[Music]

Focus from Reu Noodles, Maggie Veg Noodles, 100% goodness.

[Music]

From Fav, richer aroma, or B Swad, CL favorite, NFE better, richer aroma, or bold.

[Music]

Time, office presentations, calls.

[Music]

Am matter.

[Music]

Nescafe Gold, carefully selected coffee beans roasted to perfection for a rich aroma and a smooth taste.

Time ja jit, make the most of it. Nescafe, make your world.

[Music]

You care, Asia. For years, Nescafe has been committed to educate the farmers about sustainable farming practices that enable better livelihood while caring for mother nature.

Nescafe from Nestle, cold coffee. Yeah, but I call it iced coffee, just make it right.

[Music]

Bro, so smooth, and it's iced, it's just right. The new Nescafe Ice Roast, the right coffee for iced coffee.

[Music]

For

[Music]

[Applause]

[Music]

[Applause]

[Music]

Strong coffee, Cofe Sunrise.

[Music]

Coffee.

[Music]

Uhuh.

[Music]

I need a break. Why don't you like my post, bro?

Sir, break, but s break. I want to break free. I want to break free.

Have a break, have a KitKat.

Hey

[Music]

Forun crunch.

[Music]

Fromes crunch, CH or crunchy.

[Music]

Waer crunch.

[Music]

Fromy taste, cruncher crunch, lch from.

[Music]

Lesle crunchy wafer crunch from Mle.

[Music]

Every day from Nestle.

Hey, Yumm yum, Li minium, yum, Yumm, Yumm, Yumm, yum, Yumm, yummy, yummy, yummy, yum.

Yumm, make four and much more.

N good food, good life, refreshing, delicious, chill.

Nescafe, grab the day with Nescafe.

[Music]

Thank you, thank you so much.

[Music]

Speech

[Music]

[Applause]

[Music]

Speee, fore, speeech, spech.

[Applause]

[Music]

Plas effici collect home.

[Music]

Hand, hand.

[Music]

Arti

[Music]

Ch fore.

[Music]

Sanitation attend of.

[Music]

Lud Maggie cheating.

[Music]

From minute, fromes fore.

[Music]

Mmy minutes from mag g.

[Music]

Yeah, Madam dun.

[Music]

Madam.

[Music]

Envir through.

[Music]

[Applause]

[Music]

Banana a from.

[Music]

Nestle mag M focus better.

[Music]

Focus beta, subia taste maker.

Ru noodles, Dei Maggie veg ATA noodles.

[Music]

100% fromes fava beans, a richer aroma, or bold swad, NFE classic.

[Music]

B ARA or B.

[Music]

Office presentations, calls.

[Music]

Nescafe Gold, carefully selected coffee beans roasted to perfection for a rich aroma and a smooth taste.

Time J, make the most of it. Nescafe, make your world.

[Music]

Nature, mother.

[Music]

That you care for.

Cafe has been committed to educate the farmers about sustainable farming practices that enable better livelihood while caring for mother nature.

Nescafe from Nestle, cold coffee.

Yeah, but I call it iced coffee, just make it right.

[Music]

Bro, so smooth, and it's iced, it's just right. The new Nescafe Ice Roast, the right coffee for iced.

[Music]

[Applause]

[Music]

Coffee.

[Music]

[Applause]

Fore Sun.

[Music]

[Applause]

[Music]

Strong coffee, coffee Sunrise.

Coffee, St M.

[Music]

Uhuh, mhm.

[Music]

Strong coffee from Nestle.

I need a break. Why don't you like my post?

Practice that turn, bro.

Sir, OTP break, break.

I want to break. I want to break free.

Have a break, have a.

[Music]

KitKat.

[Music]

Crunchy crunch from Mle.

[Music]

Crunchy wafer crunch from Nestle.

[Music]

Waer CaRu crunch from.

[Music]

Mle cruncha crunch from Lesley.

[Music]

Every day from Nestle.

Hey, Yumm Yumm mini, Yumm, Yumm, Yumm, Yumm, shubby.

[Music]

Yby make four much more as good food, good life, refreshing, delicious, chill.

Nescafe, grab the day with Nescafe.

[Music]

Acties

[Music]

Thank you, Jagti. Thank you so much.

[Music]

Foree

[Music]

Fore, fore.

[Music]

Speech, spee forign, fore speech.

[Music]

[Applause]

[Music]

Speech foras.

[Music]

Efficiently colle.

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Heart.

[Music]

PR fore.

[Music]

San ATT.

[Music]

Mag minut from.

[Music]

Nle minute from slay.

[Music]

Over to you, Mr. Bajaj.

Good afternoon, everyone.

A warm welcome to all of you to the Nestle India analyst and institutional investors meet for 2025.

It is a pleasure to host all of you, both in person and online.

I'm Bajaj, I lead the investor relations for the company.

Before we begin, I'll just share the agenda with you.

We'll start with the introductions first, and then we'll have a safety briefing from Miss Simar Prit Khon, who heads our safety, health, and environment portfolio.

Before we move into the presentation from Mr. Sures Naran, we'll have Q&A.

The Q&A will be for persons who are present here as well as for online attendees.

We hope that all of you present here can join us for high as well.

The proceedings of this session will be recorded and will be uploaded on our website.

So I, first of all, will introduce you to the people present here from our senior management team.

We have Mr. Sur Naran, who's the chairman and managing director.

He's there in the center, you see.

We also have Miss Fana Baldina, the executive director for finance and control and the CFO.

Mr. Sanjay Kajura, who heads the corporate affairs and sustainability.

Mr. TS Venkateswaran, he heads our legal.

And Mr. Promod R, he's the company secretary and the compliance officer.

I invite now Simar ma'am to just take us through a brief view on safety.

Thank you, AJ.

For those of you present in the room, I would like to give you a safety briefing.

There are two emergency scenarios envisaged for this building.

One is that of fire, and the second is that of an earthquake, since Gam falls in the seismic zone.

For the first fire scenario, this building is equipped with state-of-the-art fire detection and mitigation equipment.

In the unlikely event of a fire, you will hear an automated message on the public address system.

Please leave the room through the two doors that you can see there, as well as there's a door on this side.

Walk through the cafeteria and go out of the front glass door through which you entered the building.

Take a left and assemble on the front lawns, which is the designated assembly area.

There is no fire drill planned for today, so in case you hear a message, then it is a real scenario.

In the second case, that is of an earthquake, when you feel the tremors, do not evacuate immediately.

Please move out of the room and stand next to a column or take refuge under the furniture that is placed outside in the cafeteria.

Once the tremors stop and you hear a message for evacuation, please follow the same process.

Go out through the front doors through which you entered the building and take the left to assemble at the assembly area.

Wait for the next instructions from the emergency coordinator.

But I hope no such untoward incident happens today and all of you have a safe and fruitful visit.

Thank you very much, and back to you.

Thank you, Simar ma'am.

So before we start with the main presentation, the standard disclaimer.

So except for the historical financial information contained here, the presentation may contain statements which reflect management's current views and estimates and could be constituted as forward-looking statements.

You are cautioned not to place undue reliance on these forward-looking statements, which hold only as of the date.

The future involves uncertainties and risks that could cause actual results to differ materially from the current views being expressed.

Potential uncertainties and risks include, but are not limited to, factors such as changes in general economic, political, or market conditions, commodities and currency fluctuations, competitive product and pricing pressures, industrial relations, and regulatory developments.

Significant disruptions in operations due to unforeseen events, including the spread of any disease.

Figures are on standard Lo bases and are regrouped and reclassified to make them comparable.

Calculations are based on non-rounded figures.

Analytical data are best estimates to facilitate understanding of business and not meant to reconcile reported figures.

Answers to questions may be given based on generally available information in the public domain.

No person is authorized to give any information or take any representation not contained in and not consistent with this presentation.

If given or made, such information or presentation must not be relied upon as having been authorized by or on behalf of Nestle India Limited.

The financial year of the company changed from 1st January to 31st December cycle to 1st April and 31st March cycle.

Accordingly, the financial year 2324 covers a period of 15 months, commencing from 1st January 2023 to 31st March 2024.

Where SI is mentioned in the presentation, it stands for January-December calendar year.

And now I hand over to Mr. Naran on his presentation titled "AP PA to Progress."

Thank you, thank you, and good afternoon, ladies and gentlemen.

Good afternoon to all those who also joined online.

It's a privilege and honor for me to yet again appear in front of you.

Like one of those theater actors, I guess you play the role to the hilt.

And this is one of those occasions where I come again to meet and to be amongst friends because over the years I've developed a friendship with many of you and respect you a lot for what you stand for and what you have done.

I also have the privilege today of, like all good succession planning, to introduce my successor, Manish Tiwari.

Manish has just joined 48 hours ago, and therefore, while of course you are most welcome to ask him questions on maybe his perception on Nestle and his own personal perceptions on the culture and the people in Nestle, I would request you sincerely not to ask him business questions because it's a bit unfair.

When I took on this mantle within 48 hours of the Maggie crisis, nobody quite asked me too many questions on the business except to ask me whether we'll survive or not, and we have survived.

So thank you all once again for being here today.

What I'll do is I will take you through, I call it again our path to progress.

This is a longer period of coverage, this is the last 8-9 years in terms of where we are, what we have done, what our pedigree is, what our DNA is, what are the challenges, and what are the opportunities that lie ahead of the company.

