How much did Maggi ban cost Nestle India?

On June 5 this year, Nestle India's popular Maggi noodles went off the shelves after the Food Safety and Standards Authority of India (FSSAI) imposed a ban, calling it “unsafe and hazardous” for consumption. The ban was imposed after several laboratories found the instant noodles contained huge quantities of taste enhancer monosodium glutamate (MSG) and lead, way beyond the permissible limit.

Maggi off the shelves: Stock worth nearly Rs 320 crore was recalled from across the country by Nestle India after it was banned by FSSAI.

Destroying the stock: After the ban was imposed pan-India, Nestle India was ordered to not only take Maggi off the shelves, but to also destroy the stock, which included 30,000 tonnes-worth of instant noodles. Ambuja Cements was paid Rs 20 crore by Nestle India, to burn the entire stock at its cement plant in Chandrapur in Maharashtra.

Fine: The Corporate Affairs Ministry imposed a nearly-Rs 640 crore fine on Nestle India, in lieu of finding MSG and lead beyond the permissible limit in Maggi noodles. The government filed a Rs 640-crore class action suit before the consumer forum National Consumer Disputes Redressal Commission (NCDRC).

Out of this Rs 284.45 crore was sought in basic damages, and another Rs 355.5 crore in punitive damages. However, the government had said that the penalty could go higher as it was still calculating further damages to be sought.

Market share/ share price

Nestle India's nine variants of Maggi noodles accounts for nearly 70% of the instant noodles market, which took a massive hit when a blanket ban was imposed on the product.

After the ban was imposed on June 5, the company's share price tanked. On June 8, three days after the pan-India ban was imposed, Nestle India's share price was down to Rs 5,539.8, the lowest level it had seen all year.

Data courtesy BSE

Since then, the company's scrip has seen major volatility, regaining the highest level since the ban at Rs 6,831.95 per share on August 5. On the date, Goa deputy chief minister Francis D'Souza had said that he favoured the re-think on the Maggi ban after the latest tests conducted by a central government laboratory in Karnataka found the instant noodles safe for consumption. 

Data courtesy BSE

Profit/ sales

In the quarter ending June 2015, Nestle India posted its first net loss in nearly 30 years. For the quarter, the company posted a standalone loss of 64.40 crore, down significantly from the Rs 287.86 crore profit posted in the same period last year. The company's sales were down 20%. Maggi accounts for nearly 30% of the company's revenue.

On Thursday, Nestle India announced its results for the quarter ending in September. For the July-September 2015 period, the company's net profit was down 60% to Rs 124.20 crore from the Rs 311.20 crore net profit posted in the same period last year. The company's net sales was down 32.12% to Rs 1,736.20 crore as against Rs 2,557.80 crore in the same period of previous year.

Management

Nestle India's managing director Etienne Benet was called back by the parent company on July 24. On August 1, Suresh Narayanan was appointed as the company's new managing director. On Thursday, after announcing the Jul-Sep results, the company's board appointed Narayanan as the company's chairman too. The move came after Nestle India's chairman Antonio Helio Waszyk  retired on October 1.

Operations

Nestle India shut down Maggi production at all of its eight production units in India. However, since the ban was set aside, Nestle India has started production at three of the eight factories, and wants to start production at all the factories soon. "We have resumed manufacturing of Maggi Noodles at three of our plants, at Nanjangud (Karnataka), Moga (Punjab) and Bicholim (Goa)," said a Nestle India Spokesperson.

Jobs

Nestle India employs nearly 7,200 prople in India, across its eight plants. However, according to this NDTV report, Nestle India had assured that it will not be cutting any jobs despite the production halt of one of its biggest brands. The report said that employees and factory workers were reassigned to other job roles during the ban.

However, according to this Indian Express report, the company's Moga plant that employed 1,000 contract workers apart from the regular staff, had only about 200 people during the ban.

The job losses weren't limited to Nestle India. The contagion effect was felt throughout the value chain, the IE report says. The Maggi ban's effect percolated to the company's suppliers, spice manufacturers and providers, maida suppliers, loaders and truckers, and so on. 

Advertising

With the ban now kept aside and Maggi cleared for production, Nestle India is gearing to relaunch the instant noodles. For this, the company has said that it will be advertising aggressively, increased its spending on tv commericals.

During the ban, Nestle India had come up with a series of advertisements to the theme #WeMissYoutoo.