Nestle SA Reg Shs. Ser. B Spons (ADR)(OTCMKTS:NSRGY) expects to launch its Maggi noodles back in Indian soon, after court-mandated testing report stated them to be safe, with lead levels coming below permissible limits. The new results are set to strengthen the company’s prospects in India, a rapidly-growing consumer products market where it has been dealing with its worst public relations problem following a countrywide ban on its Maggi noodles.
The problem
The ban was forced after local regulators stated in May 2015 that some packets of the Maggi noodles contained more lead over permitted limit. The firm was forced to recall Maggi noodles a month later, which cost Nestle nearly $67 million. In August 2015, an Indian court gave verdict in favour of company in its fight to overturn the ban. However, the court stated that Maggi Noodles be tested again before it can be launched again.
Nestle’s India unit reported that it had obtained test results from three labs, ordered by the Bombay High Court, and all ninety samples, covering six different varieties, were found to be safe. The company will start manufacturing and selling Maggi noodles after the newly products are approved by these mandated labs.
The expert view
Nestle SA’s CFO Francois-Xavier Roger said that the company was taking all necessary measures to put the Maggi noodles back on shelves in India. The management reported that they were hopeful to re-launch Maggi noodles in India soon. Nestle citied the noodle recall as one of the major factor that adversely affected its outlook for the year.
Its India unit said in July that it recorded a second-quarter loss as sales declined after the noodles were removed from shelves. The major challenge for Nestle will be to reestablish the Maggi brand in India as a ban is not mere financial loss but also a big blow to the brand reputation.
Nestle SA Reg Shs. Ser. B Spons (ADR)(OTCMKTS:NSRGY) has been unable to sustain above the breakout level of $77.5 and has swiftly slid below the breakout level which is a cause for concern for traders and investors on the street. The stock currently trades an above all important daily moving average which is seen as a huge positive. The relative strength index for the stock has given a sell signal which is indicative of the shift of momentum towards the sell side. Traders on the street believe that the stock could head to levels of $75 in the coming trading sessions.
