Nestlé India intends to hike its product prices countering commodity inflation
INDIA – Nestlé India, a subsidiary of Nestlé that processes food, beverages, chocolate, and confectioneries, has intended to increase the prices of its products slightly to address the rising costs of coffee, cocoa, and edible oil as it aims to keep sales coming in.
The initiative comes as profits decline due to consumer inflation and high commodity prices. The company aims to keep increases minimal while awaiting the potential boost in consumption from upcoming personal income tax cuts.
Nestle India Managing Director Suresh Narayanan said, “Profits at Corporate India came under pressure in the October- December quarter due to the double whammy of consumers cutting back due to inflation in large cities and high commodities prices. Wherever price increases are essential, we must take some pricing action.”
As reported by the Economic Times, India’s plan to cut personal income tax rates in the fiscal year 2026, unveiled earlier this month, is expected to put more disposable income in the hands of the people and eventually boost consumption.
Last month, the company reported a smaller-than-expected quarterly profit, hit by a slowdown in consumer spending in major cities and higher product prices.
Last year, in a significant decision, the company shareholders rejected a proposal to increase royalty payments to its Swiss parent company, Nestlé.
The proposal aimed to raise the royalty rate from the current 4.5 percent of net sales, net of taxes, to 5.25 percent, with an incremental annual increase of 0.15 percent.
However, 70 percent of the company’s public and 57 percent of total shareholders voted against the increase.
Nestlé India had committed in 2019 to seek shareholder approval every five years for royalty payments under the General Licence Agreement (GLA).
This agreement grants Nestle India access to the Nestle Group’s extensive intellectual property, including well-known brands like Maggi and Nescafe, proprietary technology, and over 1,300 patents.
Following the shareholders’ decision, Nestle India’s shares rose by 2.33 percent, closing at Rs 2,502.30 (US$30.04) per share, as investors reacted positively to the news.
As of 31 March 2024, Public shareholders held a 37.24% stake in the company. The remaining 62.76 percent stake is held by the Promoter & Promoter Group, viz, Nestle S.A (34.28% stake) and Maggi Enterprises Limited (2.48% stake).
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