips, etc, all these have been built into a D2C platform. We are working on a platform and will be making our foray into it. However, we want to ensure that whatever experience we give is robust and adequate to satisfy the most discerning consumers. Nestlé would not like to put a half foot forward; we want to put a firm foot forward. Q. How is Nestlé addressing the trend towards healthier living? There’s nothing called good nutrition or bad nutrition; it’s all about balanced nutrition. During the pandemic, we saw two or three things come out very clearly. Number one is that consumers are looking for nutrition and immunity. Second is the preference for quality and safety of a brand. So, for us, the journey has been to improve the quality of nutrition, and to make better, healthier and more relevant offerings. We are looking at products in healthy snacking, whether it is grain-based or protein-based.
We’re looking at entries into areas like ‘healthy ageing’. As India grows more prosperous and as our population growth rates decline, we also are becoming an ageing population. And these are the people who have money, and are looking at products that can keep them healthy and happy as they grow older.
Q. What’s your approach to responding to people on platforms like LinkedIn? When we were young managers, each one of us had a dream of what we would like to be known for. One of the things that I had hoped to do as a more mature manager was to be able to positively influence as many people as I can. I am not much of a social media person. LinkedIn is the only thing that I do reasonably regularly. One of the things that rankles me is, if I am a 23-year-old and I’m writing to someone with a request and that person does not even reply, simply because he’s sitting on a high horse. I genuinely feel extremely happy when young people achieve something in their lives because the only legacy that I will ever leave behind as a corporate leader is to have created leaders who are far better than me. So, in that context, I believe that I should find the time.