During the last one year, it has launched two big product innovations - Maggi Rasile Chow and Maggi Masala-e-Magic - specifically targeted at the hinterland and low income families.
Nestle India has taken several steps to widen its product portfolio to reach more consumers in the hinterland and has considerably strengthened its distribution network.
During the last one year, it has launched two big product innovations - Maggi Rasile Chow and Maggi Masala-e-Magic - specifically targeted at the hinterland and low income families.
Coming from a company which has traditionally targeted urban clientele, this attempt at taking products further into Indian countryside happened even as Nestle hiked prices in select stock keeping units (SKUs) in urban areas to get margins back on track.
Then, in some products, Nestle has successfully introduced lower priced SKUs — such as Chotu Munch at Rs 2 and single-finger Kitkat format at Rs 5 — to further boost realisations.
According to the company’s annual report, Maggi Rasile Chow has been developed especially for rural/semi-urban markets to provide “a low cost, tasty light meal that is fortified with iron…Maggi further leveraged its strength last year to drive affordable nutrition”. The Masala-e-Magic is a fortified taste enhancer with iron, iodine and Vitamin A.
But alongside targeting lower income families, Nestle continued to expand premium products also. Anand Rathi Securities’ Shirish Pardeshi and Aniruddha Joshi pointed out in an analysis that simultaneous uptrading and lower excise are driving realisations for Nestle.
“The focus on expanding revenue of premium products (Maggi
Pazzta) and those under chocolates are driving up average realisations. Lower excise and select price hikes of chocolates are also driving up realisations.”
And on the distribution front too, Nestle has done quite a bit of improvisation. It has begun connecting the all-powerful distributors (which play a major role in route-to-market) through a uniform and integrated Distribution Management System besides also beginning the process of advanced sales automation. “This will increase transparency, accuracy, speed, enable enhanced efficiencies in trade spends and ultimately, execution in the market. It will also liberate the frontline sales force from some of their administrative burden and enable them to focus more on their core function.”
Pardeshi and Joshi also point towards enhanced focus on distribution and price-point-based products, saying Nestle has added around 200,000 retail outlets annually for the last three years. “It is also focusing on products priced below Rs 10. Products at prices lower than Rs 10 help add customers and drive penetration in rural areas.”
In dairy products, Nestle continued to hold its own despite record high prices of milk and sugar last year. “The Everyday brand has led volume growth in the dairy whitener category, resulting in further increase in overall market share and consolidating the company’s position as market leader,” the report said. The dairy segment comprises Nesvita Dahi and yogurt, Nestle Slim Milk, Milkmaid Sweetened Condensed Milk.
In 2009, Nestle reported strong volume growth in all three major segments: milk and nutritional products up 13%; prepared dishes and cooking aids rose by 22%.
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