BAN ON MAGGI

Introduction

As consumers, we play a vital role in the health of the economy local, national or
international. The decisions we make concerning our consumption affect the demand. All
marketing starts with the consumer. So, consumer is a very important person to a marketer.
Consumer decides what to purchase, for whom to purchase, why to purchase, from where to
purchase and how much to purchase.

Maggi

Maggi is an international brand of seasonings, instant soups and noodles owned by

NESTLE since 1947. The original company was founded in Switzerland in 1872 by Julius
Maggi. Maggi is a leading culinary brand, which is today known worldwide for quality and
innovation. Nestle offers a whole range of products, such as packaged soups, frozen meals,
prepared sauces and flavorings. Maggi noodles were launched in India in the early 1980‟s.
Carlo M. Donati, chairman and managing director of Nestle India Ltd, brought the instant
noodle brand to India during his short stint here in the early eighties. At that time, there was no
direct competition.

Maggi controversy

The Maggi controversy has s shattered many hearts, Maggi was not merely a product or
a brand in India, Indian consumer who is not unused to suspect food standards, feels a deep
sense of betrayal by one of the most trusted food brands in India. In India, Maggi noodle are
specifically formulated to serve vegetarians, and carry the green dot. The product in other
countries is non-vegetarian, unless imported from India’s has noted three major
violations1.Presence of lead detected in the product in excess of the maximum permissible
levels of 2.5 ppm.2.Release of a non-standardized food product in the market, viz. “Maggi
Oats Masala , Noodles with Tastemaker” without risk assessment and grant of product
approval.3.Misleading labeling information on the package reading “No added MSG”
Food-Safety Regulations in India Processed-Food Industry Regulations

The Indian processed-food industry accounted for an estimated 32% of the country’s
food market.34The industry was highly fragmented, with approximately 75% of output
generated by the unorganized, small and medium-sized enterprises(SME) sector.35This
included an estimated10 million street foodvendors.36Historically, 13 different laws
pertaining to sanitation, licensing, food safety, and labeling governed the processed-food
industry. In 2006, the government consolidated these laws under the Food Safety and
Standards Act (FSSA). It also established a new national regulatory body, the Food Safety and
Standards Authority of India (FSSAI) to monitor the industry.37FSSAIregulations spanned
four main areas—food quality, packaging and labeling, signage and customer notices, and
licensing registration and permits. This approach also increased the FSSAI’s regulatory burden
,as it had to issue premarket approvals for all products that did not fall within the standard
list.40For the FSSAI, attesting thousands of product-approval applications with a very limited
budget of approximately $63 million41was a nearly impossible task.42(By contrast, the U.S.
Food and Drug Administration [FDA]budget was $1.6billion for the year ending September
30, 2016.D. Sivakumar, chairman and CEO of Pepsi Co India, explained, “Firms want India to
move to an ingredient-approval route, similar to what is prevalent in other parts of the world.
This will ease regulatory burden on the FSSAI, as it will owe the number of product-approval
applications.”44Another issue was the stringency of the law itself. Some industry insiders
noted that laws in developed economies were far more stringent. For instance, a senior
employee at Haldiram’s, a popular Indian snack manufacturer, stated, “A pesticide that is
permitted in India may not be allowed [in the U.S.]. And even if it is, they may not allow it in
the same concentration as it is here.

Testing controversies

MSG (Monosodium Glutamate): Testing found some MSG in Maggi noodles. The
packet stated “No added MSG”. However, MSG naturally occurs in hydrolyzed groundnut
protein, onion powder and wheat flour. Maggi offered to remove the words “No added MSG”
from the package to overcome the objection.
 LEAD: Out of the 13 samples tested by Delhi authorities, 10 of them had lead content
exceeding this limit. Testing outside of India (Singapore USA) resulted in reports that Maggi
noodles are safe. The court mandated testing to be done at three specific laboratories (Punjab,
Hyderabad and Jaipur) where Maggi was found safe. Some lead occurs naturally in plants and
soil. Some lead is found in Indian spices, although within acceptable limits.

Impact of the Maggi Controversy

Maggi controls nearly 70% of the instant noodles market in India, worth Rs 5000 crore,
according to a report by Times of India. It is followed by ITC SunFest Yippee, which has a
market share of 18-20%. Hindustan Unilever's Knorr Soupy noodles makes up for the balance
share, but after controversy following are the impact of controversy on Maggi

Fall in the sales

As states across the country banned the product, Maggi sales fell 60% across India since
the controversy began in the last week of May, according to a Kotak Securities report

Net Profit

Maggi contributed 30% of Nestle India's Rs 1,185 crore-worth profits in 2014-15, as per
the media reports. Reeling under the Maggi ban, Nestle India had reported 60.1 per cent
decline in standalone net profit at Rs 124.20 crores for the third quarter ended September,
2015. Fall in Share Price: Its share price fell nearly 13.5% or by Rs. 941 in the fifteen days to
June 10, 2015.Most consumer goods companies have seen single-digit growth in the recent
past. Keeping this in mind, the current controversy is only expected to add to Nestle's woes.
Revenue growth may weaken in this financial year in the aftermath of the controversy, Kotak
said. The Nestle India stock currently trades at33 times the company's future Earnings per
Share (EPS), according to Kotak Institutional Equities report. This means, investors pay 33
times more than the company's expected profit in FY16 to purchase the stock.

Panic in the market

As states across the country banned the product, many retailers took Maggi off the
shelves. Some states such as Punjab, Karnataka and Uttarakhand also ordered Nestle to stop
production until further orders.
Consumer confidence slumps

Trust plays a major factor when a consumer buys a particular product. With harmful
chemicals like lead and MSG found in samples across the country, consumers may feel their
health is at stake. This has shaken consumers' confidence.

Maggie Come-back

On October 26, nestle had said that it has resumed manufacturing Maggi noodles and
they will hit the markets after getting clearances from food testing labs. Initially, after re-
launch, Maggi noodles (12 packs, 70 grams, 144 rupees) on Snapdeal, the e-commerce
website. However, according to the above report, these noodles were available in 8 states of
India. On 9th November 2015, nestle had re-launched Maggi noodles in the market as the
Bombay high court had lifted the ban on nine variants of the fast food on dated 13th August
2015 and asked the company to go for fresh tests.

Within a week of Nestle’s Maggi noodles returning to the market, the country’s apex
food regulator — FSSAI has moved supreme-court against the Bombay high-court order that
had allowed re-launch of the noodles and that it had questioned the credibility of the latest
tests as samples were drawn from Nestle. It should be noted here that Maggi cleared the first
set of tests on October 16 which allowed Nestlé India start manufacturing the product and
second set of tests on newly manufactured batches also declared the products as safe for
human consumption [14]. Even after getting some reports from Mysore laboratory, supreme-
court on 14th January 2016, asked more clarification from the concerned lab and the matter
was posted to 5th April 2016 by the supreme-court and there was no interim order by the time
this case-let is completed. On re-launching 7, 20,000 units of Maggi noodles (12 packs) were
sold through ‘Snapdeal’ with 60,000 units (welcome kit). These welcome kits consist of a
Maggi calendar-2016, a Maggi fridge magnet, Maggi postcards and a ‘Welcome Back’ letter.
As a whole, 45 million packs of the popular snack within two weeks of its re-launch and the
company is selling the noodles only in 200, 000 retail outlets across 600 cities and towns. It
has a reach of 3.9 million retail outlets.