Nestle India Ltd.-இன் இயக்குநர் அறிக்கை
Dec 31, 2022
Your Directors are pleased to present their report and financial statements for the year ended 31st December 2022.
contingencies resulting mainly from matters, which are under litigation / related to disputes and other uncertainties requiring management judgement. Your Company has also reversed, utilized / settled contingency provision of '' 156.9 million (previous year '' 749.8 million) due to satisfactory settlement of certain litigations and settlement of obligations for which provision is no longer required.
|
(? in million) |
||
|
Particulars |
2022 |
2021 |
|
Sale of products |
167,895.3 |
146,649.0 |
|
Add : Other operating revenues |
1,074.3 |
756.9 |
|
Add : Other Income |
1,010.0 |
1,201.5 |
|
Total Income |
169,979.6 |
148,607.4 |
|
Less : Total Expense |
137,419.9 |
1 17,669.2 |
|
Profit before exceptional items and tax |
32,559.7 |
30,938.2 |
|
Exceptional items |
2,365.0 |
|
|
Profit before tax |
32,559.7 |
28,573.2 |
|
Tax expense |
8,654.5 |
7,389.1 |
|
Profit after tax |
23,905.2 |
21,184.1 |
|
Add : Other Comprehensive Income |
1,119.4 |
(1,514.1) |
|
Total Comprehensive Income |
25,024.6 |
19,670.0 |
|
Opening balance in Retained Earnings |
10,694.9 |
10,309.5 |
|
Amount available for appropriation |
35,391.6 |
29,978.0 |
|
Interim dividends paid during 2022: '' 145.00 per share 2021: '' 135.00 per share |
13,980.3 |
13,016.1 |
|
Final dividends paid during 2022: '' 65.00 per share 2021: '' 65.00 per share |
6,267.0 |
6,267.0 |
|
Closing balance in Retained Earnings |
15,144.3 |
10,694.9 |
|
Key ratios: |
||
|
Earnings per share (?) |
247.9 |
219.7 |
|
Dividend per share (?) Interim Dividends Proposed - Final Dividend |
145.00 75.00 |
135.00 65.00 |
|
Additional Information: Profit from operations |
33,658.6 |
32,287.5 |
2022 and 2021 figures have been restated to include the financials of acquired Pet Food Business as per requirements of Ind ^5 103 - Business Combinations under Common Control
Exceptional Item in 2021 comprises the aggregate of past service cost, settlement cost and incidental expenses incurred for the implementation of the ''Future Ready Plan'' effective 1st December 2021, for certain category of employees, asper your Company policy. ''Future Ready Plan'' is a combination of amended Defined Benefit Pension Scheme for past period of service and a Defined Contribution Scheme for future service. For details, please refer Note 4 to the Financial Statements attached.
Total Sales and Domestic Sales for the year increased by 14.5% and 14.8%, respectively. Domestic Sales growth is broad based with a healthy balance of pricing and volume. Export Sales have increased by 8.2%. Other Income decreased due to lower average liquidities following transition to âFuture Ready Plan", partly offset by higher yields.
Your Company has created a contingency provision of '' 1,309.4 million (previous year '' 907.5 million) for various
The Board of Directors have recommended a final dividend of '' 75.00 per equity share amounting to '' 7,231.2 million for the year 2022 for approval of the members at the 64th Annual General Meeting of the Company (â64th AGM"). The total dividend for 2022 aggregates to '' 220.00 per equity share which includes interim dividend of '' 25.00 and '' 120.00 per equity share paid on 6th May 2022 and 16th November 2022, respectively.
The interim dividends paid during the year and the final dividend recommended is in accordance with the Dividend Distribution Policy (âPolicy") of the Company. The Policy is available on the website of the Company at https://www.nestle.in/investors/policies.
Material changes affecting the Company
There have been no material changes and commitments affecting the financial position of the Company which occurred between the end of the financial year of the Company to which the financial statements related to and date of this report. There has been no change in the nature of business of the Company.
Your Directors do not propose to transfer any amount to the reserves.
In 2022, your Company''s export business experienced growth. The focus was on promoting the Indian product portfolio, particularly in the confectionery and foods category, through both traditional and mainstream channels.
Products from the prepared dishes and cooking aids category, such as Masala-ae-Magic, MAGGI noodles, sauces, and Pazzta, witnessed growth in key markets such as Canada, the United States, Australia, New Zealand, and Singapore. This growth underscores your Company''s commitment to reach new customers and deliver high-quality products to the global market.
The confectionery business in the Middle East delivered strong growth, led by TOFFO Sugar Chewy Boiled confectionary. During the year, your Company began exporting Polo Holes to Taiwan, where it introduced new formats such as POLO jars and POLO pouches.
NESCAFE SUNRISE, which is a fine blend of coffee and chicory continued to gain traction in Singapore and Taiwan.
Your Company''s instant tea saw a sharp uptake after COVID abated resulting in out-of-home consumption increasing across all the markets. Export to Nepal and Bhutan had stable growth despite economic challenges as a result of low forex reserves, liquidity crunch and high inflation in 2022 in both the countries. Growth was secular across Confectionery, Beverages, Milk Products & Nutrition and Prepared Dishes and Cooking Aids Portfolio.
Your Company over the years has been enabling significant contribution to various taxes. During the year 2022, your Company through its businesses, enabled tax collections at Central and State level close to '' 42.6 billion, in aggregate.
During 2022, the Indian economy started to recover despite the Omicron wave of January 2022. As stated in the Economic Survey 2022-23, mobility was enabled by localized lockdowns, rapid vaccination coverage, milder symptoms and quick recovery from the virus contributed towards minimizing the loss of economic output. IMF estimated India to be among the top two fast-growing significant economies in 2022.
However, there were several headwinds for the FMCG sector in India in 2022, a sharp rise in inflation worsened further by supply chain issues with an increase in fuel costs. Rural inflation was higher than urban inflation that delayed rural consumption.
Despite an external volatile environment, inflation, price and cost to consumer, your Company steered through challenges, with its growth platforms not being compromised. These were driven by strategies of scale, efficiencies, mix and pricing.
Your Company delivered double-digit growth pivoted on volume and broad-based performance across all categories. This was the highest growth in a decade despite a challenging economic environment.
In 2022 total sales grew by 14.5% and domestic sales increased by 14.8%, with broad-based performance across all categories. Your Company''s robust performance on e-commerce continued, fuelled by Quick Commerce and Click & Mortar. Out-of-Home (OOH) business made a strong comeback in 2022, recovering its pre-COVID base and delivering robust growth by revamping, resetting geography, channel and sales priority.
Your Company has made a strong commitment to transforming itself using data analytics, across every aspect of its business be it manufacturing, supply chain, sales, marketing and communications. This has helped understand evolving consumer needs, spotting trends, delivering innovations. This has also led to streamlining business practices, bringing operational efficiencies, becoming more strategic and predicative while making more effective business decisions.
Your Company''s business categories such as prepared dishes and cooking aids, milk products and nutrition, beverages and confectionery witnessed consistency in growth. Its brands and products, continued to resonate with consumers because of strong thrust on innovation, with multiple offerings at different stages of life. Your Company continued to launch new products in India, and has launched over 110 new products over the last seven years with approximately 30 new projects in the pipeline.
Your Company continued in its path of premiumization through the acquisition of Purina Petcare business and the launch of globally renowned brand Gerber Cereals, bringing in expertise
introduction of age-appropriate complementary feeding and continued breastfeeding until two years and beyond. Your Company''s Nutrition business is committed to providing high-quality, innovative, science-based nutrition to babies and young children.
In line with its commitment to always deliver ''Good Food, Good Life'' to consumers, your
in science and nutrition. Such initiatives are testimony to your Company''s confidence in the market opportunities in India.
Recognizing the enormous potential of millets, which also aligns with several UN Sustainable Development Goals, the Government of India has prioritized Millets. 2023 has been declared as the International Year of Millets by the United Nations General Assembly. Your Company has already incorporated millets in its sub-brand CEREGROW⢠Grain Selection⢠and will continue to do so across categories.
Nestle R&D Centre India Pvt. Ltd., Manesar (a subsidiary of Nestle S.A. and a part of Nestle''s global R&D network) recently signed an MOU with Nutrihub, ICAR-Institute of Millet Research with the aim of collaborating in areas such as millet processing, understanding health and nutrition benefits of millets in different product applications, building consumer awareness, sustainability of millet by developing regenerative agriculture practices to enhance cultivation and encouraging start-up collaborations. This will also benefit your Company in launching new and innovative products with the goodness of millets.
Your Company embarked towards creating a future ready workforce that is diverse, equitable, inclusive and multi-generational. In addition to upskilling people, your Company instituted policies on mental health and well-being and gender agnostic policies.
Your Company remained committed to enhancing the resilience of communities through its societal initiatives, expanding its initiatives to more geographies and creating meaningful impact by unlocking the power of food for everyone today and for generations to come.
Your Company has worked steadfastly to meet its sustainability ambitions and constituted Sustainability Task Forces that stays responsible for planning, management and implementation of the sustainability initiatives across climate, packaging, sourcing and water, committed to its ambitious sustainability goals to advance the health of its planet supported by healthy sustainable food systems.
Prepared Dishes and Cooking Aids Portfolio
Your Company''s Prepared Dishes and Cooking Aids business showed strong growth momentum, with a healthy balance of product mix, pricing and volume growth in MAGGI Noodles and MAGGI Masala-ae-Magic aided by strong consumer engagements and market presence with media campaigns and attractive consumer activations. In line with demand forecasts, production capacity was ramped up across factories enabling strong growth momentum. MAGGI Noodles
in 2022 saw the highest ever distribution and maintained market leadership as per Nielsen report.
MAGGI has enjoyed an extraordinary journey in the country, spanning four decades. True to the mission of ''Good Food, Good life'', MAGGI portfolio offers convenience, taste and quality to its consumers. MAGGI brand as an ally in everyday cooking, has a portfolio that continues to evolve, introducing new products that make everyday meals extraordinary.
On World Environment Day, your Company launched a campaign to raise awareness on waste disposal. Indian Actor Rajkumar Rao known for his work in Hindi cinema, was roped in to highlight how MAGGI responsibly manages plastic equivalent to the number of packs that are sold, while urging consumers to spend 2-minutes to practice responsible disposal themselves.
Strengthening Breakfast Cereals
Your Company''s breakfast cereals business accelerated in 2022 with a focus on driving penetration through accessible price points. Taste and nutritional benefits of its offerings were communicated to consumers through extensive sampling across metropolitan cities. Availability of breakfast cereal portfolio increased manifold resulting in strong volume growth for brands such as NESTLE KOKO KRUNCH and NESTLE GOLD. NESTLE KOKO KRUNCH also associated with Jurassic World and Disney for Avatar helping build brand relevance.
Milk Products and Nutrition Portfolio
Your Company''s Milk Product and Nutrition Portfolio registered satisfactory growth. Your Company believes that breastmilk provides the best nutrition for babies, and every child should be exclusively breastfed for six months, followed by the
Company expanded its offerings for toddlers aged two and above. During the year, your Company brought the globally renowned and iconic brand GERBER® to India. GERBER® was started in 1928 by a mother, Dorothy Gerber in Michigan, USA and in 2007, Nestle acquired the brand as part of its vision to provide a full range of nutritious food options worldwide. GERBER® Cereals with Powerblend® was launched in two variants - Spinach & Carrot and Mango & Berry. The product combines the goodness of 4 diverse food groups - cereals, legume, milk and fruits or vegetables depending on the variant, with age-appropriate fortification for toddlers. GERBER® Cereals are aimed at the uncompromising mother who is highly discerning and well-informed about the latest in nutrition recommendations as well as quality of different brands.
Introducing a category-first innovation in India, your Company launched Nestle KITKAT Moodbreaks range with two new fruity flavour. The multi-colored KITKAT fingers are available in Mixed-fruit flavour with vibrant pink and brown fingers and Mango flavour with bright yellow and brown fingers. Through KITKAT, there
The offering is customised to the needs of Indian toddlers, benefitting from over 90 years of GERBER®''s nutritional expertise.
Your Company also launched CEREGROW⢠Grain Selection - a nutritious cereal for toddlers inspired by traditional ingredients, made from ragi, mixed fruits and ghee. CEREGROW⢠Grain Selection is specially for parents who are looking for ways to integrate traditional ingredients and recipes into their children''s diets, along with the confidence of assured
nutrition. Millets have been an integral component of the food basket in India, and CEREGROW⢠Grain Selection is an effort to rediscover the value of these traditional millets.
MILKMAID and acceleration of ready-to-drink (''RTD'') business also contributed to the growth. Strong double-digit value growth in MILKMAID was fueled by providing an exciting range of experimental desserts across national and regional festivals, collaborating with top chefs and the upcoming trend of baking, attracting more than 2 million visits to MILKMAID''s website. The RTD portfolio delivered accelerated growth second year in a row. While in-home consumption continued to grow, there was a post-pandemic revival of the out-ofhome channels. NESCAFE RTD launched a unique campaign - Thoda Aur Machaa, celebrating India''s Gen Z real heroes.
MILO specialized for teenage nutrition with Whey protein and jaggery was launched in Tamil Nadu and received a good response. The launch of Mishti Doi with jaggery was the first ever in its category and has seen strong acceptance and accelerated growth since launch. The NESTLE a Greek Yoghurt range was introduced with local fruits like Mahabaleshwar Strawberries and Alphonso Mangoes from Ratnagiri, leading to the business increasing by double.
To continue leading the Force-for-Good, NESTLE a launched a unique upcycling initiative programme called Nestle a Cartons to Classroom, in partnership with Tetra Pack and Reliance Retail. Under this programme, a consumer can return any used milk carton to specific collection points. These cartons were upcycled to make desks that have been placed in classrooms. This programme was piloted in Mumbai and 100 desks have already been placed.
Your Company''s Nestle Health Science business through a multi-channel engagement continued to build its presence in nutritional science.
The coffee and beverages business continued to witness strong growth enabled by a sharp, consistent strategy focused on recruitment and building relevance for the coffee category.
NESCAFE in-home portfolio consisting of NESCAFE Classic, NESCAFE Sunrise, NESCAFE GOLD delivered
broad-based double-digit growth. NESCAFE in-home touched new milestones in 2022, recording the highest ever single-year growth in household penetration, and maintained its leadership position in the category with significant growth in market share. NESCAFE ready-to-drink and out-of-home delivered broad-based double-digit growth.
NESCAFE CLASSIC spearheaded category recruitment with a thematic campaign that clearly defined role for coffee with youth which was complemented by consistent distribution expansion. Your Company sustained innovation-led growth with NESCAFE ALL in 1 premixes that added to the NESCAFE recruitment strategy by offering a consistent, tasty cup each time. Your Company continued its journey of winning in South India with NESCAFE SUNRISE through the launch of a renovated product, a refreshed brand look and new communication. This was enabled by a cluster strategy, with customised plans for each market that ensured NESCAFE SUNRISE delivered healthy growth. NESCAFE GOLD delivered stellar growth and led premium category creation through its promise of delivering coffee at its best.
A significant enabler last year, was a sharp focus on mitigating inflationary pressures by adopting several key initiatives that delivered optimizations across the value chain which allowed for sustainable growth across the portfolio. Your Company continues to closely collaborate with coffee farmers in Karnataka, Tamil Nadu and Kerala through the NESCAFE Plan towards developing good agricultural practices, sustainable management of landscapes and enhancing biodiversity in coffee farms.
After two pandemic-led challenging years, this year your Company witnessed return of the confectionary consumers. The portfolio registered robust growth and market share gains led by two iconic brands - KITKAT and MUNCH. KITKAT Moodbreaks and MUNCH Max were well received by consumers. Your Company continued to focus on superior execution and implementation of robust trade plans.
was a sustained focus on the key brand proposition, ''taking a break'', in all forms of traditional and new-age communication. All this resonated strongly with every consumer segment across the country.
At the time of growing consumer consciousness around environmental responsibilities and in line with your Company''s focus on sustainability, your Company introduced a unique initiative -KITKAT ''Breaks for Good''. KITKAT installed benches made from recycled plastic packaging across popular youth hangouts and colleges in India. The campaign was a friendly reminder to the youngsters that these recycled benches not only serve as a break for them, but for the environment too.
Further leveraging your Company''s access to strong global R&D expertise and staying agile on value-up strategy of MUNCH, your Company launched MUNCH Max that has extra crunch and chocolaty flavour.
The MUNCH ''Thaalam'' campaign, for the Southern markets, showcasing the popular boat race of Kerala successfully conveyed the messaging of ''Munching with confidence''. It also became the year when MUNCH leveraged the new-age phenomenon of Metaverse for their Indian Premier League activation, enabling consumers to meet and greet their favourite cricketers in the digital world. MUNCH was the first in the category to spearhead this exclusive engagement for its consumers.
Pet Food Portfolio
With the recent acquisition of Pet Food business from Purina Petcare India Pvt. Ltd., through slump sale, your Company
has made an entry in the potentially high-growth pet food category. With great passion and commitment of making the lives of pets longer, happier, and healthier, your Company''s Pet Food portfolio has delivered a strong performance with an accelerated growth in the Dry Dog and Cat Food products.
Your Company''s Pet Food portfolio includes globally recognized brands like PURINA
Supercoat and PURINA Pro Plan in the Dry Dog Food range that provide complete and balanced nutrition, with no artificial colours or flavour, to help keep dogs happy and healthy. The Pet Food portfolio also includes PURINA Friskies, and PURINA Fancy Feast in the Dry and Wet Cat Food range respectively, that provide the right balance of nutrition and delicious taste.
With a plan to bring new products and innovation, your Company has recently launched Felix Wet Cat Food, making a strong entry in one of the highest growth portfolios across the world in the Pet Food Category. Leveraging the unique and patented grilled technology, Felix is positioned to create a strong benchmark of taste and overall nutrition. eCommerce grew with speed and delivered high growth and market penetration for your Company''s Pet Food portfolio.
Nestle Professional - Out-of-Home Business
Your Company''s Out-of-Home (OOH) business made a strong comeback in 2022 recovering its pre-COVID base and delivering robust growth which was an outcome of revamping, resetting geography, channel and sales priority.
As a beverage solution provider, your Company cemented its participation in the larger and faster growing Bean to Cup segment, by enhancing its range of blends and machine solutions, and offering the widest menu. To premiumize small operators, your Company launched CAFE MENU range, which is ''tin and spoon'' application for hot cappuccino and cold coffee. To improve its share in the street channel, SUNRISE STRONG with a superior strength and aroma was launched.
Your Company built a differentiated and relevant food solutions portfolio in line with the growing industry need of standardization, versatility and delivery-friendliness. Chefs curated a range of recipe applications for cuisines such as biryani, oriental fried rice and pasta sauces, focusing on channels such as cloud kitchens, restaurant chains and catering.
Geographical expansion beyond metros into Tier-1 towns, tapping tourist hot spots and focusing on geographical clusters led to growth. This expansion was supported with an enhanced chef organization, cafe care engineers, OOH distributors and feet on street.
Under ONE NESTLE, your Company added new sites to take the total number to over 620 MaGGI and NESCAFE branded kiosks. The model stood tall throughout the pandemic. Your Company continued to recruit new franchises on the back of our ''Employment for Youth'' programme, extending its channel mix to include healthcare and hospital sites, launching multiple kiosk formats to fit different site requirements and deploying KITKAT branded benches, made using recyclable plastic waste.
RURBAN approach
Your Company continued its path of robust growth, strengthening the RURBAN approach. There was an acceleration on the RURBAN thrust by going deeper into smaller towns and cities, scaling up on-ground activation, deploying more resources, and leveraging partnerships to expand coverage. Your Company added around 55,000 villages and 1800 distribution touch points in 2022 and increased consumer connect through Haat activities and RURBAN smart stores. During the year, your Company recruited women from rural areas as a part of Project Swabhiman by upskilling them.
Your Company also launched its first ever ''direct to consumer'' (D2C) e-commerce platform - www.mynestle.in to offer to consumers products manufactured by your Company in India created specifically keeping the consumer needs in mind, to delight the consumer in every way with curated product bundles, personalized gifting and subscriptions. Consumers can also access gourmet recipes on the site and get free nutrition counselling. Launched in Delhi NCR, it will subsequently expand to the cosumers in other parts of the country.
E-commerce, Quick commerce and Click and Mortar:
Growth from e-commerce channels continued with strong performance driven by MAGGI Noodles from the Prepared Dishes and Cooking Aids Portfolio, Coffee and Beverages and Confectionary portfolios. Quick commerce and Click & Mortar also enabled the growth of e-Commerce. Quick Commerce growth was fueled by new user acquisition initiatives through targeted digital communication and ensuring
access to your Company''s products at the point of purchase. Your Company also leveraged emerging specialized formats such as ePharmacies.
People have always been at the heart of your Company and with the unveiling of the new Nest, the renovated Head Office, evolved ways of working were initiated. The new nest is an inclusive workspace with day-care facilities, recreational zones, gender neutral accessible washrooms, height adjustable workstations and accessible elevators. The NesLife initiative offers fexibility, empowering employees to be their best at work, combining positive aspects of hybrid/ remote working.
Your Company continues to focus on employee wellbeing by establishing a Mental Health First Aider Network, and through offering mental health benefits as part of health insurance. There have been regular virtual sessions focusing on overall physical well-being as well.
Your Company also introduced a sabbatical policy aimed to support diverse needs of employees like pursuing higher education, upskilling programmes, caring for a family member or pursuing a social cause. Your Company continued its commitment to the youth through the Nesternship programme, third year in a row, upskilling 1000 interns with a depth of experience and a wealth of knowledge to thrive in workplaces.
Your Company continues to live its commitment towards being a ''Force for Inclusion'' and introduced a new parental leave policy enabling primary caregivers with 26 weeks of leave and secondary caregivers 4 weeks of leave. Your Company also introduced a gender-neutral childcare policy where either parent with children below 6 years of age are eligible for childcare benefits.
Your Company continues its journey towards inclusion by hiring people with disabilities and by ensuring continuous improvements to existing facilities by conducting accessibility audits. Your Company is also taking steady steps in the direction of making the workplace more inclusive for LGBTQA by revising healthcare benefits to include same-sex partner insurance and introducing gender-neutral policies.
Your Company has one of the highest representation of women in field sales in the FMCG industry. Ensuring safety and hygiene at distribution points, supporting working mothers are some of the interventions undertaken by your Company to empower women sales force in both urban and RUrBaN centres.
Your Company rolled out various trainings and learning initiatives to mentor employees. The LinkedIn Learning Programme offers over 10000 courses, certifications with leading Institutes and was availed by employees. A network of in-house mentors also helped groom talent for senior roles. Over 100 mentees were mentored by over 60 mentors. Your Company also instituted ''Force for Great Leadership
Programme'' that has been instituted for mid managerial levels, where select employees are assessed, coached, made to attend leadership labs and external immersions.
Your Company has developed a resilient and agile supply chain framework that sources its direct and indirect materials from its suppliers and has touched the lives of farmers, retailers, distributors while ensuring the safety of its partners and customers.
Your Company selects its suppliers through strictly laid out procedures and engages with them in line with Nestle Responsible Sourcing Standard (''NRSS''). The requirements of Business Integrity, Human Rights (labour standards), Health and Safety and Sustainable environmental standards in their business activities, production processes, services provision, and their own purchasing procedures, as enshrined in the NRSS, apply to all suppliers.
Your Company''s Sustainable Sourcing team ensures that raw and packaging materials and the services received are aligned with NRSS.
Your Company works with farming communities to ensure sustainable production in the long-term. Your Company is committed to increase responsibly sourced ingredients such as fresh milk, palm oil, cocoa, wheat, spices, rice and green coffee. During FY 2022, 73% of inputs were sourced sustainably.
Your Company engages with rice, wheat and spice farmers for good agricultural practices, helping them grow safe, high-quality raw materials, and develop resilient, sustainable farms. Your Company procures raw materials locally. In addition to collecting milk and implementing the Nestle Milk District Model successfully to ensure a stable livelihood for local dairy farmers, your Company supports the development of milk farmers by assisting them to improve milk productivity and quality through technical assistance, providing veterinary services, medicines at no profit basis and promotion of sustainable agricultural practices.
Your Company''s sustainability commitment focuses on climate change, packaging, sourcing, and water.
From 2007 to 2022, for every ton of production, your Company reduced the usage of energy by around 36%, water usage by around 51%, generation of wastewater by around 38% and specific direct Green House Gas emissions by 52%.
Your Company was among the first to responsibly manage quantity equivalent to the post-consumer plastic waste generated by its products, and its brands have remained plastic neutral since 2020. It continues to engage with various waste management agencies, for end-to-end management of plastic waste as part of Extended Producer Responsibility Initiative and has achieved EPR of 23,300 MT through plastic waste management.
Sustainable sourcing is key to how your Company does business. Your Company collaborates with the dairy farmer to encourage sustainable dairy farming practices. As part of the NESCAFE Plan, your Company trains coffee farmers in sustainable agricultural practices and through MAGGI Spice Plan, your Company is now sourcing 8 key spices from suppliers, that are sustainably and local sourced.
Year 2022 was an interplay of complex disruptions and opportunities as well. The geo-political order was transforming, with an increasingly interconnected world, where the ramification of disruptions caused by war, economics, climate had an impact on consumers, society and businesses. As outlined by the International Monetary Fund, through investing in people, digitalization, green energy, and supply chain diversification, economies can bounce back from adversity and stay resilient.
India''s Economic Survey 2021 -2022 stated that the health and economic shocks of the pandemic and the spike in commodity prices in 2022 will wear off creating opportunities for growth. Reforms in digitalization, higher financial inclusion, and more economic opportunities will be the second most important driver of India''s economic growth in the medium term. Trends underpinned by India''s advanced digital infrastructure, offshoring, investments in manufacturing and energy transition, could create an environment for India to surpass other mature economies.
The 2023 edition of World Economic Forum''s Global Risks Report highlights the multiple areas where the world is at a critical inflection point. The global ânew normal" is a return to basics - food, energy, security - problems our globalized world was thought to be on a trajectory to solve. Last few years have also exposed multinational firms to an unprecedented risk due to global trade tensions, pandemic-induced supply chain disruptions and the Ukraine-Russia war.
Risks
Global and Macro-Economics
Global volatility can put business to the risk of unforeseen inflationary pressures and potential moderation of consumer demands and choices. Churn in geopolitics can impact the landscape of operating macroeconomics and in specific supply chains. Evolving business models and the vulnerability of Information Technology (IT) systems could additionally challenge and sometimes disrupt the normal course of operations.
Your Company has a comprehensive process of commodity procurement and business-continuity measures towards meeting exigencies. With a robust framework in place, it ensures a continuous monitoring, identification and redressal to meet unforeseen challenges.
Post-pandemic world has led to substantially enhanced usage of IT and consequently, the increase in risks associated with the IT systems. Systemic susceptibility to cyberattacks, loss of sensitive information, breakdown in systems or unavailability of critical IT means and outputs remains a constant risk. Your Company has been sensitive to the prevailing challenges of systemic issues, cyberattacks and cybercrime to its business operations. It has upgraded its safety mechanisms and processes, carries periodic internal assessments and builds the requisite firewalls to mitigate any threats and risks. Specific measures have been deployed towards identifying business-critical IT systems and their disaster recovery plan to ensure business-continuity in any eventuality. Multiple training sessions and Standard Operating Procedures (SOPs) have been put in place to align the relevant stakeholders to handle any sort of IT risk eventuality.
Climate change is a staring risk that directly impacts the food and beverage industry. World Bank in its recent report stated that in India more erratic monsoon rains have translated into more volatile food prices, destabilizing households'' inflation expectations and undermining the ability to forecast inflation. From increased cost of raw materials, lower production to multiple issues related to water shortage, it has direct bearing on your Company''s business. Even governmental action to address climate change imperatives could have an impact on our existing business model. Societal and consumer sensitivity to issues like carbon emission, energy consciousness and water management puts additional challenge to continuously improve and adapt. Your Company has taken the challenge seriously and made bold commitments. Your Company is constantly monitoring the environmental impact of its operations and taking strong steps to meet its sustainability targets.
Conscious consumer
Consumer preferences and sensitivities are fast evolving. Speed of consumer shifts is expected to increase even further with easier access to information, rising demand to know more and seek more choices based on their preferences. Consumers progressively seek to know the transparent impact of their purchase decision, consumption and subsequent management of the product packaging by the organisation. Sustainability and societal concerns for the planet is paramount and they are demanding tangible action on plastic neutrality, zero emission and sustainable practices that go into the process of sourcing, manufacturing, transportation and handling of waste. The importance of label to bear critical information like nutritional composition of ingredients, sourcing details and proper disposal instruction are becoming a priority. Your Company is constantly upgrading its information dissemination on the labels and via other brand communication mechanisms to provide all relevant details to enhance and enrich the consumer experience.
With a plethora of information available on the various ingredients and product attributes, the Consumer is seeking clarity based on science and validated efficacy. Your Company is leveraging its vast resources and know-how of technological and scientific knowledge on food and nutrition by having access to global R&D network to meet the consumer requirements. It is utilising various platforms like the corporate websites, brand websites and even dedicated helplines for easy access and engagement. The information shared is holistic and is curated towards aiding the consumers lead a balanced, pleasurable and healthy lifestyle.
As consumers increasingly rely on digital platforms for easy access, querying and engagement with prospective brands and services, ensuring meaningful presence across online channels is critical. Your Company is investing substantial time and resources to develop compelling content and presence across various social media platforms, web and mobile applications. These engagements are viewed as meaningful investments to convince and retain consumers towards our brand and services and build long-term relationships.
Increasing the reach in rural markets by putting sharper focus on increasing mind share and market share will be important. Companies would need to expedite their rural distribution strategy, keep consumers engaged with new offerings and drive the premiumization strategy to adapt to the changing landscape. Through the cluster-based approach, that is powered by data and technology, your Company has made deeper penetration into newer markets, unleashed growth potential and created a transparent planning process.
Company
⢠Nestle India was awarded the ''MNC of the year'' by All India Management Association (AIMA)
⢠Nestle India Procurement secured 2nd position in FICCI Sustainable agriculture award for building climate-resilient agriculture.
⢠Nestle India Supply Chain won Inflection Awards 2022 from Alden Global for Digital Supply Chain of the Year in Category- FMCG-2022.
⢠The Procurement team received the 4th Procurement India Leadership Awards organized by Institute of Supply Chain Management (ISCM) for Best Sustainability Initiative in procurement and Best Procurement risk mitigation.
⢠Choladi Factory was acknowledged by the Madras Export Processing Zone and awarded the No. 1 Export Excellence Award for the third consecutive year.
⢠NQAC Moga won âGolden Peacock National Quality Award 2022" in the âAnalytics" category.
⢠Ponda & Bicholim Factory won Gold at the 8th Edition of India Green Manufacturing Challenge 2022.
Brands
⢠Nestle KITKAT won India''s Most Desirable Chocolate Bar Brand 2022 at the 8th Edition of TRA''s most desirable brand.
⢠NESCAFE won the prestigious Brands of India Award 2022 by BARC Asia.
⢠NESCAFE RTD was awarded gold for the paper straw campaign at E4M Impact Digital Infuencers Award 2022.
⢠Resource High Protein received the Product of the Year at Channelier FMCG Awards 2022 and Resource Diabetic won the Effective Marketing Strategy at CIMS Nutrition & Wellness Awards 2022 for its thematic campaign âWhat did you do for yourself today".
Statements in this Report, particularly those which relate to Management Discussion and Analysis as explained in the Corporate Governance Report, describing the Company''s objectives, projections, estimates and expectations may constitute ''forward looking statements'' within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied in the statement depending on the circumstances.
Directors'' Responsibility Statement
The Directors state that:
a) in the preparation of the annual accounts for the year ended 31st December 2022, the applicable accounting standards have been followed and no material departures have been made from the same;
b) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st December 2022 and of the profits of the Company for that period;
c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 (âthe Act") for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) they have prepared the annual accounts on a going concern basis;
e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Directors and Key Managerial Personnel
Ms. Rama Bijapurkar (DIN: 00001835), retired as an Independent Non-Executive Director of the Company with effect from 30th April 2022 after completion of her term of five consecutive years. Your Directors wish to place on record their appreciation for the contribution made by Ms. Rama Bijapurkar during her tenure as an Independent Non-Executive Director of the Company.
The members, at the 63rd Annual General Meeting held on 12th April 2022 approved the appointment of Ms. Anjali Bansal (DIN: 00207746) as an Independent Non-Executive Director with effect from 1st May 2022, to hold office for a term of five consecutive years.
During the year, Ms. Roopa Kudva (DIN: 00001766) resigned as an Independent Non-Executive Director with effect from 31st May 2022 to fulfil her commitments on her professional responsibilities in the social impact investing space. Your Directors wish to place on record their appreciationfor the contribution made by Ms. Roopa Kudva during her tenure as an Independent Non-Executive Director.
The Board of Directors had, on the recommendation of the Nomination and Remuneration Committee, at their meeting held on 21st April 2022 appointed Ms. Alpana Parida (DIN: 06796621) as an Independent Non-Executive Director of the Company with effect from 1st June 2022 for a term of five consecutive years, subject to approval of the Members. Subsequently, the Members had, vide resolution passed through Postal Ballot on 27th May 2022, approved the appointment of Ms. Alpana Parida as an Independent Non-Executive Director of the Company with effect from 1st June 2022, to hold office for a term of five consecutive years.
All the Independent Non-Executive Directors of your Company have submitted the declaration confirming that they meet the criteria of independence as prescribed under the Act and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (âListing Regulations") and are not disqualified from continuing as Independent Non-Executive Directors. The Board is of the opinion that the Independent Non-Executive Directors of the Company including those appointed during the year possess requisite qualifications, expertise and experience and they hold highest standards of integrity. The Independent Non-Executive Directors of the Company have confirmed compliance of relevant provisions of Rule 6 of the Companies (Appointments and Qualifications of Directors) Rules, 2014.
In terms of the Articles of Association of the Company, the Board of Directors, at its meeting held on 16th February 2023, appointed Ms. Svetlana Leonidovna Boldina as an Additional Director with effect from 1st March 2023. The Board of Directors had also, on the recommendation of the Nomination and Remuneration Committee, recommended appointment of Ms. Svetlana Leonidovna Boldina
(DIN: 10044338) as a whole-time director, designated as âExecutive Director - Finance & Control and Chief Financial Officer" (''Key Managerial Personnel'') with effect from 1st March 2023, for a term of five consecutive years, to the members for their approval at the 64th AGM, in place of Mr. David McDaniel, Executive Director - Finance & Control and Chief Financial Officer, who will relinquish his office with the effect from 28th Feberuary 2023. Ms. Svetlana Leonidovna Boldina holds office as Additional Director up to the date of the forthcoming Annual General Meeting and is eligible for the appointment. Further, in terms of Listing Regulations, the Audit Committee has approved her appointment as Chief Financial Officer after assessment of her qualification, experience and background.
Appointment of Ms. Svetlana Leonidovna Boldina, being a non-resident in India, is subject to the approval of the Central Government. Ms. Svetlana Leonidovna Boldina fulfils the criteria provided in the Nomination and Remuneration Policy of the Company including her qualification, experience, background, expertise, proficiency and integrity.
Brief resume, nature of expertise in specific functional areas, disclosure of relationships between directors inter-se, details of directorship held in other companies, membership of committees of the Board along with listed entities from which resigned in the past three years, shareholding in the Company held by the directors proposed to be appointed/ re-appointed at the 64th AGM, is provided in the Notice of the 64th AGM.
Mr. Matthias Christoph Lohner (DIN: 08934420) Executive Director of the Company, retires by rotation at the 64th AGM, and being eligible, has offered himself for re-appointment. A resolution seeking approval of the members for his re-appointment, forms part of the Notice of the 64th AGM. As per the terms of his appointment as approved by the members, his re-appointment at the 64th AGM as a director retiring by rotation would not constitute break in his appointment as a whole-time director, designated as âExecutive Director - Technical".
The Board of Directors had, on the recommendation of the Nomination and Remuneration Committee, at their meeting held on 28th July 2022, approved the appointment of Mr. Pramod Kumar Rai (FCS 4676) as the Company Secretary and Compliance Officer (Key Managerial Personnel) of the Company effective from 1st October 2022 in place of Mr. B. Murli, Company Secretary & Compliance Officer of the Company, who retired on 30th September 2022 after an illustrious career of over three decades with the Company. The Directors wish to place on record their appreciation for the contribution made by Mr. B. Murli during his tenure with the Company. Mr. Pramod Kumar Rai is a fellow member of the Institute of Company Secretaries of India and a law graduate from University of Delhi with over 26 years of experience in varied fields such as legal, governance, compliance, investor relations, audit, insurance and has been associated with the Company for over 18 years and before taking up this assignment was designated as Deputy Company Secretary and Associate General Counsel (Corporate Legal, Governance and Compliance) of the Company.
The Nomination and Remuneration Committee had adopted principles for identification of key managerial personnel, senior management including the executive directors which are based on âThe Nestle Management and Leadership Principles" and âNestle Leadership Framework". Nomination and Remuneration (NR) Policy of the Company includes criteria for determining qualifications, positive attributes and independence of a director. The NR Policy relating to the remuneration of directors, key managerial personnel, senior management and other employees is framed with the object of attracting, retaining and motivating talent which is required to run the Company successfully. The same is also available on the website of the Company at https://www.nestle.in/investors/policies.
An annual evaluation has been made by the Board of Directors of its own performance and that of its Committee and individual Directors and the details of manner of performance evaluation of Directors, Board and it''s Committees are available in the Corporate Governance Report, which forms an integral part of the Annual Report.
The details of familiarization programmes to Independent Non-Executive Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are available on the website of the Company at https://www.nestle.in/investors/directorsandofficers/ familiarisation-programme.
Corporate Social Responsibility (CSR)
During the year, the CSR Committee was re-constituted, Ms. Anjali Bansal, Independent Non-Executive Director, was appointed as member of the CSR Committee with effect from 1st May 2022 in place of Ms. Rama Bijapurkar, Independent Non-Executive Director, who ceased as member of the CSR Committee with effect from 30th April 2022, due to completion of her tenure as a Director of the Company.
As on 31st December 2022, the CSR Committee comprised of Dr. Swati A. Piramal as Chairperson and Mr. Suresh Narayanan, Mr. David Steven McDaniel and Ms. Anjali Bansal, as members. The terms of reference of the CSR Committee are provided in the Corporate Governance Report. Your Company has also formulated a CSR Policy, which is available on the website of the Company at https://www.nestle.in/investors/policies. Annual Report on CSR activities as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended (âCSR Rules") is annexed as Annexure 2 and forms an integral part of this Report.
In terms of Section 135 of the Companies Act, 2013 read with CSR Rules, your Company has during the year 2022 spent over two percent of the average net profits of your Company during the three preceding financial years in accordance with the CSR Policy and the Annual Action Plan approved by the Board of Directors, from time to time on the recommendation of the CSR Committee. In addition to the above, your Company has been implementing societal activities since many decades under the umbrella of âCreating Shared Value" which have not been reckoned for arriving at the spends as per CSR Rules. Your Company''s CSR activity
expands across nutrition awareness, water and sanitation, rural development and environment. Details of some of the salient features of the CSR Policy and CSR initiatives are mentioned hereunder:
Project Vriddhi
As a part of your Company''s vision to strengthen community-led rural development to positively impact the lives of people, Your Company in collaboration with SM Sehgal Foundation, expanded the project to two more villages in Haryana in 2022. Since its launch in 2019, Project Vriddhi has touched the lives of over
6,000 beneficiaries across all 5 villages. The Project focuses on improving access to clean drinking water, promoting watersaving irrigation, increasing nutrition awareness, enhancing farm productivity and providing a conducive learning environment in schools by improving hygiene and sanitation practices.
Your Company has been a part of the transformation journey of villages that is unleashing a multiplier effect on several development indicators such as nutrition and health, hygiene and sanitation, education and agriculture.
The Nestle Healthy Kids Programme is a part of your Company''s commitment to promote healthier lifestyles amongst adolescents and parents. The Programme focusses on promotion of healthy eating habits, personal hygiene and the importance of physical activity as part of their daily routine. Launched as a pilot in 2009, the Programme has expanded significantly since its inception, incorporating pertinent elements like plastic waste management. Till date over 466,000 adolescents and over 30,000 parents across 25 States and Union Territories have been encouraged to live healthier lives through this Programme.
Project Jagriti is aimed at promoting optimal health outcomes in collaboration with healthcare providers and community stakeholders. Launched by your Company in partnership with Mamta, an NGO working in the field of nutrition, Project Jagriti focuses on four key groups- adolescents, young couples, pregnant women and lactating mothers. It emphasizes the importance of nutrition and healthy eating, prenatal and postnatal care, exclusive breastfeeding, family planning, check-ups, counselling, contraception, and adolescent-friendly health services at primary and secondary health centers.
Till 2022, the project has reached out to over 9.7 million beneficiaries (3.1 million direct and 6.6 million indirect beneficiaries) across 10 States and Union Territories.
