Nestlé India warns of near-term demand slowdown amid inflation pressures

New Delhi: Nestlé India has cautioned that consumption in the food and beverages sector could soften in the near term as inflationary pressures from the West Asia conflict and concerns over an El Niño-led weak monsoon weigh on consumer demand.

Speaking during an analyst call after the company’s June quarter results, Nestlé India, chairman and managing director, Manish Tiwary said market growth had already begun slowing, with industry data pointing to weaker demand. According to reports by The Economic Times and Mint, the company described overall consumption and food and beverage industry growth as a “watch-out in the short term”.

Tiwary said food inflation had started affecting the market, while rising costs for energy, packaging materials, edible oils and shipping, along with currency volatility, were adding to pressure on the business.

The company attributed much of the cost escalation to the ongoing conflict in West Asia, which has disrupted shipping routes and pushed up input costs across the supply chain.

Despite the headwinds, Tiwary maintained that the challenges were likely to be temporary and said the company remained confident about its long-term growth prospects, supported by low category penetration, premiumisation and rising rural demand.

Nestlé said it would continue relying on productivity improvements across its value chain to offset higher input costs while sustaining growth.

The optimism came alongside a strong quarterly performance. The maker of Maggi, Nescafé and KitKat reported a sharp jump in June quarter earnings, with revenue rising by around 25 per cent year-on-year to about Rs 6,378 crore, while net profit increased by nearly 48 per cent to approximately Rs 975 crore, according to company disclosures cited by the reports.

The company also highlighted the resilience of rural markets, where demand continues to outpace urban consumption. Tiwary said Nestlé’s distribution network has expanded significantly over the past five years, reaching nearly 6.2 million retail outlets and about 219,700 villages, while noting there remains considerable scope to deepen rural penetration.

Premium products and digital commerce are emerging as additional growth drivers. Nestlé said its premium portfolio has increased from 11 per cent to 14 per cent of sales, with quick commerce and e-commerce helping accelerate product launches and strengthen its presence in urban markets.

Tiwary added that flagship brands such as Maggi, Nescafé and KitKat continue to have household penetration in the mid-50 per cent range, leaving ample room for further expansion.

While inflation and geopolitical tensions may temporarily cloud the consumption outlook, Nestlé believes India’s long-term appetite for branded food remains firmly on the menu.