Toxic Lead: Nestle's $100M Pot of Troubles in India

Lead poisoning is a significant problem in India, particularly for small children. In recent years, the government of India has pushed to reduce lead exposure, which is often caused by environmental factors, such as aging infrastructure, unsafe eating utensils that have been made with lead, paint, leaded gasoline and air pollution. Unlike in North America, where many of these factors have been reduced through regulation and public education, a significant number of children still suffer from lead exposure.

A 1999 study throughout India showed that of some 22,000 children aged 12 or younger, more than half had concentrations higher than the World Health Organization's threshold of lead in their bodies. Since then, a great deal has been done to try to reduce the presence of lead in the environment, but this continues to be a challenge in some of the country's industrialized areas. Ten years after that study, research showed that children in at least seven of India's largest cities are still at risk for lead poisoning. In some cities, the level is more than five times WHO's allowable limit for lead exposure.

In June, food manufacturer Nestle India found itself embroiled in this issue, when state governments forced Nestle to yank packages of its Maggi Noodles from grocery shelves. According to the Food and Safety Standards of India, random samplings of the product tested in excess of permissible lead limits. Within days, more than six states had banned the products, which are considered practically a staple in India.

According to Nestle, it routinely tests lead levels in the ingredients it uses and sources "ingredients from regions with the lowest levels of lead." The company insisted in press statements that the levels were within acceptable limits, but it has not published the test results to explain the conflict.

Although the courts in India have since lifted the bans, the government isn't satisfied. It slapped Nestle with a $100 million suit for "unfair trade practices," accusing the company of not adhering to food safety laws. And even though Nestle is free to sell Maggi Noodles in India again, the financial loss has already been felt by Nestle India. By the time the bans lifted, more than 400 million packages of the products had been incinerated.

To put this recall into perspective, it was enough to push the local division into loss in the second quarter -- and cause a 20 percent drop in profits. It also prompted the U.S. Food and Drug Administration to put Maggi products through increased testing. The ripple effects of the ban and drop in consumer confidence was felt across the globe wherever Maggi products are sold.

While India states that the issue relates specifically to the safety of Maggi products, this isn't the first time Nestle has run into controversy concerning the safety of its products. As in this case, the problems largely had to do with "misunderstandings," either about the methods in which products were to be used (such as in the 1970s in Latin America and later in Bangladesh) or the company's water provision and procurement methods.

How much does public opinion and previous controversy play into a government's incentive to protect its people? How much does it affect the confidence of a consumer base? How well Nestle regains its footing in India may soon tell.

Interestingly, not everyone in India is convinced that the government handled the controversy to the benefit of Maggi's considerable consumer base. Most just want to be able to see their favorite product back on the shelves. And that is probably the biggest indicator of whether Nestle and its globally popular noodles will be able to regain their footing in India.

Images: 1) Flickr/Sixth6sense; Flickr/Ravindernav