INTRODUCTION

Why Organizations Focus on Customer Satisfaction?

Businesses monitor customer satisfaction in order to determine how to increase their customer
base,customer loyalty, revenue, profits, market share and survival. Although greater profit is
the primary driver,exemplary businesses focus on the customer and his/her experience with
the organization. They work tomake their customers happy and see customer satisfaction as
the key to survival and profit. Customersatisfaction in turn hinges on the quality and effects of
their experiences and the goods or services they receive.
Customer Satisfaction
The definition of customer satisfaction has been widely debated as organizations increasingly
attempt tomeasure it. Customer satisfaction can be experienced in a variety of situations and
connected to both goodsand services. It is a highly personal assessment that is greatly affected
by customer expectations. Satisfactionalso is based on the customers experience of both
contact with the organization (the moment of truth as itis called in business literature) and
personal outcomes. Some researchers define a satisfied customer withinthe private sector as
one who receives significant added value to his/her bottom linea definition that mayapply
just as well to public services. Customer satisfaction differs depending on the situation and the
productor service. A customer may be satisfied with a product or service, an experience, a
purchase decision, asalesperson, store, service provider, or an attribute or any of these. Some
researchers completely avoidsatisfaction as a measurement objective because it is too
fuzzy an idea to serve as a meaningfulbenchmark.4 Instead, they focus on the customers
entire experience with an organization or service contactand the detailed assessment of that
experience.
For example, reporting methods developed for health care patient surveys often ask customers
to ratetheir providers and experiences in response to detailed questions such as, How well did
your physicians keep you informed? These surveys provide actionable data that reveal
obvious steps for improvement.

Customer satisfaction is a highly personal assessment that is greatly influenced by individual

expectationsSome definitions are based on the observation that customer satisfaction or
dissatisfaction results fromeither the confirmation or disconfirmation of individual
expectations regarding a service or product. To avoiddifficulties stemming from the
kaleidoscope of customer expectations and differences, some experts urgecompanies to
concentrate on a goal thats more closely linked to customer equity. Instead of
askingwhether customers are satisfied, they encourage companies to determine how customers
hold themaccountable Customer satisfaction, a business term, is a measure of how products
and services supplied by acompany meet or surpass customer expectation. It is seen as a key
performance indicator within businessCustomer satisfaction depends on the products
performance relative to a buyers expectation, thecustomer is dissatisfied. If preference
matches expectations, the customer is satisfied.
If preference isexceeds expectation, the customer is highly satisfied or delighted outstanding
marketing insurance companiesgo out of their way to keep their customer satisfied. Satisfied
customers make repeat purchases insuranceproducts and tell other about their good
experiences with the product. The key is to match customerexpectations with company
performance. Smart insurance companys aim to delight customers by promisingonly what
they can deliver, then delivering more than the promise. Consumers usually face a broad array
ofproducts and services that might satisfy a given need. How do they choose among these
many marketingmakers offers?
Consumers make choices based on their perception of the value and satisfaction that
variousproducts and services deliver.
Customer value is the difference between the values the customer gains from owning and
using a productand the costs of obtaining the products customers from expectations about the
value of various marketingoffers and buy accordingly. How do buyers from their
expectations? Customer expectations are based onpast buying experiences, the opinion of
friends and marketer and competitor information and promises.Customer satisfaction with a
purchase depends on how well the products performance lives up to thecustomers
expectations. Customer satisfaction is a key influence on future buying behaviour. Satisfied
customers buy again and tell others about their good experiences dies-satisfied customers of
ten switches to competitors and disparage the products to others. An insurance provider open
only to active duty, retiredand separated military members and their immediate families and

therefore not included in the rankings,achieved a satisfaction ranking equal to that any
insurance company.
In general, customer satisfaction with auto insurance providers decreased significantly, with
20 of the21 companies surveyed decreasing in satisfaction from the previous year. Insurance is
the only carrier thatdid not experience a decline in satisfaction. Though consumers report their
insurance carriers are resolvingtheir claims and problems faster. Businesses survive because
they have customers who are willing to buytheir products or services. However, many
businesses fails to check in with their customers to determinewhether they are happy or not
and what it will make to make or keep them happy.According to U.S consumers affairs
department, it costs five times more to gain a new customer thanto retain an existing one.
Other studies have repeated that with just a five percent increase in Customerretentions a firm
can raise its profitability customers spend salary at first, but with succeeding years of
goodexperience, they will spend increasingly more.Depending on the industry and the nature
of the bad experience, dissatisfied customers will complainto 10 to 20 friends and
acquaintances, which is three times more than those with good experiences are.Hence, the
negative information is influential, and consumers generally place significant weight on it
whenmaking a decision. If that is not the reason enough, fierce competitor is needed more and
more todifferentiate firms from one another. With technology available to virtually every one
today, the traditionalfeatures and cost advantages are no longer relevant. Still product and
service quality provides an enormousopportunity to distinguish a firm from the rest. The
Japanese have recognized this and have though us toexpect quality. Todays consumers do,
and they know more about products and services than they ever did. Customers are the best
source of information. Whether to improve an existing product or service orwhether firms are
planning to launch something new. There is no substitution for getting it from horsesmouth
When you talk to your customer directly, to increase your odds for achieving success you
mistakeproofyour decisions and work on what really matters. When you routinely ask the
customers for feedbackand involve them in business they, in turn, become committed to the
success of your business.

Customer Satisfaction Measurement: A basic and effective base line customer satisfaction survey program should focus on
measuring
customer perceptions of how will the company delivers on the critical success factors and
dimensions of thebusiness as defined by the customers:
For example:

Service Promptness
Courtesy of Staff
Responsiveness
Understanding the customer problem, etc.

The findings of the company performance should be analyzed both with all customers and by
key segmentsof the customer population. The essential starting point for Customer
Satisfaction Measurement (CMS) isexploratory research. Since satisfaction is about an
organizations ability. To meet customer requirement onehas to start by clarifying with
customers exactly what those requirements are. This is done throughexploratory research
using focus groups or one to one depth interviews.
Two main factors determine the accuracy of CMS. The first is the asking the right question
and thesecond is the asking them to the right people sample of customers which accurately
reflects the customerbase.
Three things decide the accuracy of a sample. They are:.
It must be representative.
It must be randomly selected.
It must be adequate enough.