Project ''Serve Safe Food'' was launched by your Company in 2016 in partnership with National Association of Street Vendors of India (NASVI), to provide training to the street food vendors and enable them to voluntarily adopt the hygienic practices that improve food
quality. Along with an NGO, Nidan your Company organized training sessions on food safety, hygiene, COVID-19 precautionary measures and digital payments This project has benefitted over 41,000 street food vendors across 25 states/Union Territories till 2022.
Plastic Waste Management Awareness
Your Company launched Project Hilldaari in 2019 to address the issue of plastic waste management in 5 tourist cities Mussoorie, Dalhousie, Ponda, Mahabaleshwar and Munnar. The project aims to create an integrated waste management model by engaging multiple stakeholders including government authorities, waste management contractors, local NGOs, residents and organizations to collaborate towards a common goal of a sustainable and clean environment.
The project aims at achieving 3 outcomes i.e. diverting waste from landfill by creating awareness on waste segregation and anti-littering; professionalizing waste workers to improve the ways of working, getting recognized and leading a better life; enabling digital mechanism to manage waste in the city, in monitoring waste at different stages, creating revenue out of waste and having a system in place to manage waste workers.
Since 2019, your Company has managed to divert over
22.000 MT of waste, which includes over 3,550 MT plastic waste from landfills. Your Company has also been working with over 680 waste professionals and provided over 1,350 safety gears to the waste management professionals to improve their working conditions. Your Company has also enabled digital monitoring system in more than 25,000 property units that include household and institutions across these cities.
Your Company believes that education is a powerful tool in bringing a change in the society. Project Jigyasa was launched in 2022 with the aim to spread science education, science labs and libraries were set up in 4 schools of Goa and Samalkha with about 2,000 students. The Project aims to increase access to practical, hands-on science education through an innovative model that is holistic and experiential.
Your Company is committed to providing access to clean water to communities in schools located near its factories. Since 1999, your Company has supported setting up of over 300 clean drinking water facilities, benefitting over
150.000 beneficiaries.
It has constructed modern, easily maintainable modular toilets to ensure that sanitation is not compromised. These sanitation blocks come with its own water supply and storage area. Over 800 schools have been provided with sanitation facilities till 2022, giving more than 270,000 girl students access to clean toilets and the opportunity to lead healthier lives, as well as pursue their academic dreams.
In addition to CSR, your Company has made interventions where societal needs are high or in special situations such as natural calamities, disasters including COVID-19.
Business Responsibility and Sustainability Report
Your Company does business that delivers long-term shareholder value and benefits society. Your Company continue to focus on its commitments which are aligned with national priorities and United Nations Sustainability Development Goals.
Your Company aims to make safe, tasty and sustainable food that is nutritous, accessible and affordable, minimising its impact on the resources, contributing to a future in which they are available for generations to come; boosting the well-being of the communities and enabling a just transition to regenerative practices; and creating a positive business environment and empowering your Company''s employees to make sustainable business decisions.
In terms of Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (âListing Regulations") read with relevant SEBI Circulars, new
reporting requirements on ESG parameters were prescribed under âBusiness Responsibility and Sustainability Report" (''BRSR''). The BRSR seeks disclosure on the performance of the Company against nine principles of the âNational
Guidelines on Responsible Business Conduct'' (''NGRBCs''). As per the SEBI Circulars, effective from the financial year 2022-23, filing of BRSR is mandatory for the top 1000 listed companies by market capitalisation and
filing of BRSR is voluntary for the financial year 2021-2022. Accordingly, for the financial year ended
31st December 2022, your Company has opted to publish BRSR instead of Business Responsibility Report. BRSR is annexed as Annexure 3 and forms an integral part of the Annual Report.
Statutory Auditors and Auditors'' Report
As per Section 139 of the Companies Act, 2013, read with your Companies (Audit and Auditors) Rules, 2014, the members of the Company in 63rd Annual General Meeting of the Company (''63rd AGM'') approved the appointment of M/s. S.R. Batliboi & Co. LLP, Chartered Accountants (ICAI Registration No.: 301003E/E300005) (''M/s. SRB''), as the Statutory Auditors of the Company for a term of five consecutive years i.e. from the conclusion of 63rd AGM till the conclusion of 68th AGM.
The Report given by M/s. SRB on the Financial Statements of your Company for the financial year 2022 is part of the Annual Report. The Notes on the Financial Statements referred to in the Auditor''s Report are self-explanatory and do not call for any comments. The Auditor''s Report does not contain any qualification, reservation, adverse remark or disclaimer. During the year, the Auditors had not reported any matter under Section 143 (12) of the Act, therefore, no detail is required to be disclosed under Section 134 (3) (ca) of the Act.
Cost Auditors and Cost Accounts
Your Company is required to make and maintain cost records for milk powder products as specified by the Central Government under sub-section (1) of section 148 of the Act. Accordingly, your Company has been making and maintaining such cost records as per the requirements.
In terms of Section 148 of the Act read with Companies (Cost Records and Audits) Rules, 2014, the Audit Committee recommended and the Board of Directors appointed M/s. Ramanath Iyer and Co., Cost Accountants, New Delhi (Registration No. 00019) being eligible, as Cost Auditors of the Company, to carry out the cost audit of milk powder products manufactured by the Company falling under the specified Customs Tariff Act Heading 0402 in relation to the financial year ending 31st December 2023. Your Company has received their written consent that the appointment is in accordance with the applicable provisions of the Act and Rules framed thereunder. The Cost Auditors have confirmed they are not disqualified to be appointed as the Cost Auditors of your Company for the year ending 31st December 2023. The remuneration of Cost Auditors has been approved by the Board of Directors on the recommendation of the Audit Committee. In terms of the Act and Rules thereunder requisite resolution for ratification of remuneration of the Cost Auditors by the members has been set out in the Notice of the 64th AGM of your Company. In the opinion of the Directors, considering the limited scope of audit, the proposed remuneration payable to the Cost Auditors would be reasonable and fair and commensurate with the scope of work carried out by them.
Secretarial Auditors and Secretarial Audit Report
The Secretarial Audit was carried out by M/s. S.N. Ananthasubramanian & Co., Company Secretaries (PCS Registration No. 1774) for the financial year ended 31st December 2022. The Report given by the Secretarial Auditors is annexed as Annexure 4 and forms an integral part of this Report. The Secretarial Audit Report is self-explanatory and does not call for any comments. The Secretarial Audit Report does not contain any qualification, reservation, adverse remark or disclaimer. During the year, the Secretarial Auditors had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134 (3) (ca) of the Act.
In terms of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Audit Committee recommended and the Board of Directors appointed M/s. S.N. Ananthasubramanian & Co., Company Secretaries (Registration No. 1774) as the Secretarial Auditors of the Company for the financial year ending 31st December 2023.
Your Company has received their written consent that the appointment is in accordance with the applicable provisions of the Act and rules framed thereunder. The Secretarial Auditors have confirmed that they are not disqualified to be appointed as
the Secretarial Auditors of the Company for the financial year ending 31st December 2023.
During the year, your Company has complied with applicable Secretarial Standards i.e. SS-1 and SS-2, relating to âMeetings of the Board of Directors" and âGeneral Meetings", respectively.
Seven meetings of the Board of Directors of your Company were held during the year 2022. The particulars of the meetings held and attendance of the Directors in the meetings are detailed in the Corporate Governance Report, which is annexed as Annexure 1 and forms an integral part of this Report.
In terms of Section 92(3) of the Companies Act, 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014, the Annual Return of the Company is available on the website of the Company at the web-link https://www.nestle.in/investors/stockandfinancials/annualreturns.
Details of Loans, Guarantee and Investments
Details of loans, guarantee and investments are given in Note no. 7, 8, 11 and 16 to the Financial Statements attached.
Your Company has formulated a policy on materiality of related party transactions and on dealing with related party transactions (''RPT Policy'') including clear thresholds limits as approved by the Board of Directors. The updated Policy is available on the website of your Company at https://www.nestle.in/investors/policies. The RPT Policy was last reviewed and approved by the Board of Directors at their meeting held on 17th February 2022 on the recommendation of the Audit Committee. The Board of Directors of your Company has approved the criteria to grant omnibus approval by the Audit Committee within the overall framework of the RPT Policy on related party transactions. All members of the Audit Committee are Independent Non-Executive Directors.
All related party transactions are placed before the Audit Committee for review and approval. Prior omnibus approval is obtained for related party transactions on a quarterly basis for transactions which are of repetitive nature and/or entered in the ordinary course of business and are at arm''s length basis.
All related party transactions entered during the year were in ordinary course of the business and at arm''s length basis. No material related party transactions, i.e. transaction with a related party exceeding Rupees one thousand crore or 10% of the annual consolidated turnover, as per the last audited Financial Statements of your Company whichever is lower,
were entered during the year by your Company. Accordingly, the disclosure of related party transactions as required under Section 134(3)(h) of the Companies Act, 2013, in Form AOC-2 is not applicable. Members may refer to Note no. 42 to the Financial Statements which sets out related party disclosures pursuant to IND AS-24.
In terms of Regulation 23(4) and other applicable provisions of the Listing Regulations, the members of the Company at the 60th Annual General Meeting held on 25th April 2019 approved the Ordinary Resolution (''Ordinary Resolution''), inter-alia, for continuation of the payment of general licence fees (''royalty'') by the Company to Societe des Produits Nestle S.A. (''the Licensor''), being a related party, at the rate of 4.5% (four and a half percent), net of taxes, of the net sales of the products sold by the Company as per the terms and conditions of the existing General Licence Agreements (''GLAs''), notwithstanding that the transaction(s) involving payments to the Licensor with respect to general licence fees (''royalty''), during any financial year including any part thereof, is considered material related party transaction(s) being in excess of the limits specified under Regulation 23(1A) of the Listing Regulations at any time. In terms of the Listing Regulations, no related party voted on the Ordinary Resolution. The Ordinary Resolution was effective from 1st July 2019 and approval of members shall be sought every five years in compliance with the applicable laws and regulations. During the year, there was no subsequent material modification in the terms and conditions of GLAs, as defined by the Audit Committee and specified in the RPT Policy.
Your Company has developed and implemented a Risk Management Policy and in the opinion of the Board of Directors, during the year, there were no elements of risks identified which may threaten the existence of the Company.
The Board of Directors of your Company evaluates the risk management systems periodically and takes into account any recommendation(s) of the Risk Management Committee and the Audit Committee.
The Risk Management Committee (RMC) was re-constituted and Ms. Anjali Bansal, Independent Non-Executive Director was appointed as member of the RMC effective from 1st May 2022. Ms. Roopa Kudva, Independent Non-Executive Director ceased as member of the RMC upon her resignation as a Director of your Company with effect from 31st May 2022.
As part of Nestle''s global sustainability commitment, your Company, in pursuing its business purpose, aim for long-term sustainable value creation, is conscious of the interdependence of economic, social and environmental interests and seeks to reconcile them in its daily business activities. Sustainability is an integral part of Nestle''s strategy and behaviour in business as described in Nestle''s Corporate Business Principles. In view of the above and considering the regulatory framework prescribed by Securities and Exchange Board of India (''SEBI'') on Business Responsibility and Sustainability Reporting, the Board of Directors had at its meeting held on 28th July 2022, on the recommendation of the Nomination and Remuneration Committee, extended the terms of reference of the Risk Management Committee to the following âSustainability Areas":
a) review Company''s sustainability agenda including the measures which ensure your Company''s sustainability and how its long term strategy relates to its ability to create shared value;
b) review reports and give advice on measures which ensure the long-term sustainability of your Company in its economic, social and environmental dimension;
c) monitor your Company''s performance against essential and leadership indicators provided under the Business Responsibility and Sustainability Reporting;
d) review the annual Business Responsibility and Sustainability Report (''BRSR'') and give its recommendations thereon to the Board of Directors of your Company; and
e) any other terms of reference by the Board of Directors of your Company on the Company''s sustainability initiatives.
To better reflect the extended role of the Committee in the matters of sustainability, the Board of Directors had approved change in the nomenclature of the Risk Management Committee to âRisk Management and Sustainability Initiatives Committee" or âRMSI Committee". The RMSI Committee was further re-constituted and Dr. Swati A. Piramal, Independent Non-Executive Director and Chairperson of the CSR Committee was appointed as a member of the Committee with effect from 1st October 2022. As on 31st December 2022, the RMSI Committee comprised of Mr. Suresh Narayanan as Chairman and Mr. P R Ramesh, Ms. Anjali Bansal, Dr. Swati A. Piramal and Mr. David McDaniel, as members.
The RMC or RMSI Committee on timely basis informed the Board of Directors about risk assessment and minimization procedures. The RMSI Committee has, inter-alia, formulated a detailed Risk Management Policy, as prescribed under the Listing Regulations.
The Board of Directors, at its meeting held on 28th July 2021, had approved the Scheme of Arrangement between the Company and its members under Section 230 of the Companies Act, 2013, as amended (âthe Act") read with other applicable provisions of the Act and Rules made thereunder (âthe Scheme"), which envisages transfer of the entire balance of '' 8,374.3 Million standing to the credit of the General Reserves to Retained Earnings. The Scheme, under the relevant Section(s) of the Act, is subject to the approval of the shareholders and such other class of persons as directed by the Hon''ble National Company Law Tribunal, Delhi Bench (Hon''ble NCLT), sanction of the Hon''ble NCLT and such other approvals as may be prescribed.
Your Company had filed an application with Hon''ble NCLT on 22nd March 2022 for the sanction of Scheme and in terms of the Orders of the Hon''ble NCLT, the Scheme was approved by the members of the Company at their NCLT convened meeting on 25th July 2022. As per the Orders of the Hon''ble NCLT, meeting of the un-secured creditors was dispensed with. Your Company had filed its second motion application with Hon''ble NCLT on 4th August 2022 for the sanction of Scheme and as per the Orders of the Hon''ble NCLT, your Company has served notice to the Statutory Authorities seeking their objection, if any, to the Scheme. Sanction of the Scheme is awaited from Hon''ble NCLT.
Upon the Scheme becoming effective, the entire amount of '' 8,374.3 million standing to the credit of the General Reserves of the Company shall be reclassified and credited to the ''Retained Earnings'' of your Company and constitute accumulated profits of your Company for the previous financial years, arrived at after providing for depreciation in accordance with the provisions of the Act and remaining undistributed in the manner provided in the Act and other applicable laws. The amount so transferred, pursuant to the Scheme, shall be available for utilisation by your Company for payout to the members in accordance with the terms of the Scheme. The details of the Scheme and other related documents are available on the website of the Company a https://www. nestle.in/investors/stockandfinancials/scheme-arrangement.
Complaint filed in National Consumer Dispute Redressal Commission
The Union of India, Department of Consumer Affairs in 2015 had filed a complaint before the National Consumer Dispute Redressal Commission on the allegation that by selling MAGGI Noodles in the past, your Company had indulged in unfair trade practice, sold defective goods to the public and sold goods which were hazardous. Complaint seeks compensation of '' 2,845.5 million and punitive damages of '' 3554.1 million. Your Company has challenged the complaint. The court proceedings are currently ongoing.
Internal Financial Controls and their adequacy
The Directors had laid down internal financial controls to be followed by the Company and such policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to Company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information. The Audit Committee evaluates the internal financial controls systems periodically.
During the year, the Audit Committee was re-constituted and Ms. Alpana Parida, Independent Non-Executive Director, was appointed as member of the Audit Committee with effect from 1stJune 2022 in place of Ms. Roopa Kudva, Independent Non-Executive Director, who ceased to be a member of the Audit Committee upon her resignation as a Director of the Company with effect from 31st May 2022.
As on 31st December 2022, the Audit Committee comprised of Mr. P. R. Ramesh as Chairman, Mr. Rajya Vardhan Kanoria and Ms. Alpana Parida as members of the Committee, all are Independent Non-Executive Directors.
Powers and roles of the Audit Committee are included in Corporate Governance Report, which forms an integral part of the Annual Report. All the recommendations made by the Audit Committee were accepted by the Board of Directors.
The Vigil Mechanism of the Company is governed by significant documents âThe Nestle Corporate Business Principles", âThe Nestle Management and Leadership Principles", âNestle India Code of Business Conduct" and âNestle India Vigil Mechanism/Whistle-blower Policy". The documents are available on the website of the Company at https://www.nestle.in/investors/policies. The Code/ Policy provides for adequate safeguards against victimization of director(s)/ employee(s) who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee in exceptional cases. It is affirmed that no person has been denied access to the Audit Committee.
Your Company as part of establishment of Vigil Mechanism provides an independent third party operated free phone and web-based Platform, namely, âSpeak up", to all internal and external stakeholders including directors and employees with a dedicated communication channel for reporting potential instances of non-compliance with Nestle Corporate Business Principles or for reporting, on a confidential basis, any practices or actions believed to be inappropriate or illegal under the Nestle India Code of Business Conduct. Details of the link to âSpeak up" is available on the website of the Company at https:// www.nestle.com/aboutus/businessprinciples/report-your-concerns.
Further, your Company has appointed Ombudsman for Infant Code, under which employees can report Infant Code violations directly to the Ombudsman, with adequate safeguard to protect the employee reporting.
Your Company sensitizes the availability of the above Vigil Mechanism from time to time to the directors and employees of your Company.
Information regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo
Information required under Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 for the financial year ended 31st December 2022, in relation to the Conservation of energy; technology absorption; and Foreign Exchange earnings and Outgo is annexed as Annexure 5 and forms an integral part of this Report.
Information regarding employees and related disclosures
The statement of Disclosure of Remuneration under Section 197 of the Act and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (''Rules''), is annexed as Annexure 6 and forms an integral part of this Report. As per second proviso to Section 136(1) of the Act and second proviso of Rule 5 of the Rules, the Report and Financial Statements are being sent to the members of the Company excluding the statement of particulars of employees under Rule 5(2) of the Rules. Any member interested in obtaining a copy
of the said statement may write to the Company Secretary at the Registered Office of the Company or at the email address: [email protected].
As per the requirement of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH), as amended, your Company has a robust mechanism in place to redress complaints reported under it. Your Company has complied with provisions relating to the constitution of Internal Committee under POSH. The Internal Committee (IC) comprises of internal members and external member who has an extensive experience in the field. In 2022, one case of sexual harassment was reported, which was investigated and resolved as per the provisions of the POSH.
During the year 2022, initiatives were undertaken to demonstrate your Company''s zero tolerance philosophy against discrimination and sexual harassment, which included creation of comprehensive and easy to understand training and communication material which are also made easily accessible. In addition, online workshops were also run for the employees to enhance awareness and knowledge of other biases that may influence thinking and actions by running the unconscious bias session.
Statement on Investor Education and Protection Fund
Pursuant to the provisions of Section 124 of the Act, Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (âIEPF Rules") read with the relevant circulars and amendments thereto, the amount of dividend remaining unpaid or unclaimed for a period of seven years from the due date is required to be transferred to the Investor Education and Protection Fund (âIEPF"), constituted by the Central Government. In terms of the IEPF Rules, during the year 2022, your Company had transferred '' 4,813,619/- and '' 1,608,472/- to the IEPF, being the unpaid and unclaimed dividend amount pertaining to Third Interim 2014 and Final Dividend 2014 & First Interim Dividend 2015, respectively.
Pursuant to the provisions of IEPF Rules, all shares in respect of which any dividend which has not been paid or claimed for seven consecutive years shall be transferred by the Company to the designated Demat Account of the IEPF Authority (''IEPF Account'') within a period of thirty days of such shares becoming due to be transferred to the IEPF Account. Accordingly, the Company had transferred such equity shares on which the dividend(s) remained unpaid or unclaimed for seven consecutive years to the demat account of IEPF Authority, after following the prescribed procedure.
Your Company has been awarded AAA credit rating for its bank credit facilities by CRISIL. It is the highest rating and indicates a stable outlook for the Company. The rating reflects that the Company has serviced its financial obligations on time. As regards the short-term facility provided by the bank, the Company has been awarded the credit rating of A1 . The rating reflects strong degree of safety and lowest credit risk.
During the year, there were no transaction requiring disclosure or reporting in respect of matters relating to: (a) details relating to deposits covered under Chapter V of the Act; (b) issue of equity shares with differential rights as to dividend, voting or otherwise; (c) issue of shares (including sweat equity shares) to employees of the Company under any scheme; (d) raising of funds through preferential allotment or qualified institutions placement; (e) significant or material order passed by the Regulators or Courts or Tribunals which impact the going concern status and Company''s operations in future; (f) pendency of any proceeding under the Insolvency and Bankruptcy Code, 2016 and (g) instance of one-time settlement with any bank or financial institution.
Your Company did not have any subsidiary or joint venture or associate Company.
Your Company maintained healthy, cordial and harmonious industrial relations at all levels. Despite severe competition, the enthusiasm and the unstinting efforts of the employees have enabled the Company to remain at the forefront of the industry.
Your Company continued to receive co-operation and support from the distributors, retailers, stockist, suppliers and others associated with your Company as its trading and value chain partners. Your Directors wish to place on record their appreciation for the same and your Company will continue in its endeavor to build and nurture strong links with trade, based on mutuality, fairness, respect and co-operation with each other and consistent with consumer interest.
Your Company has been able to operate efficiently because of the culture of professionalism, creativity, integrity and continuous improvement in all functions and areas of its operations as well as the efficient utilization of your Company''s resources for sustainable and profitable growth.
Your Directors hereby wish to place on record their appreciation of the efficient and loyal services rendered by each and every employee, without whose whole-hearted efforts, the overall satisfactory performance would not have been possible. Your Directors look forward to the long-term future with confidence.
On behalf of the Board of Directors
Date: 16th February 2023 Suresh Narayanan
Place: Gurugram Chairman and Managing Director
Dec 31, 2018
Dear Members,
The Directors are pleased to present their report and financial statements for the year ended 31st December, 2018.
(Rs. in Million)
|
Particulars |
2018 |
2017 |
|
Sale of products |
112,162.3 |
101,351.1 |
|
Add : Other operating revenues |
760.4 |
570.7 |
|
Add : Other Income |
2,589.2 |
1,769.2 |
|
Total Income |
115,511.9 |
103,691.0 |
|
Less : Total Expense |
91,222.4 |
85,298.0 |
|
Profit before tax |
24,289.5 |
18,393.0 |
|
Less: Tax expense |
8,220.2 |
6,141.1 |
|
Profit after tax # |
16,069.3 |
12,251.9 |
|
Add : Other Comprehensive Income |
(404.1) |
(889.8) |
|
Total Comprehensive Income |
15,665.2 |
11,362.1 |
|
Opening balance in Retained Earnings |
25,054.5 |
23,689.3 |
|
Amount available for appropriation |
40,821.8 |
35,034.0 |
|
Interim dividends 2018: Rs.90.00 per share 2017: Rs.63.00 per share |
8,677.4 |
6,074.2 |
|
Final dividends 2017: Rs.23.00 per share 2016: Rs.23.00 per share |
2,217.6 |
2,217.6 |
|
Less: Dividend distribution tax |
2,238.7 |
1,687.7 |
|
Closing balance in Retained Earnings |
27,688.1 |
25,054.5 |
|
Key ratios: |
||
|
Earnings per share O |
166.67 |
127.07 |
|
Dividend per share O Interim Proposed - Final |
90.0 25.0 |
63.0 23.0 |
|
âProfit from operations |
23,508.6 |
18,304.8 |
Reported Total Sales and Domestic Sales for the year increased by 10.7% and 10.9%, respectively. These growth rates are adversely impacted due to lower reported sales by the change in structure of indirect taxes. Domestic
Sales growth is volume led and broad based. âExport Salesâ increased by 6.9%.
Other Income has increased due to higher average liquidities as well as higher yields.
The Impairment loss on property, plant and equipment of Rs.110.8 million relates to various items of plant and machinery and building that have been brought down to their recoverable values upon evaluation of future economic benefits from their use.
Your Company has created a contingency provision of Rs.1,242.5 million for various contingencies resulting mainly from matters, which are under litigation / related disputes and other uncertainties requiring management judgement. Your Company has also reversed, utilised/settled contingency provision of Rs.205.7 million due to the satisfactory settlement of certain litigations and settlement of obligations under free replacement warranty for which provision was no longer required.
Dividends
The Board of Directors have recommended a final dividend of Rs.25.0 per equity share amounting to Rs.2,410.4 million for the year 2018. The total dividend for 2018 aggregates to Rs.115.00 per equity share which includes first interim dividend of Rs.20.00 per equity share paid on 1st June, 2018, second interim dividend of Rs.20.00 per equity share paid on 24th August, 2018 and third interim dividend Rs.50.00 per equity share paid on 21st December, 2018.
Amount Transfer to Reserves
Your Directors do not propose to transfer any amount to the reserves.
Exports
The exports for your Company registered growth of 6.9 % in 2018. Your Company continued to extend the MAGGI brand beyond India in 13 geographies. In 2018, the culinary category registered strong growth in markets with sizeable Indian diaspora contributing the highest quantum. Your Company also registered growth in the exports of infant nutrition products to Bangladesh.
Instant Tea exports had strong growth and the outlook for future looks positive with continued focus on premium and value added range.
Your Company continues to explore new markets for its products with added focus on confectionery products and instant tea vending mixes.
Contribution to the Exchequer
Your Company over the years has been enabling significant contribution to various taxes. During the year 2018, the Company through its business, enabled tax collections at Central and State level close to Rs.30.76 billion, in aggregate.
Business Development
Your Companyâs commitment to Nutrition, Health and Wellness was further strengthened in 2018 through new product launches, community engagement, contribution to the society and care for the environment. Your Company made steady strides in the foods and beverages sector for the Indian consumers that are designed to provide tastier and nutritious product offerings of high quality. The year 2018 was shaped by innovation and renovation, with the launch of around 13 new products. Your Company continued to access the brands, technology and assistance from Nestle Group to drive product innovations and renovations. Offerings continued to be adapted to suit the interests, tastes and sensibilities of the diverse consumers across India. Introduction of newer formats, local flavours and ingredients enabled your Company to connect with consumers across all ages and adapt to the evolving market place.
Striving towards building a healthier society, your Company continued to work towards reducing sodium, sugars and saturated fats, and adding healthful ingredients like whole grains, vegetables and micronutrients to its foods and beverages making them more nutritious.
Your Company reinforced its commitment towards sustainable environment with special focus on plastic waste management, paving the way to build a healthier society.
Innovating and Renovating âPrepared Dishes and Cooking Aidsâ
During the year 2018 âPrepared Dishes and Cooking Aidsâ benefitted from strong performances across MAGGI range of products, especially MAGGI Noodles, where multifaceted inputs and regional engagement drove penetration, distribution and volume growth. MAGGI Noodles in the Instant Noodles category maintained its leadership position.
MAGGI Noodles continued its focus on innovation and renovation, with the launch of MAGGI Special Masala, with ingredients comprising of 20 roasted spices and herbs. Your Company also introduced for the first time MAGGI NUTRI-LICIOUS Baked Noodles with sweet corn.
The Cooking Aids business witnessed extremely encouraging consumer response for MAGGI MASALA-AE-MAGIC, refurbished with attractive packaging and amplified with the launch of new variants for non-vegetarian and South-Indian dishes. The Sauces business continued to generate topline growth.
During the year, MAGGI introduced its new campaign aimed at driving advocacy, âKuch Achha Pak Raha Haiâ. Building on the concept, MAGGI KITCHEN JOURNEYS, a communication platform engaging with women showcased 12 inspiring stories of women who have established their own unique identity, using food as a medium and made a difference, leveraging their culinary skills creatively. This platform also offers online courses on cookery, food safety, hygiene and even tips on financial management for start-ups.
Under another initiative, the MAGGI Spice Plan, your Company, with the help of partners, has worked with more than 1,250 farmers in establishing provenance of high quality, locally sourced spices that has contributed to improving agricultural practices and consequently, yields. Today, more than 90% of spices used in MAGGI TASTEMAKER have traceability up to the farm level.
Introduction of Breakfast Cereals In line with the vision to introduce products rooted in Nutrition, Health and Wellness, your Company has added Nestle Breakfast Cereals from Cereal Partners Worldwide (CPW) to its existing portfolio during the year. CPW is a 50/50 joint venture which combines the expertise of Nestle S.A, Switzerland and General Mills Inc.,
United States, to produce and sell breakfast cereals. With this launch, your Companyâs objective is to provide high quality nutritious breakfast cereals to the consumers in India.
Strengthening of âMilk Products and Nutritionâ
The âMilk Products and Nutritionâ business continued to register a satisfactory growth, driven by volume of existing products and an encouraging response to new products.
Your Company extended chilled dairy portfolio range of healthier yoghurt based option of Dip and Spread, under the brand of MAGGI in exotic flavours such as, Jalapeno Salsa and Cheese Garlic.
Your Company continued to drive dessert recipe solutions under the legacy brand MILKMAID, by driving Ice Cream Kits and Choco-Dessert Kits on e-commerce platforms, inspiring consumers to try new age recipes with MILKMAID condensed milk.
Your Company introduced NANGROW, a nutritious milk drink for growing children aged 2-5 years, containing nutrients that includes high quality whey proteins, DHA (Docosahexaenoic Acid), probiotics and immunonutrients, to support the overall growth and development of the child with âZero Added Sugarâ (sucrose). DHA supports the childâs normal brain development and whey protein is required for easy digestion. NANGROW is the only milk drink in its segment with the proposition of âAll Growthâ. âZero Added Sugarâ, provides a healthier option for children.
CEREGROW, an iron fortified nutritious cereal for children over 2 years, launched its new communication titled, âPoora Poshan, Poori Tasalliâ. CEREGROW is designed to meet the nutrition requirements of children aged between 2-5 years.
Your Company rolled out a communication titled âPet Bhara, Par Nutrition Bhara Kya?â to educate consumers to help them make right food choices.
Your Company believes breast milk provides the best nutrition for babies, and every child should be exclusively breastfed for six months, followed by introduction of age appropriate complementary feeding and breast milk until two years and beyond.
In the Infant Formula, your Company re-launched NAN PRO with DHA (Docosahexaenoic Acid) and ARA (Arachidonic Acid). NAN EXCELLAPRO was also re-launched with high quality, partially hydrolysed proteins.
In Healthcare Nutrition Products marketed under the umbrella of Nestle Health Science, your Company has over 10 brands with an array of appropriate nutritional solutions. This includes RESOURCE Diabetic intended for dietary management of individuals with diabetes. RESOURCE Diabetic has low Glycemic Index, contains 20 vitamins and minerals and has high quality protein. Your Company introduced RESOURCE Renal and RESOURCE Dialysis for chronic kidney diseases and NOVASOURCE NUTRIHEP for Hepatic disorders. PEPTAMEN, a nutritionally balanced peptide based diet, was re-launched with a new recipe based on latest advancement in medical nutrition.
Growing âPowdered and Liquid Beveragesâ
2018 was an exciting year for the âPowdered and Liquid Beveragesâ business as your Company continued to focus on growing the coffee and beverages market. NESCAFE consolidated market share in coffee with robust brand growths and also led the household penetration of the category.
Your Company ventured into the domain of personal coffee machines with the launch of NESCAFE E, a smart app enabled coffee machine.
After the successful launch of NESCAFE Ready-To-Drink Coffee in UHT format, your Company also launched successfully Ready-To-Drink Coffee in can format, under iconic youth brand of NESCAFE. Instant Premix Tea was also launched under the heritage brand of EVERYDAY in three variants - Desi Masala, Saffron & Cardamom and Ginger & Lemongrass.
NESCAFE Classic leveraged its connect with the youth and launched a number of initiatives and activations. The new campaign âBadal Life Ki Raftaarâ establishes the strong role of NESCAFE Classic to provide the stimulation that equips the youth to take on the pressure of being a grown up. The topical execution of the campaign during monsoon with innovative formats in outdoor was highly appreciated by consumers. Weather based targeting on digital platforms enabled NESCAFE Classic to connect with the target audience through relevant messaging. The brand also reached out to the youth by experiential coffee sampling at colleges and consumer touch points across several cities.
NESCAFE SUNRISE continued its journey of driving brand differentiation in the core coffee market of South India. The new communication campaign âStart Your Day Brightâ was complemented with a regionalised approach to drive brand salience, consumption and availability. To take the brand culturally closer to the consumers, NESCAFE SUNRISE launched a new festive campaign about how small gestures can make a big difference, just like the rich aroma granules of NESCAFE SUNRISE.
The premiumisation journey was accelerated with the relaunch of NESCAFE Gold. The new product leverages global innovations to build premium cues and to deliver a superior coffee cup to consumers. The campaign âFor The Moments That Matterâ focused on celebrating special bonds in your life with a cup that is crafted with care.
More offerings in âConfectioneryâ
The âConfectioneryâ business continued its focus on growing the core and foraying into the value-up/ premium segment. The business wielded its strength towards continuous innovation and renovation of its portfolio to befit the evolving consumer trends. It was a year that delivered strong growth and consumers responded favourably to the new launches.
Your Company extended its portfolio and set another innovation benchmark in the coated wafer category with the launch of MUNCH Crunch-O-Nuts. It offers in every bite the multi textural combination of cocoa balls, double choco layer and delicious peanut creme.
MUNCH also became the official Crunch Partner of three popular teams in I PL 2018 with its mega campaign. Consumers were offered cool attitude bands, a limited edition T20 special MUNCH Orange Spinner flavor and a whole new TVC that brought to life the idea of MUNCH giving âFree Ka Attitudeâ.
MUNCH Nuts new campaign was amongst the most viewed ads on YouTube, and was also declared number one campaign on The Economic Times Brand Equity list.
Your Company also introduced KITKAT
DESSERT DELIGHT Brownie Kubes, a unique western dessert concept that provides balanced dark chocolate for the Indian consumers. Continuing to provide innovative breaks to its consumers, your Company launched a new strawberry flavoured NESTLE KITKAT Strawberry Duo.
KITKAT, which has always inspired consumers to take a break from the monotonous routine, launched a new packaging, showcasing immersive travel locations of Goa. Your Company also collaborated with Government of Goa and Drishti to train 1,000 lifeguards, cruise crew, beach cleaning staff and watersport operators.
âNestle Professionalâ - Out-of-Home Business
Your Companyâs âOut of Home businessâ registered volume and value growth in 2018.
This growth was driven by increased reach and distribution of products across key out of home channels such as education institutes, airlines, railways, offices as well as the food service channels such as hotels and restaurants. Your Company also engaged with young chefs in various hotel management institutions and celebrated International Chefs Day, by organizing cooking workshops for adolescents, teaching them the basics of nutrition.
Institutional packs of NESCAFE Classic,
MAGGI Coconut Milk powder and MILKMAID performed well with new customer acquisitions and increased penetration through stronger customer engagement. New product in the form of KITKAT bits meant for the bakeries and cafes was also launched.
With access to an array of brands under its portfolio, your Company through its retail formats âOne Nestle Experienceâ, brought brands and consumers closer. MAGGI and NESCAFE adopted this format with consumers seeking high quality food options that fit into their time crunched lifestyle. Additionally, 300 kiosks operated by third parties selling Company products were added across cities of India.
Awards and Recognitions
Your Company received awards at various industry platforms in the area of corporate management, marketing, advertising, digital engagement, packaging, human resource development and corporate social responsibility. Some awards are listed below:
- Bagged âEmployee Engagement Leadership Awardâ in the category âBest Initiative in Benefits for Working Mothersâ at the Employee Engagement Leadership Converge 2018.
- Featured amongst the Rs.100 Best Companies for Women in Indiaâ at the âBest of Best Conference 2018â, presented by Avtar group and Working Mother Media.
- Recognized by Brand Equity, as one of the âTop 10 Ads of March 2018â for MAGGI MASALA-AE-MAGIC âKuch Achha Pak Raha Haiâ film.
- Won the âCampaign of the Month Award - All Indiaâ, by allaboutoutdoor.com for KITKAT DESSERT DELIGHT Brownie Kubes outdoor launch.
- Won silver for âNanhi Kali- Story Books Finds A Wayâ in âDirect Marketingâ and Bronze for NESCAFE RJ Rishi Campaign in âConsumer Products-Beverages & Drinks Categoryâ at Effie Awards 2018.
- Awarded âProduct Innovation of the year 2018â in the Nutrition Category for NESTLE CEREGROW
- Awarded âThe Emerging Brandâ by CIMS Medica in the Health and Wellness Category for RESOURCE Diabetic.
- Received Best Supplier Award for âSupply Chain - Foodâ at Walmart India annual âSupplier Summitâ
- Recognised by Confederation of Indian Industries for Food Safety; Food Testing, Manufacturing Competitiveness and Quality Management.
- Awarded Silver by Skoch Awards for âCorporate Social Responsibilityâ for Project Jagriti implemented in partnership with NGO Mamta.
- Won ET NOW, CSR Leadership Awards for the commendable work in the category of âConcern for Healthâ.
- Mr. Suresh Narayanan was ranked amongst the âBest CEOsâ at Asia Pacific Gender Diversity and Leadership Excellence Awards for âLeading on Gender Diversityâ.
- Mr. Suresh Narayanan was honoured with the âResponsible Business Leaderâ award for successfully embedding responsible business practices across Nestle India at Responsible Business Summit 2018.
- Mr. Shobinder Duggal was awarded âThe Best CFO of A MNC - Largeâ by YES Bank and Business World.
Employee Focus
Your Company has been recognized as one of the leading three FMCG Companies for campus placements, which was further strengthened through multiple new touch points including the launch of Companyâs Instagram page, âN-Reachâ, a first of its kind industry-academia partnership, and 1st Day on Campus with Nestle.
Your Company in 2018 made successful lateral hires and strengthened its position as an âEqual Opportunity Employerâ. Your Company also saw a strong representation of women both as managers and in the field force. In 2018, its field force constituted 20% women, 71% women as management trainees, 60% women as technical trainees and 75% women as sales trainees. The diversity extends to your Companyâs Board of Directors, 50% of independent directors are women.
To further improve diversity, your Company organized unconscious bias programmes for employees. Provision of sanitary pad dispenser and disposal units in all factories and offices, sessions on menstrual health in factories and enhanced travel benefit for mothers, contributed towards the creation of an inclusive environment, that led to an increase in representation of women employees.
Your Company also launched the Nestle Changemakers programme - a social sabbatical policy that allows employees to volunteer their time and skills with an NGO partner on a socially relevant project for 4 weeks.
Sales
Your Company has further strengthened its distribution base, sales capabilities and execution skills to deliver leadership position in most categories. The speed, efficiency and best-in-class roll-out of putting new products on to the shelves and online platforms, along with the requisite consumer sampling and engagement activities has ensured availability, visibility and accessibility. Your Company continues to enhance its distribution footprint in the emerging purchase and consumption domains and geographies.
The fast growing shopper and consumer opportunities on the e-commerce channels were tapped and promoted through customized inputs, offers and packs like MAGGI Masala, NESCAFE travel kit, MAGGI rakhi and diwali packs.
Your Company believes that distribution-excellence and customer servicing will remain the key differentiator in the rapidly evolving retail landscape. Your Company recognized the necessity of a granular business focus approach and alignment process, and therefore conducted dedicated regional meets with its business partners across the country. New opportunities, initiatives and training programmes were shared, embraced and organized at these regional meets to ensure the continued excellence of our sales operations through our trusted business partners. Your Company has continued with its commitment of conducting its sales operations under the Nestle Business Excellence framework. This has led to further efficiencies via enhanced automation, simplification, order-and-collection management and in addressing the service gaps and opportunities.
Management Analysis
Review of Economic Scenario and outlook
Indiaâs economy in 2018 gained momentum as a result of the stabilization of Goods and Services Tax (GST) and India opening up more to foreign investors.
The year 2018 witnessed quick recovery and Indiaâs growth accelerated to an estimated 7.3 per cent for 2018 - 19. The economy regained after a temporary slowdown due to demonetisation and the implementation of GST. Economic activity continued to recover with strong domestic demand and increase in consumption remained a major contributor to this growth. India emerged as the fastest growing major world economy in 2018 despite increased global vulnerabilities, such as rising oil prices, escalated trade wars between global partners, and the US monetary shutdown.
During the year 2018, India made some important strides. It climbed another 23 points in the World Bankâs ease of doing business index to the 77th position, for the first time.
During the year 2018, the Food Processing sector grew at an average pace of 8% per annum. Governmentâs flagship programmes played a significant role towards boosting investment in this sector.
Opportunities and Risks Aided by consumer demand, private consumption remains robust in India. Healthy demand growth outlook will continue to boost the economy. The rural markets performed well because of numerous government schemes and also because of the growing income levels of the rural population. Consumption in the rural market was buttressed by a large base of technologically savvy Indian consumer.
The young India, is aspirational, this is reflected in the lifestyle choices adopted by them, both in their personal and professional life. The availability of high disposable income and exposure to a rapidly changing environment is encouraging the millennials to consider health and wellness as an important part of overall well-being that complements their changing and upwardly mobile lifestyle. While there are quick purchases, these purchase decisions are backed by healthy choices and increasing demand for value-up and premium products. Your Company has specialized digital acceleration and e-commerce teams that are pursuing business opportunities in the space of e-commerce.
