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Will Relaunch of Maggi Noodles into Indian Market be a Success?*

CASE STUDY, MARKETING MANAGEMENT
ET Cases - FLAME, 12 Pages
AUTHOR(S) : Sunit Taunk- PGPM Student, Nikunj Panchal- PGPM Student, Vinod M Lakhwani- Faculty - IBS, Ahmedabad

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Will Relaunch of Maggi Noodles into Indian Market be a Success?

 

“This controversy has led to consumers losing trust in us. We do not put MSG in our products.”

– Paul Bulcke, Nestlé Global CEO

“We will come out with the big hitters first. That’s what consumers want. Then (we will) look at other opportunities, as time evolves and regulatory clarity (for product approvals) comes in.”

– Suresh Narayanan, Managing Director, Nestlé India

 

After crossing all the hurdles, Maggi – The favorite fast food of Indian consumer’s palate was back into Indian market on the auspicious day of Dhanteras – November 9th 2015. The noodles were off from Indian market shelves for almost six months due to reported high content of monosodium glutamate (MSG) and lead in it.

The trouble began in March 2014, while doing routine quality checks FDA officials of Barabanki, Uttar Pradesh sent samples from batch of noodles manufactured in February 2014 for lab testing. The test revealed high amountS of MSG and that of lead. The permissible limit of lead was 0.01ppm to 2.5 ppm in noodles, but test results showed 17 ppm of lead. As a consequence, a notice was issued to the company for violating the rules. Nestlé challenged the reports and further sent samples to Kolkata lab whose results came in April 2015 coinciding with the earlier reports of FDA, Barabanki.......................

Maggi Journey

Maggi began its journey in 1869 when Julius Maggi (Julius) (after whom noodles were named) took over the control of hammer mill from his father. When the hammer milling sector was passing through tough times Julius started searching for new opportunities. It was during this time he got in touch with a physician Fridolin Schuler, who had an idea to improve the nutritional level in the labor classes by using packaged foods having milled pulses or legumes.........

Nestlé’s Voyage

Nestlé’s journey dates back to 1866 when Anglo-Swiss Condensed Milk Company was founded by US brothers-Charles and George Page. In the year 1867 Henri Nestlé, a pharmacists had developed and launched infant’s food “farine lactee” (flour with milk) in Vevey, Switzerland for kids who could not be breastfed. In 1875 Nestlé sold his company and factory to three local businesses in Switzerland...........

Maggi’s Arrival in India

Way back in 1912, Nestlé entered India through its Milk Maid brand. In 1983 Nestlé introduced Maggi to the Indian market. The Maggi noodles caught instantly the attention of Indians, especially women as it had liberated them from the time consuming snacks preparation for children........

Noodles Market in India

As of 2016, instant noodles market in India consisted of brands like Chings, Maggi, Yippee noodles, MTR, Top Ramen and Bambino. Before the Maggi fiasco the market size was INR34,000 million but shrunk as on January 2016 to INR20,000 million...........

Lead and Monosodium Glutamate: Effect on Human Body

As per the Food Safety and Standard rules MSG should not be added to foods consumed by infants below 12 months and it is not permitted in nearly 50 items that includes noodles and pasta. However, MSG is allowed in seasoning used in pastas and noodles. As per the law (Food Safety and Standards (Contaminants, Toxins and Residues) Regulations, 2011) the permissible levels for lead is 0.2 ppm in infant milk substitute and infant foods and 10 ppm in baking powder, tea, dried herbs and spices flavorings...........

Maggi: Enmeshed in controversy

The Drama Unfolds

As a part of routine quality checks, in February 2014 samples of Maggi noodles batch was tested by FDA officials of Barabanki in March 2014 and it revealed high levels of lead and MSG. The results were informed to Nestlé in July 2014 which the company challenged and therefore the samples were sent to a lab in Kolkata for re-test. The decision of the test came in April 2015 which confirmed the earlier outcome. As the news broke out, different states of India started taking precautionary measures........

Brand Ambassadors Bears the Brunt Too

In May 2015, actress Madhuri Dixit got FDA notice for endorsing Maggi noodles and also FSDA12, UP food regulator filed case against Nestlé India. A local advocate Sudhir Kumar Ojha filed separate case against Amitabh Bachchan, Madhur Dixit and Preity Zinta in the court of..........

Impact on Market and Losses Faced by Nestlé India

The whole debacle had impacted Nestlé India’s overall performance. Its net sales dipped by 17.2% for the year ended on December 2015. The net profit dropped to INR5,632.7 million from INR11,846.9 million and also market shrunk to 42%, 35% lower than the year 2014.13 The share price also tumbled down to the lowest
of INR5,539.8 for the year 2015...............

