Nestlé India Limited (500790) Earnings Call Transcript & Summary

Hi, and good afternoon, everyone. A very warm welcome to Nestle India's Analyst and Institutional Investor Meet 2026. We are delighted to have you with us today and sincerely appreciate your time and participation. My name is Sarah Bhambre, and I'm part of the Investor Relations team. Joining me today are members of Nestle India's management team; Mr. Manish Tiwary, Chairman and Managing Director; Mr. Edouard Mac Nab, Executive Director of Finance and Controller and Chief Financial Officer. We also have Mr. Rachit Chaudhary, Head, FP&A and Investor Relations. Before we commence, I would like to draw your attention to the disclaimer slide. Thank you. It is now my pleasure to invite Mr. Manish Tiwary to deliver his presentation theme, Consumer First brand strong future ready. Over to you, Mr. Tiwary.

Thank you. Thank you so much, Sarah, and thank you, everyone, for joining us today afternoon. It's a pleasure to be able to share how we see our performance over the last 1 year and more importantly, how we see the path forward. What I would be doing today is spending the next 30 to 40 minutes on the growth journey, the kind -- the way we see the opportunity in this country and some of the key focus areas and takeaways, and then happy to take some questions post that. In Nestle, whenever before we start and get into the business end of things, I always tell people that it's important to keep ourselves anchored on the purpose behind which has guided Nestlé for the last 160 years globally and for the last close to 115 years, all of us in India. The story behind this company began in 1867 when Henri Nestlé developed Lactée. This was an infant cereal designed to help working mothers to take care of there and to take nourishment to their babies. And this really helped reduce mortality at that period of time. The simple invention was rooted in a very, very powerful belief for everyone in Nestle, which is good nutrition has the power to improve lives. And over the last 160 years, we've evolved from a single product nutrition company into one of the world's leading food and beverage companies. But the one thing which has remained the same is the purpose. The purpose behind Nestle has remained unchanged. And I always feel it's an important point to start any business presentation because that's what we are anchored around at Nestle India. I would start with the growth journey. And before getting on to the numbers, it's important to remind ourselves, we've been around for the last close to 115 years now. And we are truly a Make in India company. We manufacture most of our products in the country ourselves, and we source close to 96% of our ingredients from India. Over the years, the presence of Nestle in this country has grown. We have close to 8,500 employees today. Consumers can reach out to 6 million touch points and buy some of their loved brands. And one of the greatest things, which is quite unique about Nestle in India is along with the trust which we built with the consumers, with our partners, with our customers, there is also a very important stakeholder, the trust we've built with our investors. Today, we have a family of over 500,000 shareholders, and many of them have remained invested in this company across generations. Even today, when I'm traveling, I take flights, very often, I run into people who tell me about their association with Nestle, about how their parents or grandparents bought Nestle India share decades ago and the wealth which got created through that investment decades ago has gone on to fund children's education, support marriages and really help build the family legacy. To me and to all of us at Nestle, that is the true meaning of long-term value creation. At the core of what we do is the other brands we love, and the brands which millions and millions of Indians have loved across generations. Today, if you look at our business, 2 out of 3 households in this country interact and engage with our brands. So when you get up in the morning, the chances are very bright that you would start your day with a cup of Nescafe, enjoy your favorite Maggi and then, of course, take a kid cat break. All of us have such fond memories about childhood consumption of milk made. And in the recent past, we've now entered some new segments. We are one of the leading players in terms of pet nutrition across the world and very proud to share that Nestlé India is very active both in the dog and the cat nutrition space. And of course, we have an out-of-home business, which ensures that not only do consumers get to enjoy some of our brands at home, even when you're outside home, you interact with the multiple points of presence, which we have. And this business serves close to 535 million customers outside home. So a very, very impactful presence across the country. And yes, some of these left brands have resulted in the business performing really, really strongly. I mean, if you look at the trajectory over the last 5 years, as a company, we've always delivered double-digit growth. It's been a very, very resilient growth across the years. And the great thing about this is it's not only the resilience, it's actually the acceleration which we are now witnessing over the last few quarters. I think this consistent performance is the result of the brands which I referred to, the strength of these brands. It's a result of some great disciplined execution and the result of the entire organization's ability to capture some of the new growth opportunities, which are popping up across the consumer segment. The great thing about growth is not just that the value growth, it's been underpinned by a very, very steady recovery in volumes. And that's very, very important because it means more and more consumers are getting a chance to engage with our brands. We've seen the momentum build progressively. So if you look at the last 5 years, we were getting a CAGR of close to 4.2% volume growth. But what's been really heartening is if you look at the last few quarters, we moved into double-digit volume growth consistently. And this volume growth improvement reinforces that our growth is broad-based. It is volume led, which is very, very critical, especially in a country with such low penetration, and it is supported by the super strong brands we have, the distribution width we've created and of course, continuing to win consumer preference. And that's the story of our growth, which is volume-led growth accelerating in the last 4 to 5 years. And this, of course, has resulted in acceleration in our penetration. If you look at some of the numbers, these are the household penetration. You can see the trajectory upwards, be it Maggi, be it Nescafe or Kit Kat. But what I want to draw your opportunity is if you look at the actual penetration numbers, they are still in the mid-50s