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Photo: Hemant Mishra/Mint
Photo: Hemant Mishra/Mint

Nestle turns to chocolate and dairy to reduce load on Maggi noodles

Nestle India is planning to launch new dairy products in the next couple of months

New Delhi: Nestle India Ltd, the local arm of Swiss packaged food company, is planning to launch new dairy products in the next couple of months as part of its strategy to cut dependence on Maggi instant noodles that accounted for about 30% of its total sales in 2014. In the quarter ended 31 December, the company launched two new chocolate products.

The plan to diversify and reduce dependence on Maggi sales was spelled out by Suresh Narayanan immediately after he came to India as the chairman and managing director of the company in July last year. At that time, Nestle India was caught in a controversy after India’s food regulator Food Safety and Standards Authority of India (FSSAI) banned the sale of Maggi on 5 June, citing the presence of flavour enhancer monosodium glutamate and excess lead.

Nestle India could not sell the product for six months in 2015.

“We are aiming to expand our product range with this launch," Nikhil Chand, general manager (chocolates and confectionery), Nestlé India, said, commenting on the company’s just-launched chocolate KIT KAT Duo.

Over the next few quarters, Nestle has lined up a few product launches in dairy, chocolate and confectionery categories.

“The focus will be on adding value to existing products and strategic new launches," Narayanan said on 10 March, on the sidelines of a public event organised by an industry lobby group.

Nestle relaunched Maggi noodles in November but is yet to regain its market share.

The company has managed to cover 75-80% of distribution and results would be visible in the coming quarters, Narayanan had said.

In January, Maggi noodles had a 42% market share, as compared with 77% a year ago, according to a report in The Economic Times on 22 February that cited Nielsen data.

For the year to December (Nestlé India follows a January-December accounting year), net profit fell 52% to 563.27 crore.

“The company faced an unusual situation with Maggi Noodles that impacted its operations during the 2nd, 3rd and 4th quarters. The results for the year and for the 4th quarter ended 31 December, 2015 are not fully comparable with the results of the previous corresponding periods," Nestlé India said in its latest annual result statement.

Equity analysts remain positive about Nestle India’s performance. “We remain positive on Nestlé from 2-3 years perspective, being a strong play on urban revival. But over medium term the company’s margins and volumes will remain under pressure," Edelweiss Securities analyst Abneesh Roy said in a note on 15 February.

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