Maggi marketer Nestle India reports 111% YoY growth in e-commerce sales

Like Hindustan Unilever (HUL) and Dabur, fast moving consumer goods marketer Nestle has also reported a significant growth in online sales. In its analyst meet held on February 16, Nestle declared that it has seen a 111 per cent growth in e-commerce sales. The likes of Amazon, Flipkart and BigBasket now contribute 3.7 per cent of Nestle's domestic sales.  

The total and domestic sales for the year (2020) increased by 8.1 per cent and 8.5 per cent respectively. "Domestic sales growth is largely driven by volume mix and is broad-based. Demand in out of home channel was impacted throughout the year due to COVID. Export sales growth, at 1.4 per cent, were impacted by lower coffee exports," stated Nestle in its financial statement.

The total and domestic sales for the last quarter increased by 9.2 per cent and 10.1 per cent respectively. Export sales were lower by 7.7 per cent, again due to lower coffee exports.

Consulting firm Edelweiss, in its analysis, stated that the domestic revenue (of Nestle) continues on a double-digit growth trajectory, while high staff costs partially negate strong gross margin expansion.

"With domestic revenues increasing 10.1 per cent YoY, Nestle is well ahead of the growth seen in Britannia," stated Edelweiss analysts.

EBITDA was up 10.3 per cent YoY, "which is six per cent below our estimates. This, we believe, has happened due to higher salary costs," said Abneesh Roy of Edelweiss.

Suresh Narayanan, chairman and managing director, Nestlé India, said, “Under these circumstances, I am pleased to share that we delivered strong domestic sales growth. Nearly two-thirds of our key brands, like Maggi Noodles, KitKat and Nescafe Classic, posted double-digit growth last year. This was backed by a step up in marketing spends, especially in the last quarter."

He added, "Our innovation and renovation pipeline continued to be a thrust area across categories, like foods, breakfast cereals and Nestlé Health Sciences. E-commerce continued to grow, surge ahead and now contributes 3.7 per cent of domestic sales. We embraced the digital journey of the consumers with numerous innovative initiatives across brands, and launched Ask Nestlé in Hindi."

Here are the highlights of the analyst meet:

1. Total and domestic sales for the year increased by 8.1 per cent and 8.5 per cent respectively. Domestic sales growth was largely driven by volume mix and was broad-based. Demand in out of home channel was impacted throughout the year due to COVID. Export sales growth, at 1.4 per cent, was impacted by lower coffee exports.

 2. Total and domestic sales for the quarter increased by 9.2 per cent and 10.1 per cent respectively. Domestic sales growth was broad-based, largely driven by volume mix. Demand in out of home channel improved in the quarter, but continued to be impacted by COVID. Export sales were lower by 7.7 per cent due to lower coffee exports.

3. Other income decreased due to lower yields and average liquidities. It was impacted by lower yields.

4 Cost of materials consumed for the quarter decreased due to lower commodity prices, particularly milk and its derivatives.

5. Employee benefits expense for the quarter and year increased, mainly due to higher incentives in view of COVID. The current quarter was impacted due to finalisation of long-term compensation arrangements for most factory employees in line with industry practice.

6. Other expenses were positively influenced by reduction in overheads due to restricted operations.

7. Legal proceedings in the Maggi Noodles case are currently before the Supreme Court. The issue has been adequately explained in the 2015 annual report and press releases available on the company's website.