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‘Maggi’ under regulatory scanner for lead, MSG beyond permissible limit

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Maggi risks losing Rs 2,000 crore brand’ tag

NESTLE RAPPED

MAGGI SAFE: BULCKE

NEW DELHI: Nestle’s scientists are hard at work on Plan B — a snack that can take the place of Maggi noodles, banned in India earlier this month for excessive lead content and mislabelling ."With no clarity over when Maggi in its existing form will be back on shelves, Nestle is working on alternate snacking options," said one of two persons who confirmed the development. "Snacking is a huge opportunity which Nestle doesn’t want to vacate, and it already has an existing backend for the culinary business."This could be in the form of ready-to-eat or ready-to-cook food and involve relaunching Maggi in a new format, pending the return of noodles if and when it obtains the requisite clearances, a process that could take several months.Nestle was guarded in its response to ET’s queries. "We are currently looking at all possible options to ensure that we live up to our consumers’ expectation," a spokesperson said."We are working hard to resolve the situation and we aim to be back in the market as soon as we can. Adhering to Nestle’s rigorous quality policies and testing protocol, we are confident that we will come back soon, ensuring food safety, as we always do," the Nestle spokesperson said.The company has a strong global R&D team that works continuously on product development, Nestle said. "We do more food testing than any other entity in the world. In total, around 100 million analyses a year are carried out for Nestle and we have 8,000 people working to assure quality and food safety in our products worldwide," the spokesperson said."We are hopeful of a consensus and are working towards the same."Maggi noodles is a high-stakes brand for Nestle with sales of more than Rs 2,000 crore and accounting for a third of Nestle’s India business. Production at its five plants — Moga in Punjab, Pantnagar in Uttarakhand, Nanjangud in Karnataka, Bicholin in Goa and Tahliwal in Himachal Pradesh — remains suspended but research is proceeding on a priority basis at its labs.The Food Safety & Standards Authority of India (FSSAI) ordered the recall of Maggi noodles on June 5 after tests showed lead in excess of permissible limits besides mislabelling with regard to monosodium glutamate (MSG) content.The exercise, one of the biggest in the history of packaged foods in India, involves the withdrawal of Maggi noodles worth Rs 320 crore, or 27,420 tonnes of stock, and destroying the contents.While Nestle executives said they were working to get the product back on shelves "as soon as possible", the government has dragged the company to the National Consumer Disputes Redressal Commission for "unfair trade practices and misleading advertisements".Nestle, on its part, has challenged the FSSAI order in the Bombay High Court with hearings in the case to resume on June 30.The company maintained that its quality policies and testing protocols were rigorous."We are constantly engaging with the regulators on Nestle’s inbuilt controls to guarantee safety, from raw material selection to processing and packaging," it said.Nestle said its quality assurance centre at Moga was the biggest in Nestle South Asia and tests for pesticide residue and heavy metal content in a wide range of products such spices, milk, cereals and confectionery. That’s being augmented."To meet growing market needs, the centre atMoga is building additional capability," the company said. The Moga centre has tested more than 1,000 samples for lead content .Nestle Global Chief Executive Paul Bulcke said Maggi products were completely safe, adding that "packaged food was unfairly fingered by many around the world as a health risk", AFP reported on Wednesday. The company’s reputation had been badly hit "because it’s a big brand and that (ban) made a lot of waves", AFP cited Bulcke as saying in an interview in Geneva."Food has never been safer. But there is this perception and we have to work on that. The only thing that interests me is to have the product back as soon as possible and that things are cleared up," he told AFP. Maggi may lose more than $200 million in brand value following the FSSAI ban, having been pegged at $2.4 billion before the development, according to Brand Finance."Any health concerns raised by a credible source such as FSSAI will most certainly damage customer loyalty and consideration of a food brand," said David Haigh, CEO of the London-based brand valuation consultancy."As Maggi’s parent company, Nestle will have to turn around swiftly to ensure that the Maggi brand can retain its dominance in the Indian market. If not, the Nestle brand itself could be at risk as the Nestle logo prominently features on the back of Maggi noodles packaging, making it synonymous with the Maggi brand." Prepared dishes and cooking aids comprise 29% of Nestle’s sales, the majority of which is instant noodles."Besides the obvious impact on sales, the crisis could also hurt the operating leverage of Nestle as prepared dishes and cooking aids was the only segment during calendar year 2014 that was growing in volumes," financial services firm Motilal Oswal Securities wrote in a note on June 6."However, we believe that the impact on brand equity is more devastating because Maggi is widely consumed by kids and restoring consumer trust could take time." The Nestle India stock has dropped nearly 16% in the past month. It ended at Rs 5,845.35 on the BSE on Thursday, down 2.67%.