#MAGGI IN A SOUP- THE

MAGGI-MSG
CONTROVERSY OF 2015
Arsheya Baweja, Roll No-1
Anushka Sethi, Roll No-2
Dhruv Gupta, Roll No-
Neeraj Yadav, Roll No-
Alan
• Nestlé is a multinational packaged foods company
founded and headquartered in Vevey, Switzerland.
• Set up in 1866 by Henri Nestlé.
• NIL- The Indian subsidiary of the global FMCG.
• NESTLE house–Gurugram, Haryana
• Introduced the MAGGI brand in 1982.
• Entirely new food category-instant noodles-Indian
packaged food market.
 Maggi Noodles
• Nestlé, a subsidiary of Nestlé S.A. (Switzerland) formed its company
in India and set up its first factory in 1961 at Moga, Punjab.
• Presently it is the world's largest and most diversified food
company.
• Maggi holds a commanding position in the Noodles Segment with
over 60% market share.
• Maggi has a large fan following in the country and personalities
such as Amitabh Bachchan have endorsed it in the past.
 Comparison with competition

Noodles brand prefrences

40

35

30

25

20

15

10

0
Maggi yipee wai wai others
 From the above chart – I, it is concluded that out of 50
people 35 consume Maggi. Whereas 9 people like Yipee
while 3 people each liked either Knorr noodles or other
brand. Maggi is the most liked noodle brand among all.
It seems a clear trend that Maggi has a good brand
recall as compared to its competitors.
 Maggi – MSG Controversy
• Maggi one of Nestlé's most popular products has come under the scanner
lately.

• The UP Food Safety & Drug Administration carried out systematic raids
on retail outlets of Nestle selling Maggi Noodles.

• Testing in Government Laboratories in UP and Kolkata revealed that one

of India’s favorite snacks had:-

 7 times the permissible amount of MSG or monosodium

glutamate otherwise popularly known as Ajinomoto, a taste
enhancer.
 Elemental lead has also been detected of up to 17.2 parts per
million.
• MSG increases the body MSG level by 20% which is harmful for humans
especially children.
• Nestle India has its own argument regarding the MSG content in Maggi.
They claim that the MSG found in Maggi is not added by them which they
clearly mention in the Maggi packets as “NO ADDED MSG.”
• It is also challenged by Nestle India that out of the 1000 samples inspected
of the 12.5 crore Maggi packets, the found lead content on an average does
not exceed the prescribed level of lead content.
 Impact on the company
• Fall in the sales:
Some states such as Punjab, Karnataka and Uttarakhand also ordered
Nestle to stop production until further orders. As a result, Maggi sales
fell 60%
• Nestle revenue dented:
Nestle lose about Rs. 160 crore in revenue in the quarter to June 2015.
This was also expected to affect Nestle's overall profits. Maggi
contributed 30% of Nestle India's Rs. 1,185 crore-worth profits in
2014-15, as per the media reports.
• 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.
• Financials to take a beat:
Most consumer goods companies have seen single-digit growth in
the recent past. Revenue growth weaken in that financial year in
the aftermath of the controversy.
• What does it mean for the investors?
investors pay 33 times more than the company's expected profit in
FY16 to purchase the stock. Importantly, the future EPS was
calculated by considering 55% growth in profit per share between
2014 and 2016. This is not valid any more. Experts forsee EPS to
be hit by 10-20% by the fall in Maggi sales.
Nestle’s net Net profit Jan Jan
sales 2016 2015
Market 42% 77%
share of
17% 52.45% Maggi
Size of Rs. Rs.
Rs. 8123 cr Rs. 563.27 instant 2000 3400
cr noodle cr cr
market
• Its net sales declined 17 percent to Rs. 8,123 crores and its profit declined
52.45% to Rs. 563.27 crore.

• Nestle said sales in Asia, Oceania and sub- Saharan Africa (AOA) markets
were “overshadowed” by the issue in India.

• Market research agency Nielsen's data for January 2016 put Maggi's
market share at 42 per cent, 35 percentage points lower than the share of
the brand a year ago.

• The company, however, has gained significant market share since its
relaunch on November 9, to beat ITC‟s Yippee noodles within two months
to regain the top slot in January. Implying there remains significant
potential for the brand to regain its lost ground.
 IMPACT OF THE ‘MAGGI BAN’ ON
OPERATIONS INSIDE NESTLE
Impact on prod
Maggi off the shelves: Stock worth nearly Rs 320 crore was recalled from across
the country by Nestle India after it was banned by FSSAI.

Destroying the stock: After the ban was imposed pan-India, Nestle India was
ordered to not only take Maggi off the shelves, but to also destroy the stock, which
included 30,000 tonnes-worth of instant noodles. Ambuja Cements was paid Rs 20
crore by Nestle India to burn the entire stock at its cement plant in Chandrapur in
Maharashtra.

