Nestle to invest ₹5,000 crore in India, consider acquisitions

Nestle SA, the world’s largest food company, will allocate ₹Rs 5,000 crore will be earmarked for setting up factories and research centres in India by 2025 as a growing middle class in Asia’s third-largest economy increases spending on food and beverages, Chief Executive Mark Schneider said on Friday.

The new investments will also be used to build brands, said Schneider, who was on a week-long visit to India, one of the Swiss company’s 10 largest markets.

“The investment that I was talking about — that’s capital expenditure, we’re investing in our facilities, whether it’s factories or research facilities. And then, if we see interesting merger and acquisition opportunities, we’ll be very, very happy to explore them,” he added. “When you look at the investment in this country and the investment plan through 2025 — we’re talking about ₹5000 crore which can be compared to ₹8,000 crore in the last 60 years since we started manufacturing in the country,” he said.

Nestle is doubling down on India, the world’s fastest-growing economy, as it grapples with weak demand in Western markets hit by decades-high inflation. While food companies are more resilient to price shocks, persistently high inflation could force consumers to switch to cheaper products.

“Globally, we have a bad situation of persistent inflation. You’ve seen this week from so many central bank decisions that inflation continues to be a pretty serious issue. And of course, we’re looking at country by country, market by market, to what extent; persistent inflation at some point affects people’s willingness to buy, and the answer to that question is different by country and by category,” he added.

The new investments in India point to the company’s “accelerated” plan to expand its presence and give it ammunition to compete with the Indian unit of rival Unilever as well as local giants such as ITC Ltd and Tata Consumer Products.

Nestle started as Nestle Anglo-Swiss Condensed Milk Co. (Export) Ltd in 1912 in India, importing and selling finished products in the market. In 1961, the company set up its first factory in Moga, Punjab. However, in 2015, the company faced its worst crisis in India when its popular noodle brand Maggi was temporarily banned.

Since then, the company has recovered and Nestle India’s net sales have increased to ₹14,633.72 crore in 2021 ₹8,123.27 crore in 2015

Nestle India, which has nine factories in India, said the proposed investments would also help it create “significant” direct and indirect jobs.

“It (the investment) will be secular across categories. That is the ambition we have as a company to be successful across categories, probably in terms of looking at new locations for factories as well,” said Suresh Narayanan, chairman and managing director of Nestle India.

Narayanan said the investment plans include accelerating the company’s core businesses in a sustainable manner.

Nestle India will also capitalize on new growth opportunities—whether it’s the emerging consumer shift toward plant-based proteins or healthy snacks. Schneider said the company plans to grow its pet food business in India over time.

He said that despite inflation concerns around the world, underlying demand in India remains strong. “Globally, we have concerns about inflation right now and I think they are real. But at some point, they also have a dampening effect on demand. So I think India is in a very good position. Of course, there are concerns about inflation, but you see such strong underlying demand from the growing middle class and people reaching higher income levels that it kind of overshadows some of the concerns that may come from inflation,” he said.

Schneider added that Nestle as a company strives to apply responsible pricing principles to make its products affordable to all social classes.