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Nestle India noodle scandal not simmering down

NEW DELHI -- The controversy over Nestle noodles in India is starting to snowball.

     The Swiss multinational's Maggi instant noodles, a popular snack in India for over three decades, are suddenly off the menu due to allegations that they contain excessive amounts of lead and were labeled inaccurately. 

     The scandal erupted last month after food inspectors in the northern state of Uttar Pradesh alleged that random sample testing of Maggi noodles found lead concentrations of 17.2 parts per million, well above the permitted 2.5 ppm. Traces of monosodium glutamate, a flavor enhancer known as MSG, were also said to be present -- contrary to the labels.

     A number of Indian states ran their own tests and banned Maggi 2-Minute Noodles, which held a roughly 80% share of the country's instant noodle market. The Food Safety and Standards Authority of India, a national regulator, declared the noodles "unsafe and hazardous for human consumption" and ordered a recall of all nine varieties sold locally.

     Now, the watchdog is digging into other companies' noodles, too. Products it is testing include Top Ramen from Indo Nissin Foods; Foodles from GlaxoSmithKline Consumer Healthcare; and Sunfeast Yippee from ITC.

     Hindustan Unilever has so far been excluded from the probe. Nevertheless, it said it is withdrawing its range of Knorr-brand Chinese instant noodles, pending approval from the safety regulator. 

See you in court

Nestle India insists its noodles are safe for consumption and is pushing back against the regulator. Approaching the Bombay High Court on June 11, the company raised "issues of interpretation" concerning Indian food safety laws and sought a judicial review of the recall order.

     This came days after Paul Bulcke, Nestle's global CEO, flew to India to address "unfounded" concerns about Maggi. Bulcke expressed confidence the noodles would return to store shelves soon.

     Nestle India says its tests have consistently shown lead levels in Maggi noodles to be within the permissible limit. It also says no MSG is added to the products, but that ingredients such as groundnut protein, onion powder and wheat flour contain glutamate naturally. The company suggests this may have caused confusion. On June 5, however, it announced a decision to remove "no added MSG" from its labels.

     The scandal has taken a toll on Nestle India's share price. The company's stock had been trading around 7,000 rupees ($109) before Maggi noodles hit headlines. It touched a fresh year-low of 5,499 rupees on June 8 and is still hovering below 6,000 rupee mark as of June 16.

     "Whenever such news comes, markets react very sentimentally -- it is more of a knee-jerk reaction rather than a calculated one," said Pramit Brahmbhatt, CEO of Veracity Financial Services, a company that offers trading in currency derivatives and equities. "We have seen exactly that" in the case of Nestle India. 

     Maggi noodles, packets of which start at just 12 rupees (18 cents), fall under Nestle India's prepared dishes and cooking aids segment, which accounts for about 30% of its overall sales. The Indian unit contributes less than 2% of the Nestle group's total revenue.

     While Nestle India is only a small part of the massive Swiss conglomerate, the scandal is drawing unwanted attention internationally. Made-in-India Maggi noodles are exported to Australia, Canada, Kenya, Singapore and the U.K., among other countries.

     The Canadian Food Inspection Agency has been independently checking imported Maggi noodles and said it would issue a recall warning if any products are found to be unsafe. The U.K.'s Food Standards Agency also said it would test the noodles for excessive lead.

     After a brief suspension, the Agri-Food and Veterinary Authority of Singapore declared the product safe for consumption.

     The U.S. Food and Drug Administration is also checking samples of Maggi noodles produced in India and intended for the U.S. market, according to a Nestle group spokeswoman. She stressed that Nestle does not directly import, market or distribute the noodles in the U.S. "Any Maggi noodle products found on U.S. store shelves are sourced directly by retailers or imported through third-party trade," she explained.

Other threats

Back in India, consumer concern about food safety is running high. Some say going after multinational corporations like Nestle is not enough. 

     Shashi Sharma, a 45-year-old mother whose two teenagers used to snack on Maggi noodles regularly, said she also wants to see a crackdown on merchants who sell unbranded noodles, toffee and other things on roadsides and outside schools.

     Hemlata Sati, a mother of a 4-year-old boy, echoed that sentiment: "While it is good that the authorities are testing these branded food products and generating awareness about the harmful ingredients in them, they should also take action against local roadside sellers whose products may be much more harmful, as they don't go through any lab testing."  

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