Covid-19: Nestle says consumer behaviour changing, essentials 'taking precedence' over luxury

The Covid-19 pandemic has brought a major shift in consumption patterns among consumers as necessary purchases are taking precedence over luxury spending, Nestlé India chairman Suresh Narayanan has said.

Stating that the coronavirus crisis has witnessed "re-calibration of the consumer wallets" amid economic disruptions, he said certain terms like quality, safety, nutrition and trust have gathered more prominence as consumers are preferring "tried and tested" brands in these uncertain times.

"With the economic pandemic that has followed Covid-19, a re-calibration of the consumer wallets is taking place were ‘essentials’ are taking precedence over luxuries, however affordable they are,” said Narayanan. Moreover, there will also be re-calibration of channels such as e-commerce, which has increased its penetration and prominence among the customer's post lockdown, he added.

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"If you look at e-commerce channels, in the US what took eight years in terms of penetration, it has been achieved in eight weeks (of lockdown). Clearly the e-commerce journey is here to stay and there will be re-calibration of channels,” Narayanan told PTI.

Post-Covid-19, Nestle’s entire innovation funnel is also undergoing a change to engage with the customers under a new normal.

"Every business is recalibrating in the context of newly relevant consumer behaviours that are coming in, that is, what innovations we should go with, what innovation should be left out,” he explained.

Narayanan said he believes that in crisis, one should engage not disengage. "If we disengage then the consumer has other choices,” he added.

Like others, Nestle has also witnessed a rise in its ‘in-home indulgence’ segment of products and introduced new products under ‘MAGGI- Cooking Made Simple’ service.

"The words quality, safety, nutrition and trust have undergone sharper re-definition and consumers tend to favour ‘tried and tested’ brands and relationships formed herein,” the CMD said. There is a new word that has been added to the lexicon of consumer needs in the pandemic, which is ‘immunity’ for self and the family, he added.

While talking about sales, Narayanan said that Nestle India is witnessing a better growth in the rural and semi-urban areas, where the market has recovered quickly after lockdown-related disruptions.

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Besides, the company is also witnessing a surge in sales from e-commerce channels, he said.

“We have witnessed better growth in tier 2, 3, 4 cities, semi-urban areas than urban areas during the lockdown. Rural consumption continues to be stronger than urban demand. We delivered a strong performance in the e-commerce channel,” said Narayanan.

Like other FMCG companies, Nestle has also witnessed a sharp decline in its “Out of Home” consumption channels as restrictions on several channels as restaurants, hotels, cafes etc, which form bulk of the segment, continued.

However, its “in-home consumption” was up and sales of Everyday Dairy Whitener, Nestlé a+ Milk, another milk-based portfolio, Nescafe performed well this quarter, Narayanan said.

"Maggi also witnessed solid growth towards the end of the quarter after initial supply constraints," he said.

According to Narayanan, now the Indian economy is showing signs of recovery after the initial impact of Covid-19 though some of the sectors were impacted more than the others.

“With the easing of restrictions on economic activities, businesses are slowly getting back on track. To address these concerns in such challenging times, the Government of India has announced several measures to ensure business continuity and sectoral revival,” he added.