across, yes. And that clearly indicates that there is a significant headroom. Remember, all these numbers which I am sharing with you, these are annual penetration numbers. Basically, 50% of houses are right now enjoying a Maggi in a year. And that clearly indicates while that growth has been there, driven by volumes, there is sizable white space that remains across our current categories. And as I take you through this presentation, I will dwell a lot on driving penetration, driving innovation, driving premiumization and to continue to invest strongly behind our brands. That is what our growth hypothesis is based on. This drive in penetration, we can also see very clearly happening in rural. If you look at the distribution coverage. It's one of the things all of us at Nestlé are really proud about. In 2021, we had around 13,500 distribution points. These are typical distributor points. There are various names we use like CD, RD, depending on the population they serve, whether it's urban, rural, semi-rural, but our distribution points have gone up by close to 4 points -- 4x. And as a result of that, if you look at our total village coverage, it's shot up. It's very, very important. We are a foods business, and we want to keep a direct control over the distribution channel to ensure the freshest products reach our consumers. And which is why whenever we drive distribution, a large chunk of it is driven by direct distribution, something which we are very focused to ensure high-quality products with the right shelf life reach all our consumers. And this has clearly resulted in the gain which we are getting in distribution overall, which is urban plus rural -- over the last 5 years, we've added close to 500,000 retail outlets. This is the reporting as per AC Nielsen. What is also really heartening is when we compare our outlet addition, we have very clearly had the highest ever expansion in terms of outlet reach across our peer group. That clearly shows that today, more and more consumers across the country can access our brands. Now a wider reach basically means greater availability, stronger visibility for our products and more opportunities to drive penetration, recruit new consumers. And that's why we are so excited about the continued improvement we have had in our distribution width and backed by bulk of it being direct distribution, not through indirect channels like wholesale. And while we are very excited about rural, there is, of course, the emerging opportunity, which is e-commerce and Q-commerce. And very clearly, if you see our growth in this channel has been well ahead of the overall market growth, which these customers, these partners are experiencing. I think there is something really great, which is happening in the consumption story because of this channel. These channels is not just about overall consumption, but it's about acquiring new customers, more importantly, premiumizing our portfolio and then, of course, driving rapid innovation using this channel. The teams have worked very, very well with these channel partners to become -- to make these e-commerce and Q-commerce sites almost a launch pad for innovation. And even beyond innovation, we are working with these partners for fit-for-purpose portfolios. So for example, if you see that Maggi Bowl, which was an iconic innovation we did with one of the Q-commerce partners, the Vietnamese Late launch, a lot of new launches will start with these partners. And I think what it is helping us is to deliver targeted activation, drive consumption occasions. And of course, we are even getting on to off-platform collaborations with them. I think together with our partners in Q-commerce and e-commerce, these capabilities are helping us scale faster in urban markets, drive our innovations faster and premiumize much faster. So a very, very significant role. And now when you think of it, it is now showing up in our premiumization drive. If you look at our premium portfolio, the contribution has grown rapidly from 11% to 14%. More importantly, the growth in this part of the portfolio is well ahead of our overall growth. So the premium part is growing by close to 500 bps ahead of overall growth. And I want to bring your attention to some of these innovations. I mean, if you look at the Nescafe can, which is there, the Nescafe Roastery, this is really high-class specialty coffee, Barista crafted beverages. And it really drives that immersive brand experiences we want. You look at Kit Kat Delight, again, one of our most successful premiumization efforts, and it's already become a very, very big success, especially with the Gen Z kind of consumers. If you look at Pro Plan, Pro Plan is a really scientifically designed advanced nutrition range. We just launched it for cats. And it has some really specialized solutions, which pet parents really care about, for example, in terms of urinary care, hair ball control. These products have great science backing them up, and they address some of the most common and growing needs of our pets. So across the portfolio, backed with some great innovation, backed with science and R&D, we are very happy our premiumization drive has done well over the last few years and continues to accelerate, especially with some of our channel partners providing the right platform like Q-commerce and e-commerce. Overall, when we look back, I always keep on saying a business is like a flywheel. Once the right ingredients come together, the flywheel picks momentum and starts moving faster and faster. We are experiencing that. We are very, very delighted with the way our value creation journey continues. It has consistently delivered, but more importantly, this growth model is sustainable. As you saw through some of our numbers, our performance, it's not the result of one single initiative. It's an outcome of what I call very, very disciplined and running a model which is well proven. And what do we do? To put it simply, invest behind our brands, strengthen the customer and the consumer trust, expand our distribution. And this results in higher sales growth, better profitability because we are driving volume-led growth. And as a result, we have a stronger cash generation. This cash again gets reinvested behind our brands or behind creating capacity. And that is the value creation. That's the flywheel I'm talking about. When you sit back and look at this disciplined approach, it's translated into superior shareholder returns for all our 500,000-plus shareholders with a TSR of over 15% in the last 1 year. I strongly believe the fundamentals of our business has never been stronger. And with the significant growth opportunities, which I referred to in terms of penetration, in terms of premiumization, we remain confident in our ability to continue to create sustainable long-term value for all our shareholders. I think it's important as we talk about