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Maggi Ban Takes A Toll On Nestle

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Switzerland-based multinational food and beverage company, Nestle India, suffered a net loss at Rs 64.4 crore in Q2, hit by Maggi noodles ban. Analysts believe that the recall costs added to the woes of the company’s loss apart from the sales that were hit initially when the news of excess lead in its ready-to-eat product Maggi was exposed in early June this year.
 
This was the company’s first quarterly loss in the last 15 years as a long drawn battle with India’s food regulator FSSAI continues. Nestle India, however, made a statement that the whole controversy disrupted its profitability this quarter. In addition, to loss of sales, the firm reversed net sales worth Rs 288.4 crore during the quarter in relation to Maggi noodle stocks already sold to retail and withdrawn from the market. It reiterated its products are safe for consumption and that it recalled Maggi because of confusion in the consumer's mind about its safety following test reports.
 
The company has already lost money to the tune of Rs 320 crore in recalling and destroying its product from the market shelves. The ready to cook Maggi noodles contributes two thirds of sales in prepared dishes and cooking aids, which was the only category to demonstrate positive volume growth in FY14. 
 
The estimated sales value of Maggi noodles in the market was Rs 200 crore while related materials in the factories and distribution centres have an estimated value of Rs 1.10 crore, according to a recent filing with the exchange. Having been in India for over 100 years, Nestle India at present has 26 per cent of the total packaged foods industry in the country.
 
Nestle India recently appointed Suresh Narayan as the new India chief who had to take up the baton in a challenging phase for the company. Analysts have always been of the view that an Indian should head the Indian arm of the Swiss multinational. But it hardly made a difference as the company continued to make profits before stumbling this year. But it certainly is a rough weather for the FMCG giant that needs to win back its market share and the battle with the Indian regulators.


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