Nestlé SA recalled 12 types of products in the US because they may contain small pieces of glass, while Indian media reports said its Maggi noodles may face new regulatory issues, setbacks for the Swiss food company as it seeks to revitalize some of its best known brands.
No injuries have been reported as a result of the US flaw, according to the Vevey, Switzerland-based company, which announced the recall of a "limited" number of DiGiorno, Lean Cuisine and Stouffer’s products Thursday. Nestlé also recalled two types of Delissio pizzas in Canada.
"If I were a Mom, I wouldn’t be buying DiGiorno pizza right now for my kids," said Robert Waldschmidt, an analyst at Liberum Capital in London. "There’s going to be some lackluster sales just as Nestle was hoping to reap the rewards of that repositioning."
Lean Cuisine underwent the biggest overhaul in its 35-year history last year as Nestlé invested millions in turning around the ailing convenience-meal brand. The company introduced healthier options, such as organic and high-protein meals, as prepared-meals were increasingly perceived as unhealthy. Nestlé, which has also revamped DiGiorno and Stouffer’s, said last month that second-half volume of US frozen foods rose by a "mid-single-digit" percentage and the turnaround of frozen foods helped add 1.2 percentage points to North American sales growth for the whole year.
Maggi Again?
Separately, Nestlé’s Maggi noodles may be facing new issues in India. The Press Trust of India said district authorities of Barabanki in the state of Uttar Pradesh are giving the company one month to appeal a claim that Maggi noodles are substandard because of ash content. The noodles are safe and the regulator is incorrectly applying standards for macaroni on the product, Nestlé India said in a statement, adding it hasn’t received any information from the authorities.
The food company has been reintroducing Maggi in that market recently after regulators said last year they found samples that contained too much lead. Nestlé, which has maintained its noodles were safe, filed a case in June, challenging the recall over allegations of unsafe lead levels. The Bombay High Court later overturned the ban on Maggi noodles, and ordered tests that showed the noodles were safe.
Shares of Nestlé traded 0.7 per cent higher at 71.50 francs as of 10:33 am in Zurich, while the Stoxx 50 Index rallied 2.2 per cent. Nestlé India dropped 0.6 per cent.
The US recall may cut about 40 million francs ($44 million) of sales over the coming weeks, estimates Jon Cox, an analyst at Kepler Cheuvreux. He said the US recall won’t be as big an issue as last year’s Maggi issues in India. "However, it is going to have an impact because the company has been rebooting its frozen business in the US."
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