the company to take a step back and look at some of the opportunities India provides us with, yes. It's a matter of great pride for us that India is a priority market for Nestlé worldwide, and it's always been classified as a strong growth driver for the group. In a very recent interaction, and I'm sure some of you would have read about that, our global CEO, Philip, he actually called out India and said that India has delivered a very, very strong performance, crediting the region's momentum, India's momentum to disciplined execution on product innovation, availability and support. It's also a matter of great pride for us that India, it's always been the largest market for Maggi worldwide and now is also the largest market for KitKat globally. So India clearly occupies a place of great importance for Nestle worldwide. And more importantly, when you think of the India opportunity, it just comes alive. India's consumption story is very, very clearly entering a new phase. the rapidly expanding middle and affluent consumer base, it really creates some very, very exciting opportunities across those tiers, yes. I mean by 2034, the number of affluent and aspiring households is going to increase significantly. And therefore, the share of their consumption, their expenditure will continue to rise. We believe, Nestle, we are positioned very uniquely to capture this opportunity. Our portfolio spans across the entire income segments, and I'll talk a little more about it in the slides to come. And therefore, our growth story is, therefore, not just about gaining share, it's about growing alongside India's evolving consumer and wherever they are on their consumption journey, we believe we have the innovations and the brand to actually engage with them. Let me shift and talk about some of the key focus areas, which we believe, given where we've come from, some of the performance I spoke about and the India opportunity, which all of us believe are important for the business as we go forward. The first and something which is very, very close to all of us, the growth has to be led by volume. That's a very important thing. Given the low penetration, we believe there is a chance for more and more Indians to engage with our brands. And then, of course, at the same time, there is a massive premiumization opportunity. The second, we have to optimize our -- across the value chain to make sure we save every rupee so that we can invest it behind delighting our customers and consumers. As we enter into this growth phase, we also realize our brands need investment, 2 kinds of investment. One is, of course, to support the communication and the innovation and then also to scale up capacity because bulk of our growth, which has happened over the last 2 years is volume led. Now to drive the top 3, there are a couple of things which are very, very important. And I think one of the most important things, which has really helped us leverage and deliver the kind of results we've been talking about is how to use technology. We strongly at Nestlé believe that technology can be the force multiplier as we enter into this growth phase. So all of this put together and a disciplined capital deployment model and margin management, I believe these are the things underpinned with awesome execution, which we feel can lead Nestlé India to the next level of growth. Let me start with -- I spoke about it a couple of times about the growth opportunity. And I spoke about penetration and premiumization. If I can just draw your attention to the left hand, the blue bars, it shows the penetration of noodles and Maggi is a large player in that market vis-a-vis some of the other categories like biscuits or salty snacks. And when you look at the numbers, what it shows you very clearly that compared to biscuits, for example, which have close to 100% monthly penetration, noodles is 1/3 of that. So while we are very, very proud about what Maggi stands for, the fact that it's spent 50 years in India. It is the most trusted noodle brand. We still believe that with a brand as strong as Maggi, with the right innovation and investment, there is a lot of headroom to recruit new consumers to drive innovations across format, and which is why we are so excited. We have the brands which have this really, really strong positioning in the mind of the Indian consumer, and we have the opportunity to grow when we compare noodles to a salty snacks or a biscuits category. And this is true across. So if you move to coffee, a few decades back, minus South, we would say India is a tea market, that's shifting. That's shifting rapidly, and I'm sure all of you encounter it. You go to any office and when you ask the machine operators, and we are one of the large machine operators in this country, the consumption is almost 50-50, 50% coffee consumption, 50% tea. At Nestle India, we're not just growing our coffee business. We are actively shaping India's coffee culture. And how are we doing it through the right consumer campaigns, through affordable entry packs, premium offerings and creating new consumption occasions. And that's the role of a category captain. That's what Nescafe is driving in India. And if you look at it, it's delivered some great results. Last quarter, Nescafe recorded its 20th consecutive quarter of double-digit growth. So clearly shows a market shifting from tea to coffee and Nescafe playing the role of the lead brand in this space. And it's clearly a reflection of the strength of this brand and the innovation which has gone behind. And of course, I keep on saying it the consistent execution across brands and channels. I mean if you look at the -- I'm sure a lot of you would have seen the Banao Apni Dunya campaign. It's an example of how we are elevating the Nescafe experience, the brand experience far beyond just functional coffee and making it an aspirational lifestyle proposition. As coffee consumption continues to evolve in India, we believe our brand Nescafe is in a unique position to sort of capture this growth opportunity. The same is true for confectionery. I mean, Kit Kat, it's a matter of pride now that India is the largest Kit Kat market globally for Nestle. At the same time, we are super excited about what this brand can achieve. If you look at the penetration numbers, the purchase occasions, our market share, it clearly tells you that this brand should be growing rapidly. And what the team has done in terms of innovation and brand building, I mean, this entire idea of a Kit Kat break really, really wives with the Gen Z, with everyone who works in office. The Break The Loop campaign, I'm sure some of you would have encountered this campaign, which Kit Kat did with Spotify. It was almost to give consumers a lighthearted, relatable reason to pause their day and enjoy that Kit Kat, yes. So some of the best campaigns, I mean, this is a brand which has won various