When a Global Giant failed to understand Local Litigations: 2-minute Nestlé Noodle Case*

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instant noodle market before the ban and thus resulted into a loss amounting to INR3.2 billion³ worth of inventory withdrawn from shelves, distributors and manufacturers.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

When a Global Giant failed to understand Local Litigations: 2-minute Nestlé Noodle Case

Synopsis

Through the backdrop of the Nestlé’s Maggi experience and a discussion in the setting of a classroom, this case runs through the timeline of Maggi fiasco in India and attempts to address the issues related to the overall management, understanding of local business and legal environment. This case aims to discuss the strategic issues in such scenarios and corrective measures/strategies to be opted by the concerned firm. The present case cites evidences of earlier product recalls and actions taken by the firms in those scenarios.

Learning Objectives

The pedagogical objectives of this case study are stated as below:

• To understand the various stakeholders, positions at stake and strategy during crisis situations
• To understand the various corporate legal strategy and adoption of right one in the right scenario
• To analyse the potential strategy/course of action to implement from previous cases of product recall

Case Positioning and Setting

This case study focuses on crisis management at Nestlé India, a host country legal environment and responsiveness by the parent company in such scenario. This case can be discussed in the Business Environment, Strategic Management courses in regular MBA program. In the setting of marketing communication, this case can be utilized as a study and discussion material with a group exercise on pros and cons of actions taken up by firm. This case study can also be discussed in the setting of corporate legal strategy...............