Nestlé India

Cerelac is a brand of instant cereal made by Nestlé. The cereal is promoted for infants 6 months and older as a supplement to breast milk when it is no longer the sole item in an infant’s diet. I got introduced to the Cerelac brand in the early 80’s when my mother was feeding it to my younger brother. After 20+ years the same brand came into my life once again when my wife was feeding it our elder son. Click here to read the rest.

18 thoughts on “Nestlé India

  1. Thank you for such a detailed report.

    I am willing to wager 2:1 that Patanjali will not make any dent in the noodles market atleast. That is because of the huge barrier of Maggi brand in the mind of the mother and the child, carefully built over the years, the almost un-usurpable retail shelf space across millions of retail outlets. And finally taste, something that simply cannot be replicated. This combination creates a lollapalooza effect. Getting all of them right together almost overnight is well nigh impossible. If you think about it, these strengths have come over decades and will take decades to root out. Surveys indicated that people trust Maggi more than the Govt., after the lead fiasco.

    Initial sales for Patanjali noodles may be high becuase folks may want to try it out, but repeat usually falls even for a great brand to 50%, and Patanjali will be no exception. I have not tried it because I could not find at all in atleast two of the shops I buy my provisions from. In one shop, soon after Maggi was relaunched, the shelf space in the noodle section has again become Maggi dominant…..I know this is anecdotal evidence.

    Finally one celebrity led brands have limitations. The brand cannot become bigger than the celebrity and the celebrity’s limitations will show on the brand. If you take a look at some of the world’s big brands, and even in India, no brand is a national leader in its category because of the celebrity. Even Lux, a brand built only around celebrities, has many celebrities and is not the leader. Finally celebrities age, they get replaced by others, and a brand so identified with the celebrities will suffer collateral damages.


    P.S: No holdings
    P.P.S: I used to work in branding at Procter and Gamble.

  2. Jana,

    Thanks for the writeup. I couldn’t quite understand the table you put up with RIG, volume and value growth. Isn’t RIG the volume growth by itself? So what is this figure under volume?

    • Mani,

      RIG is nothing but keeping the price constant see what the growth from volume alone is. This is what is indicated in the last column.


  3. Sir, Page 11, Rs. 20000 cr. You missed the cr.

    Thanks, @saurabh / My first book: / *Order Now: *

    On Fri, Feb 12, 2016 at 4:47 AM, Seeking Wisdom wrote:

    > Jana Vembunarayanan posted: “Cerelac is a brand of instant cereal made by > Nestlé. The cereal is promoted for infants 6 months and older as a > supplement to breast milk when it is no longer the sole item in an infant’s > diet. I got introduced to the Cerelac brand in the early 80’s when ” >

  4. Hi Jana

    Great analysis and lots lots learn from this post!

    Applying the residual earning model as you had explained in an old post for valuation still indicates Nestle is extremely over priced. So do you think Residual Earning model is not suited for this kind of companies to arrive at best entry prices?


  5. Hi Jana, I have not been impressed by Patanjali’s aggressive launch of a host of consumer goods. The shampoo container’s flip type cover was shoddy. I was not comfortable with the toothpaste nor with the taste of it’s biscuits. However, for the moment my wife is impressed by the brand and sales of Patanjali seem to have taken off (atleast at their outlet near my home). Moreover, the speed of their launch seems to be dependent on their goodwill with authorities.

    Your analysis of Nestle’s performance has been extremely thorough. What I am interested in is how much time did it take? My rough estimate would be atleast a week assuming around 2 hours of study a day. Please let us know how you approach this type of work. Do you first wade in and then hunt for resources, info etc or do you first get most of the stuff ready and then do your analysis?

    All the best and more power to your pen.


    • Kaviraj,

      Thanks for your points on Patanjali’s products.

      Regarding my analysis on Nestle I would say I got the 70-75 percent of the story. There is another 25-30 percent that is still pending. Including watching the videos, reading the book, writing the document I would have spent around 40 hours that is spread over a week (5 to 6 hours a day).


  6. Fascinating write up!
    Thanks for sharing your thoughts,

    I would like to add couple of points, You already have mentioned The Indian subsidiary generated a revenue of 1.4 billion in Swiss Franc. Sales from India is 1.53 percent of its parent. This is miniscule as India represents 18 percent of the world’s population. The parent has a lot of products which are yet to be launched in India.
    some time back one of the senior investor in Indian market also mentioned all over globe nestle earns about 15$ per person in India its less than 1$.
    Lets see per capita income of Indian person vs German, swiss and US person

    India- 5350 $ (PPP adjusted)
    US- 53,750 $ (PPP adjusted)
    Germany-45,620 $ (PPP adjusted)
    Swiss- 59,210 $ (PPP adjusted)

    now if we compare what percentage of our incomes we spend on nestle vs average US/ swiss citizen then we would get some realistic figure. margins can not be stretched to infinite levels. We are in era where someone’s margins are someone’s opportunity. Affordability and alternative options would be questions. We prefer idly-wada, poha.🙂

    on similar lines long long back other argument I heard was per capita consumption of chocolates in US vs India was 22 kg vs 1 kg (big gap, numbers may be little here and there), but Indians already are having so many traditional sweets. Indian mom would say no to chocolates but will never say no to gulab jamun. These are traditional habits. Ready to eat food items are not so much successful (keep directly in oven for 5 minutes and eat) vs dosa mixtures or similar products which make cooking easier are more successful (Rajiv Thakkar has mentioned this in one of his talks). So other products which are to be launched in India are what kind of products? Indian market/consumer mind (and wallet) is ready for that? (we can argue on the point that % of working ladies is increasing but still people easily get maid to cooks for them). Google’s Rajan Anandan mentioned in one of his talks that female internet users in India are 30% (less than middle east- Kuwait like countries !), with very much traditional mindsets and habits will they accept these products?

    Rajan Anandan’s talk- (you can jump to 30th minute)
    Rajiv Thakkar’s talk-

    • Mandar,

      Valid points. I agree that margins can’t expand from the current levels. Also the A&P spending of Nestle is very low and it will go high and already the new CEO hinted at that.

      Regarding PPP yes it is true at the current levels. But we are talking about economic growth in India. When that happens should PPP not rise. Food habits are a function of tradition and culture. And they are not set in stone. With more women joining workforce and setting up nuclear families these things will change over time. We are in the world of Whatsapp and things change very fast beyond exponentially.


      • Jana, does the brand cerelac sold in india come under “nestle india”. I have my doubts and as far as i know nestle got “cerelac 123” only under “nestle india”. Kindly confirm.


  7. please let me Know how I can but parent company of nestle and Markel corporation please let me know I am average investor i would like to purchase stock after reading your post and that of sanjay bakshi

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