communication awards. For example, the recent series with globally popular anime, the one piece to launch an exciting collaboration. I mean, it's one of our most viral campaigns, and it has now fans across the country. So clearly, Kit Kat has the momentum and the opportunity to grow rapidly. And within all these categories, the thing which stands out is not just low penetration. It's also premiumization. Clearly, I mean, while we've done well, we believe there is a lot of headroom for premium food and beverage categories. And we are positioned really, really well to capitalize on this, supported by some really strong brands, supported by some innovations. I mean, if you look at one of our most premium entries, Nespresso, in the last 1 year, we've expanded. We now have 4 boutique stores in 3 cities, and we are seeing great traction on Nespresso across the country. If you just take -- look at coffee as an example, I mean, if you look at our portfolio, I spoke about affordable entry packs, I spoke about driving consumption occasions. I spoke about premiumization. I think this portfolio brings it alive beautifully. At the entry point, we have INR 2 sachets. As consumers want to explore coffee, it's a very easy access point, affordable access point for them. To drive multiple consumption occasions, the reality is we now have ice roast, black roast. These are occasion-based to make cold coffee, espresso, and therefore, we are driving that up. And it keeps on getting laddered up. From INR 2 to INR 100 a pod for an espresso, the brand has the brand strength to cover the entire range of use cases. And this laddered portfolio, it allows us simultaneously to recruit new consumers, drive consumption and premiumize. So which is what I said at the beginning, our portfolio gives us that opportunity and that ability to straddle across the entire price range. And it just doesn't stop at the product and in-home consumption. If you look at our out-of-home business, I think it's really, really -- sorry, I just skipped a slide, my bad. If you look at the consumption occasions, one of the key things which is happening on the coffee space is cold. People are consuming cold coffee, 1 out of 4 coffee cups in summers is cold. By the way, even if you went to winters, it just changes to 1 out of 5. Now think of the opportunity over there. We launched these machines. If you look at that machine with that red and blue, it's India's first dispensing machine at scale. It's called the Nescafe Duo Gusto. It can dispense both hot and cold beverage. And it's complemented by low zero sugar options. So there is some major innovation happening in this space. The Nescafe ready-to-drink, it's been one of our most successful launches, and we are further strengthening it. We just launched the Vietnamese Latte, the Ice cappuccino variants. You can clearly see that Nescafe as a brand is at the forefront of this trend. So whether it's espresso hot, Nespresso capsules, the cold -- the ability to take on the cold opportunity, we have a very, very holistic way to make sure we engage with the consumer at every possible touch point. And more and more consumers, the number of occasions consumers are consuming food out-of-home is increasing quite rapidly. If you look at it, it's close to double in the last decade. And this is something which all of us experience when we go out, we have coffee, we have a favorite Maggi desserts. I'm really, really proud about how the out-of-home business has developed. It's already the second largest out-of-home business for Nestle in this part of the world. When I say this part of the world, I'm talking about Asia, Africa and Oceania. And when you walk into a Thai restaurant and have your green coconut Kerry, the chances are very bright that it's the Nestle coconut milk powder, which is being used in that recipe. So it's not about the product. We actually train the chefs. When you have some of your favorite desserts, don't be surprised that Milkmaid would be a critical ingredient for that dessert. Similarly, on the beverage solution, I spoke about some of the innovations we are doing. And we are very, very excited about how this opportunity is panning out. And given our service plus brand strength, we believe we are in a good place to sort of leverage and ride on to this changing consumer habit of consuming more and more food and beverage outside. I think at the back of all these innovations, what really makes us stand out as a food and beverage player is the science. Innovation has always been at the heart of what we do. And we have one of the largest R&D organizations in the world in the food and beverage industry, close to 4,000 people working. We spent close to CHF 1.6 billion behind research. And the great thing is one of the most critical research centers is actually next to our office here in India in Manesar. And that gives us an ability to borrow and leverage global research and then marry it with what Indian consumers, South Asian consumers want. I mean if you look at some of our businesses, I mean, the nutrition business is a good example where we leverage the R&D, which happens globally and some of the technological enhancements offer some of the best products in India. For example, we've just launched Nestle and Excellapro with 5 HMOs and probiotics together. Lactogen got relaunched with probiotics and prebiotics. And it's not just restricted to human food and nutrition goes on to a pet portfolio. It is -- pet food is Nestle's second largest business worldwide. And we have a dedicated Purina pet care research unit in U.S. This world-class R&D facilities, we've leveraged that so that we can meet the need of pets and pet parents in India with specific formulations happening for this country. So this business, which has been performing really well for us, what gives us confidence is the science which goes behind all these products. And that's really, really critical for a company which is all about nutrition, be it humans or be it our pets. Now to drive all this, some of the innovations, some of the R&D strength we spoke about, what is really, really important is do we have the right cost structures. And I'm really proud that one of the things which the team has done really well across is if you look at our cost-saving programs, it's really accelerated. In a normal year, we would be around 1.8% to 1.9%. We've really stepped up. We've gone to 2.6% in '25. And this year, we are further accelerating on that. And why is this happening? I think one of the most important levers for unlocking the savings is it's been a very structured program with great governance across and the team has been ready to challenge status quo by looking at the outside in. So how can we be best at India, best at Nestle on every metric, which can help us delight our consumers and customers. That's what has unlocked efficiencies across the value chain. And