Nestle India flags further price hikes amid high input cost inflation

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Packaged foods major Nestlé India will continue with its pricing actions for categories including coffee due to higher production costs, chairman and managing director Suresh Narayanan told in a post-earnings analyst meet on February 4.

Naryanan pointed to a 75 per cent increase in coffee prices which he claimed as 'difficult to be absorbed' by the company.  "If the coffee price is unrelenting, there will be a little bit more of pricing. We will try and reduce it as much as possible through efficiencies. We have doubled our capacities and that will better the efficiencies, but you can expect some amount of pricing pressure to be there,"  Naryanan said.

Reportedly, Nestle has been raising the price of its 45-gram coffee jar on a quarterly basis throughout the year, with the price increasing from Rs 180 at the beginning to Rs 230 currently. It's leading coffee brand Nescafe, is a market leader with a reach of about 3.7 million households as of December 31, 2024. The brand gained more market share in the third quarter, the company said without specifiying a number.

Nestle reported a 6 per cent rise in net profit on the back of robust contributions from its powdered and liquid beverages business, which sells popular products like Nescafé and Milo. The  beverages unit reported a  price-led high double-digit growth, driven by NESCAFÉ, and surpassed Rs. 2,000 crore business in the last twelve months.

While, urban slowdown and raw material inflation has impacted its core categories, analsyts at HDFC securities  expect the company to deliver a  high single-digit revenue growth in the medium term, helped by its ramping of its rural distribution network, focus on  out-of-home channel, capacity expansion and premiumisation.

However, brokerage Motilal Oswal maintained  a neutral rating on the stock and said that  moderating urban consumption and high food inflation pose risks to near-term recovery.

Naryanan said that he expects the budget measures to prop up the consumption to have a positive impact, especially for the midstream segment.

Meanwhile, he flagged that the pricing pressure to continue in other categories too, albiet in a lower order, as compared to the levels from 2022 and 2023.