Food major’s ad spending surge delivers record volumes albeit with a little margin squeezeÂ
Nestle India is spending money on advertising. The maker of Maggi noodles and KitKat chocolates just posted its strongest volume growth in five years, but it came at a price: margins compressed as the company pumped 42% more money into advertising and promotions compared to last year.
Revenue jumped 18.6%, significantly ahead of expectations. Nuvama, which had been estimating lower growth, found the actual performance came in “8.5% ahead of our estimate.” Centrum notes the topline growth accelerated from “low double digit in Q2 to high teens double digit growth” in Q3, driven primarily by volumes rather than price increases.
According to Nuvama, volumes grew in double digits year-on-year, marking the “highest-ever in last five years.”
The Margin Story
But growth came with a trade-off. EBITDA margins contracted 186 basis points as advertising and promotional expenses surged. Centrum calculates that gross margins fell 66 basis points to 55.7%, pressured by “elevated input costs (cocoa, milk, and edible oil).” The real kicker came from operating expenses. Centrum notes “higher other expenses (+96bps YoY as % of sales)” caused the overall EBITDA margin contraction of 149 basis points to 26.6%.
Of course, there were “no one-offs in revenue or ad spends; focus remained on aggressive growth and brand building,” as per Nuvama.
But that should be good for long term business growth and the brand. “We believe increased ad spends to drive brand building is a step in the right direction,” Centrum notes. Nuvama goes further: “Ad spends will stay elevated, but will lead to volume-led double-digit revenue growth in at least next three quarters, which we believe is the right approach.”
The revenue growth wasn’t concentrated in one or two products. Nuvama says “three out of four product portfolios logged double-digit YoY growth.”
Maggi, the undisputed king of instant noodles in India, “grew in double-digits,” according to Nuvama. This is particularly noteworthy because Centrum points out that growth came “despite increased competitive intensity.” New variants are pulling their weight too—Nuvama notes that “value-added portfolio, including the new Spicy range and Double Masala, logged positive traction.”
The confectionery division turned in what Nuvama calls “strong double-digit growth.” KitKat specifically grew in “high double-digits” while Munch delivered double-digit gains. Even Masala-ae-Magic, the flavor enhancer, “sustained strong momentum.”
But the most significant development is in milk products and nutrition, a category that’s been struggling. “Milk products & nutrition witnessed improved performance after several quarters of muted performance,” Centrum observes. Nuvama singles out Milkmaid as having “continued its strong growth momentum.”
Beverages hit what Nuvama describes as an “18-quarter high” with double-digit growth. That’s four and a half years since the category performed this strongly.
The Distribution Engine
General trade, the backbone of Indian FMCG distribution, “posted strong double-digit growth,” according to Nuvama. Centrum adds that within this channel, “rural markets” led the charge, an important signal given that rural demand has been patchy across the broader consumer sector.
Quick commerce is becoming a meaningful contributor. Nuvama notes that “momentum accelerated further, supported by on-platform demand generation initiatives.” These rapid delivery apps—Blinkit, Swiggy Instamart, Zepto—are changing how urban Indians buy groceries, and Nestle is clearly gaining traction there.
The Commodity Headache
The input cost picture is mixed and unlikely to provide much relief soon. Nuvama notes that “milk prices remain firm despite the flush season supported by robust demand.” Edible oils “remain elevated and are likely to trade sideways in H1CY26.”
There are some positives. “Coffee prices have stabilised at lower levels compared with last year aided by favourable crop yields in Vietnam and India,” Nuvama notes. The April 2026 wheat harvest “appears positive,” which should help products that use wheat as a base ingredient.
What It Means for Investors
Nestle India stock has always commanded a premium in the market, and for good reason. It’s the kind of stock that delivers consistent returns, and requires patience rather than timing. The company has carved out dominant positions in categories like instant noodles, infant nutrition, and coffee, with brand equity that’s strong, which is an understatement.
The numbers support this view. Nuvama has raised revenue estimates for FY27 and FY28 by 4-5%, but the firm is “maintaining EBITDA estimates due to expected increase in ad spends.” Centrum projects revenue and profit CAGR of 12.5% and 18.1% over FY26-28, a meaningful acceleration from the 9.8% and 8.5% growth rates the company delivered from CY19 to FY25.
Nuvama has a target of Rs1,595 and Centrum at Rs1,460. But here’s what matters more than the target prices: Nestle India isn’t trying to be a turnaround story or a growth stock that suddenly appeared out of nowhere. It’s a compounder doing what compounders do—steadily expanding market share, launch new products, deepen distribution, and build brands that will command pricing power. But of course there’s no reason to chase the stock, but keep the stock on watch for valuation opportunities.
