Case Study Analysis

Principles of Management
Subject Code: MGT 401
Name: Vengatesh Sunderraman
UID No: EPG/August21/1051

Nestle India –
The Maggi Ban
Introduction

“ Good Food, Good Life”, Nestlé’s tagline touched the millions of Indians hearts by offering the most
instant & easily cook food “Maggi Noodles”, two minutes is all it takes to make this food is the best
way to remember Maggi. Business runs on trust. The brand leader with almost 80% market share in
India shows how consumers believe the brand. 30 year old brand lost their market share, from 80%
to zero, within 30 days. How Maggi as a Brand or Nestle as a company has undergone the roller
coaster in the year 2015 and this case analysis discusses the response in four parts in line with
questions

Case Synopsis:

Part A: Maggi Noodles Food Inspection & Ban in India

1. It was a routine raid by Food Safety & Drug Administration (FSDA) inspector picked the
Maggi noodles and found Maggi contains MSG & lead, the lead level found was 1000 time
more than what the company claims in the label. This whole process took almost an year
2. To seek clarity with the company U.P government send the notice to nestle India about
presence of MSG & lead in Maggi Samples. Company sends the Internal monitoring
document on May 05, 2015.
3. Local news paper published an article about this whole on May 07, 2015. After two weeks of
silence, Nestle India made official statement that “no order to recall Maggi noodles being
sold & safe to eat”
4. Within this time media studios are started debating the issue, in this meantime Nestle India
has incurred the loss of half a billion dollar
5. As Nestle India hasn’t settled this issue with 3 Lakhs rupees fine with Uttar Pradesh Food
Safety Department. Things gone out of control & the company has left with no other choice
than recalling 38,000 tonnes sold noodles from the retail outlets by spending almost three
months and destroyed as the govt., has banned the product by June 2015

Part Maggi’s re-entry & Nestlé’s product launch strategy

6. As a part of safety crackdown product has undergone thousands of tests & hit the retail
shelves by November 2015. Since the Maggi ban company reworked it strategy & plan to
focus new product categories such as cereals, healthcare & skincare which has huge scope in
India and the enormous competition too
7. Company realized the need of Plan B journey is nothing but how to stay alive without maggi,
during the interim period (from June 2015 to Nov 2015) finally gives 3 year strategy and the
need for new entering new business segments after 1990 the time when it launched
chocolates
8. Ban of the brand which earned ~30% of the total sales in the last year ( the brand which has
more earned double the revenue in 12 years) made the company to realize hardly 20
products is not sufficient to be in the fast growing consumer market against the 20,000
brands on its global bouquet
9. Finally nestle felt the need of new products which made them to come out of their comfort
zone by introducing 30 products in 2 quarters
 10. Graphical Representation of Nestle Sales (Source Business- Standard.com)

Product vs Quantity sold in 1000 metric tons

500
400
300
200
100
0
prepared Dishes Milk & Nutrition Confectionary Beverages Total
& Cooking
Aids(Brand
Maggi)

CY 2014 CY 2015

Key issues:

1) When the company received formal notice from U.P., government there was lack in swift
response, by not estimating how the digital media can rapidly reach the millions of
customers within a few hours
2) There should’ve been a attempt by Nestle to explain how the lead content can vary across
the states
3) Two week of delay in addressing the key complaints shows lack of leadership. Someone from
the product team like Brand Manager or some senior managers should address the issue to
media
4) Lost opportunity to settle the issue with U.P food Safety department by not paying the
penalty of 3 lakhs which turns as a “Threat” for the brand – Maggi
5) Bringing the Global Chief Executive(GCE) to face a country bound issue & addressing the
local media clearly shows the improvement in GLOCAL approach (A global Chief Executive
may or mayn’t know the policies or expectation on a leader who faces the local medias)
6) “Applying the same quality standard & methods in the world here in India too” questions
whether Nestle been in adopting the local standards including it labelling
7) Too much of dependency on a particular brand i.e., almost 25% of total revenue from a
particular brand.
8) No recent category of products been launched for almost three decades
9) Fast growing economic countries like have 1/1000th of product comparing the global
bouquets
10) Entering the huge potential market at later stage puts the company to face huge
competitions
Questions on the case

1) Explain with reasons was it external environmental change that caused the problems for
Maggi or was there some internal environmental issues? (Answer in maximum of 150
words).

