ITC’s Yippee noodles looks to step into fill Maggi void

New Delhi: On one of the world’s highest mountain passes where bikers gasp for breath stands an eatery that serves hot snacks to travellers.

At 17,590 ft, Chang La Cafeteria, named after the intimidating pass in Leh, has a limited menu: chocolates, tea, coffee and noodles.

The café has Yippee noodles stacked high up and sells a cooked Rs.5 pack—the smallest pack sold by its maker, ITC Ltd—for Rs.50 a plate.

Yippee’s entry into the menu at Chang La—which sold only cooked Maggi noodles in all of its 25 years of existence—illustrates the swift market share gains made by ITC in less than three months since Maggi, the country’s most popular instant noodles brand, went out of the market.

Some 2,500km away from the cafeteria, Keventer Foods, the contract manufacturer for Yippee noodles, has received an order from ITC, the Kolkata-based conglomerate that’s India’s biggest cigarette maker besides making packaged consumer goods and running hotels, to double production at its Barasat factory in West Bengal, from mid-August.

Fortunes changed dramatically for Yippee noodles after the country’s food regulator, the Food Safety and Standards Authority of India (FSSAI), banned Maggi in June, calling it “unsafe and hazardous”. Since then, its maker, Nestle India Ltd, has recalled and destroyed more than 35,000 tonnes of Maggi noodles from about 4.5 million retail outlets across the country, according to the Swiss packaged food company.

In August, the Bombay high court set aside the food regulator’s nationwide ban on Maggi noodles, and told the manufacturer it will be allowed to resume production and sales once the popular snack is retested and cleared for consumption by government-approved laboratories.

By then, the damage had been done, and it wasn’t limited to Nestle. The FSSAI move led to an 80% fall in instant noodle sales in June and the trend continued through July, a top executive at a packaged food company that also sells noodles said, requesting anonymity.

“Sales picked up during the past four to five weeks. But it is still about 30-35% below the level of what it was in April-May,” the executive said.

Still, Yippee gained. “There has been an encouraging growth in market share,” said V.L. Rajesh, who ovesees the foods division at ITC, without specifying figures.

Introduced in 2010, Yippee noodles gained a 10.8% market share by end-2014, when Maggi controlled 63% of the market, according to a report by Euromonitor International. A May report by Nomura Financial Advisory and Securities (India) Pvt. Ltd said Maggi had 80.2% of the market for instant noodle in the quarter to March 2015.

“Yes, production has almost doubled in the past four weeks,” said an executive at Keventer Foods, seeking anonymity.

Mayank Jalan, managing director, Keventer Group, however, declined to comment on the extent of the production increase, saying only that the production of Yippee noodles had increased substantially in recent weeks. The Barasat plant can pack 450 noodle packets every minute.

According to estimates by market research analysts, ITC now commands more than 50% of the instant noodles market in India, a sharp rise from just about 10-12% in May before the Maggi ban.

“There’s a reason why ITC fared better than other noodles brands. ITC has one of the most extensive distribution and retail network, which helped the company push Yippee wider, compared with other noodles brands,” said Abneesh Roy, associate director (institutional equity research), Edelweiss Securities Ltd.

ITC products are available at 4.3 million of the estimated 8 million retail outlets. Of this, 2 million are under the company’s direct distribution network.

A clever, well-timed advertising campaign focused on its quality and safety, too, worked in Yippee’s favour. The new Yippee noodles commercial, created by Ogilvy and Mather, showed the factory where Yippee is being manufactured, with focus on safety and quality. The advertisement was released on general entertainment channels, children’s channels and music channels. ITC declined to give details on its advertising and promotions spending on Yippee.

“The campaign has been appreciated by consumers for its transparency and honesty and has generated a lot of positive feedback and queries from consumers,” said Rajesh.

Wai Wai noodles from Nepal’s Chaudhary Group-owned CG Foods has also gained market share at Maggi’s expense, market analysts said, but the company said sales were yet to recover to levels before the June ban, which triggered safety concerns about products available across the instant noodles market.

“We are trying to recover lost ground. Availability has partially recovered in August. We are yet to reach sales level of May 2015,” said G.P. Sah, chief executive of CG Foods.