So therefore, I will talk about four aspects: our consistent growth story, number one; the rising India opportunity, number two; delivering on our strategy, virtual circles, and the five Ps that we always define as our own; and the key takeaways.

I will spend more time on point number one, point number three, rather than so much on point number two because that's something that is already within the domain of the coverage of companies that you do, and I will not be having anything more than what is already available to us.

In terms of the rising India opportunity, every organization begins with a purpose, and I think our purpose is very well defined by what our founder, Andre Nestle, put forward in 1866: unlocking the power of food to enhance the quality of life for everyone today and for generations to come.

That's what we do.

We do food and beverage for man, woman, boy, girl, dog, cat across the world, and that's really what we specialize in.

What is our growth story?

I think many people are, and especially you would be, and I would be colored by the recent quarters of growth and to think that this is in fact the matrix for growth for the country.

I would offer you the thesis that actually this is probably coming out of a curve and getting into a better curve as we move ahead, and that's really the way I would define it because you would not have had a past which has been good and without a blip unless you also look forward to a better future.

We are deeply entrenched in this country.

You know the facts.

We have been here for 113 years.

It's an old company, 8,700 plus employees.

The last time I presented to you shareholders was about 120,000 shareholders.

We split the shares, and the shareholding went from 120,000 to 547,000 plus.

So we have a number of shareholders today.

Our societal initiatives have got about 14 million beneficiaries.

We are, remember, a company with a purpose.

A purpose is to not only do good for the shareholder but to do good for society.

That's also an integral part of who we are.

10,000 plus distributors and redistributors with whom we have a good relationship, come hell or high water.

5.3 million outlets in terms of total reach.

280,000 farmers whose lives we touch and who make our products happen.

And finally, nine factories going on to the 10th one, which I'll come to.

There's been significant investment in India, and at a time when people have been talking about capex, I think this is a company that has put its money where its mouth is and, in fact, invested between 2020 and 2025.

We'll be investing almost 5,800 CR, and that's a significant amount of money for a food processing company.

The investment in the 10th factory in Orissa is to begin very soon, and the capex levels you can see go up from 1.8% in the calendar year 2015 to 7.7% in the financial year ending 22-23-24.

Now we have Sanand, which has opened its doors to a third confectionery factory of us after Pond and Taliwal.

We have now Sanand, which is also producing KitKat and producing it quite well.

The capacity expansion since 2020 has been significant.

The capacities that we have added for Maggie, coffee, and chocolates is more than 35%.

We would not put that up, ladies and gentlemen, unless we were confident about the future.

So this is not a company that is going to be just putting up factories for keeping them idle.

It is keeping them because there is a longer-term horizon that we see.

We don't get cowed down by a year or two years of blip.

We look at it more in terms of the longer term.

The growth and financial performance, I’m very proud, and this is an achievement of the entire team.

Therefore, there is not just me, but I have the proud privilege of giving out the roar when the team achieves something.

Between 2015 and 2023-24, the turnover of the company has gone up by about 134%.

This adjusts for the 15-month period.

11.2% CAGR, a profit from operations of 15.1% CAGR, and a market capitalization which also, the return has gone up by 15.7%, and a market capitalization which is also up by 273%.

So these are all the results of good work that has been done by the team, by the partners, and also relevant resonance from the consumers in terms of the brands that we have marketed.

We consistently outperform the peers.

Nestle is never used to be known for brandishing its results and wearing it on its sleeve, but I want to share this with you with all humility that in all this period we have outperformed the peers that we have in our listed peers that we have in our entity.

The growth during this period since 2015, which is an 8-year period that has been taken, is marginally ahead of the peers.

10.5 is what the peer group organic growth is; 11.2 is what Nestle has delivered.

And profit after tax is, of course, considerably better: 11.2% versus 23.2%.

So there has been a not only we compare ourselves with what we do globally and what we do as an absolute entity, but how we compare ourselves to peer group as well.

The growth is based on a BAL portfolio.

This, in 2015, when I came on board, one of the accusations that was made is that this is a single product, Maggie company.

I think we moved on.

It's not to say that it has become completely and totally dimensionalized change, but change has begun, and change has begun to show on the portfolio of the company as well.

About 39% coming from milk products and nutrition, it's a more mature category in terms of its size and heft with a 6% growth.

Prepared dishes and cooking aids, Maggie, that came back from the dead literally in 2015, roaring to a 19% growth during this period with a 31% contribution out of home, which I'll talk to briefly about, is a significant opportunity.

Nestle is well placed in terms of portfolio, in terms of capability, and in terms of commitment to play the game in a form of confectionery.

What was a relatively languishing business 10 years ago is now a roaring business, doing well, 16% contribution, 14% is the growth that we have seen on this.

And powder and liquid beverages, which captures our coffee business, has grown significantly and continues to do well, as you would have seen in the latest quarter results as well.

Coffee is an area of a lot of happiness for us and considerable scope for future growth with a lot of other initiatives that are coming on.

What drives this?

I think one of the things that we have talked about and which has been a consistent refrain of mine in strategic terms has been penetration-led volume growth strategy.

Penetration-led volume growth strategy is what our simple strategy is.

There's nothing else, nothing more, nothing less than that.

The first step in that is to reach as many outlets as you can, and I think that is something that we are very, very happy doing.

I think the operational savviness and skill of the company is fairly strong.

Execution skills are something that is at a premium at Nestle, and in 2024, we reported 5.3 million outlets.

Now you'll say, why only 5.3?

Please remember that during the Maggie crisis, we lost a million outlets.

We were down from 5 to 4, and we had to rebuild the whole distribution back again.

In 2024, we have actually, amongst the FNB companies, added in percentage terms the maximum number of outlets.

Close to 5% of outlets have been added, and it's the highest gain amongst peers in 2024.

This is the manifestation of the rubban strategy that you're seeing, which I'll come to very briefly.

And that is what is helping us to buffet some of the headwinds that we see in mega cities and metros being balanced with greater opportunities in the smaller towns, bolstered by an aggressive digital approach.

You would say, why isn't he talking about television commercials?

They continue to be strong, but 51% of our media spends are today digital.

They would have been less than half of this even five years ago.

So there has been considerable heft as far as digital spends are concerned.

You all know the math: 1.1 billion mobile phone users, 25 million grocery shoppers, and 86% socially influenced.

It makes sense to fish where the fish are, and that's really what we're doing.

Since 2020, 126% increase in the total digital media spend is what we report.

This number is only going to accelerate as we move forward in the direction of new categories and new spends.

Strengthened by household penetration, penetration-led means households.

We have to get to more number of households.

This has also been a good story for us.

Between 2016 and 2024, there has been a 50% increase in the number of households that consume Maggie.

52% households do coffee consumption.

Again, two examples: 2016 to 2024, 130% growth and about 30% of households.

So more number of households, more number of outlets gives us the arithmetic of frequency of purchase and making the market shares happen for us.

This has led to robust volume growth.

Volume growth is what you seek, is what we have sought always, and you see this number.

Why I'm giving you a longer perspective is we can easily get disheartened by what we have seen in the last couple of quarters.

And I again believe that this is a chapter of a book, but the book itself is fairly interesting and robust.

This growth for us has been 99.5% growth from 2015 to 2023.

What I would like to leave you with is a simple message: this company knows how to generate volume growth.

That's what is our DNA.

There are some companies that chase turnovers; this company chases volumes, chases single units, eaches, as we call it.

And that is where the efficiency of the organization gets established over a period of time.

So that's led to volume growth, and it has further amplified our brand scores.

One of the characteristics of consumer companies are probably three-fold: one, strong brands with differentiated propositions; relatively strong margins, which are capable of supporting the growth story; and third, reach capabilities that are strong; and fourth, execution capabilities which are unparalleled.

If you have these four, by and large, you should be able to create a successful roster of brands and companies over a period of time.

And that's what we are blessed with.

Both the Maggie, post the crisis, has rode back and come back to great strength.

Not that everything is stitched and everything is done; there is still competition out there, which we are cognizant of.

So those of you who might ask me the question saying, what are you doing with regional competition?

Yes, we are there in the game to ensure that we get the fair share of our business.

So we're not going to be sleeping at the wheel saying that, look, these are not important.

They are important; they have to be respected, and some of them are pretty good.

So therefore, that's a response mechanism.

We'll have KitKat again has done very well.

KitKat was number 10 in the world 10 years ago for the Nestle world.

Today it is number two.

It's come a long way.

We are just fighting shy of getting the crown from the UK.

So we may not get the kinor, but one day we will get the title of being the largest KitKat market.

That's a dream that I'm sure Manish will recit in due course.

Nescafe again has done extremely well.

This is a category of choice now for the youth.

Earlier, tea used to be the drink of social animals; today, coffee is the drink of choice, is a drink of social bonding.

And that's where Nestle is very well placed in terms of its portfolio and category-leading brands.

Ultimately, all of this, the penetration, the volume, the outlet reach, the media and digital exposures, the differentiation that we do, all leads to category-leading brands.

And I'm proud of the fact that we have, in many of our categories, category-leading brands.

Nescafe, very, very strong.

Maggie, with 4.5 billion serves, is by far the biggest.

Between Munch and KitKat, we cover almost 6 billion units that are being sold.

33 million tins of milk made.

And what's interesting, and this is where interesting is, out of home, you have almost 940 plus one Nestle kiosks, which are kiosks that sell the whole range of Nestle that are just relevant at tourist spots, at educational institutions, and other places.

