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Maggi Case study: The 2015 Maggi crisis
If you’re reading this, we’re sure in your lifetime you would’ve had a pleasure of sparing those controversial two minutes to cook a Maggi and another few to eat it. We’ll never know how those advertisements manage to cook their Maggi in two minutes. Anyway, we’re not here to question the two-minute proposition of our most loved Noodle brand and rather to discuss a controversy that happened in 2015. Which has become the famous Maggi case study, a case study that teaches you how to emotionally connect well with your consumer.
Before you learn about the controversy – here’s a quick intro to the brand: Maggi was introduced in India by a Global FMCG company called Nestlé in 1982 and over this time, until 2015 the brand captured 60% of the noodle market in India . Maggi was in every nook of the country, this was because of how affordable, portable and instant these noodles are.
However, as all good things come to an end. Maggi faced a temporary ban in 2015, here’s the entire story for you (This post has a lot of videos, we’d recommend you at least watch the last few ones).
FSSAI is not very well known for surprise food inspections, however, April 2015 was different. FSSAI conducted a surprise Inspection for testing any possible food adulteration issue on Maggi’s manufacturing unit in the Barabanki district of Uttar Pradesh. The tested samples were sent to FSSAI labs and reports of higher than permissible levels of lead and the presence of Monosodium Glutamate(MSG) was released, these substances are banned to use for consumable products.
Naturally, Nestlé India Limited (NIL) appealed against the report and said MSG was a result of natural processes (it’s also mentioned on their website) and requested re-inspection of the products in the unit. Following this appeal, samples were sent to a government-authorized lab in Kolkata which only supported the findings of state FSSAI laboratory.
These reports led to several states banning sale and use of Maggi, obviously because of the health concerns. And unfortunately, on 9 th June, 2015, FSSAI (Food Safety and Standards Authority of India) i.e. the food regulator in India put a nationwide ban on sale on Maggi noodles for 5 months. Owing to this nationwide ban Nestlé recalled all the Maggi products from all the outlets and emotionally promised that they’ll be back in market as soon as the lab reports were clear. Almost 38,000 tonnes of Maggi was destroyed by Nestlé which worth Rs.320 crore.
Impacts of the ban:
The then brand Ambassadors of Maggi – Amitabh Bachchan, Preity Zinta, and Madhuri Dixit were slammed for endorsing the brand. Criminal cases were filed against them – yep, no joke. See here . Competitors: Top Ramen, Yippie, Patanjali Noodles started marketing their noodles healthy – we guess fats were not really unhealthy back then. Well, we can’t really blame them, 60% of the Market was now open for them to capture.
Things went south when the Government filed a case against Nestlé and charged Rs.640 crore for damages – Yikes! Nestlé posted its first loss in 17 years after the Maggi was banned. But worse, the consumers were now losing their trust in Maggi. Yep, FSSAI and the Government is all serious when it comes to your health – but the story wasn’t over yet.
And, the Return:
Surprisingly even when the Maggi was banned, it really wasn’t ready to give up on its consumers. The brand had an active social media page through which it stayed connected to its audience by the way of various social media posts and advertisements. Even on their Facebook page , they kept posting that their (consumers’) favorite food will be safe to consume very soon. There was a loyal set of customers that believed in Maggi and would occasionally post on their social media about how much they wanted their favorite noodles to return. Responding to them Maggi ran a campaign showcasing how they were missing their customers as well. They also created helpline numbers and FAQ pages for customers’ related queries.
In August 2015, the ban was lifted by the Bombay High court on the condition that it will be relaunched only after the reports are cleared by the FSSAI. And, in November 2015, when Nestlé got a nod from the food regulatory authority of India (FSSAI), it launched its WELCOME BACK campaign – an emotional campaign that won the heart of its consumers. They even launched 15 new variations of Maggi. They teamed up with e-commerce giants and started selling welcome kits which contained 12 Maggi packs. The response was great, the then e-commerce company Snapdeal sold 60,000 Maggi kits in just 5 minutes after the launch.
Learning from the Maggi case study:
All in all, this teaches at all that matters in end is the emotional connection you have with your customers. Unfortunately for Maggi’s competitors, they really did not achieve a lot during the ban. Maggi captured over 60% again in the next two years to come. And, this was the story of the crisis our favorite noodles faced – we hoped we killed it. You can write to us if you’d like any improvements.
Read more here . Stay safe, have a good one! Take a look at our page here for more case studies .
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4 thoughts on “ maggi case study: the 2015 maggi crisis ”.
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Very good and informative site thankyou for collecting valuable information…
I was really curious to know about what happened back in 2015, after my friend told me that Maggi was banned, the site helped me find the entire information about it.
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20 What Went Wrong? A Case Study on Nestle Maggi Noodles
- Published: June 2022
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Nestle’s ‘Maggi brand noodles’ the trusted and valuable food brand in India is the favourite among all the children in the country. It was considered as snacks in many households and a basic diet in many other homes. But in the recent past, the ban on Maggi has created a negative impact of Nestle. The favourite and most preferred instant food product of children, Maggi Noodles, got entangled in its ethical issues of the ingredients being used. The corporate social responsibility of Nestle India was tremendously cross-questioned with its after-test results, by food regulatory authorities. The case study is an effort to explore the various issues, possibilities, and opportunities for Maggi. The study focuses on need and scope brand image and brand repositioning, brand extension, etc.
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The case study on India's biggest food scare in the history, Maggi Noodles.
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- 1. MAGGI NOODLES (PROJECT QUALITY MANAGEMENT) PRESENTED BY- DAKSH RAJ CHOPRA PARTH AVINASH CHAUHAN RABIH ATAYA HARMANDEEP SINGH HARMANJEET SINGH PARMAR
- 2. INTRODUCTION • Maggi brand started with humble beginnings in the late 19th century in Switzerland. • Started by Julius Maggi, who later launched Maggi ready-to-use soups in 1886. • Later in 1947, when the brand spread swiftly Nestle bought it in 1947. • Nestle in India known as Nestle India Limited(NIL) launched the Maggi noodles.
