India to Protect its Consumers

16.06.2015 Author: Natalia Rogozhina

56456222For nearly two months there has been a simmering scandal in India over the Swiss company Nestle, which produces instant noodles under the brand name Maggi Noodles. Six types of this product are sold in the country accounting for 70% market share. According to a report of the World Instant Noodles Association, India ranks fourth in terms of their consumption (5.5 mln. packages per year). In comparison: in China, which ranks first, this value amounts to 44.4 million.

Easy-to-prepare food, no cooking skills required, instant Maggi Noodles has become popular among Indians. Nestle India’s strong position, who has been already operating for 32 years in the country, did not seem to be threatened.

However, the situation has been dramatically changed when in Uttar Pradesh the quality of instant noodles on sale was checked to see if the product meets the consumer health safety standards. Tested product samples showed an excess of MSG (Monosodium Glutamate – MSG), and the presence of lead. Then the  Food Safety and Drug Administration launched a complaint against Nestle India for the violation of regulations and demanded it to withdraw the product from the local market that was produced in February 2014 yet.

Having not evaluated the gravity of the situation properly, Nestle India showed no flexibility in settling the conflict of interests. It made a statement affirming that its products are safe for health and furthermore that 200 thousand packages of noodles that they had to withdraw had already either been sold or passed the use-by date.

However, the behaviour of the company only “added fuel to the fire”, drawing it upon itself. The response of the central government was immediate. The national government, considering the “gravity” of the claims made against Maggi, gave the order at the end of May to the Food Safety and Standards Authority of India to deal with the problem encountered.

Regular consumption of instant noodles of Nestle India is harmful to human health. The presence of high concentrations of lead is especially dangerous for children and adolescents causing destruction of liver, kidneys, bones, nervous system and hormonal disorders. But due to the fact that the symptoms of the disease are difficult to be recognized immediately, doctors can’t often diagnose the illness.

As for monosodium glutamate, the seemingly harmless substance that is found naturally in tomatoes, cheese, soy beans, seaweed and dried mushrooms, its artificial substitute also poses a risk for human health, particularly for children and pregnant women. An excess ofMSG content in food can cause headaches, sweating, fever in the body, nausea and general weakness, disrupt the nervous system and increase the blood pressure.

Despite the evidence available, Nestle continues to refute these claims, insisting that their products are safe for human health, which allegedly contains no artificial MSG and its concentration (in natural form) does not exceed the established standards. And as for lead, according to the statement made by Nestle, the company regularly controls its presence in its products.

But these assurances of Nestle India weren’t enough to overcome the negative attitude that regulators responsible for national food safety had developed towards them. Six Indian states have banned the production of Maggi Noodles. This greatly undermined the image of the company in the Indian market and reduced its share value. But, as the CEO of the company Paul Bulcke who specifically arrived in India to find a way out of the current situation noted: “…I am not worried about the share price falling since it will correct over time. Consumers’ trust is more important.”

Taking consumers’ trust into consideration, on which the demand for products and consequently its market price ultimately depends, Nestle India after nearly two months of active resistance on June 5 decided to withdraw its products, which it still considers to be safe according to its statement. With this action the company decided to prevent the possibility of having their license revoked and an introduction of a universal ban on its production.

According to experts, it is unlikely that someone from other noodles manufacturers can oust Nestle India from the market. But the fact is that regulations have changed in comparison with the regulations existed 30 years ago when Nestle came to the country, where the utmost task was to feed the population, forcing international companies to adapt to the new rules of the game, the tone of which is not already set by them.

Currently three bills are being prepared in India providing for a tougher regime on the recall of food products from the market that are dangerous to public health and even payment of compensation for damages caused. The conflict with Nestle has urged the authorities to take more decisive actions to protect consumer rights.

Natalia Rogozhina, Ph.D. in political sciences, a leading research partner at the Institute of World Economy and International Relations at the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”.