Maggi “Chotu” price hike dents Nestle’s sales volumes and revenue growth in December quarter    

Nestle raised prices of Maggi “Chotu,” by Rs 2 during the quarter, which meant the 35-gram pack of noodles was priced at Rs 7 instead of the earlier Rs 5. (Representative Image)

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26 Aug, 2025 12:21

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A small price hike appears to have impacted Nestle India’s sales volumes and revenue growth in the December quarter of 2022. The company raised prices of the Low Unit Pack (LUP) of Maggi noodles, also called Maggi “Chotu,” by Rs 2 during the quarter. That meant the 35-gram pack of noodles was priced at Rs 7 instead of the earlier Rs 5.

So while net sales grew 14.2 percent to Rs 4,233.3 crore, led by pricing, analysts said the single percentage point volume decline in domestic sales during the quarter happened mainly due to the price hike in Maggi “Chotu.” LUPs account for nearly a fifth of Maggi portfolio sales and competitors did not follow Nestle in increasing prices of noodle LUPs.

Also, though the growth in sales in mega cities — with a population of over 4 million — remained strong in the December quarter, ICICI Direct pointed out that it was anyway impacted by the Maggi “chotu” price increase. The same phenomenon was witnessed in towns with a population below 100,000, where sales growth fell largely because of the pricing action on Maggi “chotu,” the brokerage said.

Chairman and Managing Director Suresh Narayanan said that in towns with less than 100,000 population, sales growth came down from 13 percent to 5 percent for the company in the December quarter. “This is where the pricing action in LUPs, especially in the noodles category, has had an impact. Price increase there has been close to 40 percent and this has clearly had an impact. But this is not something that wasn’t anticipated by the company. In fact, on a margin-accretive basis, uptrading has happened to single and multi-packs and that will help longer-term growth,” he said.

Uptrading refers to change in consumer behaviour when bigger and pricier packs of the same product are bought by customers who were earlier opting for smaller packs.

Sales growth remained strong in mega and large cities despite the “chotu” price increase, with metros and Tier I towns showing nearly 20 percent growth year-on-year (YoY).

Q4 numbers 

Nestle India reported net profit of Rs 628.1 crore (Rs 567 crore) in the December quarter. In the year-ago period, there was a one-off exceptional expense of Rs 236.5 crore related to its employee benefit pension plan and adjusting for this one-off, the actual growth in net profit YoY was 10.8 percent. Else, growth was nearly 62 percent. And while the sales growth has remained in double digits for the entire calendar year (Nestle India tracks January-December), one look at the quarterly growth shows the decline — revenue grew the slowest in three quarters in December. Revenue growth had been 10.2, 16.1 and 18.2 percent in the first three quarters of the calendar year, as per an analysis by Motilal Oswal.

Margins 

The company reported an over 240 basis point decline in YoY Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) margin to 22.1 percent from 24.5 percent even though the margin improved sequentially.

Narayanan pointed out that 2022 was marked by severe commodity headwinds. Over the last six years, milk prices have gone up by 40 percent, wheat by nearly 30 percent, edible oils by a whopping 145 percent and even packaging material prices have shot up by 44 percent. These are considerably high numbers and even in January 2023, the Consumer Price Index inflation (CPI) was at 6 percent plus and food inflation was at 16 percent. He said that while the company was confident of mitigating these factors through cost saving measures and pricing action, some pressure will remain.

Distribution focus 

Nestle India has expanded its direct distribution to 1.5 million outlets from 1.4 million while overall distribution network is now over five million outlets. This five million number is a build back from 2015, when the Maggi crisis had adversely impacted distribution. Narayan said during a call with analysts that Nestle’s rural play is just about 20 percent now but growth has been fairly strong at 25-26 percent. He also said that the company’s ambition was to expand its rural reach, in villages with a population above 2,000.

“We want to grow our coverage to 120,000 villages with a population of above 2,000 by 2024. In 2022, we have already increased coverage to over 91,000 such villages. Our total village coverage stood at 165,367 villages in 2022 compared with 68,578 villages in 2020,” he added. From adding wholesalers and distribution touch points to scaling up activations at village fairs (Haats), the company is taking several measures to improve its visibility in rural regions.

Capital expenditure 

Motilal Oswal noted that Nestle’s planned Rs 5,000 crore capital expenditure over the next three years is expected to boost volume growth, especially in prepared dishes (Maggi) and chocolates and confectionary over the medium term. The company’s overall volumes grew by 5 percent YoY and 6 percent in the domestic market. The brokerage said that “the long-term narrative for revenue and earnings growth is highly attractive.”

“The Packaged Foods segment offers immense growth opportunities in India. This is particularly true for a company such as Nestle, which has a strong pedigree and distribution strength. The successful implementation of its volume-led growth strategy in recent years provides confidence in execution as well,” it added.