NEW DELHI: Hit by the Maggi ban, Nestle India reported its first quarterly loss in at least 30 years as sales dipped by over 20%. The Indian arm of the Swiss multinational said its losses during the June quarter were estimated at Rs 64 crore, compared to profit of close to around Rs 288 crore a year ago. The food major earns around a quarter of its revenue from Maggi.

"As far as I can remember, they have always been a profitable company although they have been criticised for not being aggressive here. They banked on one product, that is, Maggi, too much. Since, their rivals in the category couldn’t do much, they thought they were invincible," said Harminder Sahni, founder and MD, Wazir Advisors. Company executives, however, said that this is Nestle's first loss in over three decades.

The company's domestic sales declined by 20.6% to Rs 1,776 crore, primarily on account of the food-safety controversy surrounding Maggi as it failed to clear safety tests in various states, resulting in the food safety regulator asking the company to stop sales. Its overall revenues were also impacted by a 12.7% drop in coffee exports to Russia, company said in a stock exchange filing.

Although the ban on the country's most popular instant noodles brand kicked in on June 5, it had to reverse sales of Rs 288 crore as Maggi sold to distributors and retailers had to be recalled. As a result, it has made an "exceptional" provision. Maggi sales contributed around 25% to the company's Rs 9,800 crore 2014 turnover.

While announcing the results, Nestle maintained that tests conducted on over 2,700 samples in India and abroad contained prescribed levels of lead. The food safety regulator, FSSAI, had banned sales on the grounds that lead content in Maggi was more than the permissible level and there were undeclared amount of monosodium glutamate (MSG) as well.

"The ban has hurt it hard. But over the last three years, they did not see any growth in volumes. Whatever growth was there was due to increase in prices. Nestle has a tough task ahead as it has been silent, slow and has mounted a legal challenge against the regulator's move. In contrast, the cola companies and Cadbury (which faced pesticide and worm-related charges) were proactive," said Abneesh Roy, associate director at Edelweiss Securities. He added that the controversy has also impacted the other brands sold by the company in India.