- 3. ABOUT THE CASE • In May 2015, India witnessed a nation wide food scare, one of kind in the history. • Since Maggi says ‘No Added MSG’ on the packet. Monosodium glutamate • On March 30, 2014, a Maggi sample was sent for test in Gorakhpur, Uttar Pradesh and the lab analyst found samples of lead and MSG.
- 4. ABOUT THE CASE • NIL took the samples for further tests to a central food laboratory in Kolkata (East Indian city) where illegal levels of lead (at 17.2 ppm against the allowable limit of 2.5 ppm) were found. • Lead to a recall of Maggi products in the north Indian state of Uttar Pradesh in June 2015. • Some popular retailers also withdrew the stock from their shelves. • As the company still was confident on their claim about MSG. • On June 1, 2015, Nestle held a press conference after testing 125 million packets that the noodles are safe to eat. • Four days later on June 5, FSSAI had ordered NIL to withdraw all nine variants of Maggi instant noodles from the market, terming them “unsafe and hazardous” for human consumption
- 5. EFFECT ON COMPANY • NIL destroyed Rs.3 billion worth of Maggi noodles products without going for any further tests. • The Maggi fiasco had repercussions on the company as a whole, and NIL sustained its first quarterly loss in 17 years, according to its quarterly report for the period ending June 2015. • Its top line for the quarter had fallen by 20% to Rs. 19.34 billion.
- 6. EFFECT ON COMPANY
- 7. EFFECT ON COMPANY
- 8. CHANGES HAPPENED AFTER THE CASE • NIL India also appointed Suresh Narayanan (Narayanan) as its MD, replacing India head Etienne Benet. • Narayanan took charge from August 1, 2015, the first time in 17 years that an Indian was at the helm of NIL. • In late August 2015, NIL had come up with short video ads leveraging on nostalgia and emotional quotient attached with Maggi instant noodles. • In October 2015, Nestlé claimed that it had cleared three lab tests mandated by a court in the western state of Maharashtra, and would relaunch Maggi by November 2015. • As Maggi geared for its relaunch, Narayanan had several challenges ahead of him.
- 9. PRESENT SCENARIO
- 10. ANY QUESTIONS ?
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Case Study | Maggi Ban – Crisis And Repositioning In India
Case Study | Maggi Ban – Crisis And Repositioning In India 6 min read
Maggi is a well-known brand that everyone knows. It is a brand that needs no introduction. Since 1947, the Nestle brand has included instant noodles, seasonings, and soups. Among all of its products, Maggi was the first to introduce protein-rich vegetable dinners to the market, followed by prepared soups. 1983 was a watershed moment in Indian history since it saw the introduction of Maggi instant noodles.
Maggi has typically remained in the spotlight for its flavor, and it has become the preferred snack of the majority of India’s people. Maggi, on the other hand, was in the news for a variety of reasons at one point in time. The major reason was poor promotional activity owing to the presence of monosodium glutamate (MSG) and dangerously high levels of lead in the packets examined by FSSAI . The customer’s trust was shaken as a result of this. As a result of this uproar, many parts of society were concerned due to the involvement in the health of children in this case.
In what way the commotion originated?
After the proximity of pesticides in soda, the Nestle Maggi two-minute noodles emergency has ballooned up as India’s most exceptionally awful nourishment concern. The uproar over Maggi, one of India’s most popular snacks, drew attention owing to rising consumer health concerns.
Maggi noodles were sued in India for alleged violations of food security standards following a test by a state government lab that discovered the presence of MSG (a chemical that Nestle stated it did not put to their item) or higher levels of lead. Regardless, they rejected these results, despite the fact that further testing by administrative labs in several states revealed conflicting results. Despite the company’s confidence in Maggi’s safety, the Delhi municipal administration imposed a ban, signaling that other state governments should follow suit.
The disappearance of Maggi was a significant disappointment for Indian customers who still had a soft spot for the product and were unable to let it go. The fall of Maggi was not caused by any external causes, but rather by the product’s inherent characteristics, such as an increase in lead content, which harmed customer health. Nonetheless, despite the product’s dramatic decline, Maggi survived. They turned this catastrophe into a learning experience for their future endeavors. Maggi recovered its shelf position by thoroughly rechecking its product and its components.
Maggi has held the market top position since its inception. However, Maggi’s fall phase saw the development of then-market followers contending for the position of market leadership.
The re-emergence of Maggi in the market drove its competitors to second place, recovering and retaining market leadership due to the overall influence that it has always had on the Indian market. Nestle has been on a firefighting strategy since the Maggi disturbance became press headlines, by making this crisis scenario a point of learning for their future endeavors. Without a doubt, the brand’s reputation was harmed; it took some time for the brand to restore its strength and return to the shelves, leaving all of its competitors in the dust.
Discussion of Maggi
From the government to law enforcement, there was an all-out onslaught against Maggi. The government of India has filed a claim for damages from settle after allegations of excessive lead and MSG (a flavor enhancer) in Maggi prompted a nationwide inquiry. They become heated up over Nestle Maggi 2-minute noodles being hailed as India’s worst nourishment apprehension in ten years, following the presence of chemicals in soda pops. It was a real issue of general wellness, and the legislation allows us to take self-made legal steps against blundering’s elements official from the national purchaser question redressal commission.
Following recurrent quality testing and meetings with settle supervisors, the Food Safety and Standards Authority of India (FSSAI) ordered a nationwide assessment of the Maggi.
Reporting of the issue in social media
As the feud between Nestle and the FSSAI heated up, TV channels, newspapers, and other social media platforms in India gushed over Maggi as if it were one of the year’s greatest stories. News stories were released with headings such as, “Maggi under regulatory scrutiny for lead, MSG above permitted limits; Maggi treachery has crushed our good Indian hearts; Maggi demonstrates Indian customers are taken for granted,” and so on. The emotional connection with Maggi at its customer interaction, along with the uproar over contradicting test results and the public’s lack of awareness about food regulations, gave the media a chance to sway public opinion. Maggi was subjected to a media trial prior to its seizure.
Just as conventional media reported the topic widely, social media exacerbated it. The growth in the dominance of social media players such as Facebook and Twitter has aided in the transmission of news, regardless of its validity. This has apparent ramifications for Nestle: a heated debate on a contentious topic might spread quickly. Maggi sales have dropped, with big metropolitan stores reporting a 15% to 20% drop. Nestle India’s shares plummeted 15% between mid-May and early June.