Your Company can leverage access to Nestle technology to develop more science-based products that provide superior benefits of Nutrition, Health and Wellness at appropriate price points. Your Company has state-of-the-art manufacturing facilities, efficient supply chain, sales automation with extensive reach. This combined with access to strong R&D and expertise in science based nutrition plays an important role in providing high quality and safe food products. The product portfolio of your Company continues to be strengthened by accelerated innovation and renovation to stay relevant to the emerging and differentiated needs of the consumers.
Your Company continues to receive valuable support from Nestle Groupâs unmatched R&D capabilities and expertise. Under the General License Agreements (GLAs), your Company has ongoing access to global portfolio of thousands of brands and patents, proprietary technologies and know-how developed by the global network of 31 R&D centres (including one in India); as well as expertise across the business value chain in operations, commercial and support functions. All the products manufactured and/ or sold by the Company, are on the basis of the Licences provided by the Licensor to the Company under the GLAs. The access under the GLAs to the capabilities of Nestle Group, is integral for the Company to continue to deliver long term sustainable growth, Create Shared Value for the shareholders and the society.
Your Company has initiatives in place to minimize the environment footprint in the areas of water, plastic waste management, conservation and proper disposal of packaging materials which are in the latter part of the report.
Despite risks arising out of volatile crude oil prices and the weakening of the Indian Rupee against US dollar, the rural markets combined with ongoing structural reforms are expected to continue to boost economic activity in India.
Operational Efficiency
Your Companyâs improved operational efficiencies have delivered products of higher quality and at a competitive cost.
Your Company through digitalization has moved towards âPaperless Shop Floorâ. By introducing Factory Automation System (FAS) at all factories, your Company has ensured data security and reliable network. In addition to the above, your Company already has an Advanced Process Control at Samalkha factory which ensures smooth manufacturing operations, automated recipe adjustment flexibility, better control on loss and performance and delivery of quality products.
Quality and Food Safety
Quality and Food Safety are highest priority for your Company. Your Company continued to deliver products that meet high quality standards and are safe for consumption. In line with the requirement of Food Safety Training & Certification Programme (FoSTaC) under Food Safety and Standards Act (FSSA), 469 employees have been trained across all factories.
During the year 2018, all factory laboratories of your Company have received accreditation from the National Accreditation Board for Testing and Calibration Laboratories (NABL), which is aligned with ISO 17025 Standard. Accreditation of Laboratories is considered to be an important indicator of the technical competency to undertake the tests for which the laboratory is accredited and further strengthen consumer trust in the products of your Company.
Environment
The aim of your Company is to develop business while improving its environmental performance in order to create a more sustainable future. In order to achieve this, your Company continues to focus on measures for the conservation and optimal utilization of energy in all the areas of its operations. Factories are encouraged to consistently improve operational efficiencies, minimize consumption of natural resources and reduce water, energy and carbon emissions while maximizing production volumes.
From 2003-2018, for every tonne of production, your Company has reduced the usage of energy by 45%, reduced water usage by 53%, reduced greenhouse gases generation by 55% and the generation of waste water by 49%.
Waste for Disposal
Your Company is always looking at ways to improve efficiency, quality and productivity with optimal resources and less waste. As part of the commitment to zero waste to landfill in the operations, efforts to reduce waste have shown marked improvement over the last year. During the year 2018, the factories reduced waste for disposal to landfill by 68.5% over 2017. Six out of eight factories are zero waste to landfill and your Company aims to make all factories as zero waste to landfill by 2020.
Packaging and Plastic Waste Management Rs.2 Minute Safaai Ke Naamâ
Your Company believes that there is a need to engage with consumers and bring about a behavioural change about the need for disposing plastic waste responsibly. Therefore, your Company designed a campaign for this purpose and called it, Rs.2 Minute Safaai Ke Naamâ (2 minutes for cleanliness) in Dehradun and Mussoorie. In this campaign, the Company incentivized the consumers by giving them a packet of MAGGI Noodles on return of every 10 empty MAGGI noodles wrappers. This campaign brought together multiple stakeholders to address the issue of proper plastic waste disposal. Your Company, the media partner, NGO, not for profit waste management organizations, colleges / universities, retailers, owners of MAGGI branded retail outlets (MAGGI Point), all came together for responsible disposal of plastic waste and protecting the environment.
In the second phase of this Project, your Company is working with Mussoorie Nagar Palika Parishad (MNPP) and RECITY Network by implementing an integrated plastic waste management system in Mussoorie. The initiative will focus on governance, understanding waste streams and its generation, filling the infrastructure gaps, driving behavioral change, developing a monitoring framework to ensure transparency and developing a circular economy and structure to carry forward the systems developed by the Project. The aim of this Project is to support Mussoorie being amongst the cleanest hill stations in India.
Extended Producers Responsibility and Consortium Approach
Your Company believes that tackling the issue of plastic waste requires collective approach. Also, there was an urgent need to showcase that multi layered plastic waste, when properly collected, segregated and disposed can be processed and managed till the end of its life. A consortium which initially comprised of 5 companies was formed. The consortium engaged with various NGOs, waste management service providers and conducted successful pilot projects to manage multilayered plastics effectively. The projects focus on the following:
- Awareness and training programmes for rag pickers
- Improve livelihood of waste pickers
- Collection, segregation and recycling of postconsumer waste
Post successful pilots, the consortium started working in the states of Punjab and Maharashtra. The membership of the consortium has increased to almost 35 FMCG companies and is expanding. Your Company in its individual capacity expanded its waste management projects to another 10 states. In the year 2018, your Company managed approximately 5,986 metric tonnes of post-consumer multi layered plastic waste, as a part of commitment towards Extended Producers Responsibility.
Reduction in Greenhouse Gas Emissions The Nanjangud factory in the State of Karnataka has entered into long term power purchase agreements with two solar power developers to supply 20 Mio KWH (units) per annum, which is 56% of the total requirement. This initiative will reduce greenhouse gas emissions by 18,200 tonnes per annum and also save cost.
Safety and Health
Your Company developed a comprehensive and systematic programme on machinery safety for the benefit of the employees to prevent any untoward incident. Your Company has also taken considerable measures to promote road safety by conducting awareness campaigns for the employees as well as third party transport service drivers. Your Company provides preventive health check-up to employees.
Your Company offers programmes for employees, that support healthier lifestyle choices and also conducts programmes on yoga, stress management, bone health and ergonomics.
Supply Chain
During the year 2018, Supply Chain continued to actively work towards enabling consumer led growth and creating a winning edge. Post implementation of Goods and Services Tax (GST) during 2017, your Company initiated work on simplification of the downstream value chain and progressed well in reducing the distribution centres from the starting point of 38 to 30 and plans to continue the work for further optimisation. This initiative has led to savings in costs, improved freshness and better availability of products.
Your Company continues to improve the freshness of products available on the shelf, leveraging mobile application based technology and advanced analytics using data and information on product attributes and real time information about on-shelf product freshness levels. There is continuous improvement in supply planning resulting in optimum product inventory and availability of your Companyâs products at each stage of the value chain. Sustained focus is maintained on continuous improvement in trade working capital efficiency. Initiatives during the year targeting optimization of finished goods and material inventories and improvement on trade payables have resulted in improved net trade working capital.
Nestle Business Excellence
To support Nestleâs organization principles of increased business focus, speed and quality of execution, and highly efficient support structures, Nestle Business Excellence (NBE) was formed in 2014. Your Company is constantly working towards transforming End-to-End (E2E) processes and leveraging technology to simplify operations and enhance its capabilities to retain the competitive edge. NBE provides the requisite framework to leverage our size, optimize E2E flows and provide world-class services (Nestle Global Business Service) in an integrated, cost-competitive and seamless manner to support business performance.
Your Company is optimizing six industry-standard global E2E flows, which captures ongoing business operations:-
1. Source to Pay (from sourcing materials and services to paying vendors)
2. Order to Cash (from customer order to invoice payment)
3. Hire to Retire (from attracting talent to enabling employees on their Nestle journey)
4. Record to Report (from recording transactions to financial and performance reporting)
5. Plan to Execute (from strategic and product planning to supplying products)
6. Idea to Launch (from innovative product ideas to consumer launch)
During the year, your Company implemented the Idea-To-Launch processes and tools. It has set up a Centre of Scale at Gurugram that leverages scale and supports the transactional processes for the various E2Es. A Centre of Competence is also being set up to support and execute competence based E2E activities for the business operations.
The initiative of Nestle Continuous Excellence (NCE) will continue to enable through people: alignment, leadership development and Lean ways of working. Information Technology will continue to enable through technology: processes, data and systems.
Cautionary Statement
Statements in this Report, particularly those which relate to Management Discussion and Analysis as explained in the Corporate Governance Report, describing the Companyâs objectives, projections, estimates and expectations may constitute âforward looking statementsâ within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied in the statement depending on the circumstances.
Directorsâ Responsibility Statement
The Directors state that:
a) in the preparation of the annual accounts, the applicable accounting standards had been followed and no material departures were made from the same;
b) they had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period;
c) they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) they had prepared the annual accounts on a going concern basis;
e) they had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
f) they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Corporate Governance
In terms of Regulation 34 of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter âListing Regulationsâ), a Report on Corporate Governance along with Compliance Certificate issued by Statutory Auditors of the Company is attached as Annexure - 1 and forms integral part of this Report (hereinafter âCorporate Governance Reportâ).
Directors and Key Managerial Personnel
In terms of the Articles of Association of the Company, on the recommendation of the Nomination and Remuneration Committee, the Board of Directors, in its meeting held on 26th October, 2018 subject to approval of the shareholders of the Company, appointed Ms. Roopa Kudva as an Additional Director and Independent Non-Executive Director of the Company with effect from 1st January, 2019 for a period of five consecutive years for a term up to 31st December, 2023. Ms. Roopa Kudva holds office up to the date of the forthcoming Annual General Meeting and is eligible for appointment. Based on the recommendation of the Nomination and Remuneration Committee, the Board recommends for the approval of the Members through an Ordinary Resolution in the 60th AGM of your Company, the re-appointment of Ms. Kudva as an Independent Non-Executive Director for a term of five consecutive years from 1st January, 2019 up to 31st December, 2023.
Pursuant to the provisions of the Companies Act, 2013 (âActâ), the shareholders in the 56th AGM of your Company held on 15th May, 2015 appointed Mr. Rajya Vardhan Kanoria as an Independent Non-Executive Director to hold office for five consecutive years for a term up to 12th May, 2019. Mr. Kanoria is eligible for re-appointment as an Independent NonExecutive Director for a second term of five consecutive years. Pursuant to the provisions of the Act, based on the recommendation of the Nomination and Remuneration Committee, the Board recommends for the approval of the Members through a Special Resolution in the 60th AGM of your Company, the re-appointment of Mr. Kanoria as an Independent Non-Executive Director for second term of five consecutive years from 13th May, 2019 up to 12th May, 2024.
Mr. Martin Roemkens shall retire at the forthcoming AGM of your Company by rotation and being eligible offers himself for re-appointment. His brief resume and other details as required under the Act and Listing Regulations for his re-appointment as Director are provided in the Notice of the 60th AGM of your Company.
Details of the proposal for the appointment / re-appointment of Directors are mentioned in the Explanatory Statement under Section 102 of the Companies Act, 2013 of the Notice of the 60th Annual General Meeting (âAGMâ) of your Company.
The Independent Directors of your Company have given a declaration confirming that they meet the criteria of independence as prescribed both under the Act and the Listing Regulations. The Nomination and Remuneration Committee had adopted principles for identification of Key Managerial Personnel, Senior Management including the executive directors which are based on âNestle Purpose and Valuesâ and âNestle Leadership Frameworkâ. The Appointment and Remuneration Policy of the Company includes criteria for determining qualifications, positive attributes and independence of a director and policy relating to the remuneration of Directors, Key Managerial Personnel and other employees is framed with the object of attracting, retaining and motivating talent which is required to run the Company successfully. The same is available on the website of the Company at the link: https:// www.nestle.in/investors/policies
Your Company has devised a formal process for annual evaluation of performance of the Board, its Committees and Individual Directors (âPerformance Evaluationâ). It covers the areas relevant to the functioning as Independent Directors or other directors, member of Board or Committees of the Board. Your Company engaged a leading HR Consulting Firm for compilation of the feedback received from the Board members, Committee members and directors and for identifying key inferences and observations with respect to Performance Evaluation.
Corporate Social Responsibility
During the year under review, the Corporate Social Responsibility Committee comprised of Dr. (Mrs.) Swati A. Piramal (Chairperson), Ms. Rama Bijapurkar, Independent Nonexecutive Director and Mr. Suresh Narayanan, Chairman and Managing Director of the Company. The terms of reference of the Corporate Social Responsibility Committee is provided in the Corporate Governance Report. Your Company has also formulated a Corporate Social Responsibility Policy (CSR Policy) which is available on the website of the Company at https://www.nestle.in/investors/policies. Annual report on CSR activities as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 has been appended as Annexure - 2 and forms integral part of this Report.
In terms of Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility) Rules, 2014 as amended (âCSR Rulesâ) and in accordance with the CSR Policy, during the year 2018, the Company has spent above two percent of the average net profits of the Company during the three immediately preceding financial years. The details are provided in the Annual Report on CSR activities. In addition to the above, the Company has been implementing societal activities since many decades under umbrella of Creating Shared Value activities which have not been reckoned for arriving at the spends as per CSR Rules.
Some key initiatives that your Company has been engaged in are as follows:
Nestle Healthy Kids Programme The Nestle Healthy Kids Programme has been developed with a focus to raise nutrition, health and wellness awareness among adolescents. The programme contributes towards overall development of adolescents as well as encourages healthier lifestyle, by arming them with knowledge that impacts them in a meaningful way. The programme is being conducted since 2009 and is helping raise awareness regarding good nutritional and cooking practices, good hygiene and promoting physical fitness. The programme is implemented through two modes, one is in partnership with six regional universities and the second is with NGO Magic Bus India Foundation.
Till year 2018, over 280,000 adolescents across 22 states have been encouraged to live healthier lives through Nestle Healthy Kids Programme.
Project JAGRITI
As part of the commitment to inspiring people to lead healthier lives and providing educational programmes, your Company, in partnership with Mamta Health Institute for Mother and Child implemented Project JAGRITI. The programme focuses on developing community support for improved health and nutrition outcomes among adolescents, young couples and caregivers while improving the uptake of public health services.
During the years 2016 to 2018, the programme ran across 15 districts of Rajasthan, Karnataka, Maharashtra, Chandigarh, Odisha, Uttar Pradesh, Bihar and Delhi, reaching out to 4.6 million beneficiaries - 1.5 million direct and impacting 3.1 million beneficiaries indirectly.
Project Serve Safe Food Recognizing the potential of street food vending as an important source of livelihood, your Company joined hands with NGO Nidan and National Association of Street Vendors of India (NASVI), to develop programmes to train street food vendors on subjects such as health, hygiene, food handling, food safety, personal hygiene, cart hygiene, garbage disposal and entrepreneurship. During the year 2018, this programme was implemented across Delhi, Kerala, Maharashtra, Madhya Pradesh, Chhattisgarh, Tamil Nadu, Gujarat, Odisha, J&K, reaching out to 14,165 street food vendors.
Business Responsibility Report
Creating Shared Value is your Companyâs fundamental way of working and contributing to society while ensuring long-term business success. Your Company has been conducting business in a way that delivers long-term shareholder value and benefits to society under approach of âCreating Shared Valueâ.
The Business Responsibility Report as per Regulation 34 of the Listing Regulations has been appended as Annexure - 3 and forms integral part of the Annual Report.
Statutory Auditors
As per Section 139 of the Companies Act, 2013 (âthe Actâ), read with the Companies (Audit and Auditors) Rules, 2014, the Members of the Company in 58th Annual General Meeting approved the appointment of M/s. B S R & Co. LLP, Chartered Accountants (ICAI Registration No- 101248W/W-100022), as the Statutory Auditors of the Company for an initial term of 5 years i.e. from the conclusion of 58th Annual General Meeting till the conclusion of 63rd Annual General Meeting of the Company. Pursuant to amendments in Section 139 of the Companies Act, 2013, the requirements to place the matter relating to such appointment for ratification by members at every annual general meeting has been omitted with effect from 7th May, 2018.
The Report given by M/s. B S R & Co. LLP, Chartered Accountants on the financial statement of the Company for the year 2018 is part of the Annual Report. There has been no qualification, reservation or adverse remark or disclaimer in their Report. During the year 2018, the Auditors had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134(3)(ca) of the Act.
Cost Accounts and Cost Auditors
In terms of the Section 148 of the Companies Act, 2013 (âthe Actâ) read with Rule 8 of the Companies (Accounts) Rules, 2014, it is stated that the cost accounts and records are made and maintained by the Company as specified by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013.
In terms of Section 148 of the Act read with Companies (Cost Records and Audits) Rules, 2014, the Audit Committee recommended and the Board of Directors appointed M/s. Ramanath Iyer and Co., Cost Accountants, New Delhi (Registration No. 00019) being eligible, as Cost Auditors of your Company, to carry out the cost audit of milk powder products manufactured by the Company falling under the specified Customs Tariff Act Heading 0402 in relation to the financial year ending 31st December,
2019. Your Company had received their written consent that the appointment will be in accordance with the applicable provisions of the Act and rules framed thereunder.
The remuneration of Cost Auditors has been approved by the Board of Directors on the recommendation of Audit Committee and in terms of the Companies Act, 2013 and Rules thereunder requisite resolution for ratification of remuneration of the Cost Auditors by the members has been set out in the Notice of the 60th Annual General Meeting of your Company.
During the year 2018, the Cost Accountants had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134(3)(ca) of the Act.
Secretarial Auditors and Secretarial Standards
The Secretarial Audit was carried out by M/s. S.N. Ananthasubramanian & Co., Company Secretaries (CP No. 1774) for the financial year 2018. The Report given by the Secretarial Auditors is annexed as Annexure - 4 and forms integral part of this Report. There has been no qualification, reservation or adverse remark or disclaimer in their Report. During the year 2018, the Secretarial Auditors had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134 (3)(ca) of the Act.
In terms of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Audit Committee recommended and the Board of Directors appointed M/s. S.N. Ananthasubramanian & Co., Company Secretaries (CP No. 1774) as the Secretarial Auditors of the Company in relation to the financial year ending 31st December, 2019. Your Company had received their written consent that the appointment will be in accordance with the applicable provisions of the Act and rules framed thereunder.
During the year 2018, your Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.
Meetings of the Board
During the year 2018, the Board of Directors met eight times. For details of the meetings of the Board of Directors, please refer to the Corporate Governance Report.
Extract of Annual Return
The extract of annual return in Form MGT 9 as required under Section 92(3) of the Companies Act, 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014 is available on the website of the Company at the link: https://www.nestle.in/investors/ stockandfinancials/annualreturns
Details of Loans and Investments
Details of the loans given by your Company under Section 186 of the Act during the financial year ended 31st December, 2018 are as follows: Nestle R&D Centre India Private Limited (Fellow Subsidiary): Rs.250 million at the interest rate of 7.75% per annum for general business purpose (Loan outstanding at the end of the year was Nil); SMA Nutrition India Private Limited (Fellow Subsidiary): Rs.50 million at the interest rate of 8.17% per annum for general business purpose (Loan outstanding at the end of the year was Nil); and PURINA PetCare India Private Limited (Fellow Subsidiary): Rs.165 million at the interest rate of 8.04% per annum for general business purpose (Loan outstanding at the end of the year was Nil). For details of investments, please refer note no. 10 forming part of financial statements.
Related Party Transactions
Your Company has formulated a policy on related party transactions which is also available on Companyâs website at https:// www.nestle.in/investors/policies. This policy deals with the review and approval of related party transactions. The Board of Directors of the Company has approved the criteria for making the omnibus approval by the Audit Committee within the overall framework of the policy on related party transactions. Prior omnibus approval is obtained for related party transactions which are of repetitive nature and entered in the ordinary course of business and at an armâs length basis. All related party transactions are placed before the Audit Committee for review and approval.
All related party transactions entered during the year 2018 were in ordinary course of the business and on an armâs length basis. No i material related party transactions were entered during the Financial Year by your Company.
The disclosure of related party transactions as required under Section 134(3)(h) of the Companies Act, 2013 in Form AOC 2 is not applicable to your Company. Members may refer to note no. 46 to the financial statement which sets out related party disclosures pursuant to IND AS-24.
Risk Management
The Board of Directors had constituted Risk Management Committee to identify elements of risk in different areas of operations and to develop policy for actions associated to mitigate the risks. The Committee on timely basis informs the Board of Directors about risk assessment and minimization procedures which in the opinion of the Committee may threaten the existence of the Company, if any. The details of Risk Management Committee and its frequency of meetings are included in the Corporate Governance Report.
Public Deposits
Your Company has not accepted any Public Deposits under Chapter V of the Companies Act, 2013.
Significant and Material orders passed by the Regulators/Courts/ Tribunals
No significant or material orders were passed by the Regulators or Courts or Tribunals which impacts the going concern status and Companyâs operations in future.
Complaint filed in National Commission
The Union of India, Department of Consumer Affairs in 2015 had filed a complaint before the National Consumer Dispute Redressal Commission on the allegation that by selling MAGGI Noodles in the past, your Company has indulged in unfair trade practice, sold defective goods to the public and sold goods which will be hazardous. Complaint seeks compensation of Rs.2,845.5 million and punitive damages of Rs.3,554.1 million. Your Company has challenged the complaint. The court proceedings are currently ongoing.
Internal Financial Controls and their adequacy
The Directors had laid down internal financial controls to be followed by your Company and such policies and procedures adopted by your Company for ensuring the orderly and efficient conduct of its business, including adherence to your Companyâs policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. The Audit Committee evaluates the internal financial control system periodically.
Audit Committee
During the year under review, the Audit Committee comprised Independent NonExecutive Directors, namely, Mr. Ashok Kumar Mahindra (Chairperson), Dr. Rakesh Mohan and Mr. Rajya Vardhan Kanoria. Powers and role of the Audit Committee are included in Corporate Governance Report. All the recommendations made by the Audit Committee were accepted by the Board of Directors.
Vigil Mechanism
The Vigil Mechanism of your Company is governed by significant documents âThe Nestle Corporate Business Principlesâ, âNestle Purpose and Values document â and âNestle Code of Business Conductâ. The said mechanism is available to the directors and employees, who can report to the Company Secretary, on a confidential basis, any practices or actions believed to be inappropriate or illegal under the Nestle India Code of Business Conduct (âthe Codeâ). The Code provides for adequate safeguards against victimization of director(s)/ employee(s) who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee in exceptional cases.
It is affirmed that no person has been denied access to the Audit Committee. As an additional facility to all the directors and employees of the Company, the Company under the Code provides Integrity Reporting System (âIRSâ), an independent third party operated free phone and web based facility for the directors and employees of the Company across all locations. The details of IRS along with FAQs are available to the directors and employees on your Companyâs intranet portal. Further, your Company has appointed Ombudsman for Infant Code, under which employees can report Infant Code violations directly to the Ombudsman, with adequate safeguard to protect the employee reporting. Your Company also provides an independent third party operated free phone and web based facility, âTell usâ, to all internal and external stakeholders with a dedicated communication channel for reporting potential instances of non-compliance with Nestle Corporate Business Principles. Details of âTell Usâ are available on www.nestle.in.
Information regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo
Information required under Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 for the financial year ended 31st December, 2018 in relation to the Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is given in the Annexure - 5 forming integral part of this Report.
Information regarding Employees and related disclosures
Your Company considers people as its biggest assets and âBelieving in Peopleâ is at the heart of its human resource strategy. Concerted efforts have been put in talent management and succession planning practices, strong performance management and learning and training initiatives to ensure that your Company consistently develops inspiring, strong and credible leadership. During the year the focus of your Company was to ensure that young talent is nurtured and mentored consistently, that rewards and recognition are commensurate with performance and that employees have the opportunity to develop and grow.
Your Company has established an organization structure that is agile and focused on delivering business results. With regular communication and sustained efforts it is ensuring that employees are aligned on common objectives and have the right information on business evolution. Your Company strongly believes in fostering a culture of trust and mutual respect in all its employees and seeks to ensure that Nestle values and principles are understood by all and are the reference point in all people matters.
The statement of Disclosure of Remuneration under Section 197 of the Act and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (âRulesâ), is appended as Annexure - 6 to the Report. The information as per Rule 5(2) of the Rules, forms part of this Report. However, as per first proviso to Section 136(1) of the Act and second proviso of Rule 5(2) of the Rules, the Report and Financial Statements are being sent to the Members of the Company excluding the statement of particulars of employees under Rule 5(2) of the Rules. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.
As per the requirement of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH), your Company has a robust mechanism in place to redress complaints reported under it. The Company has complied with provisions relating to the constitution of Internal Complaints Committee under POSH. The Internal Committee (IC) composed of internal members and an external member who has extensive experience in the field. During the year 2018, no cases of sexual harassment were reported in your Company. During the course of the year, several initiatives were undertaken to demonstrate the Companyâs zero tolerance philosophy against discrimination and sexual harassment, which included creation of comprehensive and easy to understand training and communication material which are also made easily accessible. In addition, workshops were also run for the employees to enhance awareness and knowledge of other biases that may influence thinking and actions.
Trade Relations
Your Company maintained healthy, cordial and harmonious industrial relations at all levels. Despite severe competition, the enthusiasm and unstinting efforts of the employees have enabled your Company to remain at the forefront of the Industry.
Your Company continued to receive cooperation and unstinted support from the distributors, retailers, stockists, suppliers and others associated with the Company as its trading partners. The Directors wish to place on record their appreciation for the same and your Company will continue in its endeavor to build and nurture strong links with trade, based on mutuality, respect and co-operation with each other and consistent with consumer interest.
Appreciation
Your Company has been able to operate efficiently because of the culture of professionalism, creativity, integrity and continuous improvement in all functions and areas as well as the efficient utilization of the Companyâs resources for sustainable and profitable growth.
The Directors hereby wish to place on record their appreciation of the efficient and loyal services rendered by each and every employee, without whose whole-hearted efforts, the overall satisfactory performance would not have been possible. Your Directors look forward to the long term future with confidence.
On behalf of the Board of Directors
Suresh Narayanan
Chairman and Managing Director
Date : 14th February, 2019
Place : Gurugram
Dec 31, 2017
Board''s Report - 2017
Dear Members,
The Directors are pleased to present their report and financial statements for the year ended 31st December, 2017.
(Rs, in Million)
|
Particulars |
2017 |
2016'' |
|
Sale of products |
101,351.1 |
94,096.0 |
|
Other operating revenues |
570.7 |
649.7 |
|
Other Income |
1,769.2 |
1,509.0 |
|
Total Income |
103,691.0 |
96,254.7 |
|
Total Expense |
85,298.0 |
80,693.1 |
|
Profit before exceptional items and tax |
18,393.0 |
15,561.6 |
|
Less: Exceptional items |
- |
107.8 |
|
Profit before tax |
18,393.0 |
15,453.8 |
|
Less: Tax expense |
6,141.1 |
5,440.2 |
|
Profit after tax |
12,251.9 |
10,013.6 |
|
Other Comprehensive Income |
(889.8) |
(760.4) |
|
Total Comprehensive Income |
11,362.1 |
9,253.2 |
|
Opening balance in Retained Earnings |
23,689.3 |
21,016.0 |
|
Amount available for appropriation |
35,034.0 |
30,477.8 |
|
Interim dividends 2017: ''63.00 per share 2016: ''40.00 per share |
6,074.2 |
3,856.6 |
|
Final dividends 2016: ''23.00 per share 2015: ''18.50 per share |
2,217.6 |
1,783.7 |
|
Less: Dividend distribution tax |
1,687.7 |
1,148.2 |
|
Closing balance in Retained Earnings |
25,054.5 |
23,689.3 |
|
Key ratios |
||
|
Earnings per shared |
127.07 |
103.86 |
|
Dividend per share( '') Interim Proposed - Final |
63.00 23.00 |
40.00 23.00 |
|
Additional Information: Profit from operations |
18,304.8 |
16,542.0 |
The Company has adopted Ind AS w.e.f.
1st January, 2017 with a transition date of 1st January, 2016. Accordingly, results for the year ended 31st December, 2017 have been prepared in accordance with Ind AS prescribed under Section 133 of the Companies Act,
2013 and other accounting principles generally accepted in India. Previous periods figures have been restated as per Ind AS to make them comparable.
Total Sales and Domestic Sales for the year increased by 7.7% and 8.2%, respectively. These growth rates are adversely impacted due to lower reported sales by the change in structure of indirect taxes and reduction in realizations to pass on the GST benefits. On a comparable basis the domestic sales growth is ''estimated'' at 11.8% due to increase in volumes including rebuild of MAGGI Noodles, supplemented by better underlying realizations. Export Sales increased by 0.9%.
Other Income has increased due to higher average liquidities partially offset by lower yields. The Impairment Loss on Fixed Assets of ''371.8 million relates to various items of plant and machinery and building that have been brought down to their recoverable value upon evaluation of future economic benefits from their use.
The Company has created a contingency provision of ''1,136.5 million for various contingencies resulting mainly from matters, which are under litigation/related disputes and other uncertainties requiring management judgment. The Company has also reversed, utilized/ settled contingency provision of ''260 million due to the satisfactory settlement of certain litigations and settlement of obligations under free replacement warranty for which provision is no longer required.
Market Capitalization is based on year end closing share price quoted on BSE Ltd.
Book Value per share is based on the total shareholder''s funds as at the year end.
*Impacted by MAGGI Noodles issue
Figures of 2016 and 2017 are stated as per Ind AS (Refer note 54 of the financial statements)
total dividend for 2017 aggregates to Rs,86.00 per equity share which includes three interim dividends of Rs,15.00 per equity share paid on 2nd June, 2017, Rs,15.00 per equity share paid on 16th August, 2017 and Rs,33.00 per equity share paid on 22ndDecember, 2017.
Exports
The exports for your Company remained flat for the year at Rs,6,626.6 million. All key markets with sizeable Indian diaspora responded positively to the culinary business plans and demand is now emanating from these geographies. The year 2017 witnessed your Company making inroads into newer geographies for instance Caribbean Islands, European Union and Sri Lanka.
Coffee exports for your Company continued to witness growth in 2017. Important export markets for instant coffee were Turkey, Bangladesh, Taiwan, Singapore and Middle East. Coffee exports of your Company received recognition from trading partners and by the Karnataka State Export Promotion Council.
The Confectionery exports to Middle East and Ghana which started in 2016, remained subdued because of slow demand. Infant nutrition exports to Bangladesh grew in volume during 2017.
Contribution to the Exchequer
Your Company over the years has been enabling significant contribution to various taxes. During the year 2017, the Company through its business, enabled tax collections at Central and State level close to Rs,27.3 billion, in aggregate.
Business Development
Nutrition, Health and Wellness continued to be the cornerstone of your Company''s business in 2017. The brands were once again re-energized through innovation and renovation, in the form of new product launches or introduction of product variants, to meet the changing needs of consumers. Your Company was focused and driven, it increased its product penetration into newer regional markets and expanded its consumer base.
Since food and its safety has a significant influence on people''s health, at our request, Nestle S.A. set up the Nestle Food Safety Institute (NFSI) in India in September 2017 as a part of Nestle R&D Centre India Pvt. Ltd., with the objective of building and sharing knowledge that would strengthen the food safety environment in our country. NFSI aspires to be a collaborative partner between regulatory bodies, academia and industry to cater to the health and safety of our consumers. The NFSI laboratory is equipped with high-end analytical technology and is an integral part of the global network of food safety experts at Nestle.
Our commitment to Nutrition, Health and Wellness was further reinforced through our work, aimed at creating healthier products, healthier environment, healthier community and healthier society.
Innovating and Renovating ''Prepared Dishes and Cooking Aids'' Portfolio
The ''Prepared Dishes and Cooking Aids'' business 2017 was a year of comprehensive , performance by brand MAGGI. MAGGI''s core category Noodles had a double-digit volume growth and an increase in households purchasing the brand as compared to 2016.
A robust regional initiative consisting of local language media, sampling, activation, drove awareness and trials at the grass root level. MAGGI continued its focus on innovating and renovating its portfolio with new engagement every quarter.
A special limited edition range of noodle variants inspired by regional cuisines and spices called "MAGGI Masalas of India"
was introduced in markets across India. It was launched innovatively through Google Search and PayTM. It was the first time that any brand introduced Google ''Search'' in the pre-launch phase. The campaign resulted in creating engagement with over 130,000 entries, 7,500 pre bookings and a sale of over 150,000 packs on the day of the launch.
A new range of noodles were launched under MAGGI brand called "Nutri-licious" with variants like ''Atta Mexicana'' and ''Oats Masala'' supplemented with the benefits of protein and fibre.
In addition to this, your Company continued to develop the second pillar - the seasoning and cooking aid side of the business, led by our Masala-ae-Magic all-purpose seasoning.
Strengthening of ''Milk Products and Nutrition'' Portfolio
The ''Milk Products and Nutrition'' business registered a satisfactory growth, which was driven by volume of existing products and encouraging consumer response to new products.
Your Company extended chilled dairy portfolio range of Greek yogurts under NESTLE a GREKYO with exotic fruit flavors like blueberry, litchi and plain greek style curd. As a healthier snack with extra milk protein and real fruit pieces, the brand continued to accelerate its growth.
Recipe kits with partly sweetened condensed milk like MILKMAID ice cream kit and MILKMAID celebrations kit were designed as complete recipe solutions to prepare new, experimental, homemade ice creams and chocolate twists.
Nestle believes breast milk provides the best nutrition for babies and every child should be exclusively breastfed until six months, followed by introduction of age appropriate complementary feeding and breast milk until two years and beyond. For babies who cannot be breastfed, NAN EXCELLA PRO, a formula with DHA (Docosahexaenoic Acid) and ARA (Arachidonic Acid) combined with whey proteins was launched. DHA supports baby''s normal brain development and whey protein is required for easy digestion.
CEREGROW, an iron fortified nutritious cereal for children over 2 years launched in 2016 in select geographies got an encouraging response and was rolled out across India helping your Company to partner with consumers to nurture a healthier generation. Micronutrient deficiency is amongst the biggest public health challenge in the country with 80% of children less than 3 years, suffering from iron deficiency anemia, which could impact the overall cognition of a child. Since, the stomach size of a child is only 1/5th of an adult, the child cannot be fed with huge amounts of food to bridge the energy and micronutrient needs. CEREGROW provides the option of "Big Nutrition for Small Tummies" supported by an engaging program for the Healthcare professionals on the importance of iron fortification.
Your Company re-launched three health supplements in the adult nutrition segment manufactured by the Company under the brand ''RESOURCE'' designed to meet the specific health and nutrition needs. RESOURCE High Protein helps meet 37% of daily adult protein requirement, while RESOURCE Opti helps address malnutrition due to ageing or disease.
Growing ''Powdered and Liquid Beverages'' Portfolio
2017 was an exciting year for the ''Powdered and Liquid Beverages'' business as your Company continued to focus on growing the coffee and beverages market. NESCAFE Classic further leveraged it''s connect with the youth and launched a number of initiatives and I activations. The RJ Rishi campaign won several awards nationally and internationally '' including the Silver at ABBYs 2017 and the prestigious Grand Prix at the ADFEST 2017. The excitement in the category was fueled by the Cold Coffee initiative in summer season and the thematic brand campaign that was extended during the year with a new creative "Badal Life ki Raftaar, It all starts with a NESCAFE". Digital media was extensively used when engaging with the target audience.
NESCAFE Sunrise continued its journey to drive differentiation through various brand initiatives.
. __ _____ It launched a new
campaign, "Start Your Day Bright", which shows a new age couple starting their busy day together.
In 2017, your Company introduced MILO I ready-to-drink beverage low on sugar and received encouraging response.
More offerings in the ''Confectionery'' Portfolio
The ''Confectionery'' business continued its focus on growing the core and foraying into the value-up/premium segment. The business wielded its strength towards continuous renovation and innovation of its portfolio, to befit the evolving consumer trends. Your Company also introduced Category-Firsts with some of the brands. Your Company continued to strengthen its core brands KITKAT, MUNCH, MILKYBAR, BARONE, NESTLE CLASSIC and ALPINO through improved offerings and unique marketing campaigns.
KITKAT Dessert Delight was launched in a distinct ''finger-tablet'' format exclusively for the Indian market, with two rich and indulgent flavours, inspired by international desserts. Unique consumer promos were created like ''My Travel Break'' - a campaign that promised
to bring immersive travel break experiences to life and ''Celebreak.'' In a first of its kind initiative, select KITKAT packs were designed as picture postcards from interesting Indian locations.
MILKYBAR''s core portfolio became robust with MILKYBAR relaunch that took forward Nestle''s commitment to Health and Wellness. MILKYBAR extended its brand franchise to MILKYBAR MOOSHA, with a new milk coated bar with caramel and nougat.
MUNCH, the largest brand for Confectionery business tied up with Bahubali 2 - The biggest blockbuster; in a category-first mega thematic campaign. The brand leveraged the popularity of Bahubali 2, to create a high brand recall amongst its consumers and gain market share.
In one of its kind socially relevant partnerships, your Company collaborated with Indian Mouth and Foot Painting Artists (IMFPA) association in the festive season to create unique gift packs with Company products that make for a thoughtful gift. The range of these gift packs had visually appealing designs created by artists from IMFPA using their mouth or feet. With this unique gifting concept, your Company raised awareness about these artists and their organization across India, while also creating a deeper emotional connect with the consumers to celebrate this special cause.
Nestle Professional
''Nestle Professional'', the out-of-home business registered volume and value growth in 2017.
This growth was driven by increasing reach and distribution of products across key out-of-home channels like education institutes, airlines, railways, offices as well as the food service channels like hotels and restaurants.
Your Company''s brands NESCAFE Classic, NESCAFE Sunrise, MAGGI Coconut Milk Powder performed well with new customer acquisition and increased penetration through stronger customer engagement.
Your Company also engaged with young chefs in various hotel management institutions and celebrated International Chefs Day by organizing cooking workshops for adolescents teaching them the basics of nutrition.
Awards and Recognitions
Your Company received awards in various industry platforms in the area of corporate management, marketing, advertising, creativity, digital engagement, packaging, human resource development and social cause. Some awards are listed below:
- Forbes India Leadership award for the best CEO from an MNC was given to Mr. Suresh Narayanan. The Forbes India Leadership Awards recognizes outstanding leaders who have achieved success through their vision, foresight, and business ethics.
- MAGGI''s strong resurgence was also reflected in Brand Equity''s Most Trusted Brand Survey 2017, where MAGGI gained 9 spots and was ranked 16 amongst all consumer brands, across all categories. MAGGI was ranked 3rd under foods category.
- SABRE Asia Pacific is considered one of the most credible platforms that awards companies for their work in the area of communications.
Your Company won Gold, under the foods and beverages category.
- ADFEST showcases Asia''s best creative work by experts in various disciplines. This is a creative festival of repute. Your Company won 2 Gold and 1 Silver for the best use of radio channel, promotion and activation and best user generated content for the #StayStarted campaign by NESCAFE.
- ABBYs is one of the most distinguished Indian creative advertising platforms that awarded your Company 2 Gold, 6 Silver and 1 Bronze for the campaign #EducateTheGirlChild. NESCAFE won
2 Silver for the MTV labs and #StayStarted RJ Rishi campaign. MAGGI HOT HEADS received 1 Silver in the radio category for the ''Missing Mirchi'' Campaign.
- Your Company was recognized as the "Radio Advertiser Of The Year" at the Golden Mikes 2017, where MAGGI HOT HEADS bagged 6 awards for "Finding Mirchi" campaign.
Golden Mikes celebrates the best work in radio advertising in India and recognizes the contribution of the brands in the growth of radio in the country.
- At the Indian Digital Media Awards that celebrates excellent work by brands in the digital and social media space, KITKAT won a gold in the best use of a social network category for the "Twitter takes a break with KITKAT" Campaign. #EducateTheGirlChild also bagged a silver for the best-integrated media campaign for a social cause.
- Your Company through #EducateTheGirlChild Campaign partnered with The Times of India to launch a highly innovative communication
I campaign called ''Power I Of Print'', where leading I communication agencies I created inspirational I messages on sending more
- Continuing on its path to innovation, MAGGI HOT HEADS launched first of its kind Twitter campaign #UntrendLikeHotHeads. The campaign resulted in massive online engagement with over 13 million impressions, 28,000 hashtag mentions and over 800 entries in just three days. It broke multiple benchmarks of campaign engagement and awareness both globally and in Asia Pacific.
- Your Company was awarded the ''India Star 2017'', for excellence in packaging for ALPINO Gift Pack and NESCAFE Latte 3 in 1 cup, INSTA Filter Can and NAN EXCELLA PRO carton.
- The Tata Strategic Management Group presented your Company with the Global Logistics Excellence award.
