BackNestlé India’s March quarter profit falls 19.13% to Rs259 crore
The packaged foods maker's sales in the domestic market fell 8.7% from a year ago; exports dropped 4.8%
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Maggi noodles has been back on the shop shelves for six months now, but Nestlé India Ltd hasn’t quite recouped the market share it lost because of the recall last year of its most popular product.
The Indian unit of Swiss packaged foods maker Nestlé SA posted on Thursday March quarter results bearing this out.
Quarterly net profit fell 19.13% to ₹ 259 crore from ₹ 320 crore a year ago. Net sales declined 8.4% to ₹ 2,295.57 crore from ₹ 2,506.79 crore.
Nestlé India’s sales in the domestic market fell 8.7% from a year ago while exports dipped 4.8%.
“Results for the quarter have been impacted by the Maggi Noodles issue in 2015," Nestle India said in a statement.
Maggi has clawed back to market leadership in the instant noodles category with a share of over 50%, according to Nestlé India. That’s still far below the 80.2% market share it commanded in the quarter to March 2015, according to a May 2015 report published by Nomura Financial Advisory and Securities (India) Pvt. Ltd.
In June, the food safety regulator banned Maggi noodles, which made up 30% of Nestle India’s sales in 2014, after some samples were found to contain monosodium glutamate and excess lead.
The product returned to the market in November after the ban was overturned by the Bombay high court and laboratories tested samples and found them to be safe for consumption.
Nestle India chairman and managing director Suresh Narayanan said the March quarter performance of the company had improved from the preceding quarter, when net profit fell 43.8% on a sales drop of 22.57%.
“This is extremely satisfying as we move ahead and rebuild our business, particularly Maggi Noodles, after a tough year," he said.
To be sure, Nestle India has been trying to reduce its dependence on Maggi noodles.
The company recently launched four variants of Maggi noodles plus Munch nuts, Kitkat duo chocolate, Nestlé a+ Grekyo and Nescafe Sunrise Insta-Filter coffee.
These products are “precursors to products which are in different stages of readiness for launch. We are working on increasing penetration for all our businesses including milk and nutrition, chocolate and confectionary, and coffee and beverages," Narayanan said.
Still, Nestlé will feel the impact of the Maggi ban for at least one more quarter, said an analyst.
“We expect this to regularize post June. On a sequential basis, Nestlé India has performed better as volumes increased," said Sachin Bobade, an analyst at HDFC Securities Ltd.
According to Abneesh Roy, an analyst at Edelweiss Securities Ltd, the market share of Maggi noodles increased from about 42% in December to over 48% in March. In April, according to Nestle, it rose to over 50%.
“Online promotions and launches, coupled with special promotions across categories—something that the company has never done in last 2 years— worked in favour of Nestle India in increasing volume," added Roy.
During the period that Nestle India took Maggi off the shop shelves, ITC Ltd’s Yippee noodles and Wai Wai noodles from Nepal’s CG Foods gained market share, filling the void. Yoga guru Baba Ramdev’s Patanjali Ayurveda also joined the race for a share of the market by launching atta (wheat) noodles.
“It’s too early for Patanjali noodles to have any visible impact on Maggi. People consume noodles as a snack so taste is a priority. It’s not about the health aspects. And, atta noodles, a segment where Patanjali is trying to play, is still a very small category. In contrary, ITC’s Yippee has gained market share substantially," Roy said.
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