Nestle Maggi has been in firefighting mode since the news broke about unsavory additives in Maggi. The brand’s reputation suffered greatly as a result. Maggi noodles sales have suffered significantly when it was discovered that the samples examined by government laboratories included unnecessary substances such as lead and MSG. Because of the Maggi prohibition, the manufacture of Maggi ceased, affecting suppliers. Around 1500 people in India involved in the production of Maggi were impacted by the suspension of production following the Maggi ban. The impact of Maggi’s demise was felt by the stock market as well.
Maggi has long been one of India’s most popular snacks. It was typically kept in the news for its flavor. During the prohibition time, the organization did not dismiss any of its changeless laborers but rather engaged them in various activities like planning, group development, and so on.
However, it should be noted that definite procedures, values, and ethics have varied meanings for different types of businesses. Maggi has long been a market leader, accounting for 80 percent of the consumer market. Market leaders are frequently perceived to be able to create their brands and utilize their brands based on well-defined procedures within the company in order to persist.
Relaunch of Maggi
On October 26, Nestle resumed assembling Maggi noodles, which entered the market after receiving approval by food testing labs. Nestle reintroduced Maggi noodles to the market after the Bombay High Court removed restrictions on all nine Maggi varieties.
Within seven days of Nestles Maggi noodles being reintroduced to the market, the nation’s main nutrition controller – FSSAI – moved the supreme court against the Bombay high court’s order that allowed the noodles to be reintroduced. However, it should be noted that Maggi passed the first round of testing on October 16, 2015, allowing Nestle India to continue manufacturing the item. The second round of tests on newly manufactured groups also declared the item safe for human consumption. At regular intervals, a few Maggi samples were tested.
Snapdeal sold 7,20,000 units of Maggi noodles (twelve-packs) at its debut, with 60,000 units sold (welcome unit). These well-received packages included a Maggi date-book 2016, a Maggi ice chest magnet, Maggi postcards, and a welcome return note. It quickly grew to 3.9 million retail locations.
Also Read: Tropicana Rebranding Failure
A market-based crisis may occur as a result of numerous reasons such as economic, political, socio-cultural, technical, and competitive pressures. These variables impact the shift in market operations, necessitating a change in the firm’s actions. They function as an influence and determine their severity depending on the influence’s breadth, degree of impact, range of impact, response gap, the timing of interaction factors, and so on.
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Nestle Maggi Crisis: Critical Analysis
- Topics: Nestle
- Words: 3750
- This essay sample was donated by a student to help the academic community. Papers provided by EduBirdie writers usually outdo students' samples.
Whenever we think about Nestle, we think about a story about organizational success. Since its inception in 1866, the company has seen rapid growth, profit, and earned reputations all around the world. Even its company in India is doing exceptionally well. Since 1959 Nestle has been operating in India. It is selling noodles to a rice/wheat-eating country. Sells chocolates to people who are famous for their sweets. Sells powder milk to a country obsessed with fresh milk. Unfortunately, the company lost its reputation in India in 2015 and faced a never before seen crisis. The 104-year-old reputation was inked when a lab found high amount of lead in its most famous brand of noodles, Maggi. This finding lead to a subsequent nationwide ban of India’s most beloved product. Nestle India faced its worst nightmare. However, the company managed to jump back from the situation and regained its once-held reputation. What’s more impressive about Nestle is how they reacted in the face of its worst crisis. The way they solved their problem, remained in business, and now growing faster than ever before is a case for study and research. This paper delves deep into how the crisis began and how the company efficiently and effectively came out of it.
Nestle Maggi Crisis
A brief history.
It all started in 1867 in Vevey, Switzerland. The founder of Nestle is Henri Nestle. It’s first product was created as an alternative for mothers who could not breastfeed their babies. It was called Farine Lactée Henri Nestlé. Within a few years it gained popularity in the Europe.
At that time their main competitor was Anglo-Swiss Condensed Milk Company. The companies merged in 1905, on that year Nestle also added Chocolates on their product of foods. Initially they had factories in the United States, Britain, Spain and Germany. And soon they started manufacturing in Australia, Singapore, Hong Kong and Bombay. They faced some complications during the World War 1 but their production boosted back after the World War.
By the 1920s Nestle was Creating chocolate and powdered beverage products. The developed their one of the successful Product in 1930s Nescafe along with Nestea and it became an instant hit. Nescafe became a main Beverage for the American Soldiers in Europe and Asia. Their total sales increase by $125 million from 1938-1945 during the World War 2. After the World war they expanded their product line. And within a matter of time Nescafe became one of the largest stock holders in the market.
The First logo of Nestle in 1868.
Current operations around the world
- Nestle and Starbucks will work closely together on the existing Starbucks range of roast and ground coffee, whole beans as well as instant and portioned coffee. The companies are working on a new innovation with the goal of enhancing its product offerings for Coffee lovers globally. The agreement significantly strengthens Nestle’s portfolio in The North American premium roast and ground and portioned coffee business.
- Nestle launches free online chef’s academy with WORLDCHEFS. It will be a great help for the aspiring chefs to take the first step. This academy is a partnership between the World Association of Chefs Societies (WORLDCHEFS) and Nestle Professional Academy is free of cost and accessible for anyone, no matter what their background is or what skills they have.
Introduction in India
Nestle’s relationship with India dates back to 1912.After India’s independence in 1947, the economic policies of the Indian Government emphasized the need for local production.
Nestle responded to India’s aspirations by forming a company in India and set up its first factory in 1961 at Mega, Punjab, where the Government wanted NESTLÉ to develop the milk economy. Nestle has been a partner in India’s growth for over a century now and has built a very special relationship of trust and commitment with the people of India. The Company’s activities in India have facilitated direct and indirect employment and provides livelihood to about one million people including farmers, suppliers of packaging materials, services and other goods.
