Case let: Nestlé’s Maggi Noodles in India: Ban and Aftermath

1. Appraise the environment forces in context of this situation

The various external factors revolving around the Maggi Noodles ban in India are as below. Maggi, the brand is
synonymous with instant noodles in India.

Competition Government

Customers Shareholders

Maggi

 The reports that the levels of lead and MSG in the Maggi Noodles were above the permissible limits would create
panic among the customer base. Since the lead can affect the health of the people, and Maggi being primarily
consumed by a younger generation of the society would have deeper effects within the customer community. This
would affect the customer’s perception of the quality of the product. This would be a test of the loyalty of its
customers, to find if they would still continue using Maggi when it is reintroduced.
 The competition was also looking for an opportunity to capitalize on this news to increase their market share. The
reduce in sales of Maggi due to the ban and subsequent recall means other competitors had a chance to increase their
market share levying the customer base that Maggi created. Since the ban of Maggi, and the subsequent recall of
Maggi from the shops, would mean that Maggi is out of the competition for a while which will give a chance for
competitors to win the loyalty of the customers, and also induct new customers.
 Another force involved in this case is the government agencies. The fact that agencies and labs from other countries
have deemed Maggi fit to eat raises questions about honesty and sincerity of its officials, and also the correctness of
the evaluation methods.
 Since the news of the ban, and the subsequent withdrawal and destruction of Maggi worth $50M would affect the
company’s performance, the shareholder of the company would be dissatisfied with the decision of the management.
It would reduce their confidence in the brand.

2. Although Nestle was right in their approach, they could have done it in a better way. To counter FSSAI’s claim,
Nestle continued to re-assure the customers that the noodles were safe which was a step in the right direction. Since
Maggi noodles contributed majorly to their revenues and it has been in the market for decades, these reports would
have resulted in a fall in their stock price and could have affected Nestle’s other products too. Also, Maggi noodles
is targeted primarily towards children and that puts the brand into limelight as parent’s are more attentive towards
what their kids consume. Even a false speculation can lead to parents’ switching over to a different product thus
reducing Maggi’s market share. Had Nestle continued to sell Maggi, it could have been much worse for all the
stakeholders. However, this could have been communicated in a better manner. Nestle should have made a public
announcement citing the reports from other parts of the world where it was found that the lead levels were within
permissible limits. They should have communicated their reason of temporarily recalling their products with the
customers.

3. Ethical considerations in this particular case can be divided into two parts:

(i) Ethical considerations for Nestle:

Since Maggi’s primary target consumers are children, if their noodles contain lead which are not within permissible
limits, then it can have detrimental effects on them. The company cannot hide or mislead their consumer’s by selling
the product in the market and if they are culpable, they must own it and communicate this to their consumers. By
recalling their products off the market and destroying it, they need to ensure that they are not destroying evidence.
They also need to ensure that the products being tested in India and abroad are from the same batch or have same
ingredients. Further if there is any inconsistency in batches, then they should find out where the problem is. If their
claims are not true, then that will affect Nestle in the long run.

(ii) Ethical considerations for FSSAI:

FSSAI must ensure the credibility of the tests. They need to get the product tested from accredited labs and make
sure that the standard testing procedures were followed. If other countries are claiming that the product is not violating
the norms, then that will cast a doubt on Indian testing agencies. This can also be disastrous for the entire FMCG
industry. They also need to ensure that the tests conducted were done without any involvement of a competitor. The
batch that was tested must not have exceeded its shelf life.