Nestle India on recovery path after Maggi fiasco

Days after company clears SC-directed safety tests, Global CEO Paul Bulcke says India business has recovered 'faster than expected'

Nestle Global CEO Paul Bulcke’s statement on Thursday that the Indian operations bounced back “faster than expected” has come at a time when flagship brand Maggi noodles has cleared the safety tests directed by the Supreme Court and the National Consumer Disputes Redressal Commission.

On April 11, Nestle India had said none of the tests conducted on 29 samples of the instant noodle brand found any excess lead or artificial monosodium glutamate (MSG). It said the reports were submitted to the Supreme Court, where it was facing a Rs 640-crore class-action action suit.

The company had already received the go-ahead to manufacture and market the brand last year following a legal battle in the Bombay High Court. The firm’s battle had begun in the wake of Maggi's recall and ban in June last year following allegations of contamination.

The class-action suit against the company, the first of its kind in the country filed on behalf of consumers by the government, was viewed as the last impediment in Maggi's journey back into consumer lives.

Nestle India is now looking to double efforts to launch new variants and re-introduce those that were pulled out of shop shelves following the recall and ban. Currently, only the masala and chicken variants of Maggi instant noodles are out in the marketplace.

At the close of trade on Wednesday (April 13, 14 and 15 were public holidays), Nestle India's stock — despite falling 0.49 per cent — hovered in the region of Rs 6,105.80 a unit, the highest in 2016. It highest point before that was in October 16, 2015, the day the company cleared the Bombay High Court-mandated safety tests.

In a conversation with Business Standard earlier, Suresh Narayanan, Nestle India's chairman and managing director, had said he would get all nine variants of Maggi back in the market this year. Additionally, the company was working on new variants, to be launched in the coming months. Maggi’s market share since the relaunch has consistently moved up, touching 48 per cent in February, according to market research firm Nielsen. The instant noodle is currently available in all the states in India, after it got approval to enter Tripura this week.

Narayanan, who took over as managing director in August 2015 (he was subsequently promoted as India chairman), said he would also focus his attention on some of Nestle's other categories such as chocolates, confectionery and beverages that have not delivered as strongly in the past. “I will add new brands and rev the engine up. The third stage (after getting Maggi back on track and focusing on existing categories) would be to look at new product segments”.

Abneesh Roy, associate director (research — institutional equities) at Edelweiss, said investors were looking forward to Nestle’s investments in new and existing categories. “Expansion of existing segments such as chocolates will be key. The addition of new categories such as pet food, packaged water and breakfast cereals by Nestle in India will excite investors.”

While the company reported a 17.2 per cent decline in net profit for the December 2015 quarter, this was lower than the 60 per cent decline it reported in the September 2015 quarter and the loss it reported in the June 2015 quarter.

The company’s net sales touched Rs 1,960 crore in the December 2015 quarter, after declining 22 per cent on a year-on-year basis. In the previous two quarters, sales fell 32 per cent and 20 per cent, respectively.