Nestle India Ltd
Directors Reports
Dear Members,
Your Directors are pleased to present their report and financial statements for the
year ended 31st December, 2018.
Financial Results and State of Company's Affairs
|
|
( 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 |
8,677.4 |
|
| 2017: RS 63.00 per share |
|
6,074.2 |
| Final dividends |
|
|
| 2017: RS 23.00 per share |
2,217.6 |
|
| 2016: RS 23.00 per share |
|
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 (RS ) |
166.67 |
127.07 |
| Dividend per share (RS ) |
|
|
| Interim |
90.0 |
63.0 |
| Proposed - Final |
25.0 |
23.0 |
| #Profit 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. "Export Sales" 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 ofRS 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 Company's 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 Nestl 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 ‘Prepared Dishes and Cooking Aids'
During the year 2018 ‘Prepared Dishes and Cooking Aids' 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
21 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,
‘Kuch Achha Pak Raha Hai'. 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 Nestl 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 Nestl S.A, Switzerland and General Mills Inc.,
United States, to produce and sell breakfast cereals. With this launch, your Company's
objective is to provide high quality nutritious breakfast cereals to the consumers in
India.
Strengthening of ‘Milk Products and Nutrition'
The ‘Milk Products and Nutrition' 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 ‘Zero Added Sugar' (sucrose). DHA supports the child's normal brain
development and whey protein is required for easy digestion. NANGROW is the only milk
drink in its segment with the proposition of ‘All Growth'. ‘Zero Added Sugar',
provides a healthier option for children.
CEREGROW, an iron fortified nutritious cereal for children over 2 years, launched its
new communication titled, ‘Poora Poshan, Poori Tasalli'. CEREGROW is designed to meet
the nutrition requirements of children aged between 2-5 years.
Your Company rolled out a communication titled 'Pet Bhara, Par Nutrition Bhara Kya' 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 Nestl 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 ‘Powdered and Liquid Beverages'
2018 was an exciting year for the ‘Powdered and Liquid Beverages' business as your
Company continued to focus on growing the coffee and beverages market. NESCAF
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
NESCAF , a smart app enabled coffee machine.
After the successful launch of NESCAF Ready-To-Drink Coffee in UHT format, your
Company also launched successfully Ready-To-Drink Coffee in can format, under iconic youth
brand of NESCAF. Instant Premix Tea was also launched under the heritage brand of
EVERYDAY in three variants - Desi Masala, Saffron & Cardamom and Ginger &
Lemongrass.
NESCAF Classic leveraged its connect with the youth and launched a number of
initiatives and activations. The new campaign ‘Badal Life Ki Raftaar' establishes the
strong role of NESCAF 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 NESCAF 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.
NESCAF SUNRISE continued its journey of driving brand differentiation in the core
coffee market of South India. The new communication campaign ‘Start Your Day Bright'
was complemented with a regionalised approach to drive brand salience, consumption and
availability. To take the brand culturally closer to the consumers, NESCAF SUNRISE
launched a new festive campaign about how small gestures can make a big difference, just
like the rich aroma granules of NESCAF SUNRISE.
The premiumisation journey was accelerated with the relaunch of NESCAF Gold. The new
product leverages global innovations to build premium cues and to deliver a superior
coffee cup to consumers. The campaign ‘For The Moments That Matter' focused on
celebrating special bonds in your life with a cup that is crafted with care.
More offerings in ‘Confectionery'
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
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 crme.
MUNCH also became the official Crunch
Partner of three popular teams in IPL 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
‘Free Ka Attitude'.
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.
‘Nestl Professional' – Out-of-Home Business
Your Company's ‘Out of Home business' 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 NESCAF 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 ‘One Nestl Experience', brought brands and consumers closer. MAGGI and
NESCAF 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 ‘Employee Engagement Leadership Award' in the category
‘Best Initiative in Benefits for Working
Mothers' at the Employee Engagement Leadership Converge 2018.
• Featured amongst the ‘100 Best Companies for Women in India' at the
‘Best of Best Conference 2018', presented by Avtar group and Working Mother Media.
