SummaryThe case highlights the series of steps that Nestlé, a 150-year-old packaged food company,

took after the Indian food regulator Food Safety and Standards Authority of India (FSSAI) temporarily
banned the manufacture, sale and distribution of Maggi noodles leading to half a billion dollars
worth of losses in missed sales and brand value.For a controversy of this magnitude, the steps to be
taken by a company like Nestlé seemed to be very simple: talk to customers using facts, conduct
independent tests by certified laboratories, engage with the regulatory body and introduce re-
designed packets that highlight the safety of the product. The case discusses at length the strategic
decisions taken by Nestlé and highlights several issues, three of which are analysed as follows.

Analysis of Issues

The three key issues that gets reflected throughout the case are detailed as follows

1. Engaging with consumers

When a crisis of this magnitude that can shake customer confidence happens to a company, the
first step should be the leadership team interacting with customers and launching fact-based
campaigns. Steps like these help customers to continue believing in the product and more
importantly prevents the spread of rumours and wrong information. For example, when Coca-
Cola and Pepsi were embroiled in the pesticide con-troversy in the early to mid-2000s, both
CEOs held a joint press conference and the two companies kick-started a communication
process by utilizing credible celebrities like Aamir Khan and Amitabh Bachchan in ad campaigns
to address the issue. Quick and prompt engagement on traditional and social media was
crucial, but Nestlé chose to be silent on the issue, both offline and online. Interestingly enough,
the Yippee noodles marketing team of Nestlé’s competitor ITC apparently took this brief
moment of opportunity provided by the Maggi con-troversy and used it to grow market share. In
August 2015, it rolled out an advertising campaign that highlighted the state-of-the-art
manufacturing facil-ities and rigorous testing protocols as well as a ‘You Ask We Answer’
initiative to address customer queries.

2. Liaison with regulators in developing markets

What started off as a simple penalty fine of ` 0.3 million escalated into a full-fledged national issue
due to the company’s poor liaison with officials. Nestlé was convinced from the very beginning that
it was right and that there was no need to argue with anyone. In July 2015, Nestlé’s lawyer informed
the Mumbai High Court on the unfairness of FSSAI previously approving the product packaging and
then accusing Nestlé of mislabelling with regard to MSG content at the time of the ban. The case
explains how argumentative stances taken by employees of a corporation do not go well with
government official in developing economies who are usually accustomed to plenty of pampering
and wooing by corporations. While being factual is certainly right, diplomacy also works to the
benefit of a company operating in an ambiguous environment. The timely appointment.
of Suresh Narayanan as the new CEO and the focused mandate that Suresh undertook shows that
Paul Bulcke understood this soft aspect of the business.

2. Raw materials and the production process

The case discusses how naturally occurring MSG con-tent in the ingredients may have led to
the test reports. Kolkata-based SAJ Food Products was already FSSAI-certified and
manufactured about four per cent of Maggi’s annual volumes. Yet Nestlé decided to
terminate its agreement with SAJ Food Products to manufacture Maggi while allowing the
firm to continue to distribute other Nestlé products. This does raise suspicion on what
actually led to the test reports that showed high levels of lead and MSG. For a company
like Nestlé, raw material procure-ment and manufacturing costs contribute to 60 per cent of
its total expenditure (see Figure 1), so there will always be a pressure to bring these costs
down.