Managing PR in Trouble Time

The delayed response by the company had a negative impact on its consumers. Nestlé did not engage its consumers during the period that led to high speculations. Even the response given by the company on twitter on June 3rd 2015 was too late to control the damage. The response on twitter too was poorly executed by uploading a PDF file and putting a standard answer, “We do not add MSG to Maggi Noodles. Some ingredients may contain naturally occurring Glutamate which can be mistaken for MSG”). Even on Facebook page merely a link was provided for all queries...................

Maggi: Back to Indian Streets

On November 4th 2015, Nestlé announced the starting of resale of Maggi noodles. In a statement issued the company said that samples from the newly manufactured batches of Nanjangud (Karnataka), Moga (Punjab) and Bicholim (Goa) plants have been cleared by three NABL accredited labs, as required by the Bombay High Court. They further added that 3,500 tests on 200 million packages were conducted both at national and international level...............

The Road Ahead

The allegation did give chills to entire instant noodles market in India. But in a competitive market, a loss of one is always a gain for another. The loss of Maggi noodles gave considerable edge to its competitors. The biggest gainer was Sunfeast Yippee noodles who grabbed market share of 33% as compared to 10% in
2014...........

 Exhibits

Exhibit I: Size of Indian Noodles Market

Exhibit II: Brands Share in India’s Noodles Market

Exhibit III: Nestlé’s Product Line and Length

Exhibit IV: Net Sales of Maggi

Exhibit V: Earnings Per Share

Exhibit VI: Net Profit

Exhibit VII: Segment Wise Gross Sales in 2015

Exhibit VIII: Trend of Share Prices

Teaching Note Preview

Will Relaunch of Maggi Noodles into Indian Market be a Success?

 

Synopsis

Fast food or instant foods in packaged form during 80’s were not well-known. Nestlé identified the market for the same and launched Maggi instant noodles in 1983. No one ever had imagined that the product would be so successful that Nestlé’s presence in India would be recognized by just one brand. The recall value of Maggi noodles in noodles segment is unmatchable.

But on June 3rd 2015 this successful product suffered a hitch. Lead and monosodium glutamate (MSG) were discovered in Maggi noodles beyond permissible limits. The samples contained 17 parts per million (ppm) lead, while the acceptable limit was only 0.01 ppm. Food Safety and Drug Administration asked Food Safety and Standard Authority of India (FSSAI) to take action against Maggi. The outcome was that different states of India started banning Maggi sales in their territory. However after overcoming all hurdles, it was re-launched on auspicious day of Dhanteras – November 9th 2015.

The case deals with the various issues that were faced by Maggi, the steps that were taken by Nestlé India Ltd for damage control and also mentions how the Maggi noodles were re-launched into Indian market.

Case Positioning and Setting

The case can be taught to post graduate management students in subjects like Marketing Management, Brand Management and Business Strategy.


Concepts like creating customer value and customer relationship, competitive dynamics, creating brand equity and managing mass communication can also be taught through this case.

Learning Objective

The objective of the case is to make students understand crisis management, actions for damage control, impact of such crisis on overall performance of the organization and re-launch strategy of product.................

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Abstract

Nestlé introduced Maggi noodles to the Indian Market in 1983 at a time when instant food was not popular and Indian customers were habituated to traditional dishes. But with its two minutes tagline and various ad campaigns it gradually became the favorite fast food of Indian consumer palate. The success became so much phenomenal that in local dialects it created a different food category separating itself from noodles, which Maggi brand actually was.

On June 3rd 2015, this successful product had a major setback. Maggi noodles were banned in New Delhi after it was discovered that lead and monosodium glutamate (MSG) were present in noodles beyond permissible limits. The trouble began, when in Uttar Pradesh while doing routine quality checks of the Maggi noodles, samples were found having high content of MSG and lead. The samples contained 17 parts per million(ppm) lead, while the acceptable limit was only 0.01 ppm. As a result Food Safety and Drug Administration asked Food Safety and Standard Authority of India (FSSAI) to take action against Maggi. The outcome was that many Indian states started banning Maggi sales in their territory. However after overcoming all hurdles, Maggi was re-launched on auspicious day of Dhanteras – November 9th 2015.

This case study lets the students understand the various issues that were being faced by Nestlé when it was alleged for not meeting the safety and quality guidelines. It also covers the several steps taken by Nestlé India Ltd. for damage control, assurance given to the consumers about the safety of noodles and the reputational along with financial loss incurred to the company due to this controversy. Lastly, it discusses about the re-launching of Maggi noodles and the road ahead.

Pedagogical Objectives

The objective of developing this case study is to make students understand about handling of crisis management, various actions taken for damage control, impact of such crisis on overall performance of the organization and re-launch of product. This case study can be used to teach various concepts of Marketing Management and Business Strategy subjects.

Case Positioning and Setting

This case study can be appropriately used in undergraduate as well as post graduate management programs for Marketing Management, Brand Management and Business Strategy courses. Concepts like creating customer value and customer relationship, competitive dynamics, creating brand equity and managing mass communication can be discussed using this case study.


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