The Maggi Noodles Crisis

Nestl S.A A Brief Introduction

Nestl S.A (Estd. 1905) is the worlds largest food and beverage
company in terms of revenue.
Headquartered in Vevey, Switzerland.
Nestl S.A India, a subsidiary of Nestl S.A. set up its first
factory in 1961 at Moga, Punjab.
It caters to varied product segments Refrigerated Products,
Chocolates, Baked Goods, Cereals, Coffee, Water, Infant Foods,
Seasonings, etc.
It could capture the chunk of the food market due to its ability
to venture into diversified product segments.

Maggi A Brief Introduction

Maggi was originally a wholly owned Swiss
subsidiary that was reputed in the field of
seasonings, instant soups & noodles.
Established 1872 by Julius Maggi.
Maggi was the pioneer in bringing protein rich
legume meal in the market and followed it up
with a ready-made soup.
In 1947, it merged with Nestle due to changes
in the Organization and corporate structure.

Maggi A Brief Introduction

(Indian Context)
The Maggi Instant Noodles was a monopoly in the
noodles segment as it almost had 70% share in the
Indian Market.
It is a niche product in its segment as an easy to cook
instant noodles.
Its consumer base consisted of children in which
majority were students.
Brand Ambassadors: Amitabh Bachan, Preity Zinta,
Madhuri Dikshit.

Market Share and competitors

Maggi had a 70% market share in the noodles segment and
hence held a monopoly .

Competition:
Sunfeast Yippee Noodles
Horlicks Foodles
Top Ramen
Knorr Soupy Noodles
Chi gs Noodles

Its Variants and their popularity

Maggi Noodles - Crisis

In May, 2015, the UP Food Safety regulators carried out systematic
raids on retail outlets of Nestle selling Maggi Noodles.
Testing in Government Laboratories in UP and Kolkata revealed
that I dias favorite snacks had: 7 times the permissible amount of MSG or monosodium
glutamate.
Elemental Lead detected up to 17 times more than the permissible
level.
This paved way for the imposing of ban on the popular instant
noodles and the existing supplies were all lifted out of the retail
stores.
Thereafter, one after other, 11 states have banned the sale of
Maggi Instant Noodles until further notice.

Nestle Damage Control Mode

Issued a press statement on 21st May, which
reassures consumers the brands commitment to
quality.
The Brand has a page Meri Maggi on Facebook
and issued a similar statement through a post.
The post received mixed reactions from followers,
some defended the brand while others continued
asking questions on the controversy.
Maggi has increased the ad spots post the crisis
.These ads are visible across prime slots i.e. between
9pm - 11pm

The Crisis In Numbers

Implications of the fiasco

Demand & Supply
Retailers took maggi off the shelves was one of the first
reason that fall in sales of maggi noodles.
Maggie sales fell 60% across India since the controversy
broke.
As harmful chemicals like lead and MSG found in samples
consumers may feel their health is at stake. This has shaken
co su ers confidence.
Nestles public relations strategy also failed to take
consumers into confidence.
The Maggi controversy has affected all the other packaged
food brands since it was a widely used brand.

Implications of the fiasco

Revenue
The fall in sales directly affects the revenue since Maggi is a single
largest brand under Nestle India, which usually contributes about
22-25% to its total revenue of the company.
The fiasco has forced Nestle to cut production by one-third,
recalling Maggi from markets across India. Nestle lose about Rs
160 crore in revenue in the quarter to June 2015.
There is a 9 percent decline in the purchase of ready to cook food
and 4 percent decline in the beverages purchase. The overall
packeged food segment growth has been declined to 4 percent as
compared with the 9 percent in the previous year.

Implications of the fiasco

Competition
Maggi dominated its segment with huge market share.
The current crisis can prove to be an immense window of
opportunity for rival brands such as Yippee .
It gives the chance to woo audiences without competing
with the market leader.
They can use the situation as a chance to increase their
visibility at retail markets & occupy racks that were
previously dominated by Maggi.
They can possibly look at increasing their marketing
budgets & media spends.
An opportunity to build relationships with audiences and
get the consumer confidence back.

Current Scenario
The Indian unit of Nestle had challenged a June 5 order of the
Food Safety and Standards Authority of India (FSSAI) of the
ban on the product.
The Bombay High Court on Thursday set aside the
countrywide ban on nine variants of Nestles Maggi instant
noodles.
The court has ordered Nestle India to conduct fresh safety
tests on the product before relaunching it.
Nestle has started to pave the way for the brand's comeback
with a series of social media ads. Using the hashtag
#WeMissYouToo, the company has posted four adverts on
Youtube.

What can Nestle India do

Nestle India could look at roping in a brand ambassador to
advocate their products
The ambassador or the celebrity should have high trust value
amongst the audiences.
Maggi has been in the market for years. They can reveal
statistics of deaths due to Maggi over the past decade which
would be none. Hence using numbers as a positive
reinforcement.
Make necessary changes to the product & that adhere to the
norms.
Cooperate with the FDA & redress the issue.
Build a campaign around Maggi being a health conscious
brand through its latest wheat, oat & raggi noodles.

Conclusion
Maggi has lost the trust of many customers &
rebuilding that trust will be a challenge for
Nestle.
There is an immense window of opportunity
for Maggis rival brands.
With the lift on ban Nestle will now attempt
to win back its customers with an aggressive
marketing campaign.