Royalty agreement up for review - timeline and parent's approach?
Look, at the moment, I think we are still in, it's still in front of the board of Nestle India in terms of discussing this, preparing because it's still, it's tenable till June next year, till June 2024. So, there is still a bit of time, but I think we are very conscious of the fact that brands, technology and operational excellence are what Nestle brings to the table. And I think all these three would be evaluated fairly squarely before any decision is taken, but to clarify to you Latika as of now no decision has been taken.
Have you lost volume share in noodles/coffee to local/regional players given downtrading?
Coffee: high bean prices limit local players. Maggi Masala-e-Magic - some entrants but limited traction. Noodles: small pack price hikes saw fringe entry; RURBAN package and Rs.10 price point tailoring is bringing volumes back. Overall responding fast enough to mitigate losses.
8 years back vs now - is INR 2/5/10 coinage issue under control? Maggi small pack price 5->7->10. Why isn't UPI helping vacate popular price points given grammage impacts?
Cash still predominant in retail trade. Price point still important - Nestle portfolio: ~1/3 PPP, 15-20% premium, rest mainstream. Two forces - premiumization and downtrading. INR 5/10 still fraught with risk for trade-offs.
With green coffee and cocoa inflation - end of price action cycle? Or more pricing needed given 2 quarters gross margin step-up?
Pricing is last option. Hope towards end of price cycle on coffee unless dramatic. Coffee bean prices very much on the uptick. Cocoa: secular trend up. Intention is to avoid pricing as much as possible. 'It is a wish Harith at the moment. I feel difficult to predict.'
Material step up in innovation next 12-18 months vs last 3 years?
Relatively speaking, step-up. COVID times muted innovation - now being unleashed. 10 projects most powerful for market. Calibrated - building brand equity, gastric capacity considerations, RURBAN drive priorities. Will see uptake for sure.
Of 7% volume growth - how much from sales vector? Headroom for 3-4 year medium-term view?
At least 3% (maybe 3.5-4%) of 7% volume growth attributable to sales vector + digitization + analytics. Continues to be area of thrust. Going forward best-case as strong, worst-case slightly lower but still significant as we sweat the assets.
Pet care ramp-up plans medium term? Is 2023 Nestle different on M&A vs 10-20 years back?
M&A continues to be area of interest - eyes/ears open on fit, value-add, valuations. Pet care integration with Nestle India complete. Expanding distribution scope and synergies. 'Some of the early leads on the cat food segment is very positive.'
Any thoughts on entering NESPRESSO via Nestle India?
NESPRESSO is business of interest. Few regulatory and duty-related issues on import of pods/capsules need to be navigated. Once cleared, decision on direct involvement of Nestle India. Pet care continues to be area of serious interest.
$40B in $800B - growth should be much higher; case for disruptive launch like PepsiCo Sting (INR 120 -> INR 20 led to scale)?
Philosophy is balance between growth and profitability - won't launch deeply dilutive products without distinct competitive advantage. Empty calorie growth not philosophy. Building infrastructure for higher growth - on categories like nutrition or health science where volume small but values/impacts significant.
Trust important for Gen Z (59%) - 41% would go for non-trustworthy brands - does that worry you?
Two meanings of trust in the research - sticky vs experimental. No company is owed market share. 41% should keep us awake - have we got right consumer proposition, compelling experience, value delivery to justify market shares? Yesterday's hero is today's zero.
Premium products only ~10% - definition of premium?
Rigorous definition: PPP is 10-20% below mainstream; premium is 30-40% above mainstream. KITKAT in normal parlance considered premium but Nestle classifies as mainstream. Premium growth 2-2.5x rest of organization including small towns.
% portfolio impacted by price hikes last year and which categories may not require rollback?
About half the portfolio touched in pricing. Don't see imminent rollback - while inflation came down, commodity prices still at high level. Differences purely marginal for distinct rollback. Unlike petroleum-based ingredients where decline was sharp.
Media spend up 1.3x but ad spend ~4% vs pre-pandemic 6% - risking market share via brand equity?
Not risking equity - spending more efficiently and effectively. Digital spends up significantly. Digital share varies 20% to 60-70% by brand.
Capex being built - should we imagine much higher growth trajectory? Most exciting categories?
Definition of much-much different. Capacities created to enable higher growth. Volume growth ambition - 'definitely comparable, if not better than what we have got in the past.'
Distribution reach 5.2m - portfolio gaps? Where are opportunities?
All categories offer opportunities - distribution depends on repeat purchase and activation. Number of MAGGI noodle outlets won't equal coffee outlets. Headroom across all brands.
June quarter gross margin +200 bps - raw material softening, price hikes, or other?
Combination of raw material softening and better realization.
Innovations like Ceregrow, Milo, Nestleplus, Gerber - meeting the bar of moving the needle (1-2% of sales)?
Some show stronger promise - noodles initiatives, chocolates, coffee getting traction; nutrition takes time. Days of seeking another MAGGI noodles is a mirage. Smaller number of strong opportunities. Long-term ambition: innovation to 10% of sales (not next year - takes time).
Margin improvement not stated objective - keeping margins stable, focus on growth - can it change?
Broad approach growth with sustained profitability does not dramatically change. Within category could look at parts of portfolio with short-medium term sacrifice. Won't take 30% growth at 15% EBIT vs current 23-24%.
Niche opportunities vs distribution constraint dichotomy - smaller opportunities require new launches but bandwidth limited?
Two levels: gastric capacity for complexity (procurement, manufacturing, sourcing); geo-targeting and sharp-shooting on route to market for niche regional opportunities. Portfolio not dramatically different by geography - few variants, some SKUs in/out. Manufacturing flexibility with 10 factories + 10 co-manufacturers; sizing opportunities is the challenge.