Maggi noodles growth rate slows even as Nestle introduces new flavours
Nestle India's Maggi noodles has gained back substantial market share since its relaunch last year. Maggi noodles, once the market leader in its category, was taken off shelves in 2015 after a health hazard clarion call by Food Safety and Standards Authority of India (FSSAI).
Since its comeback in 2016, Maggi noodles has clawed back to its position and now holds 60% of the instant noodles market as against 80% before the ban.
However, Maggi noodles' growth rate is now slowing.
Between January to March of 2017, Nestle India's net profit rose 6.76% to Rs 306.76 crore, while total sales were up nearly 10%, at Rs 2,591.90 crore.
Nestle India said, “The net sale growth was on the back of domestic sales which increased by 9.7% mainly due to rise in volumes, including rebuild of Maggi Noodles, supplemented by marginally better realisation mostly from carrying over pricing.”
Abhijeet Kundu, analyst at Antique Stock Broking Limited said, “Maggi post-relaunch after the ban has been able to grow their market share but at slower pace, which was witnessed in the current quarter's domestic sales growth.”
Since the re-launch, Maggi had a total of 12 variants selling in India which included Hot Heads category, classic masala, tomato chicken, atta noodles and oats noodles.
As recent as in May, to cement its position further, Nestle introduced four new flavours of Maggi noodles -- Amritsari Achari, Mumbaiya Chatak, Super Chennai and Bengali Jhaal.
Maggi's market share growth rate is now falling.
From 55% market share in June 2016, Maggi has manged to grow to 60% by end of calendar year 2016. Antique Broking expects that by end of September 2017, Maggi's market share will reach 64%.
Edelweiss Financial Services said, "For management, the Maggi issue is now a thing of the past and Nestle is focusing on growth in various categories by stepping-up aggression on new launches, promotions and enhancing penetration."
Challenges that await
A Motilal Oswal report said, “While the pace of new launches has markedly improved, there has been no material improvement on price actions to boost growth or advertising to support new products. Double-digit volume-led sales growth seems long time away.
"Nestle is no longer the business it was before CY11 and may never be,” it said.
Kundu said, “Wai Wai noodles have gained share in North India while ITC's Yippee noodles gained significant market share in Southern India. Patanjali's instant noodles however could not make any meaningful impact in the market."
Suresh Narayanan, Chairman and Managing Director of Nestle India said that Nestle's actions over the next four years will set the tone for the following few decades is encouraging."
Narayanan highlighted that many products are at different stages of readiness for launch.