Nestle India spent Rs 19 crore for quality testing and Rs 445 crore on ads but Govt seeks damages

New Delhi(PTI/Reuters): In the dock over alleged lapses of food safety standards in its famous Maggi noodles, Nestle India has disclosed having spent Rs 445 core on ‘advertising and sales promotion’ last year, while the expenses towards ‘quality testing’ was less than 5% of such amounts.

Similar has been the trend over the last five years, when the ‘advertising and sales promotion’ expenses ranged between Rs 300-450 crore annually, while expenditure on ‘laboratory or quality testing’ moved between Rs 12-20 crore.

An analysis of the annual financial accounts of the Indian arm of the Swiss multinational giant Nestle shows that the expenses towards employees have risen the most in the last five years — up by about 75% from Rs 433 crore in the year 2010 to Rs 755 crore in 2014.

The company follows a financial year ending December 31.

In comparison, the advertising and sales promotion expenses has risen by 47% from Rs 302 crore in 2010 to Rs 445 crore in 2014. In the same period, the ‘laboratory or quality testing’ expenses rose by 45% from Rs 13 crore to Rs 19 crore.

Experts, however, say that similar trend could be seen at other such companies as all of them spend huge sums on brand promotions.

The financial accounts of Nestle India further shows that the expenditure towards heads like ‘travelling’ and ‘training’ was higher than the same towards quality testing.

While travelling expenses has risen by 27% from Rs 54 crore in 2010 to Rs 68 crore in 2014, the training expenditure rose by 51% from Rs 25 crore to Rs 38 crore in the same period.

The expenditure towards ‘market research’ was however lower at about Rs 16 crore in 2014, up by about 69 per cent from Rs 9.7 crore five years ago in 2010.

While it insists that Maggi noodles are safe, Nestle India had to withdraw the product from the markets after many states banned the famous ‘2-minute’ instant food after tests showed them containing taste enhancer MSG (Mono Sodium Glutamate) and lead in excess of permissible limits.

The central food safety regulator FSSAI has also ordered recall of all variants of Maggi noodles, terming them as “unsafe and hazardous” for human consumption. Besides, FSSAI has also ordered recall of one variant ‘Maggi

Oats Noodles’, which it said was being sold without a product approval and without undertaking the risk and safety assessment.

Incidentally, Nestle India Chairman A Helio Waszyk and Managing Director Etienne Benet wrote in their letter to shareholders, published in the latest annual report of the company, that ‘Good Food, Good Life’ is their mission.

Stating that India was “severely impacted by malnutrition,” they wrote that Nestle India was “constantly researching and observing the role that food plays in the lives of consumers across the income pyramid.” “Our vision and ambition is to be the recognised leader of Nutrition, Health and Wellness in India,” the letter said, while adding that Nestle India was “focused on understanding the changing lifestyles, evolving needs, and dietary preferences of consumers”.

The Indian unit, they further said, relies on Nestle’s extensive global R&D network and expertise “to develop products that enable consumers to lead better lives and help them to improve nutrition in their daily diets”.

The company has also been criticised for lacking on the communication front, with experts saying that Nestle could have contained the damage if it had reacted swiftly when the first reports started coming in about the safety standards from Uttar Pradesh early last month.

India’s government has filed for damages from food group Nestle after a food scare involving reports of excess lead in Maggi noodles forced a nationwide recall, government officials said on Sunday.

“It’s a serious matter concerning public health and the law allows us to take suo moto legal steps, or legal actions, against erring entities,” said one official in the consumer affairs department of the food ministry.

The claim, made on behalf of Indian consumers, was not filed through the courts but with the National Consumer Disputes Redressal Commission (NCDRC), which has semi-judicial powers and will decide on the merits of the case and the size of any damages.

The officials said Nestle was being accused of unfair trade practices, adding this is the first case in which the Indian government has sought damages from a multinational.

A Nestle spokesman in India said the company had not received any official notification as of Sunday, and could not comment. The food ministry sources said NCDRC would notify the company when the case comes up, likely next week.

Also read: Nestle India spent Rs 19 crore for quality testing and Rs 445 crore for ads

Nestle has been under fire in India since one regional regulator said in May that it had found evidence of excess lead and monosodium glutamate (MSG) in some packets of Maggi instant noodles, a cheap and hugely popular snack.

Since then, several state regulators have followed, and Nestle said early on Friday that it would temporarily withdraw all Maggi noodles from the country’s shelves, though it reiterated the products were safe.

Total Maggi sales in India, including sauces and condiments, account for less than 1% of Nestle’s group annual sales, but brand damage could be significant in a country where the noodles are ubiquitous, in homes and roadside eateries.

Nestle fielded its global chief executive on Friday to help quell one India’s most high profile food scares in a decade.

Indian newspapers reported separately on Sunday that the national food safety agency planned to inspect all Nestle’s manufacturing facilities across India as a result of the scare. Nestle has eight factories in India, though not all produce Maggi.

Calls to the agency’s office went unanswered on Sunday.