- Your Company bagged CII''s SCALE national award for supply chain and logistics excellence for being the most innovative and digital supply chain.
Employee Focus
Your Company was recognized by Nielsen as one of the leading three FMCG companies on campus. This year your Company made successful lateral hires and strengthened its position as an ''Equal Opportunity Employer'', which resulted in an increase of women representation in white collar jobs by 140 bps in the past 2 years.
To further increase diversity, your Company organized unconscious bias programs for members of the employee union, gender sensitization sessions for the sales team, sanitation facilities for women in distribution centres and dual career network sessions, among others, all of which helped make the environment more inclusive. The year ended with a 460 bps reduction in high performance attrition over the past 2 years and 640 bps dip in the women manager''s attrition level.
Management Analysis
Review of Economic Scenario and Outlook
Beginning of 2017 had a slow start because of the effects of demonetization that made consumers restrict their consumption. There was a slow revival of consumption with the urban market being more resilient compared to rural India. Towards the middle of the year, the economic growth improved. Inflation in the country continued to be moderate during 2017-2018, Consumer Price Index was the lowest in the last six financial years.
On 1st July 2017, a unified indirect tax structure was introduced in India through the Goods and Services Tax (GST) that should positively impact the economic environment in the long term, but created short term challenges in the trade.
Considerable steps were taken by the government to bolster the food-processing sector. The Ministry of Food Processing Industries organized World Food India 2017 (WFI 2017), India''s first ever platform that positions India as a preferred investment destination and manufacturing hub for the global food industry. As per the government of India data, WFI 2017 attracted an investment intent of USD 13.56 billion from domestic and foreign investors for the food processing sector. Government initiatives were rolled-out to increase the capacities in the entire supply chain
of food processing.
Multilateral agencies have been positive about India''s growth story. This was evident, as India jumped 30 spots on the World Bank''s Ease of Doing Business rankings. India''s ranking in the world has improved by a position to 126, as its per capita GDP in PPP terms increased from USD 6,690 in 2016 to USD 7,170 in 2017, as per data from International Monetary Fund (IMF).
Opportunities and Risks
Private consumption combined with ongoing structural reforms are expected to continue to boost economic activity in India. More transparent regulatory environment and evolving food laws are making India emerge as an attractive business destination, creating opportunities for investment and growth especially in the processed foods sector.
Consumers in India are fast evolving; they are young, aspirational and have higher disposable income. The young India is more health and fitness conscious. Rise in lifestyle diseases has also prompted the Indian consumers to evaluate their food habits more closely and make lifestyle changes, where required.
Your Company brings a strong heritage and years of trust and credibility. It has strong R&D capabilities and the benefits of this and the expertise in science based nutrition and technology flow to your Company. Your Company is an integral part of Indian society and has state-of-the-art manufacturing facilities, efficient supply chain, sales automation with extensive reach and coverage in its target markets, strong brands and capable employees and partners who are committed to provide value with high quality and safe food products.
The product portfolio of your Company continues to be strengthened by accelerated innovation and renovation to stay relevant to the emerging and differentiated needs of the consumers. Consumer lifestyles are changing and there is an increasing demand for value-up and premium products and your Company can leverage Nestle know-how and technology
to develop more science-based products that provide superior benefits of Nutrition, Health and Wellness at appropriate price points.
India is also becoming a technology driven country, empowering the people to look for new opportunities and it is transitioning towards a digital, cashless economy. This change is seen not only in urban areas but is also reflected in rural India. High mobile and internet penetration has enabled a rapid growth in e-commerce in India. Your Company is actively participating on social media platforms through specialized and enabled digital acceleration teams and pursuing business opportunities in the space of e-commerce.
Your Company is operating in an industry sector that faces price volatility in raw materials and is dependent on agricultural commodities that need to meet its stringent quality standards and on natural resources where alternatives are not viable. Supplier development is an ongoing exercise undertaken to ensure continuity in supplies. There is also increasing competition in the processed foods sector and the regulatory framework is still evolving, which requires undivided focus of technical and marketing experts. Your Company has initiatives in place to minimize the environment footprint in the areas of water conservation and proper disposal of packaging materials mentioned elsewhere in this report.
Operations, Quality and Safety
Your Company''s improved operational efficiencies have delivered products of higher quality and at competitive cost. Through the Total Performance Management (TPM), the workspace has been transformed, by engaging with approximately 65% of resources. The leadership at shop floor has enabled the factories to achieve manufacturing excellence at all levels of the organization, and deliver the business results.
For your Company, quality and food safety is a priority. In line with Nestle Group''s direction to move to internationally recognized certifications, all factories of your Company have received ISO 9001:2015 certifications.
Laboratory accreditation is considered an important indicator of technical competence, that strengthens the consumer''s trust in the products of your Company. Your Company embarked on this journey in 2017 and by the end of 2017, two factory laboratories received certification, plans for other factories are underway. These achievements once again reiterate the emphasis on quality at the factories that are aligned with internationally accepted ISO standards.
Your Company''s Samalkha factory Unit II was recognized by the CII for Significant Achievement in Food Safety. The criteria for food safety systems were drawn from the Food Safety and Standards Act, Rules & Regulations 2011, ISO 22000/FSSC 22000 Standards, Codex and Industry best practices.
Packaging
Your Company launched pilot projects "WE CARE" and "EPR connect" on Waste Management Collection and Recycling in preparation for compliance with Plastic Waste Management Rules, 2016. This was the first joint Extended Producer Responsibility (EPR) initiative in India where a consortium was formed with five corporate houses, an NGO and the Indian Pollution Control Association (IPCA). This initiative was supported by the Central Pollution Control Board and East Delhi Municipal Corporation for disposal of waste to the energy plant at Ghazipur, Delhi. The project was executed in eight different cities covering Delhi, Noida, Faridabad, Gurugram, Ghaziabad, Chandigarh, Dehradun and Mumbai.
Environment
In continuation to its commitment to a healthier environment, your Company continued to focus on measures for the conservation and optimal utilization of energy in all the areas of operations, including those for energy generation and effective usage of sources. Factories are consistently improving operational efficiencies, minimizing consumption of natural resources and reducing water, energy and CO2 emissions while maximizing production volumes.
As a result, during the period from 2002 - 2017, for every ton of production, your Company has reduced the usage of energy by around 43%, water usage by around 51%, generation of waste water by around 57% and reduction in specific direct greenhouse gas emissions by around 51%.
Waste for Disposal
Your Company is continuously working towards reduction in waste for disposal. In 2017, the factories reduced waste for disposal to landfill by 63%. Robust plans are in place to reduce this to zero by 2020.
Safety and Health
Occupational Health and Safety of people is of the highest priority and of utmost importance to your Company. All the sites (Offices and Factories) of your Company are certified under Safety and Health Management System that complies with OHSAS 18001:2007 and Environment Management System that complies with ISO 14001:2015.
Your Company provided regular safety and skill up-gradation trainings to the employees where required. Your Company has been consistently focusing on the machinery safety, Lockout & Tagout, behavioural feedback system, Tool Box Talks, Management GEMBA and other aspects of industrial safety.
In 2017, emphasis remained on building of a proactive safety culture. Safe behavior was widely promoted and more than 40,000 behavioral feedback sessions were carried out to promote strengthening of the right safe mindset. Safe driving under ''Project Suraksha'' was promoted amongst the field sales as well as with the third party transport service providers for liquid milk transportation. Road safety awareness camps have been organized at many sites to ensure that employees practice safe driving behaviors, both on site and off site. Compliance is an important pillar of the
S&H (Safety & Health) Management System. Dedicated team is established for every site to ensure flawless implementation of your Company''s own standards as well as legal requirements. Further, to improve the health of the employees, ergonomic aspect of routine production tasks have been assessed and plans are being put in place to reduce the identified ergonomic hazards. Sessions on health topics such as Yoga, Stress management, Bone health and Ergonomics were conducted for building awareness of the employees at various sites of your Company.
Supply Chain
In 2017, your Company''s Supply Chain actively worked towards enabling consumer led growth and creating a winning edge. Your Company was amongst the first one to switch over to the new GST system and adopt subsequent changes in the GST price structure. Simplification of the value chain began by moving from 38 to 33 Distribution Centres (DCs) and plan is to further reduce the DCs. This led to cost savings, improved freshness, better availability and sustainability in the operations.
Your Company was the first in India to collaborate with a key customer for synchronization of online information on product attributes. Through an app, your Company provided real time information about on-shelf product freshness levels. Using advanced analytics for accurate forecasting of regional demand, your Company improved supply planning that resulted in optimum product inventory and availability of your Company''s product at each stage of the value chain.
Your Company also introduced a 24x7 online-automated system that captures orders, even for small and medium customers that increased ease and speed of servicing and helped the customers. Digitalization benefitted our consumers with fresher products and your Company was able to reduce inventory and lower distribution costs.
Your Company also made significant progress on the Nestle Business Excellence program for
two key processes of sourcing and the servicing of customers across supply chain. This delivers value for your Company''s suppliers, customers and improves availability of products on the shelf, besides setting benchmarks in the FMCG space.
Directors'' Responsibility Statement
The Directors state that:
a) in the preparation of the annual accounts, the applicable accounting standards had been followed and no material departures were made from the same;
b) they had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period;
c) they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) they had prepared the annual accounts on a going concern basis;
e) they had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
f) they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Corporate Governance
In terms of Regulation 34 of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter "Listing Regulations"), a Report on Corporate Governance along with Compliance Certificate issued by the Statutory Auditors of your Company is attached as Annexure - 1 and forms an integral part of the Board''s Report (hereinafter "Corporate Governance Report").
Directors and Key Managerial Personnel
Pursuant to the Retirement Policy of the Non-Executive Directors of the Company,
Mr. Ravinder Narain, Independent Non-Executive Director of the Company had retired with effect from 11th May, 2017.
The Directors wish to place on record their appreciation for the contribution made by Mr. Narain during his long association with the Company.
In terms of the Articles of Association of the Company, on the recommendation of the Nomination and Remuneration Committee, the Board of Directors, in its meeting held on 27th March, 2017, appointed Mr. Martin Roemkens as an Additional Director of the Company with effect from 1st April, 2017, subject to approvals. Mr. Aristides Protonotarios, ceased as a Whole time Director of the Company with effect from 31st March, 2017 to take another assignment within Nestle Group. Directors wish to place on record their appreciation for the contribution made by him during his tenure.
The Members, in its 58th Annual General Meeting held on 11th May, 2017, subject to approval of the Central Government, approved the appointment of Mr. Martin Roemkens as a Whole-time Director, designated as ''Director-Technical'' for a period of five years with effect from 1st April, 2017. The Company received the approval of the Central Government for the appointment of Mr. Roemkens as a Whole-time Director, designated as ''Director-Technical'', as he was a non-resident in India before the appointment.
During the year under review, on the recommendation of the Nomination and Remuneration Committee, the Board of Directors appointed Ms. Rama Bijapurkar, as an Independent Non-Executive Director of the Company with effect from 1stMay, 2017.
The Members, in its 58th Annual General
Meeting held on 11th May, 2017, approved the appointment of Ms. Rama Bijapurkar as an Independent Non-Executive Director of the Company to hold office for a term up to 30th April, 2022.
Pursuant to the provisions of the Companies Act, 2013 ("Act"), Dr. (Mrs.) Swati Ajay Piramal was appointed as an Independent Non-Executive Director to hold office for five consecutive years for a term up to 31st March, 2019 by the Members of the Company in the 55th Annual General Meeting held on 12th May, 2014. Dr. Piramal is eligible for re-appointment as an Independent Non-Executive Director for another term of five consecutive years. Pursuant to the provisions of the Act, based on the recommendation of the Nomination and Remuneration Committee, the Board recommends for the approval of the Members through a Special Resolution in the 59th Annual General Meeting re-appointment of Dr. Piramal as an Independent Non-Executive Director for another five consecutive years from 1 st April, 2019 up to 31st March, 2024.
Mr. Shobinder Duggal, Whole-time Director, shall retire at the forthcoming Annual General Meeting by rotation and being eligible offers himself for re-appointment. The brief resume and other details as required under the Act and Listing Regulations for the aforesaid proposed appointment of Directors are provided in the Notice of the 59th Annual General Meeting of the Company.
The Independent Directors of your Company have given a declaration confirming that they meet the criteria of independence as prescribed both under the Act and the Listing Regulations. The Nomination and Remuneration Committee had adopted principles for identification of Key Managerial Personnel, Senior Management including the executive directors which are based on "The Nestle Management and Leadership Principles" and "Nestle Leadership Framework" which is available on the Company''s Website www.nestle.in. The Appointment and Remuneration Policy of the Company includes criteria for determining qualifications, positive attributes and independence of a director and policy relating to the remuneration of Directors, Key Managerial Personnel and other employees. The same is attached as Annexure - 2 and forms an integral part of this Board''s Report.
The details of familiarization programmes to Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are available on the website of the Company at: https:// www.nestle.in/investors/directorsandofficers/familiarisationprogramme.
The Company has devised a formal process for annual evaluation of performance of the Board, its Committees and Individual Directors ("Performance Evaluation"). It covers the areas relevant to the functioning as an Independent Director or other director, member of Board or Committee of the Board. Your Company engaged a leading HR Consulting Firm for compilation of the feedback received from the Board members, Committee members and Directors and for identifying key inferences and observations with respect to Performance Evaluation.
Corporate Social Responsibility
During the year under review, Ms. Rama Bijapurkar, Independent Non-Executive Director, was appointed as a Member of the Committee in place of Mr. Ravinder Narain. Accordingly, the Corporate Social Responsibility Committee was re-constituted and comprises of Dr. (Mrs.) Swati A. Piramal (Chairperson), Ms. Rama Bijapurkar, Independent Non-executive Director and Mr. Suresh Narayanan, Chairman and Managing Director of the Company. The terms of reference of the Corporate Social Responsibility Committee is provided in the Corporate Governance Report. Your Company has also formulated a Corporate Social Responsibility Policy (CSR Policy) which is available on the website of the Company at https://www.nestle. in/investors/policies. Annual report on CSR activities as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 has been appended as Annexure - 3 and forms an integral part of this Board''s Report.
In terms of Section 135 of the Act read with Companies (Corporate Social Responsibility) Rules, 2014 as amended ("CSR Rules") and in accordance with the CSR Policy, during the year 2017, your Company had spent above two percent of the average net profits of the Company during the three immediately preceding financial years. The details are provided in the Annual Report on CSR activities. In addition to the above, your Company has been implementing societal activities since many decades under umbrella of ''Creating Shared Value'' activities which have not been reckoned for arriving at the spends as per CSR Rules. Some key initiatives that your Company has been engaged in are as follows:
Nestle Healthy Kids Programme Your Company, through partnerships with expert Universities and NGOs conducted the Nestle Healthy Kids Programme to improve nutrition and health awareness of school age children. Implemented across 21 states, the programme reached out to over 200,000 adolescents from marginalized communities.
Initiated in 2009, the programme in partnership with Universities around factory locations, has grown across metros in partnership with Magic Bus India Foundation. The programme is customized for each region and is conducted through the classroom-based model and the ''Sports for Development'' model, in schools and communities. Through specially designed interactive sessions, children are encouraged to practice nutritious and healthy living and are also made aware of health initiatives offered by the government.
Project Jagriti
As part of the commitment to inspiring people to lead healthier lives and providing educational programmes, your Company, in partnership with Mamta Health Institute for Mother and Child implemented Project Jagriti. The programme focuses on developing community support for improved health and nutrition outcomes among adolescents, young couples and caregivers while improving the uptake of public health services.
In 2017, the programme ran across 15 districts of Rajasthan, Karnataka, Maharashtra, Chandigarh, Odisha, Uttar Pradesh, Bihar and Delhi and aims to reach three million beneficiaries by 2018.
Project Serve Safe Food Your Company collaborated with NIDAN, National Association of Street Vendors of India (NASVI), national and local food authorities to develop programmes to train street food vendors on subjects such as health, hygiene, food handling, food safety, personal hygiene, cart hygiene, cleaning and chemicals, pest control, garbage disposal and entrepreneurship.
In 2017, this programme was implemented across Goa, Rajasthan, Uttar Pradesh, Kerala and Delhi, reaching out to about 4,800 street food vendors.
Business Responsibility Report
Nestle''s approach to business is Creating Shared Value or ''Saanjhapan'' as used by your Company and it is about the impact of the business and engagement through it. Your Company has been conducting business in a way that both deliver long-term shareholder value and benefit society under approach of ''Creating Shared Value'' (hereinafter ''CSV'').
The Business Responsibility Report as per Regulation 34 of the Listing Regulations is annexed as Annexure - 4 and forms an integral part of the Annual Report.
Statutory Auditors
As per Section 139 of the Act read with the Companies (Audit and Auditors) Rules, 2014, the Members of the Company in its 58th Annual General Meeting held on 11th May, 2017 approved the appointment of M/s. B S R & Co. LLP, Chartered Accountants (ICAI Registration No - 101248W/W-100022), as the Statutory Auditors of the Company for an initial term of 5 years i.e. from the conclusion of 58th Annual General Meeting till the conclusion of 63rd Annual General Meeting of the Company.
The Report given by M/s. B S R & Co. LLP, Chartered Accountants on the financial
statements of the Company for the year 2017 is part of the Annual Report. There has been no qualification, reservation or adverse remark or disclaimer in their Report. During the year under review, the Auditors had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134 (3)(ca) of the Act.
Cost Auditors
As per Section 148 of the Act read with the Companies (Cost Records and Audit) Rules, 2014, the Audit Committee recommended and the Board of Directors appointed M/s. Ramanath Iyer and Co., Cost Accountants, New Delhi (Registration No. 00019) being eligible, as Cost Auditors of the Company, to carry out the cost audit of milk powder, etc. manufactured by the Company falling under the specified Customs Tariff Act Heading 0402 in relation to the financial year ending 31st December, 2018. The Company has received their written consent that the appointment is in accordance with the applicable provisions of the Act and rules framed there under. The remuneration of Cost Auditors has been approved by the Board of Directors on the recommendation of Audit Committee and in terms of the Act and Rules there under requisite resolution for ratification of remuneration of the Cost Auditors by the members has been set out in the Notice of the 59thAnnual General Meeting of your Company.
Secretarial Auditors
The Secretarial Audit was carried out by M/s. S.N. Ananthasubramanian & Co., Company Secretaries (PCS Registration No. 1774) for the financial year 2017. The Report given by the Secretarial Auditors is annexed as Annexure - 5 and forms an integral part of this Board''s Report. There has been no qualification, reservation or adverse remark or disclaimer in their Report. During the year under review, the Secretarial Auditors had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134 (3) (ca) of the Act.
In terms of Section 204 of the Act, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Audit Committee recommended and the Board of Directors appointed M/s.
S.N. Ananthasubramanian & Co., Company Secretaries (PCS Registration No.1774) as the Secretarial Auditors of the Company in relation to the financial year ending 31 st December,
2018. The Company has received their written consent that the appointment is in accordance with the applicable provisions of the Act and rules framed there under.
Meetings of the Board
During the year, the Board of Directors had seven Board meetings. For details of the meetings of the Board, please refer to the Corporate Governance Report.
Extract of Annual Return
The extract of the Annual Return of the Company is annexed as Annexure - 6 and forms an integral part of this Board''s Report.
Details of Loans and Investments
Details of the loans given by your Company under Section 186 of the Act during the financial year ended 31st December, 2017 are as follows: Nestle R&D Centre India Private Limited (Fellow Subsidiary): ''500 Million at the interest rate of 7.67% for general business purpose (Loan outstanding at the end of the year was Nil); and SMA Nutrition India Private Limited (Fellow Subsidiary): ''50 Million at the interest rate of 7.67% for general business purpose (Loan outstanding at the end of the year was Nil). For details of investments, please refer note 6 and 10 of the financial statements.
Related Party Transactions
Your Company has formulated a policy on related party transactions which is also available on Company''s website at https:// www.nestle.in/investors/policies. This policy deals with the review and approval of related party transactions. The Board of Directors of the Company had approved the criteria for making the omnibus approval by the Audit Committee within the overall framework of the policy on related party transactions. Prior omnibus approval is obtained for related party transactions which are of repetitive nature and entered in the ordinary course of business and on an arm''s length basis. All related party transactions are placed before the Audit Committee for review and approval.
All related party transactions entered during the Financial Year were in ordinary course of the business and on an arm''s length basis. No material related party transactions were entered during the Financial Year by your Company. Accordingly, the disclosure of related party transactions, as required under Section 134(3)(h) of the Act, in Form AOC 2 is not applicable to your Company. Members may refer to note 49 of the financial statements which sets out related party disclosures pursuant to IND AS-24.
Risk Management
The Board of Directors had constituted Risk Management Committee to identify elements of risk in different areas of operations and to develop policy for actions associated to mitigate the risks.
The Committee on timely basis informed members of Board of Directors about risk assessment and minimization procedures which in the opinion of the Committee may threaten the existence of the Company. The details of Risk Management Committee including composition thereof are included in the Corporate Governance Report.
Public Deposits
Your Company had not accepted any Public Deposits under Chapter V of the Act.
Significant and Material orders passed by the Regulators/Courts Tribunals
No significant or material orders were passed by the Regulators or Courts or Tribunals which impacts the going concern status and Company''s operations in future.
Complaint filed in National Commission
The Union of India, Department of Consumer Affairs in 2015 had filed a complaint before the National Consumer Dispute Redressal Commission on the allegation that by selling MAGGI Noodles in the past, the Company has indulged in unfair trade practice, sold defective goods to the public and sold goods which will be hazardous. Complaint seeks compensation of ''2,845.5 million and punitive damages of ''3,554.1 million. Your Company has challenged the complaint. The court proceedings are currently ongoing.
Internal Financial Controls and their adequacy
The Directors had laid down internal financial controls to be followed by your Company and such policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to Company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. The Audit Committee evaluates the internal financial control system periodically.
Audit Committee
During the year under review, Dr. Rakesh Mohan, Independent Non-Executive Director, was appointed as a Member of the Committee in place of Mr. Ravinder Narain. The Audit Committee comprises Independent Non Executive Directors, namely, M/s. AK Mahindra (Chairperson), Rakesh Mohan and Rajya Vardhan Kanoria. Powers and role of the Audit Committee are included in Corporate Governance Report. All the recommendations made by the Audit Committee were accepted by the Board of Directors.
Vigil Mechanism
The Vigil Mechanism of the Company is governed by significant documents "The Nestle Corporate Business Principles",
"The Nestle Management and Leadership Principles" and "Nestle Code of Business Conduct". The said mechanism is available to the directors/employees, who can report to the Company Secretary, on a confidential basis, any practices or actions believed to be inappropriate or illegal under the Nestle India Code of Business Conduct ("the Code").
The Code provides for adequate safeguards against victimization of directors/employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee in exceptional cases. It is affirmed that no person has been denied access to the Audit Committee. As an additional facility your Company under the Code provides Integrity Reporting System ("IRS"), an independent third party operated free phone and web based facility for the directors and employees of your Company across all locations. The details of IRS along with FAQs are available to the directors and employees on the Company''s intranet portal. Further, the Company has appointed Ombudsman for Infant Code, under which employees can report Infant Code violations directly to the Ombudsman, with adequate safeguard to protect the employees reporting. The Company also provides an independent third party operated free phone and web based facility, named, "Tell us", to all internal and external stakeholders with a dedicated communication channel for reporting potential instances of non-compliances with the Nestle Corporate Business Principles. Details of "Tell Us" are available on the Company''s website www.nestle.in.
Information regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo
Information required under Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 for the financial year ended 31st December, 2017 in relation to the Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is given in the Annexure - 7 and forms an integral part of this Board''s Report.
Information regarding Employees and related disclosures
Your Company considers people as its biggest assets and ''Believing in People'' is at the heart of its human resource strategy. Your Company has put concerted efforts in talent management and succession planning practices, strong performance management and learning and training initiatives to ensure that your Company consistently develops inspiring, strong and credible leadership. During the year, the focus of your Company was to ensure that young talent is nurtured and mentored consistently, that rewards and recognition are commensurate with performance and that employees have the opportunity to develop and grow.
Your Company has established an organization structure that is agile and focused on delivering business results. With regular communication and sustained efforts it is ensuring that employees are aligned on common objectives and have the right information on business evolution. Your Company strongly believes in fostering a culture of trust and mutual respect in all its employees and seeks to ensure that Nestle values and principles are understood by all and are the reference point in all people matters.
The statement of Disclosure of Remuneration under Section 197 of the Act and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 ("Rules"), is given as Annexure - 8 forming part of this Board''s Report. However, as per first proviso to Section 136(1) of the Act and second proviso of Rule 5 of the Rules, the Report and Financial Statements are being sent to the Members of the Company excluding the statement of particulars of employees under Rule 5(2) of the Rules. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.
As per the requirement of The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 (''SHWW Act''), your Company has a robust mechanism in place to redress complaints reported under it. There is an Internal Committee (IC) composed of internal members and an external member who has extensive experience in the field. In 2017, 5 cases of sexual harassment were reported in the Company and all 5 have been investigated and were resolved as per the provisions of the SHWW Act. During the course of the year, several initiatives were undertaken to demonstrate the Company''s zero tolerance philosophy against discrimination and sexual harassment, which included creation of comprehensive and easy to understand training and communication material which are also made easily accessible. In addition, workshops were also run for the employees to enhance awareness and knowledge of other biases that may influence thinking and actions.
Trade Relations
Your Company maintained healthy, cordial and harmonious industrial relations at all levels. Despite severe competition, the enthusiasm and unstinting efforts of the employees have enabled your Company to remain at the forefront of the Industry.
Your Company continued to receive co-operation and unstinted support from the distributors, retailers, stockists, suppliers and others associated with the Company as its trading partners. The Directors wish to place on record their appreciation for the same and your Company will continue in its endeavor to build and nurture strong links with trade, based on mutuality, respect and co-operation with each other and consistent with consumer interest.
Appreciation
Your Company has been able to operate efficiently because of the culture of professionalism, creativity, integrity and continuous improvement in all functions and areas as well as the efficient utilization of the Company''s resources for sustainable and profitable growth.
The Directors hereby wish to place on record their appreciation of the efficient and loyal services rendered by each and every employee, without whose whole-hearted efforts, the overall satisfactory performance would not have been possible and look forward to the long term future with confidence.
On behalf of the Board of Directors
Suresh Narayanan
Chairman and Managing Director
Date : 14th February, 2018
Place : Gurugram
Dec 31, 2016
Dear Members,
The Directors are pleased to present their report and financial statements for the year ended 31st December, 2016.
Financial Results and State of Company''s Affairs
The Company supplemented the Provision for Contingencies with further amount of Rs, 1,684.7 million (net) for contingencies resulting mainly from issues, which are under litigation/ dispute and other uncertainties requiring management judgement.
|
Particulars |
2016 |
2015 |
|
Net Sales |
91,592.8 |
81,232.7 |
|
Add: Other operating revenues |
645.2 |
520.4 |
|
Less: Operating expenses |
75,983.0 |
67,800.3 |
|
Less: Impairment loss on fixed assets |
118.3 |
282.2 |
|
Less: Net provision for contingencies (from operations) |
418.0 |
333.1 |
|
Profit from Operations |
15,718.7 |
13,337.5 |
|
Add: Other income |
1,493.9 |
1,100.9 |
|
Less: Finance costs |
35.1 |
32.9 |
|
Less: Employee benefit expense due to passage of time |
874.0 |
753.2 |
|
Less: Net provision for contingencies -others |
1,266.7 |
301.5 |
|
Profit before exceptional items, corporate social responsibility and taxation |
15,036.8 |
13,350.8 |
|
Less: Exceptional items |
307.8 |
5,008.4 |
|
Less: Corporate social responsibility expense |
313.6 |
206.1 |
|
Profit before taxation |
14,415.4 |
8,136.3 |
|
Less: Tax expense |
5,150.0 |
2,503.6 |
|
Profit after taxation |
9,265.4 |
5,632.7 |
|
Add: Profit brought forward |
18,825.4 |
18,825.2 |
|
Amount available for appropriation |
28,090.8 |
24,457.9 |
|
Less: Interim dividends |
3,856.6 |
2,892.5 |
|
Less: Proposed final dividend |
2,217.6 |
1,783.7 |
|
Less: Dividend distribution tax |
1,236.6 |
956.3 |
|
Less: Transfer to general reserve |
- |
- |
|
Surplus in statement of profit and loss |
20,780.0 |
18,825.4 |
|
Key ratios |
||
|
Earnings per share (?) |
96.10 |
58.42 |
|
Dividend per share (?) |
63.00 |
48.50 |
Net Sales for the year increased by 12.8% on a base impacted by MAGGI Noodles issue. Net Domestic Sales increased by 13.5% and Export Sales increased by 3.5%
This was after the reversal, utilisation/ settlement of contingency provision of Rs, 128.9 million due to the satisfactory settlement of certain litigations and settlement of obligations under free replacement warranty for which provision is no longer required.
Exceptional Items during the year is net of:
(a) Provision made for diminution in the value of non-current investment: Rs, 200.0 million;
(b) Write backs, arising, inter alia, from actualization of estimates of part of the provision made for exceptional item in the previous year:
Rs, 212.2 million;
c) Cost towards the restructuring of a long term arrangement for supply of ingredients to extinguish the obligations under the arrangement in view of changed business circumstances:
Rs, 320.0 million.
Dividends
The Board of Directors have recommended a final dividend of Rs, 23/- per equity share (Face value Rs, 10 per equity share) for 2016, amounting to Rs, 2,217.6 million. This is in addition to three interim dividends already paid for the year 2016, at the rate of Rs, 12/- per equity share, Rs, 12/- per equity share and Rs, 16/- per equity share which were paid on/ from 31st May, 2016,19th August, 2016 and 22nd December, 2016, respectively. The total dividend for 2016 aggregates to Rs, 63.00 per equity share, amounting to Rs, 6,074.2 million.
Exports
Despite the pressures in the external environment in 2016, the exports division leveraged your Company''s diversified portfolio contributing to the total revenue. MAGGI Noodles were welcomed back by shoppers while confectionery opened doors to export to eight markets in the Middle East and Ghana. Though instant tea remained flat, instant coffee registered growth on account of increase in exports to Romania and Bangladesh. Infant Nutrition exports also showed good growth.
Customer feedback surveys were conducted from different markets to ensure long term sustained growth. Our efforts in developing exports of quality coffee, meanwhile, continued to earn us recognition.
Contribution to the Exchequer
Your Company, over the years, has been enabling significant contribution to various taxes. During the year 2016, the Company through its business, enabled tax collections at Central and State level close to Rs, 23.9 billion, in aggregate
Business Development
Your Company remained dedicated to strengthening Nutrition, Health and Wellness across its product portfolios. It made product propositions more compelling, widened tasty and healthier offerings by innovation and renovation and remained relevant to consumers'' requirements. The year 2016 witnessed a spate of innovations and renovations with the launch of more than 30 new products and variants.
Having Nestle R&D Centre India in Manesar, has also brought Nestle global research and development closer to your Company''s businesses. Along with the network of R&D Centres across the globe, R&D India and the Business Units worked towards developing winning concepts, suited to local consumers.
The teams got engaged in a lot of groundwork and several stages of ideation for all your Company''s new as well as existing products. Your Company made every effort to increase penetration with more offerings, across all portfolios such as the following:
Launch of New MAGGI Noodles Variants
- MAGGI Noodles strengthened its leadership position with about 60% market share in the Noodles category as per Nielsen report. Your Company introduced ''MAGGI HOT HEADS'' and ''MAGGI No Onion No Garlic Masala'' variants of MAGGI Noodles
- Cup noodles were back with the introduction of MAGGI HOT HEADS Cuppa Noodles and the re-launch of MAGGI Cuppa Masala and MAGGI Cuppa Chilly Chow
- A comeback in the soups category through the New MAGGI Cup-a-licious Soups - a range of 6 instant soups available in exciting, contemporary and unique flavours
Strengthening of Milk Products and Nutrition Portfolio
- Your Company''s focus in the milk product category has been on the value-added segment. NESTLE a GREKYO was introduced in several variants along with EVERYDAY Masala Fusion Dairy Whitener with 6 natural spice flavours
- NESCAFE RTDs (Ready-To-Drink) in three unique flavours were introduced in the market
- Products like CEREGROW for children between the age group of 2 to 5 and NESTLE a PRO-GROW, a protein rich milk were all clutter breaking innovations
- The Company renovated the entire CERELAC range fortifying it with Iron
Expanding Coffee and Beverages Portfolio
- NESCAFE SUNRISE INSTA-FILTER was introduced as part of your Company''s focus into differentiated products. This revolutionary new coffee with dry decoction granules offers the authentic South Indian Filter Coffee Taste in an instant
- Three very exciting variants for NESTEA Iced Tea were launched along with NESCAFE Latte
More offerings in the Chocolate and Confectionery Portfolio
- Your Company continued its focus to grow brands like KITKAT, MILKYBAR, NESTLE MUNCH, BARONE and ALPINO
- KITKAT Duo was a first of its kind combination of brown and white and BARONE CHARGE and the New ALPINO were introduced to cater to niche audiences
The business of ''Prepared Dishes and Cooking Aids'' saw the brand MAGGI go from strength to strength, throughout the year in 2016. It reclaimed the noodle category leadership with nearly 60% market share post re-launch. The year started with a strong focus on reinforcing nostalgia and re-invoking the quintessential MAGGI Moments via the #NothingLikeMAGGI campaign that helped build back brand equity, quickly. In addition to the thematic advertising, brand MAGGI also put immense focus behind small town and rural pockets via sampling, activation and vernacular media engagements. As a result, today brand MAGGI''s equity and imagery scores stand almost at par with the pre-crisis levels, as also reflected in MAGGI''s meteoric recovery in the Brand Equity''s MOST TRUSTED BRAND SURVEY for 2016. In the said Survey, the brand had fallen to 95th Rank in the top 100 Most Trusted Brands in 2015, but in 2016 it gained 70 places to end at 25th Rank.
In the Foods category MAGGI ranked at 3rd position.
In addition to re-building the core back, brand MAGGI also unleashed a slew of innovations in noodles and other adjacent categories in 2016, thereby reinvigorating its portfolio. In noodles, a new range of spicy noodles targeted at new age youth was launched under the name of MAGGI HOT HEADS. All the four variants have met with good response and continue to sizzle the taste-buds across the country. Apart from these, MAGGI also expanded its sauces range by launching the MAGGI Masala Sauce that promises the signature MAGGI Masala taste in tomato sauce. Lastly, MAGGI made a comeback in the Soups Category though the New MAGGI Cup-a-licious Soups - a range of 6 instant soups available in exciting, contemporary and unique flavours.
The ''Chocolate and Confectionery'' business focused on the mainstream and the high growth premium segments. An array of product launches were made to cater to rapidly evolving consumer tastes and preferences across the portfolio. KITKAT Duo and NESTLE MUNCH
TRIO were innovative launches targeted to delight consumers. The re-launch of the flagship premium brand ALPINO (bonbons made of milk chocolate, draped over a crispy cocoa wafer encasing a rich.
velvety centre), along with the launch of a range of premium imported tablets from Europe, rejuvenated your Company''s premium chocolate offerings.
Innovative, category-first and relevant consumer promotions were offered to consumers throughout the course of the year. The Paytm cash promotion on KITKAT was an industry-first marketing activity. Innovation in communication was seen in KITKAT with film integration. The digital platform was highly leveraged across Twitter through #My Break campaign and YouTube through the Laughter Games (comedy creators) integration. KITKAT India won the first edition of the Twitter Aviator Awards in 2016, a global contest organized by Nestle and Twitter exclusively for Nestle markets, delivering a dynamic and real time campaign based on daily trends in India.
For ''Coffee and Beverages'' 2016 was a
challenging year with increased competitive
2 intensity as well as m a volatile external "â''environment. Your Company first redefined the developed coffee market in the south by launching NESCAFE SUNRISE INSTA-FILTER - a revolutionary new coffee chicory mixture with dry decoction granules to offer the authentic South Indian Filter Coffee Taste in an instant. Three very exciting variants for NESTEA Iced Tea were launched along with NESCAFE Latte. Brand NESCAFE continued building its connect with the youth in line with the brand idea of ''It all starts with a NESCAFE''. The RJ campaign with the tagline of #StayStarted became the most viewed digital campaign which saw an extension of the Reel life into Real life with RJ Rishi coming to life and hosting a real radio show NESCAFE Mornings with radio channel Red FM. NESCAFE Labs created impact with its mega challenge events and with ground events at various colleges all over India. NESCAFE SUNRISE was also renovated with a superior taste.
The ''Milk Products and Nutrition'' business category saw the extension of the journey from infants to toddlers as your Company launched CEREGROW during the year. A nutritious and tasty junior cereal for 2-5 year old kids, the product is packed with the nourishment of multigrain cereal, milk and fruits. The Company renovated the entire CERELAC range fortifying it with Iron to support cognitive and brain development in early infancy.
Nestle believes breast milk provides the best nutrition for babies. This is why the Company promotes the World Health Organization''s recommendation of exclusive breastfeeding for the first six months of life and beyond. Good nutrition during the ''First 1000 days'' places babies on the path to a healthy future. Under your Company''s ''Start Healthy Stay Healthy'' program, over 963 Breastfeeding Rooms were installed in clinics across 150 cities in the country. A breastfeeding room locator tool was also developed to enable mothers to find the nearest breastfeeding room. The SUPERBABY campaign was launched with the key message ''It takes you all to make a Super baby'' in order to emphasize the role of various stakeholders to #Help Moms Breastfeed.
With focus on the value added segment, your Company launched a brand new exotic range of Greek Yoghurt under the brand name of NESTLE a GREKYO for the first time in India. A perfect blend of health and indulgence, NESTLE a GREKYO has a rich and creamy texture coupled with real fruit bits. Globally the Greek Yoghurt category came into prominence less than a decade back and in certain countries it has already captured a major share of the entire yoghurt market. In India, this category is still at a nascent stage but your Company is confident that it will lead the global trend for the Indian consumers soon. NESTLE a PRO-GROW has been another addition to the NESTLE a brand and addresses specific needs of protein for growing children. Your Company continued its journey as pioneers by customizing not just the taste, but also the mode of consumption to deliver ''Anytime Coffee'' for today''s active lifestyle and launched NESCAFE Ready-to-Drink range.
''Nestle Professional'' business registered volume growth in 2016. The New NESCAFE Solution machine continued to perform well in the business and industry channels. The entire range of coffees pre-mixes for hot and cold machines, were renovated by your Company and NESTEA Masala Gold tea premix was successfully launched. All food categories generated growth.
Chef2Chef activities pan India offered good visibility to Nestle Professional products. Nestle Professional significantly developed sales in transport channels by enlarging the assortment of products in Airlines and the Indian Railways.
Commitment to Nutrition, Health and Wellness
In addition to providing consumers with differentiated and innovative choices, your Company also places high priority in providing consumers with nutrition information on food labels to make informed dietary choices. The GDA labelling provides guidance on the daily intake for energy and defines key nutrients to help consumers evaluate a product''s role in their daily diet. To demonstrate this commitment your Company has started GDA labelling on the entire confectionery portfolio, Beverages portfolio, UHT milk, MILKMAID Sweetened Condensed Milk and EVERYDAY Dairy Whitener. Your Company enhanced labelling of products with a QR code that allows consumers to use their smart phones to find out more about its products. On scanning the QR code on the label, consumers can get information specific to the product under three heads, which are Nutrition, Environment and Society. Committed to promoting a healthy lifestyle, your Company partnered with PROCAM Running, the organizers for marathon events, across India in four metropolitan cities. Expert sports nutritionists provided personalized nutrition counselling to runners to help them get run-ready from nutritional perspective. Your Company also conducted sessions on nutrition counselling for consumers in modern trade outlets, government offices and corporate offices. The objective was to help the participants to make tastier and healthier food choices for a healthy lifestyle.
Awards and Recognitions BrandZ is an annual consumer study conducted by Kantar Millward Brown for WPP Group. Millward Brown then combines the BrandZ data with financial data of brands to compile their annual rankings of top 50 most valuable brands in India. In 2016, your Company was recognized as ''The Most Valuable Food Brand'' in India. Your Company ranked 13th and MAGGI ranked 39th in the overall top 50 most valuable brands in India.
The Effie Awards are known by advertisers and agencies globally as the pre-eminent award in the industry, and recognizes all forms of marketing communication that contribute to a brand''s success. Since 1968, winning an Effie has become a global symbol of achievement. Today, Effie celebrates effectiveness worldwide with the Global Effies and the Positive Change Effies, regional programs in Asia-Pacific, Europe, the Middle East / North Africa, North America, Latin America and more than 40 national Effie programs. 2016 was a landmark year for your Company''s Effie''s Journey. Nestle India became The Top Food & Beverage Client of the Year at Effies 2016. Your Company bagged the first ever Gold Metal for the MAGGI ''Winning Back A Mom''s Trust'' campaign in the Foods category. It also Bagged 2 Silver Metals for the ''MAGGI Comeback'' campaign in the Foods and Integrated campaign categories and a Bronze Metal for NESCAFE in the Beverages category. Your Company was awarded CII SCALE award for being most innovative digital supply chain across FMCG during 2016. Your Company also won the ASSOCHAM excellence award for Best FMCG Company in Logistics and Warehousing.