Fine: The Corporate Affairs Ministry imposed a nearly- Rs 640 crore fine on Nestle
India, in lieu of finding MSG and lead beyond the permissible limit in Maggi
noodles. The government filed a Rs 640-crore class action suit before the consumer
forum National Consumer Disputes Redressal Commission (NCDRC).
Out of this Rs 284.45 crore was sought in basic damages, and another Rs 355.5
crore in punitive damages. However, the government had said that the penalty
could go higher as it was still calculating further damages to be sought.
• Market share/ share price:
• Nestle India's nine variants of Maggi noodles accounts for nearly 70% of
the instant noodles market, which took a massive hit when a blanket ban
was imposed on the product.
• After the ban was imposed on June 5, the company's share price tanked.
On June 8, three days after the pan-India ban was imposed, Nestle India's
share price was down to Rs 5,539.8, the lowest level it had seen all year.
Since then, the company's scrip has seen major volatility, regaining the
highest level since the ban at Rs 6,831.95 per share on August 5. On the
date, Goa deputy chief minister Francis D'Souza had said that he favoured
the re-think on the Maggi ban after the latest tests conducted by a central
government laboratory in Karnataka found the instant noodles safe for
consumption.

• Profit/ sale:
• In the quarter ending June 2015, Nestle India posted its first net loss in
nearly 30 years. For the quarter, the company posted a standalone loss of
64.40 crore, down significantly from the Rs 287.86 crore profit posted in
the same period last year. The company's sales were down 20%. Maggi
accounts for nearly 30% of the company's revenue.
On Thursday, Nestle India announced its results for the quarter ending in
September. For the July-September 2015 period, the company’s net profit was
down 60% to Rs 124.20 crores from 311.20 crores net profit posted in the same
period last year. The company’s net sales was down 32.12% to Rs 1736.20 crores as
against Rs 2557.80 crores in the same period of the previous year.

Management:
Nestle India's managing director Etienne Benet was called back by the parent
company on July 24. On August 1, Suresh Narayanan was appointed as the
company's new managing director. On Thursday, after announcing the Jul-Sep
results, the company's board appointed Narayanan as the company chairman. The
move came after Nestle India's chairman Antonio Helio Waszyk retired on October
1.
Operations:
Nestle India shut down Maggi production at all of its eight production units in India.
However, since the ban was set aside, Nestle India has started production at three
of the eight factories and wants to start production at all the factories soon. “ We
have resumed manufacturing of Maggi noodles at three of our plants at Nanjangud
(Karnataka), Moga (Punjab) and Bicholim(Goa), said a Nestle India Spokesperson,
back in 2015.
Jobs:
Nestle India employs nearly 7,200 people in India, across its eight plants.
However, according to this Nestle India had assured that it will not be cutting
any jobs despite the production halt of one of its biggest brands. The report
said that employees and factory workers were reassigned to other job roles
during the ban.
According to the Indian Express report, the company's Moga plant that
employed 1,000 contract workers apart from the regular staff, had only about
200 people during the ban.

The job losses weren't limited to Nestle India. The contagion effect was felt
throughout the value chain, the IE report says. The Maggi ban's effect
percolated to the company's suppliers, spice manufacturers and providers,
maida suppliers, loaders and truckers, and so on.

Advertising:
With the ban now kept aside and Maggi cleared for production, Nestle India is
gearing to re launch the instant noodles. For this, the company has said that it
will be advertising aggressively, increased its spending on tv commericals.
During the ban, Nestle India had come up with a series of advertisements to
the theme #WeMissYoutoo.
EXPERTS’OPINION ON THE IMPACT OF MAGGI BAN: “Nestle
could take up to three years to recover losses”

 According to the expert, it could take three years for Nestle to completely
recover its Indian revenues following the impact of the Maggi episode as per
conventional wisdom but the Swiss foods giant is looking to do it faster, its Asia
head has said. following the impact of the Maggi episode as per conventional
wisdom but the Swiss foods giant is looking to do it faster, its Asia head has said.

“With regards to other categories or other companies, conventional wisdom will tell
you that it will take three years to come back to the pre-crisis mode, but...I am
pushing for it not to be three years, so we will see”
Wan Ling Martello, executive , vice president at Nestle SA, said in an interview with
Swiss newspaper Schweiz am Sonntag.
Martello, who heads Nestle's Asia business, said the maker of KitKat chocolates is
running television and online campaigns to restore faith in the Maggi brand.