as a result of that, we are now in a position to invest more behind our brands. So if you look up at our advertising, we've really stepped it up over the last few years. And in the last few quarters, and we've reported this every quarter, the investments are growing up by close to 40%. And this is what I call the flywheel impact, invest behind your brands, generate the cash, make sure your cost programs work well and that further creates stronger brands, which generates the right bottom line and cash -- we believe that this investment will continue to help us. I spoke about driving penetration, premiumization and share gain in a couple of categories. I think this is the investment which is required. And the team is making sure that it goes into the right places. Close to 55% to 60% of our money goes behind digital now because there is a large population, which is the digital-first customer. And for them, what happens is our investment into these channels, they really help because it's far easier to do performance marketing. It's far easier to measure the customer engagement. And I personally believe that the increasing contribution of digital spends will just result in much better ROI and impact on our business. So very, very excited about our hypothesis of increased investment playing out to support our brand growth. And to do all of this, it's very, very important that we continue to invest in our capital expenditure. Like I said, we are a make in India. Bulk of our products are made in India, bulk of our raw materials are sourced from India. And we've been on a capacity expansion to support our volume growth. So if you look at the last 5 years, we've invested more than INR 64 billion. In the last calendar year, we started a new Maggi line with close to INR 170 crores plus investment, a new Munch line, where again, we invested close to INR 225 crores. So I think the virtuous cycle of growth is moving and capital expenditure is something we would continue to do to ensure we deliver quality products to our consumers. One of the things which I touched upon, which is really, really helping us grow in its current avatar without resources growing in the same linear manner is the use of technology. I think I'm very proud of how all of us in Nestle India have jumped on to this opportunity of using technology as something which can deliver great value for -- across the value chain. I mean if you look at it, we started embedding -- and the fact is we have a great ERP system. We've migrated to the SAP S/4HANA system. So when you have good quality data, it's very easy to embed the right heuristics, ML and AI model on top. And from end-to-end, right from the millions of touch points of sales right up to the raw material planning. We are integrating the entire value chain to drive the right kind of efficiencies, which will help us deliver it at the right cost to our consumers and customers. And you would see it across, be it supply chain, be it operations, be it sales. So very, very enthused by what this can do. And I mean, it's really, really helping us build a far more agile, data-driven organization. And despite the kind of volume growth we are having, we see improved service levels, better productivity and our cost efficiencies going up. So excited about what technology can do for Nestle India and how it can be a growth multiplier. I've spoken about the opportunities. I've spoken about the India piece and what we are doing. And why we do this, I think it's important and a lot of people ask me, but what about the macro environment? And it's an important -- it's a very, very important factor for any CPG. Yes, there are a few headwinds, if you want to call that. There are a few things happening in the environment. I mean, the fact is we are seeing a little bit of slowdown in market growth as reported by Nielsen. Also, there is a little bit of impact on food inflation. But I would just like to point out some of these macro factors impact you when your penetration levels are 100%, when your consumption levels are comparable to some of the other countries which have similar profile. While these are headwinds, inflation would be of concern. I just feel that given where we are on this journey in terms of penetration, in terms of the rural consumer, in terms of premiumization, I remain quite confident of our ability to handle these short-term blips. And the same is true for the macroeconomic, the geopolitical situation. Yes, it's a challenge. There are some costs which are going up of things like energy, packaging, oil, shipping disruptions, there's volatility in the currency. Does it concern us? Yes. We try our best to have the best kind of BCPs in place to make sure we can handle that. And I still believe the medium- to long-term growth story for us does not get impacted. The team has the resilience to work around and address some of these challenges while continuing to delight our consumers in India. And therefore, the growth journey continues. I want to conclude by saying there's a great amount of confidence we have on our growth journey in India. It continues to remain stronger than ever. We believe that this -- India continues to offer one of the most compelling long-term consumption stories. And this is across, I'm saying, the 190 countries which Nestle operates in. The fact that we have a strong portfolio of brands, we have great consumer understanding, local R&D support and what is really exceptional is our execution capability across functions. That gives us the confidence that we would very successfully tap on to this growth journey. It is built around a dual engine. While we continue to strengthen our core brands, the Maggi, Nescafé, Kit Kat, Cerelac, we will continue to expand and move into new consumption occasions, Nespresso, Purina, out-of-home. These are just some examples of that. And technology would be at the heart of what we do. Strongly believe what AI can do for our business is multiply what we -- the human capacity we have, and we will continue to depend on our people to drive the foundation of this success. Nestle India in a big, big way is not just participating in the growth story in this country. I believe we are helping shape it, especially in the food and beverage part of the industry. With a strong, resilient model, exceptional executional capabilities and a clear term -- clear long-term strategy, we believe our best years of growth are still to come. And like my team keeps on saying, we will, as a group of people, the 8,600 people who work for Nestle and the thousands and thousands of partners and farmers who work with us, we would continue to be relentless in the inputs we control and resilient in the output. So thank you so much for giving me a chance to share with you how we look at the business and why we are so excited about the growth journey in India. Thank you. Sarah, over to you.