Employee Focus
In 2016, the effort was towards re-visioning the culture of your Company in line with the ambition of being a Fast, Focused and Flexible organization. Rise2Gether was a cultural intervention basis evaluation of feedback from employees and from the leadership team and then identifying the key focus areas for change. Your Company has also made consistent efforts towards being an Employer of Choice for current and prospective employees. Your Company connected with students across campuses and held a national case study competitions panning HR, Supply Chain and Marketing. The members of the Management Committee also travelled across campuses delivering talks on leadership. To ensure your Company invests in high calibre talent, over 70 employees were part of high potential programs and another 100 employees went through the Executive General Management Program at IIM Calcutta.
Management Analysis
Review of economic scenario and outlook
Last year was marked by two important economic policy developments in India: a constitutional amendment making way for the goods and services tax (GST) and withdrawal of legal tender of high value currency notes ('' 500 and ''1000) which intends to curb black money and running of a parallel economy. With a slow start in 2016, the economic momentum recovered towards the middle of the year.
While this growth momentum was temporarly impacted with demonetization, the India economy appears to be recovering fast and will continue as one of the fastest growing nations.
Cashless transactions systems have been encouraged across the board. The move towards digital payment have benefitted e-commerce companies though dependence on cash-on-delivery got impacted. In the urban markets, the drop in sales in traditional retail outlets due to lack of cash availability have been partially compensated by the modern trade channel.
Greater formalization of the economy has triggered financial inclusion and the banking system has benefitted partially from higher levels of deposits as well as the opening of new accounts. The National Payments Corporation of India (NPCI) successfully finalized the Unified Payments Interface (UPI) platform enabling mobile phones in digitalization of payments. Over the past year much progress has been made in spreading JAM (Jan Dhan, Aadhar and Mobile) across the country which refers to large-scale, technology-enabled, real-time cash transfer. This has the potential of financial inclusion improving the economic lives of the poor.
Consumers are opting to spend on necessities rather than on discretionary items. The FMCG industry remained under pressure because of subdued consumer sentiments. Earnings for most companies were soft through the year and they struggled for volume growth.
The current emphasis on ''Make in India'', investments in accelerating development of transport infrastructure, pro-reform approach and efforts at fiscal rationalization are all positive indicators and your Company is optimistic that the economy will pick up.
The passage of the GST bill in the Parliament is a positive for the economy bringing in more transparency in the tax administration. GST will create a common Indian market, improve tax compliance and governance. The transition to GST is complex from an administrative as well as a technological perspective. What will be critical is the efficiency in relation to its implementation. Your Company believes that in the medium run it will lead to more digitalization and will help in effective governance.
Risks and Opportunities
The economic and business environment is fast evolving, and with the rapid transformation of technology and the impact of cultural changes, society and consumers are also transforming on multiple dimensions. Increased exposure, improved education and awareness, as well as changing aspirations at various levels of the income pyramid and the urban-rural divide are creating opportunities that organizations need to understand and prepare for the emerging future. Your Company has significant strengths and being Nestle is in itself a very huge strength, because the brand brings with itself 150 years of trust and credibility. The General License
Agreement gives it access to Nestle Group''s proprietary technology / brands, expertise and extensive centralized Research and Development facilities.
The Company is an integral part of Indian society and has state-of-the-art manufacturing facilities, efficient supply chain, sales automation with extensive reach and coverage in its target markets, strong brands and capable employees and partners who are committed to provide value with high quality and safe food products.
However, the Indian market is complex and demands a very efficient and complex supply chain configuration. This is further complicated by cascading indirect taxes. With GST roll out in 2017, this should be addressed though full gains out of it would take some time to realise. Your Company is operating in an industry that faces price volatility in raw materials and is dependent on agricultural commodities that need to meet stringent quality standards and on natural resources where alternatives are not viable. There is also increasing competition in processed foods and as the regulatory framework is evolving, standardization of norms is a major requirement for new and innovative product launches. Clearly, even though there is slower than anticipated momentum in the economy, there are opportunities. Consumer lifestyles are changing and there is increasing demand for value-up and premium products and your Company can leverage Nestle technology to develop more science based products that provide superior benefits of Nutrition, Health and Wellness at appropriate price points. Technology is throwing up immense opportunities to understand consumers and engage better with them. Digital and e-commerce can hold immense potential and strategic significance for your Company.
Sales
Your Company is proud of the immense commitment and support that trade partners and retailers have extended, for not only the strong comeback of MAGGI Noodles, but also for whole-heartedly supporting the launch of the many new products and variants. Your Company has also demonstrated the strength of its sales and distribution network by bringing new products on to the shelves, at a very fast speed with best-in-class visibility. Realizing the growing importance of e-retailing the Company continues to successfully engage with the leading e-retailers. The Company has been constantly looking for opportunities and partnerships to reach out to consumers in a relevant and engaging manner. It has leveraged all channels that consumers reach out for buying Nestle products. Hence along with traditional and modern trade partners, your Company has joined hands with e-commerce companies.
Technology, Quality and Safety
Nestle Continuous Excellence (NCE) as a management system ensures that the workforce of your Company is fully aligned with the organization''s strategy towards delivering competitive advantage and consumer led growth. Last year was marked by the factories supporting and delivering continuously in order to meet business objectives by ensuring timely launch of new products. This was in addition to catering to the regular production of the existing brands available in the market.
In spite of increased production, the overall asset intensity (equivalent to operational efficiencies) and cost reduction improved. This was achieved through the following:
- Total Performance Management (TPM) and focused improvement projects have been consistently driven to achieve manufacturing excellence.
- The education and training pillar focused . on setting up of
- strong understanding t of methodologies 1 and stressed on the importance of capability building across the manufacturing units.
In line with the ''Zero Defect & No Waste'' policy, the following defect reduction projects were driven up to consumer touch-points:
- ''Quality by Design'' initiatives like packaging structural improvements with an additional overwrap protection for Nutrition portfolio. KITKAT tamper proof packaging and anti-counterfeit packaging on bigger NESCAFE soft packs, have helped address issues related to packaging.
- Continuing our strong collaboration with upstream raw material and packaging material vendors ensured right quality material for smooth operations.
- Special focus was given to improve the cool chain effectiveness for confectionery products. This included project where your Company collaborated with business partners (Distributors) to contribute in quality control.
Significant progress was also made on road safety awareness with our finished goods transporters and milk tanker fleets operational at our factories. Drivers'' rest rooms have been organized at factories to give drivers proper rest before the journey commencement. Risk assessment for the journey is being discussed for all identified lanes, use of seat belts and proper maintenance of vehicles prior to the journey is being mandated.
Environment
As in the past, your Company continued to stress upon measures for the conservation and optimal utilization of energy in all the areas of operations, including those for energy generation and effective usage of sources/ equipment used for generation. Within Nestle India factories there have been continuous efforts to improve operational efficiencies, minimizing consumption of natural resources and reducing water, energy and CO2 emissions while maximizing production volumes.
As a result, during the period from 2001 to 2016, for every ton of production, your Company has reduced the usage of energy by around 47%, water usage by around 53%, generation of waste water by around 55%, reduction in specific direct greenhouse gas emissions by 55%.
During 2016 your Company consolidated and further accelerated the supply chain strategy to support the priorities of the market.
Product launches were done in an efficient and speedy manner from concept development to market launch by the team in close collaboration with all stakeholders.
In order to build logistics capability across supply chain team and prepare your Company to be GST- Ready, ''Logistics Excellence'' review program was launched across the organization. This resulted in capability building of the logistics team on the ground and identification of waste across the value chain leading to cost efficient operations. As a result, material flow across our factory and distribution centres was enhanced leading to fresh products on the shelf and faster speed to market.
Sales and operations planning process across the organization was refreshed using enhanced use of data analytics for demand planning, creation of robust event management process leading to better delivery of sales execution on the ground.
In order to continuously create value for our consumers and customers in today''s reality of commodity headwinds and intense competitive intensity at market place, your Company accelerated the deployment of LEAN mindset across value chain. This helps to align the value chain to continuously reduce non-value added activities and thereby optimizing cost structures across your Company.
Quality in the value chain initiative was launched across the Company ensuring that handovers across value chain are managed seamlessly.
This helps the Company to ensure that right quality of products are available on the shelves for our consumers, despite the journey through a fragmented trade structure, multiple storage points and unstructured handling.
Your Company further extended the Responsible Sourcing program to cover not only the direct materials suppliers but also our transporters, services and indirect material suppliers. This is part of our commitment to business integrity, openness, respect for universal human rights and core labour principles.
Cautionary Statement
Statements in this Report, particularly those which relate to Management Discussion and Analysis as explained in the Corporate Governance Report, describing the Company''s objectives, projections, estimates and expectations may constitute ''forward looking statements'' within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied in the statement depending on the circumstances.
Directors'' Responsibility Statement
The Directors state that:
a) in the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same;
b) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profits of the Company for that period;
c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) they have prepared the annual accounts on a going concern basis;
e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and
f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Corporate Governance
In terms of Regulation 34 of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter "Listing Regulations"), a Report on Corporate Governance along with Compliance Certificate issued by Statutory Auditor''s of the Company is attached as Annexure - 1 and forms integral part of this Report (hereinafter "Corporate Governance Report").
Directors and Key Managerial Personnel
During the year under review, on the recommendation of the Nomination and Remuneration Committee, the Board of Directors appointed Dr. Rakesh Mohan as an Independent Non-Executive Director of the
Company with effect from 1st May, 2016.
The Members, in its 57th Annual General Meeting held on 12th May, 2016, approved the appointment of Dr. Rakesh Mohan as Independent Non-Executive Director of the Company to hold office for a term up to 30th June, 2020.
Mr. Aristides Protonotarios, Whole-time Director of the Company designated as "Director -Technical", who was appointed for a period of five years with effect from 1st April, 2013, shall be taking up a new assignment within the Nestle Group and therefore shall cease to be the Whole-time Director of the Company with effect from 31st March, 2017.
Mr. Shobinder Duggal shall retire at the forthcoming Annual General Meeting and being eligible offers himself for re-appointment. The brief resume and other details as required under the Act and Listing Regulations are provided in the Notice of the 58th Annual General Meeting of the Company.
The Independent Directors of your Company have given a declaration confirming that they meet the criteria of independence as prescribed both under the Act and the Listing Regulations.
The Nomination and Remuneration Committee had adopted principles for identification of Key Managerial Personnel, Senior Management including the executive directors which are based on "The Nestle Management and Leadership Principles" and "Nestle Leadership Framework" which is available on the Company''s Website www.nestle.in. The Appointment and Remuneration Policy of the Company includes criteria for determining qualifications, positive attributes and independence of a director and policy relating to the remuneration of Directors, Key Managerial Personnel and other employees. The same is attached as Annexure - 2 and forms integral part of this Report.
The details of familiarization programmes to Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are put up on the website of the Company at the link: https://www.nestle. in/investors/directors and officers/familiarisation-programme.
The Company has devised a formal process for annual evaluation of performance of the Board, its Committees and Individual Directors ("Performance Evaluation"). It covers the areas relevant to the functioning as Independent Directors or other directors, member of Board or Committee of the Board. The Company engaged a leading HR Consulting Firm for compilation of the feedback received from the Board members, Committee members and directors and for identifying key inferences and observations with respect to Performance Evaluation.
Corporate Social Responsibility
During the year under review, the name of the Corporate Governance and Social Responsibility Committee was changed to Corporate Social Responsibility Committee and Dr. (Mrs.) Swati A. Piramal, Independent Non-Executive Director, was appointed as Chairperson of the Committee in place of Mr. Suresh Narayanan. The Corporate Social Responsibility Committee comprises of Dr. (Mrs.) Swati A. Piramal (Chairperson),
Mr. Ravinder Narain, Independent Non-executive Director and Mr. Suresh Narayanan, Chairman and Managing Director of the Company. The terms of reference of the Corporate Social Responsibility Committee is provided in the Corporate Governance Report. Your Company has also formulated a Corporate Social Responsibility Policy (CSR Policy) which is available on the website of the Company at https://www.nestle.in/investors/policies. Annual report on CSR activities as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 has been appended as Annexure - 3 and forms an integral part of this Report.
In terms of Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility) Rules, 2014 as amended ("CSR Rules") and in accordance with the CSR Policy, during the year 2016, the Company has spent above two percent of the average net profits of the Company during the three immediately preceding financial years. The details are provided in the Annual Report on CSR activities. In addition to the above, the Company has been implementing societal activities since many decades under the umbrella of Creating Shared Value activities which has not been reckoned for arriving at the spends as per CSR Rules.
Some key initiatives which your Company has been engaged in are as follows:
Nestle Healthy Kids Programme The Nestle Healthy Kids Programme has been developed with a focus to raise nutrition and health awareness of school age children. The unbranded programme has been conducted since 2009, in village schools around the factories of your Company with the objective of raising awareness regarding good nutritional and cooking practices, good hygiene and promoting physical fitness. The programme has been conducted in partnership with six leading regional Universities through the Department of Home Science and Food Science.
Your Company has also been working in metros in partnership with Magic Bus (one of India''s largest behaviour change organisations). Magic Bus has a well-entrenched community presence, across 22 states both in rural and urban geographies and the Healthy Kids Programme is conducted through the Magic Bus model of ''engaging through sports and activities'' as a medium to bring change. Children are engaged in interactive sessions in which they receive nutrition and health knowledge and are encouraged to play regularly.
Project Jaagriti
Your Company rolled out the Project Jaagriti in partnership with Mamta Health Institute for Mother and Child as part of its commitment to provide education programmes for good nutrition and feeding practices improving nutritrion and health at key life stages - adolescents and caregivers. The programme has been conducted across 15 districts in 7 states and 1 union territory with a goal to accelerate the uptake of health services by improving continuum of care on health, nutrition and hygiene practices amongst adolescents, young couples and caregivers.
#Educate the GirlChild - Partnership with Nanhi Kali
Your Company was happy to be associated with #Educate The Girl Child program which aimed at raising awareness about girl child education.
We extended support to girl child education in association with Nanhi Kali, one of the largest community programs imparting education to underprivileged girl children across India. This partnership provided on ground support to girl children through necessary academic material and social backing by identifying critical centres of education of the Nanhi Kali project. Three most iconic brands of Nestle India - MAGGI, NESCAFE and KITKAT - changed packaging to support girl child education. Your Company changed packaging of 100 million packs with the aim of raising more awareness about the cause.
Collaboration between Nestle India, Food and Drugs Administration, Goa and NASVI joining hands
Your Company joined hands with Food and Drugs Administration, Goa and National Association of Street Food Vendors of India (NASVI) to train over 1000 street vendors in Goa. The training of street vendors was conducted through NASVI''s training center and comprised of subjects such as health, hygiene, food handling, food safety, personal hygiene, cart hygiene, cleaning and chemicals, pest control, garbage disposal and entrepreneurship. The participants were also awarded a certificate at the end of the training.
Business Responsibility Report
Nestle''s approach to business is Creating Shared Value or ''Saanjhapan'' as used by your Company and it is about the impact of the business and engagement through it. Your Company has been conducting business in a way that both deliver long-term shareholder value and benefit society under approach of "Creating Shared Value" (hereinafter ''CSV).
The Business Responsibility Report as per
Regulation 34 of the Listing Regulations is annexed as Annexure - 4 and forms integral part of the Annual Report.
Statutory Auditors
As per Section 139 of the Companies Act, 2013, read with the Companies (Audit and Auditors) Rules, 2014, the term of M/s. A.F. Ferguson & Co. (Firm Registration No. 112066W), Chartered Accountants, New Delhi as the Statutory Auditors of the Company expires at the conclusion of the ensuing Annual General Meeting of the Company.
The Board of Directors of the Company at their meeting held on 28th October, 2016, on the recommendation of the Audit Committee, have made its recommendation for appointment of M/s. BSR and Co. LLP, Chartered Accountants (ICAI Registration No- 101248W/W-100022), as the Statutory Auditors of the Company by the Members at the 58th Annual General Meeting of the Company for an initial term of 5 years. Accordingly, a resolution, proposing appointment of M/s. BSR and Co. LLP,
Chartered Accountants, as the Statutory Auditors of the Company for a term of five consecutive years i.e. from the conclusion of 58th Annual General Meeting till the conclusion of 63rd Annual General Meeting of the Company pursuant to Section 139 of the Companies Act, 2013, forms part of the Notice of the 58th Annual General Meeting of the Company. The Company has received their written consent and a certificate that they satisfy the criteria provided under Section 141 of the Act and that the appointment, if made, shall be in accordance with the applicable provisions of the Act and rules framed there under.
The Report given by M/s. A.F. Ferguson & Co., Statutory Auditors on the financial statement of the Company for the year 2016 is part of the Annual Report. There has been no qualification, reservation or adverse remark or disclaimer in their Report.
During the year under review, the Auditors had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134 (3)(ca) of the Act.
M/s. A.F. Ferguson & Co. over many years have successfully met the challenge that the size and scale of the Company''s operations pose for auditors and have maintained the highest level of governance, ethical standards, rigour and quality in their audit. The Board place on record its appreciation for the services rendered by M/s.
A.F. Ferguson & Co. as the Statutory Auditors of the Company.
Cost Auditors
As per Section 148 of the Act read with Companies (Cost Records and Audits) Rules,
2014, the Audit Committee recommended and the Board of Directors appointed M/s. Ramanath Iyer and Co., Cost Accountants, New Delhi (Registration No. 00019) being eligible and having sought appointment, as Cost Auditors of the Company, to carry out the cost audit of milk powder products manufactured by the Company falling under the specified Central Excise Tariff Act heading in relation to the financial year ending 31st December, 2017. The Company has received their written consent that the appointment is in accordance with the applicable provisions of the Act and rules framed there under. The remuneration of Cost Auditors has been approved by the Board of Directors on the recommendation of Audit Committee and in terms of the Companies Act, 2013 and Rules there under the requisite resolution for ratification of remuneration of Cost Auditors by the members has been set out in the Notice of the 58th Annual General Meeting of your Company.
Secretarial Auditors
The Secretarial Audit was carried out by M/s.
S.N. Ananthasubramanian & Co., Company Secretaries (PCS Registration No.1774) for the financial year 2016. The Report given by the Secretarial Auditors is annexed as Annexure - 5 and forms integral part of this Report. There has been no qualification, reservation or adverse remark or disclaimer in their Report. During the year under review, the Secretarial Auditors had not reported any matter under Section 143 (12) of the Act, therefore no detail is required to be disclosed under Section 134 (3)(ca) of the Act.
In terms of Section 204 of the Companies Act, 2013, the Audit Committee recommended and the Board of Directors appointed M/s.
S.N. Ananthasubramanian & Co., Company Secretaries (PCS Registration No.1774) as the Secretarial Auditors of the Company in relation to the financial year 2017. The Company has received their consent for appointment.
Meetings of the Board
During the year, the Board of Directors had five Board meetings. For details of the meetings of the Board, please refer to the Corporate Governance Report.
Extract of Annual Return
The extract of the Annual Return of the Company is annexed as Annexure - 6 and forms integral part of this Report.
Details of Loans and Investments
Details of the loans given by your Company under Section 186 of the Act during the financial year ended 31st December, 2016 are as follows:
Nestle R&D Centre India Private Limited (Fellow Subsidiary): Rs, 400 million at the interest rate of 8.97% for general business purpose (Loan outstanding at the end of the year was Nil); and SMA Nutrition India Private Limited (Fellow Subsidiary): Rs, 35 million at the interest rate of 8.80% for general business purpose (Loan outstanding at the end of the year was Nil).
For details of investments, please refer note no.12 and 14 forming part of financial statements.
Related Party Transactions
Your Company has formulated a policy on related party transactions which is also available on Company''s website at https://www.nestle.in/ investors/policies. This policy deals with the review and approval of related party transactions. The Board of Directors of the Company has approved the criteria for making the omnibus approval by the Audit Committee within the overall framework of the policy on related party transactions. Prior omnibus approval is obtained for related party transactions which are of repetitive nature and entered in the ordinary course of business and at arm''s length. All related party transactions are placed before the Audit Committee for review and approval.
All related party transactions entered during the Financial Year were in ordinary course of the business and on arm''s length basis. No material related party transactions were entered during the Financial Year by your Company. Accordingly, the disclosure of related party transactions as required under Section 134(3)(h) of the Companies Act, 2013 in Form AOC 2 is not applicable to your Company.
Members may refer to note no. 40 to the financial statement which sets out related party disclosures pursuant to AS-18.
Risk Management
The Board of Directors had constituted Risk Management Committee to identify elements of risk in different areas of operations and to develop policy for actions associated to mitigate the risks. The Committee on timely basis informed members of board of directors about risk assessment and minimization procedures which in the opinion of the Committee may threaten the existence of the Company. The details of Risk Management Committee are included in the Corporate Governance Report.
Public Deposits
Your Company had not accepted any Public Deposits under Chapter V of the Act.
Significant and Material orders passed by the Regulators/Courts/ Tribunals
No significant or material orders were passed by the Regulators or Courts or Tribunals which impacts the going concern status and Company''s operations in future.
Complaint filed in National Commission
The Union of India, Department of Consumer Affairs in 2015 had filed a complaint before the National Consumer Dispute Redressal Commission on the allegation that by selling MAGGI Noodles in the past, the Company has indulged in an unfair trade practice, sold defective goods to the public and sold goods which will be hazardous. Complaint seeks compensation of '' 2,845.5 million and punitive damages of '' 3554.1 million. Your Company has challenged the complaint. The court proceedings are currently ongoing.
Internal Financial Controls and their adequacy
The Directors had laid down internal financial controls to be followed by the Company and such policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to Company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.
The Audit Committee evaluates the internal financial control system periodically.
Audit Committee
The Audit Committee comprises Independent Non-Executive Directors, namely, M/s. AK Mahindra (Chairman), Ravinder Narain and Rajya Vardhan Kanoria. Powers and role of the Audit Committee are included in the Corporate Governance Report. All the recommendation made by the Audit Committee were accepted by the Board of Directors.
Vigil Mechanism
The Vigil Mechanism of the Company is governed by significant documents "The Nestle Corporate Business Principles", "The Nestle Management and Leadership Principles" and "Nestle Code of Business Conduct". The said mechanism is available to the Director(s)/ Employee(s), who can report to the Company
Secretary, on a confidential basis, any practices or actions believed to be inappropriate or illegal under the Nestle India Code of Business Conduct ("the Code"). The Code provides for adequate safeguards against victimisation of director(s)/ employee(s) who avail the mechanism and also provides for direct access to the Chairman of the Audit Committee in exceptional cases.
It is affirmed that no person has been denied access to the Audit Committee. As an additional facility to all the Directors and Employees of the Company, the Company under the Code provides Integrity Reporting System ("IRS"), an independent third party operated free phone and web based facility for the directors and employees of the Company across all locations.
The details of IRS along with FAQs are available to the Directors and Employees on the Company''s intranet portal. Further, the Company has appointed an Ombudsman for Infant Code, under which employees can report Infant Code violations directly to the Ombudsman, with adequate safeguard to protect the employee reporting. The Company also provides an independent third party operated free phone and web based facility, "Tell Us", to all internal and external stakeholders with a dedicated communication channel for reporting potential instances of non-compliance with Nestle Corporate Business Principles. Details of "Tell Us" are available on www.nestle.in
Information regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo
Information required under Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014 for the financial year ended 31st December, 2016 in relation to the Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is given in the Annexure - 7 forming an integral part of this report.
Information regarding Employees and related disclosures
Your Company considers people as its biggest assets and ''Believing in People'' is at the heart of its human resource strategy. It has put concerted efforts in talent management and succession planning practices, strong performance management and learning and training initiatives to ensure that your Company consistently develops inspiring, strong and credible leadership. During the year the focus of your Company was to ensure that young talent is nurtured and mentored consistently, that rewards and recognition are commensurate with performance and that employees have the opportunity to develop and grow.
Your Company has established an organization structure that is agile and focused on delivering business results. With regular communication and sustained efforts it is ensuring that employees are aligned on common objectives and have the right information on business evolution. Your Company strongly believes in fostering a culture of trust and mutual respect in all its employees seek to ensure that Nestle values and principles are understood by all and are the reference point in all people matters.
The statement of Disclosure of Remuneration under Section 197 of the Act and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 ("Rules"), is appended as Annexure - 8 to the Report.
The information as per Rule 5(2) of the Rules, forms part of this Report. However, as per first proviso to Section 136(1) of the Act and second proviso of Rule 5(2) of the Rules, the Report and Financial Statements are being sent to the Members of the Company excluding the statement of particulars of employees under Rule 5(2) of the Rules. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at the Registered Office of the Company.
The Company has a Policy on "Prevention of Sexual Harassment of Women at Workplace" and matters connected therewith or incidental thereto covering all the aspects as contained under the "The Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 2013". The Company received two complaints under the Policy, both of which were disposed of.
Trade Relations
The Company maintained healthy, cordial and harmonious industrial relations at all levels. Despite severe competition, the enthusiasm and unstinting efforts of the employees have enabled the Company to remain at the forefront of the Industry.
Your Company continued to receive co-operation and unstinted support from the distributors, retailers, stockists, suppliers and others associated with the Company as its trading partners. The Directors wish to place on record their appreciation for the same and your Company will continue in its endeavour to build and nurture strong links with trade, based on mutuality, respect and co-operation with each other and consistent with consumer interest.
Appreciation
Your Company has been able to operate efficiently because of the culture of professionalism, creativity, integrity and continuous improvement in all functions and areas as well as the efficient utilization of the Company''s resources for sustainable and profitable growth.
The Directors hereby wish to place on record their appreciation of the efficient and loyal services rendered by each and every employee, without whose whole-hearted efforts, the overall satisfactory performance would not have been possible.
Your Directors look forward to the long term future with confidence.
On behalf of the Board of Directors
Suresh Narayanan
Chairman and Managing Director
Date : 15th February, 2017
Place : Gurgaon
Dec 31, 2014
Dear Members,
The Directors are pleased to present their report and financial
statements for the year ended 31st December, 2014.
The global economic environment in recent years has been challenging
and marked by increasing uncertainty. Though it is believed that the
growth engine for the global economy is shifting from the West to large
emerging economies such as China and India, any significant or
structural change will be a long drawn out process. Nevertheless, the
economic slowdown being experienced globally created stress and
increased the complexity and volatility in the economic environment in
India as well. The continuing high inflation, high fiscal deficit, and
low consumer confidence, added to the challenges, as the growth rate of
GDP continued to slide lower and the rupee depreciated further.
The year 2014 has been a sort of watershed for India, from the
political perspective. Your Company commenced the year 2014 in this
environment, with prudence and caution, realigning initiatives and
businesses to adapt to the reduced vibrancy of the Indian economy.
Apart from some optimism on sporadic signs of revival from the US
economy the global environment remained sluggish and there was little
cheer in the early months for the Indian economy. Your Company
continued to repose faith in the fundamentals and strong potential of
the economy, and in Nestle''s knowledge and capabilities to create
sustainable value, improve the quality of life of people and ability to
actively participate in the growth of the economy. The general
elections for the Lok Sabha constituencies brought about a decisive
turnaround in the political environment. Close monitoring by the
Central Bank, softening of commodity prices and new initiatives by the
Government seem to have helped in mitigating general inflation though
food inflation remained at elevated levels. For the most part of the
year the external environment continued to lack buoyancy.
Your Company is optimistic that the economy will recover and return to
a higher growth trajectory that is in keeping with its true potential.
All signals from the new Government indicate increased focus on
reviving economic growth by redefining policies, improving
administration and infusing investments to create a robust
infrastructure for economic activity. The political stability, the
increased engagement with other countries, FDI liberalization in
Railways and Defence, and reform oriented initiatives in mining, Direct
Benefit Transfer and the Make In India campaign reflect the change
underway.
One of the strengths of India and the underlying basis for its
potential is the demographic dividend and the opportunity to improve
the quality of life of its people. In order to realize this potential
India will have to overcome various challenges, key amongst them being
the challenge of health and nutrition for its people, since inadequate
nutrition has an adverse impact and lowers productivity and output of
people. This is already a challenge across the income pyramid. Almost
55% women in urban India suffer from micronutrient deficiencies. More
than 75% of pre-school children suffer from micronutrient deficiencies,
and over 50% mortality amongst children is attributed to malnutrition.
While much of this is possibly linked to poverty and /or lack of
awareness even across families that are economically better off,
economic growth is also accompanied with the lifestyle diseases
including diabetes, hypertension and cardio-vascular. These lifestyle
diseases result from inadequate understanding of nutrition, the
inability to follow a balanced lifestyle and sometimes due to lack of
options. Clearly nutrition and food will play an important role in
shaping the quality of life in India but there is no easy solution.
India''s social structure and demography is complex and food habits are
very diverse and often based on climatic and regional differences, and
food choices are also influenced by income disparities. Moreover,
whether people consume food for convenience, nutrition, indulgence or
for responsible pleasure is a personal choice. Nutritional solutions
will require a focus on increasing awareness and nutritional knowledge,
developing food products that can combine taste, convenience and
nutrition in daily diets.
Your Company''s vision is aligned with societal needs for food and
nutrition and its approach to business is to Create Shared Value. Your
Company embarked on an ambitious journey of reshaping itself and its
product portfolio towards its vision to be the recognized leader of
Nutrition, Health and Wellness in India. Your Directors'' believe that
your Company can make a significant difference in improving the quality
of life of the population. Nestle India is well integrated into India''s
culture and constantly engaging with consumers to understand changing
lifestyles, aspirations and preferences to unlock consumer insights
that help develop relevant products. Your Company has access to
Nestle''s global network of 34 R&D facilities, knowledge of science
based nutrition and technological expertise. These along with the other
strengths that your Company has developed will prove to be the
competitive advantages in the emerging scenario.
Improving balanced nutrition is not the only challenge. There is
increasing concern that as population pressure continues to intensify,
the availability of land, water and other renewable resources is
rapidly getting depleted, and can impact food security. There is urgent
need to reduce wastage of farm produce, improve the supply chains for
transportation of perishable commodities and create incentives that
accelerate the transfer of knowledge and technology to improve
productivity and sustainability. The food processing sector has the
potential to make substantial contributions in this area and your
Company is optimistic that the food processing industry will be
supported in its efforts.
Your Directors'' are satisfied that in the economic environment that
prevailed during the year your Company has kept its sight on strategy
to consistently move towards the vision of being recognized as the
leader of Nutrition, Health and Wellness in India while maintaining
healthy overall performance. Your Company has a strong leadership team
and has conducted itself with fairness and integrity, continuing to
focus on reinforcing the fundamentals of growth drivers, further
improve operational efficiencies, and rationalization of products
portfolio. The concerted and ongoing efforts have ensured that
businesses including Noodles, Coffees, and Nutrition are doing well.
Financial Results And Operations
(Rs. in Millions)
Particulars 2014 2013
Net Sales 98,062.7 90,619.0
Add: Other operating revenues 485.7 391.5
Less: Operating expenses 80,177.5 73,556.2
Less: Impairment loss on fixed assets 81.1 99.4
Less: Net provision for contingencies
(from operations) 364.3 413.1
Profit from operations 17,925.5 16,941.8
Add: Other income 873.2 830.9
Less: Finance costs 142.3 365.1
Less: Employee benefit expense due to
passage of time 648.3 558.1
Less: Net provision for contingencies -
others 249.5 207.4
profit before corporate social
responsibility, exceptional 17,758.6 16,642.1
items and taxation
Less: Corporate social responsibility
expense 85.1 -
Add: Exceptional items 70.0 138.1
profit before taxation 17,743.5 16,780.2
Less: Tax expense 5,896.6 5,608.9
profit after taxation 11,846.9 11,171.3
Add: Profit brought forward 15,328.8 10,745.5
Amount available for appropriation 27,175.7 21,916.8
Less: Interim dividends* 4869.0 3,471.0
Less: Proposed final dividend 1,205.2 1,205.2
Less: Dividend distribution tax 1,091.6 794.7
Less: Transfer to general reserve 1,184.7 1,117.1
Surplus in statement of profit and loss 18,825.2 15,328.8
Key ratios
Earnings per share (Rs.) 122.87 115.87
Dividend per share (Rs.) 63.00 48.50
* 2014 includes additional interim dividend of Rs. 10/- per shares.
Net Sales have increased by 8.2%. Net Domestic Sales grew by 8.6%
mainly from better realizations. Export Sales grew by 2.9% impacted by
lower coffee exports to Russia. Earnings Per Share at Rs. 122.87
increased by 6%.
The increase in Other Income is mainly due to higher realization of
export incentives. Finance Costs have reduced mainly due to repayment
of External Commercial Borrowings.
The Impairment Loss on Fixed Assets of Rs. 81.1 million relates to
various items of plant & machinery and building that have been brought
down to their recoverable value upon evaluation of future economic
benefits from their use.
The Company supplemented the Provision for Contingencies with further
amount of Rs. 613.8 million (net) for contingencies resulting mainly
from issues, which are under litigation/dispute and other uncertainties
requiring management judgement. This was after the reversal,
utilisation/settlement of contingency provision of Rs. 121.0 million
due to the satisfactory settlement of certain litigations and
settlement of obligations under free replacement warranty for which
provision is no longer required.
Exports
The global market continued to see tough conditions, particularly in
Europe. Consequently, Exports remained virtually flat at Rs. 6441.8
million, growing by a nominal 2.9%. This was mainly sustained on
account of sales of Dairy and Nutrition products to affiliate
companies, where new markets were added. Exports of culinary products
did see some uplift in our major markets and we anticipate this to
continue growing as the popularity of specially Indian products
increases. On the other hand, exports of Instant Tea saw a slowdown,
both in Europe and in the Far East. Similarly, exports of Instant
Coffee dropped due to lower imports by the affiliate in Russia, where
the market is undergoing a change. This setback in beverages was offset
to some extent by other product categories. Our efforts in developing
exports of quality Instant Coffees, meanwhile, continued to earn us
recognition in the form of Awards from the Coffee Board.
The strategy to develop new products and target new export regions
would continue, so that we have a broad based direction of exports.
Contributions to the Exchequer
Your Company has been a leading tax payer of the country and over the
years has been enabling significant contribution to various taxes.
During the year 2014, the Company through its business, enabled tax
collections at Central and State level close to Rs. 25 billions, in
aggregate.
Dividends
The Board of Directors have recommended a final dividend of Rs. 12.50
per equity share (Face value Rs. 10/- per equity share) for 2014,
amounting to Rs. 1205.2 millions. This is in addition to the three
interim dividends of Rs. 12.50 per equity share paid on 29th May 2014,
Rs. 30.00 per equity share (including an additional interim dividend of
Rs. 10.00 per equity share as the Company has completed the major
capital expenditure programme announced in 2010 and has fully repaid
the borrowings made for capital expenditure) paid on 26th September
2014 and Rs. 8.00 per equity share paid on 22nd December 2014. The
total dividend for 2014 aggregates to Rs. 63.00 per equity share
compared to Rs. 48.50 per equity share for 2013. The same is in line
with the financial strategy of the Company.
Business Development
Your Company''s objective is to provide consumers with the best tasting,
most nutritious choices in a wide range of food and beverage categories
and eating occasions from morning to night and help them attain and
maintain optimal nutrition, health and wellness. However, human
nutrition is complex. The nutritional needs evolve with age and depend
to a large extent on the nutritional foundation laid in the early years
of our lives. It is now well accepted in the scientific circles that
nutrition starts to play a role in our lives even in the mother''s womb,
and the nutrition received by the baby in the first 1000 days from the
moment of conception creates the basic blueprint for the baby''s future
health. In later years this influences our ability to cope with
changing lifestyles and is impacted by the lifestyles that we choose to
lead. Your Company continues to partner with health care and
nutritional experts to provide nutrition knowledge through education
initiatives such as ''Start Healthy, Stay Healthy'' that propagates the
importance of nutrition and other communication that motivates active
lifestyles and nutritious diets amongst families.
Your Company''s mission is ''Good Food, Good Life''. Good Food supports
the nutritional needs at every stage of life starting from infancy and
it is central to Health and Wellness. This demands insights into
consumers'' unique needs and preferences that vary enormously and are
constantly evolving. The ability to provide tasty and nutritious food
that is relevant to different needs requires expertise and a
multidisciplinary range of knowledge and technology to stay abreast of
the rapidly emerging areas of scientific research. Your Company has
access to the extremely extensive and advanced global network of Nestle
R&D, and not only focuses on manufacturing and promoting products that
provide safe nutrition and high quality, but has also been advocating
balanced and healthy diets. Your Company respects that the decision to
consume food is a personal decision and determines whether it is for
nutrition, indulgence, or responsible pleasure.
During the year, your Company embarked on a journey of reshaping and
evolving the product portfolio that is more focused on premium and
value-up ranges, and while protecting the current business base it is
gearing up to become more efficient to take on the current and future
trade evolution and competitive challenges. It is satisfying that the
strategy of Nutrition, Health and Wellness for existing range and
innovations, value-up portfolio management and redirection of marketing
investments is starting to build further momentum.
''Prepared Dishes and Cooking Aids'' business maintained clear
leadership, improved volumes and strengthened its connect with
consumers. The emphasis on innovation and renovation of products to
provide taste and health, strong consumer insights, and excellent
engagement with consumers strengthened the business. During the year
MAGGI improved its position in the annual Brand Equity survey where it
moved up 4 positions and is in the Top 5 Most Trusted Brands of India.
While the survey also ranked MAGGI as the No.1 Food Brand in India,
another independent assessment ranked MAGGI as the Most Powerful Brand
in India.
MAGGI has constantly championed ''Taste Bhi, Health Bhi'' with its strong
product portfolio and during the year it also launched MAGGI Oats
Noodles with the goodness of grains (Grain Shakti) to enter the
breakfast segment with an enjoyable and healthy offering for the
family. It reached out to consumers on a deeper insight, that the key
to health is a combination of physical activity and balanced diet. The
concept was broadcast through the campaign for MAGGI Veg Atta Noodles
where MAGGI inspires kids to go out and play, leveraging the idea of a
progressive mom. The importance of physical activity and balanced diet
was reinforced with the MAGGI Oats Noodles campaign which generated
interest in the concept and demonstrates how mothers can inspire the
family to start the day with a physical workout and reward them with
the mazedaar MAGGI Oats Noodles.
The business continued to focus on understanding consumer preferences
and market needs. The MAGGI Masala-ae-Magic spice mix that was
developed as a taste enhancer fortified with Iron, Iodine and Vitamin A
for everyday cooking is growing rapidly. It expanded its footprints
into new homes as well and and is helping in addressing the serious
concerns about micronutrient deficiencies in India. MAGGI continued to
consolidate its position during the year. It drove penetration of
Noodles in small, semi urban towns with communication that was relevant
for those consumers, while in the Sauces category it recruited new
consumers to drive growth with MAGGI Pichkoo.
The ''Chocolate and Confectionery'' business continued to focus on
innovation and renovation even as it maintained its strong leadership
of the light eating chocolaty-wafer category with its brands Nestle KIT
KAT and Nestle MUNCH. With deceleration of the industry growth in the
category over the past year and steep increases in commodity prices and
packaging material, the business continued to review its product
portfolio. Leveraging Nestle technological expertise and consumer
insights into human food consumption behavior, the portfolio was
strengthened during the year to improve value-up management. ''Slow
Churned Chocolate'' was introduced in India for the first time, through
product offerings, Nestle KIT KAT SENSES Milk, Nestle KIT KAT SENSES
Dark and Nestle Extra Smooth. These Premium chocolates use finest cocoa
and milk ingredients and are churned for over 12 hours under controlled
conditions to deliver a signature rich smooth taste. Nestle POLO the
iconic ''Mint with the Hole'' was re-launched with menthol crystals and
attractive new packaging. Nestle MILKYBAR which continues to be the
leader in ''whites'' was renovated and re-launched with the innovative
concept of ''play eat & learn'' to create more value. Your Company
encourages responsible consumption and during the year it has started
to print Guideline Daily Amount (GDA) on the front of pack for this
category to indicate the calorie content for each portion. This will
enable consumers to make a considered consumption choice.
Sustained focus on newer and relevant communication and integration in
the digital and social media continued to strengthen the brands.The
Nestle KIT KAT astronaut music video #MyDiwaliBreak during the year was
appreciated widely as an example of how the brand has been ''listening''
to consumers on social media and responded swiftly with focused and
engaging content to inspire conversations, drive engagement for
increased saliency and buzz. During the year, the digital campaign for
Nestle ALPINO won an Effie Award. The focus on creating relevant
engagement with consumers was done across the portfolio. During the
year, the business also developed a new campaign for Nestle MUNCH. The
communication that has been released in January 2015 uses
''MUNCHification'' as a call for the consumers of MUNCH to announce their
uniqueness to the world and create their own rules to establish their
identity.
