India noodle recall to cost Nestlé over CHF47 million

Instead of ending up as quick snack the banned noodles will have to be boxed and transported to destruction centres Keystone

Complying with an Indian court order to recall its Maggi brand of instant noodles from the Indian market will cost Swiss food and drink giant Nestlé over INR3.2 billion (CHF47 million), according to company estimates released on Monday. 

India’s food safety authority had ordered Nestlé on June 5 to recall its noodles, after levels of lead well above allowable limits were discovered. This was followed by an indefinite ban on the products issued by the Mumbai High Court on June 12. 

Nestlé India estimates that the market value of the product stock already on the market is around INR2.1 billion (CHF31 million). In addition, the company also has around INR1.1 billion (CHF16 million) worth of stock in its factories and distribution centres that cannot be sold following the ban. 

However, according to the company, the cost of the ban is likely to be much higher due to expenses associated with transporting the stock from the markets to destruction points and the cost of destroying the products themselves. Hence the final figure will be announced at a later date once these additional costs have been accounted for.

Wider impact

With a commanding 63% market share of instant noodles sold in India in 2014, Nestlé’s Maggi brand is bound to be the biggest loser as a result of the consumer’s loss in confidence in processed snacks. However, the scare surrounding the Maggi recall has affected other brands as well, according to Indian media reports. The entire instant noodles segment has taken a hit in the country.

#MaggiBanExternal link: Sale of instant noodles from other brands falls as much as 80% across India. pic.twitter.com/usbP6Q5v4nExternal link

— ET NOW (@ETNOWlive) June 8, 2015External link

Other sectors are also bound to feel the pinch of the Maggi ban. Nestlé’s suppliers such as manufacturers of spice sachets, flour mills, food packaging companies and even farmers will have to bear the brunt of the court ruling against Nestlé.

Suppliers to @NestleIndiaExternal link have lost business worth tens of crores every week after the @MaggiIndiaExternal link ban. #MaggiBanExternal link pic.twitter.com/4O2dMpFAN6External link

— ET NOW (@ETNOWlive) June 15, 2015External link