Measuring customer satisfaction

Organizations need to retain existing customers while targeting non-customers. Measuring

customer satisfaction provides an indication of how successful the organization is at providing
products and/or services to the marketplace.
Customer satisfaction is an abstract concept and the actual manifestation of the state of
satisfaction will vary from person to person and product/service to product/service. The state
of satisfaction depends on a number of both psychological and physical variables which
correlate with satisfaction behaviors such as return and recommend rate. The level of
satisfaction can also vary depending on other factors the customer, such as other products
against which the customer can compare the organization's products. Work done by
Parasuraman, Zeithaml and Berry (Leonard L) between 1985 and 1988 delivered SERVQUAL
which provides the basis for the measurement of customer satisfaction with a service by using
the gap between the customer's expectation of performance and their perceived experience of
performance. This provides the researcher with a satisfaction "gap" which is semi-quantitative
in nature. Cronin and Taylor extended the disconfirmation theory by combining the "gap"
described by Parasuraman, Zenithal and Berry as two different measures (perception and
expectation) into a single measurement of performance relative to expectation.
The usual measures of customer satisfaction involve a survey with a set of statements using a
Linker Technique or scale. The customer is asked to evaluate each statement in terms of their
perception and expectation of performance of the service being measured.

Methodologies
American Customer Satisfaction Index (ACSI) is a scientific standard of customer
satisfaction.
Academic research has shown that the national ACSI score is a strong predictor of Gross
Domestic Product (GDP) growth, and an even stronger predictor of Personal Consumption
Expenditure (PCE) growth. On the microeconomic level, research has shown that ACSI data
predicts stock market performance, both for market indices and for individually traded
companies. Increasing ACSI scores has been shown to predict loyalty, word-of-mouth
recommendations, and purchase behaviour. The ACSI measures customer satisfaction annually

for more than 200 companies in 43 industries and 10 economic sectors. in addition to quarterly
reports, the ACSI methodology can be applied to private sector companies and government
agencies in order to improve loyalty and purchase intent. Two companies have been licensed
to apply the methodology of the ACSI for both the private and public sector: CFI Group, Inc.
applies the methodology of the ACSI offline, and Foresee Results applies the ACSI to
websites and other online initiatives. ASCI scores have also been calculated by independent
researchers, for example, for the mobile phones sector, higher education, and electronic mail.
The Kano model is a theory of product development and customer satisfaction developed in
the 1980s by Professor Noriaki Kano that classifies customer preferences into five categories:
Attractive, One-Dimensional, Must- Be, Indifferent, Reverse. The Kano model offers some
insight into the product attributes which are perceived to be important to customers. Kano also
produced a methodology for mapping consumer responses to questionnaires onto his model.
SERVQUAL or RATER is a service-quality framework that has been incorporated into
customer-satisfaction surveys (e.g., the revised Norwegian Customer Satisfaction Barometer)
to indicate the gap between customer expectations and experience.
J.D. Power and Associates provides another measure of customer satisfaction, known for its
top-box approach and automotive industry rankings. J.D. Power and Associates' marketing
research consists primarily of consumer surveys and is publicly known for the value of its
product awards.
Other research and consulting firms have customer satisfaction solutions as well. These
include A.T. Kearney's Customer Satisfaction Audit process, which incorporates the Stages of
Excellence framework and which helps define a companys status against eight critically
identified dimensions. For Business to Business (B2B) surveys there is the Info Quest box.
This has been used internationally since 1989 on more than 110,000 surveys (Nov '09) with an
average response rate of 72.74%. The box is targeted at "the most Important" customers and
avoids the need for a blanket survey.

Improving Customer Satisfaction

Published standards exist to help organizations develop their current levels of customer
satisfaction.
The International Customer Service Institute (TICSI) has released The International
Customer Service Standard (TICSS). TICSS enables organizations to focus their attention on
delivering excellence in the management of customer service, whilst at the same time
providing recognition of success through a 3rd Party registration scheme. TICSS focuses an
organizations attention on delivering increased customer satisfaction by helping the
organization through a Service Quality Model.
TICSS Service Quality Model uses:-The 5 P's
Policy,
Processes People,
Premises,
Product/Services, as well as
performance measurement.
The implementation of a customer service standard should lead to higher levels of customer
satisfaction, which in turn influences customer retention and customer loyalty.
Customer Satisfaction Surveys:
Surveys and questionnaires are the most common marketing research methods. Typically, they
are used to:

Assess the level of customer satisfaction with a particular product, service or

experience
Identify factors that contribute to customer satisfaction and dissatisfaction;
Determine the current status or situation of a product or service;
Compare and rank providers;
Estimate the distribution of characteristics in a potential customer population; or
Help establish customer service standards.

Benefits and Challenges:

Surveys allow an organization to quickly capture vital information with relatively little
expense and effort. A primary advantage of this method is its directness: the purpose is clear
and the responses straightforward. Additionally, the information gathered by surveys can
easily be analyzed and used to identify trends over time. The public views consumer product
polls and pollsters in a generally positive manner compared to political and other polls. One
study found that at least sixty percent of the public feels that market research about products
and services has a positive impact on society. Seventy percent consider the people who
conduct such surveys to have positive impacts on societyA major disadvantage of customer
surveys is that the responses may be influenced by the measurement itself through various
forms of bias. For example, most surveys are voluntary, and some researchers have found
differences between survey respondents and non-respondents.

Nestle Is The Worlds Largest Food Processing Company Marketing Essay

COMPANY PROFILE

Nestl S.A. is the worlds largest food processing company and is headquartered in Vevey,
Switzerland. The company was founded by Henri Nestl in 1866. Nestl Company had made
several name changes from 1866 to 1947, and finally adopted Nestl S.A. in 1977 as the
companys name. Nestle S.A. has factories or office in almost every region of the world and
markets a wide range of brands. The company is often described as "the most multinational of
the multinationals." in the current food industry market.

