The Food Safety and Standards Authority of India has taken a hard line on Nestle's Maggi brand. But – with Nestle's strong international food safety and compliance record – has the regulator picked the right battle? Katy Askew suggests the FSSAI's increasingly belligerent tone and single-mindedness in its pursuit of Nestle will do little to improve food safety in the country. It could, however, make multinationals think twice about investing in India.
Nestle's Maggi noodle brand has become a regular feature of headlines coming out of India in recent months, as the company and the country's food safety regulator squabble over whether Maggi products can return to shelves.
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A nationwide recall of Maggi branded noodles was launched a little over two months ago after tests from the food safety regulator in the state of Uttar Pradesh found elevated lead levels in a sample pack of the product. The tests also flagged the presence of the ingredient MSG, contrary to the claim on the packaging of "no added MSG", regulators suggest.
The baton was swiftly taken up by the FSSAI – the federal food safety regulator – who ordered the food safety departments of India's other states to test Maggi products. Some returned positive in tests for lead, some did not. The FSSAI issued a national ban on Maggi noodles, which were pulled of the shelves and destroyed.
Nestle estimated that it expects stock and related materials worth around INR3.2bn (US$49.9m) to be destroyed. But, with Maggi noodles still not back on the shelves, the cost of the recall is likely to be far higher. The company swung to a loss in the second-quarter in India. For the three months to the end of June Nestle's Indian unit made a net loss of INR644m, compared with a INR2.88bn profit a year earlier. Sales fell 20% to INR19.34bn in the wake of the Maggi scare.
According to MainFirst analyst Alain Oberhuber, Maggi sales comprise around 29% of Nestle sales in India. The loss of this revenue stream would represent a "significant hit" to Nestle in the country.
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By GlobalDataThe issue could also prove detrimental to Nestle's broader strategy in the Indian market. According to Euromonitor International analyst Lianne van den Bos, India is an important country for Nestle's Maggi brand, representing its second-largest market with retail revenue of US$623m.
"Nestle’s strategy in India has been to provide affordable products that cater to a wide consumer base (including tier three and four cities). By building a strong image in an affordable product such as noodles, Nestle has been able to broaden the Maggi brand’s remit, and extend into products with higher margins such as cooking sauces and meal solutions for the more affluent consumers. This strategy has, however, been dependent on the trust that consumers have in Maggi and this is what is at risk," van den Bos noted when the scandal first broke.
For its part, Nestle has persistently maintained that its noodles are both "safe" to eat and free from added MSG. The company said that in tests of 125m packets carried out by an independent laboratory as well as its own accredited lab found allowable levels of lead.
Nestle is currently in the process of challenging the ban on its Maggi noodles in the Bombay High Court. Both sides have set their arguments out before the Court, which has reserved judgement pending further testing.
According to local reports, Nestle has questioned the validity of the FSSAI's testing procedures. A spokesperson for the company told just-food that it is unable to comment further on the legal proceedings as the matter is "sub-judice".
While Nestle continues to await the fate of the Maggi brand in India, it is worth noting that evidence is mounting to support the safety of the product. Immediately following the recall announcement, various international food safety bodies – including the UK, Singapore and Canada – all tested Maggi noodles. All results returned negative for MSG and found levels of lead acceptable.
Yesterday (5 August), further tests from an FSSAI-accredited laboratory returned negative for excess lead. The Central Food Technological Research Institute (CFTRI) examined samples of Maggi noodles provided by the Goa state Food and Drug Administration. All tests found the product is in compliance with India's regulatory requirements.
The FSSAI immediately moved to undermine the validity of these tests. Firstly, the FSSAI subtlety suggested the research might not be all that reliable by highlighting the fact that this was the second set of tests the CFTRI carried out on behalf of Goa.
The results of these initial tests were received on 1 June. The FSSAI explained: "Observing that the food analyst of the said lab had wrongly taken the permissible limit of lead as 10 PPM for the ‘tastemaker’ as against the actual maximum permissible level of 2.5 parts per million and the results reported by the lab did not contain specific lead content found in the samples, the FSSAI had sought clarifications from the state food authority."
The second set of tests came back negative. But, the FSSAI said, this has "no bearing" on its move to ban Maggi. The regulator insisted: "FSSAI has not given any clean chit regarding the safety of Maggi noodles."
Interestingly, the FSSAI also took the opportunity to address the all-clear Maggi noodles have received from its overseas counterparts. "News reports have also appeared in the media in past stating that Maggi Noodles were found to be safe in UK and Singapore," the FSSAI said. Well, these "reports" are pretty easy to corroborate – all the food safety bodies put statements out.
The regulator continued: "The FSSAI requested Nestle India to share the details of test reports of UK and Singapore. Nestle has not shared the details of the said test reports of UK and Singapore regulators with the FSSAI stating that they do not have this information." Would it be that inconceivable for the FSSAI itself to reach out to its international counterparts?
The FSSAI did put forward a feasible argument for why exported products were found to be safe, while those on sale in India were not. The FSSAI said the noodles for export markets were produced by Nestle at its plant in Bicholim, Goa. It said Maggi noodles destined for the Indian market were produced at five different facilities in India.
Food safety is paramount for the growth of the packaged foods sector. Consumers must be provided with products that are safe. Food safety regulators play a key role in achieving this. But a collaborative approach is most affective in this regard.
The confrontational stance and decision to single out Nestle does not suggest the FSSAI is prepared to take a co-operative approach on this issue. Rather, it is prioritising taking a "tough stance" against an international food maker.
But is Nestle the right target? In markets like China, the company has worked with the authorities to help raise the quality bar for the supply of raw materials like liquid milk. Multinationals like Nestle have a deep understanding of food safety and this can be invaluable for improving standards in emerging markets where safety scares are frequent.
By going after Nestle, the FSSAI is at risk of making multinational food companies think twice about investing in the market – where a significant risk now appears to be an unstable regulatory environment. India's food sector was, after all, already well known to be burdened by red tape and a cumbersome regulatory process.
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