Last week Nestlé SA of Switzerland took Indian food regulators to court to challenge a ban on the company’s instant noodles, which authorities claim contain hazardous levels of lead. Meanwhile in China, Western consumer product groups such as Unilever are feeling the heat as large numbers of Chinese are turning from shopping malls to e-commerce retailing.
Nestlé, the Swiss food giant, which is the world's biggest food and beverage group, has been struggling to respond to claims by state regulators that they found illegally high amounts of lead in samples of Maggi 2-Minute Noodles — one of Nestlé’s best-selling products in India.
“In India Maggi is synonymous with noodles and completely dominates the market with 63% share in 2014,” said food analyst Lianne van den Bos of Euromonitor International according to swissinfo.ch. “This means that the brand has a lot to lose.”
According to Euromonitor, India is the second largest single market for Nestlé’s Maggi brand with retail sales worth $623m (CHF579m) in 2014 across noodles, table sauces and other products.
The Bombay High Court asked food regulators to submit a written explanation within two weeks. The court is slated to hear the petition again on 30 June.
The Journal says analysts say Nestlé isn’t alone in its uncertainty about product approvals and testing. Earlier this week, the authority listed hundreds of products — many made by international brands — that it said were being sold in India without their approval. And Unilever PLC said Wednesday that it was pulling its own instant noodles from sale in India until further clarity on rules and approvals.
In a related development, The Washington Post reported on Friday that House Democrats dealt President Obama a humiliating defeat on his free-trade initiative Friday, derailing a key priority for the president and rebuffing his rare, personal pleas for their support.
The defeat at the hands of his own party placed Obama’s trade agenda in limbo and exposed deep party divisions on economic policy, leaving the pro-trade Democrats marginalized by the anti-corporate wing of the party, which has been on the rise since the 2008 financial collapse. It also exposed the weakening hand of House Minority Leader Nancy Pelosi, who had worked for days to avoid a Democratic takedown of the president’s agenda, only to throw her support in with the rank-and-file rebellion at the last minute.
The Wall Street Journal reported Sunday that the recent exodus from retail stores has disrupted retailers world-wide, with global e-commerce topping $1.3tn last year. But in China, the move online happened with greater force, partly because of the speed of smartphone penetration.
The Journal says consumer-goods sales from the top 100 retail chains accounted for 8% of total sales in 2014, down from 11.2% in 2009, according to the research arm of DTZ, a commercial real-estate-services firm.
For Unilever, which relies on emerging markets for around 60% of its revenue, the China falloff contributed to a 2.7% drop in global revenue last year.
Sales of nonfood items, which include shampoo and soap, fell 13% to 7.3bn yuan (around $1.18bn) in 2014, according to market-research firm Kantar Worldpanel China.
Many countries use regulations to protect local industry.
Pessimism about growth and profitability has forced European businesses to cut back significantly, particularly through headcount reduction: 39% are planning to cut costs—a large jump from just 24% in 2014—with most of them planning employee lay-offs. China remains a key market and thus European companies want the ‘new normal’, much like China wants to move its economy up the value chain. However, the regulatory framework has yet to come into place. In particular, a better implementation of the rule of law is seen as the top driver for China’s economic development going forward, according to the Business Confidence Survey 2015 released last week by the European Union Chamber of Commerce in China and Roland Berger Strategy Consultants.
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