Operations in India
The main operation of Nestle is to serve Good quality food. Nestle India manufactures products of truly international quality under internationally famous brand names such as Nescafe, Maggi, Milky bar, Kit Kat, Bar-One, Milkmaid and Nestea and in recent years the Company has also introduced products of daily consumption and use such as Nestle Milk, Nestle Slim Milk, Nestle Dahi and Nestle Jeera Raita.
Nestlé India Head Office, Gurgaon, Haryana
Nestle contribution to india’s economy.
Nestle’s contribution to India’s economy till now is quite good. Their first factory was created in 1961 in Moga. Their total sales are Rs. 7,546 crores as of September 2017 and their net profit after tax is Rs. 913 crores as of September 2017. Nestle has given a major push to the dairy sector of the country and has developed the Milk economy. Nestle is the market leader in various categories such as Infant Cereals (96.5%), Instant Pasta (65.2%), Instant Noodles (59.5%), White Chocolates and wafers (62.6%).
The Beginning of the crisis
Before Maggi was launched in India in 1983, nobody imagined that a snack can be prepared in just 2 minutes. Within a short period of time it gained popularity all over the sub-continent. It was mainly targeted for the middle-class families of the country.
Everything was going smoothly for three decades but then a storm struck in 2014. On a laboratory in Gorakhpur proved that the samples of Maggi contained lead and monosodium glutamate 1 (MSG) much beyond the permissible limit. Then several state governments tested the samples and banned the product. Within a matter of time Maggie was off the Market.
Maggi instant noodles came under the scanner for three main reasons. The first was the aforementioned violation of the regulations for adding lead and MSG into the product. As against the maximum limit of 2.50 parts per million (ppm), the amount of lead detected in the Maggi samples was perilously high at 17.2 ppm. The second offence was mentioning ‘No added MSG’ on the packaging, which is an act of mislabeling. Also, it launched ‘Maggi Oats Masala Noodles’ without meeting the appropriate norms of standardization. Maggi owned 80% of The market share in the instant noodles segment. After the ban it dropped to 0%. The crisis was very serious and it was state of emergency for Nestle India. Maggi’s all hard work of 30 years was at stake. So, Nestle India had to take some necessary steps.
The Financial Downturn
As a result, Nestlé India slipped into a loss for its second quarter after being battered by a national ban on its popular Maggi noodles due to safety concerns.
The Maggi meltdown would prove costly. Nestlé lost at least $277 million in missed sales. Another $70 million was spent to execute one of the largest food recalls in history. Add the damage to its brand value—which one consultancy pegged at $200 million—and the total price tag for the debacle could easily be more than half a billion dollars. And the fallout continues. [image: https://fortunedotcom.files.wordpress.com/2016/04/nestle-maggi-stock.png]
In a statement to the Bombay Stock Exchange, Nestlé India reported a net loss of Rs 644m ($10m) in the three months ending in June 2015, compared with a Rs 2.8bn profit during the same period in 2014.
The loss of Reputation
With Indian Food Inspectors ordering Nestle India to recall a batch of Maggi instant noodles identifying dangerous levels of lead and MSG (click for entire report), Maggi (Nestle India) was caught into a vicious circle of bad reputation.
Maggi till date has been enjoying a brand that could connect people to not only a product but to the whole concept. Maggi has become the other name for “Instant Noodles”. Even if someone purchases Top Ramen Noodles or Sunfeast Yippe Noodles, it would still be assumed as another type of noodles but not instant noodles. At times Maggi is been sought for as a quick alternative to the staple food. However, what problems the present crisis would create to Maggi is to be watched.
Due to the scandal, the internet had started talking more and more about the ill effects of Maggi which is considered as itself a brand. This gave an opportunity to rumor-mongers and gossipers to start talking more and more about the ill effects of Maggi. Social media sites such as Facebook, twitter , and google+ were abundantly supplied with information of what is good and what is bad and how Maggi (Nestle India) is cheating its customers. Hashtags like #Maggi, #Maggi ban is being voiced over in the internet. Famous mobile messaging apps like WhatsApp, WeChat, etc., will now spit the venom against Maggi.
The loss of Market Share
- Nestlé India said its sales plunged by 20% in the second quarter, as a food-safety scandal and a large-scale product recall weighed on its earnings.
- [image: https://fortunedotcom.files.wordpress.com/2016/04/nes-05-01-16-print-charts.png]
- Nestlé Noodle’s market share in India also took a nosedive from 63% in 2014 to 23% in 2015 due to the Maggi noodle scandal.
- The Indian arm of Nestlé SA said its revenue declined to 19.34 billion rupees ($302 million) in the three months ended June 30th 2015, compared with 24.19 billion in the same period a year earlier.
The loss of Public Trust
Due to the reports of the lead contamination in Maggi noodles, consumers lost their trust on Nestle. Trust metric for Maggi noodles dropped to as low as 3% in 2015. On top of all that, enraged consumers wasted no time venting their anger. In some cities protesters in the street smashed and set fire to packs of noodles and photos of Bollywood stars who were paid Maggi endorsers. One prominent newscaster compared the situation to Bhopal, the worst industrial accident of all time, in which a toxic gas leak at a Union Carbide pesticide plant in central India killed thousands of people. From commanding 80% share of India’s noodles market, (as estimated by Nomura Securities in May 2015) Maggi went down to zero in just a month.
The Maggi sample which was tested contained more than seven times the permissible level of lead—over 1,000 times more than the company claimed was in the product. Due to this debacle, Nestle had to face several legal ramifications such as the ban imposed on Maggi noodles for an indefinite period and it had to take all Maggi packs — or 35,000 tones — off the shelves of about four million retailers.
Other nations such as Nepal indefinitely banned Maggi over concerns about the lead levels in the product. Maggi noodles were subsequently withdrawn from the market of five African nations: Kenya, Uganda, Tanzania, Zimbabwe and South Sudan.
Dealing with the crisis
The Uttar Pradesh food safety commissioner sent a formal notice to Nestle seeking clarification on presence of MSG and lead in Maggi samples. The company did mail its response along with its internal monitoring documents on 5 May 2015, but did not take any proactive step to counter any possible aftershock. On 7 May, there was a small news item on the episode in one of the Hindi newspapers in Uttar Pradesh.
