Nestle India Q4 Results Review - Price Hike In Low Unit Packs Impacts Volumes: ICICI Direct

ICICI Direct Report

Nestle India Ltd.'s net sales witnessed growth of 14.2% to Rs 4233.3 crore led by pricing growth. Domestic sales grew 13.8% to Rs 4061.9 crore led entirely by pricing growth and product mix changes. Exports were up 17.1% led by mix of volume and pricing growth.

Domestic volumes were down 1% Impacted by de-growth in noodles segment specifically in ‘Maggi Chotu pack’. The company increased the 35- gram Maggi noodles price from Rs 5 to Rs 7. However, competition has not taken a price hike in smaller stock keeping units.

The sales growth in mega cities (more than 40 lakh population) have remained strong at 12% in Q4. However, it was somewhat impacted by price hike in smaller pack. The sales growth in Metro cities (more than 10 lakh and less than 40 lakh) and tier-I cities (more than 1 to less than 10 lakh) were stronger at 21% and 19%, respectively.

In tier-II to Tier-six towns (less than one lakh), sales growth de-accelerated at 5% largely due to price hike taken in Maggi noodles low unit pack. The growth in villages has been strong at 25% during the quarter.

Nestle India is continuously expanding its distribution reach in rural India, which is leading to such strong growth. Rural regions contribute 20% to the Nestle India’s domestic sales.

Nestle India direct reach has increased from 1.4 million retail outlets to 1.5 million outlets. Its total coverage stands at 5.1 million retail outlets.

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