Urban areas facing strain due to sluggish demand: Nestle

NEW DELHI: The FMCG sector is facing a muted demand, with growth in F&B (food and beverage) declining to 1.5-2% as against double-digit expansion some quarters ago.
Urban areas are facing significant strain due to sluggish demand, with the middle segment, where most of the FMCGs (like us) used to operate, and which offer fair to reasonable value, seem to be shrinking, Nestle India CMD Suresh Narayanan said Tuesday.The sector is witnessing a decline due to a combination of factors, including food inflation and increase in oil prices.
Mega cities are particularly affected with weak performance in segments such as milk and nutrition, chocolate, and confectionery, he said, adding that brands like Munch are also contending with increasing regional competition. “We ourselves face a difficult situation, as far as cocoa and coffee are concerned, which are reaching 10-year highs in terms of prices. Overall, our volume growth has come down, but our model is penetration-led volume growth, so we have to start getting back to it and any more price increase that we do is going to sharply retract us from that path. So, we would like to minimise it and take it very, very selectively,” he added.