Still, Nestle did not react. It never thought the news could lead to an estimated half a billion-dollar loss for the company (including erosion of brand value) that would shake the Swiss multinational and that the subject would be debated at length in television studios.
Nestle failed to gauge the depth of the crisis even after national newspapers started writing about it. It did not issue any statement till 21 May. And in its first official statement, it said there was “no order to recall Maggi noodles being sold” and the popular instant noodle was “safe to eat”.
On 5 June 2015, the day FSSAI asked Nestle to recall Maggi noodles, the company’s global chief executive Paul Buckle met the regulators, and addressed the media in New Delhi. Buckle said: “This is a matter of clarification and we need to sit down together and clear the air… We will look into the safety concerns. We do not add MSG in Maggi noodles… We apply the same quality standards everywhere. Everything we do is keeping consumers in mind. We will do everything it takes, and are fully engaged with the authorities.”
But by then, things had spun out of control. Buckle was left with little choice but to recall the popular noodles from the market. The company got Luca Fichera, then executive vice-president (supply chain) at Nestle India, to lead the recall process.
Between 5 June and 1 September 2015, Fichera’s team collected 38,000 tons of Maggi noodles from retail stores, and destroyed them by first crushing the noodles and then mixing them with fuel and burning in incinerators at 11 cement plants across the country.
How Nestle managed to jump back
“Clinically dead”, is how the company’s India boss loves to describe the Nestle of those days.
Swiss parent controlled Nestle India, makers of Maggi noodles, has made a strong comeback to regain its lost ground in 2017 – nearly two years after it was forced to withdraw its largest selling noodle brand from shops across the country following its failure to meet certain food safety standards.
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After two years, Maggi noodles commands a market share of 60 percent, having regained most of its lost share during the ban days.
The brand equity and customer trust has been built over generations and this has helped the brand bounce back after a near ‘death’ experience, Suresh Narayanan had said in an interview to First post last year. After the five-month ban, in November 2016, Nestle India relaunched Maggi noodles in the Indian market.
The company is not just relying on Maggi brand, although it still accounts for a major portion to its overall revenue. In the last few quarters, Nestle has launched several products like Greek yoghurt, kids breakfast cereal Nestle Ceregrow, health food drink Nestle A+ Pro-Grow, Nescafe RTD chilled Latte, everyday masala, Maggi Hot Heads, and variants of Maggi noodles.
Going forwards, the company plans to launch Nespresso (a coffee machine), Dolce Gusto (a coffee capsule system), besides products in pet care, healthcare and skincare. Despite the planned launches, Nestle parent sells just 20 brands in India as against its global bouquet of around 20,000 odd brands, a Mint report said.
The company wants to tap India’s top 600 cities that will account for half of the consumption growth over the next 10 years or so.
Nestle’s current performance
Nestle is a story of organizational success. Even after its 2015 Maggie debacle, Nestle managed to turn back from the disaster, and established itself as one of the most durable companies in the world. Nestle India released the annual report for the year 2017 (the food and beverages major maintain a January-December format). It revealed, among other things, that the firm had managed to grow volumes in all four product categories for the first time since 2010 — milk products & nutrition, prepared dishes & cooking aids, beverages and chocolates & confectioneries — grew.
In the late afternoon of May 17, Nestle India’s stock was trading at Rs 9,865 a piece at the Bombay Stock Exchange. In other words, the company had bounced back from the biggest existential threat in its 104-year history in India.
In the quarter ended March 2018, domestic sales remained strong (up 10.9 per cent year on year), primarily led by higher volumes across categories. Nestle’s domestic growth was comparatively better than the growth reported by other large FMCG players this far for the quarter,” analysts from Edelweiss said in May.
So, we can see that even after such a huge crisis, Nestle has managed to recover its market share, profit and it is growing faster than ever before.
Innovating with existing products
Suresh Narayanan, chairman and managing director of Nestle India, who was brought in to handle the crisis in August of 2015 said that they were innovating with their existing products. Nestle has introduced six new variants of Maggi called HotHeads. They have high levels of spice and they come in exotic flavors. There is also Munch Nuts, a chocolate wafer with peanuts, and Nescafe Cappuccino ready-to-drink premixes.
As Suresh Narayanan said, “We have launched 25 new products or variants since the Maggi crisis. All of these are in the incubator. Some will gallop in the future; others will canter, some may die. People ask me, what has changed? How did Nestlé suddenly acquire this pace? We’ve never had so many product launches in such a short time in the history of the company”.
Change in Attitude
Often times, success or failure of an organization depends on its attitude. The same is true for Nestle.
Suresh Narayanan believes that the reason for Nestle’s recent success is its changed attitude.
In one interview Narayanan said, “Today I see an attitude and mindset of growth. There is an instinct growth opportunity among people working across verticals. Part of this is reflected in our new motto of growth through innovation and renovation,” he said. Earlier it used to take some two years to come up with a new product; now the time has been cut to less than six months”.
“In the past we have had periods of rapid launches but could never sustain the momentum,’ he added.
With its changed attitude Nestle proved what the former American professional baseball player, Wade Boggs said, “A positive attitude causes a chain reaction of positive thoughts, events, and outcomes. It is a catalyst and it sparks extraordinary results”.
How the crisis affected the organization
In one interview the Chairman and Managing Director of Nestle India, Suresh Narayanan said, “Nestle probably required such shock treatment as the June 2015 ban on Maggi noodles to jerk it out of its ennui”.
Narayanan had spoken about how the Maggi Noodles crisis was the most challenging and dramatic situation in his entire professional career. Maggi is the worst crisis that they have faced in the 104 years of their existence in India, also the worst crisis the company has faced globally in a long time.
Narayanan also talks about the mood of the workers and employees of Nestle India. He said, “The team was shattered. Our factory workers were extremely upset…. I had an empty feeling. At that time, I realized as a leader, the weight of responsibility on my shoulders is so big during a crisis”.
Change in Organizational Structure
Due to the Maggie crisis Nestle realized that the way things had been going on needed to change. Nestle was quick to change with the changing situations. They brought about changes to the decision-making process.
To increase focus on the market, Nestle has decentralized the decision-making process by creating 15 verticals that now target specific geographies with their respective hyper-local strategies.