And hey, this is incidentally bigger than many QSRs, right, in terms of the number of outlets that we have.

Of course, the size of each outlet is different, but I'm just looking at the geographic footprint and the relevant consumer footprint.

All this with 20 million, 2 CR people walking in and out, all target group, all youngsters, all people who are interested in brands, makes for a huge trial opportunity and penetration opportunity for our brands.

So this is something that we work on, and all of this is a self-sustaining business model.

So this is not bleeding at the seams for us to take it down.

This is a self-sustaining business model that has been worked.

So a Nestle product reaches two out of three households in India.

It reaches 80% of the urban households and as yet 60% of the rural households.

That's where the challenge is; that's where the opportunity for the company is.

So the rising Indian opportunity, this you know it well, you know the GDP rank.

What's interesting here is that why is it exciting for packaged foods?

It's exciting for packaged foods because even Philippines and Malaysia are at anywhere between three to four times in per capita terms the consumption of packaged food.

Packaged food is the first food of choice when you uptrade from lose or from unbranded.

This is therefore a significant opportunity for us going forward since we have a wide portfolio, since we are a packaged food and beverage company.

This is where the opportunity for us comes.

Now where do we go to?

How do we unpeel the onion is something that strategy, time, execution, and resources will tell.

But that there is an opportunity, I think, is a no-brainer as far as India is concerned.

The consumer class is going up significantly.

We have pressure points.

I know I was the one who made the comment about the shrinking middle class, right?

And some sense it has been answered in this budget.

I'm so happy to hear that.

But again, let's be very clear that companies like mine, we survive and thrive on the affordable population and the middle class.

It's important to us.

The rich are important for what they buy, but it is the midstream that is important for us because that is the belly of the market.

And there are almost 60 million households estimated to be added between now and the next 7 to 8 years, at least till 2030.

Those are the numbers that we've got.

Despite opportunities, challenges remain.

So I don't want to leave you with the picture, as I've always done.

I think credibility and trustworthiness have been some characteristics I've tried to and strive to develop in all these years, is not to show that everything is rosy and pink and everything must click back again to huge growth.

There are challenges.

Some of the challenges, in fact, are opportunities: evolving consumer trends.

I'll cover three: premiumization and consumer experience, rising health consciousness in out of home, and the whole slowdown in consumption story.

What do I see of it, and where is it going?

Commodity inflation, urban-rural consumption, and there's a third piece on geopolitics that I'll not talk about because that's a subject that is beyond my pale of competence.

But you all know the consequences of geopolitics and how it is going to play with the supply chain and the future output profiles of this country.

What is our strategy?

Our strategy globally, and this is a globally articulated strategy by Laurent Fuchs, our new CEO, is a very simple strategy.

It seeks to achieve three things: achieve efficiencies, deploy the resources in investing in key brands and growth platforms, drive market shares, and thereby drive profitable growth.

So it's a virtuous circle of seeking efficiencies, brands investment, market shares, and growth enabled by four platforms: Nestle continuous excellence, which I will give you a brief example in this presentation; good for the planet; data and AI is becoming an important element of who we are; good for you, which is the whole piece on upgrading the value of nutrition; and the competitive advantage of our products inspired by three pieces: creating shared value, quality, our values, and safety.

And at the core are our consumers, people, and teams.

So it's a simple, straightforward strategy that pivots itself on three vectors, gets inspired by four enablers, gets cemented by three by four platforms, and of course is executed by the team across the organization and across the world.

This is indeed the same strategy that we had put together called Grow to Win, which was similar: growth to win using consumer innovation, using investments, using penetration, and using simplification as part of the platform.

So what are the evolving consumer trends?

Which are the two or three big trends that give us hope for the future?

Number one is premiumization and consumer experience.

I put here, and these are all approximate numbers, so please don't hold me to the math on this, but this is the overall opportunity.

The overall premiumization opportunity we see in our categories is roughly 7,500 CR today.

The growth of this portfolio is 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.

Nestle has a brand portfolio to deliver, so that's an important part that we are not here seeking to build a premium portfolio; we already have a premium portfolio which we can leverage and grow to fruition.

Premiumization trend is universal across urban and rural, so it's no longer true to say that only urban India and the urban rich or the urban middle class consume premium products.

Even rural India is also having a taste for premium products, and as part of the rubban strategy, this is what is being tapped into for the future.

So some of the premiumization trends: prepared dishes and cooking aids, there are different.

What is being sought here is taste and variety, right?

The consumers are seeking taste and variety and different platforms of consumption.

So we have our products that are already there.

Milk products and nutrition seek nutrition as its key pivot and also differentiation in terms of what we can offer.

The recent reintroduction of ready-to-drink or relaunch of ready-to-drink has met with an encouraging response in the market, and that's something that is part of the RTD revolution that's taking place in the country.

Powdered and liquid beverages, premium coffees, including espresso that I'll come to, is defining the coffee experience and does offer a greater opportunity for growth.

Confectionery, again, premium confectionery, which is still a small part of our portfolio, is powering ahead quite well and will give us incremental growth and profitability for the future.

And finally, of course, pet care.

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.

So this is what we are talking about in pet care.

What gives me the confidence?

You would say, look, why is he suddenly talking about pet care?

There are three things in pet care that give us the confidence as a company.

One, deep consumer insights.

Probably one of the best-marketed categories in this company is pet care.

The degree of depth and knowledge and understanding of pet consumers and pets themselves is pretty strong.

The portfolio covers the consumer landscape, so there's a wider landscape that we talk about.

And world-class R&D, I think the R&D facilities that we have access to is truly world-class with a possibility of customization to a context as well, which is important.

And India is very well placed because we are the fifth largest in terms of pet population, almost 30 million pets, more dogs and less cats, but the cat population is also growing at a fairly nifty pace.

So the power of pets, the power of Purina, and the power of Nestle is what we are bringing together.

So therefore, this is an area of incremental investment and incremental growth.

Nespresso, you all know it, and I think it's a category that, even though it has not been formally launched in this country, still had a lot of salience.

I think it's the premium coffee consumption and the fact that we deal with 150,000 coffee farmers, and some of the farmers are in India as well.

Almost 2,000 of these farmers are in India supplying them premium coffees, premium Arabicas, and robustas in order to make the coffee happen.

Delighting consumers with an original and also with a professional range of machines, some of them have already been introduced in the country.

The Nespresso website is now live.

We will be opening shortly the boutique in Delhi to begin with, and then it'll go to Bombay and to various other places as we go.

And to just break the monotony, I thought I'll share with you the latest commercial of espresso, which is quite interesting.

[Music]

One so when I went to sleep, my jewels were here, and when I woke up, gone.

And night's morning, and I have Nespresso coffee.

[Music]

Chef, unforgettable, my jewels.

I must confiscate the evidence.

Don't forget to recycle.

Cut!

Oh my God, you kidding?

You seconding me?

[Music]

This press, what else?

George Clooney.

Any other way is just as sweet.

So this is something that we are very excited about.

Clearly, this is a domain competence for the company, and with, as you know, with the rich in India splurging on various premium products, Nespresso offers that opportunity as well.

So we look forward to accelerating the journey with Nespresso.

Rising health consciousness, I think this is becoming one of the truisms of the country today.

And what do we have to offer?

I think this is intrinsically a strong nutrition-based company.

The size of the prize here in just the nutrition and the prepared dishes area is about 3,400 CR.

That's how big the market is in milk products and nutrition.

I think both for toddler nutrition and for chilled dairy, there are numerous initiatives that are being looked at in order to enhance the quality of the nutrition that we seek to offer.

And in fact, that extends itself to prepared dishes and cooking aids as well.

I mean, we have Vata there, we have Basin noodles, we have millets, and we have oats, and we have different offerings that are on the anvil.

Quite a few of the projects are on the anvil for enhancing the nutrition quotient of the brands as we move forward.

The other one, of course, is a joint venture with Dr. Reddy's.

I'll come to that a little bit later.

24,000 CR is the opportunity.

I think it brings together the best of Dr. Reddy's and Nestle Health Science, and I'll report on it a little bit later in my presentation on what we think are the big opportunities there.

What is above all important in nutrition is R&D, science, technology, and facts.

And that is something that we are privileged to have as a company of unimpeachable quality.

Almost 1.8 billion is the R&D cost in the calendar year 2023.

More than 4,000 employees, 23 sites, and we have access to them, to the throughput of these R&D centers.

And this is what will flow into some of the categories that we're talking about.

The Nestle Health Science products that will be part of the Dr. Reddy's portfolio will be, by and large, manufactured locally, which really means that we will be getting some of the expertise from the R&D facilities to be able to do that as we move forward.

Out of home, I think this is a very, very exciting market.

It's a very exciting proposition.

It is expected to double by 2030.

There are estimates anywhere between 25 to 30 billion of business.

The food service market is getting more organized in the coming years.

I think post-COVID, one of the phenomenons that we have seen is that people are a lot more careful today about what they consume and where they consume it.

Hygiene and safety and reliability is an important part of that consumption profile.

Cafes are driving coffee culture, and that gives us also the opportunity.

And Gen Z and Millennials are seeking new food experiences.

So some of the vending opportunities that we have got, and some of them are outside here, there is a compat machine there which you might like to try after the meet gets over, which has for the first time freshly brewed tea.

Normally, you get the tea bag W chai, but this is freshly brewed tea and freshly brewed coffee.

And the freshly brewed tea has got other flavors that you can add to it, which is like an Adra, like a Tulsi, like a masala, and various other things that really makes it even more exciting.

