Nestle gets all noodled up

Nestle is in news for all the wrong reasons. The stock which usually remains rock steady with no major upheavals, is today down over 8% at Rs.6257 with an intra day low of Rs.6119. Volumes are up almost 6 times.

The market, like the rest of the country, is perturbed with the ongoing investigations into the quality of Maggi Noodles, the flagship product of the company. Things have become sticky for the company after the Delhi Govt yesterday summoned officials of Nestle, claiming that the samples of Noddles tested were found to be dangerous for consumption with lead exceeding the permissible limits. The Health Ministry stated that, “Out of 13 samples taken last week, 10 have been found to be containing lead more than the permissible limit. Eighty percent of the samples failed.”

The company is sure to face a heavy fine and if it had been an Indian company and the not the MNC that it is, it would have been forced to down the shutters. And surely, if this had happened in USA, Nestle would have been sued to its grave. But here, it will most likely get away with a hefty fine. Yet, the trust factor is permanently gone and this is sure to affect sales in the months to come.