10,000 trucks, 6 cement plants to destroy 27,000 tonnes of Maggi noodles5 min read . Updated: 16 Jun 2015, 09:58 AM IST
It will take at least 40 days to destroy Nestle's available stock of the 'two-minute noodles'
Sampla (Haryana): More than 27,000 tonnes of noodles, recalled from 3.5 million retail outlets, with 10,000 trucks transporting them for incineration. Those are the kinds of mind-boggling figures Nestle India is looking at, 10 days from the launch of its drive to recall and destroy Maggi noodles—a task that will need the help of an army of workers.
It will take at least 40 days to destroy Nestle’s available stock of the ‘two-minute noodles’.
The mandate for about 1,600 people directly engaged with Nestle India’s sales has changed in the aftermath of the controversy over Maggi instant noodles—ordered withdrawn over the alleged presence of monosodium glutamate and high levels of lead.
Starting 5 June, these people no longer drive sales. Rather, they have been working to ensure that the Swiss food company completes the process of recalling Maggi noodles from all its distributors and retailers—if not all packets of the popular snack, as much as is possible.
Apart from its own sales force, there are about 12,000 people associated with Nestle’s distributor network engaged in the ongoing recall of Maggi noodles.
In one of the largest recalls in Nestle’s history, the Swiss multinational’s Indian entity, which has been in business for more than 100 years, is in the process of recalling 27,420 tonnes of Maggi noodles, according to the company’s latest estimates.
Nestle India estimates that it would be destroying Maggi noodles worth ₹ 320 crore, after the food safety regulator’s 5 June order to recall the product from the market.
Of the 27,420 tonnes, about 1,422 tonnes were at Nestle India’s five factories, which have now stopped producing Maggi noodles; about 8,975 tonnes were in its 38 distribution centres; about 7,000 tonnes were with distributors; and about 10,020 tonnes with retailers that Nestle could track.
That makes for about four million cartons, consisting of 96 units of 70g packs, that need to be recalled from 1,400 distributors that connect over 3.5 million retails outlets across the country. Of these, just about 1.5 million retail outlets are under the direct control of Nestle India.
“The entire recall process is huge and complex," Luca Fichera, executive vice-president (supply chain), Nestle India, said in Sampla, a major distribution hub for the company.
And to recall these Maggi noodles off the shelves of outlets, Nestle will need around 10,000 trucks, according to the company’s estimates.
As part of the exercise, Nestle India is using more than 50% of the space across all its 38 distribution centres in India just to stock the recalled Maggi noodles before they are re-packed and sent for incineration at select cement plants.
“We don’t have enough space available to keep all. We have already taken 12 storage spaces additionally to keep the recalled noodles," said Ashish Pande, head of supply chain operations (India), Nestle India.
The task is complex and enormous. Between 9 and 13 June, Nestle India had managed to destroy just 169 tonnes of Maggi noodles—at three cement plants, where the noodles are crushed and then mixed with fuel and burnt in incinerators. The process, said Fichera, is approved by the Indian government and has minimum possible impact on the environment. Nestle will engage five to six such cement plants to destroy the recalled noodles.
“Once in full swing, all five or six cement plans together will be able to destroy about 700 tonnes of noodles every day," added Fichera.
“It will take minimum 40 days just to destroy these noodles. However, 27,420 tonnes is our estimate. There may be more that could also be recalled which will take much more time. Our estimate is till the distributors’ and retailers’ level, not till the consumers’ level," he adds.
Nestle India had, till 13 June, recalled 5,635 tonnes of Maggi noodles which now are either stocked at its distribution centres or in transit to the cement plans for incineration. Additionally, about 5,848 tonnes of Maggi noodles have been recalled from the market and are stuck with the distributors.
“The estimated sales value of the stock in the market, including that with its trade partners, is around ₹ 210 crore," Nestle India said in a statement to the BSE on Monday. In addition, Maggi noodles and related material at Nestle India’s factories and distribution centres are estimated to be worth ₹ 110 crore. The company said these are broad estimates as it is impossible to calculate the final figure while the withdrawal is taking place.
About 40% of the Maggi noodles currently in the market is not under the control of Nestle India. “We don’t know when they would come back to us," says Pande.
To manage the recall process efficiently, Nestle India has been hiring about 30-40% additional daily workers at each of its 38 distribution centres, and work is going on in two 8-hour shifts daily. Normally, they work single shifts.
Retailers are being paid in cash or by credit, as per their preferences, said Fichera.
As Nestle India has stopped production in all five Maggi factories, all of the regular workers at these factories have stopped active work. “Some have been engaged in other works, some in the recall process, and some are sitting at home," said Fichera, adding, “It’s a paid holiday for them."
But the contract workers whom Nestle India hires on a daily basis will not be required at its factories for some more days until the ongoing recall of Maggi noodles is over.
According to Fichera, the costs involved would be much higher than the estimated ₹ 320 crore that the company has disclosed. “That’s just the cost of the material. There are costs for logistics, packaging, transport, handling and storage. And, Nestle India is also paying the cement plants for destruction of the noodles. Overall, it’s a huge complex exercise which we have never done before at Nestle India."
Abneesh Roy, associate director (institutional equities research), Edelweiss Securities Ltd, said, “Nestle India will recognize the estimated loss as an exceptional loss in its profit and loss account for calendar year 2015. In relation to the ₹ 210 crore which has been sold, the sales value will be taken as sales return and inventory will need to be destroyed. Overall the total impact will be of ₹ 320 crore on profit before tax. This is 18% of the profit before tax of CY14 (calendar year). The likely impact is expected to come in Q2CY15/Q3CY15. Additional to this, there will be additional expenses relating to transportation, destruction etc which will further impact profitability."
Meanwhile, the Australian government’s department of agriculture has issued a “holding order" against Maggi, news agency PTI said. This would apply to all Maggi noodles imported to Australia from India, the department said on 11 June.
“Under the holding order, each consignment will be held in a place to be approved by an authorized officer until it has been inspected, or inspected and analysed, in accordance with the applicable requirements of the Imported Food Inspection Scheme," it said.
Maggi has also come on the radar of the US Food and Drug Administration, which has taken samples of the instant noodles brand for testing.