Henri Nestl, also know as of the main originator of condensed milk. In 1867, he developed
the first milk food for infants and a baby who could not be breast-fed was rescued. Nestls
invention responded to the need for a nutritionally safe alternative to breast milk. Thus, Nestl
S.A has targeted to build a business based on sound human values and thoughts.

The key to success of the company is due to its huge Research and Development network
within the food processing industry. With R&D as the competitive advantage, Nestl has
become the worlds leading nutrition, health, and wellness company. The company is devoted
in continuing to improve the nutritional value of their products while enhancing the flavor.
Nestl achieves this through its brands and with initiatives like the Nutritional Compass and
60/40+. Millions of people choose to consume Nestl products everyday because the company
sustain the quality as the fundamental ingredient in all of its brands. Consumers choose to
place their trust in Nestl due to the companys dedication to achieve distinction and turn to
Nestl brands to preserve nutritional balance in todays fast paced world.

Switzerland-based Nestl S.A. has the highest ranking as the largest player throughout the
entire world in the competitive position within the food industry. The rating reflects the
companys competitiveness and market attractiveness. With combined sales of 110 billion
(Swiss Franc) in 2008, Nestl states a diversified business portfolio, being the market leader in
numerous product categories worldwide including bottled water, instant coffee, milk and
cheese products, nutrition and baby food, ice cream, frozen foods, culinary preparations, and
coco products. Nestl's broad geographic coverage includes North America and Europe as
well as Asian markets.

The vision of Nestl R&D is long term, it helps shape the future of foods making consumer
needs into research priorities and convert new technologies into consumer benefits, and
services
OBJECTIVES
Nestls purpose is to offer safe, tasty, convenient and nutritious foods to improve health and
well-being of consumers of all ages all over the world. To meet the needs and desires of
todays and tomorrows consumers, Nestl is strongly committed to Research and
Development (R&D) to improve existing products and develop new foods with specific health
benefits.

Nestle India
Nestl India is a public listed company
Nestl SA holds 62.76% share
Market capitalisation INR 402 bn

 M
a
Milk products and nutrition
(45%)

r
k
e

Prepared Dishes and

Cooking Aids (29%)

Chocolates and
Confectionery (13%)

Beverages (13%)

Segmentation
For getting the maximum market share and respect of the product in
the minds of the consumer, as per observation it is been concluded that Nestle
segmentation is based on two points.
-Geographic Segmentation
-Demographic Segmentation
Geographic Segmentation
The company has divided its geographic segmentation in several regions. First they
have the segmentation of a whole country and from each provincial capital, they
divided its areas into north, east, west, south. So that it could be easy for the company
to work efficiently on its supply chain management.
Demographic Segmentation:

Nestle isnt a supreme quality product that only the high class uses. The product is for
all classes. Infant to seniors. There is no age, sex, income and any other kind of
limitation on use of the product. The product is for all. Anyone can use the product as
per need.
Products of Nestle
Milk Products
Nutrition Products
Prepared Dishes and Cooking Aids
Beverages
Chocolate
Confectionery
Energy Drinks
Instant Noodles

SWOT ANALYSIS IN NESTLE

Environmental scanning has the management scan internal environment and external
environment. The factors which are the predominant factor for an organization factor is
SWOT standing for strengths, weaknesses, opportunities and threats.

 Internal Environment
Strengths
BRAND STRENGTH: Quality brands and products ; Top selling brand: Nescafe,
Maggi, Kit Kat, Honey Stars, Pepsi and etc.

PRODUCT INNOVATION:
Continuously introducing new products & manufacturing is efficiency. Strengths include
anything a company does well and its resources and capabilities for developing a competitive
advantage. The greatest strength of Nestl is culture that is team focused and an open door
policy. Nestl focuses on collectivism and performance orientation attitude which encourages
employees to work harder.
Nestl achieves broader range of products by improving existing and innovating new
products. Consumer demands are switched to changes of taste, colours and design that have
been undertaken to products such as Nestls Smarties and Kit Kats. The launch of Kit Kat
Chunky has proven that creativity and innovation can extend the life cycle of a product.
Strengths-

 Parent support
Company Image
High Quality Products
Well-developed strategy
Market Share
Good marketing skills and services
Brand strength
Research & Development Team
Product innovation
HR department
RESEARCH & DEVELOPMENT CAPABILITIES: have the largest R&D network of
any food company in the world, with 32 R&D centres and over 5,000 people directly
involved in R&D
MARKET SHARE: high level of market share and that people all over the world trust
and recognizes Nestle as a big brand name.
Weaknesses
The lack of certain strengths and things a company does not do well are viewed as
weaknesses. Nestl is poor in targeting some of its products.
Nestl MilkPak is a premium product targeted to upper middle and high class consumers.
Most consumers in India are from lower middle and poor class. They are not afford to
purchase it due to the premium price.
Nestl has a complex supply chain configuration too and traceability is a critical issue for
Nestl India. High standards of hygiene, quality of edible inputs and workforce are required in
the food industry. Fragmented nature of the Indian market will cause more problems.
Less Proactive : Nestle being a company is less proactive they create changes
but usually unless competitor doesnt change they doesnt adopt a change.
Limited Distribution Channel : Nestles major & bad factor is the limited distribution channel
because they distributes their products to whole seller in their own factory vehicles as compare
to their major competitor they have limited distribution channel but they are maintaining to
penetrate the market as far.