And it's relatively inexpensive, so it's not a really expensive proposition either.

So these kinds of solutions you'll be happy to note are developed by Nestle India.

So these are solutions developed here, customized here, manufactured here, and rolled out here, customized to Indian standards and also with digital payment facilities.

So therefore, you don't have to look for change, and any of the digital profiles can help you in order to make the payments.

And this is an interesting area together with, of course, food solutions, which has also been an important part of the journey.

So food solutions, especially using coconut milk powder and others, is becoming important.

A chef's abilities to conjure up new recipes and to try out new food habits is also becoming an important part and parallel of the out-of-home experience, and that is where we find our portfolio to be rich and to be relevant for this.

So some of it I talked about, comp, I talked about what espresso.

We have expanded into branded collaboration with Maki customers.

So whether it is social or chai point or 7-Eleven or any of the others, I think there has been a lot of collaboration that has taken place.

In fact, even in the recent Kuma, we've made inroads with chai point and others in terms of the RTD and the chocolates portfolio to make it available in large gatherings.

Now, you may say that maybe not all of the people who come there are tea consumers, but literally creating the awareness for the brands and availability of the brand itself is a starting process.

And of course, the retail one, outlets have now, for example, not just Nescafe zones but also KitKat break zones.

So KitKat recipes are being tried out there, curated KitKat menus are being tried there in order to expand the usage of the brand.

So there are multiple touchpoints, and we have a lot of expertise and investment that is being put into competence building in this part of the business, which has rules of the game that are quite different from the retail part of the business.

I mean, the way in which a Nestle professional guy will talk to you is quite different from the way in which a retail guy will talk to you because the drivers and motivators of business are quite different.

Innovation, you would ask about innovation.

Innovation has moved up quite nift, quite smartly for the company.

It was at about 1.5% in 2016; it's moved up to about 6.12% now in the nine months of 2024.

About 150 new products have been launched in the last nine years.

What was different is that the pace of innovation has gone up almost three times, and failing to succeed is now become an accepted mantra, at least of this organization.

So there are numerous experiments which have failed, but I'm happy to support it because unless you support failure, you will never see success.

Today, they contribute 6.5% to sales.

I would like to see this ambition go to at least 10%, which would be a good number to have as far as innovation is concerned.

But having said that, there are quite a few projects on the anvil.

There are at least 16 to 20 more projects that are on the anvil.

The question is when do we launch them, how do we support them, and how do we prioritize?

I think those are the ideas.

The machine in Nestle or the development machine in Nestle is never idle.

The question is how much can you afford in the context of the inflationary circumstance that you are on and the need to support some of the core brands are concerned.

So that's the primary motivator of investing behind these brands.

Slowdown in consumption growth, I think really what we see is food inflation that continues to hurt.

It is impacting budgets.

In research after research, the consumer is feeding back to us: we are buying more expensive but consuming less.

That's a simple answer that is coming.

Hopefully, some of the changes that have been made will mitigate the situation, but clearly, headline inflation is moderating, but high prices persist on select agri commodities.

And to just give you an idea, I think milk has been relatively stable.

Coffee has been a complete super inflation, almost a chaotic curve to follow.

Point to point, between this year and last year, the coffee prices are up 75%.

It's very difficult for any company to survive with 75% increases and still manage growth.

And so that is where it is.

Cocoa has also, our exposure is relatively lower to cocoa, but nevertheless, I think the price of cocoa has been significantly impacted and continues to rise dramatically, again in the 40-50% kind of range of increase.

Wheat has been, was relatively stable, but with the winter sewing being a little bit impacted and with the increase in the procurement price that has been announced, there will be some increase in the price of wheat as well.

Packaging, relatively stable so far.

Edible oils also have met with some increase in the recent past.

We do hope that this stabilizes, but the worry factors here are really coming in from coffee and to a certain extent from cocoa and wheat.

It would be the things that we have to watch out for.

So this clearly then means that we have to find ways of mitigating it, and this is really what we have done.

I come back to this: Nestle continuous excellence, which is translated into our company as project shark.

We have been doing it for many years.

It's part of the theor nice to hear a distraction sometimes.

So it's really been about three vectors: buying efficiencies, manufacturing and conversion cost efficiencies, distribution cost, and only the final element left to pricing.

This has now, I'm proud to say, become a part of the DNA of the company.

In fact, everything from photocopying costs to large capex costs are being monitored, and something like 7,700 projects have been on since 2016 to generate anywhere between 1% of sales to now almost 2% of sales.

So that helps us to mitigate some of the costs that happen.

Only after this, because we are a penetration-led volume growth company, remember that's what our core strategy is, only after we have exhausted the opportunities of procurement economies of material usage and of the cost dynamics of buying smart do we even touch pricing.

So price is the last element that we would like to touch.

Unfortunately, we have had to touch a fair bit of it because the increases have been extremely sharp in the last couple of years.

Growth, where is it today?

What do we see?

This is exactly the information that you have that we also see.

Urban growth has tapered downwards; rural growth is looking upwards.

But yet, I think the cause for concern on growth continues to remain.

It's not something that we are completely out of the woods.

Urban unemployment, teid real wage growth, and post-COVID moderation are what we see as the three big reasons.

But having said this, I think some of the steps that have been taken in the budget, especially the putting on the table 100,000 crores of consumption expenditure, part of it I hope does come into consumption.

Some of it might go into savings and pairing down debt; that can happen, and that probably will happen.

But even if some of it comes into consumption, it can be a positive fillip as far as many of the companies, especially the midstream companies, are concerned.

The top-end companies, only way in the premium segment, won't feel the pinch either way.

But those in the PPP segment or in the belly of the market will certainly feel some positive impact.

I do hope as we move forward.

Outlet expansion, I think this is clearly something that we are very proud of that we have done under the circumstances.

And what have we done here?

The ran strategy, just to refresh your memories, involves four pieces: infrastructure, visibility, portfolio, and consumer connect.

There's a lot of data and database that is being used.

NMRA is one of our data analytic platforms.

It's an application that helps us to track at an outlet level what to sell, when to sell, how much to sell, and what not to sell.

So it's a powerful tool that we've got that helps us to potentially cover a million and a half outlets, if not more.

The RD DMS is redistributors.

So below the 2,000 odd distributors, there are about 10,000 odd redistributors.

We are one of the few companies that has got a data plug into the redistributors as well, so we know the demand and oft patterns.

And this, as I will come to, will help us in terms of the use of AI for predictive models of demand generation, which will be a little bit more granular and accurate simply because we have been able to track data and analytics at the ground level, at the base level.

So the village coverage, you know, it was quite modest in 2020.

We were covering just about 70,000 villages.

Today we are covering more than 200,000 villages.

The distribution touchpoints, so it's a classic distribution game.

So this is not application-based that you can just wish away.

In outlets, you have to do it on the ground.

So on the ground, there are people, there are structures, there are organizations, there are brands, there are portfolios making it happen.

Distribution touchpoints have gone up from about 12,000 to about 21,000.

7,400 towns are covered, but the relevant fact for you is that more than 200,000 villages are covered.

Again, in terms of activation, India, there are multiple flywheels in India.

There is one India which is digital, which is quick commerce, which is e-commerce, which is ordering on app.

There is a considerable part of India which depends on heart activation and rural and village FS.

We haven't forgotten that India because that India is at the core of our consumption.

So the number of activation points and the number of activation activities have gone up considerably.

Feet on the street, we still are a company that believes in the power of the distributor salesman to make productivity, college, and portfolio representation happen.

It's not yet ripe for purely an app to do that.

Maybe in some of the urban centers in large metros and mini-metros, you can do that.

But in the smaller, rurban markets, it is still a question of a distributor salesman taking a call, going there, but fully enabled with a package.

And I'll come to that.

Today we have a powerful package that helps him on call on each outlet without doing any guesswork what to sell, when to sell, what to promote, what not to promote, and what outcome to expect.

This is all the power of analytics and artificial intelligence that we are able to.

And ran smart stores again, I think opening up the number of visible and dedicated stores is also something that's part of this journey.

Increasing competitive intensity in urban, I said we take regional competition seriously, and therefore there are campaigns which are building awareness of taste and quality at a granular local level.

There are digital interventions, but there are also other media interventions.

There are price point strategies that are there.

So we had a 5 rupee pack which we had to discontinue and make it seven.

So we launched a 10 rupee pack and offered value at the 7 rupee price point as well in order to ensure that there is no serious long-term consumption loss for the organization.

Accelerating our e-commerce footprint, I think this has been a great story.

We have a portfolio that is tailored to the shopper needs, a portfolio that is focused on the e-commerce and quick commerce.

And one of the advantages we are getting, you know, sometimes what happens is what your customer does helps you to improve your own efficiencies.

I think one of the advantages of quick commerce has been that our capability at supply chain management has dramatically improved.

Right, we have to challenge ourselves because the consumer challenges us.

A blinket asks us a question saying, I deliver in 8 minutes; why should you take two days?

Good question.

So Nestle puts its heart on it, works, puts systems, puts practices, and ensures that at least we get it down to one day, and hopefully now we'll get it down to a couple of hours.

The increasing name of the game in this country is going to be enhanced efficiency and effectiveness and the use of AI for predicting the future rather than just having brands and differentiation.

And that's really the name, and that's what the third part, holistic supply chain approach for quick commerce, is the exciting journey.

