NEW DELHI: Nestlé, the Swiss food giant, is rethinking its strategy in India to incorporate a greater emphasis on the growing numbers of wealthy consumers, a leading executive has said.
"We made a mistake," Nandu Nandkishore, executive vice-president and Zone Director for Asia, Oceania, Africa and the Middle East, told the Financial Times. "We basically focused on driving the mass market, and we really ignored a little bit the emerging affluent segment."
The company is now attempting to rectify that oversight while continuing to target the consumer group that has driven its growth in recent years. "The challenge is developing an organisation that is able to manage the extremes of going after the rural market and the affluent at the same time," said Nandkishore.
Considering these two ends of the market, he described rural demand as "robust" and premium growth as "very strong" but added that "where we have felt pressure is in the middle".
A slowing economy, depreciating rupee and rising prices have all combined to squeeze that consumer sector. "The whole game for these [consumer goods] companies was to upgrade consumers regularly to more expensive brands, which is clearly not happening right now," noted Nitin Mathur, an analyst at Espirito Santo Securities in Mumbai.
At the top end, however, affluent consumers are less affected by economic issues and the need to rein in spending. One example of an upmarket product that Nestlé has introduced is Alpino chocolates, which compete against Ferrero Rocher and the premium offerings of Cadbury.
The company is also exploring the potential of its premium coffee brands, with Nescafé Gold already available. "There is opportunity in bringing out our top-end coffee solution Dolce Gusto, which offers shop experience of coffee at home, something we are definitely looking at," Nandkishore told Business Line.
As well as reaching upmarket consumers, Nestlé is developing products aimed at an increasingly health-aware population, with, for instance, lower sodium levels or higher fibre content. Nandkishore cited spice mix fortified with iron and vitamins and whole wheat noodles as items that were performing well.
"We are looking to transform the company to be almost 100% in areas where we can demonstrate positive focus on health and wellness," he declared.
Data sourced from Financial Times, Business Line; additional content by Warc staff