marketing
Writer: Source: The Economic Times - Monday, Apr 10,2006 6:41 AM
Nestle to skim the fat off its dairy products portfolio

Nestle India is looking at rationalising its dairy products portfolio. Having withdrawn butter from the market citing it 'unviable', it is considering a proposal to discontinue two more products. Sources say, Fruit & Mix Dahi and UHT milk could be on the list as both haven't made much headway. Nestle's dairy business has been under pressure for some time. Portfolio rationalisation - began late last year( the company moved out of dust tea, withdrew Nestle Chocostik, butter and Nestle Choo). It is now looking at the dairy product portfolio.

In fact, the dairy product business has been a dark spot during '05. Nestle says the performance of its dairy related products “wasn't satisfactory.” Barring Nestle Dahi, which itself has volume constraints due to premium pricing, most of the other items in this segment haven't done too well. While Nestle Everyday Dairy whitener grew 'modestly', Nestle Milkmaid has been under pressure. Its UHT milk was hit by severe procurement problems late last year. An e-mail to Nestle went unanswered.

Innovating its dairy portfolio, last year Nestle introduced Raita in select markets. Sources say, the product hasn't generated much excitement and is yet to go national. “The prices of milk continue to be on an upward trend and efforts will be to improve the performance of this category with appropriate price management, in a very competitive environment,” Nestle says in its annual report. While it trims its portfolio, Nestle is bullish on the culinary segment and sees a great opportunity in the out-of-home consumption market.

No wonder, there's an increasing thrust on expanding the network of vending machines for beverages. Nestle sees the OOH opportunity as “significant to leverage its skills and competencies in vending and using its product portfolio to address consumer needs.”

Culinary focus emanates from Nestle's buoyed performance in the business last year. Nestle launched a series of new initiatives under the Taste Bhi, Health Bhi brand, such as Maggi Vegetable Atta Noodles and New Maggi Healthy Soups, both of which have been well-received. The company wants to consolidate those gains. It plans a new facility in Uttaranchal with an investment of Rs 100 crore to manufacture culinary products.

Nestle India has actually been looking at various options for a speedier growth path. It has announced a slew of launches during the last twelve months, the latest being Nestle Ceremeal Daliya (porridge).

Also on the cards is, Everyday Sugar-free variant to kickstart the products growth on health platform. The company took the same health route for its instant noodle brand, Maggi, when it launched Atta noodle and fortified Maggi soups. The new Nescafe 3-in-1 coffee mix is actually a re-launch. It's previous attempt at instant coffee mix some 5 years back had come a cropper.

Persistent quest for newer product options, say analysts, will be critical to Nestle as its key product segments have been under pressure lately.

In February, deceleration in sales of milk food and weaning foods restricted the company's growth to 8.2% YoY, much below the industry average of 10.6%. According to analysts, Nestle's sales growth in weaning foods decelerated to 3.4% YoY from 10% YoY in CY05 and milk foods decelerated to 8.2% YoY from 11.7% YoY in CY05.

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