Crisis and Organizational Culture
An organizations culture can give an estimation as to how an organization would react if they faced any crisis. It is evident that during the face of crisis the strong and weak cultures have an important role to play. Moreover, the rigidity or flexibility of an organization’s culture will give an idea as to how soon an organization can overcome its crisis or give into it.
Various studies have revealed that a multinational corporation with over a century of presence in the country struggled to align itself to the complexities of the cultures of the host country. In the case of Nestle India, whereas environmental variables such as political economy and Westernization of urban India boosted the growth of its instant noodles, the multinational company struggled to cope with the rise of media corporatization, activist pressure.
It is evident that Nestle’s crisis response was governed more by its traditional corporate culture than by an ability to keep pace with the changing demands of its environment, leading to the amplification of an issue into a crisis.
So, we can see that multinationals that ignore culture will be forced to pay a heavy price both in terms of reputation and finance.
Lessons for Management
The omnipotent view of management shows that managers are completely responsible for the success or failure of an organization. Although that is not completely true, Management in an organization bears the most important roles for an organization to succeed. As the top-level management reap most of the profits gained by the organization it is also their responsibility to see if anything goes wrong. Besides the real competency of the managers are tested during a crisis.
Since its inception in India in 1959, Nestle India is a story of organizational success. But, the 2015 Maggie crisis put them to their test in 2015. There are multiple lessons for management here.
- No matter how successful an organization is they can always face crisis
- Consumers won’t remember the years or hard work and service, rather they will remember that one mistake the organization made
- Public trust is easier to lose than to gain
- In the cutthroat world of business no one is truly your friend
- You should always be prepared for change
Nestle realized this during their 2015 Maggie crisis. Fortunately, they bounced back from their state and is now performing better than before.
Lessons for students
As business students, we are learning various theories about how business is operated. Without practical knowledge these theories are not much of help. The story of Nestle has a lot to teach to us students also.
Analyzing its 104-year history and ways of operation, we cannot but marvel at the success of an organization. In a rice country they make noodles; in a tea country they sell coffee; in a sweets country they sell chocolates; in a fresh milk country they sell powder. They must be doing something right.
However, the 2015 scandal was a shock for all. What makes this company different from others is how they solved their problems and overcame the crisis. Nestle’s crisis management should be a case study and a matter of research. We as students learned a lot as to how the role of Management, Culture, Commitment and attitude can take a company to the top.
- Dhanesh, G. S. (2017, December 21). Culture and Crisis Communication: Nestle India’s Maggi Noodles Case. Retrieved from Journal of International Management: www.sciencedirect.com
- Dubey, A. S. (2017, December 4). ‘Maggi is the worst crisis that we have faced in the 104 years of our existence in this country’. Business Today, p. 6.
- Fry, E. (2016, April 26). Nestlé’s Half-Billion-Dollar Noodle Debacle in India. Retrieved from Fortune: fortune.com
- Money Control. (2017, August 29). Post-Maggi Crisis: How Nestle India is stepping up its game. Retrieved from Money control: www.moneycontrol.com
- Nestle. (2016, April 11). MAGGI Noodles timeline of events. Retrieved from Nestle: www.nestle.in
- Rediff Business. (2018, June 8). How Nestle bounced back from the Maggie Crisis. Retrieved from Rediff Business: www.rediff.com
- Robbins, S. P. (2017-18). Organizational Culture. In S. P. Robbins, Management (pp. 465-467). New York: Pearson.
- Sharat Pradhan. (2015, June 9). Maggi noodle crisis: How it all began. Business Today, p. 7.
- The Quint. (2017, September 9). Excerpts: How Nestle Overcame the Maggie crisis. Retrieved from The Quint website: www.thequint.com
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Nestle India Maggi Noodles Ban Case Study Solution
The project titled “A case study of India’s favorite’s instant noodles-MAGGI, a product of Nestle India Pvt. Ltd.” deals with the study of the case of MAGGI ban, which happened in 2014. The project report mainly deals with the impact of ban on NESTLE’s financial results for the year 2014 and 2015. Also it studies the marketing and promotional strategies that are adopted by NESTLE India Limited post ban. The long term success of any company can be effectively measured in terms of brand value it creates in the market place, but more than that it is the brand image in the consumer’s heart which matters the most. The unique selling proposition of a particular product has to be the impact on environmental, social and human health criteria.
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Objectives of The Study:
- To examine the root cause of Maggi row.
- To assess the impact of Maggi row in India.
- To understand the marketing and promotional strategies adopted by NESTLE India Limited post ban.
Limitation of The Study
- Time, being the major constraint while undertaking the research has limited it to an extent.
- Availability of resources like funds, appropriate data for analysis is another limitation of the study.
Research comprises “creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of humans, culture and society, and the use of this stock of knowledge to devise new applications. It is used to establish or confirm facts, reaffirm the results of previous work, solve new or existing problems, support theorems, or develop new theories. Research methodology is a systematic way to solve a problem. It is a science of studying how research is to be carried out. Essentially, the procedures by which researchers go about their work of describing, explaining and predicting phenomena are called research methodology. It is also defined as the study of methods by which knowledge is gained. Its Aim is to give the work plan of research. Data collection would basically mean systematic collection of data from various sources for undertaking a research. Data is the basic inputs for taking any decisions.
Methods of Data Collection:
- Primary data: Primary data means fresh data which is collected for the first time with a stated purpose. It could be collected through surveys, observations, interviews etc.
- Secondary data: data which is gathered and analyzed by someone else and for an objective other than the current objective is secondary data. It involves less cost, time and efforts. This project is based on data collected from secondary sources such as newspapers, internet, magazines, books etc.
