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‘Our growth will be organic’

business Updated: Sep 23, 2010 21:45 IST
Gaurav Choudhury
Gaurav Choudhury
Hindustan Times
Highlight Story

Swiss food major Nestle has set up its first research and development (R&D) facility in India. Nestle has a strategic focus in emerging markets, where the company expects sales to reach 45 per cent of total revenues by 2020. Nestle India chairman and managing director Antonio Helio Waszyk spoke to Hindustan Times on a range of issues. Excerpts:

Nestle has been around in India for many decades. Why did it take such as long time to set up an R&D facility here?

With the growth objectives here in the market, we thought it’s just the right time. We were about R5,000 crore last year. As a percentage of Nestle’s total revenues, this is irrelevant. The point about why now, it is only in the last three four years that really Nestle India has started to take off. The growth rate we are having since 2007, the board of Nestle India and Nestle SA are bullish. It’s absolutely the right time — Nestle India has been growing in the last three years at 20 to 25 per cent.

Are you looking for domestic acquisitions and expanding the product line in packaged foods?

I would not like to offer any comments on that. The primary driver of our growth is going to be organic, because there are not too many options. There are not too many possibilities. I keep my team focused on organic growth.

Hasn’t the margins of your largest brand Maggi instant noodles come under pressure from new entrants such as Hindustan Unilever (Foodles) and Glaxo Consumer (Knorr)?

When a competitor enters a category with good quality, good innovation, good communication and good packaging it only helps the category. Maggi is such a nice large cake that everyone today wants to get a bite. There are two ways of looking at it. I keep the cake and everyone takes a bite, or I bake another cake.
That’s what we are doing. We are baking another cake. In this country, looking at market share or a slice of the cake is very short minded. I cannot say what is the size of the market of Maggi is. I know their numbers, but they do not know my numbers. Nobody knows my numbers. We have to continue to do what we are doing. People who enter this category, should be professional enough to drive the growth of the category.

Most companies are targeting Tier-II and Tier-III cities to increase product penetration by offering lower price points. How does Nestle India plan to exploit opportunities in smaller towns?

Urban areas are driving growth for products which give higher benefits to consumers. Not benefits for the company. It is a more beneficial proposition for consumers to enjoy. Take pasta, for example. We launched pasta less than a year ago. We are the leaders. Metros and Tier I cities are driving growth in this sector. On the other hand, Maggi’s Rasile Chow is designed specifically for rural areas. My strategy is both urban and rural involving existing products and innovation. It’s a combination of traditional trade and modern trade. This is what we are doing. We are increasing the number of sales points in rural areas.

In times of high inflation and high commodity prices, what measures are you taking to stay competitive?

We are managing by five levers: pricing, innovative products, technology processes, portfolio management of products, and the Nestle Continuous Excellence (NCE). We are bringing in proprietary technology that brings in more throughput in our plants. In many cases we patent these technologies. In some cases we keep it as a secret so that competitors do not know about it. NCE is the most holistic exercise undertaken in the food industry to reduce waste.