Blog: Maggi returns but will growth follow in AOA for Nestle?
Katy Askew | 5 November 2015
Nestle had some reason for cheer this week when it was confirmed that Maggi noodles should be back on Indian shelves this month.
The Maggi recall was a significant contributor to the top line issues that have dogged the Swiss food group. When Nestle revealed its results for the first nine months of the year in October, the Swiss company said the ban has weighed about 30 basis points on group organic growth in the year to date. On Nestle's Asia, Oceania and Africa (AOA) division, the negative impact was about 170 bps.
But does Maggi's comeback herald an up-tick in fortunes for Nestle's AOA performance? Certainly, across social media Indian consumers have largely welcomed the return of the popular snack. But bringing the brand back to its former strength will likely require investment – both in terms of time and cash.
Bringing growth back to AOA is key for Nestle. The zone has typically been a key contributor to group growth and the region's significant slowdown since 2012 has been a cardinal factor in the firm's failure to hit the 'Nestle model' which calls for 5% organic growth.
The boost from the resumption of Maggi sales in India will certainly be welcome. Analysts at Morgan Stanley note: “In India, a noodles rebound creates upside. We estimate every 500bps increase in Zone AOA LFL boosts group LFL by 90bps.”
However, Nestle's problems in the region are about much more than the Maggi recall. China is by far Nestle's largest market in AOA, accounting for around 32% of sales. And while the noodles boost will play out as a positive for the region, to get AOA back on track Nestle really needs to improve its performance in China.
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