Mature markets : Nestle is entering into markets that are already mature and can give a tough
competition to new entrants
Supply Chain : complex chain management

External Environment
Opportunities
The external environmental analysis a firms new opportunities for profit and growth. Nestl
has a great opportunity for expanding its milk products because India is the seventh major
milk producer in the world with annual output more than 22 billion litres.
Support from Foreign Investors :- Government support foreign investors to invest in India
which eventually is the opportunity for Nestle.
Enhance Distribution Channel :- Nestle should be working on the distribution network to
enhance the companys network against its competitor.
Changing Social Trend :- Consumers in urban areas now adopt Western lifestyles, especially
the younger generation which is hugely influenced by the Western media. Younger consumers
tend to follow Western life style. There was an increase in demand for Nestle products over
the review period.
Health conscious :- Increasing health and hygiene awareness among people has greatly
increased sales of nestle products. Both the government and the media have started health
awareness campaigns to make Indians realizes that consumption of Nestles hygienic products
is as essential as eating food. Fruit/ juices & eatable products are doing very well in both
urban and rural areas.

Market growth :- Nestle market expands very fast. A new research proves that in future every
person use 85.5 liters juices per years & uses more hygienic products because of the low
hygienic conditions of the environment.
Health-based products- transition to Nutrition Company
Threats
Adjustments in the external environment present threats to a firm. For an example, shifts in
consumers preferences. The major threats to Nestls products is Unilevers Walls, a famous
ice-cream brand. It is distributed nationwide and has total control within the local market.
Besides, economic slowdown can reduce demand, and inflation is getting higher and higher
causing the purchasing power of consumers is decreasing day by day.
-

Government Regulation :- They face problem if government employ taxes on them

which force them to raise the price of their product.

Increase in Competition among Competitor :- Competition among competitors is major

threat to Nestle which can be controlled by the help to retaining more customers &
making more loyal ones.

No Entry Barrier :- There are no many entry barriers so a large numbers of local
companies enter in various Nestles product market.

Unfavorable Changes in Consumer Demand :- With the increase in the competitors

there will be a increase in the number of related products which eventually harm the
Nestles market. Due to which the consumers demand pattern fluctuate.

Loss of Market Share :- When the market saturates the loss of the market share of
Nestles products is there major threat to Nestle.

International Marketing Standards; Changing Consumer Trends

Sector Woes :- Rising prices of raw materials and fuels; Increasing packaging and
manufacturing costs

.
GLOBAL COMMITMENT
Nestl firmly supports the principles of the United Nations Global Compact and is committed
to

reflecting

these

in its

business

principles

and

practices.

Search

for

trust:

Nestl is the world's leading food and beverage company, with sales of about CHF 72 billion.
It has 230,000 employees world-wide and operates 520 factories in 82 countries. Its products
are available universally, including such remote markets as North Korea, and they are sold
under a number of brands such as Nestl, Nescafe, Nestea, Maggie, Buitoni, Perrier and
Friskies. Company belongs to more than 200,000 shareholders, today; Nestl is about twice
the size of its nearest competitor in the food and beverage sector. The company is in business
for over 130 years. Since the days of its founder, brands have been a mainstay of companys
development and its management strongly believes that is one of the key elements of company
success. A basic reason company has grown to be the world's largest food company is that
consumers have learned to trust its brands. The Nestls challenge was the establishment of a
clear hierarchy of very few corporate strategic global brands that now cover almost all
products, as well as the parallel usage of regional and local product brands and product
denominations.
Additionally company introduced the Nestl Seal of Guarantee and emphasized corporate
logo. This Seal of Guarantee is a visible sign of companys corporate responsibility for the
safety and quality of every product, which leads to maintain consumer confidence and trust in

this corporation. In order to be able to give this quality and safety assurance, company
developed a Nestl Quality Management System, which collects the experience of our
Research & Development, on which we spend CHF 800 million a year.
For a company such as Nestl, economic success depends on winning the public's approval
every day in every country where our products are sold.
They have always believed strongly that tobacco should never be marketed to youth. It should
only be marketed to adult smokers, in an appropriate way that takes account of the risks posed
to health. They also believe adults who have chosen to smoke should be able to receive
information about what they buy, and should be able to communicate responsibly with them
about their brands.

Nestle companys Success is built on quality :

Quality is the cornerstone of companys success.:-Everyday, millions of people all over the
world show their confidence in company by choosing Nestl products. This confidence is
based on our quality image and a reputation for high standards that has been built up over
many years.
Every product on the shelf, every service and every customer contact helps to shape this
image. A Nestl brand name on a product is a promise to the customer that it is safe to
consume, that it complies with all regulations and that it meets high standards of quality.
Customers expect company to keep this promise every time.
Under no circumstances company compromise on the safety of a product and every effort
must be made to avoid hazards to health. People, equipment and instruments are made
available to ensure safety and conformity of Nestl products at all times.
The customer comes first:
Company does want to win and keep customers, distributors, supermarkets, hotels,
shopkeepers and the final consumers. They have very different requirements. Trade customers
expect excellent service, correct information and timely delivery. Consumers consider taste,
appearance and price when they make their choice. Companys task is to understand what

Company serves various groups of consumers and there is demand for products at different
levels of perceived quality and price. All customers expect good quality at a reasonable price.
Customers are central to companys business and company always respects their needs and
preferences.
Quality is a competitive advantage:

Company lives in a competitive world and must never forget that their customers have a
choice. If they are not satisfied with a Nestl product, they will switch to another brand.
Companys goal is to provide superior value in every product category and market sector in
which

it

competes.

The pursuit of highest quality at any price is no guarantee for success, nor is a single-minded
cost-cutting approach. Lasting competitive advantage is gainedfrom a balanced search for
optimal value to customers, by simultaneous improvement of quality and reduction cost.
Quality units at different levels of the organization provide specific support, promote quality
awareness, assume guardianship and audit the system. Quality departments monitor operations
against agreed standards and must intervene in case of non-conformity.Training and teamwork
are crucial to the successful implementation of high quality standards. Continuous training
ensures that everyone understands his tasks and has the necessary skills to carry them out.
Teamwork allows us to achieve results that are greater than the sum of individual efforts.
We motivate employees by demonstrating management commitment to Quality, by setting
challenging

goals

and

by

giving

them

responsibility

and

recognition..

Progress is followed by listening to our customers and by measuring our performance.

