Nestle flags near-term consumption slowdown amid West Asia conflict, El Nino concerns

FMCG major Nestle India on Tuesday cautioned that consumption growth in the food and beverages sector could moderate in the near term as inflationary pressures from the ongoing West Asia conflict and concerns over a weak monsoon linked to El Nino weigh on consumer demand.

The company said overall consumption and food and beverage industry growth remain a "watch-out in the short term", citing rising raw material costs driven by geopolitical tensions and weather-related uncertainties. Speaking during an analyst call, Nestle India Chairman and Managing Director Manish Tiwary said industry data already points to softer demand.

Also Read: From L’Oreal to Unilever, global FMCG giants step up India investments to expand retail reach


"There are a few things happening in the environment. The fact is, we are seeing a little bit of slowdown in market growth, as reported by Nielsen. Also, there is a little bit of impact on food inflation," Tiwary said.

The company, however, maintained that these challenges are likely to be temporary and expressed confidence in its long-term growth prospects, supported by low category penetration, expanding rural demand and premiumisation.

"While these are headwinds, inflation would be of concern. I just feel that given where we are on this journey in terms of penetration, in terms of the rural consumer, in terms of premiumisation, I remain quite confident of our ability to handle these short-term blips," he said.

Nestle said the conflict in West Asia has pushed up costs across key inputs, including energy, packaging materials and edible oils, while also disrupting shipping routes and increasing currency volatility.

"Yes, it's a challenge. There are some costs which are going up -- things like energy, packaging, oil, shipping disruptions. There's volatility in the currency. Does it concern us? Yes," Tiwary said.

Also Read: For Nestle, India a growth outlier across markets

He said the company is relying on value-chain productivity initiatives to mitigate cost pressures while maintaining growth momentum.

Despite the near-term uncertainties, Tiwary said Nestle remains optimistic about its medium- and long-term trajectory.

"I still believe the medium- to long-term growth story for us does not get impacted. The team has the resilience to work around and address some of these challenges while continuing to delight consumers in India," he said.

The maker of Maggi noodles, Nescafe coffee and KitKat chocolates reported a 48.26% year-on-year rise in consolidated net profit to Rs 958.68 crore for the June quarter, while revenue from sale of products increased 25.4% to Rs 6,363.27 crore.

Nestle said it continues to focus on volume-led growth backed by strong brands, wider distribution and consumer preference. The company has delivered double-digit growth over the past five years and sees further opportunities in rural India, where it continues to expand its distribution network.

Tiwary said Nestle's rural distribution remains about half that of some peers, leaving significant room for expansion, while acknowledging that rural demand is currently outpacing urban markets.

The company is also betting on premiumisation and digital channels to drive growth. E-commerce, particularly quick commerce, has emerged as a key growth engine, helping Nestle scale premium products and accelerate innovation.

"The premium portfolio has grown from 11 to 14 per cent, with premium growth ahead of overall growth," Tiwary said. "I think together with our partners in e-commerce, these capabilities are helping us scale faster in urban markets, drive our innovations faster and premiumize much faster."

He added that household penetration for flagship brands such as Maggi, Nescafe and KitKat remains in the mid-50% range, indicating ample headroom for growth. Over the past five years, Nestle has expanded its retail footprint by nearly 500,000 outlets, marking its largest-ever increase in distribution reach.