Nestle India highlights significant gains from parent's IPRs amid royalty payout dispute

livemint.com:

NEW DELHI:Packaged foods company Nestle India has said it has benefitted "immensely" from its parent company's intellectual property rights, or IPRs, over the years, leading to greater speed of innovation as well as cost-savings to the business. The statement comes in the wake of a majority of shareholders rejecting a proposal to increase the royalty payout to its Swiss parent, Société des Produits Nestlé S.A., from 4.5% to 5.25% per annum.

This is the first time the company has detailed these benefits since the proposed hike was turned down.Nestle India maintains a licensing agreement with its parent company that grants it exclusive rights to manufacture and sell Nestle products in India, use Nestle trademarks, and access Nestle's technology, know-how, and patents. This access is crucial for the company's business operations.

In its annual report for FY24, Nestle India credited these IPRs with enhancing innovation speed, achieving cost savings, and enabling the premiumization of its product categories.The annual report was published on Saturday, two days after Nestle India board said it would continue paying royalty at the existing rate.The company elaborated on the benefits, citing improvements in product innovation and renovation (I&R), speed to market initiatives, factory design, production automation, productivity in commercial execution, distribution expansion, digital consumer engagement, and strategic revenue management for sustainable pricing. These initiatives have reportedly led to enhanced efficiency and reduced waste, contributing to the company's operational success.Furthermore, Nestle India highlighted cost-saving measures that have resulted in annual savings of about 1.5% of sales, driven by recipe