Maggi to lose $200 mn in brand value

Asset valuation consultancy sees Maggi's brand value slip to $2.2 billion

Maggi is set to lose $200 million in brand value after Food Safety and Standards Authority of India (FSSAI) ordered manufacturer Nestlé recall all its variants, according to Brand Finance, an independent asset valuation consultancy.

Maggi will destroy $50 million worth of noodles labelled “unsafe and hazardous” after FSSAI discovered higher-than-permitted amounts of lead in some packets of the noodles.

A Nestlé spokesperson said, “Maggi is the consumers’ brand and their trust is our foremost priority. We are currently making efforts to resolve the Maggi noodles issue and are also listening to them. We will take appropriate initiatives to reinforce their trust further when we come back on the shelves.”

According to Brand Finance, the Maggi brand was valued at $2.4 billion before the recall. The noodles brand was ranked by Brand Finance as the 23rd most valuable food brand in the world. The consultancy calculated the $50-million loss of goods combined with a damaged brand resulted in a reduced Maggi brand value of $2.2 billion.

“Any health concerns raised by a credible source such as FSSAI will most certainly damage a food brand. Nestlé will have to ensure the Maggi brand can retain its dominance in the Indian market. If not, the Nestlé brand itself could be at risk,” Brand Finance CEO David Haigh said in a statement.

On June 15, Nestlé said it was destroying Maggi noodles worth Rs 320 crore. On June 5, FSSAI directed Nestlé to immediately recall all nine variants of Maggi noodles from the market. (Nestlé said the estimated sales value of the stock in the market, including those with trade partners, was Rs 210 crore. The noodles stock and related materials in its factories and distribution centres when the withdrawal was announced is estimated to be worth Rs 110 crore.)

The company said these were broad estimates and there would be additional costs to take into account, such as bringing stock from the market, transporting that to destruction points and destruction cost. These costs will be dealt with in line with applicable accounting standards, said the company.

Nestlé has challenged the order before the Bombay High Court, which on June 12 declined to provide interim relief. The court has scheduled the next hearing for June 30 and has directed FSSAI and the Maharashtra Food and Drug Administration to file affidavits in two weeks over concerns raised by Nestlé.

In an announcement on June 12, the company said it had reiterated during the hearing it was continuing to remove the noodles from stores and was sending progress reports to FSSAI. The court has also directed FSSAI not to take any action in respect of the notice, which required the company to explain itself in 15 days over the product approval already granted for Maggi noodles, till the next hearing.