Nestl's Position on Gene Technology: From its inception more than 130 years ago, Nestl has
built its business on successfully applying scientific breakthroughs and technological
innovations while taking full responsibility for the quality and the safety of its products.
Throughout these years Nestl has been manufacturing and marketing products tailored to
meet the diverse needs and preferences of consumers all over the world. Nestl has always
strived to respect these differences and to take them into account in its activities..

Consumer information and labeling:

Consumers confidence in the food they are buying is supported by having access to
information. Nestl's Consumer Services are well equipped to provide this access and thus are
the first source of information, including the use of ingredients, derived from genetically
modified crops, in Nestl products.
Many governments now have implemented or are considering regulations for the use
and labeling of these ingredients. In the absence of a global agreement on the labeling of
ingredients, derived from genetically modified crops, and recognizing governments
responsibility for the regulatory process, Nestl strictly adheres to national laws and
regulations regarding their labeling.

ENVIRONMENT OF THE COMPANY

MANAGEMENT
The executive board, a distinct entity from the board of directors, includes:
Peter Brabeck-Letmathe, Chairman & CEO
Carlo Donati, EVP, Chairman, and CEO of Nestl Waters
Frits van Dijk, EVP of Asia, Oceania, Africa, Middle East divisions
Lars Olofsson, EVP of Strategic Business Units and Marketing
Francisco Castaer, EVP of Pharmaceutical and Cosmetic Products, Liaison with L'Oral
Human Resources
Michael Powell, EVP of United KingdomsDiivision
Paul Bulcke, EVP of Americas divisions
Paul Polman, EVP of Finance, Control, Legal, Tax, Purchasing, Export
Luis Cantarell, EVP of Europe divisions
Richard T. Laube, Deputy EVP of Nutrition Strategic Business units
Werner J. Bauer, EVP of Research and Development, Technical, Production, Environment.

Corporate Governance
Nestl's commitment to sound Corporate Governance goes back to its very early days.
This commitment is reflected and explained in several publications, such as the Corporate

Governance Report, Articles of Association, Committee charters etc. It is also visible in

Nestl's day-to-day business behavior.
The Corporate Governance Report covers the following areas:
Group structure and shareholders
Capital structure
Board of Directors
Executive Board
Compensations, shareholdings and loans
Shareholders participation
Changes of control and defence measures
Auditors
Information policy
Nestle, How Consumer Insights Can Lead Product Development
Your first association with the European-based Nestle brand may be hot chocolate, but this
major food and agribusiness company holds a portfolio of products that include:
Nescaf (coffee)
Smarties, KitKat (confectionery)
Perrier, Buxton (water)
Buitoni (pasta)
Shredded Wheat (cereal)
Many of these sub-brands may resonate with you as delicious, but they may not signal health
conscious. The major trend today in the nutrition space is a focus on health and weight loss.
Nestle, with its consumer-led product development process, immediately began to develop
products in its verticals that would meet these changes and keep the companys customer
global base loyal.

An important aspect of maintaining long-term customer satisfaction is evolving your product

portfolio to meet the changing demands of the times. Nestles market researchers conducted
qualitative (focus groups) and quantitative (surveys) research to understand how best to
translate the companys brand equity and customer loyalty into products geared toward the
rapidly growing segment of dieters and health conscious eaters.
Enter Sveltesse (which translates to Slimness or Elegance in French), a line of low-cal
and zero calorie options. As the market researchers determined what was needed in terms of
product varieties, they partnered with Nestles food scientists to develop products ranging
from yogurts to dessert.
The market research revealed insights into the direction the companys customers food
preferences were moving. This led to an overall strategic and positioning pivot for the
company, and in 2001 Nestle announced: We want to grow from the respected and
trustworthy food company that we are known as now, into a respected and trustworthy food,
nutrition and Wellness company.
For Nestle, Wellness embodied the concepts of healthy foods, fitness, and vitality.
Ultimately, Nestle developed a range of products for people who needed enhanced nutritional
support or low-fat options. The company reformulated more than 700 products so that they
were lower fat, lower sugar, and lower salt.
The company paired these product development efforts with consumer education and brand
initiatives including websites with nutritional info, better information on packaging, and
wellness related outreach.
What can other businesses learn from Nestles approach? The companys longevity is due in
large part to their ability to stay tuned into their customers changing preferences. Food is an
area where trends change and consumers are becoming more demanding about options,
transparency, and accountability.
Being in touch with those evolving expectations, and using that information to inform product
development gives Nestle a strategic lead in retaining their customers over the long-term
despite changes in the market.

Ask yourself the following questions:

Has anything changed about the way customers consume your products? For example,
authors and publishers are now confronted with the realities of electronic publishing.
Have expectations about what is acceptable changed in your niche? The demand for
increasingly environmentally healthy products has changed the cleaning products
industry forever.
Do your customers have access to resources that could turn them into better customers
for your business? Many content publishers are now reaching subscribers in print, via
the web, and on mobile devices often in the same day.

Maggi Stews in Lead and MSG Pot: Controversy over Indias favourite instant Noodles
Abstract Maggi Stews in Lead and MSG Pot: Controversy over Indias favourite instant
Noodles
The Maggi imbroglio escalated to an unprecedented level with India's food regulator Food
Safety and Standards Authority of India (FSSAI) ordering a total recall of all nine variants of
the best-selling instant noodles brand. This is the first ever recall of a popular food product in
India. The transformation of Maggi from being staple food for students and bachelors to
being declared unfit for consumption has been quite instant. The Nestls maggi noodles were
banned across states after samples of it were found to contain excess amounts of lead and
MSG a flavor enhancer. The recent controversy around Maggi noodles that has every
household in an uproar.