The ''Milk Products and Nutrition'' business sustained its performance
and focused on renovating products that leveraged consumer insights and
emerging science based knowledge. Your Company considers nutrition as a
critical element for good health and has consistently worked towards
providing science-based nutrition to babies in accordance with all
national and international regulations and guidelines. The business
continued to drive ''Start Healthy Stay Healthy'' educational and
science-based initiative in partnership with health care and nutrition
experts, to focus on the lifelong impact of breast feeding and the
first 1,000 days of life when the blueprint for the future health is
being charted. Nestle has always believed and advocated that breast
feeding is the best nutrition for babies and the business sustained its
efforts to educate consumers on this message and its importance in
nurturing healthier and happier generations.
The ''Super Baby'' campaign initiated in 2013 generated half a million
pledges. During the year 2014, the business launched a social campaign
to reinforce the importance of breastfeeding with the message ''When
breast fed it shows'' and focused on taking the public support beyond a
pledge and to convert it into action and to encourage advocacy around
the cause.
Using Nestle R&D technology and their expertise in science based
nutrition, your Company launched ''NAN LO-LAC'' as the first ever low
lactose formula in the country for nutritional management of diarrhea.
The portfolio of dairy products including Nestle a Milk, Nestle SLIM
Milk, Nestle a Dahi, Nestle SLIM Dahi and Nestle MILKMAID Sweetened
Condensed Milk increased the focus on strengthening relationships with
consumers who are looking for Nutrition, Health and Wellness in their
everyday lives. Nestle a Milk continues to be preferred by consumers
for its high quality, and during the year initiatives were implemented
to strengthen the association of Nestle a Milk as a source of
nourishment for the family. Research indicated that consumers across
the country preferred tea prepared with Nestle EVERYDAY and in keeping
with this insight your Company launched Nestle EVERYDAY as the
preferred partner for tea creaming. Nestle MILKMAID Sweetened Condensed
Milk maintained its leadership and leveraged technology to further
focus on building dessert consumption at home. An internet based
campaign ''Create Sweet Stories'' that encourages family bonds, was
rolled out. The Company also test launched Nestle Buttermilk and Nestle
Lassi in Delhi to assess the market in the liquid refreshment section.
''Coffee and Beverages'' business had satisfactory growth during the
year, driven by NESCAFE, which further strengthened your Company''s
market leadership in Instant Coffees. Brand Equity''s Most Trusted
Brands survey for 2014 ranked NESCAFE in the top 5 Hot Beverage brands
and the 100 Most Trusted Brands of the country. To mark the 75th
anniversary of the NESCAFE brand globally, in India the business
launched a unified, global look campaign with a new slogan - ''It all
starts with a NESCAFE''. NESCAFE aligned itself to the fast changing
environment the evolving lifestyle and aspirations of the youth.
Through technological renovation the strong and perfect cup of NESCAFE
for product superiority was reconfirmed. The communication "It all
starts with a NESCAFE" on digital as well as television generated
unprecedented buzz, especially amongst youth, resulting in volume and
value growth and market share gain. The campaign has been included in
the Best campaigns of 2014 by leading Media houses like Financial
Express and CNBC TV 18.
NESCAFE SUNRISE consolidated its portfolio and continued its focus on
strong communication and on-ground execution to gain market share.
NESTEA also performed satisfactorily during the year 2014 was a
challenging year for ''Nestle Professional'' the out of home business.
The beverages vending solutions category was adversely impacted by the
surge in milk prices at the start of the year and focus on cost control
and execution of an enhanced strategy enabled it to end the year
stronger. Portfolio in coffee vending solutions continued to be
strengthened during the year with enhanced focus on value-up vending
solutions. Continued emphasis on the ''Innovation by Application''
concept in the food portfolio and focus on route-to-market through
product demonstrations, Chef to Chef activities, tailor-made recipe
application development, staff training and similar initiatives
continued to strengthen your Company''s presence in Restaurant, Hotel
and Catering industry. Your Company remains committed to consolidate
and build further on its strengths in the out-of-home industry.
Sales
Your Company continued to make active efforts to reach its products to
consumers wherever and whenever the consumer may want it. The focus
during the year was to improve availability in a sustained manner in
the secondary and tertiary towns. During the year, the Company
continued to increase its reach amongst relevant consumers by adding
more outlets. These efforts were reinforced by increased engagement
with its trade partners. In recent years your Company has invested in
improving sales automation systems to enhance productivity of its sales
force. During the year, it continued to leverage this to improve the
planning process and the productivity of the sales force. Your Company
has been strengthening partnerships with customers in organised trade
by ensuring higher levels of customer service and this has been
appreciated and recognised by the customers.
Technology, Quality and Safety
Your Company is committed to providing consumers with high quality
products. It follows stringent quality assurance norms, has
state-of-the-art technology and high degree of automation and is
continuously improving the products to ensure a 60:40 taste preference
with a nutritional advantage. Sustained delivery on this commitment has
ensured that your Company''s products are trusted by consumers. During
the year your Company continued its focus on driving the quality
culture and total productivity management across the factories.
Your Company has a General License Agreement (GLA) that allows it
access to Nestle Group''s intellectual property rights including global
portfolio of brands, proprietary science and technology including over
1300 patents, extensive research and development capabilities.
The GLA includes access to over 6,000 brands such as NESTLE, MAGGI and
NESCAFE and technologies developed by the global network of 34 Research
& Development facilities, including one at Manesar, Haryana which will
further assist in localization of global concepts.
All the factories continue to embrace Nestle Continuous Excellence and
LEAN mindset and are continuously implementing initiatives that reflect
War on Waste and Total Performance Management. This ongoing engagement
has continued to benefit your Company by streamlining of the planning
activity, savings through optimization of processes, reducing waste
especially in non-quality areas, while maintaining focus on further
improving quality and competitiveness.
Your Company believes that safety practices are important in every
activity, function and location wherever the employees are engaged, and
is committed to maintaining the safety culture. The ''Safe by Choice''
and ''B-SAFE'' programmes continue to be high priority and are constantly
being reiterated to engage the employees.
Environment
Your Company has consistently emphasized sustainable use of natural and
non-renewable resources. Within the factories the efforts are ongoing
to continuously assess and improve operational efficiencies, minimize
consumption of natural resources, and reduce consumption of water,
energy and emission of CO2 even as production volumes are maximized.
Within the factories your Company constantly evaluates new initiatives
that could reduce waste and emissions and actively engages the
employees to increase awareness about the need to sustain the
environment. All processes use state-of-the-art technology, follow the
Nestle Environmental Management System, and comply with government
policies, laws and regulations relating to the environment.
In order to reduce its water footprint, your Company has adopted the 3R
methodology (Reduce, Reuse, Recycle). During the year, a major project
was commissioned at the Moga Factory where milk is collected from over
100,000 farmers. This project has the potential to recover and recycle
water collected every day, and at full capacity it has the potential to
reduce ground water withdrawal significantly. Your Company is working
on implementing a similar project at the Samalkha Factory.
In the area of energy consumption your Company worked with reputed
external experts during the year and conducted energy target setting
exercise at four factories. This facilitates the evaluation of the
areas of improvement and further optimizes the energy consumption in
the factories.
These efforts have shown excellent results. During the past 15 years,
even as production volumes have continued to increase substantially,
your Company has reduced the usage per tonne of production by as much
as 57% for energy, 72% for consumption of water and 64% for emission of
green-house gases. During the last one decade itself, even with
addition of 3 new manufacturing units and an enlarged base during this
period, your Company has reduced water usage by around 49% per ton of
product.
Supply Chain
During the year, while your Company continued its preparation for the
Goods and Service Tax, the supply network has not changed.
Infrastructure continue to be a constraint and the overall value chain
remains complex.
Your Company has accelerated the use of technology across the value
chain and during 2014 made significant progress. Your Company has
implemented a system to streamline the milk collection to directly pay
the farmers who supply milk to the Moga Factory. Apart from other
benefits, the access to bank facilities will also ensure financial
inclusion of the farmers.
In the area of Supply Planning, your Company has improved the use of
SAP in most of the factories with improvements in data reliability and
people productivity. In the area of Customer Service, your Company has
implemented a stock replenishment system (CMI) managed directly by
customer''s representative, with inventory optimization and improvement
in productivity. The roll out of the warehouse management systems (WMS)
with RF technology has been extended to more locations. The Customer
Service team also successfully initiated joint projects with some key
customers to improve "on shelf availability" and your Company
maintained overall high service levels.
Volatility and uncertainty in raw materials are part of the new
reality. The Procurement team of your Company continued leveraging
economies of scale and ensured supply of quality materials and services
at competitive prices. During the year, your Company also continued to
develop local raw materials, including specialized ingredients for
business, and continues to work to develop alternate vendors to reduce
risks and deliver savings. The Responsible Sourcing Program, initiated
in 2010, has now reached over 150 suppliers with regular audits and
continuous feed-back on compliance. The NESCAFE plan, launched in 2012,
has been accelerated, with your Company purchasing "4C" certified
coffee from over 300 selected farmers who are provided regular visits
and technical assistance.
Nestle Continuous Excellence (NCE) now covers the entire value chain
and is helping your Company to increase efficiencies, reduce
complexities, while enabling to improve product freshness for the
customer. The savings generated have helped to partially offset the
commodity inflation. LEAN has also helped your Company and the
suppliers to reduce inventories, lead-time and reduce waste.
While continuing to upgrade warehousing and transport facilities, your
Company has successfully implemented a cost saving program to partially
offset the cost inflation in physical distribution. The savings in cost
of distribution have been achieved with better truck mix, better
vehicle utilization, more direct deliveries, increase in rail
transports and better route planning.
During the year, your Company has continued to increase the payable
values leveraging dedicated finance schemes and annual negotiations. In
conjunction with other continuous improvement initiatives, this has
helped your Company to maintain a healthy working capital position.
Human Resources and Trade Relations
Your Company considers people as its biggest assets and ''Believing in
People'' is at the heart of its human resource strategy. It has put
concerted efforts in talent management and succession planning
practices, strong performance management and learning and training
initiatives to ensure that your Company consistently develops
inspiring, strong and credible leadership. During the year, the focus
of your Company was to ensure that young talent is nurtured and
mentored consistently, that rewards and recognition are commensurate
with performance and that employees have the opportunity to develop and
grow.
Your Company has established an organization structure that is agile
and focused on delivering business results. With regular communication
and sustained efforts it is ensuring that employees are aligned on
common objectives and have the right information on business evolution.
Your Company strongly believes in fostering a culture of trust and
mutual respect amongst all its employee seeks to ensure that Nestle
values and principles are understood by all and are the reference point
in all people matters.
The Company has a Policy on Prohibition, Prevention and Redressal of
Sexual Harassment of Women at Workplace and matters connected therewith
or incidental thereto covering all the aspects as contained under the
"The Sexual Harassment of Women at Workplace (Prohibition, Prevention
and Redressal) Act, 2013".
During 2014, the Company received four complaints under the Policy all
of which were disposed-off.
SWOT Analysis for the Company
Strengths:
* Being NESTLE
* General Licence Agreement which gives access to the Nestle Group''s
proprietary technology/ brands, expertise and the extensive centralized
Research and Development facilities.
* High quality and safe food products at appropriate prices, and trust
in NESTLE.
* Understanding of Nutrition, Health and Wellness.
* Strong and well differentiated brands with market share leadership.
* Product innovation and renovation, based on consumer insights.
* Well diversified product portfolio across categories and income
strata.
* Strong financial position.
* Efficient supply chain and sales automation.
* Distribution structure that allows wide reach and coverage in the
target markets.
* Capable and engaged human resources.
* Participation in Global Business Excellence (GLOBE) and Nestle
Continuous Excellence
* Manufacturing capacities in place to cater to emerging demand with
speed.
Weakness:
* Complex supply chain configuration.
* Cascading indirect taxes.
* Price point portfolio.
* Low market attractiveness in some pockets of the portfolio.
Threat:
* Price volatility of key raw, packaging materials and fuels. Food
inflation.
* Increasing competition in processed foods.
* Availability of agro based commodities that meet Nestle
specifications.
* Regulatory developments impacting processed foods.
* Increasing concern on currently prevalent packaging materials and
absence of viable alternatives.
* Increasing dependence on technology for connectivity.
* Delay in introduction of GST that would have simplified distribution
network.
* Uncertainty in global economic environment.
Opportunities:
* Potential for expansion of numeric and weighted distribution in
smaller towns and other geographies.
* Increasing demand for value-up and premium products.
* Emergence of social media to connect with young consumers.
* Renovation of ''Out of Home'' business.
* Leverage Nestle Technology to develop more products that provide
Nutrition, Health and Wellness at affordable prices.
* Emerging opportunities in Digital and e-Commerce.
* Optimism around Government preparing initiatives to facilitate doing
business.
Awards and Recognitions
Your Company continues to be a highly trusted for the quality of its
products, innovation and renovation of its products based on strong
consumer insights and the ability to engage with consumers across the
country. During the year, your Company was also recognized for the
leadership in using the emerging digital platforms to develop relevant
content. Some of the key awards and recognitions include:
* WPP Milward Brown survey declared MAGGI as the ''Most Powerful Brand''
in India where Brand Power was a measure of salience, relevance,
connect, uniqueness and dynamism.
* In the Economic Times Brand Equity Survey 2014, MAGGI moved up 4
positions from the previous year survey to break into the Top 5 Most
Trusted Brands of India. Also ranked as the No.1 Food Brand in India.
* In the Asian Customer Engagement Forum Nestle BABY & me won Gold.
* In the EFFIES Awards NESCAFE Classic awarded Silver in Beverages
Category as well as for integrated advertising campaign category.
Nestle ALPINO awarded Bronze in consumer products category. Nestle BABY
& me awarded Bronze in Healthcare category.
* Nestle ''Share Your Goodness'' corporate video ranked amongst the best
of the year in the Google list of top trending videos.
Directors'' Responsibility Statement
Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors
confirm that:
* in the preparation of the annual accounts, the applicable accounting
standards have been followed and no material departures have been made
from the same;
* they have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year and of the profits for
that period;
* they have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
* they have prepared the annual accounts on a going concern basis.
Corporate Governance
In compliance with the requirements of Clause 49 of the Listing
Agreement with the Stock Exchange, a separate report on Corporate
Governance along with Auditors Certificate on its compliance is
attached as Annexure-1 and forms integral part of this Report.
Business Responsibility Report
Nestle''s approach to business is Creating Shared Value or ''Saanjhapan''
as used by your Company and it is about the impact of the business and
engagement through it. Your Company has been conducting business in a
way that both deliver long-term shareholder value and benefit society
under approach of "Creating Shared Value" (hereinafter ''CSV). The CSV
activities undertaken and the spends are in the Business Responsibility
Report under Clause 55 of the Listing Agreement, that describes the
initiatives undertaken by the Company in line with the philosophy of
Creating Shared Value. The Report is made available on your Company''s
website www.nestle.in and forms part of this Annual Report. Any member
interested in hard copy of the Business Responsibility Report may
inspect the same at the Registered Office of the Company or write to
the Company Secretary for a copy.
Cautionary Statement
Statements in this Report, particularly those which relate to
Management Discussion and Analysis as explained in the Corporate
Governance Report, describing the Company''s objectives, projections,
estimates and expectations may constitute ''forward looking statements''
within the meaning of applicable laws and regulations. Actual results
might differ materially from those either expressed or implied in the
statement depending on the circumstances.
Directors
The Board of Directors at their meeting held on 13th May, 2014
appointed Mr. Rajya Vardhan Kanoria as an Additional Director and
Independent Non-Executive Director of the Company with effect from 13th
May, 2014 for a period of five consecutive years for a term upto 12th
May, 2019. The above appointment was based on the recommendation of the
Nomination and Remuneration Committee and subject to the approval of
the Shareholders of the Company at the forthcoming Annual General
Meeting. Mr. Rajya Vardhan Kanoria holds office upto the date of the
forthcoming Annual General Meeting and is eligible for appointment.
Details of the proposal for the appointment of Mr. Rajya Vardhan
Kanoria as an Independent Director with effect from 13th May, 2014 for
a period of five consecutive years for a term upto 12th May, 2019, are
mentioned in the Explanatory Statement under Section 102 of the
Companies Act, 2013 of the Notice of the 56th Annual General Meeting of
the Company. His appointment is appropriate and in the best interest of
the Company.
Mr. Aristides Protonotarios shall retire at the forthcoming Annual
General Meeting and being eligible offers himself for re-appointment.
Statutory Auditors
The Statutory Auditors of the Company, M/s. A. F. Ferguson & Co.,
Chartered Accountants, New Delhi, hold office till the conclusion of
the ensuing Annual General Meeting of the Company and being eligible,
offer themselves for re-appointment. The Company has received their
written consent and a certificate that they satisfy the criteria
provided under Section 141 of the Companies Act, 2013 and that the
appointment, if made, shall be in accordance with the applicable
provisions of the Companies Act, 2013 and rules framed thereunder. The
Audit Committee and the Board of Directors recommends the
re-appointment of M/s. A. F. Ferguson & Co., Chartered Accountants, as
the Auditors of the Company in relation to the financial year 2015 till
the conclusion of the next Annual General Meeting. The re-appointment
proposed is within the time frame for transition under the third
proviso to sub-section (2) of Section 139 of the Companies Act, 2013.
Cost Auditors
In terms of Section 148 of the Companies Act, 2013 read with Companies
(Cost records and audits) Rules, 2014, as amended, milk powder products
manufactured by the Company and falling under the specified Central
Excise Tariff Act heading, are covered under the ambit of mandatory
cost audits from the financial years commencing on or after 1st April,
2015. As your Company''s financial year begins from January, cost audit
is applicable on the Company for the financial year from 1st January,
2016. The Audit Committee recommended and the Board of Directors
appointed M/s. Ramanath Iyer and Co., Cost Accountants, New Delhi
(Registration No. 00019) as the Cost Auditors of the Company, to carry
out the cost audit of the milk powder products manufactured by the
Company falling under the specified Central Excise Tariff Act heading,
on a voluntary basis in relation to the financial year from 1st
January, 2015 to 31st December, 2015. The Company has received consent
from M/s. Ramanath Iyer and Co. for their appointment.
Secretarial Auditors for 2015 and Voluntary Secretarial Audit Report
for 2014
On the recommendation of the Audit Committee, the Board of Directors of
the Company have appointed M/s. S.N. Ananthasubramanian & Co., Company
Secretaries (PCS Registration No. 1774) as the Secretarial Auditor of
the Company in relation to the financial year 2015, in terms of Section
204 of the Companies Act, 2013. The Company has received consent from
M/s. S.N. Ananthasubramanian & Co, Company Secretaries, for their
appointment.
The Board of Directors on a voluntary basis appointed M/s S.N.
Ananthasubramanian & Co., Company Secretaries (PCS Registration No.
1774) as the Secretarial Auditor of the Company in relation to the
financial year 2014. The Secretarial Audit Report for financial year
2014 done on a voluntary basis is available on the Company''s website
www.nestle.in. Any member interested in hard copy of the Secretarial
Audit Report may inspect the same at the Registered Office of the
Company or write to the Company Secretary for a copy.
Information Regarding Conservation of Energy etc. and Employees
Information required under Section 217(1)(e) of the Companies Act, 1956
(hereinafter referred to as ''the Act'') read with Rule 2 of the
Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988 is given in the Annexure - 2 forming part of
this Report. Information as per Section 217(2A) of the Act, read with
the Companies (Particulars of Employees) Rules, 1975, as amended from
time to time, forms part of this Report. However, as per the provisions
of Section 219(1)(b)(iv) of the Act, the Report and Accounts are being
sent to all the members excluding the statement containing the
particulars of employees to be provided under Section 217(2A) of the
Act. Any member interested in obtaining such particulars may inspect
the same at the Registered Office of the Company or write to the
Company Secretary for a copy.
Corporate Social Responsibility
With the enactment of the Companies Act, 2013 and the Companies
(Corporate Social Responsibility) Rules, 2014 read with various
clarifications issued by Ministry of Corporate Affairs, the Company has
undertaken activities as per the CSR Policy (available on your
Company''s website www.nestle.in) and the details are contained in the
Annual Report on CSR Activities given in Annexure - 3 forming part of
this Report. Even though CSR spend is applicable from 1st April, 2014,
the spend on CSR activities for the financial year 2014 together with
the amount unspent which will be done in 2015 on projects of 2014, is
around one percent of the average net profits of the Company during the
three immediately preceding financial years. It is planned to step up
this spend in a staggered manner in the coming years.
In accordance with Nestle''s way of doing business, your Company''s
approach is to spend on activities for the welfare of society under
umbrella of Creating Shared Value activities, Corporate Social
Responsibility activities etc. ensuring that the total spend in each
financial year would be above the level prescribed under the Companies
Act, 2013. Following this approach, the cumulative spend under the
umbrella on such activities for the welfare of the society during 2014,
was above the level prescribed under the Companies Act, 2013.
Trade Relations
The Company maintained healthy, cordial and harmonious industrial
relations at all levels. Despite severe competition, the enthusiasm and
unstinting efforts of the employees have enabled the Company to remain
at the forefront of the Industry.
Your Company continued to receive co-operation and unstinted support
from the distributors, retailers, stockists, suppliers and others
associated with the Company as its trading partners. The Directors wish
to place on record their appreciation for the same and your Company
will continue in its endeavor to build and nurture strong links with
trade, based on mutuality, respect and co-operation with each other and
consistent with consumer interest.
Appreciation
Your Company has been able to operate efficiently because of the
culture of professionalism, creativity, integrity and continuous
improvement in all functions and areas as well as the efficient
utilisation of the Company''s resources for sustainable and profitable
growth.
The Directors wish hereby to place on record their appreciation of the
efficient and loyal services rendered by each and every employee,
without whose whole-hearted efforts, the overall satisfactory
performance would not have been possible.
Your Directors look forward to the long term future with confidence.
On behalf of the Board of Directors
Date : 13th February, 2015 Antonio Helio Waszyk
Place : Gurgaon Chairman
Dec 31, 2012
The Directors are pleased to present their report and the statement of
accounts for the year ended 31st December 2012.
The economic environment in 2012 has been tough and the growth in India
moderated for one more year. There were various Internal and external
factors that played a role, The effect of the uncertainty and
recessionary trends in the global economies was compounded by the
complexity in the domestic environment. Unpredictable weather and fear
of delayed monsoons again triggered a negative focus on the output gap
and high food Inflation persisted at uncomfortable levels and remained
a concern. The economic sentiment remained subdued as the government
policy and measures were keenly watched for their impact on fiscal
deficit and interest rates. The GDP growth rate remained positive and
relatively healthy despite all this but currency volatility, some
concern on the economic growth model, transitional imbalances and
emerging focus on corruption issues softened the sentiments.
In the immediate term these are areas of serious concern but despite
that the general consensus remains optimistic about long term growth.
There is underlying confidence that consumption will continue to
sustain on the back of rising aspirations, urbanization, more working
professionals, favorable demographics, low penetration of consumer
products, prerniumisation trends and the ongoing shift to branded
products.
Your Company anticipates that the moderation In the growth rates will
show steady recovery in the short term and the growth momentum
will revive soon.
In this new reality and a volatile, uncertain environment your Company
believes that to ensure long term profitable and sustainable growth, we
have to think ahead and constantly ask ourselves how we could be
Creating Shared Value. Your Company maintained a forward looking
approach to ensure that it is well prepared to seize new opportunities
and handle new challenges with speed. Since the success of your Company
depends on the ability of the business to keep understanding the
changing environment and to keep adapting its responses in a seamless
manner it has continued to focus on realigning its initiatives
internally and externally. The Company remained focused on the
principles of Nestle Continuous Excellence to drive efficiencies and
strengthen the basic businesses, and focused on strengthening its
ability to provide Nutrition. Health and Wellness, through deeper
insights, bigger innovations, faster responses and adequate capacity.
Since balanced nutrition is a challenge across the income pyramid in
India, your Company has constantly innovated and renovated its product
portfolio with products that are tasty and provide nutrition, health
and wellness. As you are aware, your Company has a very significant
advantage in this through Usability to access Nestle Group''s expertise
and knowledge in science based nutrition and food technology from its
global R&D network. There is concern about the increasing problems of
lifestyle diseases in the country including diabetes, obesity and
heart, and your Company has consistently worked to achieve better
insights into the nutritional aspects and taste profiles of traditional
Indian cuisine to be able to develop products that are useful for the
consumers. With the increasing focus from the Nestle Group on India and
its investment in the R&D Centre in India, your Company''s competitive
advantage will become even stronger.
Your Directors are satisfied that the Company has conducted Itself with
fairness and integrity and believes that its operations and activities
are creating value for stakeholders as well as for the society. Your
Company has a strong leadership team in place and is continuing to
develop a culture of safety, better gender balance and an environment
that empowers everyone with the philosophy of "Dream, Dare. Deliver."
Your Directors'' are pleased that during 2012, your Company has again
sustained its healthy and profitable performance even as it
strengthened its business base for sustainable growth in the long term.
Net Sales have increased by a satisfactory 10.8%. Domestic Sales
increased by 11% mainiy on account of net realizations and product mix,
and Export Sales moved up by 7.6% contributed largely by exports to
third parties.
Financial Results and Operations
(Rs. in millions)
2012 2011
Net sales 83,023 74,908
Add: Other operating Revenue 323 237
Less; Operating expenses 67,537 60,914
Less : Impairment loss on Fixed assets (Net) 69 104
Less : Net provisions for contingencies 340 287
from operations
DPBIT # 15,400 13,840
ADD: other incomes 310 272
Less : Financial Costs ## 266 51
Less : Net provisions for contingencies- others (82) 182
Less : Tax Expenses 4,847 4,264
Net Profit 10,679 9,615
Add : Profit Brought Forward 6,569 3,343
Balance available for Appropriation 17,248 12,950
Less: Interim Dividend 4,673 3,471
Less : Financial Dividend Proposed - 1,285
Less : Corporate Dividend Tax 759 754
Less : Transfer to General reserve 1,068 951
Surplus Carried in the statement of Profit 10,745 6,569
and loss
Key Ratio
Earning per Shares 110.73 39.73
Dividend per Share (Rs.) 48.50 48.50
# Profit from operations other income, Finance costs, other Net
provisions for contingencies ( non operation) and taxation.
## Exclusive Rs. 549 Millions (Previous year 1,100 Millions) treated as
capital Expenditure.
Net Profit for the year 2012 increased by 11.1% The cost of materials
for goods sold In percentage of Net Sales has decreased to 45.5% from
48.0% In 2012, mainly due to borrowing, which comprise largely of the
exchange loss on External Commercial Borrowing, as this has deen
treated as capital expenditure in line with applicable Accounting
Standards.
Your Company continued to emphasize cash generation and delivered
strong operating cash flow during the year. Short term surplus funds
arising out of timing differences between generation and utilization
thereof, have been prudently invested after ensuring that such
investments satisfy the Company''s criteria of safety, liquidity and
returns.
The Impairment Loss on Fixed Assets of Rs. 69 million relates to
various items of plant and machinery that have been brought down to
their recoverable value upon evaluation of future economic benefits
from their use and is net of deferred taxes of Rs. 46 million.
The Company supplemented the Provision for Contingencies with further
amount of Rs. 258 million (net) for contingencies resulting mainly from
issues, which are under litigation/ dispute and other uncertainties
requiring management judgment. This was after the reversal /
utilisation of Rs. 223 million provision, due to settlement of certain
disputes for which provision was no longer required.
The current year has commenced with uncertainties and ambiguity
especially with respect to the overall environment which requires
careful attention and your Directors are committed to sustain
performance. Your Company is hopeful the government, through ifs
policies, will continue to support food processing sector which is
integral to India''s growth mode.
Your Directors are confident of the long-term business prospects of the
Company.
EXPORT
During the year, Export Sales at Rs. 4,257 million grew by 7.6%. There
has been a general slowdown in exports out of India and your Company
has also been impacted by the sluggish economic conditions in Europe
and North America.
Tire rate of growth for Instant Tea products was lower than anticipated
as economic conditions in the export markets continued to falter.
Nevertheless, the sales of Instant Tea grew during the year due to the
focus maintained on the high value-added grades. Your Company continued
to promote the exports of culinary products for the Indian Diaspora and
made breakthroughs into a few new markets during the year. It also
succeeded in developing new markets for coffee exports, and the
forthcoming year should see better sales in both categories.
The strategy to develop new products and target new export regions
would continue, so that we have a broad-based direction of exports, in
particular, for Instant Tea, we shall seek to add variety and value to
the portfolio in the coming years.
DIVIDENDS
The Board of Directors declared third interim dividend for 2012 of Rs.
12.50 per equity share (Face value Rs. 10/-per equity share), amounting
to Rs. 1205 million, which will be paid in March, 2013. This is in
addition to the two interim dividends of Rs.18.00 each per equity share
paid in August and December 2012 (amounting to Rs. 3471 million). The
total dividend per share in 2012 aggregates to Rs. 48.50, the same is
in line with the financing strategy for capital expenditure.
BUSINESS DEVELOPMENT
One of the key drivers for the Company is its insight and expertise in
Nutrition, Health and Wellness. Good Food, Good Life is the commitment
to consumers, to enhance lives, throughout life, with good food and
beverages. Your Company has consistently advocated balanced and healthy
diets and has been conducting basic nutrition related programmes in
partnership with experts. Your Company focused on expanding
distribution and strengthening the groundwork for bigger innovations
that will add value to consumers. Though rapid growth revival is not
expected, there is general consensus that consumption led growth
revival can be expected in the short term. Your Company also
understands the change that Is taking place in the market place and the
consumers, and the businesses have been working rapidly to realign
themselves to ensure that their products and communication continue to
be relevant as leaders.
The business for ''Prepared Dishes and Cooking Aids''
maintained its market leadership and growth. The business continued to
drive penetration with its Popularly Positioned Products including the
small packs of MAGGI Noodles and MAGGI Pichkoo sauce and continued to
build and strengthen its bonds with consumers. The new ''Meri MAGGI 2
Minute meln Khushiyan'' advertising campaign that has the iconic
statesman Amitabh Bachchan as the storyteller of consumer stories
further strengthened the emotional connect mat MAGGI already has with
consumers. Maggi Noodles continued to drive growth of the Instant
Noodles category, offering the consumer ''Taste Bhi Health Bhi''. During
the year, your Company further consolidated its position as the market
leader in sauces and continued to build the business for MAGGI
Masala-ae-Magic fortified seasoning mix with well thought out
initiatives and new pack sizes that are more convenient for regular
consumption. A new range of MAGGI Healthy Soups was rolled out. Your
Company believes that one of the key reasons why consumption of
packaged soups has not been growing in India is because the products
available till now have not delighted consumers. Your Company worked
closely with Nestle R&D in Shanghai and using Nestle''s new and
proprietary ''granulation based technology'' have developed delightful
soups that retain the freshness of the vegetables and deliver a
multi-sensorial experience. These soups contain fresh vegetable purees
and deliver the fresh taste and aroma of home-made soups. For the first
time, the consumer has a product thai delights her from the moment she
picks up the pack, starting with the rustle of the granules, the sight
of colorful real vegetables, the aroma of fresh vegetable purees, and
the taste of real soup, all of which add to the overall enjoyment. The
range contains six delicious popular varieties and for the first time
ever, this technology allows us to make a delicious Spinach soup which
is popular in Indian homes. Your Company is amongst the first in the
Nestle world to adopt this unique technology for making soups.
The consistent hard work and commitment, consumer engagement and
innovation has continued to add value to consumers and provide the
growth momentum. While the Meri MAGGI faceboak page by your Company has
crossed 1 million fans and is today the largest MAGGI face book page in
the world, MAGGI continues to be rated as amongst the Top 10 MOST
TRUSTED BRANDS and has been ranked very high amongst the ''Buzziest
Brands'' in India.
The ''Chocolate and Confectionery'' business continued to grow steadily
and there has been consistent focus on developing insights and
understanding of emerging consumer needs. While sweet snacking is an
intrinsic part of traditional consumption habits there is a growing
awareness of nutritional balance and preference for products that can
make this experience more beneficial. Over the years your Company is
established as the leader in the chocolaty wafer segment for ''lighter
eating'' with NESTLE KITKAT and NESTLE MUNCH and Whites'' with NESTLE
MILKYBAR. With the growing awareness about the benefits of dark
chocolates your Company had earlier launched NESTLE Dark Chocolate.
During the current year NESTLE KITKAT Dark Crisp wafer fingers covered
with Plain Chocolate was also launched and is doing well in the market.
With the changing lifestyles of consumers across the country, the
business focused on developing more innovative products and enhancing
capacity to prepare for the emerging demand. While NESTLE KITKAT was
renovated and is now available in a very exciting new packaging, MUNCH
ROLLZ Wafer Tube filled with Toffee was launched from the new plant in
Himachal Pradesh.
NESTLE POLO which continues to be iconic and defines the irreverent
''youth defining'' mint with the hole strengthened its partnership with
Wendell Rodricks to create POLO Fashion and cues strong aspiration for
the youth white providing the unique POLO ''refreshment1.
During the year, ''Coffee and Beverages ''continued to define the coffee
drinking market in North, East and West of India where it has
significant market share and maintained leadership in the instant
coffee business. As the leader, your Company understands the need to
provide the right product experience to the right consumers and
continued to accelerate its work on developing stronger consumer
insights and rolling out relevant products and initiatives. The
portfolio was strengthened with the re-launch of NESCAFE Classic in
a unique jar of contemporary shape and stature, ramped up distribution
for NESCAFE GOLD which is the premium freeze dried coffee, and launch
of SUNRISE Strong which is a stronger coffee-chicory blend specifically
tailor made for the consumers in Andhra Pradesh. NESCAFE Cappuccino
which has a taste advantage over similar competitive products
continued to be liked by the younger generation and increased market
share. NESTEA also increased its presence and market share and is fast developing into a strong pillar for the beverage business of your
Company. Your Directors are pleased that the advertising communication
for the business is being received well by the consumers and also that
your Company''s NESCAFE Facebook page is the most popular NESCAFE page
in the world with over 2.2 million fans.
The ''Milk Products and Nutrition'' business faced a challenging year but
delivered a satisfactory performance. In line with the vision to
nurture a healthier, happier generation, your Company organized several
educational initiatives to support breast feeding. During the year,
your Company marked its entry into the maternal nutrition category
through the launch of NESTLE BABY & ME, a maternal nutrition supplement
for pregnant women and breastfeeding mothers. Your Company also
launched CERELAC Shishu Aahar, a range of Indianised infant cereals
providing Indian tastes while delivering age appropriate nutrition.
LACTOGEN and CERELAC were renovated with nutritional improvements in
line with the latest science. Healthcare nutrition aligned its new
manufacturing solution, re-faunched the improved product portfolio and
added PEPTAMEN and NUTREN Junior.
The portfolio of dairy products and UHT Milk continued to consolidate
and put in place further initiatives to enhance the consumers''
appreciation of its premium quality. Late in 2011,
your Company had launched Nestle A Milk and Nestle A Dahi to
encourage consumers to make informed choices when selecting milk or
dahi. During the year, activities were sustained to educate consumers
on the steps taken to implement and track the high quality standards
and good practices across the value chain of these products on the
premise ''Good makes Good''. Your Company has consistently leveraged the
strength of NESTLE MILKMAID which is amongst the successful and fast
moving brands in India for decades. Your Company launched MILKMAID
CREATIONS developed by expert chefs as a range of powdered dessert
mixes especially for the contemporary convenience-seeking consumers.
They have been developed on the insight that contemporary families do
not have time to prepare elaborate desserts but still want the quality
and taste of traditional delicacies.
''Nestle- Professional'' the out-of-home segment, continued to maintain
overall leadership in the Coffee vending solutions business despite
increased competitive intensity. Based on Insights established through
comprehensive research, plans are underway to launch new solutions and
recipes catering both to the mainstream and premium segment. Pilot test
launch of base gravy products specially meant for chefs and cooks
yielded positive results and are now being expanded. A wider range of
relevant culinary products specifically designed for the
hotel/restaurant/catering industry are proposed to be launched during
the current year, based on the development efforts during the year.
Your Company''s focus would continue to remain as the out-of-home
industry''s preferred food and beverage solutions partner,
SALES
Your Company has consistently made efforts to improve the availability
of its products wherever and whenever the consumer may want it and has
continued to build a deeper and wider distribution network. During the
year, it added another 500,000 outlets accelerating from 400,000
incremental outlets in the previous year. Working with its long term
distribution partners it leveraged its efficient and broad based
network to scale up the infrastructure necessary for growth. While
accelerating the expansion of its distribution network, your Company
also increased the focus on enhancing the capabilities, improving
processes and operations and cutting out waste. Nestle Continuous
Excellence has been rolled out across the regions.
In order to further enhance productivity in sales operations, your
Company had earlier initiated a drive to equip its distributors with
advanced sales automation. The increased transparency into secondary
sales data and improved channel insights at the granular level is
helping direct the resources and Inputs more efficiently, while also
increasing visibility and merchandising impact. Your Company also
strengthened partnerships with key customers in organized trade by
ensuring high levels of consumer service, faster speed to shelf and
impactful shopper engagement.
TECHNOLOGY, QUALITY AND SAFETY
During the year, your Company completed the capacity expansion plans
initiated in 2010, commissioning the new Factory in Tahliwal, Himachal
Pradesh, a new unit in Samaikha Factory, Haryana and new plant in Ponda
Factory, Goa. In addition a new line was commissioned in Moga Factory
for dessert mixes as well as a new plant for granulated soups in
Bicholim Factory. All of these new installations have been completed
with state of the art technology received from Nestle Group,
Switzerland under the General License Agreement and support your
Company''s permanent endeavors for excellence in quality and high
performance.
All the factories of your Company successfully passed the
re-certification against food safety and quality management as well as
for safety and environment; by a highly reputed third party agency.
All the factories had embraced NestI6 Continuous Excellence last year
to further improve in all areas, based on LEAN mindset for war on waste
and Total Performance Management concepts. Your Company benefitted from
the deployment of Nestle Continuous Excellence programme generating
improvements, delivering cost savings from operations, reducing waste
and improving quality. Nestle Continuous Excellence will continue to be
important for the operations to ensure consumer trust and preference
whilst enhancing competitiveness.
Your Company is committed to providing consumers with high quality
products and is continuously improving them to ensure a 60:40 taste
preference with nutritional advantage, These products touch the lives
of lakhs of consumers everyday and sustained delivery on this
commitment has placed your Company and its products amongst the most
trusted. Apart from the fact that your Company follows stringent
quality assurance norms, has state-of-the-art technology and high
degree of automation, your Company has a competitive advantage In the
ability to develop superior products. It has continuous access to the
Nestle Group research & development and the technical expertise, as
well as the best practices available in the global Nestle network.
These enable it to consistently stay aligned with the best and
efficient processes.
SAFETY
Your Company had earlier Initiated activities to strengthen the safety
culture and had launched a safety engagement programme ''Safe by Choice''
in partnership with DuPont. During the year, the program was extended
to all operating factories and enabled the organization to take quantum
leaps in terms of improvement in safety culture. Despite the fact that
during 2012 more than 20 million man-hours were engaged for major
construction work at the factories at Ponda, Nanjangud, Samatkha and
the construction of new Factory at Tahliwal, the ''Safe by Choice''
programme contributed to a good outcome on the Safety front,
Your Company believes that safety practices are important in every
activity, function and location where our employees are engaged. To
further strengthen this commitment your Company put up dedicated safety
structure for all sales branches as well. Safe driving has emerged as
the main
focus area for the field force and the ''B-SAFE'' programme was launched
across all sites and offices. Your Company is committed to equip the
field force with a defensive driver attitude and ensure their safety
while on road.
NESTLE R&D CENTRE IN INDIA
In 2010, Nestle S.A, Switzerland had agreed to the request of your
Company to set up an R&D Centre in India. The R&D Centre was
established under a separate wholly owned subsidiary Nestle R&D Centre
India Private Limited, in November 2012, Nestle S.A., announced the
opening of this R&D Centre In India. It Is built close to the Head
Office of your Company and will be additional competitive advantage for
your Company in the future and will also help to strengthen and
accelerate product innovation and renovation.
Nestle R&D Centre in India will work towards developing fortified
products and Populariy Positioned Products (PPP) that will seek to
address nutritional deficiencies especially In India and also across
the world. PPP are developed to meet the specific needs of consumers at
lower income levels by offering them high-quality, nutritionally
enhanced products at affordable prices. Nestle has an extensive global
R&D network and expertise in science based nutrition and Indian R&D
Centre will further help accelerate regional adaptation of global
technologies.
ENVIRONMENT
Your Company has consistently emphasized the need for sustainable use
of natural and non-renewable resources. it ensures that all processes
follow the Nestle Environment Management System, use state-of-the-art
technology and equipment, and comply with government policies as well
as environmental laws and regulations. New initiatives are constantly
being discussed and implemented within the factories to reduce waste
and emission, and consistent efforts are being made to constantly
increase awareness about the need to sustain the environment.