Nestle S.A. is among the largest consumer packaged goods companies in the world, founded and headquartered in Vevey, Switzerland. Nestle originated in a!905 merger of the Anglo-Swiss Milk Company, which was established in 1866 by brothers George Page and Charles Page, and the Farinc lactee Henri Nestle Company, which was founded in 1866 by Henri Nestle, whose name meant “Little Nest”. The company grew significantly during the First World War and following the Second World War, eventually expanding its offerings beyond its early condensed milk and infant formula products. Today, the company operates in 86 countries around the world. NESTLE is the world’s leading Nutrition, Health and Wellness company. Our mission of “Good Food, Good Life” is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night. The Company was founded in 1866 by Henri Nestle in Vevey, Switzerland, where our headquarters are still located today. We employ around 2, 80,000 people and have factories or operations in almost every country in the world. NESTLE’s relationship with India dates back to 1912, when it began trading as The NESTLE Anglo-Swiss Condensed Milk Company (Export) Limited, importing and selling finished products in the Indian market. After India’s independence in 1947, the economic policies of the Indian Government emphasized the need for local production. NP’! STLF responded to India’s aspirations by forming a company in India and set. Up its first factory in 1961 at Moga, Punjab, where the Government wanted NESTLES to develop the milk economy. The Company’s activities in India have facilitated direct and indirect employment and provides livelihood to about one million people including farmers, suppliers of packaging materials, services and other goods. The Company continuously focuses its efforts to better understand the changing lifestyles of India and anticipate consumer needs in order to provide Taste, Nutrition, Health and Wellness through its product offerings. NESTLE India manufactures products of truly international quality under internationally famous brand names such as NESCAFE, MAGGI, MILKYBAR, KIT KAT, BAR-ONE, MILKMAID and NESTEA and in recent years the Company has also introduced products of daily consumption and use such as NESTLE Milk, NESTLE SLIM Milk, NESTLE Dahi and NESTLE Jeera Raita.
Nestle’s Presence in India :
After more than a century-old association with the country, today, NESTLE India has presence across India with 8 manufacturing facilities and 4 branch offices. NESTLE India set up its first manufacturing facility at Moga (Punjab) in 1961 followed by its manufacturing facilities at Choladi (Tamil Nadu), in 1967; Nanjangud (Karnataka), in 1989; Samalkha (Haryana), in 1993; Ponda and Bicholim (Goa), in 1995 and 1997, respectively; and Pantnagar (Uttarakhand), in 2006. In 2012, Nestle India set up its 8th manufacturing facility at Tahliwal (Himachal Pradesh). The 4 Branch Offices located at Delhi, Mumbai, Chennai and Kolkata help facilitate the sales and marketing activities. The NESTLE India’s Head Office is located in Gurgaon, Haryana.
Competitors of Nestle MAGGI:
Maggi instant noodles, foods major Nestlé’s flagship brand that has dominated the Indian instant noodles market for nearly three decades, is losing market share on a monthly basis to newer entrants such as Patanjali Noodles, GlaxoSmithKline’s (GSK) Horlicks Foodies, Hindustan Unilever’s (HUT.) Knorr Soupy noodles, Big Bazaar’s Tasty Treat, Top Ramen and several other smaller players.
The Nestle MAGGI BAN – Case Study Solution:
It all started back in march 2014 in Uttar Pradesh, where the authorities informed nestle that MSG was detected in a sample of MAGGI Noodles that carried a “No added MSG” claim on the pack. In the first half of 2015, Nestle India decides to temporarily stop selling MAGGI Noodles in India until the situation with the authorities is resolved. The Food Safety and Standards Authority of India (FSSAI) issues an order to Nestle India which includes, among others, the:
- Recall of all nine variants of MAGGI Noodles from the market
- Halt of commercial activities related to the product, including sale and production. Removal of the “No Added MSG” claim from product packs.
- Withdrawal / recall of MAGGI oats Noodles as it did not have ‘Product Approval’.
In June 2015, Nestle India files a legal petition with the Bombay High Court, seeking a judicial review of this order. While legal proceedings arc ongoing, Nestle continues to comply with the FSSAI order and destroys over 35,000 tonnes of the product, though the Bombay High Court allows Nestle India to continue exporting MAGGI Noodles. As the year passed, in the second half of the year in August 2015, The Bombay High Court overturns the government’s ban on MAGG3 Noodles, arguing that the move was “arbitrary” and “that principles of natural justice were not followed.” The court rules that Nestle India can bring the product back to the market if fresh tests – conducted in three accredited laboratories on the existing samples and subsequently on the freshly manufactured product – find the product safe.
In October 2015, Test results from all three laboratories mandated by the Bombay High Court show MAGGI Noodles to be safe, with lead content well within the permissible limits. In compliance with the orders of the Bombay High Court, Nestle India commences manufacturing MAGGI Noodles and submits the new batches for fresh tests to reconfirm they are safe for consumption. In November 2015, All three NABL (National Accreditation Board for Testing and Calibration Laboratories) accredited laboratories – mandated by the Bombay High Court – find samples of the newly manufactured MAGGI Noodles to be safe for consumption, with lead content well within permissible limits. Now that the orders of the Bombay High Court have been complied with, Nestle India has made MAGGI Noodles available for sale once again.
The Burnt From Maggi:
Affected by a countrywide recall and destruction of its instant noodle brand, Maggi, India’s largest food company by revenue, Nestle India, posted its first quarterly loss in 17 years. The Indian subsidiary of the world’s largest food company reported a Rs 64.4-crore net loss in what was its most challenging quarter to date. Thanks to the recall and ban of Maggi on June 5 (trouble for it began towards the end of May when sales began falling after detection of contaminants in some of the product’s samples), the company took a one-time charge of Rs 452 crore which hit its bottom line.
Market Share/ Share Price:
Nestle India’s nine variants of Maggi noodles accounts for nearly 70% of the instant noodles market, which took a massive hit when a blanket ban was imposed on the product. After the ban was imposed on June 5, the company’s share price tanked. On June 8, three days after the pan-India ban was imposed, Nestle India’s share price was down to Rs 5,539.8, the lowest level it had seen all year. Since then, the company’s scrip has seen major volatility, regaining the highest level since the ban at Rs 6,831.95 per share on August 5. On the date, Goa deputy chief minister Francis D’Souica had said that he favored the re-think on the Maggi ban after the latest tests conducted by a central government laboratory in Karnataka found the instant noodles safe for consumption.