The dispute has placed the processed food industry, regulators, government, and even
consumers in uncharted territory.This dispute has raised serious questions about processed
food industry, What caused such a vehement reaction against what was adjudged as the Most
Powerful Brand in recent times and to answer this questions, the research cum case study
paper would like to explore the controversy surrounding around Nestls maggi in particular
and food industry in general and highlight the shortcomings of food safety apparatus at
central and state level and suggest the strategies to revamp the same
Key Words- Food Safety and Standards Authority of India (FSSAI), Maggi.
Introduction
Many fast food items have flooded the markets but noodles remained as the most popular item
of all of them. Urban and semi-urban markets are controlled by Maggi and other players are
Top Ramen and other brands. Maggi has revolutionized the concept and this product has
gone to majority of the urban households. As an off-shoot of this development, noodles have
become very popular in India.
The current version of noodles has been around for over half a century on the global menu
card. Facing intense food shortages after world war II, Japan was forced to import bread from
the US, the move didnt sit well the Taiwanese- Japanese business man Momofuku Ando who
after months of flash-frying experiments, finally invented instant noodles, the founder of
Nissin Food Products in 1958 in Japan. Packaged under the brand name Chikin Ramen, they
were priced around six times that of traditional Japanese noodles and were considered a luxury
item (The Times of India, 2015). However, in 2005 an evidence of the oldest noodles is
believed to be found, which were discovered inside an overturned sealed bowl buried under
three meters of sediment in Qinghai, northwest China. Scientists determined the 4,000 year
old, long, thin yellow noodles were made from broomcorn millet and foxtail millet and show a
fairly high level of food processing and culinary sophistication.
Asia-Pacific represents the largest regional market for noodles worldwide, as stated by the
new market research report on Noodles. The region is portended to continue its dominance
Growth-wise; Middle East/Africa is projected to be the fastest growing regional market for
noodles, with a CAGR of more than 13% over the analysis period. The world instant noodles

association in its report Global Demand for Instant Noodles provides a comprehensive
review of the noodles markets, per capital annual consumption & packs eaten in the world in
a year. (The Times of India, 2015).
The continent's history of eating noodles is part of the reason why it is more popular here.
The world today chomps through some 102.7 billion servings of noodles (led by China &
HK who contribute to about half of that) a year. Unlike in other parts of the world, noodles
are a mainstream food category in Asia-Pacific, making it the single largest producer and
consumer in the world, The region, led by relentless demand from the Chinese and Hong
Kong markets, is portended to continue its dominance over the coming years. Emerging over
the Asian horizon is China that is recording massive production and consumption figures.
With relatively low annual per capita consumption levels compared to other Asian
counterparts, China represents a potential market for noodles. Noodles in Middle East/Africa
are experiencing a growth in the demand, with the introduction of newer products into the
market and are poised to grow at a strong compounded annual growth rate (CAGR) over the
long-term.

Impact Factor 3.582 Case Studies Journal ISSN (2305-509X) Volume 4, Issue
7 July-2015
Figure No.1 Global Demand for Instant Noodles

Global Demand of Instant

Noodles
(Figures in Million
Packs)

5000
0
4500

Source: - World
Instant Noodles
Association

44400

0
4000

Global Demand

0
3500

means packs

0
3000

eaten in the

0
2500

world in a year,
Figure in million

0
2000
0
1500

packs
13430

0
1000
0
5000

Figure No.1 shows

5500 5340 5000

4280

the Global demand

3590

3070

2800 2360

for Instant Noodles,

China & HK is one

the largest consumer

for instant noodles 102.7 billion servings of instant noodles were eaten in 2014. On average,
everyone on this planet ate 14 servings in a year. Regardless of the area, age and gender,
instant noodles are loved as Global food. In India its a comfort food.
2. Background
Nestl India is a subsidiary of Nestle S.A. of Switzerland. With seven factories and a large
number of co-packers, Nestls relationship with India dates back to 1912, when it began

trading as The Nestl Anglo-Swiss Condensed Milk Company (Export) Limited, importing
and selling finished products in the Indian market.
Beginning with its first investment in Moga in 1961, Nestls regular and substantial
investments established that it was here to stay. In 1967, Nestl set up its next factory at
Choladi (Tamil Nadu) as a pilot plant to process the tea grown in the area into soluble tea.
The Nanjangud factory (Karnataka), became operational in 1989, the Samalkha factory
(Haryana), in 1993 and in 1995 and 1997, Nestl commissioned two factories in Goa at
Ponda and Bicholim respectively. Nestl India has commissioned in 2006 its 7th factory at
Pant Nagar in Uttarakhand.
3. Nestles Maggi Noodles in Indian Market
Many fast food items have flooded the markets but noodles remained as the most popular
item of all of them, . Maggi has revolutionized the concept and this product has gone to
majority of the urban households. As an off-shoot of this development, noodles have
become very popular in India.
It is a far cry from the initial launch days when Maggi was distributed free in schools to
promote trial; in 1980s during the launch period. The company made an attempt in the mid90s to change the formulation of the product, which was outright rejected by the consumers
and the company had to go back to it old formulation and the company had to do a massive
communication campaign. Today India is the largest market for Maggi noodles. Maggi
pioneered the concept of packaged instant noodles in India three decades back and despite
several brands entering the fray, dominates the space.ITC Foods' Sunfeast Yippee has
garnered 18-20% of the market. Hindustan Unilever, which markets Knorr soupy noodles,
holds the balance share with other brands.

Impact Factor 3.582 Case Studies Journal ISSN (2305-509X) Volume 4, Issue
7 July-2015
In 2014, the instant noodles category added on average 17,000 outlets a month. Noodles
were among the most widely distributed products in the country, in addition to biscuits,
soaps and detergents. According to Nielsen, products in the fast moving consumer goods
(FMCG) space are sold at close to 8.5 million outlets.
Before the controversy over lead and monosodium glutamate found in Maggi's two-minute
snack, India was the world's fifth-largest instant noodles market, valued at Rs 3,800 crores
Table No.1- Nestles market share in India & Maggis competitors
COMPETIT
MAGGIS ORS
Horlicks
GSK
foodles

consumer

NESTLES MARKET SHARE

IN INDIA
Source:

MARKE
CATEGORY

T
SHARE

RANK

Edelweiss
research

in
%
Table No

Knor
1

r
Sunfeast

HUL

Yippee
ITC
Top Ramen
Indo Nissin
Maggi Brand Products
Instant noodles
Instant

Infant Milk Cereals

96

shows the
Nestles

Noodles
Wafers And Whites
Pasta
Instant Coffee

80.2
68.5
65.7
51.8

1
1
1
1

Pasta

Tea Cream
Infant Milk

49.9

Ketchup and Sauce

Instant Masala
Soups

Nutrition
Ketchup

41
26.9

2
1

market
share in
India in
various
product
categories

Overall Chocolate
18.8
2
&Maggis competitors, Nestle has captured 80 per cent of the Noodles market share, and
dominates the market whereas, the competitors of maggis are much behind.