And since we have a young supply chain team, they're also excited because it's using a lot of analytics data and an exploratory approach.

It's almost a moonshot in some cases in supply chain that is being taken, which is starting to bear results, but more, of course, has to be done.

Today, 8.5% contribution and growth, of course, 33%.

So the growth is good, but as a company, we always balance our channels.

So I don't want you to get the impression that it'll be quick commerce and quick commerce all the way.

We know we have quick commerce; we know we've got other traditional e-commerce; we know we've got traditional trade; we know we've got modern trade; we know we've got other outlets.

We have to balance the terms of trade between all of this on the principle of fairness, salience, and sustainability.

And therefore, if you notice that Nestle is not in the name in terms of fraass with distributor associations or retail associations, it's because of that.

It's because we balance it out, and we don't go one way or the other after a short-term phenomenon because we believe that going forward, there will be a balancing out that will take place, and none of the channels will entirely vanish or none of the channels will entirely dominate the outlet tapestry.

So this brings us to the virtuous circle of our lives, which is really the five Ps: purpose, people, planet, partnerships, and performance.

And again, I will come to the performance part of it, creating value for all shareholders.

The volume growth that you have seen, the organic growth which has been consistent, the recent past has not been as strong.

But what I want to point out to you is that the company that has a DNA and a pedigree of strong growth can have a temporary blip of flu, but it doesn't mean that it is going to be in the ICU very soon.

So there is a question of coming out of it, which is what we are seeing.

Accelerating profit from operations, I think I'm very happy to see that in the last decade, almost 500 basis points of operating margins have been improved as a company.

If you look at it in terms of EBITDA, it is about the same.

The EBITDA margins being a little higher, but almost about 500 basis points there too, and about a 15.1% CAGR in terms of 2015 to 2023.

So double-digit on growth and double-digit on profits as well.

Again, you'll see that the nine months, of course, has been a little bit impacted, and that is impacted really because of the overall slowdown and the commodity inflation that has forced us to take some price increases that we would have not liked to but which we are compelled to in order to balance the equation.

A best-class return on equity, I think I say this without boasting that we are probably the highest return on equity among listed companies, much higher than our competitors.

This itself is not a reason to valorize us, but it's a reason to assure yourself that the company is reasonably well managed to be able to deliver equity levels and returns which are fairly strong.

Value creation journey continues.

If you look at the combination of stock price appreciation, dividends put together, which is the total shareholder return, up by 34% from 2015 to 2023, 17.1% annualized return, and about a 3.1 times cash flow operating cash flow that has been generated.

So I feel a bit satisfied that it has been a path of progress, a progress that has been fairly strong.

And in fact, the market cap is up by 3.7 times, which is 1.4 times ahead of the FMCG benchmark index, at least during this period.

Of course, the recent past is a different story, so I'm not trying to justify it, but to just tell you that the longer term has been much stronger than what the immediate short-term indicates.

Partnerships, I think I would like to focus on distributors, suppliers, farmers, retail outlets, direct and indirect sustainability partners, and of course on the joint venture.

I'll take just two examples here for you.

One is this partnership.

You would say that we got into it.

This is the first of its kind in India for Nestle, a joint venture partnership with Dr. Reddy's.

And I think it is combining the synergies of product portfolio and distribution reach.

We are a consumer product company with a more limited healthcare exposure as compared to Dr. Reddy's, which is a healthcare company.

And therefore, the coming together of the portfolio in the 49-51 combination that you see out there, the integration has been successful.

I happen to be involved with the board of that company as well.

The integration has been successful; the teams are working well together.

They came together only in July of last year, but I think the integration has been strong and solid.

They have shown double-digit growth, which is also encouraging, and there are new launches on the anvil from some of the Nestle Health Science portfolio and some of the Dr. Reddy's portfolio as well.

So this offers us, and you will see that one of the biggest challenges for the country is efficacious healthcare products, and that is a large opportunity.

I talked there about 24,000 crores; that's just a number, but it's a large opportunity.

It's an opportunity that also does good for the company and does good for society.

So this is something that we are quite ined by, and I would like to thank my colleagues at Dr. Reddy's for enabling the support to make this partnership work.

Logistics excellence, I think one of the things is post-GST, we've looked at upgrading our supply chain networks and looking at distribution centers and redefining the levels of technology and capability in the distribution centers.

We have effectively transformed about 13 distribution centers.

That means, ladies and gentlemen, 26 moves because each one is a move in itself.

Almost half, more than half of the sales have been covered, and there has been a lot of new technology, new initiatives that have been put into the supply chain space, including creating digital twins at our distribution center in Bhandi, which helps us in terms of the planning mechanism and the resource allocation mechanism for the future.

So these are new developments which I'm very happy to report.

People, this is a subject that is very close to my heart, and I'm very proud of the fact that we have nurtured an inclusive and a diverse work culture.

I think diversity and inclusivity are alive and well, irrespective of what they might seem to ESG trackers, but for us, it's an important part of who we are.

And encouraging gender diversity is a key part of the management philosophy of the company.

Happy to report, and you know it already, that 50% of my board consists of leading women independent directors.

We have amongst the highest representation in the field force in FMCG at 21%, and we have about a fourth of our white-collar, which consists of women.

So there is a strong focus here.

There's also, of course, the factory at Sanand, which is majority women.

The factory in Odisha, when it comes up, will also be majority women.

And making ourselves more salient, making ourselves more relevant, and making ourselves more robust as far as talent is concerned is one of the important tasks that management has.

In fact, if there is going to be one differentiating factor for most companies in the war of talent that will take place, it is the quality of the talent, and we focus a lot on it.

And yes, despite having Gen Zies, you know, Gen Zies and Millennials constitute about 80% of this office.

So I am the oldest guy on the block, and I too will be gone soon.

So therefore, the average age will fall down quite dramatically.

And you think that Gen Z run away very quickly and they get bored.

We have an attrition of 10% or less.

So there must be some good reason why they stay where they stay.

And we are not the highest paymasters; we are not the guys who give the most mola in the system.

But there is a way in which we conduct our work and a way in which we go about our job, which probably makes them stay in the company and sustain industrial relations.

Happy to report that there will be no strikes, no lockouts, no haral, no buns of any kind in this company in the last couple of years, which I'm happy about because I think we live in stressful times, and it's important to run operations which are also relatively stress-free.

A planet, I think four elements I will not dwell more on it because it is something that I've shared with you before, but some parts I might cover with you.

Four areas where we work on: climate action, sustainable packaging, caring for water, and responsible sourcing.

Dairy and dairy interventions on climate change have been one of the important interventions of the company.

We are one of the pioneers in the use of biodigesters on farms.

In our farms in Moga, almost 5,000 plus biodigesters have been installed.

That makes a circular economy as far as the manure is concerned, is used for biogas and also used for fertilizers.

Also makes for a reduced carbon emission as far as the farm itself is concerned.

GHG emissions down by 61%.

This is from the period 2008; it's a 15-year reporting cycle that we have consistent with our sustainability report.

Energy usage down by 29%.

Water usage down by half.

Generation of wastewater down by 60%.

And what I'm proud about is that we are plastic neutral since 2020, which means that the amount of plastic that we use in our materials, in our products, is neutralized by the amount of plastics that we collect and recycle.

So that's a positive note as far as sustainability is concerned.

Again, to boost sustainability, we're looking at ways and means of how we can contribute to the environment.

And one of the projects that we worked on is a biomass facility in Moga, which you know is in Punjab.

And reducing the reliance on fossil fuels has been one of the key drivers of our company.

We will be, we are kind of zero coal as of now, and hopefully, we'll be HSD free as well in the foreseeable future.

But what is exciting in the Moga facility is that we collect the stubble and make that into briquettes and use it for the biomass facility.

So almost 4% of stubble in Moga district is collected by the company and made into briquettes and used in the biomass facility.

So it's a start.

We do hope that this becomes an example in Punjab to be able to build larger facilities, but reduction in GHG emissions and to create an additional farmer's income because a farmer sells the stubble.

It is not free; they sell the stubble; they make some money, and also hopefully to whatever extent it reduces the polluted atmosphere here, even by a micron, that will be an important contribution.

I think I'll just share with you the method that has been used for this.

[Music]

So the attempt is to create such a circular economy wherever we are.

The initial experiment has been in Moga.

Wherever possible, a similar setup would be created.

We are working in close partnership with THX; they are the ones who do this for us.

And I think a couple of plants have already been made by them, which are all working quite well for us and reducing our carbon footprint.

Sustainable sourcing for coffee, I think this has been a highlight of the coffee plan.

What I want you to note is the fact that every kilogram of coffee that we procure in a sustainable manner has got an on-charge of anywhere between 3 and 4 rupees per kilogram for following the sustainable practices.

So when you drink a cup of Nescafe, you're drinking a sustainable cup of coffee where the farmer has been rewarded.

So it's not that it comes to us gratis.

About 55% of the coffee is procured sustainably.

It takes time to convert farmers into a sustainable way because they have to trade off the price with the yield.

Now price is not an issue, but there was a time when price was an issue, and they would trade off the price realization versus the yield that they were doing and regenerative agricultural practices to address GHG emissions.

I believe we have a short video on this as well.

Again, for both KitKat and for Maggie, there are recycling plans that are in place that make it happen.

I will share with you the Maggie story and the Nescafe story in brief nature.

[Music]

Mother, Mother Nature, that you care.