Profits / Sales:
Nestle added while releasing its results that the June quarter of this year was not comparable with the corresponding period last year. “Results for the quarter have been affected by the Maggi noodle issue,” it. said in its statutory statement. “Recent developments and growing concerns about the product had led to an environment of confusion, leading to the product being temporarily taken off shelves,” the company said. “Without question, trust has been hit and for Nestle to win that back will not be easy,” a senior industry executive from a rival company said. “While Maggi contributed some 22 per cent to the company’s revenue in 2008, it is now at 30 per cent,” this executive said. “In the same period, revenue contributions of Nestle’s ‘chocolate & confectionery’ and ‘beverages’ businesses have together come down to some 25 per cent from 32 per cent,” he added. As things stand today, Nestle India derives 46 per cent of its revenues from milk products and nutrition, 29 per cent from prepared dishes and cooking aids, 13 per cent from beverages and 12 per cent from chocolates.
The Corporate Affairs Ministry imposed a nearly-Rs 640 crore fine on Nestle India, in lieu of finding MSG and lead beyond the permissible limit in Maggi noodles. The government filed a Rs 640-crore class action suit before the consumer forum National Consumer Disputes Redressal Commission (NCDRC). Out of this Rs 284.45 crore was sought in basic damages, and another Rs 355.5 crore in punitive damages. However, the government had said that the penalty could go higher as it was still calculating further damages to be sought.
Nestle India’s managing director Etienne Benet was called back by the parent company on July 24. On August 1, Suresh Narayanan was appointed as the company’s new managing director. On Thursday, after announcing the Jul-Sep results, the company’s board appointed Narayanan as the company’s chairman too. The move came after Nestle India’s chairman Antonio Helio Waszyk retired on October 1.
Nestle India shut down Maggi production at all of its eight production units in India. However, since the ban was set aside, Nestle India has started production at three of the eight factories. and wants to start production at all the factories soon. “We have resumed manufacturing of Maggi Noodles at three of our plants, at Nanjangud (Karnataka), Moga (Punjab) and Bicholim (Goa),” said a Nestle India Spokesperson.
With the ban now kept aside and Maggi cleared for production, Nestle India is gearing to relaunch the instant noodles. For this, the company has said that it. Will be advertising aggressively, increased its spending on TV commercials. During the ban, Nestle India had come up with a series of advertisements to the theme #WeMissYoutoo.
Marketing Strategy By Nestle Post Ban:
In today’s world of citizen journalism, news goes viral in a flash. And if it is bad news, it acquires a spin and speed that is virtually impossible to stop. Brands, therefore, are more susceptible to a tarnished image today, than in any other day and age. The cocktail of the online and offline world, consumer and shareholder activism, random decisions by government bodies, volatile social groups, and hatchet jobs by competing firms make it all too easy to fall from grace. And the loss of goodwill can play out in the form of decreased revenue, loss of clients or suppliers and loss of market share. Maggi re-launched with a digital media campaign “WeMissYouToo” and they have been promoting it forcefully on all brand’s social media channels. This as well as the brand has turned to a great degree brief in answering to their fan’s post. Be it loving their presents or answering on them, Maggi is trying to include an individual touch in their correspondence. In an interview, Narayanan said the organization is taking a look at setting up 24×7 sans toll customer services too keeping in mind the end goal to “get the connect, and network with the product consumer. Suresh Narayanan, chairman and managing director, Nestle India, said, “Our promotional strategy will be across three platforms. We will use traditional media to reassure our consumers regarding the safety of our product. We will connect digitally with our target group. Besides, there will be a lot of events tor brand activation.” The Swiss food major has also partnered with online marketplace Snap deal for selling Maggi.
- In 2013, Net sales grew up by 7.1% contributed by net realizations and volume growth in certain products as compared to year ended 2012.
- In 2014, the net sales grew up by 8.2% as compared to the previous year.
- In 2015, net sales decreased by 17.2% largely due to the impact of MAGGI noodles issue. Net domestic sales decreased by 18.3%. Export sales also decreased by 1.3% because of the MAGGI issue and lower coffee exports.
- Share prices were also impacted with the MAGGI issue.
- Other current liabilities
The other current liabilities have increased, in comparison to the year 2014, mainly due to the MAGGI noodles issue liability.
- The Bollywood superstars who endorsed the brand are now facing the danger of FIR to be lodged against them under various Indian Penal (“ode sections which include section 420 charge for cheating consumers, section 270 charge for involving in the malignant act responsible for likely to spread diseases dangerous for human health and section 273 charge for getting involved in the promotion of sale of noxious food.
- Some websites and discussion forums reveal that it not the problem with the product rather the way it is cooked even the company agrees to this but then question arises why such warning was not given on the packet.
- MAGGI, being an icon of nestle; should not be the target of controversies that questioned its reputation. Nestle should attach more value and significance to its product.
- Each brand has a soul and distinct characteristics. That’s what distinguishes a cult brand from an average brand. Nestle should come up with representations at local vendors and media with its best product quality assurance and safety.
- Bearing the competition created by products of Knorr, patanjali, top ramen is an important task for nestle now, after the comeback.
- Nestle needs to re-formulate MAGG1 as per Indian standards and regulations, and replace them in stores.
- Investing in corporate social responsibility activities, signing a credible endorser, effective public relations etc. would help regain customer confidence.
Nestle motto ‘Good Food, Good Life’ will have to prove its credibility and put a lot of efforts again as it has ended up in scratch. Nestle should concentrate on product portfolio diversification with focus on diary, beverages and coffee and also chocolates as well as confectioner}’ in order to avoid over-dependence on single product. It is rightly said one can do anything but only if God and Time permits. Those who fail to analyses the happenings in the surroundings become losers and those who accommodate and adjust according to time rule the world. The controversy started igniting last year but no officials of Nestle India paid heed to do the necessary rectification resulting now a bad name and shame for the company. Health is of prime concern for everyone though taste also matters. It is very difficult to restore the faith lost because even the school going kids now say -Maggi is bad. This controversy will surely lead to increased awareness among consumers for understanding the impact of any product before consumption rather than blindly believing on false claims in the advertisements. It will also pressurize the other food product giants to move cautiously by abiding the norms of Food and Safety regulatory norms.
Nestle Operations Management Project Report
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Case Study Of Maggi
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