India is the second largest single market for Nestle’s Maggi brand, with retail sales worth $623 million in 2014 across noodles, table sauces and other products, according to Euromonitor International. And the prepared dishes and cooking aids category, which includes Maggi, contributes nearly 30% of Nestle India’s revenue, according to a January 2015 research report by French banking and financial services firm, Societe Generale.
“In India, Maggi is synonymous with noodles and completely dominates the market with 63% share in 2014. This means that the brand has a lot to lose,” Lianne van den Bos, a food analyst at Euromonitor, said in a note.
This chart shows how Maggi rules India’s noodles segment:
Nonetheless, Nestle needs to sort the mess soon, because India’s noodles market doesn’t look like it’ll slow down, with or without its favourite brand.
After displaying some initial resilience, investors, too, have begun losing their faith in Nestle India: Between May 28 and June 4, Nestle India’s share have dropped 15% on the Bombay Stock Exchange. In the same period, the Sensex fell 2.52%.
This has caused significant damage to the company’s market capitalisation, or the valuation of a firm based on the market price of its stock and the total number of shares. In the seven days between May 27, 2015 to June 4, 2015 the market cap erased Rs10,162.7 crore.
On May 27, the market cap was at Rs68,116.26 crore, which dropped to Rs57,953.56 crore on June 04.