Thank you, Mr. Tiwary. We will now open the floor for the Q&A session. Instructions for joining the queue are being displayed on the screen. We will pause briefly to on our participants to join the queue. When it is your turn, the moderator will unmute your line and invite you to ask your question. To ensure that as many participants as possible have an opportunity to engage with the management team, we request a maximum of 2 questions per participant. Thank you, and we look forward to an engaging session. Over to you, Inba. .

[Operator Instructions] We will take the first question from Abneesh Roy of Nuvama.

My first question is on your 3 new businesses. So if you could tell us more about how breakfast cereals, pet food and say, Nespresso has done. And one follow-up on pet food is Nestle Parent has a small stake in Dulles. I wanted to understand, is there any cross synergy, if at all, between Dulles and Purina? That is my first question.

Okay. I will take this one, and you can add jump in wherever needed. I think let me start with the cereal part of the business. We've seen some great success on the Munch portfolio. We are very happy with how that segment is developing. Also, it helps us create a master brand, which works across confectionery and cereals. So a great place to be in, and Munch is our second strong pillar in that business. So Kit Kat is the main confectionery brand, and then we have Munch. So very, very happy with the way the business is emerging. I think Nespresso has been a revelation to us in a positive way. There were people sourcing Nespresso through e-commerce websites. People would buy the latest capsule variant from duty-free in various airports and bring it to the country. Since we've introduced Nespresso officially in India, both through online. And like I said, we now have 4 boutiques across 3 cities. Customers locally are delighted to be able to source the various variants we have to source machines from India with a complete service backup. And it has really, really positively surprised us with the traction it's getting. I keep on saying that given the booming affluent population, I think Nespresso has a long, long runway to sort of work on and very, very excited about the Nespresso part of the business. Pet food is a very interesting one. We are a global -- one of the global leaders in this, especially when it comes to cat food. And if you look at India, even the pet adoption post COVID has really shot through. And the interesting thing is in some of the metros, the dog and the cat population is almost 50-50. We have very strong propositions, both for dog and for cat with the Pro Plan portfolio, Felix portfolio, Friskies portfolio, and we are doing really well. One of the things which we always hold ourselves accountable and responsible for we want to build the business in the right way. It's a nutrition for our pet friends. And therefore, we work through the vet channel, through the specialty channel, through breeders. And if you meet some of the top dog breeders in the country, they actually depend on Pro Plan. So very, very happy, excited with the way these businesses are getting built up. I call them accounts. So while we have the big trees of Maggi, Nescafé, Kit Kat, these are the cons which we'll build and will give us a chance to address more consumers and consumption occasions. Dulles is just a financial investment, which the Nestle Worldwide group has done. So I don't have any specific comments on Dulles per se. It's just a financial investment. Anything to add?

Just I will add just on pet food. The Capa food is -- we gained market share in that category, and it's a category that is growing and where we're growing actually also very strongly.

My second and last question is on the spectacular scale-up company has seen after you joined. So I wanted to understand which is the most important reason for such sharp growth. See, there are 3 reasons. One is, of course, 40%, 50% higher ad spend Y-o-Y last 3 quarters. Second is, of course, your 8 years' experience in Amazon. And clearly, Nestle India, pre your joining and now, clearly, there was an opportunity to catch up in terms of QComm. And third, of course, is GST. So in your view, which is the most important reason in terms of the fast scale up Nestle has seen?

Thank you. I think you're being very kind if you attribute it to me. I think it's very, very important. I keep on saying this in our business, there are 2 things which are critical, the brands and the people. If you look at some of the brands we have, I mean, if you think of culinary, we have one single brand called Maggi, which is really loved and has great impact. Similarly, for coffee on Nescafe, similarly for Cerelac and Lactogen, I mean, all of us have been brought up on these brands. I think the brands are extraordinarily strong. The same is true for our people. What we have done is we've unlocked a lot of investments behind these great brands. And that is what is moving the flywheel much faster. You spoke about the ad spend. These brands deserve more investment. And the moment when you put your money behind something which is really strong, you can see the results. I think Q-commerce is doing well. I also think when you think of a Q-commerce player, they're close to 6,000 stores. They need partners who can reliably supply. because that's one of the biggest challenge because with 2 days of stock in 6,000 dark stores, it's not easy to manage that. And I think the supply chain team has done -- we are one of the best suppliers if you speak to some of our Q-commerce partners. GST was something which was -- I think the government really should be congratulated on unlocking this for our consumers. It happened across the industry. I think the execution, which the team did across the millions of outlets across changing all the pack mat pricing, weight, I think that was flawless. So if you recollect, we did not have a GST downside in Q3 of the calendar year last year, nor did we have a downside in Q4 of the calendar year. We actually saw an upside. And I think that's a proof of how well the team has executed it. So the big blocks of brand and people is what gives us the strength. the fact that we are now optimizing cost and investing behind them is what is resulting in the flywheel moving faster.

