From mint · Harsha Jethmalani,Pallavi Pengonda · · 2m
Nestle better insulated from cost inflation than rural-heavy rivals
ICICI Sec analyst says Nestle benefits from urban demand while rural-focused rivals face cost inflation risks.
In brief
ICICI Sec analyst says Nestle benefits from urban demand while rural-focused rivals face cost inflation risks. Nestle India shares fall 8% as inflation concerns grow, but ICICI Securities' Manoj Menon argues diversified urban-focused companies like Nestle are better insulated from cost inflation than rural-heavy…
Nestle shares plunge 8%
Nestle India shares plunged 8% on Thursday amid growing worries of cost inflation.
ICICI Securities analyst Manoj Menon
Manoj Menon, head of research and consumer analyst at ICICI Securities.
Dabur and Emami exposed to rural risks
Dabur India and Emami are exposed to the risk of weak rural incomes.
DMart margin pressure
DMart’s margin for Q2FY27 fell 30 bps year-on-year to 7.3% amid cost pressures and QC competition.
80% of DMart trade overlaps with QC
80% of DMart’s trade areas already overlap with quick commerce services.
DMart store expansion challenges
DMart added 85 stores in FY26 to reach 500 stores but faces cannibalization and slow productivity.
QC competition threatens DMart
Quick commerce companies are taking away frequent small top-up purchases due to convenience.
DMart’s price advantage strategy
DMart should keep prices lower for weekly and monthly grocery shopping to retain value-conscious households.
DMart store network expansion
DMart targets adding 15% more stores annually to reach underserved areas with lower operating costs.
DMart’s digital strategy
DMart Ready focuses on scheduled delivery of large orders within six hours in profitable areas.
Rural-focused retailers at risk
Value apparel retailers like V-Mart Retail face margin pressure due to high operating costs and discounting needs.
Urban retailers more resilient
Large grocery discount retailers like DMart and mixed-format retailers like Vishal Mega Mart are more resilient to margin compression.
Nestle better insulated from inflation
Nestle benefits from steady urban demand and strong brands that support price increases during cost inflation.
Smallcap funds show strong inflows
Small cap mutual funds recorded a third consecutive month of robust inflows in September, drawing ₹ 9,038 crore.
The bottom line
Nestle India shares fall 8% as inflation concerns grow, but ICICI Securities' Manoj Menon argues diversified urban-focused companies like Nestle are better insulated from cost inflation than rural-heavy rivals.
