Nestle takes another baby step

Baby food major Nestle India is steadily expanding its reach and product portfolio in the infant nutrition category. The global leader in infant nutrition and milk substitute products has decided to venture into the nutritional breakfast cereal category in India with a new brand Ceregrow. And with this new launch, the company will be addressing to the cereal-based foods category among children aged above two years — which it was not present earlier.

Over the past few years, Nestle India has expanded its offerings both ways in terms of age of children. While, it had a dominant presence in the breast milk substitute segment with its brands such as Nestogen and Lactogen for decades, it launched Nan Pro - a slightly premium offering in the category - some years back to further its dominance over the domestic market. Nestle enjoys a majority share in baby food and nutrition market in India.

However, the pre-natal mother and baby care segment remained untapped by Nestle till recently when it came up with Baby & Me. The product was aimed at providing nutritional benefits to pregnant mothers. It also launched Neslac - nutritional milk for kids aged above two years. The segment was being dominated by Abott's Pediasure since 2009.

Experts say, the recent announcement is in line with the firm's strategy to strengthen its presence in the baby nutrition related food category. Nestle India gets more than 45% of its sales from milk products and nutrition category, under which the infant formulations are placed. The category gives it better margin compared to other segments such as prepared dishes cooking aids.

With Ceregrow, the fast moving consumer goods (FMCG) company is further stretching its offerings. While, all its products in the cereal based infant food category, like Nestum and Cerelac, cover children of aged two years, Ceregrow is meant for kids aged between two to five years.

According to India Breakfast Cereal Market Overview, India's breakfast cereal market has been growing at a CAGR of 22.1% over last five years, with 75% market share captured by Kellog's India, Bagrry and PepsiCo.

However, above mentioned companies do not have products specifically focusing towards breakfast for child between the age group of 2 to 5 years. "We believe this can create a new market in itself. This is great product positioning which will complete Nestle's positioning in overall child health and nutrition”, Abneesh Roy, senior vice-president , institutional equities, research analyst, Edelweiss Securities said.

Post the Maggi crisis which hit the company last year and cost it considerable loss in sale and profit - Nestle has been ramping up its portfolio in categories such as milk and nutrition, beverages and confectionaries. It has so far launched 27 products including new variants of Maggi instant noodles. The aim is to bring in volume growth and improve margins in categories other than that of Maggi brand. While, it used to get some 30% of its Rs 9,800 crore domestic revenue from Maggi before the crisis, the firm is also working on to reduce its dependence on the category.