Maggi row: Nestle India spent Rs 445 cr for ads, but just Rs 19-cr for quality testing

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.

By: Press Trust of India | New Delhi | Updated: June 7, 2015 6:26 pm
maggi ban, maggi row, maggi controversy, maggi, maggi india, maggi news, Nestle maggi, nestle India, Maggi quality testing, maggi testing, maggi food quality, maggi MSG, maggi lead, india news, indian express news 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.

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.

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  1. A
    Aurovrata
    Jun 7, 2015 at 5:22 pm
    It's not about quality testing expenditure versus marketing but rather endemic corporate atude of profit before social responsibility.
    Reply
  2. C
    Chavali
    Jun 7, 2015 at 9:43 pm
    It is purposeless article. The Ad is inevitable to push a product. At least one is spending money for quality control. How many Indian companies does? Do you know the package and selling of water in India as per BIS. How many companies follow it? How adulterated product sweeps the market. It has become fashion to comment on MNCs. No doubt MNCs have muscle but sometimes unethical like other businessman. Why single out some? It appears those who are opposing FDI in India orchestrating a campaign through willy nilly means for ages.
    Reply
  3. D
    Dashrath Babu
    Jun 7, 2015 at 7:12 pm
    NESTLE are aware that there is tough compeion from TOP RAMEN & Other Indian Companies in Instant NOODLE business, only way to CAPTURE INDIAN Market is to MAKE MORE Y , bcoz Indians like Y FOOD , hence NESTLE added more MSG etc Naagu
    Reply
  4. D
    Damaru Prasad
    Jun 7, 2015 at 4:48 pm
    OMG! poor folks paying to Amitabh Bachchan. Madhuri Dixit, etc etc to announce this poor man's meal!!
    Reply
  5. N
    Narendra M
    Jun 7, 2015 at 7:55 pm
    It is a common experience that multinational companies, particularly big ones with huge operations in India, and of course powerful Indian companies, get away with almost anything. They claim to follow high safety standards but such claims are never put to test. Once in a while, like in this case of Maggi noodles, they get into trouble. Here safely level of ingredients used by Indian companies is also important. Question is whether the Food & Drug Administration is competent, well-equipped and impartial to deal with those who violate safety norms. Answer is it is not.
    Reply
  6. M
    MK
    Jun 7, 2015 at 11:15 pm
    This article headline does not make sense. CPG have large marketing expenditure. Stop making noise.
    Reply
  7. T
    Thennarasu Ind
    Jun 7, 2015 at 6:52 pm
    nice article.. it sounds like another union carbide around the corner..
    Reply
  8. T
    Thrinethran T
    Jun 7, 2015 at 5:18 pm
    Gives an excellent measure of the concern for market-share relative to concern for consumer health.
    Reply
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