Nestlé to lose millions of pounds due to Maggi recall

By Michael Stones contact

- Last updated on GMT

 Nestlé is on track to lose millions
Nestlé is on track to lose millions

Related tags: Food safety, Food standards agency

Food giant Nestlé is set to lose more than £127M and suffer brand damage worth billions of US dollars, after India banned its Maggi noodles on food safety fears, warns a brands consultancy.

Brand Finance calculated the damage following the Food Safety and Standards Authority of India’s (FSSAI’s) verdict that the noodles were “unsafe and hazardous”. ​Some noodle packets contained “higher-than-allowed levels of lead”​ and Nestlé had failed to comply with the nation’s food safety laws, it said.

Maggi’s brand was valued at £1.54bn ($2.4bn) before the food safety ban, which ranked the noodle manufacturer as the 23rd most valuable food brand in the world. But Brand Finance calculated Nestlé’s decision to destroy noodles valued at £32M combined with a damaged brand, will result in a reduced brand value of £1.41bn ($2.2bn).

Brand Finance boss David Haigh warned health concerns raised by a credible source such as the FSSAI would most certainly damage customer loyalty and consideration of a food brand.

‘Nestlé brand itself could be at risk’

“As Maggi’s parent company, Nestlé will have to turn around swiftly to ensure that the Maggi brand can retain its dominance in the Indian market,”​ said Haigh. “If not, the Nestlé brand itself could be at risk as the Nestlé logo prominently features on the back of Maggi noodles packaging, making it synonymous with the Maggi brand.”

The manufacturer began withdrawing the noodles from retailers in India at the beginning of this month – but is thought to face a logistical nightmare in accomplishing the recall quickly due to infrastructural challenges.

Reputational damage

“Any health concerns raised by a credible source such as the FSSAI will most certainly damage customer loyalty and consideration of a food brand.”

  •  David Haigh, Brand Finance

Nestlé planned to challenge the Indian high court ruling and raise “issues of interpretation”​ of India’s food safety laws. At the beginning of June Nestlé said: “Unfortunately, recent developments and unfounded concerns about the product in India have led to an environment of confusion for the consumer there, to such an extent that Nestlé India has decided to withdraw the product off the shelves in India, despite the product being safe.”

‘Despite the product being safe’

Food safety concerns have also been raised about the presence of high levels of the flavour enhancer monosodium glutamate in the noodles.

The Food Standards Agency is continuing to probe the safety of Maggi noodles sold in the UK​. Nestlé said the batch of noodles originally tested by the authorities in India was not sold in the UK or Ireland while other flavour Maggi noodles were imported from factories outside India.

Nestlé accounted for 80% of India’s lucrative instant noodles market, after their launch in the country 32 years ago.

Meanwhile, avoiding costly product recalls is one of the aims of the Food Manufacture Group’s one­-day food safety conference on Tuesday September 29.

The conference – ‘Safer food and drink – from the harvest to the home’ – will take place at The Lowry, Manchester. Click here to benefit from the early bird discounted price to the conference, which ends on June 30.

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1 comment

Courageous, bold -Thought necessary

Posted by SamWoe,

It is never easy for executives to stop
a perceived momentous problem escalating totally out of control. Especially in circumstances so massive plus usually out of the blue! Over time we all get used to dealing with day by day client complaints.
But on this scale. Wow!
To challenge the Indian Food Authority findings would have prolonged the damage, then who knows what the ultimate court decision would be.Or the time involved. Meanwhile losses mounting by the hour.
Yes! The numbers are huge, yet no doubt
other companies, managements, will possibly have been or will be in the future - Be called to make decisions that effect, sales, turnover & company prestige. Massive to these parties also.
The bottom line though is - weigh up all
the factors - Then be decisive. Bold. Pick up the pieces,rebuild a new. Learn
from any errors discovered. Sadly though,
one often discovers a combination of factors, hitherto unknown to the venture.
No doubt any areas perceived as suspect
will be addressed in any new developments.
As they say,
'There but for the grace of GOD go us!'
Do I hear - 'That could not happen to us.'
Suggest you, whatever your position, make sure it does not- even if you do not make
noodles. Applies across the board.

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