Nestle India Ltd is offering a 33% discount on its premium milk range to induce trials and increase sales in an attempt to offset revenue loss from the ban on Maggi noodles in India.
The one-litre Nestle A+ tetrapak, which was priced at Rs.75, is now being sold at Rs.60. The discount makes the milk brand available at a price cheaper than Amul Gold, at Rs.62, and Britannia Industries Ltd’s offering, which is priced at Rs.65, said Abneesh Roy, assistant director of institutional equities (research) with Edelweiss Securities Ltd.
“Though this is only a limited-period offer, we believe it is largely to drive growth in the non-noodles portfolio of the company,” Roy added.
Maggi noodles alone contributed 23% of the company’s revenue of Rs.9,806 crore for 2014. Milk and allied products accounted for 45.2%. So-called prepared dishes and cooking aids constituted 29.2%.
Consumer packaged goods firms often resort to discounts for limited periods to induce trials and gain consumers.
Discounts are also being offered on Nestle’s condensed milk and EveryDaydairy whitener, according to people with knowledge of the matter.
Nestle did not respond to a query regarding the ongoing sales promotion.
On the discount blitz, R.S Sodhi, managing director, Gujarat Cooperative Milk Marketing Federation, the makers of Amul, said: “We will not discount. Even if their (Nestle) sales increase by 100%, it will not make a difference to us as our market share is way ahead of theirs. Moreover, there is a difference in the quality and taste of their milk and our milk, and consumers who like our milk will not switch to their brand.”
“UHT (ultra-high temperature) milk is a Rs.2,000 crore category, growing at 25% per annum,” said Pankaj Gupta, practice head, consumer and retail, Tata Strategic Management Group, a Mumbai-based consulting firm.
Since the first reports of Nestle’s Maggi noodles containing high lead and monosodium glutamate (MSG) content surfaced on 21 May till date, the Nestle India scrip has lost 11.65%, while the BSE’s benchmark Sensex has gained 0.76%.
Source: LiveMint