As food inflation bites, Nestle turns to smaller cities to drive growth

New Delhi: Food inflation shaped household choices in ways that went far beyond price, with families reconsidering pack sizes, buying frequency and category priorities in FY26, Nestle India chairman and managing director Manish Tiwary said on Friday.

The manufacturer of Maggi noodles, KitKat chocolates and Cerelac baby food is making deliberate bets on tier-2 and tier-3 markets, where consumption is rising faster than in metros, Tiwary told shareholders at the company's 67th AGM.

While terming FY26 a year of uneven demand patterns, a steep surge in commodity costs and geopolitical churn, Tiwary said the country's long-term potential remained resilient.


"There will be quarters that test and bets that don't pay off immediately, but that's the nature of building something that lasts," he said. Besides surging costs of fuel, oil and food, supply disruptions linked to the West Asia crisis have roiled economies globally through the first half of calendar 2026.

Nestle will increase its focus on penetration-led volume growth and on rural and semi-urban markets that Tiwary said will drive "the next wave of long-term consumption". The India unit of the Swiss foodmaker has invested nearly ₹2,000 crore in capital expenditure over the past two years.

For FY26, Nestle India reported domestic sales of ₹23,071.5 crore, up nearly 15% year-on-year, driven by double-digit volume growth and market share gains.

Also read | Prices climb, but low loan rates keep homes affordable

In what was his first AGM after taking over the corner office, Tiwary said, "We are operating in a market full of opportunities, but one that will increasingly reward only those who are agile, disciplined and genuinely close to the consumer." India is now the world's largest market for Nestle's Maggi noodles and KitKat chocolates.

Nestle is reinvesting its savings into advertising and digital spending to deepen brand reach and support growth, Tiwary said.

India's FMCG sector is likely to post healthy revenue growth in the first quarter of FY27 despite inflationary pressures, driven by premiumisation, selective price hikes and stronger performance in modern trade and quick commerce, brokerage Anand Rathi said in a report two weeks ago. Though rural demand has moderated in some categories, urban consumption remains relatively resilient, the report said.