Nestle India expands direct distribution, deepens rural coverage

In line with its rurban growth strategy, Nestle India has expanded its direct distribution to 1.5 million outlets in 2022 and is also deepening its rural coverage. The FMCG major has increased its overall distribution network to 5.1 million outlets, which includes direct and indirect distribution in 2022, from 4 million outlets in 2016.

On an earnings call on Thursday, Suresh Narayanan, Chairman and Managing Director, Nestle India, said,” We have accelerated our direct reach from 1.4 million to 1.5 million outlets. Overall reach is at 5.1 million outlets. As you recall, in 2015 as a consequence of the Maggi crisis, our distribution had shrunk quite considerably. The build back of distribution is now fully complete and we are now exceeding the levels of distribution that we had lost during that particular period.”

On growing rural coverage, Naryanan said the company’s ambition is to grow its rural reach in villages with 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.

Tapping Bharat

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.

Meanwhile, the share of e-commerce channels to Nestle India’s domestic sales has grown to 6.5 per cent in 2022 from 5.3 per cent in 2021. With the launch of over 110 new products in the last seven years, new products now contribute 5.4 per cent to the company’s domestic sales.

Price hikes

The company reported a domestic sales growth of 14.8 per cent in 2022 .A report by Motilal Oswal noted that the company “registered about 6 per cent domestic volume growth in CY22 to 550,00 tonnes from 522,000 tonnes in CY21. There have been lower tonnage sales in Q4 CY22. Low unit packs, especially Maggi Chotu packs, have been impacted to some extent because of price increases.”

“Impact of price hike on low unit packs is moderately concerning. However, early-signs of clawing back volume market share in the main-stream and premium segments is comforting,” noted a report by ICICI Securities.