Management Discussion and Analysis- Report

Nestle - 2019

Economic scenario and outlook

India has gained substantially in the World Bank’s Ease of Doing Business rankings by
moving up from the 142nd position in 2014 to the 63rd position in 2019, thereby progressing
on seven out of the ten parameters.
This is despite the fact that in 2019, private consumption, private investments and exports
slowed down. Rural wages, tightening of lending conditions and rising unemployment
contributed to low demand for goods and services.
Exports also remained volatile as a result of global uncertainties around trade and
investments and geopolitical issues. Credit to micro, small and medium enterprises was
affected. Uncertainty on employment impacted consumer, investor and corporate confidence.
The fall in domestic demand and low international crude oil kept the current account deficit
under control and FDI picked up for a few quarters as India remained an attractive
investment destination.
In response to the slowdown, the Government made policy announcements to boost supply
and demand and the investment climate.
Additionally, the Reserve Bank of India cut its benchmark rates by 0.85% to stimulate
private investment. The government reduced corporate tax rates. Steps were taken towards
bank consolidation, to add robustness to the banking system and improve flow of credit to
private sector.
These included liberalization of FDI norms for select sectors, rollback of surcharge on
foreign portfolio
investors, incentives to support several industries, bank consolidation to increase capital
inflows and reinvigorate private investments and hiring for boosting the economy.

Opportunities and Risks

With multiple product offerings and brands, your

Company operates in a dynamic environment, where the food and beverages industry is
transforming rapidly.
With the consumer at the core, it is Company’s effort to meet the changing preferences of the
diverse consumers. There is greater demand for healthier products that are locally inspired.
Company has been actively introducing new products, with a focused social media and
digital marketing approach.
With increasing internet penetration and tech savvy consumer, embedding technology in the
organizational processes is important. “AskNestlé” is one such app-based initiative for child
nutrition needs.
Company is impacted by the constant fluctuations in commodity and fuel prices. Economic
slowdown impacts consumer demand.
Changing consumer behaviour poses a constant challenge and proactive steps are being taken
to maintain brand loyalty and market share.
The technological advancement and IOT (Internet of things) has changed the supply chain
process completely in today’s world.
Climate change is one of the biggest threats we face as a society and is also one of the
greatest risks to the future of business. To address this issue, Company is transforming its
business to reduce Green House Gases emissions, end deforestation, reduce food loss and
waste and improve soil health.
Company is continuously reducing waste and emissions while simultaneously optimizing on
the production measures.
Company also maintains a BCP (Business Continuity Planning) process to prevent and to
recover from any future potential threat or disaster to ensure smooth functioning of the
business.

Quality and Safety

Quality and Food Safety are highest priority for Company. In line with zero defect mindset,
during 2019, a special focus was given towards upstream raw material vendors for products
such as wheat flour, tomato and chilly paste and sugar, as well as at Company’s factories
ensuring right quality and compliant product.

Environment

The aim of the Company is to develop business while improving its environmental
performance in order to create a more sustainable future. In order to achieve this, Company
continues to focus on measures for the conservation and optimal utilization of energy in all
the areas of its operations.
From the period, 2004-2019, for every tonne of production, Company has reduced the usage
of energy by around 49%, reduced water usage by around 54%, reduced greenhouse gases
generation by around 58% and the generation of wastewater by around 59%.

Financial Outlook

Nestle 2019 2018

Sales 122,953 112,162
Profit from Operation 25,863 23,509
Profit after tax 19,696 16,069
As %of Sales 16.0 14.3
(In Millions)
EPS 204.3 166.7
Dividend per share 342.0 115.0