4. Controversy over Lead and Monosodium Glutamate (MSG)

The Food Standards and Safety Authority of India (FSSAI) which is entrusted with ensuring
that all food in India is safe, issued an eight page statement pointing out three major
violations by Nestle, and kept its options open for prosecution on these counts under the
Food Safety and Standards Act 2006.
The violations are -presence of lead in the product in excess of the maximum permissible
levels of 2.5 parts per million (ppm), misleading consumers by printing No added MSG on
the Maggi packets and release of Maggi Oats Masala Noodles in the market without risk
assessment and grant of product approval. Simultaneously, Maggi producer Nestle India,
which controls over 80% of the instant noodles market in the country , announced a
withdrawal of Maggi from the shelves because of unfounded concerns and an
environment of confusion for the consumer. A high-level Nestle delegation, led by its global
CEO, met FSSAI officials at their Delhi headquarters and disputed the claims about lead
being found in the product, the MSG content and the Maggi oats noodles issue.
The FSSAI rebutted each of these arguments in detail.
According to Nestle, Maggi noodles packs contain a tastemaker sachet and the noodles cake.
Both parts put together should be tested for lead levels, not separately . FSSAI has rejected
this and said that they will test the product as it is sold--in two parts--not as it is processed by
the consumer.
Standards have to be applied in respect of each of these two components independently and
have no linkage with the processing of the end product as it is consumed, it said.
Experts believe this is a grey zone with no clear law. A higher lead content of the tastemaker
will get diluted and fall below the permitted level when mixed with the noodles cake. But the

FSSAI argued that consumers are going to add water while making Maggi, so should they
start taking the water also into consideration? Giving details of lead tests from various states,
FSSAI said that in Delhi, Gujarat and Tamil Nadu, lead levels were found to be higher than
permissible levels. It said that Nestle had claimed in 2012 that lead levels were just
0.0153ppm in its noodles. Now tests were indicating levels as high as 17.2ppm which is
dangerously high. The FSSAI also said reports from certain other states were not in the
desired format and hence they had been sent back for clarification.
Dismissing Nestle's claim regarding the advisory No added MSG printed on Maggi packs,
the FSSAI said that rules require tha t no additional information than required by law should
be given on packages so that consumers are not confused. It quoted from the US Food and
Drug Administration (FDA) document saying that many food items contain glutamate in
natural form (like cereals) and it is not correct to declare that there is no added MSG when
such products are being added. This, according to FSSAI, is misleading the consumers. On
the Maggi oats noodles issue, the FSSAI strongly came down on Nestle, saying they
launched a new product without going through the due process of risk assessment and
approval, violating the law.
So, what happens now? The FSSAI has called upon Nestle to re-ascertain the safety of its
productsas per the law and issued show cause as to why permission to produce Maggi
noodles should not be withdrawn. Nestle has been asked to report to the

Impact Factor 3.582 Case Studies Journal ISSN (2305-509X) Volume 4, Issue
7 July-2015
FSSAI on a daily basis. As indicated by the regulator, food safety commissioners in states are
free to launch prosecutions against Nestle for violation of the law.
5. Causes for concern in processed food industry
The dispute has placed the processed food industry, regulators, government, and even
consumers in uncharted territory.
Data collected by FSSAI gathered from all states and union territories clearly shows a pattern
in rise in adulteration over the last few years. While less than 13 per cent of the samples
collected by all states were found to be not conforming to the standards in 2011-12, the
percentage rose to 14.8 per cent in 2012-13 and further jumped to 18.8 per cent in 2013-14.
Also this has resulted into a rise in conviction/ penalties and amount collected in penalties
jumped five times from 764 in 2011-12 to 3845 in 2013-14. With rising instances of
adulteration, the government is looking to sensitize its officials to check on the same.
Table No. 2 Food standards and safety Authority of India (FSSAI) Enforcement
Year
2011-12
2012-13
2013-14
2014-15

Samples
NonProsecution
examined conforming launched
64,593
8,247
6,845
69,949
10,380
5,840
72,200
13,571
10,235
49,290
8,469
7,098
Source:

Convictions/ Penalties
Penalties
(Rs Cr)
764
NA
3,175
5.2
3,845
7.3
2,701
6.9

FSSAI
Table No. 2 shows the scenario of food adulteration in India, and the action taken by Food
standards and safety Authority of India (FSSAI) Enforcement.
A look at the report of annual testing laboratories across states shows that five states-UP,

Maharashtra, MP, Kerala and Andra Pradesh account for more than 90 percent of the total
penalties levied in the year 2014-15 and 84 per cent of the total amount raised in penalties.
A recent India Spend report mentions India has only 148 food testing laboratories. For a
nation of 1.26 billion people, and millions of independent, largely unorganized retail pointof-sale outlets for food products (including grocers, street vendors, restaurants, dhabas, roadside eateries, and mithai shops etc.), it translates to just about 1 lab for about 8.5 million
population and thereby severely jeopardizing the health and wellbeing of millions of
unsuspecting Indians.
Food adulteration comes under the Food adulteration Act, which is administered entirely by
the states and therefore the power for seizure, for conducting inspections, for seizing
samples, filing cases etc; lie with the state governments. The regulator, however, is the Food
standards and safety Authority of India (FSSAI) which falls under the Ministry of health so
the standards set by the FSSAI have to be enforce and implemented essentially by the State
governments. Unlike other sector regulators, this is one such case where the regulator does
not have enforcement powers and it has to rely on the states for the same.
In light of this incident, it is crucial to examine the implications this can have on various
other products. There are also other similar categories such as instant soups, vermicelli, and
oats. What about roadside eateries that source their noodles and sauces from local
manufacturers? The FSSAI should take a key role in getting such eateries registered and
ensure compliance and monitoring is done.
The collateral damage following the ban on popular instant noodles brand Maggi, which food
safety regulator FSSAI has declared
unfit for consumption, is not just impacting suppliers, but an estimated 1,500 workers, as
well. These workers are mainly involved in manufacturing Maggi noodles across Nestle
Indias plants.
In the companysMoga plant, SatishSrinivasan, Factory Manager at the plant, said: About

