Nestle to enter organic food segment in India with Nestle Ceregrow

The Indian arm of food and drink company Nestlé on May 17 announced its entry into the Indian organic food segment with the launch of its ready-to-cook children’s breakfast cereal Nestlé Ceregrow.

"Organic is a worldwide trend but is relatively nascent in India. Organic food brings together the core disciplines that Nestlé is known for in its food and nutrition space. We have been working on this for two years now. The product is made from 100 percent organic wheat, milk and ragi," Suresh Narayanan, Chairman and Managing Director, Nestlé India said.

The Indian arm of the Switzerland-headquartered multinational company has been involved in developing farms where organic practices are in place and hiring the necessary expertise required for the organic segment.

"We have worked with farmers in Rajasthan, Karnataka and Andhra Pradesh to develop organic wheat, millet and rice. We are also working with one of the reputed foundations in Rajasthan that is making organic milk for six-seven years to hone up their practices and make them acceptable as organic for us," Narayanan said.

The challenge in the organic segment is not in marketing but in procurement, Narayanan said. The company has plans to introduce more products in the organic category but didn't disclose any details.

The management of Hindustan Unilever , Britannia Industries and Dabur India have conveyed concerns over a slowdown in consumption after they, along with Godrej Consumer Products (GCPL), released their quarterly earnings this week . With regards to that, Narayanan said the fundamental thesis of consumption-led growth cannot be dismissed. He said that Nestlé came out stronger than its counterparts because 25 percent of their exposure is rural and 75 percent urban.

"Rural slowdown has happened, but it is too early to pronounce that it is systemic," he said.

Though there has been an increase in raw material prices like wheat and milk, the company has been able to mitigate the costs by creating efficiencies of scale, he said, adding that the company also plans to launch five-six new products by the third quarter of the calendar year.

On May 14, the company announced its Q1 results for the Janauary to March quarter. Nestlé  recorded a 9 percent increase in its total global sales. In India, Nestlé  witnessed a growth of over 10 percent. Also, with Rs 463 crore, the company’s profits swelled by 9.25 percent. Nestlé  has also clocked in a total income of Rs 3,076.14 crore.