• Recognized by Brand Equity, as one of the ‘Top 10 Ads of March 2018' for
MAGGI MASALA-AE-
MAGIC ‘Kuch Achha Pak Raha Hai' film.
• Won the ‘Campaign of the Month Award – All India', by
allaboutoutdoor.com for KITKAT DESSERT DELIGHT Brownie Kubes outdoor launch.
• Won silver for ‘Nanhi Kali- Story Books Finds A Way' in ‘Direct
Marketing' and Bronze for NESCAF RJ Rishi Campaign in ‘Consumer
Products-Beverages & Drinks Category' at Effie
Awards 2018.
• Awarded ‘Product Innovation of the year 2018' in the Nutrition Category for
NESTL CEREGROW
• Awarded ‘The Emerging Brand' by CIMS Medica in the Health and Wellness
Category for RESOURCE Diabetic.
• Received Best Supplier Award for ‘Supply Chain – Food' at Walmart
India annual ‘Supplier Summit'
• Recognised by Confederation of Indian Industries for Food Safety; Food Testing,
Manufacturing Competitiveness and Quality Management.
• Awarded Silver by Skoch Awards for ‘Corporate Social Responsibility' for
Project Jagriti implemented in partnership with NGO Mamta.
• Won ET NOW, CSR Leadership Awards for the commendable work in the category of
‘Concern for Health'.
• Mr. Suresh Narayanan was ranked amongst the ‘Best CEOs' at Asia
Pacific Gender Diversity and Leadership Excellence Awards for ‘Leading on Gender
Diversity'.
• Mr. Suresh Narayanan was honoured with the ‘Responsible Business Leader'
award for successfully embedding responsible business practices across Nestl India at
Responsible Business Summit 2018.
• Mr. Shobinder Duggal was awarded ‘The Best CFO of A MNC – Large' 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 Company's Instagram page, ‘N-Reach', a first of its kind industry-academia
partnership, and 1st Day on Campus with Nestl.
Your Company in 2018 made successful lateral hires and strengthened its position as an
‘Equal Opportunity Employer'. 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 Company's 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 Nestl Change makers 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,
NESCAF 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 Nestl 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
India's 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 India's 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 Bank's 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. Government's 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 Nestl 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 Nestl Group's 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
Nestl 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
Your Company's improved operational efficiencies have delivered products of higher
quality and at a competitive cost.
Your Company through digitalization has moved towards ‘Paperless Shop Floor'. 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 020.
Packaging and Plastic Waste Management ‘2 Minute Safaai Ke Naam' 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, ‘2 Minute Safaai Ke Naam' (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 post- consumer 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 Company's 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.
Nestl Business Excellence
To support Nestl's organization principles of increased business focus, speed and
quality of execution, and highly efficient support structures, Nestl 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 (Nestl 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 Nestl
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 Nestl 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 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 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 Statutory Auditors of the Company is attached as Annexure - 1 and
forms integral part of this Report (hereinafter "Corporate Governance Report").
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 ("Act"), 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 Non-
Executive 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 (‘AGM') 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 "Nestl Purpose and Values" and "Nestl Leadership
Framework". 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 ("Performance Evaluation"). 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
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 - 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 ("CSR Rules") 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:
Nestl Healthy Kids Programme
The Nestl 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 Nestl 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 Company's 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 "Creating Shared Value". 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 (‘the Act'), 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 (‘the Act') 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 31 st
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 31 st 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/ stock and financials/ annual returns.
Details of Loans and Investments
Details of the loans given by your Company under Section 186 of the Act during the year
ended 31st December, 2018 are as follows: Nestl 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 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 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 year 2018 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. 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
financial 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 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, 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 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, the Audit Committee comprised Independent Non-Executive
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 "The
Nestl Corporate Business Principles", "Nestl Purpose and Values document
" and "Nestl Code of Business Conduct". 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 Nestl
India Code of Business Conduct ("the Code"). 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 ("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 your Company's 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, "Tell us", to all internal and external stakeholders with a dedicated
communication channel for reporting potential instances of non-compliance with Nestl
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, 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 ‘Believing in People' 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 Nestl 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 – 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 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 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
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 : 14th February, 2019
Place : Gurugram