It is a matter of pride that over the past 15 years these efforts have
enabled us to achieve very high efficiencies in the use of natural and
non-renewable resources. Even as the production volumes have been
increasing, your Company has reduced the usage per tonne of production
by as much as 65% for energy, 70% for emission of green-house gases and
73% for consumption of water.
CAPAC1TYAND FUNDING
Your Company has been delivering steady performance over the past years
and continues Its leadership across businesses. Though the growth rate
of the economy has moderated, your Company believes that there will be
steady recovery. The Food Processing Sector can play a significant role
in food security as well as in creating employment and your Directors
are hopeful that the Government will continue to support ft. Your
Company has to think ahead to ensure long term profitable and
sustainable growth and be prepared to cater to the emerging demand with
speed,
During the past six years, your Company has invested close to Rs. 38000
million responsibly and sustainably, to expand the existing
manufacturing facilities at Bicholfm, Moga, Nanjangud and Ponda,
commissioning of a new unit at Samalkha, a Greenfield facility at
Tahliwal and a new plant for MAGGI products at Nanjangud as well as to
strengthen the distribution footprint. This includes substantial
investments of around Rs. 17000 million in 2011 and around Rs. 10000
million in 2012 respectively.
Your Company has been funding this accelerated capital expenditure with
a judicious mix of ''internal accruals'' and ''debt''. During the year, US
Dollar (USD) 56 millions were drawn down from Nestle SA for 5 years
under the External Commercial Borrowing approval from Reserve Bank of
India. The total amount outstanding as at 31.12.2012 was USD 192
million (Rs. 10500 million). Your Company is maintaining very strict
financial discipline and during the year has repaid all its short term
loans.
SUPPLY CHAIN
While infrastructure improving slowly and Goods and Services Tax not
yet implemented, your Company continues to operate in a complex supply
chain configuration.
The Supply Chain operation of your Company continued to procure quality
materials at competitive prices. Some key projects to source milk and
to localize milk derivates have been completed successfully and are
delivering sustainable savings.
Your Company has entered into an agreement for acquiring 26% minority
stake In Indoor Agra and Allied Activities Private Limited, engaged in
milk, collection business in Western India. This business investment
will contribute to sustainable sourcing and creating shared value with
farmers engaged in milk.
The replenishment and delivery of products to the customers have been
further improved. During the year, your Company has increased the
service levels achieving top tier status with key account customers.
The number of Stock Keeping Units (SKUs) was reduced by over 20%,
bringing down complexity costs across the value chain. Improved
planning process contributed to further reduction of stock levels.
During the year, Nestle Continuous Excellence (NCE), covering all
supply chain and procurement processes, achieved Important milestones.
The Goal Alignment initiatives and LEAN in Ponda Factory, delivered
improvements in productivity and people engagement. Over 300 employees
are now running 40 operational reviews targeting waste elimination with
problem solving tools.
The modernization of warehousing and transport remain a key priority
for your Company and all the new Distribution Centers have modem
infrastructure. Your Company has also started implementing warehouse
management systems (WMS) with RF technology to increase speed, further
improve accuracy and productivity levels. The Responsible Sourcing
program, initiated in 2010, has been extended to more vendors with
continuous support and education. Your Company launched the NESCAFE
PLAN to work with the coffee farmers, experts and R&D Centers and a
traceability initiative on sugar.
HUMAN RESOURCES AND TRADE RELATIONS
Your Company strongly believes that People are its core competitive
advantage. Accordingly your Company took measures to ensure that it is
attracting and retaining the right talent, creating a high performance
culture, ensuring development conversations, providing learning and
development opportunities, and recognising performance on an ongoing
basis. Your Company launched a comprehensive Leadership Development
Framework with all necessary tools and processes, thus ensuring that
the depth, quality and diversity of the talent pool is consistently
increased.
Your Company strongly believes in fostering a culture of trust and
mutual respect in all its employee relations endeavors, Your Company
has ensured that there is sustained communication and engagement with
workforce through various forums. These efforts have been very well
received by employees and have helped in fostering high engagement and
sound industrial relations,
Your Company upholds the strong culture which is explicit in the
''Nestle Management and Leadership Principles'' and ''Nestle Corporate
Business Principles and Nestle India Code of Business Conduct''.
Accordingly, your Company has put a lot of emphasis in ensuring that
all employees have a common understanding of the Company principles and
values and that the same needs to be adhered and complied with in all
our business operations.
SWOT ANALYSIS FOR THECOMPANY
Strengths
- Being NESTLE
- General License Agreement which gives access to the Nestle Group''s
proprietary technology/ brands, expertise and the extensive centralised
Research and Development facilities.
- High quality and safe food products at affordable prices, and trusting
Nestle.
- Understanding of Nutrition, Health and Wellness.
- Strong and well differentiated brands with market share leadership.
- Product innovation and renovation, based on consumer insights.
- Well diversified product portfolio across categories and income
strata,
- Efficient supply chain and sales automation.
- Distribution structure that allows wide reach and coverage in the
target markets.
- Capable and engaged human resources.
- Participation in Global Business Excellence (GLOBE).
- Strong financial position.
- Manufacturing capacities in place to cater to emerging demand with
speed.
Weakness
- Complex supply chain configuration.
- Cascading indirect taxes.
- Price point portfolio.
Threat
- Price volatility of key raw, packaging materials and fuels.
- Availability of agro based commodities.
- Food inflation.
- White-collar talent.
- Global and local uncertainty in the economic environment.
Opportunities
- Potential for expansion in smaller towns and other geographies.
- Increasing demand for premium products.
- Introduction of GST to simplify the distribution network.
- Development of ''Out-of-Home'' segment and Health Care Nutrition.
- Leverage Nestle Technology to develop more products that provide
Nutrition, Health and Wellness at affordable prices.
WORKING WITH COMMUNITIES AND BUSINESS RESPONSIBILITY REPORT
Nestle''s approach to business is Creating Shared Value. While creating
value for stakeholders business must also create value for the society
through its products, operation and social responsibility. In India the
Company calls it Saanjhapan as that is more commonly accepted in the
Indian context. A separate Business Responsibility Report is attached
as Annexure-3, detailing the various initiatives of the Company and
aligned to the National Voluntary Guidelines on the Social,
Environmental and Economic responsibilities of Business Issued by
Ministry of Corporate Affairs and with the requirements of Clause 55 of
the Listing Agreement with the Stock Exchange.
CONTRIBUTION TO EXCHEQUER
Your Company has been a leading taxpayer of the country and over the
years has been enabling significant contribution to various taxes.
During the year 2012, the Company through its business, enabled tax
collections at Central and State level of close to Rs. 20 billion, in
aggregate,
AWARDS & RECOGNITIONS
Your Company continues to be a highly trusted company for the quality
of its products, innovation and renovation of products that are based
on strong consumer insights and ability to engage with consumers across
the country. During the year your Company received many honors which
reflect the hard work and sustainability of its successful strategies.
Some of the Key awards and recognitions:
Nestte India was named Business Standard''s Star MNC of the year. The
announcement wrote ''The award that took the least time to decide was
the Star MNC of the year and everyone agreed the best part of Nestle
was its ability to localize brands -MAGGI, for example.''
Mr. Shobinder Duggal, Director - Finance & Control of the Company, was
recognized as ''Best CFO of an MNC in the Business Today - YES Bank
awards for2012.
- For the second year in a row MAGGI in 2012 was rated amongst India''s
Top 10 ''Most trusted Brands'' by Economic Times Brand Equity.
- In the annual ICMR study on India''s most valuable brands, MAGGI was
ranked No.1 amongst FMCG Food Products, and a separate ranking by
Nielsen for Social Media Brand Equity ranked MAGGI as No.1 Food Brand.
- MAGGI Masala-ae-Magic was recognised as one of the ''Most trusted
Brands of 2012'' in the Reader''s Digest awards.
The communication activities for the various brands have been
recognized for excellence including some of the work they are doing in
digital marketing. NESCAFE SUNRISE received a bronze at the EFFIES.
NESCAFE ''Know Your Neighbors'' Face book page has become the largest
Face book page for NESCAFE in the Nestle world with over 2 million fans,
the NESCAFE Commercial The Morning Band'' received over 1 million views
on YouTube within days of release.
The new KITKAT'' Babies TVC crossed 3,5 million public views on You Tube,
making It the most highly viewed Indian FMCG commercial so far. Nestle
KITKAT also has over 1 million fans on its Face book page ''Break Banta
Hai'' and is now the largest KITKAT page in the world, just as MILKMAID
has over 5 million fans on Face book and is the largest,
- KITKAT UK range gift packs was honored for Excellence in Packaging
Design at the INDIASTAR AWARDS 2012,
DIRECTORS'' RESPONSIBILITY
STATEMENT
Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors
confirm that;
- in the preparation of the annual accounts, the applicable accounting
standards have been followed and no material departures have been made
from the same;
- they have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year and of the profits for that
period;
- they have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
- they have prepared the annual accounts on a going concern basis.
CORPORATE GOVERNANCE
In compliance with the requirements of Clause 49 of the Listing
Agreement with the Stock Exchange, a separate report on Corporate
Governance along with Auditors certificate on its compliance is
attached as Annexure-1 to this Report.
CAUTIONARYSTATEMENT
Statements in this Report, particularly those which relate to
Management Discussion and Analysis as explained in the Corporate
Governance Report, describing the Company''s objectives, projections,
estimates and expectations may constitute ''forward looking statements''
within the meaning of applicable laws and regulations. Actual results
might differ materially from those either expressed or implied in the
statement depending on the circumstances.
DIRECTORS
Dr. Rakesh Mohan relinquished his membership of the Board of Directors
of the Company with effect from 31th October, 2012, It is a matter of
great pride for your Company that Dr. Rakesh Mohan has been appointed
as an Executive Director of the International Monetary Fund, with
effect from 1st November, 2012, The Directors wish to place on record
their appreciation for the contributions made by Dr. Mohan during his
tenure.
Mr. Christian Schmid. Whole-time Director designated as
Director-Technical'', shall be stepping down after 31st March, 2013. He
shall be taking up a new assignment with another Nestle affiliate. The
Directors wish to place on record their appreciation for the
contributions made by Mr. Schmid during his tenure.
In terms of the Articles of Association of the Company, your directors
appointed Mr. Aristides Protonotarios as an additional Director of the
Company with effect from 1st April, 2013. Subject to approvals, Mr.
Protonotarios has also been appointed as Whole-time Director,
designated as "Director- Technical", Mr, Protonotarios has the
qualifications and experience, necessary to take over the position of
Director - Technical, He is currently heading the R&D function of the
Beverages Strategic Business Unit of Nestec Limited, Switzerland which
he established. Mr, Protonotarios holds office till the Annual General
Meeting and is eligible for re- appointment. Notice has been received
from a member signifying his intention to propose Mr. Protonotarios as
a Director. Details of his proposal are mentioned in (he Explanatory
Statement under section 173{2) of the Companies Ad, 1956 covered under
item no. 5 & 6 of the Notice of the 54th Annual General Meeting.
In accordance with Article 119 of the Articles of Association, Dr.
(Mrs) Swati A. Piramal retires by rotation and being eligible offers
herself for re-appointment.
STATUTORY AUDITORS
The Statutory Auditors of the Company, M/s. A. F. Ferguson & Co,,
Chartered Accountants, New Delhi, retire in accordance with the
provisions of the Companies Act, 1956 and are eligible for
re-appointment. M/ss A. F. Ferguson & Co., Chartered Accountants, New
Delhi have sought the re-appointment and have confirmed that their
re-appointment if made shali be within the limits of Section 224{1)(B)
of the Companies Act, 1956. The Audit Committee and the Board of
Directors recommends the re-appointment of M/s. A. F, Ferguson &Co.,
Chartered Accountants, as the Auditors of the Company.
COST AUDITORS
Complying with the provisions of Section 233B of the Companies Act,
1956 and the MCA General Circular No. 15/2011 dated April 11,2011. (as
amended vide General Circular No. 36/2012 dated 601 November, 2012)
subject to the approval of the Central Government, the Audit Committee
has recommended and the Board of Directors had appointed M/s. Ramanath
Iyer and Co., Cost Accountants, New Delhi (Registration No. 00019)
being eligible and having sought re-appointment, as Cost Auditors of
the Company to carry out the cost audit of all the products
manufactured by the Company for the year ending December2013.
INFORMATION REGARDING CONSERVATION OF ENERGY ETC. AND EMPLOYEES
Information required under Section 217(1) (e) of the Companies Act,
1956 (hereinafter referred to as ''the Act'') read with Rule 2 of the
Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988 is given in the Annexure - 2 forming part of
this Report. Information as per Section 217(2A) of the Act, read with
the Companies (Particulars of Employees) Rules, 1975, as amended from
time to time, forms part of this Report. However, as per the provisions
of Section 219(1) (b) (iv) of the Act, the Report and Accounts are
being sent to all the members excluding the statement containing the
particulars of employees to be provided under Section 217(2A) of the
Act. Any member interested in obtaining such particulars may inspect
the same at the Registered Office of the Company or write to the
Company Secretary for a copy.
TRADE RELATIONS
The Company maintained healthy, cordial and harmonious industrial
relations at all levels. Despite severe competition, the enthusiasm and
unstinting efforts of the employees have enabled the Company to remain
at the forefront of the Industry.
Your Company continued to receive co-operation and unstinted support
from the distributors, retailers, stockiest, suppliers and others
associated with the Company as its trading partners. The Directors wish
to place on record their appreciation for the same and your Company will
continue In its Endeavour to build and nurture strong links with trade.
based on mutuality, respect and co-operation with each other and
consistent wilts consumer interest.
APPRECIATION
Your Company has been able to operate efficiently because of the
culture of professionalism, creativity, integrity and continuous
improvement in all functions and areas as well as the efficient
utilisation of the Company''s resources for sustainable and profitable
growth.
The Directors wish hereby to place on record their appreciation of the
efficient and loyal services rendered by each and every employee,
without whose whole-hearted efforts, the overall very satisfactory
performance would not have been possible.
Your Directors look forward to the future with confidence.
On behalf of the Board of Directors
Date : 20th February, 2013 Antonio Hello Waszyk
Place: Gurgaon Chairman
Dec 31, 2010
Dear Members,
The Directors are plessed to submit their report and statement of
accounts for the year ended 31st December 2010
The Government continued with its strenuous efforts to steer the
economy. With continued focus on reforms and a comb nation of stimulus
packages, rural Income generation schemes and monetary policy amongst
others the government was successful In keeping the GDP growth Largely
on track especially when many parts of the word struggled on this front
This past year highlighted the increasing complexity and volatility of
the economic environment While the Government staking action and new
food regulation is being put In place, faster Implementation could
sustain the growth momentum
Against this background, your companys success can be measured on
three dimensions - Growth inclusion. Leadership,
Your Company has alwaya reiterated that good food Is essential for
ensuring productivity and good life. With economic growth, the
lifestyles in India ana evolving and changing People need to eat better
and stay healthy to keep pace with their aspirations but the evolving
scenario is complex On the one hand a very largo population does not
have access to affordable nutrition, and on the other hand there is an
Increasing problem of diabetes, obesity and heart diseases, The need
for better nutrition is a chalenge across the income pyramid. Your
Company has access to the Nestle Groups immense nutritional expertise
and food technology for developing products that provide taste and
science-based nutrition With strong consumer centric innovation and
Renovation supported by the Nestley R&D network, your Company remained
focused on developing Indian concepts and relevant products that help
people manage their need for taste and nutrition and enabled the
Company to grow.
Your Directors believe the Company remained sensitive to the need for
efficient and sustainable utilisation of resources and following Its
basic approach to business to Create Shared Value. It continued to
inspire happiness for Its shareholders and the communities where It
operates With the own sphere of activities your Company continued to
utilise its expertise and knowledge and consciously implemented
Initiatives to ensure that while its core business continued to grow,
the impact of Its business on the communities, rasults In a better
quality of life for them and is in their interest. Your Company
continued to Invest resources both in terms of talent and capital In
the areas of water, nutrition and rural development because these are
also the areas where shareholders interest and the interests of society
strongly intersect and where your Company can create significant value
for both, in an inclusive manner
The factories Invested in state-of-the-art technology and equipment to
process and add value to agricultural produce, worked closely with the
farmers, suppliers and communities, transferring technology and
knowledge to help them upgrade the quality of their raw materials.
Your Director* are pleased to inform that during 2010 your Company
delivered a strong performance Net Sate for the year 2010 increased by
21 9% over the previous year Domostic Sales increased by 22.9% on
Increased volumes and realisations, Export Sales increased by 7.6%
Overall, the businesses continued to grow the market while retaining
leadership in most businesses
The consistent performance of your Company over the years, reflects the
strength of the brands, the trust in Its products and the strong
support coming from Nestle Group, Switzerland It also demonstrates the
continuous engagement and performance of the people and business
partners.
Financial Results and Operations
(Rs In Millions)
2010 2009
Gross Revenue 62,974 51f672
Profit before Interest Impairment.
contingencies and taxation 11,646 9,610
Interest 11 14
Impairment Loans on Fixed Assets (Net) - 103
Provision for Contingencies (Net) 164 323
Provision for Tax 3,264 2,620
Net Profit 8,187 6,560
Profit Brought Forward 1,425 1,001
Balance Available for Appropriation 9,612 7,551
Interim Dividends 3,471 3,471
Final Dividend Proposed 1,205 1,205
Corporate Dividend Tax 772 795
Transfer to General Reserve 619 655
Surplus carried in Profit and
Lose Account 3,345 1,425
Key Rates
Earnings per Share (Rs.) 84.91 67.94
Dividend per Share (Rs ) 48.50 48.50
Total Income
Net Profit for the Year 2010 increased by 25% The operating margins
Improved due to better absorption of fixed cost end Improved product /
channel mix- The Impact of Increase In cost of materials was largely
offset by the one-off Cost In 2009 relating to actuarial losses on
retirement benefits The improvement in
FIXED ASSETS
Net Profit Margin is due to the Increase In operating margin as the
effect of lowering lncome tax rates has been offset by tower
contribution of the income tax
SHAREHOLDERS FUNDS
holiday at Pantnagar factory Your Company continued to emphasise on
cash generation and delivered strong operating cash flow during the
year. Surplus Funds have been prudenlly invested after ensuring that
such Investments satisfy the Companys criteria of safety. liquidity
end returns.
Cash Flow
The Company supplemented the Provision for Contingencies with further
amount of Rs 184 million (net) for contingencies resulting mainly from
issues, which are under litigation/dlspute and other uncertainties
requiring management judgment This was after the reversal/utilisation
of Rs 250 million provision, due to settlement of certain dtsputes for
which provision was no longer required
While the current year has also commenced as per plan, the beginning
has been with a number of uncertainties. Including the Intensity of
cost Increases specially the volatile raw material prices. Your Company
will focus efforts to overcome these challenges and is hopeful that the
Government would continue to support the food processing sector. Your
Directors are confident of the long-term business prospects of the
Company.
Exports
During the year, Export Sales at Rs 3,537 million was higher by 7 6%.
At constant exchange raise the same would be 10.3%.
The Increase in exports was largely on account of new exports of Coffee
to South Africa and Egypt which wore started during the year There was
also a significant Increase in exports of instant Tee to certain
European markets and to the Far East and a broadened customer base has
now been established This was offset by the discontinuation of exports
of Infant nutribon products to Sri Lanka and Bangladesh due to capacity
constraints, and the Lower exports of cuinary products.
Your Company continued Rs efforts to develop more products for the
Indian athnic community abroad and certain new products were shipped
out during the year. Some new grades of instant Tea have also been
developed and these will add variety and value to the portfolio.
Dividends
The Board of Directors has recommended a final dividend of Rs. 12.50
per equity share of the face value of Rs. 10/- each for the year 2010,
amounting to Rs, 1,205 Million. This is in addition to the two Interim
Dividends for 2010, aggregating to Rs 36.00 per equity share, paid in
May 2010 end November 2010 (amounting to Rs 3,471 million) The total
dividend payout for 2010 would be Rs. 4,676 million (excluding the
corporate dividend tax), and maintain the total dividend payout for
2009, and is in keeping with the financing needs for capital
expenditure
Business Development
India is evolving rapidly and people are becoming more health conscious
and eat bettor. Nutrition plays a key role In enhancing Health and
Wellness in our lives and India will be challenged by the need for
better nutrition across the income pyramid Your Company intends to play
a definitave role in providing consumers with Good Food, Good Life
Nestle products are trusted for their high quality and this drives your
Company to Innovate and renovate products to further strengthen its
bonds with consumers.
The business of "Prepared Dishes and Coolding Aids grow rapidly MAGGI
continued to strengthen its wide portfolio at an accelerated pace.
Being one of the top Most Trusted Food Brands in the country, MAGGI has
gone beyond offering products, to building emotional relationships with
consumers. MAGGI products provide Taste and Health and bring Happiness
to every home, delivering Taste Bhi Health Bhi Khushiyan Bhi.
With the support of Nestley global network of R&D centres applying
knowledge in science based nutrition. MAGGI products were innovated
and renovated In accordance with the changing needs of all members of
the family During the year, an Innovative range of Me & Meri MAGGI
testes were introduced In Noodles.
The Me & Man MAGGI campaign started in 2009. to celebrate 25 years of
the emotional relationship of MAGGI wtth Its consumers The overwhelming
response to the campaign brought out some very distinct experiences and
emotions that consumers associate with MAGGI, and the cullinary
experts worked extensively on concepts that capture these experiences
In the taste of the Noodles. Three flavour launched were Me & Meri
THRILLIN CURRY. Me & Meri TRICKY TOMATO and Me & Meri ROMANTIC
CAPSICA Soon after. MAGGI Vegetable Multigralnz Noodles was raited out
MAGGI Vegetable Multigralnz Noodles is a combination of traditional
Ingredients, known for their goodness, such as Ragi, Com, Jowar. and
Wheat with real vegetables, and are a source of Fibre, Calcium and
Protein MAGGI Masala-ac-Magic and MAGGI NUTRI-LICIOUS PAZZTA launched
in Late 2009 established themselves during the last year MAGGI
NLTRI-LICIOUS PAZZTA is already the market leader and continues to grow
the market for light meals MAGGI Masala-ac-Magic, fortifed with Iron,
Iodine end Vitamin A, is helping housewives In kitchens across the
income pyramid, to provide tasty and nutritious food to their families
everyday.
MAGGI continued to connect with consumers. In innovative and Impactful
ways MAGGI Sauces advertising acknowledged the increasing stress on
consumers and advocated Hasaon, Khushi Phaolao lndia ko Heatthy Banaol
It promoted happiness and spontaneous joy for a healthy living and
encouraged a dialogue with the consumer. The campaign for MAGGI
Vegetable Multigralnz Noodles revived another dimension In consumers
lives. It brought alive the strong emotional bonds within the family
and rested the multi-benefits of MAGGI Multigralnz to the multi-
benefits In every motherl Marketing Taste Bhi Health Bhi" solutions to
consumers at the bottom of the pyramid has its own challenges These
are Inherent in the lifestyle of these consumers that is driven by
traditional values, lack of education and limited affordabillty. While
the solutions have to be affordable, most people may lack the basic
understanding of nutrition Since MAGGI Masala-ae-Magic is an affordable
product that even low income families can use, the challenge Is to
spread nutrition education. Starting out with the first programme in
Dharavi in Mumbai, MAGGI has been sending out people to Increase
nutrition awareness In association with a social organisation Drishtee
it is also organising heath camps in rural areas. These camps create
awareness, amongst others, about micronutrient deficiencies, while the
organisation also develops retail entrepreneurs for products like MAGGI
Masala-ae- Magic With all these Initiatives, MAGGI continued to be
ranked as the No. 1 Most valuable Food Brand1 and amongst the Top 10
Buzziest Brands; in the country
The Chocolate and Confectionery business continued to drive growth in
the newer segments that are more relevant to emerging consumer needs
and wellness preferences. Driven primarily by better understanding of
consumers and extending the portfolio Innovatively your Companys
chocolate and confectionery business has grown faster than Industry.
White the overal penetration for the chocolate category is still in
single digits and has a long way to go, the consumption is impulse led
and driven largely by convenient price points. As economic growth
creates more disposable income with more people the consumption is
expected to increase. The challenge is to manage the correct colnage
for these products man Inflationary enviornment. Your Company has grown
this business steadily and it is now the leader in the chocolaty water
segment for lighter eating1 with NESTLE KIT KAT and NESTLE MUNCH and
Whites (goodness of milk) with NESTLE MILKYBAR, During the year this
business continued to Innovate and renovate brands to increase
relevance to the consumers Some of the more recent and successful
launches were NESTLE MILKYBAR Choo Choko at Rs.5/- NESTLE MILKY BAR
Crispy at Rs.5/- NESTLE MUNCH Guru pack at Rs.10/- and NESTLE KIT KAT
single finger at Rs 5/-.
During the year your Company re-launched NESTLE BARONE Rigorous work
with the R&D Centres has enabled us to develop taste superiority in
NESTLE BARONE, which is supported by consumer research It was
re-launched as the companion for the confident young Indian and the
re-launch campaign goes beyond the product benefit to strengthen the
emotional experience of the consumer NESTLE BARONE is available at
price points of Rs 5/- and Rs 10/-. and this new thrust is further
strengthened by revamped packaging which is fresh, youthful and
premium.
Your Company continues to believe that sweet snacking is an Intrinsic
part of peoples lives and with in this category the commitment is to
offer teste as well as balance to consumers. The NESTLE KIT KAT
squirrels communication is an Illustration of this where it
Innovativety brings alive the importance of breaks in routine.
In the sugar sub-segment your company continued to focus on the two
need states of indulgence and refreshment with success While it grew
the overall Eclairs portfolio to make your Company the largest player,
volume gains by NESTLE POLO has now made your Company the biggest
NESTLE POLO market In the world.
Your Company is the value leader in Instant Coffee with NESCAFE. During
the year, the Coffee and Beverages business not only strengthened Its
market position but also strengthened its bonding with consumers. The
business continued to focus its efforts on the value chain and
leveraged Nestles world class proprietary aroma recovery technology to
further Improve the aroma and taste of NESCAFE CLASSIC.
NESCAFE is a brand with a progressive world view and reflects the
thinking that we can reach our destination when we have a sense of
purpose it talks to the youth of todays progressive India and sees the
world as they see it During the year it engaged with consumers with the
Simple message "Switch on your purpose. Switch on the best In you The
business associated with the successful and vibrant Deepika Padukone as
the brand ambassador and to further engage with the youth, a digital
page Know your neighbours" was created. This page is today the biggest
fan page for NESCAFE in the world with more than three and a half lakh
fans, and is continuing to grow These initiatives along with the ones
already planned are expected to move NESCAFE to a new growth
trajectory. During the year Milk Products and Nutrition- business
performed well and continued to consolidate and grow. Science based
nutrition, stringent quality standards end innovation and renovations
are strong pillars for the business which is focused on enhancing the
quality of life During the year your Company launched the NESTLE START
HEALTHY STAY HEALTHY educational initiative in partnership with
doctors, with the aim of making good nutrition a way of life. It
emphasises the fact thai the nutrition that children get in the early
years of life can affect their health forever. And It all starts with
mothers milk. As we progress through different stages of life, we have
different nutritional needs and we need to understand and balance our
nutritional requirements to stay healthy. While your Company actively
supports and promotes breastfeeding as being the best possible source
of nutrition for the developing Infant it recognises that there are
circumstances where the mother to unable to feed Your Company continued
to build on the heritage that Nestle has of quality. trust and science
based nutrition to meet the needs of infants, as they grow up, and in
later life. NESLAC Nutritious Milk Drink for children was launched
towards the end of the year in select geographies
Your Company has a portfolio of high quality UHT milks that pass
stringent quality checks and are preferred by discerning consumers who
demand the confidence of good taste and putty. The range comprises
NESTLE MILK (Rich and Creamy). NESTLE MILK (Half Fat) and NESTLE SLIM
[Skimmed Milk], and NESTLE PRO-HEART MILK with Omega 3 Your Company
continued to strengthen the business and also extended the range of
NESTLE DAHl to include dahi in pouches. In the dairy whitener category
NESTLE EVERYDAY continued to leed volume and value growth and
introduced affordable price formats to Improve accessibility for lower
income users. The brand was renovated and research shows that 8 out of
every 10 consumers prefer NESTLE EVERYDAY making it Indias most
preferred Dairy Whitener During the year there was greater emphasis on
activations and sampling to bring the brand experience closer to
consumers MILKMAID sweetened condensed milk has in the past
successfully introduced a new generation of home cooks to easy 3 step
recipes. Your Company continued to strengthen this activity and
scale-up business
The Healthcare Nutrition Business that was acquired from Specially
Foods India Private Limited, with products for consumers with special
nutritional requirements performed satisfactorily Work to underway to
develop ft further. The products In this portfolio are marketed under
brands like RESOURCE, OPTIFAST and SPERT. RESOURCE is specially
formulated for the management of malnutrition and other medical
conditions associated with increased nutritional needs. It has a range
of formulations Including, amongst others, RESOURCE Diabetic, a ready
to use, fibre rich diet for better nutritional management of diabetics
and RESOURCE High Protein that provides easily digestible whey protein.
OPTIFAST is a Nutrition supplement In overweight condition and SPERT is
a Protein supplement to address the Increased protein needs of the
fanny With mom women entering the workforce and Increasing disposable
Incomes, there la growing opportunity In the Out or Home segment Your
Company is well placed to tap this During the year as the economic
environment Improved and hiring by corporates Increased the business
was positively benefited Your Company successfully launched vending
machines taking into account the specific needs of the customers in the
large as well as small establishments.
Sales
Your Company is aware that the emerging and the Increasing competitive
Intensity, requires us to be even more efficient, as we go forward. The
process of back- end sales automation that was initiated earlier is
now, fully implemented and provides a robust and integrated distributor
management solution that supports our efficiency In primary and
secondary sales This also facilitates a more transparent record of the
transactions from distributors, to retailers We strive to improve the
avaliability of our products with a clear focus on building distributon
by going deep & wide across urban and rural geographies This has
resulted In Improving our reach to more than 400,000 outlets In the
last year alone Your Company Is committed to continuous excellence in
the operations. During the year the focus was on building capacity
through the wiling and able distributors who are long term partners of
your Company, and provided the front lino field force, the support and
know-how to improve their capability.
Technology and Quality
Your Companys products touch the lives of millions every day and
Nestle is amongst the most trusted companies in India. The commitment
to high integrity Nestle products is supported by stringent quality
assurance norms, state-of-the-art technology and high degree of
automation The access to Nestles globel R&D and emphasis on science
based innovation and renovation to develop high quality products are
significant competitive advantages Your Company Is also working on a
robust and comprehensive Improvement programme Nestle Continuous
Excellence (NCE) that is based on LEAN mindset for war on waste and
Total Performance Management concepts The initial results from prior
areas Indicated that bettor efficiencies have been achieved from the
same assets while also reducing costs
Nestle R&D Centre in India
Your Directors are extremely pleased to inform that at the request of
your Company, Nestle S. A. Switzerland has agreed to the setting up of
a R&D Centre In India as a part of its global network of R&DCentres
Nestle R&D Centre India Pvt Ltd. Is a wholly owned subsidiary of Nestle
S A and at the request of your Company, the RAD facility has been
located In the proximity of your Companys Head Office The foundation
stone for the R&D Centre was laid by the Honble Minister for Food
Processing Industries In September, 2010 and It is expected to be
operational in 2012.
Nestles decision to establish an R&D centre In India will be an
additional competitive advantage in the future and well further
strengthen the benefits of technology and know-how received by your
Company from Nestle Group. The research at this Centre will provide
exerting opportunities for Innovation and will focus on Popularly
Positioned Products (PPPe), especially for India but also worldwide
PPPs meet the specific needs of consumers with lower income levels by
offering them high-quality, nutritionally enhanced products at
affordable prices it should help to accelerate your Companys growth
and contribute towards reducing nutritional deficiencies in lndia.
Environment
Your Company is sensitive to the fragility of non- renewable resources
and continues to work towards creating and Increasing awareness for
environmental sustainabllity Emphasis on conservation of resources is a
priority within the factories and in the manageable areas there is a
continuous effort to minimise consumption of natural resources and
reduce waste and emission. while maximising production All processes
follow the Nestle Environment Management System and business practices
comply with government policies, environmental laws and regulations
using state-of-the-art technology and equipment You writ bo proud to
know that as production volume has been increasing, during the past ten
years, there has been a significant reduction in usage of energy and
water and reduction in emission of green house gases per tonne of
production Water consumption per tonne of production has reduced
substantially and water use efficiency has improved by almost 60% by
employing efficient methods and technologies Energy consumption per
tonne of produce has reduced by almost 51% through investments in
energy efficient systems and processes and cutting down on energy
losses At the same time waste water discharge per tonne of produce
reduced by almost 70% as a result of the reusing of water and more
efficient processes that reduce water DMA The carbon footprint has been
significantly reducing through focus on technologies that improve
combustion and emphasis on utilising renewable fuels such as coconut
shells and process waste to replace non-renewable fuels
Capacity and Funding
Your Company has boon growing at a healthy rate In recent years with
continuing Leadership across its businesses. This market leadership
position and Indias positive economic environment coupled with a
progressive population provides opportunities for growth Your Company
is therefore, accelerating Investment in capacities to provide
consumers a wide product range, from Popularty Positioned Products far
low income consumers to premium offerings In the recent past some
significant investments have already been initiated Your Directors are
hopeful that the Government continues to support the Food Processing
Sector so that your Company can continue to expand manufacturing and
employment to provide consumers with affordable products Over the Last
three years, Nestle India has spent over Rs 650 crones In capital
Investments, but the Investments during 2010 atone were In excess of Rs
480 crores and additional commitments of around Rs 680 crores already
existed at the year end. Current plans foreses a further acceleration
in 2011 and beyond This capital expenditure will go into expanding
facilities at Bhichogm, Moga, Nanjangud, Porda, Samakha and in new
Greenfield fecilities while a new plant for MAGGl products is getting
ready for commissioning at the Nanjangud Factory, work has been
initiated for a green field project at Tahliwal In Himachal Pradesh
In order to finance this accelerated capital expenditure trajectory
your Company would have a Judicious mix of Internal Accruals and
Debt The Borrowings Free balance sheet of your Company and the
strong credit ratings of Nestle should facilitate this strategy Your
Directors are pleased that the Reserve Bank of India has approved
availment of External Commercial Borrowing from the foreign equity
holders of upto US$ 450 million for the sourcing of capital goods,
expansion/modernisation of facilities and new projects. The drawdown of
the loan would be based on the funding requirements from time to time
Supply Chain
The current volatile and complex economic environment requires
efficient and cost effective processes. During 2010 your Company has
ensured timely and efficient supply of materials to run the factories,
according the development of local suppliers The distribution of
finished goods to consumers across the country continues to be cost
effective and mora environmental friendly with Increasing share of rail
deliveries.
During the year, your Company also delivered sustainable coat
optimisation Initiatives as part of Nestle Continuous Excellence (NCE)
to eliminate waste and manage input coils This year the NCE programme
will be expanded further to cover all supply chain processes and select
distribution centres.
In line with the philosophy of Greeting Shared Value, Nestle India
rolled out Its Responsible Sourcing programme in 2010. All the key
vendors were engaged on this initiative through procurement tod vendor
meets at the Companys Head office and factories Vendors were supported
through a pre-assessment process, consultant visits, dedicated help
desk and continuous engagement and education AH vendors were registered
on the SEDEX platform and Independent Audits by internationally
approved agendas were conducted on the key vendors shortlisted A these
vendors were found complaint with minor gape for which road maps have
been agreed mutually
Human Resources and Trade Relations
Your Company strongly believes that people are its assets and they are
key to drive competitive advantage With the vision given to employees
to "Seek the Peak in all endeavours, the emphasis has been on
alignment of company goals with individual objectives and than
empowering employees to give their beat with the mindset of Dream Dare
Deliver, Recognising the importance of Human Resources, an efforts
have been put by your Company to ensure that best talent is recruited,
continuously developed and retained During the year, your Company has
put heavy emphasis on performance driven culture and appropriate HR
tools and processes have been deployed to ensure clear linkage with
rewards. Strong recognition platforms have been crested to encourage
people to deliver stretched goals. There has been a lot of emphasis on
training and development including self learning, manager inspired
learning through coaching and censer development opportunities.
All these efforts have ensured that your Company retains Its position
as a preferred employer and an employer of choice. Your Company
believes in fostering trust end mutual respect In employee rotations
Your Company engaged employees with trust and respect by continuously
transparently sharing Information through various forums, dialogues and
other communication means. These efforts have received excellent
redprocation from employees and in its Industrial Relations.
SWOT Analysis of the Company
Strengths:
* Being NESTLE
* General Licence Agreement which gives access to the Nestle Groups
proprietary technology/ brands, expertise and the extensive centralised
Research and Development facilities
* High quality and safe food products at affordable prices, and trust
in Nestle.
* Understanding of Nutrition, Health and Wellness
* Strong end well differentiated brands with market share leadership.
* Product innovation and renovation, based on consumer insights.
* Well diversified product portfolio across categories and income
strata
* Efficient supply chain
* Responsive Organisation Structure and strong Management Team
* Distribution structure that allows wide reach and coverage in the
target markets.
* Capable and engaged human resources
* Participation in Global Business Excellence (GLOBE)
* Strong financial position
Weakness:
* Complex supply chain configuration.
* Cascading indirect taxes.
* Price point portfolio
Threat:
* Price volatility of key raw, packaging materials and fuels
* Availability of agro based commodities
* Food Inflation
* While-collar talent
Opportunity*:
* Potential for further expansion In smaller towns and other
geographies
* Growing demand for premium products
* Introduction of GST to simply the taxation and distribution
* Recovery of Our of Home Segment
* Leverage Nestle Technology to cave op more products that provide
Nutrition. Health and Wellness at affordable prices
Working with Communities
Evan as growth and soda! change accelerate the desire to move up the
income pyramid, the issues of rural development, conservation of water
and environmental resources, access to nutrition and food security are
potential challenges Your Company believes that our response to these
common issues will not only have a bearing on our own progress but also
the ability to create sustainable inclusive growth
Nestles approach to business is Creating Shared Value or "Saajhapan"
as we call it in Nestle India and it la about the impact of our
business and engagement through it In colloquial thinking Saanjhapan
refects joint benefit Your company is focused on the three ansae of
Nutrition, Water and Rural Development where it has the greatest
potential for Joint value with the communities.
Understanding of nutrition, knowledge of balanced diets and access to
good nutrition is essential for a good life in a survey conducted by
your Company around Its factories in 2009 lack of knowledge and even
awareness about balanced nutrition had emerged as a major concern Your
Company has expertise and understanding of nutrition and Intends to use
this to help people Improve the quality of their lives. It has
developed a simple but engaging programme In partnership with
Universities that have knowledge of food habits and availability in
their areas The programme modules are structured in a way that students
absorb the basic knowledge relating to foods In a practical manner it
helps them understand the role of food in our bodies, the manner in
which food is digested and how we can improve the balance of nutrients
in diet The module specifically devotes time to explaining how cooking
practices can improve nutrition, as well as the need for food hygiene,
sanitation, and physical exercise to improve health and wellness
This programme was rolled out nationally from April and during the year
around 5000 students in village schools have already participated The
Universities also help to ensure that the programme Is being
implemented in the beat interest of the community.
The well being of the communities from where we draw our agricultural
raw materials are important for us. Consequently your Company
continues to do extensive work with fanners and other suppliers,
transferring technology and knowledge to the communities and helping
them build their capabilities so that they can participate more
effectively in business and build on progress through economic
prosperity.
During the year your Company continued to extend its Clean Drinking
Water Projects that Improve access to dean drinking water in village
schools and increase awareness for water conservation in the
communities around our factories During the year, 17 Clean Drinking
Water Projects were constructed to benefit 6300 more students, As a
result the number of these projects around our factories has increased
to 156 and 66,000 students in village school are directly benefitting
every year
Your Company has been working extensively to develop dairy fanning and
to make It a sustainable income source even for small and marginal
farmers, This effort continued in the Moga region with your companys
veterinarians and agronomists providing support, expertise and
knowledge that benefits over 110,000 farmers directly Your Company also
continued with the Village Women Dairy Development Programmes that
train them in good dairy practices as well as spread awareness about
personal hearth, hygiene, water conservation and economic independence.
160 more programmes helped to reach out to 5300 additional women during
the year, cumulatively benefitting over 45,000 village women
During recent years your Company has also been working with chicory
farmers Transfer of technology, education and better knowledge of
roasting and processing has increased yields and quality During the
past 10 years the number of chicory farmers benefitting from this has
increased from 1000 to 7500
Contribution to Exchequer
Your Company has been a leading taxpayer of the country and over the
years has been enabling significant contribute" to various taxes During
the year 2010, the Company through Its business, enabled tax
collections at Central and State Law of close to Rs 13.98 billion in
the aggregate
Awards and Recognitions
While your Companys products continued to be trusted for their high
quality, your Company has Increasingly emphasised better consumer
engagement The success is reflecting in the awards and recognitions
that your brands received during the year They are also a strong
indication of the hard work and sustainable initiatives being
implemented to delight consumers. Soma of the key awards and
recognitions:
* Conferred Marketing Company of the Year award at PITCH Indias Top
50 Marketers Awards 2010 to recognise excellence in Marketing
* Pitch Magazine recognised MAGGI amongst the top 3 Ageless Brands
and adjudged MAGGI Masala-ae-Magic amongst the top 3 for innovative
work at the Bottom of the Pyramid.