 In its full-year earnings declaration in February 2016, Nestle had said that growth
of its Zone AOA (Asia, Oceania and Africa) region, at 0.5%, was "seriously
impacted by the Maggi noodles issue in India".
 Nestle India, which follows a January-December financial year, reported a
decline of 17.2% in its net sales for the year ended December 2015 on account
of the Maggi setback. Net profit for the year fell to Rs 563 crore, from Rs 1,185
crore in the previous year. Nestle India Chairman Suresh Narayanan had, in a
statement announcing the financial results, said "the impact of the Maggi crisis
extended to not just factories and employees but also partners, suppliers,
farmers, retailers and customers".

 Following the ban, Nestle took a hit of Rs Rs 450 crore as it destroyed more
than 30,000 tonnes of Maggi. The firm had reported its first loss in three
decades — at Rs 64 crore — in the April-June 2015 quarter. The controversy
also led to the share of Maggi in the Indian instant noodles market declining to
42% last month, down from a dominant 77% in January 2015.
 The size of the instant noodles category too shrunk by nearly half, to Rs 2,000
core for the full year ended January 2016, from Rs 3,400 crore in the preceding
12 months, two officials said, quoting data by researcher Nielsen. "We remain
positive on Nestle from a two-three years' perspective. But over the medium
term, the company's margins and volumes will remain under pressure,"
Edelweiss Securities' analyst Abneesh Roy wrote in a report on February 12,
2016.
 MAGGI BAN: “ SANDWICH MAKERS GAIN”
Sandwich makers, popcorn makers and bread were the big gainers from the
Maggi ban in 2015, and now, as Maggi returns to store shelves, these categories
might return to their traditional rates of growth. Data shared by e-tailer Flipkart
in 2015 showed that sales of snack makers-products like toasters, sandwich
makers, popcorn makers and other small kitchen appliances rose 50% month on
month from June, a huge leap from the 10% month on month growth in the
year prior to June 2015.
Flipkart's data also showed that while the unprecedented growth in snack ma
kers was visible across the country , student towns like Manipal and Vellore and
hill stations like Dehradun, Shimla and Ooty were the biggest sale drivers. Maggi
was known to be enormously popular in colder climates with students,
especially those who stayed at the hostel. "Every noon I used to have a bowl of
Maggi in the college canteen. After it was banned in May , I switched to
sandwiches," says Valida Mendonca, a final year student of radiation therapy in
Manipal, a university town that is home to nearly 11,000 students from around
the world. Anant A, a civil engineering student at the Manipal Institute of
Technology , said that several of his friends had bought sandwich makers
following the Maggi ban. "Since we study late into the night, some light snacks
or food is necessary to keep us awake, he said.
Information from online grocer Bigbasket appeared to corroborate this trend.
On a request from TOI, the e-tailer did some data crunching of 500 big Maggi
consuming households. The analysis found hat bread and eggs were among
the three items that saw an increase during the period for those customers
who sharply reduced their purchase of Maggi and simi ar products. The third
item was fruits
MAGGI BAN: WHAT DID IT MEAN FOR THE
COMPETITORS?

• Maggi dominated 60% of the market segment prior to the ban

• The crisis proved to be a window of opportunity for rival brands such as

Chings & Sunfeast etc.

• It gave them an opportunity to woo the audience without competing with

the market leader.

• They used the situation to improve their visibility in the retail market and
occupy the racks that were previously occupied by the market leader.

• They increased their marketing budgets & media spends to market their
products intensively.

• It gave them an opportunity to bulid relationships with the audiences.

MAGGI BAN: RIVALS GAINED AS MAGGI MARKET SHARE DECLINED

 While sale of Nestle's Maggi products plunged during the ban in

2015,competitors like ITC loaded their barrels to gain long term market share.

 Sources revealed that Nestle's revenue from Maggi, an Rs 3,000-crore brand in

India, had plummeted to a marginal level as sales of other products such as
sauces, pasta, masala and soups, too, has declined 40 per cent in rural areas.

According to retail chain operators, although sales of noodles in the urban market
had dropped, sales of noodles other than Maggi's had gone up in rural and semi-
urban regions, which account for more than 60 per cent of all retail stores in
India.
According to an official from sales division in the consumer goods major ITC,
which sells Yippee noodles under the Sunfeast brand, sales force pushed the
noodles in rural areas to fill the void after sales of Maggi noodles declined. “We
are supplying noodles at least three times compared to what we used to supply
before the Maggi controversy started to our distributors, said the official on the
condition of anonymity. At present, Yippee holds second position in the noodles
market in India behind Maggi noodles.
Apart from attempting to replace Maggi, ITC is prepared to woo noodle lovers in
the country with advertisements and on field customer awareness programmes.

