22 Dec 2024

Nestle | Nestle’s pricing power to play rescue act in trying times

In CY21, gross margin dipped y-o-y, but lower ad spends helped Ebitda margin improve. Costs outlook is firm in CY22, but Nestle’s strong pricing power should help.

Edited by: Autora1

Akey takeaway from Nestlé India Ltd’s CY21 annual report released recently is that advertising & sales promotion (A&P) costs as a percentage of sales has dropped further. The company follows a January to December financial year. Nestlé provides the A&P details in its annual report only. The ad spends-to-sales ratio has seen a consistent decline in recent years.

“While the covid-19 pandemic in CY20 understandably led to a 70 basis points (bps) decline year-on-year (y-o-y) in ad spends-to-sales ratio, we were not expecting a further decline in CY21 (to 5.5%),” said Motilal Oswal Financial Services’ analysts in a report on 21 March.

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