Will Maggi Bounce Back?

Maggi case. Will Maggi Bounce Back? Would Nestle be able to Leverage the crisis and Gamble on the Indian Market? Prepare a case study. It should include the following: Summary/ Introduction/Background/ Situation/ Impact/ Discussion/ Recommendations/Way forward

Summary

Nestle India’s popular 2-minute noodles Maggi accounted for 60% of the noodle sales in 2014. In 2015, Nestle faced the biggest hit after Maggi was recalled by FDI, after tests showed high levels of lead and MSG in the noodle. The tests conducted in other countries did not find the levels unsafe and recently the Bombay High Court struck down the nationwide ban questioning the test results. By analysing the situation it’s hard to say where the fault lies. Were there really unsafe amount of lead and MSG in the noodle? Were they framed? The way Nestle responded to the situation, was it wrong? What else could Nestle have done? What should Nestle do bring Maggi back? This case study will show how the situation developed, how Nestle dealt with it, and also how Nestle handled the customer’s queries. The case will also have recommendations on how to bring back Maggi to the customers’.

Introduction

Background

Nestle first entered the Indian market by setting up a milk factory in 1961. Nestle India Limited introduced the Maggi brand to Indian consumers by launching Maggi 2 Minute Noodles, an instant food product in 1982. At that time they were trying to create a new food category of instant noodles especially targeting working women. But it failed and later on through survey they found out that children are the ones that like the taste the most. There onwards they started targeting the children and was able to become the most successful brand in the instant noodle category.

In 2001, Maggi became the core brand for Nestle India with a market share of 90% in instant noodle category. They produced various types of Maggi noodles like Maggi Atta for health conscious people, then various masala type as well.

Situation

In May, 2015 Food regulators in Uttar Pradesh found that samples of Maggi 2- Minute noodles have high levels of MSG and lead. On June, many states in India banned Maggi based on the results of their own testing. The major retailers like Future Group bazars, and nilgiris also banned Maggi from its stores.

On June 5, Food Safety and Standards Authority of India (FSSAI) ordered a recall of all nine approved variants of Maggi instant noodles and oats masala noodles from India, suggesting them to be unsafe and hazardous for human consumption. On June 6, Central Government of India imposed a nationwide ban to Maggi noodles for an indefinite period. Following this Nepal also banned the noodles. Maggi noodles had to also withdraw from five African nations- Kenya, Uganda, Tanzania, Rwanda and South Sudan by a super-market chain after a complaint by the Consumer Federation of Kenya. But the Bombay High Court allowed the export of Maggi while the ban in India remained.

After the food safety scare in India Maggi noodles have been tested in other parts of the world to reassure consumers that they are safe. Results from noodles tested in the UK found that levels of lead in the product are within EU levels. Shortly after the UK results were published, Canada also cleared Maggi noodles as safe.

In August, tests performed by the US health regulator FDA showed no dangerous lead levels in the products. Also the nationwide ban was struck down by the Bombay high court on Aug 13, 2015. The court stated that proper procedure was not followed in issuing the ban and called into question the test results, as the samples were not tested at authorized laboratories accredited to the National Accreditation Board for Testing and Calibration Laboratories.

Nestlé’s Response

The initial response from Nestle India was that they rejected the accusation that the noodles were unsafe and said on their website and social media accounts that there had been no order to recall any products.

A statement on their website said that “The quality and safety of our products are the top priorities for our Company. We have in place strict food safety and quality controls at out Maggi factories… We do not add MSG to Maggi Noodles, and glutamate, if present, may come from naturally occurring sources. We are surprised with the content supposedly found in the sample as we monitor the lead content regularly as a part of the regulatory requirements.”

They kept up to date the customers through their official Maggi noodles India Facebook page, Twitter and website, Nestlé states that extensive testing reveals no excess lead in Maggi noodles. They also answered the customer’s questions about the levels of MSG and lead, giving them science behind those tests. They kept reassuring their customers stating that they were working closely with the authorities in India to resolve the issue.

On June 4, after re-assuring customers that its noodles are safe, the brand does a U-turn and decides to recall Maggi noodles produced in India. Nestlé CEO Paul Bulcke spoke to the media and said that “We are working with authorities to clarify the situation and in the meantime Nestlé will be withdrawing Maggi noodles from shelves.” After that they went on destroying more than 27,000 tonnes of noodles, recalled from 3.5 million retail outlets.

Impact

Nestle India posted disappointing second quarter (April-June) results after its most popular brand Maggi noodles was banned nationwide on food safety concerns. It has posted a net loss of Rs 64.4 crore in Q2 from a profit of Rs 287.9 crore from year-ago period. The company incurred a one-time loss of Rs 451.7 crore due to stocks withdrawn which also includes incidental costs. Sales were badly hit by Maggi noodles ban. During the quarter, total income was down 19.5 percent at Rs 1957 crore against Rs 2432 crore (Y-o-Y). The company says net sales Worth Rs 288.4 crore was reversed in Q1 due to withdrawal of Maggi noodles from market.

In the society it created an environment of fear in the food industry. People became vary of buying any food items from the market. It affected the mothers most, as they are the ones who used to buy it with trust to provide to their children.  It made people realise the value of traditional cooking foods.

Discussion and Recommendations

There are many things that went wrong for Nestle India in the whole situation. Let’s first take the tests conducted by the UP Food regulators. As soon as they came out with the tests results Nestle should have asked them to provide the details and should have made sure the tests were conducted in the approved laboratories and should have started their own investigation, instead of ignoring it and hoping the situation will clear away on its own.