Nestlé to Raise Chocolate, Coffee Capacities in India

New Delhi: Nestlé India Ltd will invest ₹4,200 crore by 2025 to increase production capacity in noodles, coffee and chocolate, the head of the Indian packaged food company said, seeing opportunities to sell both mass and premium products in the country.
“If you look from 2020 to the first half of 2023, about ₹ 2,100 crore has already been spent on capital investment. They are related to increasing production capacity. About a third of this has gone into culinary investments; about a third has been spent on chocolate and sweets. The balance went to food and drink. An additional ₹ 4,200 crore will be spent between 2023 and 2025. This includes an investment of around ₹ 900 crore in the new factory in Odisha,” Nestlé India chairman and CEO Suresh Narayanan said on Friday.
Earlier this month, Nestlé India received in-principle approval for Odisha Ltd. (IPICOL) of Industrial Promotion and Investment Corp. to set up its tenth factory in the country with an investment of ₹ 894 crore. The factory will start operating within the next two years and will produce noodles, chocolate and sweets. “We are building capacity as we have seen that the basic demand is quite strong,” Narayanan said.
The announcement is in line with the company’s current plans to allocate ₹5,000 crore to build new research centers and factories in India by 2025.
“Probably, investment will go on two or three areas. One of them, of course, is the new plant in Odisha. After that, the area of ​​the coffee and beverage business will be further expanded. In the third and fourth phases of the factory in Sanand (Gujarat), we will start setting up pastry lines in addition to noodle lines. Then Moga has some expansion; and also at our factory in Ponda, the chocolate factory,” he added.
Nestlé India on Thursday reported a 37 percent rise in standalone net profit and a 15 percent rise in revenue in the June quarter. Narayanan said domestic volumes grew 4-5% during the quarter, including single-digit growth in the milk and nutrition portfolio, flat quarter-on-quarter growth in the chocolate and confectionery portfolio and double-digit growth in value-added noodles. . . However, demand for low-cost packaging was weak and Narayanan said it is now recovering. Companies such as Nestlé struggled with high inflation, which affected many areas of the company’s business, from coffee sourcing to packaging.
Narayanan said the prices of several Nestle products are cooling down. “The prices of milk and wheat have remained stable so far. The effect of El Nino is unknown and how it will affect us,” he said. He said costs for packaging materials and fuel were “favorable”. However, according to him, food inflation is still a concern.
While headline inflation has been under control, food inflation will continue to fluctuate for some time, not only because of crop expectations, but also because of the whole climate issue. How [the rains] will affect winter crops is anyone’s guess … [T]he specter of food inflation remains. We can’t wish it so soon. Fortunately, fuel and luggage costs are quite bearable for us today,” he said. Narayanan expects the gap between volume and price based growth to narrow in the coming quarters as the company prioritizes volume growth. “The underlying philosophy of the company is still volume growth driven by penetration,” he said.
Narayanan said there is “economic pain” in rural India. However, the 20-25 percent growth of the rural market accelerated faster than the urban market for the company in the June quarter. The rural market accounts for 20 percent of the company’s sales.