Maggi a popular brand from house of Nestle India touched the millions of heart in a way it
doesn’t require any introduction.

As the businesses become global & the organizations become transnational, business
environmental changes are unavoidable. This write-up put forth the details of how the
external environment specific to Firm’s industry (called specific environment) and its
component(s) caused the inconvenience to Maggi

External environments are all the events which are completely outside of the organization
influences the organization's day –to-day operations, brand value & the revenue. For
example: Misleading labelling or addition of hazardous ingredients on the food product is
not only fineable but also punishable by the regulator, put the company to recall the
products distributed.

According to me mentioned below is the list of external environment factors which

discoloured the market share & its revenue

Customer Need: The need of the customer is ever-changing. Gone are the days where
customer are looking forward tasty food product rather customers need a toxic free food
items as these prepared dish & cooking aid products are consumed by almost all age
groups, so safety should be the paramount importance.

Consumer Sentiments: From the time it launches the product, it has been positioned as a
healthy food too & its advertisement campaign mostly connects the mom & children. When
Indian government has banned the maggi mentioning it’s hazardous for consumption then
 the consumer’s belief & the sentiments got hurt which may creates the long term or
permanent aversion of the brand that provoked the competitors to capitalize their
opportunity.

Advocacy Groups: On May 07, 2015 when there was an article in the local magazine in U.P.
food advocates across the country joined their hands together, by participating in public
communications such as media debate & other social medias, to start boycotting not only
Maggi Noodles but all other products of Maggi like Jam, Ketchup & beverages which resulted
in poor sales numbers of Nestle India.

Also, Global companies like Nestle shouldn’t have Same Standard & same quality gates
across the multiple countries (As mentioned by Mr. Buckle in one of the interview in New
Delhi during his visit to India) as it misses the management slogan of Globally Local
approach. Nestlé’s quality standards / test need to be in-line with the regulators to avoid the
environment of confusion.

From the listed factors it’s been very evident that external environment changes put “Maggi
in a soup”. Nestle India need to be very watchful in scanning the environmental changes and
they need to be vigilant in responding regulator concerns without any contradictory
information.

2) Explain whether adequate plans beforehand could have helped Maggi to anticipate the
problem. Justify your answer.

As the saying goes “Failing to Plan, is Planning to fail”. Statistically a product – Maggi which
earned ~30% of Nestle India’s total sales in 2014 become ineligible to get it compared with
its own performance in 2015

According to my analysis following beforehand plans can helped the situation

Acknowledge & assure: When there’s an allegation better acknowledge it because this is
been tested at more than one lab. It is very important to assure the consumers & work
jointly with the authorities to understand the methods authorities carried out the test

Communicate effectively: During the crisis situation it’s always recommended to

communicate personally by showing a human face and timely. In this digital world
information can be transmitted much faster. So Nestle could’ve kept their communication
speed almost as instantaneous as possible.

Think & Act responsibly: During this crisis don’t hurt the consumer emotions further by
saying “Maggi is safe for consumption in India” this kind of defensive and contradictory
statement may question the credibility of the brand & might give the scope the company is
not interested in the health of the consumers
• Think Global Act Local: Customization according to local standard should be
implemented as per the country or as per the plant’s they are operating &
 manufacturing respectively. If the Indian regulator’s policy is giving importance to
labelling then the same the labelling standards shouldn’t be contradictory
• Root Cause Analysis: Eight manufacturing plants were preparing Maggi as water
can contain lead & its level may vary according to geographies, as a result of it
product produced at one manufacturing unit might shows higher lead level than
the permissible limit.
There could be the possibility that the way tests are conducted by the authorities
might be different from Nestle India’s test methods.
Robust Quality control: If the quality control of maggi would’ve been robust in terms of
experiment methods and frequency there might be the possibility this crisis wouldn’t have
take place.

