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 per cent 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 per cent from Rs 433 crore in the year 2010 to Rs 755 crore in 2014. The company follows a financial year ending December 31.
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In comparison, the advertising and sales promotion expenses has risen by 47 per cent 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 per cent 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 per cent from Rs 54 crore in 2010 to Rs 68 crore in 2014, the training expenditure rose by 51 per cent 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.