Business Proposal on Maggi Scandal

                             BUSINESS PROPOSAL

                                              ON

                      THE MAGGI SCANDAL

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EXECUTIVE SUMMARY

This business proposal discusses the controversy related to Maggi noodles, that was launched in 1983 by Nestle India Limited, being hazardous for health. Maggi’s SWOT Analysis, the controversy ‘s adverse effect on Nestle as a whole and market opportunites to other brands like ITC’s Yipee noodles, Patanjali’s Ataa noodles is also discussed. Maggi can gain back its market share and reputation through various strategies –If it acknowledges the controversy and address the customers by assuring tranparency.It can also start an advertisement campaign taking brand ambassadors of good reputation. Moreover, Nestle can setup additional transparent systems in place to ensure that all its future products are 100 percent safe.

INTRODUCTION

Maggi is an International brand that was originated in Switzerland. It was acquired by Nestle in 1947. Nestle India Limited introduced Maggi brand to Indian consumers with the launch of  Maggi 2-minute noodles, an instant food product, in 1982. Maggi was soon one of the best products of Nestle India Limited as it catered to the needs and requirements of the consumers.

        Gaining customer confidence is not easy but regaining customer confidence is even more difficult once consumers have a negative perception of a brand. Therefore, a tarnished image of a brand can lead to decreased revenue, loss of clients or suppliers and loss of market.Maggi also found itself in this quagmire. Food Safety and Drug Administration (FDA) of Uttar Pradesh found monosodium glutamate (MSG) and excessively high quantity of lead in sample testing. Food Minister Ram Vilas Paswan directed the statutory regulator, Food Safety and Standards Authority of India (FSSAI), to conduct nationwide tests on Maggi. Under Food Safety and Standards (Contaminants, Toxins and Residues) Regulations, 2011,the permitted level of lead is 2.5 ppm. It was found that MSG was present 7 times in excess of the permissible limit and therefore, unsafe to consume.

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SECONDARY RESEARCH

      In the midst of this controversy, Uttar Pradesh Food and Drug Administration ordered the recall of a batch of 20,000 noodle packs. With more and more states deciding to randomly test samples and banning sales in the interim, coupled with retail chains removing it from the shelves, the company has had no other choice but to retract the product.

     Maggi was ranked 18 in the BrandZ Top 50 Most Valuable Indian Brands study, conducted by Millward Brown and commissioned by WPP last year,with a valuation of  $1,127 million. According to the specialists, the brand value is expected to drop by 30-40%. As per the retail analysts, the Sales have dropped by 60-70%.

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“Nestlé spent three decades building a beloved noodle brand in India. Then the world’s biggest food and beverage company stumbled into a public relations debacle that cost it half a billion dollars.”   - Fortune

     Nestle, the world’s largest food and beverage company, has sold Maggi for 30 years, and brand’s ubiquity and resonance on the subcontinent is something akin to Coca Cola’s in U.S. In 2014, Indians consumed more than 4,00,000 tons of the instant noodles- marketed in 10 varieties, from Thrillin’ Curry to Cuppa Mania Masala Yo!- and Maggi accounted  for roughly a quarter of the company’s $ 1.6 billion in revenue in the country. That year Maggi was named one of India’s five most trusted brands.

       Maggi meltdown would prove costly. Nestle lost at least $277 million in missed sales. Another $70 million was spent to execute largest food recalls in history. Add damage to its brand value- which one consultancy pegged at $200 million- and the total price tag for the debacle could easily be more than half  a billion dollars.

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       Nestle is still struggling to make sense of what exactly transpired. To counter the accusations made by the Indian health officials, Nestle has produced various tests on more than 3500 samples to show that its instant noodles are perfectly safe, with lead counts well below the permissible limit.

      For a 150 year old Swiss business that brands itself as the” world’s  leading nutrition, health and wellness company,” the idea that it felt short on quality control is anathema. But then, where did the things go wrong?

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It’s ironic that a company, after a humiliating  and existential scandal over infant formula, tried to reinvent itself as a paragon of corporate do-gooding and transparency- only to discover that no matter what positive and world bettering things it did, it couldn’t quite escape its tainted image.

SWOT ANALYSIS

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1. Strenghths

1. With the presence in different product categories under the umbrella of  Maggi with large Stock Keeping Unit, Maggi has an edge over its competitors.
2. 1st Mover Advantage-  Maggi has established itself as a pioneer of changing eating habits  and acceptance of noodles as an easy meal. The idea for instant food products came into India with Maggi and it enjoyed monopoly for a long time. All the more, it still has a huge market share.
3. It has a huge brand loyalty.
4. With its huge promotion strategies and branding helped not only in creating  strong customer connect but also to have high TOMA score.
5. Robust and well established distribution channel of the parent company i.e NESTLE helps in making the product available in the market.
6. Maggi is now a part of menu in restaurants, stalls, canteens etc.

1. Weaknesses

1. Risk of over dependence – There is a high risk of over dependability on Maggi noodles, as 57% (2014) of the  revenue of the Maggi brand  comes from noodles knowing the fact that their market share  has been decresed significantly ( from 84% in 2012 to  63% in 2014). Even with more and more competitors the market share of  Maggi is expanding.
2. Adverse effects on health – With the controversy about presence of MSG and lead in Maggi , people are reluctant to consume Maggi as the consumers are more informed and educated these days.

       3) Opportunities

1. Brand Expansion-  Maggi can expand its product categories like chips, pickels etc. Moreover, these days the consumers are health conscious so it can bring healthier products like cornflakes etc.
2. So far Maggi has targeted developed areas and cities. It should also target the unexploited rural areas with innovative strategies pertaining to customer engagement with the brand.
3. Increased affinity of Indians towards chinese cuisine creates new               opportunity for Maggi to improve its taste further and capture large market share. 
4. The company can target Restaurant chains.

      4) Threats

1. Competition- The ban gave advantage to the competitiors like Yipee   noodles, Patanjali Ataa noodles, Top Ramen etc. More competitor is an area of concern.
2. Negative word of mouth- Propogation of ill effects of Maggi through television, newspapers, social media can be really very harmful  for the existence of  Maggi. Most of the revenue is generated through Maggi Noodles. Therefore, any negative publicity for Maggi noodles can be harmful for the company as a whole.
3. Commodotized name- Maggi is basically commodotized for noodles.

      COMPETITOR ANALYSIS

Maggi has a huge market share but some other brands are close behind Maggi.

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1) Maggi vs Top Ramen

     Top Ramen is the second largest  Noodles brand in India trying  hard for the past 18 years to beat Maggi Noodles. Top Ramen is the global brand from Nissin. Launched in 1991, Top Ramen is trying its best to dethrone Maggi.

   The ban on Maggi will give an opportunity to Top Ramen as the consumers will now have no other option but to go to the second best. If taken right measures , Top Ramen can capture the maximum market. The past trend shows that Top Ramen is unable to retain its customers and the main reason being the price of the product. The consumers find Maggi affordable, therefore, Maggi has a price advantage.