Eilia, for years, Nescafe has been committed to educate the farmers about sustainable farming practices that enable better livelihood while caring for mother nature.

Nescafe from Nestle.

So this is the N plan, run very successfully.

And I believe is also a very valuable contribution to the local society.

It spreads by word of mouth.

More farmers come to us, and that's how we expand the scope for sustainable coffee in this country.

Purpose, I think staying true to our purpose is clearly something that we are very, very proud of.

So this is something that we do beyond the scope of just the business activities, and I'll share with you some initiatives here that we have done.

There are about 14 million beneficiaries that are impacted as a result of what Nestle does.

About 13 million has been through Project Jagriti, which is an adolescent and young adult program centered around nutrition, around healthy habits, about preventing early marriages, and really trying to ensure that people lead healthy lives.

Water and sanitation, I think you all know it, that one of the major reasons for school dropouts in rural areas is because there is no drinking water and there's no sanitation in most of the places.

So therefore, around our factories, we have done a fair amount of work.

Livelihood, the projects serve safe food, which is to train street hawkers on hygienic selling and hygienic preparation of dishes that they serve consumers.

And in fact, we have an established model that shows that the income of these trained hawkers actually goes up as a result of the intervention.

Almost 70,000 of them are there.

Project Jigyasa, it started off as an ambition to inculcate science in schools.

Today we have about 20 schools where we have simple experiments in science that are being done amongst secondary school children in order to enhance their understanding of scientific principles.

Hopefully, some of them will go on to become science students in their lives as well.

Project Hildar, which is in seven hill stations, largely looking at plastic or waste collection segregation.

And I think that's something that we have been doing for almost 10 years now.

And so much so that the municipalities there don't want us to walk away because they don't have any other agency that can do the job for them.

But it is important that as a result of this, the identity and the self-worth of the garbage segregator and their own health facilities have improved as a result of our intervention.

And finally, rural development, which I will share with you a short video.

One of the objectives we took on as a company and in fact as a team was what happens when a company goes directly to a village and improves some of the issues that are lying: education, drinking water, sanitation, rural pond, digital education, agrarian practices.

So we went just 60 km to a new district, which is amongst the least aspirational districts in this country, and adopted initially one village.

Today it is 14 villages and 18,000 people to see what impact happens on their lives.

I believe we have a short video that gives you that detail.

Is it on?

Okay.

[Music]

So this is not a curious, this is not something that has been done because somebody decided that it's a good idea.

I think it also develops the social sensitivities of the marketeers and people who work in this company because whether you like it or you don't like it, most of India lives in there.

And I think it is also to develop the program, and there are a lot of youngsters who are actually excited by this and saying that we would like to be involved in this because the Gen Z certainly has a greater social consciousness than what many of us have.

We squirm and look away, but these youngsters want to be involved in it.

So this is something that we are very happy to support.

Plastic waste management, as I talked about, I think again there are about 1,100 waste workers that we are addressing.

That lady there is with her identity card.

She never had an identity card, never had health insurance, and was kind of the drags of society that they were considered to be the ones who were the least important.

Digital, I'll just come to it very quickly.

In all this, the reason why results happen, the reason why strategy execution, operations, and outcomes happen is because there is a data and analytic pipeline that integrates all the four.

That's why it happens.

So the digital transformation of this company is underway.

So I would not say that it is complete; it is underway.

It's in four areas: a consumer using PII data in terms of sharpening our marketing capabilities; a customer, that's what I talked about in terms of different modules, whether it is NMRA or whether it is a project called RACE, which is really to try and prioritize, you know, for every salesman in this country of Nestle to be able to prioritize the activities, the targets, the tools, the outcomes, and what not to do in each of the outlets.

We are able to generate this activity by outlet for the salesman, which I believe we were not able to do a couple of years ago.

So today, that's the part of data that we got.

On value chain, we have not only what I talked about, but also digital manufacturing operations across our factories to digitally monitor and to make paperless and to make real-time efficiency and effectiveness monitoring across our factories.

And of course, employees in terms of the everyday AI.

So this is what I've talked to you about accelerated engagement with RDMS, the redistributor management services, integrating the sub-distributors now with the supply chain of the company.

The RACE model, which is really to real-time activity planning and execution.

And of course, we use it in our nutrition business in terms of training because nutrition and milk's part of the business needs a lot of scientific data and simulation.

So therefore, there is a lot of simulation that is done on the type of the portfolio, the type of the healthcare professional, and the kind of issues that need to be addressed to each of them.

That's really part of it.

And that brings me to the AI journey of the company that started in 2019 when we set up Midas, which is our multi-analytic system that we put together.

Moved into the Nestle list as far as AI was concerned, which was more a prescriptive model.

We moved to, in 2021, to month and forecast.

You know, it is one thing to know what is there at the beginning of the month, but one thing to know what will be at the end of the month.

And for a company as wide and with the portfolio that we have got, I think the predictive models were becoming extremely important.

So the predictive part of it started, and then in 2022, the demand forecast models were put in place, category growth models were put in place, and retailer segmentation, which was on a prescriptive basis on how to segment retailer types for different promotions.

And RACE was one of the outcomes of that.

Then for distribution planning, we have the geohash model that we are able to optimize now resources at a sub-pin code level to be able to identify which outlet, which localities, which brand, which SKUs, and which promotions are made to work there.

How does it help us?

It helps us to optimize on the resources because we don't land up spraying and praying and putting budgets all across.

We are able to target it much better.

And then, of course, AI to manage the workarounds as well.

Today we have an interesting project called MROI, which is return on investment of marketing support that will give us a simulation using AI of all that you have done in the past in terms of activities, budgets, returns, and outcomes, and simulate for you if you were to do this for the future, what are you likely to generate and what could be alternate solutions.

So this gives us a more granular rather than do it and then learn; we can learn and then do it right.

And that is what is the advantage of this and onwards through 2025.

So therefore, AI is becoming now an increasingly important part of our journey, and we will be incorporating it wherever we find the usage.

Currently, it is done in a very pragmatic way, in a very measured manner, but going forward, there will be an acceleration to this as we see forward.

So let me conclude now and leave you with a couple of messages.

Number one is core strategies and consistent results.

This company will still be focused on getting things right: penetration-led volume growth, rural opportunities, premiumization opportunities, upgrading opportunities, digital opportunities, channel opportunities, and geography opportunities.

That's where we are, and that's where we will remain consistent.

Competence building in a changing context, I think increasingly we are becoming more of a complex society, and the skill levels of the organization also are being increased as we move forward.

That's linked to the third point, which is technology plus digital and more.

But we are pragmatic.

We are realistic.

We know that there is an absorptive capacity.

We know that AI is not AI unless change management is managed.

Therefore, we do it in modules; we do it in parts and then see how the transition works before we jump into the whole part.

Otherwise, we can be putting in a lot of money on AI and on digital and not having too much of return as a company.

Premiumization and growing the core as key strategies, the core is still important to us.

60% of the growth will come from the core, so we are not walking away from the core five or six categories for the company.

But we are looking at increasing premiumization opportunities therein to increase the share of the market share and also to, of course, to make the portfolio more growth resilient and more profitable.

Sustainable partnerships and sustainable environment, I think this is what we believe in.

We believe in it not because it has to be; it is fashionable.

We believe in it because we think it is an essential element of a corporate operating in an environment like us.

And finally, people bias and execution focus.

This company has succeeded because of its focus on people and its focus on execution.

There are other companies with also brands and infrastructure which can match us, but in terms of consistency, we always come a little bit ahead because we have that little bit extra effort that we put at all levels in the organization, and that's what really makes us what we are.

So that's really what I wanted to share.

And in closing, of course, consistency, collaboration, and commitment is what we promise.

I want to take this opportunity; this is my eighth investor meet, so bar lagatar, as they say.

I want to thank you all for patiently putting up with me, listening to me, and I hope in all of this journey I have been professionally honest with you, transparent, respectful, and trustworthy.

I think those are important values that I attach to myself, and I do hope that I have been able to live up to that to all of you.

So thank you all very much, and I think next question and answers.

Yes, thank you.

Thank you, sir, for that detailed presentation on our journey and our strategy going forward.

We'll take question and answers now.

We'll take it from both people who are present here as well as online.

We'll start with the people present here.

Those who are online, they will be seeing instructions on display on the screen right now on how to ask the questions.

So we can start.

Let's start here.

Hi, sir, good morning, good afternoon, sorry.

This is Mii here from Nura.

Thank you for taking my question.

So firstly, given the lack of data that

You know, we have doubled our coffee capacities now in Ljung, good. Hopefully, that will lead to better efficiencies in coffee manufacture. Some of it will flow into the value chain.

But I think on coffees is where you can expect some amount of pricing pressure to be there. Other categories, by and large, the pressures would be less. I cannot tell you that there will be no price increases, but they'll be of a much lower order as compared to what they were in 2022 and 2023.

Hi sir, Abnish from Noama. Three questions from my side. First will be on the channels of distribution. You mentioned that the balance in your case is much higher. There is no fight between the different channels. When I see, every FMCG company tries to do that, and they do that through two means: one is basically SKUs being different and less discounting.

So every company does that. How are you able to differentiate there? Because when I see the noodles discounting, for example, I see very high discounting on e-commerce. So clearly, that is common to you and other companies. If you could talk about that.

A few specifics here: how is the profit margin in this part of the business? Is it superior to the Kirana part of the business? Second is in terms of mix, if you can talk about, or say in terms of larger packs, if you can talk about.

