When a Global Giant failed to understand Local Litigations: 2-minute Nestlé Noodle Case
It was almost a month since Prof. Joshi and many more like him were missing Maggi1 noodles due to the ban on all variants of its noodles, citing the presence of excessive lead by Food Safety and Standards Authority of India (FSSAI) and by the Maharashtra2 Food and Drug Authority (FDA). Prof. Joshi who holds a PhD in Strategic Management and teaches Strategy in a Top B-school of India was not only thrilled due to this ban but also inquisitive on how Nestlé India was handling this situation. Nestlé’s Maggi noodles were under scanner due to the seven times more levels of lead than the permissible limit of 0.01ppm and violation of labelling regulations on taste enhancer monosodium glutamate (MSG) set by FDA. This resulted in a legal suit under the unethical trade practices and violations of labelling and packaging norms.
Surprisingly, Nestlé India had reacted on this whole fiasco in a very passive manner, in spite of it being an important product portfolio for the organization. Maggi held 63% of India’s instant noodle market before the ban and thus resulted into a loss amounting to INR3.2 billion3 worth of inventory withdrawn from shelves, distributors and manufacturers.
All these facts and figures triggered Prof. Joshi’s mind to discuss the whole issue in his next Strategy class. But before taking this to his class, he wanted to track the events of Nestlé India, the whole Maggi Fiasco and how the organization could have reacted in a much better manner by learning from previous incidents of product recalls....................
Exhibits
Exhibit I: Company Shares of Noodles in India: % Value 2012-2015
Exhibit II: Nestlé India Share Price movement – NSE (May 2015-April 2016)
Exhibit III: Cost to Nestle‘ India Due to Maggi Ban
Exhibit IV: Previous Product Recalls and Firm’s Strategy to Combat
1 Nestlé India’s Flagship brand in Instant Noodles in India
2 State of India located at central part of India3 $1 = INR67 (June 30th 2016)