May 12, 2016 10:26 pm JST

Nestle India trying to shrug off noodle scare

KIRAN SHARMA, Nikkei staff writer

A boy buys Maggi noodles from a grocery store in New Delhi after the product was relaunched in November 2015.

NEW DELHI -- The food safety debacle last year involving Maggi instant noodles hurt Nestle India's earnings for the January-March quarter, with the company on Thursday reporting a net profit of 2.59 billion rupees ($38.86 million), down 19% on the year.

Net sales for the first quarter slipped 8.4% on the year to about 23 billion rupees, Nestle India said in a stock exchange filing in Mumbai. The company's fiscal year corresponds to the calendar year. Results for the quarter have been impacted by the Maggi noodles issue in 2015," the local unit of the Swiss food processor said.

On June 5, 2015, sales of Nestle India's Maggi instant noodles were banned by the Food Safety and Standards Authority of India, which said samples of the product contained levels of lead in excess of safety standards. The company successfully challenged the ban at the Bombay High Court and resumed sales on Nov. 9, after samples were deemed safe for human consumption by three High Court-approved testing facilities.

The allegations badly dented the company's earnings for the year ending December, when its net profit slumped to 5.63 billion rupees, from 11.85 billion rupees in 2014. For the full year, sales dropped 17% to 81.23 billion rupees.

Commenting on the first quarter results of 2016, Suresh Narayanan, Nestle India's chairman and managing director, called 2015 "a tough year," and noted Maggi noodles were again the most popular instant noodle brand, gaining a market share of over 50% within five months of the relaunch.

Less Maggi-ic

"We are gearing up for volume growth with renewed focus and commitment on consumer-relevant innovation and renovation," Narayanan said.

Aiming to reduce its dependence on Maggi, which contributed about 30% to the company's total revenue before the food safety concerns hit sales, Nestle India launched a brand of Greek-style yogurt called a+Grekyo, Nescafe Sunrise Insta-Filter coffee, and chocolate products such as Munch Nuts and KitKat Duo, in addition to four varieties of its mainstay noodles.

"Recent launches ... are precursors to products which are in different stages of readiness for launch," Narayanan said.

In April, the parent company announced its India operations were recovering faster than anticipated. "In India, the Maggi noodles business gained back market share, but the business results were still affected by the unfavorable comparatives," it said.

Narayanan on Thursday said Nestle India is working to increase market penetration for all its businesses, including milk and nutrition, chocolate and confectionery, and coffee and beverages. "I remain optimistic about our future performance," he said.

The company's stock closed at 5,703.85 rupees, up 1.9%, on the BSE, formerly the Bombay Stock Exchange. The shares had been trading above 7,000 before the Maggi issue erupted last June -- when Maggi controlled about 80% of India's instant noodle market.

 

Asia300

Nestlé India Ltd.

India

Market(Ticker): BOM(500790)
Sector:
Industry:
Consumer Non-Durables
Food: Major Diversified
Market cap(USD): 10,842.68M
Shares: 96.41M

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