Finally, in terms of working capital, obviously, it will not be as good as the Kirana, but if you could give us some sense on that, that is the first question.

Okay, so I think, you know, good question. As far as the channel itself is concerned, I think a combination of what you said: portfolio pricing, curated promotions, and also kind of calibrating the size of the price that we look at for each of the channels.

So we don't go unbridled and say, look, this month will be only quick commerce or this month will be only traditional. We have a certain internal cap that we set for ourselves, saying not beyond this do we go. Yet, of course, there is a fierce war out there, and sometimes people could use us as a loss leader.

That phenomenon is not without merit in the context of the market shares that the quick commerce wants to do. But this is the way in which we try and control. We also try and see that the traditional trade gets packs and gets activities as a countervailing balance wherever possible.

So that we see that there is no direct conflict at all points in time. In some SKUs, there will be, but in many SKUs, there will not be. I think going forward, I see the conflict becoming more if the price inflations really catch on.

If the price inflation becomes high, then the degree of play that will be between channels will start to increase. But as of now, I think we have managed to mitigate as best as possible.

Of course, there will be pockets of the country where there will be some kind of feedback saying that there is extra discounting taking place. I can assure you that most of the discounting is being done by the players themselves and not by us.

We have fairly strong trading terms as of now. The net returns are not adversarial as far as the other channels are concerned. So we are not bleeding, right? And neither are we making more.

So it's kind of a leveling of the equation between salience, trading terms, and sustainability. That equation, if it is in a particular space, we are okay with it. But we will not allow the space to be bled in terms of the fact that we are going to give extra terms simply to get an extra pound of sale, which is going to upset the apple cart for the other channels.

Because we still have a situation where 75% to 80% of our sales do come out of traditional trade. It's in the mega cities and metros where the equation is slightly different, but in the smaller towns, we still have a lot of traditional trade to back upon.

So my second question is on the popular price point of rupees 10. We do see that Buia and Numin and biscuits seem to be growing faster than your noodles growth. We don't have data, but it seems that's happening.

Second, you have vacated the 10 rupee price point in the big cities, urban areas. So would you need the 10 rupee price point to come back?

In Coco, where there is very high inflation, again in terms of your confectionery, the 10 rupee price point is there. So would you have cut grammage in that part?

No, I think we have kept the value delivery relatively stable in terms of price point. The 10 rupee is certainly an emerging price point for us because, as you know, we had earlier the 5 rupee and the 12 rupee, which became then the 14 rupee and then the 15 rupee price point.

So 10 rupee has been more put in as a value pack in the geographies in which it has been introduced, where the single packs are relatively not as salient. It is giving us good results.

But unlike the Buia, who have been around for a while with 10 rupees, for us, the 10 rupee has been a relatively recent introduction. So it's more geographic specific and more channel specific. It's not ubiquitous as yet because we still have a single pack at 15 bucks.

So we don't want a situation where there will be significant down trading taking place at some stage.

So last quick question: you spoke a lot on out of home. If you can talk about the 940 Nestle, is it largely a franchise route?

In terms of growth, you did mention that this will double as a category, not for you, by 2030. Which segments will be benefiting more? If you could talk more about this, because I think it's very important from a marketing angle, but from sales and profits also, is it significant for the company?

Look, it's the 940. We don't run any outlets ourselves, so these are franchised outlets. But our model is a little bit different. There are larger franchises who will have 5 to 10 of these per franchise.

It will not be like one person running one. Some geography, there could be, but very few numbers. So it's more people who are running larger franchises. These are all self-sustaining.

The P&L is managed by the franchise, but we manage the rest of the equation, which is the design, the quality, the produce, the recipes, the hygiene. All of that is managed by us.

I think the channel itself has been growing quite fast. We've added in the last two to three years, we've almost doubled the number of retail one outlets that we have added. There is still more scope in terms of tourism sites because the tourism and the travel sector is doing well.

We can also do well in this. It is still not significant because our realization is only the price to trade because a franchise needs the margin to make his money.

It is not, I won't say it's a significant contributor to revenue, but it's a significant contributor to the trials and marketing activities of the company.

I think that, you know, 20 million people coming in each year is a good number, especially of the right generation, which is Gen Z, students, tourists, and those kinds of things.

So these are the benefits of it, but will it be a revenue driver for me? The answer is no. I mean, I don't think let's say sometime from now, Manish will report that the retail one outlets have now become like 2% or 5% of sales. That I think is a little far away.

Hi Sur, my first question was around market shares and competitive dynamics, particularly in your core categories of noodles, chocolates, and baby foods. If you can give us some flavor of what are the developments.

Clearly, noodles, we had come across intensified competition from regional and local players. So if you could throw some light on how market shares for your brands are trending across at least these three key categories.

Market shares, I think noodles have been fairly stable. There can be a little bit of quarterly blips up and down, but it's in the region of about 60 OD per, which is where it was. So it hasn't dramatically gone up, it hasn't dramatically come down.

The next you asked for was for chocolates and baby foods. Chocolates and baby foods have been stable. The category itself again has its own dynamics. Because of inflation, it could have shrunk a bit in some quarters, but our shares continue to be strong because we have a leadership profile there.

In chocolates, actually, we are of course distinct number two, so that equation hasn't changed. But the share of our wafer-based chocolates, KitKat and Munch, has actually gone up.

In coffee, we have clearly now the market leader.

Sure. The second question was on innovation. You talked about 60% of the growth should come from co-brands, and we've clearly seen a lot of innovation in your core portfolio.

Right, so you've seen all the new formats on coffee. You know, that you have done. Trying to gather your thoughts on how do you think about scaling up presence in some of the new sub-segments?

You know, we had done breakfast cereals a couple of years ago. Pet care is definitely a new segment. How do you think about inorganic growth, you know, specific to India?

Is there a mindset to explore that considering now we are seeing a lot of these new age brands cropping up? Some of the companies have acquired them; they are exploring and experimenting in these spaces.

Look, I think, Latia, the appetite for inorganic growth continues. Though you may say you haven't made anything happen, unfortunately, nothing has fructified so far.

But I think that interest in that space continues, and that's something that we will be working on as we move forward. I think there are opportunities in innovation as well across categories.

The reason why we have focused on the core so far and not looked at adjacencies very dramatically is because we have been trying to grapple with the forces of a consumption slowdown and a huge commodity inflation.

Therefore, the view that we have taken is protecting the core at this stage is extremely important rather than getting into a lot of new things. Incidentally, the breakfast cereals category has also done quite well.

It's a small business, but I'm happy to report that in small packs, which are single-serve packs, we are now number two to Kells. So it's not as small as you think it is, but we don't put it on the map as yet because we've got other priorities that we need to tackle.

Okay, and the last one was, you know, in your distribution reach, you've covered quite a ground: 5.5 million outlets, 3.6 million in urban.

So from here on, should we anticipate that you will focus more on throughput in these newly acquired outlets and probably expand more products rather than numeric expansion? Is it more feasible from here?

Yes, no, I think it's still feasible. I think the outlet expansion, I would reckon, ballpark till about 6 million outlets is what we should be looking at in the coming years.

But you are absolutely right. I think depth of penetration is going to be the name of the game. So increasing the frequency, the variety of the portfolio, and the price points will be the name of the game as we go.

That will give us substantially more heft to the whole strategy, and that is the rural strategy: to reach an optimal number of outlets and then to be able to increase the depth of penetration through portfolio, through price points, and through frequency of purchase.

Yeah, Arav, we are from Goldman Sachs. So Sur, the last seven to eight years, one consistent growth driver for you has been Maggie, which consistently grew double digits through good and bad cycles.

Where there seems to have been some slowdown last year, now one way to look at it is probably macro has been bad. But I wanted to understand if you think there is any other issue.

Like, are other forms of snacking taking over from noodles? Are there regional competitors coming in quick commerce and those kinds of areas? Or anything else that you can think of? Or the penetration is too high now, and therefore we should not expect that kind of growth going ahead?

So just your thoughts on Maggie's revival from this week growth this year.

No, I think it's all of the above as far as the Maggie story is concerned. Yes, Maggi continues to be a strong, robust, and relevant brand. That's the truth, and you see the indices moving.

I think the price inflation clearly has played a role because we ourselves had to take up the price from 5 to 7. We couldn't digest that anymore, and that took a little bit of a toll in terms of the volume evolution of the brand.

It was obvious, you know, nothing new about it. Also, the whole snacking space has exploded. The fact is that earlier it was biscuits and noodles; now it's biscuits, chips, you know, other snack forms, liquid and solid snack forms, and noodles that get included there.

There have been different forms of noodles that have been introduced in the marketplace. While we are cognizant of it and we make our own innovation platforms, on a regional basis, if somebody were to hit first, the impact will be on Maggie.

It won't be on anything else because we are the biggest player in the market. So we are cognizant of it. We are taking steps in terms of innovation, activation, penetration, geographic strategies, state strategies, and clusterization in terms of addressing this.

We are not fazed by it because this is the hard reality. We will not do anything foolish because one thing is to panic in the situation and say, look, all of this is happening.

Yes, this is going to happen. The space is going to become more exciting; the space is going to become more chaotic. But that is when clarity of thinking and application of mind, focus, and direction is so very important in this category, and that's what we're doing.

Therefore, we are turning back to growth and turning back to better days.

Thanks so much, Sish. Just my second question was a slightly medium-term question on milk and nutrition because not just this year, but over a period of time, volume growth has been challenging there.

