If you noticed that flour prices in your local grocery shop are down, chances are you are living near a flour mill that was a supplier to Nestle for its Maggi noodles.
After the FSSAI ban, Nestle has ordered a massive recall of all packs of Maggi, and has suspended production. Maggi accounted for Rs 2,000 crore worth of sales, and the ban has hit flour mill owners who used to supply to Nestle.
They are now scouting for other buyers or just dumping their 'maida' stock in local markets. Flour needs to be consumed before it absorbs moisture, which is likely to happen faster during the monsoon season. Millers are desperate to get rid of the stock before it it gets spoilt, and are selling at a loss of upto Rs 2 per kilogram to wholesale shops.
"The quality of maida for Maggi was different than what you see in the market. And now flour mill owners need to sell it off because otherwise they will get spoilt because of the rainy season. They won't be able to make profits, and a few of them might just manage to sell at breakeven prices," said Veena Sharma, Secretary, Roller Flour Millers Federation of India, in a phone interview with HuffPost. "This might bring down prices of maida in the local markets they supply to."
Nestle had its own manufacturing units for Maggi in several states in India and also worked with contract manufacturers. For some of them, Nestle sales represented half of their production and business was good because of Maggi's popularity.
But now, things have taken a turn for the worse with the ban and Nestle's recall order to comply with it. And the prices of maida in the markets close to such mills will remain down until they dispose of the entire stock that was meant for Maggi.
"We have supplied a large quantity in the open market and have started selling to biscuit manufacturers at a loss of Rs 1.5 a kg," said D Manikchand, managing director, Panchaganga Roller Flour Mills, in Kolhapur, Maharashtra. Manikchand's mills have supplied Nestle for over 18 years, and half of their daily production of 50 tonnes was for the production of Maggi.
"They have to sell at any price they get. Those who manage to sell soon might avoid significant losses," said Sharma.
Nestle has challenged the ban in the Mumbai High Court, which declined any interim relief to the company. The next hearing is on June 30.
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