Nestle India has recently decided to expand its business to rural India, targeting villages with more than 5,000 people. With the changing consumption patterns in the region, Nestle aims to meet the demands of rural consumers by offering a wide range of new products while also considering expanding its reach further. The company has identified this new segment as a potential market, expecting double-digit growth in business in the coming years. Nestle’s Chairman, Suresh Narayanan, has revealed that the company’s compound annual growth rate has been up to 10 to 11 percent in the last 6-7 years, with 2-3 percent without pricing and 7-8 percent with volume.
Meeting Changing Consumption Patterns in Rural India
Needless to say that with their plans for expansion, not only will Nestle greatly benefit greatly in their business but rural India would also share in the delicious variety of flavours that city dwellers have been enjoying for so long.
According to Narayanan, the target is to reach 120,000 villages, establishing a robust presence in the rural hinterlands. The company released 39 new products between 2016 and 2018, including Masala Fusion dairy whitener, Greek Yoghurt Grekeyo, and Nestlé Everyday Chai in three flavours, among others. Since they have realized that the sale of Maggi has gone up recently in rural markets, as has the sale of KitKat, the company is opportunistic enough to decide to expand its other products in the rural parts of the country.
Tailor-made Products for Rural Markets
Nestle’s decision to enter the rural Indian markets comes at a time when the sector is emerging as a significant growth driver for the economy. With the rising population and increased awareness of healthy eating habits, the demand for high-quality packaged food products is on the rise in rural India. In the past, the company had relied on a few major brands, such as Maggi and Nescafé, but since it began catering to rural markets, it has begun producing tailor-made products in various packages.
Addressing the Problem of Rising Milk Prices
However, the cost of production in India has been continuously rising due to several factors, resulting in milk prices in India being expected to increase again this year, prompting alarm among consumers and officials alike. With the value of milk being very high, Narayanan has stated his decision to take some actions in the company’s milk-based portfolio.
Nestle’s Presence in the Healthcare Industry in India
Nestle has been very active in the pharmacy industry too, with Nestle Health Science creating food for persons with Alzheimer’s that delays the start of the illness. Narayanan has further revealed that Nestle Health Science, a subsidiary of the Swiss parent company, is nascent in the country, and globally, Nestle is looking at Health Sciences in a big way. The new frontier is not just medicines but food.
Opportunities for Growth and Consolidation in the Packaged Food Industry
With the company’s plans for expansion, rural India will benefit from the variety of flavours that city dwellers have been enjoying for so long, and Nestle will significantly benefit from the new business opportunities. Nestle’s decision to tap into the rural Indian markets is in line with the government’s push towards rural development and self-sufficiency, creating job opportunities and generating income for the local population.
As per reports, the packaged food industry in India is expected to grow at a CAGR of 11.1% during the forecast period of 2021-2026. With Nestle India’s foray into rural markets, the industry is expected to undergo further growth and consolidation, opening up opportunities for other players as well.
Nestle’s decision to expand its business in rural India is a strategic move to tap into the fast-changing consumption patterns of customers in these areas. With a focus on providing tailor-made products in various packages, Nestle aims to reach 120,000 villages with a population of over 5,000. The company’s expansion plans present an opportunity to address the problem of rising milk prices in the country. With Nestle Health Science’s focus on creating food for individuals with Alzheimer’s, the company is also making significant contributions to the healthcare industry in India.
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