As Crisis Abates, Nestle Seeks to Cut Reliance on Maggi in India
Nestle’s Indian unit, which is recovering from the biggest crisis in its history, plans to reduce its dependence on Maggi noodles and introduce more products from its global portfolio.
An order by the Indian food safety regulator in June to recall the popular snack resulted in the company’s first ever quarterly loss in more than 15 years. That made one thing clear - Nestle is too dependent on Maggi, and that needs to change, Managing Director Suresh Narayanan said in an interview in Mumbai.
After the Swiss food giant parachuted him into India in July from the Philippines, Narayanan has been battling the crisis sparked by tests by the Indian regulator showing unsafe quantities of lead in the noodles. Nestle India plans to get Maggi back in stores by the end of the year, although the snack’s contribution to the local unit’s sales may shrink to as low as 20 percent over time from 30 per cent now, he said.
"Maggi is important, but other categories are also important,” Narayanan said. “We needn’t have gone through a crisis to come to that conclusion."
The Bombay High Court last month overturned the ban imposed by the regulator and allowed the resumption of sales as long as additional tests were found acceptable. That process is on now, Narayanan said.
The company spent about 4.52 billion rupees ($68 million) to recall and destroy consignments from across India, and the impact on its earnings will continue as long as Maggi stays off store shelves, he said.
“We are coming out of something traumatic and debilitating,” said Narayanan, a 16-year Nestle veteran who’s had stints overseeing the company’s operations in Singapore and Egypt as well. Resolving the Maggi issue in India “is clearly exercising every sinew in my body.”
The local unit’s prepared foods division, which is largely composed of Maggi instant noodles, was the only business that had sales volumes growth last year, according to its annual report. Milk products, chocolates and coffee, which accounted for the remaining 70 per cent of its revenue, have all declined by an average eight per cent.
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