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Maggi takes $200m hit to brand value

News, 26 June 2015

NEW DELHI: As Nestlé India battles to contain the fallout of a major food scare, a consultancy firm has estimated that Maggi, the brand at the centre of it, will lose some $200m in brand value.

Following the government's decision to ban Maggi noodles after it found high lead levels in samples, Brand Finance, which specialises in valuing brands and intangible assets, knocked that figure off its previous valuation of £2.4bn, the Financial Express reported.

That sum ranked Maggi as the 23rd most valuable food brand in the world. Last year, Maggi was also ranked the second most-trusted food brand in India, behind Coca-Cola's Maaza fruit drink, by market researcher Nielsen.

Nestlé chief executive Paul Bulcke said the company's reputation had taken a bashing "because it's a big brand and that (ban) made a lot of waves" as he continued to insist the brand is safe.

Nestlé India is contesting the ban even as it is in the process of destroying 27,000 tonnes of the product. "One can have facts on one's side but it's the perception that counts," said Bulcke. "We have to work on that. We have to reconnect with consumers."

Nestlé's troubles have not been restricted to Maggi noodles, as earlier this month there were also reports that live larvae had been found in infant milk powder.

Live Mint highlighted the difficulties international brands face in India, with fragmented supply and retail chains where one slip-up can adversely affect global reputation.

McDonald's, for example, applies elaborate hygiene standards to workers at its plants and carries out more than 100 checks on its products but can still be put at risk from the practices of the many small, often illiterate, farmers it uses as suppliers.

"There are thousands of farmers you need to reach out to, each with maybe an acre, two acres of land," according to Vikram Ogale, in charge of supply chain and quality assurance for McDonald's India.

"Think of a situation where you have 1,000 farmers and...you have to educate them, convince them," he said.

McDonald's says it can trace all its ingredients, not a claim that many can make as suppliers frequently sub-contract orders.

Live Mint also reported that one in five food samples tested by the government is found to be contaminated, adulterated or mislabelled.

Data sourced from Financial Express, Live Mint; additional content by Warc staff