Nestlé results hit by Maggi noodles recall

The world's largest packaged food company revealed organic sales growth of 3.7%, significantly below analysts’ expectations. Group sales fell 2.1% to £44bn (64.9bn Swiss francs) for the nine months to the end of September.

Organic growth in developed markets was 2.2%, while in emerging markets growth was 6.8%. Growth in China continued to be lower than the firm expected.

Nestlé ceo Paul Bulcke said: “After a good performance in the first half of the year we were impacted in the third quarter by exceptional events, with Maggi noodles in India and a rebate adjustment in Nestlé Skin Health.”​

‘Significant impact on growth’​

Bulcke added: “In the emerging markets, lost sales of Maggi noodles continued to have a significant impact on growth in the South Asia Region. Nestlé India received a favourable ruling from the Honourable Bombay High Court and is actively engaging with the authorities to get the product back on the shelves.”​

The business reported “broad-based positive momentum”​ ​across its business and many markets with continued “solid performance”​ in Europe, Nestlé Waters and Nestlé Health Science.

In Western Europe Nescafé Dolce Gusto and petcare continued to be key growth drivers, which helped to deliver a solid performance in the Great Britain region and growth in France, said the business. Frozen pizza and soluble coffee both performed well and ice cream was said to deliver good results in mature markets. 

Performance in North America showed significant improvement, especially in frozen food, he said.

Cut its growth forecast​

Nestlé cut its growth forecast for this year to about 4.5%, compared with its long-term forecasts for 5%-6% growth. 

Maggi noodles were recalled in June after the Food Safety and Standards Authority of India ruled that the products were “unsafe and hazardous”. ​The authority made the judgement after discovering “higher­ than­allowed levels of lead” ​in some products manufactured in India.

The Maggi recall would cost the manufacturer at least £127M in direct costs and billions of US dollars​in reputational damage, predicted the consultancy firm Brand Finance. Before India’s food safety ban, the Maggi noodles brand was valued at £1.54bn ($2.4bn) and ranked the noodles as the world's 23rd most valuable food brand.

Maggi noodles were recalled temporarily in the UK but later received the all clear​ from the Food Standards Agency.

Meanwhile, nearly 20% of food and drink businesses risked losing many millions of pounds​ by failing to put in place plans to cope with a product recall, warned new research from law firm Roythornes earlier this week.