EMERGENCE OF PATANJALI “ATTA NOODLES”

 ‘Patanjali’ is the Indian FMCG (Fast Moving Consumer Goods) company promoted by
international fame yoga guru ‘Baba Ramdev’. Owing to the growing popularity and
demand of noodles in India, Baba Ramdev launched completely Indian version of
noodles ‘Patanjali Atta noodles’ in competition with foreign company’s brand Maggi.
These noodles were launched in November 2015 soon after the comeback of Maggi
after ban.
Baba Ramdev emphasizes on use of ‘swadeshi’ products instead of ‘videshi’ company
products.
 Patanjali claims their noodles to be Lead and MSG free and are made with wheat
unlike Nestle Atta Maggi which is mostly made up of refined flour (Maida). Thus,
Patanjali is promoting its noodles to be a healthy snack in direct competition with
Nestle Maggi. Also they are economically priced than Nestle Atta Maggi.
Growth of Patanjali Atta noodles since launch
 Soon after the Maggi was back on shelves after five months of ban in 2015, Patanjali
launched its noodles within a week. But Maggi was still not available in two tier cities
after its comeback and it could be seen only in big cities for some time and that too at
very limited stores with limited stock.
 This is where Patanjali atta noodles entered market and started selling its newly
launched noodles through its own retail stores and some other retail chains like Big
Bazaar, etc.
Nestle Maggi developed taste buds of people for noodles and hence when Maggi was
out of stores, people looked for alternative noodles. It has been 4 months since the
launch of Patanjali noodles and the results and reviews of people who have tasted these
noodles are satisfactory. Thus Patanjali now plans to set up six new manufacturing units
apart from existing Haridwar, Uttarakhand plant in the light of ‘Make in India’ campaign.

 Take of consumers on Patanjali Atta noodles

Patanjali Atta noodles were launched in the month of November in 2015 and since then
many people have already tried these swadeshi noodles and have liked it. While trying
Patanjali noodles comparison with Nestle Maggi was natural and evident and consumers
somewhere searched for their old taste of Maggi which was intact on their tongues. But
people are well aware and mature enough to not risk their health for taste when a healthy
alternative is available in market and this is why Patanjali Atta noodles is openly liked by
people at large in India. People are very happy with the fact that these noodles are
completely made of wheat and not with refined flour (Maida) and are lead and MSG free.
Also if you talk economically then Patanjali Atta noodles beat Nestle Atta Maggi fairly
because Patanjali is priced at Indian Rupees 15 for 70 gram pack whereas Nestle Atta Maggi
is priced at Indian Rupees 25 for 80 gram pack. Thus price is another factor which goes in
favour of Patanjali noodles to flourish speedily. Thus overall review for Patanjali Atta
noodles is positive and welcoming.
RELAUNCH OF MAGGIE
 STEPS TAKEN TO UPLIFT MAGGIE
• Seek suggestions from employees on how to bring the brand
back.
• Try to change the labelling in order to ensure it doesn’t breach
food safety norms.
• Try to overhaul product packaging in order to mark a complete
break from the past.
• Intensive marketing planning in order to mark the come back
of the product in the market.
 MARKETING AND CAMPAIGNING
• Company chose the festive season of
Diwali to re-launch maggi.
• Company used nostalgia as a strategy for
marketing its brand.
• Brand aimed at playing with memories,
good times and fond moments with maggi.
• Taken emotional route to reach out his
customers using twitter hashtags like
#WeMissYouToo, #WelcomeBackMaggi,
#MaggiMother, #NothingLikeMaggi
• Made videos under #NothingLikeMaggi
series aim to bring back memories of maggi.
 CONTINUE...

• Company targeted the memories of kids, students, hostellers

and couples who survive on snack items.
 ECONOMIC CHANGE AFTER
RE-LAUNCH
Market Share by Volume(%)
90

80

70

60

50

40 78
30
48 51
20 42
33
10
10
0 0
Jun-15 July 2015-Oct 2015 Nov-15 Dec-15 Jan-16 Feb-16 Mar 216
 CONTINUE...

CY14 CY15 CY16

Revenues 9,806 8,679 10,710

(Rs Crore)

Y-O-Y Change (%) 8.2 -11.7 23.4

Net Profit 1,185 599 1,317

(Rs Crore)

Y-O-Y Change (%) 6.0 -49.4 119.9

12000
10710
9806
8679
8000

2014
2015
2016
4000

1185 1317
599
0
Revenue (Rs Crore) Net Profit ( Rs Crore)
 CURRENT SCENARIO

Market Share in Volume(%)

70
60
50
40
30 60 61 62 64
57
20
10
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 CONCLUSION

Maggi’s competitors couldn’t capitalized a lot from the

ban.

The biggest advantage of maggi is it’s taste and first mover

advantage in the instant noodle market.

Prior to the ban, maggi ruled the market not just with its
ubiquity in the remotest area of India but also with its
popularity as quick fix meal.

Even after a lot of controversies maggi is still preferred by

customers among other brands of noodles.