Nestle SA, the biggest food company in the world, said on Friday that it would invest 5,000 crores in India to build new factories and research centers. This is because India’s middle class is growing and spending more money on food and drinks.
“The investment I mentioned is Capex, which is money we spend on our facilities, whether they are factories or research centers.” chief executive Mark Schneider said. “Furthermore, if we identify good chances for mergers and acquisitions, we would be delighted to investigate them,” he added. “When you look at the investment in this country and the investment plan through 2025—we’re talking about 5,000 crores, which compared to 8,000 crores over the last 60 years when we started manufacturing here,” he remarked.
The increased investments will also be used to establish brands, according to Schneider, who is on a week-long visit to India, one of the Swiss company’s top ten markets. Nestle is increasing its focus on India, the world’s fastest-growing economy, as it deals with weak demand in Western markets plagued by decades of high inflation. Even though food companies are less likely to be affected by sudden price changes, persistently high inflation may cause people to switch to cheaper products.
“Globally, we are in a horrible situation due to continuing inflation. “You can see from so many central bank decisions this week that inflation is still a huge issue. And obviously, what we observe country by country, market by market is to what extent continuing inflation has an effect on people’s inclination to buy at some point, and the answer varies by country and category, “, he added.
The new investments in India are part of the company’s “accelerated” ambition to expand its presence and fight with rival Unilever’s India unit as well as local behemoths such as ITC Ltd and Tata Consumer Products. Nestle began operations in India as Nestle Anglo-Swiss Condensed Milk Co. (Export) Ltd. in 1912, importing and selling completed products. The firm established its first factory in Moga, Punjab, in 1961. But the worst problem the company has ever had was in India in 2015 when its popular Maggi noodles were banned for a short time.
Nestle India’s net sales have now recovered, rising to 14,633.72 crores in 2021 from 8,123.27 crores in 2015. Nestle India, which has nine plants in the country, said the projected investments would also help it create “substantial” direct and indirect jobs. “These are the objectives we have as a firm in terms of expanding across categories and even looking at other factory locations,” said Suresh Narayanan, chairman and managing director of Nestle India.
According to Narayanan, the investment goals include sustainably increasing the company’s core business. Nestle India will also capitalize on new development prospects, such as the growing customer preference for plant-based proteins or healthy snacking. Schneider also said that the company plans to grow its business of selling pet food in India over time. Despite global concerns about inflation, underlying demand in India is strong, he said.
“Globally, we do have inflation concerns right now, and I believe they are legitimate.” They do, however, have a damping influence on demand at some time. As a result, I believe India is in a very advantageous position.
Of course, there are concerns about inflation, but “you have such a strong underlying volume demand from a rising middle class and just people attaining higher levels of income that it kind of overpowers some of the concerns about inflation,” he said. Schneider says that Nestle is committed to keeping prices fair so that products are affordable for people of all income levels.
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