Indians are craving Maggi noodles but Nestle needs them even more

It is safe.
It is safe.
Image: Reuters/Danish Siddiqu
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Almost five months after it was banned, India’s beloved Maggi noodles is likely to return to the shelves.

In a statement on Nov. 4 (pdf), Nestle India—the Indian subsidiary of the Swiss food giant—said that the three laboratories mandated by the Bombay high court for testing Maggi samples have cleared the product. That means Maggi will probably be back on sale in India by the end of November.

In June, Maggi was banned in India after food safety authorities found dangerous levels of lead and MSG (monosodium glutamate) in the instant noodle. While Nestle India presented multiple reports to prove their product is safe, the Indian government wasn’t convinced. Eventually, the Swiss food giant had to resort to a court case.

While countless Maggi-loving Indians are celebrating its imminent return, no one will be more relieved than Nestle India.

Since the fiasco began, Nestle India has seen its sales decline by almost 30% and its profits fall by more than 60%. During the April-June quarter this year, the company reported its first quarterly loss in 15 years.

Revenue fell from Rs2,431 crore in the April-June quarter in 2014 to Rs1,957 crore this year, while profits plunged from Rs287 crore to a loss of Rs64 crore. Much of that had to do with a one-time cost of Rs451.6 crore for removing the noodles from the Indian market.

The slide had also continued in the July-September quarter, with revenue further falling to Rs1,742 crore, although profits somewhat recovered to Rs124 crore.

The crisis has underscored Maggi’s importance to the fortunes of Nestle India.

The noodles contribute 30% of the company’s total sales and are the second largest revenue contributor after milk products and nutrition, which form 43% of Nestle India’s total sales. The prepared dishes and cooking aid category, which Maggi is a part of, is also the only category to record volume growth last year, according to Nestle India’s annual report.

There’s also been a spillover effect. “The Maggi fiasco has obviously impacted sales of other brands of Nestle in India,” Suresh Narayanan, Nestle’s India’s managing director, said in August this year. The Indian  government had even claimed Rs640 crore ($100 million) from Nestle over “unfair trade practices.”