115 workers involved in the production of Maggi noodles have now been engaged in the
production of other company products. And in plants where only Maggi noodles were being
made, the workers are being trained in other team-building activities. However, workers,
especially temporary ones, in companies that are suppliers to Nestle India are the worst hit.
Moga-based Paras Spices Pvt Ltd, the largest supplier of spices to Nestle India, has already
asked nearly 200 temporary
Employees not to report to work, or report twice or thrice in a week, following the
ban.ParasBudhiraja, Director at the company, said supplies to Nestle India contribute nearly
45 per cent to overall business. We are now talking to new clients and getting them on
board. Since we follow strict quality standards, we believe we have strong potential to step
up our exports, he added.
6. Measures to revamp the food regulatory structure
Considering the Pandoras Box that this incident has opened up, what steps do we need to
take to uphold food safety? Banning is a knee-jerk reaction that takes us nowhere. Instead,
some practical measures require to be taken.
6.1 Increase the Number of private labs:Recently after the incidence of Maggi imbroglio,
The FSSAI has notified 82laboratories accredited by National Accreditation Board for
Testing and Calibration Laboratories (NABL) in India for testing food samples taken under
the Food Safety and Standards Act, 2006 and Rules and Regulations made there under on
April 1, 2015, said the FSSAI order issued on June 15. NABL is an autonomous body under
the aegis of department of science and technology

Impact Factor 3.582 Case Studies Journal ISSN (2305-509X)

Volume 4, Issue 7 July-2015
and is registered under the Societies Act. Food Hygiene and Health Laboratory
received the NABL accreditation in 2006 which the laboratory has been
maintaining since then not all state government and Union government run food
laboratories are accredited. Barring a few government run laboratories that have
complied with the stringent accreditation processes and bagged the NABL
accreditation, most government laboratories are yet to get the NABL
accreditation,
6.2Constitute a task force of experts from food technology institutes, such as CFTRI,
apart from renowned food scientistsworking with leading companies such as Amul,
Unilever, Nestl, Tatas and others. It is necessary to balance theory with practice.
In addition, FSSAI and the processed/ packaged food industries must also work
closely with each other so that appropriate norms and guidelines are in place, and
then are ideally supported by voluntary and proactive compliance by the industry,
so that another fiasco reminiscent of Maggi does not recur, and that the consumers
health is not put to risk at the altar of convenience, taste, or corporate profit.
6.3Create clear, uniform guidelines on how to go about monitoring the industry
With a clear timeframe such that such random, arbitrary testing is done away with.
This will ensure transparency. Simplify the FSSAI guidelines.
6.4Give a grace period of, say, 6 to 12 months to all manufacturers to conform to the
new guidelines and correct the packagingdeclarations as well.

6.5Priorities the issues and go about monitoring the same in a systematic, planned
and regular manner with clear timeframes onimplementation. If we are able to
clean up a couple of categories over the next one year we would have moved
significantly forward. If going after market leaders like Maggi and Nestl really
helps clean up the system, it would have achieved some greater good. But the way
I see it is if Maggi is unsafe, then there are at least a million other things we
shouldnt be eating right now.
6.6India needs to embrace structural changes to ensure food safety for future
generations. My main concern stems from theFood Safety Standards Authority of
India (FSSAI), created under the Food Safety and Standards Act, 2006. This has
been enacted in accordance with international codex guidelines. There are a lot of
provisions in the Act that require revamping, but what were seeing is a patchwork
implementation of both the old PFA (Prevention of Food Adulteration Act)
guidelines as well as the new FSSAI laws.

6.7Revamping the Central and State Authorities:An investigation by Indian express

had revealed a number of shortcomings inthe countrys food safety at central and
state authorities including lack of staff, technology and accreditation for most state
labs.
Currently 99 per cent of the food inspection function is with the states, that is why
it is important to revamp the states authorities, but there is also a realization that a
central authority needs to have its own staff on the field to avoid what happen in
the case of maggi noodles. The authority was literally caught napping leaving it to

all states has also ment that rejected product approval application information that
is routinely made public by the authority is not paid heeds to by the states.
7. Conclusion
The maggi controversy has shattered many hearts, maggi was not merely a product
or a brand in India, Indian consumer who is not unused to suspect food standards,
feels a deep sense of betrayal by one of the most trusted food brand in India.
The maggi controversy has exposed the pathetic condition of Indias processed and
packaged food industry. There's no denying that food safety regulations leave a lot
to be desired. Despite establishment of the Food Safety and Standards Authority of
India in 2006 and subsequent promulgation of the Food Safety and Standards
Regulations, 2011, implementation of rules is haphazard and erratic. Food safety
demands adequate oversight and inspection at each step of the food production and
supply chain. However, such a principle is rarely followed in India. The
government should completely overhaul the Food Safety and Standards Authority
of India (FSSAI) and state authorities. In fact, most of the states do not even have
the accredited laboratories.
Coming to the Nestle India, the company has disclosed having spent Rs 445 crore
on Advertising and sales promotion last year while the expenses towards quality
testing was less than 5 per cent of such amounts that itself explains everything, the
company needs to be more forthcoming in communicating actively and
transparently to the public. Since Nestl sells similar products across the world, it
means complying with numerous international food safety standards. Therefore,
Maggi and other packaged food products must of course be held accountable for

violating guidelines.