To summarize the communication plays a vital role during the crisis situation in the overall
issue Nestle India should’ve an expert PR team to front end the crisis communication or in
the absence of PR team atleast consumer communication team or any leaders from the local
office should’ve shown up to media.

3. SWOT analysis is actually not an analysis but a list of items. It does not help in making
strategies. VRIN is a better method”. Give your opinion in favour or against the statement
taking the context from the Maggi issue.

SWOT Strength, Weakness, Opportunity & Threat analysis list all the items with related to
external factors like VRIN analysis. This analysis talks in favour of VRIN Valuable, Rare,
Inimitable and Non Substitutable as this primarily talks about the competitive advantage

SWOT doesn’t help in making strategies unlike VRIN as VRIN answers “How” part which is the
core part of strategies. VRIN helps in understanding and analysis of the internal environment
after the external environment which causes maggi ban now nestle needs to have robust
analysis about their internal environment.

VRIN clearly suggest the internal environment advantage against the competitors, as in the
interim ban of five months competitors try to take over market share.

The crisis Maggi has undergone and to revive the brand starting by clearing the Govt., standard
test, to positioning their brand against the competitors and bring the faith of the brand to the
customers all required how to carry out these steps that’s where VRIN takes higher advantage.

Nestle has decided to reinstate Maggi Noodles alongside as a long term strategy now the
organizations decided to have “Motion Initiatives, Launching new products and gaining the
consumer’s trust” all required strategies to administer it. However, VRIN analysis helps in
prioritizing the bouquet of items which needs to be taken at priority.

The five months of ban has taken as an advantage by their competitors. For example as a
reviving strategies Nestle has entered into e-commerce (An information from out of the case is
gathered) shows how they wanted to use the present technological capabilities is one of the
Valuable strategy and this may take some time and / or for the competitors to Imitate until then
this is one of the Rare ideas they hold to reach the Urban educated people. However, this is
substitutable.

To summarize VRIN provides the clear strategies in how it can exploit the assets and its
capabilities to position their brand among the competitors

4) Give your idea regarding what management principle(s) Maggi can use to avoid such issues
in the future.

From my opinion following are the ways maggi could use to avoid such issues in the future

Forecast & plan: Maggi as a brand needs to start anticipate that every quarter there might
be the food inspection on the sample randomly picked and send for testing. By forecasting
this Nestle India as an organization can imitate the sample test at random manufacturing
units as a part of surprise internal test.

Standardization of Test: Nestle India as a company can start work closely with State /
Central level food inspection team to understand what the test are and how the tests are
conducted. So that they can constantly revamp the internal test strategies in-line with the
regulators

Communicate: It’s always better to communicate in person rather than using the automated
or typed messages. Instead of being reactive in communicating better be pro-active. Timely
communication plays a pivotal role.

Accept the responsibility: If there’s a safety concern raised accept it, if it’s at the very early
stage, better connect with the consumer and clarify about the ongoing issues and how
Nestle as a company is working with the regulatory body

Choose the appropriate representative: It’s very important to choose the right spoke
person, given the situation calling the Global Chief Executive or the Plant in-charge of nestle
doesn’t make sense. The ideal person could be either a brand manager or the R&D head
brings certain level of confidence to consumers

Stop mis-information: Ignoring the incorrect information irrespective of the size of the
information it’s better to clarify. The social media or digital communication is not meant only
to spread the rumours it’s also a medium to address rumours or allegation

Correct mistakes at the early stage: Given an option to settle the issue, by paying 3 lakh,
with the U.P., state government was the opportunity missed which leads to greater problem.

Portfolio Diversification: Nestle could’ve diversified the portfolio like the “Motion Initiative”
strategy. Too much of stress on a particular brand is always a threat. If Nestle India can
launch and diversify the portfolio in the very short time then the same was not done before
this crisis clearly says, the organization should invest more on their new products and its
marketing strategy which would eventually gives the diversification of portfolio and provide
the competitive edge

These are the above principles which would help to avoid such issues in future.