Nestle India’s first-quarter profit and revenue came in below expectations on Thursday as price hikes drove shoppers towards cheaper rivals, pushing the consumer giant to mark its slowest revenue growth in eight years.
The Indian arm of the Swiss food giant Nestle reported a net profit of 7.47 billion rupees for the three-month period ended June, missing analysts’ estimate of 8.16 billion rupees, as per LSEG data.
Shares of Nestle India fell further after the results to trade 2.6% lower, making it the top loser in Nifty FMCG index, which was down 0.8%.
Over the last few years, Nestle India and other consumer good giants have raised prices of their chocolates and milk products to offset the surge in cost of raw materials, including cocoa and milk.
However, that caused consumers to switch to cheaper unbranded products, not only eroding market shares but forcing the larger players to spend more on advertising to lure shoppers back.
Nestle India, whose products range from Maggi instant noodles to Kit Kat chocolates and Nescafe beverages, said its revenue from operations rose 3.3% during the quarter, but missed estimates.
The company marks its slowest revenue growth since March 2016, when it posted a drop in revenue.
Earlier in the day, parent company Nestle reported half-year sales growth below analysts’ forecast and also lowered its full-year organic sales growth outlook to at least 3% from about 4% previously.
Analysts expect market leaders such as Nestle India, which gets about 75% of its revenue from urban markets, to offer more discounts to fend off the competition from smaller and regional players.
Nestle India’s smaller rivals Marico and Dabur have reported a pick-up in their revenue in the April-June quarter as well, suggesting demand was improving gradually.
Earlier this week, Hindustan Unilever, one of Nestle’s main rivals, posted a higher first-quarter profit, aided by price cuts.
