Food inflation remains a challenge for FMCG biggies like Nestle, ITC

Indian consumers may have been grappling with the steep rise in prices of daily essentials, especially food items, but the end is still some time away, feel FMCG industry veterans. According to Suresh Narayanan, Chairman and Managing Director of food & beverages major Nestle India, the menace of food inflation remains a concern even after two years of high inflationary cycle.

”There will be pressure in terms of food inflation. Headline inflation will get mitigated because of various steps that the government will take but food inflation is still a cause for concern," said Narayanan, adding that “we would have to watch this space and see how is evolves, impact being really for 2024 rather than immediate impact we will have”.

According to him, with a 30 per cent deficit in rainfall this season Kharif crops might get impacted, even if the sowing was good. With this El Nino impact not fully played out, we still have to watch for the spectre of food inflation, he said.

Apart from agri-commodities, prices of milk have spiked in recent quarters that have impacted both retail consumers and bulk buyers like Nestle.

"The post-Covid impact on milch herd and then we had the lumpy skin disease and various other things, but that still has to be played out and also, the cost of production has gone up sharply. There has been a 30-40 per cent increase in the cost of feed. We don't expect the farmer to be able to absorb all of them,” he said. Consequently, milk prices will continue to be volatile. “But for other commodities, a lot will depend on how the Kharif and the Rabi crops come out. But still, there is a little bit of uncertainty there,” said Narayanan.

Earlier in the month, Sanjiv Puri, CMD of diversified conglomerate ITC Ltd had also expressed his concerns over the impact of climate change, El Nino and inflation. Talking at the annual general meetings of the Kolkata-headquartered firm, Puri said that with the major global economies slowing down, steep inflation and bottlenecks in supply chain persisting, leading businesses in India like ITC are facing risks in the short-term.

“While the potential is almost limitless, we are not immune to the adverse impact of several global crises including climate emergency, persisting inflation, supply chain disruptions, muted demand conditions in some major economies and the impact of geopolitical dynamics. The climate crisis represents an existential threat and in the short term, the impact of El Nino remains a key monitorable. Further, despite moderating inflation, key commodity prices remain elevated and volatile, adding to the magnitude of external risks,” Puri told ITC shareholders.