So just one last follow-up, and I'll end there. It's on advertising. So if I see 40% to 50% higher ad spend by such a large company for 3 successive quarters, unprecedented in India. So where -- what is the reason for this? Was Nestle under-indexed in its categories? Or second, if I see chocolates, where I think clearly, you are a much smaller player than the market leader. For example, from your slide, Nestle is at 23% penetration and chocolates overall is 63% penetration. So can you elaborate that your spends in the last 3 quarters, is it reflecting this 23% versus 63% -- or now you're outspending so much versus your advertising market share versus, say, volume market share that you are getting a benefit out of that. So one, if you could explain why so much advertising is happening? And second, is this the main funnel for future growth? Also, you did say that you will keep spending, but if you could elaborate from Q3, what happens, right? Q3, the base becomes very high, then what kind of growth you'll be expecting?

Yes. No, thanks for that. I keep on telling people that it's not about a base. It's always about the penetration levels we have and the future opportunities. Of course, there will be a quarter where the GST would be in the base. But those are -- when you think of a slightly more medium-term journey, it's about are you getting the secular volume growth, which we are right now. You touched upon the ad spends. Yes, we are dialing up the support, and we are dialing it up because putting it simply, you would put money behind the Veratco. I believe our brands have that kind of legs. They have the strength to run a long distance, and we are investing that. Obviously, it won't be 40% all the time. We have some pretty hard financial metrics around this investment in terms of ROI, the ROAS, which we get on digital, and we monitor that very, very carefully. So it's not -- all cholesterol is not good cholesterol, and we are very, very conscious of it. And therefore, we will -- we would never hesitate to invest behind the brand as long as it's giving us the right returns. At this point, we haven't -- I would say, the trend would continue. Would it be 40% every quarter? Obviously, not because of the base catching up. Ed, anything?

Yes. Maybe what I can add is our investment is obviously funded by the efficiency that you were noted in your earlier discussion.

I think that's a very important point because we keep on referring to the virtuous cycle, the flywheel. You can see it playing out for us in the last few quarters, higher investment, still better profitability because the growth is driven through volume, premiumization. I think those are the things which are helping us drive this flywheel faster.

We take the next question from Latika Chopra of JPMorgan.

Manish, team, thank you for a lot of insights today. My first question was on revenue growth outlook. You've talked about various levers of growth. A lot of it is execution led clearly. But as you mentioned, there were some GST tailwinds as well. In FY '26, just to set a context, you had a close to 11% volume growth. When you look ahead, do you think a double-digit volume growth for your business is doable considering what we saw today, you're talking about penetration, premiumization and of course, a higher penetration in higher participation in fast-growing channels. Also, I wanted to add, when you look at FY '26, it seemed you had a disproportionately higher growth in chocolates and coffee. And hence, the question on sustainability of this double-digit volume growth, if you could talk about this.

Yes. Thanks for that, Latika. I think to start with not getting into forward-looking projections or numbers. I really want to take a step back and all of us very strongly believe if we just do look at the market, and I compare, say, noodles to the biscuits category, I mean, biscuits has close to 100% penetration monthly. Noodles, and we are just one player in the noodles category is still around 35%, 36%. Even in urban, we would be half of biscuits. We would be much smaller than salty snacks. And that clearly tells you because, I mean, what are we talking about, a family consuming 1 pack of Maggi in a month. And obviously, given the brand love, given the kind of innovation, there is headroom. So I believe across all our businesses, I mean, whether it's nourishment, -- we are still a country which has healthy child growth. The pet nourishment, one of the fastest-growing countries in terms of getting pets into home and pet parents. Coffee tea, I spoke about, it's a change shift you can see across every day. Confectionery, our shares are much, much smaller and the category is growing in terms of penetration overall. So I believe the secular growth opportunity exists. Having said that, it is for our teams, my team and all of us to realize that. And to realize that opportunity, we need the fuel behind our brands and our people and which is why right now, it seems to be working well. You referred to confectionery and spoke about growth. If you look at the last few quarters, and we don't share category-wise growth. But suffice to say, all our businesses are getting healthy growth. I mean I spoke about coffee, 20 quarters of double-digit growth. So it's not just a confectionery thing. I think Kit Kat has now become one of those viral brands. And we're very happy with the way it's progressing. Yes, we did run out of capacity. We are putting in more capacity. But the growth we are seeing is equally strong. I mean, keeping the relative positioning in mind. I mean, we're delighted with some of the responses we are seeing on Maggi, on the Spicy range on Double Masala. So it's secular growth. And I believe it's up to me and the team to make sure we realize those growth opportunities. There could be quarters which could be a little off, but my belief and our team's belief on the secular short- to medium-term growth opportunity stays.