* NESTEA Voted Product of the Year In the powdered beverages category
by Nielsens Consumer Survey of product innovation 2010.
* KIT KAT adjudged Master Brand by the World Brand Congress
* MAGGI Masala-ae-Magic; recognised amongst The Chartbusters" of 2010
by The Economic Times
* NESCAFE Know Your Neighbours campaign amongst Top 5 Most Liked
Digital Campaigns of 2010 listing by AFAQS
* MAGGI again rated the No 1 Food Brand in India by an ICMR consumer
study.
* Me and Med MAGGI campaign recognised by Campaign India Digital
Media Awards - Silver for Best Website (FMCG) and Bronze for Beet
Loyally Campaign.
* MAGGI rated amongst Indias Top 10 Buzziest Brands by AFAQS Survey
2010
* Me and Mart MAGGI advertising campaign received Silver and Bronze
Awards at 2010 ABBYS,
* Coffee Board Awards for Best Exporter of Coffee to Russia and C S.
and Second Best Exporter of instant Coffee (2009-2010)
* In a survey by Business Today and indicus Analytics to understand
external perceptions Nestle India amongst the section toppers for FMCG
on Best Companies to Work for 2010.
Directors Responsibility Statement
Pursuant to Section 217(2AA) of the Companies Act. 1956, the Directors
confirm that
* In the preparation of the annual accounts, the applicable accounting
standards have been followed and no material departures have been made
from the same;
* They have selected such accounting policies and applied them
consistently and made Judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year and of the profits for
that period;
* They have taken proper and sufficient care for the maintenance of
adequate accounting records In accordance with the provisions of the
Companies Act 1956 for safeguarding tho assets of the Company and tor
preventing and detecting fraud end other irregularities.
* They have prepared the annual accounts on a going concern basis.
Corporate Governance
In compliance with the requirements of Clause 49 of the Listing
Agreement with the Stock Exchange, a separate report on Corporate
Governance along with Auditors certificate on Its compliance is
attached as Annexure to this Report.
Cautionary Statement
Statements in this Report, particularly those which relate to
Management Discussion and Analysis as explained in the Corporate
Governance Report. describing the Companys objectives, projections,
estimates and expectations may constitute forward looking statements
within the meaning of applicable laws and regulations Actual results
might differ materially from those either expressed or Implied In the
statement depending on the circumstances
Directors
Mr Rajendra S Pawar resigned as a Director of the Company with effect
from 22nd April 2010. The Directors wish to place on record their
appreciation for the contributions made by Mr Pawar during his tenure;
Dr. Rakesh Mohan, appointed in the casual vacancy. is currently
Professor in the Practice of international Economics and Finance at the
School of Management and Senior Fellow in the Jeckson Institute for
Gobal Affairs at Yale University He is also Non Resident Senior
Research fellow of Stanford Centre for international Development,
Stanford University He has been Deputy Governor of the Reserve Bank of
India for many years (2005-2009 and 2002-2004) and held senior
positions In the Government of India Including Secretary, Department of
Economic Affairs (2004-2005) as well as Chief Economic Advisor to the
Government of Ends (2001-2002), Director General of National Council
for Applied Economic Research, and Chief Executive of Indian Council
for Research and international Economic Rotations Dr Mohan is well
known and respected internationally for his extensive work in the areas
of economic reforms and liberalisation. Industrial economics, urban
economics, Infrastructure studies, economic regulation, monetary policy
and the financial sector
His experience would be of Immense benefit to your Company and adds a
valuable perspective in the Board of Director Dr Rakesh Mohan holds
office till the Annual General Meeting and is eligible for
re-appointment.
In terms of the Articles of Association of the Company, your Directors
appointed Dr (Mrs ) Swati A Piramal and Mr Christian Schmid as
additions directors of the Company effective from 2nd August 2010
Further, Mr. Christian Schmid was also appointed as the Whole- bme
Director of the Company designated as Director - Technical, for a
period of five years with effect from 2nd August, 2010
Dr. Swati A. Piramal is Vice Chairperson of Piramal Life Sciences
Limited She is the past President of ASSOCHAM. She has completed her
MBBS Medical Degree from University of Bombay. Industrial Medicine from
DIM College of Physicians & Surgeons, Bombay and Master of Public
Health from Harvard. USA Her contribution to the Industry,
achievements, membership of prestigious organisations and her
directorship in other companies are mentioned In detail in the
Explanatory Statement under Section 173(2) of the Companies Act, 1936
covered under item no. 5 of the Notice of the 52nd Annual General
Meeting. Your Company will be immensely benefitted with her appointment
on the Board Dr Piramal holds office All the Annual General Meeting and
is eligible for re-appointment.
Mr Schmid took over as Executive Vice President Technical in August
2009 and comes with Immense expertise in technology and process
efficiencies. He is responsible far, amongst others, the manufacturing
operations, cost optimisations, quality end safety standards, as of
which have a critical role in ensuring a competitive advantage for the
Company Mr Schmid is a process engineer from the Swiss Federal
Institute of Technology and Joined Nestle in 1991 as a Productivity
Specialist and has had a distinguished career with varied International
experience and his last assignment was Group Technical Director at
Nestle United Kingdom Details of his proposal are mentioned in the
Explanatory Statement under Section 173(2) of the Companies Act, 1956
covered under Item no 6&7 of the Notice of the 52 nd Annual General
Meeting. Mr Schmid holds office till the Annual General Meeting & is
eligible for re-appointment.
In accordance wih Article 119 of the Articles of Association, Mr Pradip
Baijal retires by rotation and due to personal commitments has not
sought re-appointment The Directors wish to place on record their
appreciation tor the contributions made by Mr Baijal during his tenure
Auditors
The Statutory Auditors of the company, M/s. A.F Ferguson & Co,
Chartered Accountants. Now Delhi, retire in accordance with the
provisions of the Companies Act, 1956 and are eligible for
reappointment M/s A F. Ferguson & Co.. Chartered Accountants. New Delhi
have sought the reappointment and have confirmed that their
re-appointment if made, shall be within the limits of Section 224(1)
(B) of the Companies Act, 1956 The Audit Committee and the Board
recommends the re-appointment of M/s A.F Ferguson & Co., Chartered
Accountants, as the Auditors of the Company Complying with the
provisions of Section 233(B) of the Companies Act, 1956, the Board of
Directors have appointed M/s Ramanath Iyer and Co., Cost Accountants,
New Delhi, to carry out an audit of cost accounts of the Company in
respect of Milk Foods for the year 2011. This appointment has also been
subsequantly approved by the Central Government
Information regarding Conservation of Energy etc. and Employees
Information required under Section 217(1) (e) of the Companies Act,
1956 (hereinafter referred to as the Act) read with Rule 2 of the
Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988 is given in the Annexuro * 2 forming part of
this Report Information as per Section 217(2A) of the Act road with the
Companies (Particulars of Employees) Rules, 1975, as emended from time
to time, forms part of this Report However, as per the provisions of
Section 219(1) (b) (iv) of the Act the Report and Accounts are being
sen! to all the members excluding the statement containing the
particulars of employees to be provided under Section 217(2A) of the
Act any member interested in obtaining such particulars may Inspect the
same at the Registered Office of the Company or write to the Company
Secretary for a copy.
Trade Relations
The Company maintained healthy cordial and harmonious Industrial
relations at all levels Despite severe competition, the enthusiasm and
unstinting efforts of the employees have enabled the Company to remain
at the fore front of the Industry Your Company continued to receive
co-operation and unstinted support from the distributors, retailers,
stockists, suppliers and others associated with the Company as Its
trading partners The Directors wish to place on record their
appreciation to the same and your Company will continue in Its
endeavour to bulid end nurture strong links with trade, based on
mutuality. respect and co-operation with each other and consistent
with consumer interest.
Appreciation
Your Company has been able to operate efficiently because of the
culture of professionalism, creativity integrity and continuous
improvement in all functions and areas as well as the efficient
utilisation of the Companys resources for sustainable and profitable
growth
The Directors wish hereby to place on record their appreciation of the
efficient and loyal services rendered by each and every employee,
without whose whole-hearted efforts, the overall very satisfactory
performance would not have been possible Your Directors look forward to
the future with confidence
On behalf of the Board of Directors
Date: 18th February 2011 Antonio Helio Waszyk
Place: Gurgaon Chairman
Dec 31, 2009
The Directors have pleasure in submitting their report and statement
of accounts for the year ended 31 st December 2009.
The global financial crisis that began in the later part of 2008 kept
the economic environment uncertain. There were occasional green shoots
but consumer sentiments and business confidence continued at low ebb
globally. This also impacted Indias growth during 2009 and the economy
slowed down.
India, however, managed the situation effectively, through a
combination of financial stimulus and other policies that supported the
inherent potential of the economy. Towards the later part of 2009, GDP
growth appeared to have stabilised and projections for the future are
reflecting optimism, although the agricultural growth is a concern.
Nevertheless, even as the economy appeared to reverse the slowdown and
picked up speed, the macro-environment continued to be challenging.
Long term trends in food inflation indicate growing mismatch between
demand and supply of food and agricultural commodities. Despite
corrective actions by the Government, commodity prices and other input
costs continued to harden. This past year effectively highlighted the
increasing complexity of the economic environment and the need for the
economy to urgently address issues such as the inflationary trends,
food security and inclusive growth that is sustainable. Amongst others,
the immediate priority includes infrastructure, rural development and
agricultural policies, conservation of natural resources, and better
access to nutrition for far more people.
Your Directors believe that while the Government is addressing these
structural issues, we need to manage the environment and resources in a
manner that we are part of the solution that India and its people need.
Based on this underlying principle of Creating Shared Value, your
Company continued to implement initiatives that will add value to
agricultural products by processing at the factories, will help more
and more people to receive affordable and better nutrition, while
emphasizing conservation of natural resources within the Companys
sphere of influence.
Your Company has a unique advantage in this journey. Nestle S.A is the
worlds leading Nutrition, Health and Wellness Company and its
expenditure for ongoing research in food and nutrition is the largest
in the global food industry. This helps translate scientific advances
and new discoveries into relevant products that provide superior taste,
convenience and Nutrition, Health and Wellness. Your Company has
always advocated that good food is central to health and wellness and
also has access to Nestle Groups immense nutritional expertise, latest
food technology and brands. Today, as lifestyles are changing rapidly,
your Company continues to focus on understanding the evolving needs of
the consumer and is constantly innovating and renovating to develop
products that are convenient, enhance taste, improve nutrition and
wellness, and are affordable.
During 2009, despite the uncertainties and complexities, your Company
remained focused on continuous excellence and strengthened or
implemented initiatives across functions to eventually create value for
stakeholders and delight consumers. Your Company continued to Innovate
and Renovate with the help of Nestle Global R&D centres, worked with
local suppliers to enhance their capabilities to make them more
competitive, invested for further improving manufacturing efficiencies
to increase sustainability of natural resources, initiated the
automation process for sales and distribution network, emphasised
people engagement, and continued working with the communities. Your
Directors are pleased to inform you that during 2009 your Company
delivered strong turnover and profits.
Net Sales for the year 2009 increased by 18.6% over the previous year.
Domestic Sales increased by 20.4% due to increase in volumes as well as
better realisations. Export sales were lower by 2.9%.
Financial Results and Operations
(Rs. in Millions)
2009 2008
Gross Revenue 51,672 43,581
Profit before interest,
impairment, contingencies
and taxation 9,610 8,052
Interest 14 16
Impairment Loss on
Fixed Assets (Net) 103 3
Provision for Contingencies
(Net) 323 305
Provision for Tax 2,620 2,387
Net Profit 6,550 5,341
Profit Brought Forward 1,001 125
Amount transferred from
Share Premium Account* - 432
Amount transferred from
General Reserve* - 431
Balance Available for
Appropriation 7,551 6,329
Interim Dividends 3,471 2218
Special Dividend* - 723
Final Dividend Proposed 1,205 1157
Corporate Dividend Tax 795 696
Transfer to General Reserve 655 534
Surplus carried in Profit
and Loss Account 1,425 1001
Key Ratios
Earnings per Share (Rs.) 67.94 55.39
Dividend per Share (Rs.) 48.50 42.50**
* Pursuant to Scheme of Arrangement.
** Includes special dividend of Rs. 7.50 per share, paid under the
Scheme of Arrangement.
Net Profit for the year 2009 increased by 22.6%. The net profit margin
has been positively affected by tax benefits. Operating margin has been
positively affected by better sales mix, improved net realisations,
energy cost savings and scale efficiencies, partially offset by higher
expenditure on advertising and sales promotion and actuarial losses on
retirement benefits. Your Company continued to emphasise cash
generation and delivered strong operating cash flow during the year.
Surplus funds have been prudently invested after ensuring that such
investments satisfy the Companys criteria of safety, liquidity and
returns.
The Company supplemented the Provision for Contingencies with further
amount of Rs. 323 Million (net) for contingencies resulting mainly from
issues, which are under litigation/dispute and other uncertainties
requiring management judgement. This was after the
reversal/utilisation of Rs. 134 Million provision, due to satisfactory
settlement of certain disputes and other matter for which provision was
no longer required.
The current year has also commenced as per plan. Raw materials costs,
in particular the recent spike in milks solids and sugar whose prices
are at record high levels, continue to pose an ongoing challenge. The
economic environment has not completely stabilized yet, but your
Directors are confident of the long-term business prospects of the
Company.
Exports
During the year, Export Sales at Rs. 3,286 million were lower by 2.9%.
This was largely on account of lower exports to Russia and Bangladesh,
partially offset by improved realisations due to the depreciation of
Indian Rupee in the first nine months of the year.
Exports of culinary products, continued to grow steadily
notwithstanding the slowdown in some of the importing markets. Sales of
noodles and sauces particularly grew satisfactorily. The overall
performance was, however, negatively impacted due to lower exports of
infant nutrition products to Sri Lanka and Bangladesh.
In continuation of efforts to develop more products for the Indian
ethnic community abroad, certain new products were shipped out during
the year. These should help to form a base for future growth.
Dividends
The Board of Directors has recommended a final dividend of Rs. 12.50
per equity share of the face value of Rs. 10/- each for the year 2009,
amounting to Rs. 1,205 Million.
This is in addition to the two Interim Dividends for 2009, aggregating
to Rs. 36.00 per equity share, paid in May 2009 and November 2009
(amounting toRs. 3,471 Million).
The total payout for 2009 would be Rs. 5,470 Million (including the
corporate dividend tax). Future dividends will continue to be based on
the needs of the Company to deploy internal accruals for business
expansion and an appropriate debt equity ratio.
Business Development
Your Company is acknowledged for its understanding of consumer needs
and robust business model. During the year, the Company sustained
focus on generating consumer insights, innovation and renovation, while
continuing its ongoing efforts to strengthen capabilities that help it
to leverage its strong and trusted brands.
The business of Prepared Dishes and Cooking
Aids grew rapidly as it focused on delighting the consumer and
developing products that enhance accessibility to nutrition. The
business encompasses the MAGGI brand which is the pioneer of TASTE BHI
HEALTH BHI concept. Its inherent ability to add value has made MAGGI a
favourite of generations and trusted by families across age/income
groups. MAGGI philosophy is that everyday meals should be a
celebration of taste, health and happiness throughout the year.
In the 25 years since MAGGI Noodles was launched in India as a
wholesome convenience food, it has become part of the lives of millions
of consumers with unique associations and fond memories. To commemorate
completion of 25 years, the business launched the Me and Meri MAGGI
campaign that established how well the brand is engaging with consumers
and has built enduring emotional relationships with consumers across
age groups. In the "Me and Meri MAGGI" campaign instead of the brand
talking to the consumers, it allowed the consumers to talk about their
unique experience with MAGGI and made the consumer the real hero of its
communication. Just as the campaign was innovative and trendsetting
because it was the consumers celebration of their favourite brand, it
reflected the fact that MAGGI Noodles has always innovated and
renovated to reach out and touch the consumers. During the year, MAGGI
demonstrated its DNA and pioneered several new products specially for
the bottom of the pyramid.
With its knowledge of culinary art in India, your Company provided
inputs to the Nestle Group R&D for development of an innovative product
MAGGI Bhuna Masala. This ready-to-use gravy base provides the same
fresh taste, nutrition and health aspects as traditional cooking,
without having to go through the time consuming process of preparing
the gravy base. The product has been well received and consumers have
appreciated the fact that it contains low levels of oil and does not
have any added preservatives. This expertise was further seen in the
launch of MAGGI NUTRI-LICIOUS PAZZTA. Though the demand for Pasta in
India is still nascent and the market includes traditional pasta
variants and some recent attempts at developing pasta based products,
MAGGI NUTRI-LICIOUS PAZZTA offers significant advantages. Developed
with the technology from Nestle Group R&D this pasta is specially
developed for the Indian consumer - it is made from 100% Suji, is a
source of Protein and Fibre, has a very short cooking time of only 5
minutes, and is very Delicious! Your Directors believe that MAGGI
NUTRI-LICIOUS PAZZTA will define and create the market.
During the year, MAGGI further leveraged its strengths to drive
affordable nutrition. The Company launched two new products which are
unique. MAGGI RASILE CHOW has been developed especially for the
rural/semi urban markets, to provide a low cost, tasty light meal that
is fortified with Iron. MAGGI MASALA-ae-MAGIC is a unique fortified
taste enhancer that is fortified with Iron, Iodine and Vitamin A and
will be useful in kitchens, especially for lower income families who
are unable to afford meals that can give them balanced nutrition.
These initiatives to pioneer low priced concepts for tasty and healthy
meals, have the potential to significantly improve the Nutrition,
Health and Wellness of the people especially at the bottom of the
pyramid.
Your Company is the value leader in Instant Coffee with NESCAFE. Though
2009 was a challenging year for the coffee business in India primarily
due to adverse climatic and weather conditions that were experienced,
the Coffee and Beverages business further strengthened its position
as the leader in instant coffees. Traditionally coffee sales are better
during the colder seasons but the past year was the hottest recorded
year in Indias history with a weak monsoon. The business-group focused
its efforts across the value chain, innovated and renovated to launch
new products, along with strong in-store activities and impactful
advertising campaigns. While NESCAFE Cappuccino had a successful
start, popularly priced packs supported growth. In the South the
limited edition NESCAFE SUNRISE Rich Mountain Blend received very good
feedback and despite the challenging environment NESCAFE performed
satisfactorily, achieving volume and market share growth in India.
Your Company believes that sweet snacking is an intrinsic part of
peoples lives and within this category the commitment is to offer
taste as well as balance to consumers. Taste comes first but
consumption in moderation should be part of daily life. Sweets give
pleasure which can reduce stress, which in turn can contribute to the
health and wellbeing of consumers. Keeping this in mind your Company
innovates and renovates products, using the technology and expertise
from Nestle Group to create products and segments that help consumers
manage their wellness quotient better. In 2009 your Company has
undertaken innovation and renovation to continue to delight the
consumers and has grown the market for lighter eating and is the
leader in the wafer-chocolayer segment of the Chocolate and
Confectionery business.
During the year based on relevant consumer insights, NESTLE KITKAT was
relaunched with an improved taste delivery making it more chocolaty and
crispy and to further improve penetration NESTLE KITKAT was also
launched in a new unique single finger format at the price point of Rs.
5/-. Further innovation in NESTLE MUNCH saw the launch of the GURU
pack at the higher price point of Rs.10/- and this coupled with the
reintroduction of NESTLE CHOTU MUNCH at the price point of Rs. 21-
contributed to the brand performance. In recent years NESTLE MILKYBAR
with its strong communication supported with successful innovations has
continued to lead the growth in white confectionary segment. During the
year, the portfolio was further extended with the launch of NESTLE
MILKYBAR CHOKO CHOO (a unique combination of a brown centre enrobed in
white choco-layer) and NESTLE MILKYBAR Crispy, leveraging the Companys
leading position in the white confectionary segment. Both these
launches have seen a strong start. During the year, your Company also
became the leader in the Eclairs category with NESTLE ECLAIRS, and in
the mint segment NESTLE POLO continued to grow its market share. In
2009 your Company continued its efforts to increase the availability
and visibility of the range of confectionery products.
During the year, Milk Products and Nutrition
business continued to perform well as per expectations. Science based
nutrition and innovation and renovation to develop products that
enhance wellbeing and lifes opportunities are key considerations at
Nestle, and are the central focus for this business. Nestle Group has a
deep knowledge of nutrition and how it impacts the health and wellbeing
of people in different stages of their lives. Your Company believes,
that the foundation of good health starts during infancy. This belief
is also widely supported by other nutritionists and scientists. As
infants become older and growth takes them through various
developmental stages, the body needs different nutrition and consumers
need products that can deliver it, while providing superior taste,
quality and convenience. While your Company actively supports and
promotes breastfeeding as being the best possible source of nutrition
for the developing infant, it recognises that there are circumstances
where the mother is unable to feed. Nestle continues to build on its
heritage of quality, trust and science based nutrition to meet the
needs of infants, as they grow up, and in later life. Your Company has
a portfolio of high quality products ranging from infant nutrition
products such as LACTOGEN, NAN and CERELAC and extending to other
products for children including NESTLE NIDO which is nutritious milk
for growing up children above the age of 2 years providing Calcium,
Vitamin D and 25 other essential nutrients. The other products that the
portfolio contains include NESTLE EVERYDAY Dairy Whitener, NESTLE
MILKMAID Sweetened Condensed Milk, NESTLE SLIM Milk, NESTLE NESVITA
Dahi and NESVITA yogurts which continued to do well during the year. In
a very competitive market, the EVERYDAY brand has led volume growth in
the Dairy Whitener category resulting in a further increase in the
overall market share and consolidating the Companys position as market
leader. The Companys continued focus on scaling up distribution reach
has enabled NESTLE EVERYDAY to expand consumer base and attract new
consumers to the brand.
Acquisition of Healthcare Nutrition Business
Speciality Foods India Private Limited approached the Company for
divestiture of their Healthcare Nutrition Business. Your Company was
pleased to acquire the Healthcare Nutrition Business with effect from 1
st January, 2010.
The product portfolio under the Healthcare Nutrition Business is meant
to satisfy the needs of consumers with special nutritional requirements
and sold in India under brands like RESOURCE, OPTIFAST and
SPERTRESOURCEis specially formulated for the management of
malnutrition and other medical conditions associated with increased
nutritional needs. It has a range of formulations including, amongst
others, RESOURCE Diabetic, a ready-to- use, fibre rich diet for better
nutritional management of diabetics and RESOURCE High Protein that
provides easily digestible whey protein. OPTIFAST is a nutrition
supplement in overweight condition and SPERT is a protein supplement
to address the increased protein needs of the family.
Your Company believes that Healthcare Nutrition plays a vital role in
satisfying the needs of consumers with special nutritional
requirements, so they can enjoy a good life. This business will further
strengthen the leadership of your Company in providing Nutrition,
Health and Wellness products.
Sales
Your Company believes that while its products must be available to as
many people who may prefer to buy them, the freshness and quality of
the stocks is important and the distribution system needs to
continuously improve to ensure this despite a larger reach. The retail
trade in India is predominantly fragmented General Trade where the
Distributors play a major role in the route-to-market. In order to use
this network more efficiently and be able to better track the movement
of stocks through this pipeline, your Company has decided to connect
the Distributors through a uniform, robust and integrated Distribution
Management System and in the last quarter of the year, started the
process of Advanced Sales Automation. This will increase transparency,
accuracy, speed, enable enhanced efficiencies in trade spends and
ultimately, execution in the market. It will also liberate the
frontline sales force from some of their administrative burden and
enable them to focus more on their core function. It will improve
white-collar productivity and internal controls.
Technology and Quality
Nestle products touch the lives of millions of consumers everyday and
is trusted for the high quality. To reciprocate this trust and to
ensure competitive advantage in the market, it is important to have the
latest food technologies that support the development of products
relevant to your Company and manufacturing them to high international
standards. You can be proud that your Company has adequate systems and
processes in place to ensure this. The Company has a General Licence
Agreement with the Nestle Group, Switzerland that enables access to
their continuing investments in Research and Development and advanced
technology, and efficient manufacturing processes. The stringent
quality assurance norms and the commitment to product integrity are
supported by state-of-the-art technology and a high degree of
automation. The product innovation and renovation during the year has
all been possible due to the ongoing support received under the General
Licence Agreement.
Your Company has seven factories spread across the country and they are
amongst the Best in Class within the global Nestle Group. All the
factories comply with the Nestle Quality Management Systems and have
been certified by independent and reputed external bodies as being
compliant as well as aligned with the external Standard for Quality
Systems ISO 9001, the Food Safety Management Standard ISO 22000, the
Environment Management Standard ISO 14001 and the Occupational Health
and Safety Management Standard OHSAS 18001. During the year, the
audits for these certifications established continuous improvement in
performance against these standards.
Your Company has a very strong foundation of Information Systems
provided by Nestle groups GLOBE initiative which are being leveraged
to enable business growth. The current version of GLOBE is being
upgraded to better prepare your Company forfuture opportunities.
Environment
Your Company is sensitized to the need for responsible action that
helps sustain the environment and natural resources. At all the
factories, efficiency and controlling cost extends beyond the
commercial and includes the objective of minimising consumption of
natural resources. During the past year they continued to follow the
two-fold approach to achieve this. On the one hand they continuously
increased efficiencies in areas within their control and have been a
forerunner in conserving water, saving energy, recycling waste and
reducing pollution. On the other hand, as partners in growth, they
enabled people in the community to be more aware and responsible
towards the environment and its resources.
Your Company complies with governmental policies, environmental laws
and regulations, and adheres to strict internal Nestle Environmental
Management System norms. The Environmental Performance Indicators
[EPIs] help to constantly monitor the use of natural resources in the
manufacturing operations. During the past ten years, for every tonne of
production your Company has reduced the usage of energy by almost 50%,
reduced the generation of greenhouse gases by almost 60% and generation
of waste water by around 70%. The efforts to make the operations more
environment- friendly are continuous and ongoing. For example,
innovative utilisation of alternate fuels likes coconut shells and
process waste to replace fuels with high sulphur content has
contributed to reduction of green house gases per tonne of the product
while also reducing the energy consumption per tonne of the product. To
do this your Company continuously reviews energy usage to track and
replace energy inefficient equipment, invests in installing processes
that reduce energy losses, modifies processes to reduce energy need,
and innovatively use waste heat of one process as input for another.
Your Company believes that every such step, no matter how small it may
seem, is important. Therefore, even in the supply chain that is not
directly within your Companys control, the Company is considering
initiatives that include the installation of solar lights where
feasible, and developing green belt projects to reduce the carbon
footprints of the distributors.
Capacity
Your Company has shown sustained performance over the years and in the
recent past it has achieved a higher growth trajectory. To maintain
this momentum it will ensure investments in capacity expansion at
existing /new sites.
SupplyChain
Ensuring timely and efficient supply, both of input commodities and
material, as well as that of the finished goods to consumers across the
country plays an important role in the long term, sustainable and
profitable operations of your Company. The ability to devise efficient
process and cost efficient systems despite the increasingly complex
economic environment has been a challenge in recent times, especially
in the past year. Your Company has done considerable innovative work to
manage this area using technology and by implementing best practice
processes that are possible with the implementation of GLOBE. During
the year, your Company initiated the process of implementing Radio
Frequency technology that will help to maintain higher inventory
accuracy and improve traceability of materials, in turn increasing
efficiency and productivity in the warehouses and shop-floors.
During the later part of the year your Company also started the process
of implementing a Nestle Group initiative under Nestle Continuous
Excellence umbrella. The objective is to improve business alignment, to
focus on waste elimination and to improve employee engagement to
accelerate consumer satisfaction and increase competitiveness.
Human Resources and Trade Relations
Your Company firmly believes that its employees are key to driving
performance and developing competitive advantage. The emphasis has been
on proper recruitment of talent and empowerment, while devoting
resources for their continuous development. During the year, your
Company has nurtured a strong performance driven culture and winning
mindset through Senior Management interactions and processes that are
backed by training, exposure and coaching to develop functional and
behavioural skills, as well as other communication initiatives.
During the year, your Company launched the Nestle Continuous
Excellence initiative that trains and empowers employees with a
mindset to Coach and transfer the benefit of experience and best
practices to further improve performance. Your Company encourages its
employees to foster an attitude of continuous learning and facilitates
this by providing them various opportunities to learn and enhance their
skills. These efforts in the management and development of the human
resources, along with the increased campus activities by your Company
at targeted business schools have improved the visibility of your
Company as a preferred employer.
While your Company has strong recognition and reward programmes for
employees to appreciate and recognise achievements, your Company
believes in creating trust and mutual respect in Industrial Relations.
Your Company engaged employees with trust and respect by continuously
sharing information through various forums, cross functional
activities, meets, dialogues and electronic media. These efforts have
received excellent reciprocation and appreciation from employees and in
its Industrial Relations.
SWOT Analysis for the Company
Strengths:
- Being NESTLE
- General Licence Agreement which gives access to the Nestle Groups
proprietary technology/ brands, expertise and the extensive centralised
Research and Development facilities.
High quality and safe food products at affordable prices, endorsed by
the Nestle Seal of Guarantee.
- Recognised Nutrition, Health and Wellness Company.
Strong and well differentiated brands with market share leadership.
Product innovation and renovation, based on consumer insights.
- Well diversified product portfolio across categories and income
strata.
Efficient supply chain.
Responsive Organisation Structure and strong Management Team.
Distribution structure that allows wide reach and coverage in the
target markets.
- Capable and committed human resources.
- Participation in Global Business Excellence (GLOBE).
- Strong financial position.
Weakness:
- Complex supply chain configuration.
- Cascading indirect taxes. Price point portfolio.
Threat:
Prices of raw materials and fuels.
- Availability of agro based commodities.
- Food inflation.
- White-collar talent.
Opportunities:
Potential for expansion in smaller towns and other geographies.
- Recovery of Out of Home segment.
- Leverage Nestle Technology to develop more products that provide
Nutrition, Health and Wellness at affordable prices.
Working with Communities
Over the years, the Nestle in the Community model has been simple.
Your Company has continued to transfer technology and knowledge to the
communities and worked with the people to build capabilities that
allowed them to participate in business growth. This empowerment has
enabled these people and their families, as is particularly
acknowledged in the Moga Milk district, to build on and progress
through economic prosperity.
Nestles business philosophy has always been to create value for
society in a sustainable manner and to improve the quality of life,
especially in the communities where it operates. For this, it follows a
robust business model to ensure that the growth is sustainable in the
long term for business, the economy and for society.
This is possible only when the business model is profitable and there
is greater awareness and responsibility in the utilisation of
resources, both renewable and non-renewable. Your Company believes that
this is the essence of inclusive growth that policymakers and
economists today consider necessary for healthy economic development of
India. Consequently, your Company has continued to do extensive work to
further develop dairy farmers around the Moga and Samalkha operations,
provide access to clean drinking water and sanitation facilities for
girl students in village schools, enhance awareness about scarce
resources and the need to conserve, while empowering village women to
be able to participate in the economic process more effectively. Your
Company is focused on three key areas in community development that
comprises Water, Nutrition and Rural Development.
During the year, your Company continued to extend its Clean Drinking
Water Projects to increase sustainable access to clean drinking water
in village schools and water conservation awareness in the communities
across its 7 factories in India. 22 more Clean Drinking Water Projects
benefiting over 11,000 students were constructed, taking the total to
139 such projects which benefit over 60,000 village students. In the
Moga region, the extensive work with milk farmers continued through the
year with your Company veterinarians and agronomists providing support,
expertise and knowledge that benefit over 110,000 farmers.
Well-attended veterinary camps, supported by regular visits to the farm
by the veterinarians and visits to the factory organized for the milk
farmers continue to be appreciated by them and are helping to develop
sustainable dairy practices. Your Company also continued with the
Village Women Dairy Development programmes that train them in good
dairy practices as well as spread awareness about personal health,
hygiene, water conservation and economic independence. 187 more such
programmes reaching out to additional 5488 women were conducted during
2009, cumulatively benefiting over 40,000 village women.
Nutrition is a fundamental pillar for good health and wellness that are
essential for a good quality of life. Your Company constantly supports
initiatives that can improve access to and the quality of nutrition
available to consumers. In a recent survey conducted by the
Company in the communities around its factories, lack of awareness and
knowledge about balanced nutrition emerged as a major issue. In order
to address this serious concern, your Company joined hands with Punjab
Agricultural University, Ludhiana and launched a pilot project to
develop a sustainable methodology for creating nutrition awareness.
This pilot for the Nutrition Awareness Programme was carried out in
the Moga milk district to educate adolescent girls regarding good
nutritional practices. The feedback from the 8 village schools was
very encouraging and the project will soon be rolled out to reach
communities more extensively, around the factories across the country.
Contribution to the Exchequer
Your Company has been a leading taxpayer of the country and over the
years has been enabling significant contribution to various taxes.
During the year 2009, the Company through its business, enabled tax
collections at Central and State level of close to Rs. 11.27 Billion in
the aggregate.
Awards and Recognitions
- Conferred with Business Leadership Award 2009 for the second
consecutive year by NDTV PROFIT.
- Declared "Star" Multinational for 2009 by Business Standard.
- Judged as Runner Up in Best Value Creator category by OUTLOOK MONEY
NDTV PROFIT
- Ranked amongst THE MOST CONSISTENT TOP 10 Wealth Creators in the 14th
Annual Wealth Creation Study released by Motilal Oswal, Financial
Analysts. Recognised for excellence in Coffee Exports by the Coffee
Board of India for the year 2008-09.
- Conferred with the Golden Peacock Environment Management Award for
Nanjangud factory in the Foods and Beverages Sector by The Institute of
Directors.
- Awarded the Greentech Environment Excellence Award 2009 for the
FMCG sector by Greentech Foundation.
- Ranked amongst the top twenty five marketers of India by PITCH
Magazine, in recognition of the sustained strategies to create value
for consumers.
- MAGGI ranked as the Most Valuable Food Brand in the survey
conducted by ICMR.
These recognitions reflect your Companys culture of continuous
excellence and also indicate the hard work and sustainable initiatives
being put in by the employees to deliver growth for the Company and
delight for the consumers.
Directors Responsibility Statement
Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors
confirm that:
- in the preparation of the annual accounts, the applicable accounting
standards have been followed and no material departures have been made
from the same;
- they have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year and of the profits for
that period;
- they have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
- they have prepared the annual accounts on a going concern basis.
Corporate Governance
In compliance with the requirements of Clause 49 of the Listing
Agreement with the Stock Exchange, a separate report on Corporate
Governance along with Auditors certificate on its compliance is
attached asAnnexure-1 to this Report.
Cautionary Statement
Statements in this Report, particularly those which relate to
Management Discussion and Analysis as explained in the Corporate
Governance Report, describing the Companys objectives, projections,
estimates and expectations may constitute "forward looking statements"
within the meaning of applicable laws and regulations. Actual results
might differ materially from those either expressed or implied in the
statement depending on the circumstances.
Directors
Your Directors appointed Mr. Antonio Helio Waszyk as the Managing
Director of the Company, for a period of five years with effect from
22nd October, 2009, pursuant to the nomination received from Nestle
S.A., Switzerland, under the Articles of Association of the Company.
Mr. Waszyk is well qualified and has had a distinguished career with
varied international experience including position of Head of Nestle
R&D Centres, Switzerland and his last posting as the Head of the Food
Strategic Business Unit, Switzerland. Details of his proposal are
mentioned in the Explanatory Statement under Section 173(2) of the
Companies Act, 1956 covered under Item no. 5 of the Notice of the 51st
Annual General Meeting. His appointment is appropriate and in the best
interest of the Company.
Mr. Martial Rolland, relinquished office as Managing Director with
effect from 30th September, 2009, consequent upon his appointment with
Nestle Group, Switzerland. Mr. Rolland assumed office as Managing
Director of the Company in December, 2004 and his contributions are
reflected in the growth and sustained performance of your Company
during his tenure. The Directors wish to place on record their
appreciation for the leadership and contributions of Mr.Rolland, which
have helped your Company reach the current position.
In accordance with Article 119 of the Articles of Association, Mr.
Ravinder Narain retires by rotation and being eligible offers himself
for re-appointment.
Auditors
The Statutory Auditors of the Company, M/s. A. F. Ferguson & Co.,
Chartered Accountants, New Delhi, retire in accordance with the
provisions of the Companies Act, 1956 and are eligible for
re-appointment. M/s. A. F. Ferguson & Co., Chartered Accountants, New
Delhi have sought the re-appointment and have confirmed that their
re-appointment if made, shall be within the limits of Section 224(1)
(B) of the Companies Act, 1956. The Audit Committee and the Board
recommends the re-appointment of M/s. A.F. Ferguson & Co., Chartered
Accountants, as the Auditors of the Company.
Complying with the provisions of Section 233-B of the Companies Act,
1956, the Board of Directors have appointed M/s. Ramanath Iyer and Co.,
Cost Accountants, New Delhi, to carry out an audit of cost accounts of
the Company in respect of Milk Foods for the year 2010. This
appointment has also been subsequently approved by the Central
Government.
Information regarding Conservation of Energy etc. and Employees
Information required under Section 217(1) (e) of the Companies Act,
1956 (hereinafter referred to as "the Act") read with Rule 2 of the
Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988 is given in the Annexure - 2 forming part of
this Report. Information as per Section 217(2A) of the Act, read with
the Companies (Particulars of Employees) Rules, 1975, as amended from
time to time, forms part of this Report. However, as per the
provisions of Section 219(1) (b) (iv) of the Act, the Report and
Accounts are being sent to all the members excluding the statement
containing the particulars of employees to be provided under Section
217(2A) of the Act. Any member interested in obtaining such particulars
may inspect the same at the Registered Office of the Company or write
to the Company Secretary for a copy.
Trade Relations
The Company maintained healthy, cordial and harmonious industrial
relations at all levels. Despite severe competition, the enthusiasm and
unstinting efforts of the employees have enabled the Company to remain
at the forefront of the Industry.
Your Company continued to receive co-operation and unstinted support
from the distributors, retailers, stockists, suppliers and others
associated with the Company as its trading partners. The Directors wish
to place on record their appreciation for the same and your Company
will continue in its endeavour to build and nurture strong links with
trade, based on mutuality, respect and co-operation with each other and
consistent with consumer interest.
Appreciation
Your Company has been able to operate efficiently because of the
culture of professionalism, creativity, integrity and continuous
improvement in all functions and areas as well as the efficient
utilisation of the Companys resources for sustainable and profitable
growth.
The Directors wish hereby to place on record their appreciation of the
efficient and loyal services rendered by each and every employee,
without whose whole-hearted efforts, the overall very satisfactory
performance would not have been possible.
Your Directors look forward to the future with confidence.
On behalf of the Board of Directors
Date: 19th Feb., 2010 Antonio Helio Waszyk
Place : Gurgaon Chairman
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Nestle India Ltd. குறித்த கூடுதல் தகவல்களை
-
Nestle India Ltd. டூல்ஸ்
- பல்க் டீல்ஸ்
- பிளாக் டீல்ஸ்
-
Nestle India Ltd. நிறுவன தகவல்கள்
- நிறுவன சுயவிவரம்
- நிறுவன வரலாறு
- நிர்வாக குழு
- மூலதன வடிவம்
- புராடெக்ட் மிக்ஸ்
- வங்கியாளர்/தணிக்கையாளர்/பதிவாளர்
-
நிறுவன வரலாறு
- போனஸ்
- மும்பை பங்குச் சந்தையில் விலை வரலாறு
- என்எஸ்இ விலை வரலாறு
-
Nestle India Ltd. முக்கிய நிதியில் விகிதங்கள்
- விகிதங்கள்
-
Nestle India Ltd. முடிவுகள்
- காலாண்டு முடிவுகள்
- அரையாண்டு முடிவுகள்
- 9 மாத முடிவுகள்
- வருடாந்திர முடிவுகள்
-
Nestle India Ltd. நிதியியல் தகவல்கள்
- தணிக்கை முடிவுகள்
- பணப்பாய்வு
- இருப்பு நிலைக்குறிப்பு
-
Nestle India Ltd. அறிக்கை
- கணக்கியல் கோட்பாடுகள்
- தணிக்கையாளர்கள் அறிக்கை
- இயக்குநர்கள் அறிக்கை
- கணக்கு குறிப்புகள்
-
Nestle India Ltd. கார்ப்பரேட் அறிவிப்புகள்
- புத்தக முடிவு
- ஈவுத்தொகை
- நிர்வாகக் குழுக் கூட்டங்கள்
