Nestle faces 'moment of truth' over reports of lead in noodles

If there is one product that can stake claim to being India’s most popular comfort food cherished by everyone from toddlers to grandparents, it has to be Nestle SA’s Maggi instant noodles. Now, they are not so sure.

A routine test on a pack from a small town supermarket produced a result that has unnerved many -- the noodles’ seasoning had too much lead. The notion that a snack that mothers have been routinely feeding their kids for the last three decades could be tainted with a metal linked to learning difficulties and even death, has jolted the nation, with the story getting front page coverage in all major newspapers.

Nestle faces its biggest crisis in India to date and shares of its Indian unit have tumbled as officials in at least six states ordered independent testing of the products, criminal complaints were filed against the company and its Bollywood star ambassadors, and India’s food minister said he would consider class action suits.

“This is Nestle’s moment of truth; events like this can be a make or break for a brand,” said Piyush Sinha, a marketing professor at the Indian Institute of Management in Ahmedabad, the nation’s top-ranked business school. “Not just the brand, but the company and its culture and ethos will be tested.”

Future Group, one of India’s biggest supermarket chains, has stopped sales of the products in its almost 500 stores. The controversy led Nestle India’s stock to plunge 9.1 percent in Mumbai Wednesday, its steepest fall in nine years.

Products suspended

Nestle India has tested 1,000 samples at an accredited laboratory and “all the results show that the lead levels are well within the limits specified by food regulations,” spokesman Himanshu Manglik said Wednesday in an e-mail in response to questions.

Maggi noodles comprise between 20 percent to 25 percent of Nestle’s India sales, and the “current negative newsflow and accompanying bans by state governments” will lead to a drop in sales this quarter, Morgan Stanley said in a June 2 report.

India’s top food regulator is now checking samples from all of India’s 28 states, and its results will guide the federal government’s next steps, Food and Consumer Affairs Minister Ram Vilas Paswan said.

States are not waiting though. Kerala in the south became the first to stop Maggi noodle sales from 1,700 stores, until tests done at its own laboratories come out in a week, said M. Muraleedharan, an official in the state’s food ministry. Delhi went a step further -- banning sales across the nation’s capital for 15 days effective Wednesday, state health minister Satyendar Jain said.