And the second bit, is it fair to assume, given our focus on operational efficiencies and a lot of digital tech that you talked about, when you look at margins, and I know you have to navigate various volatility on raw material, et cetera. But at a very broad level, would the company be able to at least maintain or modestly improve margins on an aggregate basis? Again, quarterly volatility one can exclude, but more from a medium-term perspective?

Yes. I think overall, we are very, very focused on making sure every rupee we spend helps our consumer or our customers. And that's the way we look at all our expenditure because this country is very, very price sensitive still. And in our businesses across, we spoke about low penetration, which is why the price point continues to be very, very important. So that is the thrust with the entire team is driving because if we keep on sort of flexing the pricing, we would lose out on the penetration opportunity. As far as margins are concerned, Ed, do you want to jump in?

Yes, I think we have a track record of margin and maintaining our margin. And obviously, our efficiency programs are here to tell on how we hold those margins.

Sure. And just to double-click your comment on near-term outlook, this was more a caution from a macro perspective, but you believe considering the penetration levels in your categories are low, this is not an outlook for Nestlé India perspective.

I was referring to very often we get asked this question. And Latika, it's important when you have -- when you are in a category where penetration is 100%, what happens when a macroeconomic sort of shift hits you is very different from what happens when your penetration levels are much lower. So while we are concerned about some of the rising costs and the challenges, I think the last 1 year clearly gives me the confidence that my team has the resilience to work around it. And while there could be a month of up and down, I believe the growth story -- the secular growth story remains in place strongly.

[Operator Instructions] Our next question is from Arnab Mitra of Goldman Sachs.

My first question was actually on Milk and Nutrition because this has been one segment where there has been a challenge in the last decade in terms of growth. So Manish, as you have looked at this business from a new set diagnosis growth has lagged in this segment? And can there be something that Nestle can do here to accelerate the growth of this portfolio? And you could talk about the various parts of the portfolio if you -- if that helps.

Yes, I think I'm personally quite happy with the way the dairy and nutrition business has been performing. If you see the call out we've had the last quarter, it has had good volume-led growth. It is important that when we look across the various businesses we operate in, our starting position can be very different. So when I think of a confectionery versus a dairy and nutrition position, the starting position is different. Having said that, the same opportunity exists when you look at penetration in terms of infant nutrition, in terms of dairy, the headroom for growth is there. I feel very good about the fact that we have some great science backing up our products. And therefore, I would say I continue to be as optimistic about that business as I would for confectionery, keeping in mind, there are 2 different categories and the growth opportunities on both of them would never be identical. But I am very, very enthused with what we are doing on some of our nutrition and dairy brands.

Got it. And anything you want to highlight in terms of the last 3, 4 quarters, which has -- which you have done in this milk and nutrition segment, which is different from the past and which is showing some promise of accelerating the growth for the portfolio?

No, I think, Arnab, what's important is I say this very often, and you know it more than some of the other people. 80% of points is on good execution, the day in, day out execution. And I said -- I started by saying in this business, we are among the few countries which continues to have very healthy child growth. And it's true for me, it's true for you, and it's true for the next generation. People look up to trusted brands like Lactogen and Cerelac every day for their nutrition needs. So I just think it's better execution, better science, which is supporting a journey on this business.

Got it. And my last question is on -- in the food category, we are seeing these trends of protein adoption, nutraceuticals, functional food. What's your take on it? Is Nestle participating -- is going to participate more in these segments than what you do today? Any thoughts on these emerging growth areas, vectors in nutrition and food?

I think I just want to share that we already participate in some of these segments. If you look at the top end of nutrition and protein needs, it's always in the ICU. And if you ever -- hopefully, you never get a chance, but if you ever went there, doctors in ICUs depend on Nestle Health Science brands like Peptamen, there's a joint venture we have with DRL and Celevida. These are some of the brands which operate right at the top end of what you would call the nutrition needs when the human body is most fragile. So we do address that. And we are globally in a very, very strong position backed with the right science. Of course, there is work happening on some of these. What is important for us is it's -- we've been around for 114 years. Whenever it comes to food and nutrition, we would be very thoughtful, very measured, and we would make sure that if it's a new trend, it's backed with the right research, the right product and gives us the right to win. That's a slightly different approach, especially because it's a food thing and people trust the Nestlé brand. But like I said, on the top end, on the medical front, we already have brands which are operating. And yes, we are constantly looking for innovations and things which we could delight our consumers in India. Ed, anything to that?

[indiscernible].

Our next question is from Avi Mehta from Macquarie Capital.

Manish, just 2 bits. One, you did point towards this reach expansion opportunity. Could you kind of give us a sense on how -- where we are in this journey? Would you say largely done 40%, 50% or how -- any thoughts or clarity on that front? And the second bit I wanted to kind of just get your thoughts on the infant nutrition bit. We've done some new innovations in that segment to post those growth that emerge, especially sugar. So if you could kind of give us a sense on what is the consumer acceptance and your thoughts on how it is kind of trending as we speak.