Nestle Shares Tumble After A Swiss Investigator Claims Excess Sugar In Baby Food
In India, Nestle is said to have been adding an average of nearly 3 grammes of added sugar per serving in its well-known product Cerelac.
Shares of Nestle India Ltd. tumbled to over two-month low on Thursday after a Swiss investigative organisation said the company has been adding excess sugar in baby foods for developing countries, unlike in the U.S. and Europe.
Public Eye and International Baby Food Action Network found out two of Nestle's best-selling baby food brands in mid-to-low income countries, including India, contain higher level of added sugar than products sold in developed markets.
In India, Nestle is said to have been adding an average of nearly 3 grammes of added sugar per serving in its well-known product Cerelac, according to the report.
The FMCG-giant has also allegedly violated the World Health Organisation's guideline to ban added sugar in foods made for infants.
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"I've been a power-bull on this name. Any remedial actions are to be taken, Nestle is more than capable of taking it. It's a household name. Any dips into this should be bought into. I mean, it's 100% plus return on equity capital employed business, its earnings are growing 15%," said Rahul Arora, chief executive officer at Nirmal Bang Institutional Equities.
Even though unfortunate, such opportunities should be used to buy the stock. There's hardly any reason Nestle India cannot cross correct from the lows, said Arora. Back when the Maggi controversy happened, Nestle India was able to make a stronger come back with great market share, he said.
Shares of Nestle India declined as much as 5.32%, the lowest level since Feb. 8, before paring loss to trade 3.70% lower at 11:33 a.m. That compares to a 0.60% advance in the NSE Nifty 50.
The stock has risen 18.82% in the last 12 months, and fallen 7.41% so far this year. Total traded volume so far in the day stood at 2.7 times its 30-day average. The relative strength index was at 38.19.
Of the 38 analysts tracking the company, 16 maintain a 'buy' rating, 14 recommend a 'hold,' and eight suggest 'sell', according to Bloomberg data. The average 12-month analysts' price target implies an upside of 6.6%.
