Nestlé's fresh India push is paying off, for now

Reckitt Benckiser

23/07/2026 13:00

The author is a Reuters Breakingviews columnist.  The opinions expressed are her own. Updates to add graphic.
By Shritama Bose

    MUMBAI, July 23 (Reuters Breakingviews) - Nestlé NESN.S is at a crossroads in one of its most important markets. The $268 billion KitKat maker's India arm posted a 48% jump in its net profit for the three months ending June, fuelled by strong demand across cities and rural areas. But selling to more price-sensitive shoppers could come with future costs.
A 25% increase in sales powered Nestlé India's NEST.NS first quarter earnings. The unit is also increasingly profitable with its EBITDA margin rising to 24%, a more than two percentage point increase from the same period last year. Its Mumbai-listed shares rose as much as 3.5% after it published its results on Wednesday.
CEO Manish Tiwary said the gains came from selling to a wider group of customers. That's a sign that Nestlé's push into India's hinterland, launched in 2019, is paying off as it entices aspirational consumers to its Maggi brand of instant noodles and converts tea drinkers to its Nescafe coffee. During that period, its reach has tripled to 216,000 villages.
That push has also translated into market share gains in areas like chocolate. India's booming instant delivery apps, run by Eternal ETEA.NS and Swiggy SWIG.NS, turned out to be a net positive for Nestlé's packaged goods. This was helped by a 40% increase in promotional spending during the quarter and the ability to tailor the display of its products on these apps' virtual shelves.
Nestlé India's momentum mirrors a broader recovery at its parent. Under new boss Philipp Navratil, Nestlé sales grew 3.5% in the first quarter of 2026 and the Nespresso maker is also expanding its valuation premium over rivals like Unilever ULVR.L and Reckitt Benckiser RKT.L. India contributes roughly 2% to the Swiss behemoth's annual sales.
For now, Nestlé's push into the Indian countryside looks smart. For over a year, demand from India's rural shoppers has outpaced their urban counterparts. That's been fuelled by a combination of cash transfers to households by regional governments, benign inflation and a strong monsoon season that boosted farm incomes last year.
Yet risks for the local unit loom. Its sales have been partly boosted by New Delhi's cuts to indirect taxes in September, a tailwind that could fade later this year, says Abhishek Mathur, lead analyst for India institutional equities at brokerage Systematix. Higher advertising spending and rising costs could eventually squeeze margins too, if growth slows.
Rural shoppers also tend to be more vulnerable to climate crises and price shocks. Nestlé has historically skewed towards wealthy city dwellers shielded it from those vagaries, which is reflected in its valuation: its Indian unit trades at 68 times its future earnings, higher than 43 times for Hindustan Unilever HLL.NS, which reaches nine out of 10 Indian households. That suggests reaching the widest pool of Indian customers comes with its own risks. 
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CONTEXT NEWS
Nestlé India on July 22 reported a 48% jump in consolidated net profit for the three months ended June 30 to 9.59 billion rupees ($99.35 million). Sales of products increased 25% from the same period last year to 63.6 billion rupees. 

(Editing by Aimee Donnellan; Production by Aditya Srivastav)
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