What do you think needs to change over the next, let's say, four to five-year period for you to deliver volume growth in milk and nutrition from your side?

Do you think something has to change in the environment for the growth to be faster there?

Look, I think, you know, breast milk is the best for mothers. That's the established standard, so there's no gain saying that.

But as incomes rise and as the middle-class incomes especially go up, with an increasing participation of women in the workforce, and with hopefully an abatement of some of the inflation that we are seeing today, there will be a positive momentum created.

Because nobody has anything against the category as such. The question is that when I have to balance my budgets, I do find that things are very expensive. So I cut some of them, and this could be one of the areas that could be cut.

So I see when greater moderation comes in and improvement in participation in employment and wages, that's where the incomes are important. I think that the category will come back to volume growth.

But would it be like a Maggie or a chocolate volume growth? The answer is no because it's a limited lifespan product for the consumer.

So we have to calibrate that growth. That 2% or 3% growth you get is during a one-year period or a two-year period, whereas a growth for a Maggie comes over a much longer life cycle of the brand.

Yeah, thanks so much.

Take the online question. We'll move to now the questions from the online attendees. So over to you, Enba.

Thank you, sir. Before we take our question, we would request participants to please limit their questions to one per party.

Online participants, if you wish to rejoin the queue, you may rejoin from the panelist platform and click the raise hand icon.

We'll take our first question from Harit Kapoor from Investec.

Mr. Harit Kapoor, your connection is unmuted. Please go ahead and ask your question.

Mr. Harit Kapoor, as there's no response, we will move to our next participant, that is Bakshi from Sundaram Mutual Fund.

Mr. Bakshi, please go ahead with your question.

Hi sir, thank you for taking my question. I hope I'm audible. I just had one question on the milk nutrition portfolio point of view.

So in terms of, say, the competitive intensity, what we have been seeing over the year, the pressure which we have seen, would that also be the case for the incumbents in the category?

Or given our positioning at a lower end of the overall category, are we seeing a higher level of competition versus that? Any sense on this pie would be really helpful. Thank you.

Look, it's a good question. One of the things in this category is that it is a highly regulated category, and it's media dark and consumer dark in that sense.

So anybody who were to come into this category is going to face probably greater challenges because of the fact that you are not able to, and by law, you will not be allowed to say anything or do anything in this category.

But that doesn't mean that we have to rest on our laurels. We have leadership positions there. We are both in the mid-price segment and in the high-priced, premium-priced nutrition segment.

The mid-price segment is where the challenges are the most. In the premium end of the milks and nutrition segment, the growths are encouraging; the growths are good.

Also, there, people understand the quality of nutrition that they're buying for their child. So to that extent, I think I would still put this category as a category for growth.

But I would really urge a calibration on the kind of volume growth that you will get in this category. There will be value growths that will be neat and significant, but the volume growths will not be like a noodle or a chocolate or any of those categories.

I hope that answers your question.

Thank you, sir.

Thank you. We take our next question from Anuj D of HDFC Securities.

So we request you to please unmute your microphone and ask your question.

There is no response from this participant.

INB, do you want to check with Harit if he's there to ask the question now?

Sure, I'll check that.

Sir, Mr. Harit Kapoor, may we request you to unmute your connection, and you may ask your question?

Yeah, hi. Hi, good evening. Am I audible?

Yes, sir.

Yeah, hi, good evening, and apologies for the earlier time. No, just had one question on the margin band.

So, you know, if I look at your strategy, your thought process of driving lower pack units as well in ban, actually improving the throughput, etc., at a time also where there are inflationary challenges, albeit very, very gradually abating.

Just wanted to get your sense on the margin dynamic expected over the next maybe 12 to 24 months.

Should we believe that the current level of profitability is where we stabilize that in a bid to improve the revenue growth or the volume growth? Some context on that would be great. Thank you.

Look, I think a good question, Harit. You know, as you know, our operating margins, which were about 16.5%, have gone up in the last 10 years to about 21-22%.

The brand of between 20 and 21 is where we have been operating for a reasonably long time. The company strategy itself is sustainable growth with sustainable profitability.

So the objective is not to come up with a proposition of a 20% growth and a 10% profit. I don't think that will even justify the valuation that you give us in the market.

So I would say that I'm no one, and we don't give forward guidance in any case as far as the results are concerned. But the current profitability levels are kind of optimally placed in order to support the growth journey of the company.

That's where I would be. If inflation exacerbates, then the equation changes dramatically. One doesn't know. One thought that the coffee prices would stabilize, and the cocoa price would stabilize, and the wheat price would stabilize, but it's not happening.

So therefore, I think some play will have to come. But broadly speaking, where we are is where we should be unless there is a huge upheaval that takes place.

Thank you.

We now request Mr. Nishank Jan from Max Life Insurance to please unmute your connection, and you may ask a question.

Nishank Jan, your microphone is still muted. Could you please unmute your connection and ask your question?

So there's no response from this connection.

Thanks, Andra. We'll take one more question from people who are here. Just one question.

There are two questions. So one about the cocoa prices and coffee prices, which basically have moved up pretty significantly in the last few years.

And that's probably one of the reasons why the growth is more from the pricing perspective. So can we say that volume is sort of under pressure much more than the other categories?

Whenever, historically, we haven't seen this kind of a trend, but whenever there is a deflation in these kinds of commodities, what would be your pricing strategy after that?

Look, as I said, it's a good question. For us, pricing is the last for us as stute buying because we have economies of scale, material usage improvements through specifications, and more effective or more efficient utilization of the assets that we have got.

Is the primary scope that we would like to use, and pricing is more an add-on or a derived component of it. I think today we have the capability to manage the four quite well.

Yes, to answer your question, volumes have been dented because of the pricing that has been taken. There's no two ways about it.

But I believe that if there is some stability that comes into the marketplace for these two commodities, then there is some hope of being able to restore the dynamics of volume growth back or significant volume growth back.

Remember, our volume growth has been almost 8% to 9.5%, so it's been in the 11.2% growth. About 9% has been volume, so 2% has been pricing. Now it's the other way around, right?

So a lot will depend on how these commodities evolve. But I want to assure you that the model that we work with, because of the volume stickiness, we realize, we understand, and we try and manage that as best as possible with residual pricing.

But if the situation does not improve, then the whole dynamics of the market will change, and then we have to see how we...

And we don't have a policy that every SKU of the category should make the same margins. There's no such thing. We try and see, we ladder it.

But if it doesn't work that way, and if you have to take a hit in terms of margins for a particular category, so long as we know what period of time we have to take on, we are willing to take that.

Thanks.

Yeah, maybe take...

Yeah, give him, give him, give him. They are all old friends.

Thanks, sir. Just I'll keep it just one question then.

See, in your focus in your entire presentation, two areas that came in are one is premiumization and, you know, is an important category and innovation.

Now that typically means a lot of smaller bets versus one large bet or a few larger bets. Is that understanding correct? And if it is, where are we in the journey to change the organization to handle the involved complexity that this poses?

Look, I think, you know, the days of having single large bets, at least in consumer goods, are over. There was a time when you could have a single large bet.

Now I think there are multiple smaller bets, which we realize. You know, it's unlike the tech space where you have one big algorithm that works and that gives you a couple of billion dollars.

Here, that's not the case. We have small bets that contribute to it. I think the organization, the way it is currently structured, and with the capacity flexibilities that we have created, is capable of taking the complexity.

So it's not that we are not capable of taking the complexity. However, we'll have to manage it over a period of time.

How much of complexity? So let's say if I have innovation ideas of potentially 50-60, I'll have to prune it down to 15-20 to be able to manage it.

And within that, then to calibrate and see which are the big ticket items. So increasing complexity and use of tools to be able to de-complexify it is going to be the name of the game.

But looking for that one large big bet, I'm afraid maybe it happens. I don't know. I mean, when Maggie noodles started, I don't think anybody looked at it as a big bet, but it became a big bet, right?

But as I see it, with the consumer fragmentation and with the innovative capabilities now across the industry, probably such large bets are going to be fewer, and smaller bets are going to be larger.

Large companies need to be able to manage the small organization thinking rather than trying to look for that big economies of scale that they are used to.

And so this number of 15, you know, whatever that number is, 15 or 30, is that constrained based on front end, which is, or is it more supply chain manufacturing?

It's two-way. Not really, not really supply chain end. I think supply chain will be able to manage it.

The question is what is the kind of sustainable level of investment and support that we can provide? Because remember that in this day and age, all brands need certain threshold levels of support in order to justify the growth versus profitability equation.

So if you have too many little ones that are coming in, you tend to dilute. So within that, you have to calibrate and say this 5, 2025, this 10, 2026, this 5, 2027.

In the overarching framework, 50-60% of your growth will still come from the core because I can't... I'll be foolish if I were to divert investments from the core into the small ones and allow the core to collapse.

Because the loss I'm going to have there is going to be much more significant.

Got it, sir. Got it. And so thanks a lot for taking our questions and helping us and interacting with us for all these years. It's been a pleasure.

Thank you.

Thank you very much.

Thank you. Thank you, sir.

Thank you all the participants and attendees. We close the session now. For the people who are here in the room, there are some tea and snacks just outside in the cafeteria.

Thank you.

Thank you all very much. And those online, my sincere gratitude. My apologies that all of you could not ask your questions. So I think we have to get to the bottom of that.

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Nestle India Analyst and Institutional Investor Meet 4th February 2025

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