Noodle flap lands regulator in hot water

Instant noodles, especially Maggi-brand products, are extremely popular in India. 

MUMBAI -- Nestle India is preparing to resume production and sales of its mainstay Maggi brand of instant noodles now that a court has overturned a government order to keep the products off store shelves. The focus now is on whether the food safety regulator will accept the decision or defend its sales ban, which has caused huge losses for many businesses.

A neighborhood grocery store in northern Mumbai has seen instant noodle sales tumble 30% since it stopped stocking Maggi noodles about five months ago.

The store carries other brands, such as the Sunfeast Yippee line from major local player ITC, but "customers still ask for Maggi noodles even now," the owner said.

The saga began in early June, when the government ordered Nestle India to stop production and sales of Maggi noodles, alleging that the products contained hazardous levels of lead. The company objected to the charge, filing a motion at the Bombay High Court.

The court ruled in August that Nestle India could resume sales of the noodles if they were deemed safe by three court-approved testing facilities.

Nestle India's Maggi-brand instant noodles command an 80% market share. © Reuters 

The company issued a statement on Oct. 16 reiterating its assertion that its noodles pose no health threat. According to the statement, the lead content of its instant noodles was proven to be far lower than maximum allowable level under the country's food safety laws. Nestle India also said it would immediately begin production so that it could resume sales.

Major damage

Nestle products have been available in India for over a century and have become part people's daily lives there. Of all the company's offerings, Maggi noodles are by far its most important. The brand commands about 80% of the market and generates roughly a quarter of Nestle India's sales. It is no surprise, then, that the recall order dealt a huge blow to the company's earnings. Nestle India reported a net loss in the April-June quarter.

But the impact has gone beyond just Nestle India. Soon after issuing the production and sales ban, the Food Safety and Standards Authority of India published a document outlining plans to test instant noodles from six other companies.

The document also said that all products that have yet to receive final approval would be deemed illegal. This went against the FSSAI's existing stance that makers can produce and sell products while awaiting approval.

Scrambling to respond to the regulator's about-face, the local unit of Anglo-Dutch daily products giant Unilever and Japan's Nissin Foods Holdings recalled their instant noodles voluntarily.

This led to a 90% plunge in noodle sales to 300 million rupees ($4.98 million) over a one-month period starting in early June, according to the Associated Chambers of Commerce and Industry of India.

"Indian people's awareness toward food safety has been growing sharply, particularly among the middle class," a nutrition consultant in Delhi said. "This shift is one of the reasons why the news reports of hazardous levels of lead in the Maggi noodles created such a strong response nationwide."

But various testing facilities, including one in Singapore, where Indian-made Maggi noodles are sold, started countering the FSSAI's allegation, saying they found nothing wrong with the noodles.

As a different picture began emerging, public anger at Nestle India quickly turned toward the government. And resentment over the food safety body's sudden rule change for noodle makers is still smoldering.

Lack of clarity

The FSSAI's test results differed from those of overseas labs because of the organization's lack of food-testing know-how, said Deven Choksey, CEO of Kisan Ratilal Choksey Shares & Securities. He added that while the regulator's handling of the matter has been immature, debacles like the Maggi case will probably decrease over time.

The FSSAI has not yet publicly commented on the court-ordered test results, so it is unclear whether it intends to continue pursuing the case or drop it. This means Nestle India may not be able to resume production and sales as smoothly as it hoped.

Amit Khurana, an expert on food safety issues at India's Centre for Science and Environment, does not think India has seen the end of the Maggi issue, saying lingering problems remain unresolved.

This lack of clarity from the government is a major problem that foreign companies in India have faced time and again. In the case of the sales ban on Maggi noodles, the FSSAI must clearly state its case.

Without such basic action, the dispute will likely tarnish the business-friendly image of Prime Minister Narendra Modi's administration and hurt the government's efforts to boost foreign investment.