Prepared by Dr.

Kapil Kumar

economictimes.indiatimes.com
http://economictimes.indiatimes.com/magazines/brand-equity/maggiinasoup-a-case-study-of-how-not-to-handle-acrisis/articleshow/47599502.cms

#MaggiInASoup: A case study of how not to handle a

crisis
By Ravi Balakrishnan & Amit Bapna , ET Bureau | 10 Jun, 2015, 05.20AM
IST

For nearly three decades, Nestle's Maggi noodles was the ultimate success story: an unlikely product
embraced
wholeheartedly by a difficult market. Over the last few weeks, it's become a case study of an entirely
different sort a textbook example of how not to handle a crisis.
To give you some estimate of the size of the problem facing NestleBSE 0.35 % and Maggi here are a
few
statistics: according to the World Instant Noodles Association, India consumed 5,340 million cups or
bags of
instant noodles through 2014. It counts among the fastest growing markets in the world for the snack,
having
almost doubled in size since 2010 when it accounted for 2,940 million units. Maggi is estimated to have
a 70 per cent share of the market, and contributes nearly 30 per cent to Nestle's Rs 9000 crore annual
turnover. While starting off life as a snack for children, Maggi is widely consumed by students and
young professionals, and is available even in the most inaccessible parts of the country; the Maggi
Points
on
the
Leh-Kargil
highway
for
instance. By some reckonings, Maggi has declined 70 per cent in sales since the crisis.
Amid allegations of higher than permissible levels of lead and the presence of MSG (monosodium
glutamate) in its flagship noodles, Maggi was down, out and sinking lower at the time of going to print.
It had been temporarily banned in Delhi, Tamil Nadu, Uttarakhand and Jammu & Kashmir. Kerala took
it off shelves in all government run shops, the army issued an advisory to its canteens against the
product
and
it'd
also
been
dropped
by
retailers
including Big Bazaar, Walmart, Hyper City and online store Bigbasket. An increasing number of state
governments were keen on testing not just Maggi but a wide range of processed food. Save a miracle,
we doubt the crisis will be over and done with by the time you read this.
VK Pandey, an officer with UP's Food Safety and Drug Administration ended up doing what several
deep
pocketed global multinationals couldn't do: deal Maggi (a Top 5 Trusted brand according to last year's
Brand
Equity survey) a blow it may never entirely recover from. The food brand's troubles began when
Pandey who has a previous history of activism against targets as diverse as Britannia and a
Lucknow based biryani house sampled Maggi packs from Barabanki for MSG.
After his report was challenged by Nestle, the labs came up with an even more damaging verdict: not
only was
MSG present but the lead levels were nearly 7 times the permissible limit. On 30th of April, authorities
in Lucknow ordered Nestle to recall a batch of noodles. In an emailed statement, the company
claimed, "We are confident that these packs are no longer in the market. The company does not agree
with
the
order
and
is
filing
the
requisite
representations with the authorities."

Prepared by Dr. Kapil Kumar

The Silent Treatment
And then, in the weeks it took for the controversy to spread to social media and grow into a full blown
crisis,
Nestle appears to have done... not very much at all. It seems unaccountable, considering Nestle is an
MNC and has been through enough rough patches to assume there would be a response mechanism.
According to an industry veteran, "They've had complaints about one thing or the other every three
years now. And they probably thought this would die down if they didn't do anything."
However, even when it became blindingly obvious that this was more than a minor blip, Nestle
continued to look the other way. If it reacted, it was via impersonal and template based responses to
consumers who keyed in the words Maggi and MSG. Karthik Srinivasan, national lead of
social@Ogilvy got the standardised response after posting pictures of a bowl of noodles with crudely
photoshopped images of a godman who starred in a film named MSG and made a joke about having
proof that Maggi had an excess of MSG.

Prepared by Dr. Kapil Kumar

Among Nestle's first lines of defence was a four page PDF sheet with no company logo and a highly
technical
explanation says Srinivasan. Its social media sites went on a hiatus from posting starting on the 21st of
May and coming back to life only on the 1st of June, critical days in which consumers were free to
interpret the silence in whatever way they chose.
A common interpretation was that of an admission of guilt. Says a marketing expert who personally
weathered
a
crisis in which traces of pesticide were found in popular soft drinks, "For so ubiquitous a brand, the first
thing
they
could've done is conversed with the consumer. Whether guilty or not, it didn't matter; communication
was
nonnegotiable. The more the delay, the more the suspicion." Adds a retail veteran, "Whenever a
controversy
happens, consumers pause and wait for clarity. The brand needs to come out, engage and keep the
dialogue
going."
Part of the blame for Nestle's stilted response is laid at the door of its social media strategy. Srinivasan
argues that most brands spare no expense while crafting a message over film or print. And yet this
much loved product was "given an assembly line treatment on Facebook and Twitter."
There have been enough meltdowns on social media for most brand experts to recommend a welldefined
strategy communicate openly, give the company a face, say sorry if necessary, find your loyalists,
have an
honest discussion of the issue with them, give them an insight into the brand's perspective and hope
they become your first line of defence at a time when the brand's credibility is badly damaged. Nestle
recently ran a campaign around the theme 'Main Aur Meri Maggi' inviting consumers to share their
stories:
one
assumes
they
still
had
a
database of loyalists, some of whom may have enjoyed social clout. Or it could have tapped into the
numerous
bloggers and people who were speaking up for it, many of whom were waiting for an official
explanation. Instead it opted to remain uncommunicative.
Automated Response Better Than No Response?
Even after Nestle deigned to respond, its reactions are being dissected and found wanting. Says Anil
Nair,
CEO,
L&K Saatchi, "In the digital era, a day late is like being a month late. Enough conversations have
happened
in
the
living rooms of Indian homes and it is not good news for the brand. And their response is a press
statement
and
few tweets? Maggi has been a part of a deep mother-child relationship for many years it is a
convenience
food
that mothers have given their kids with implicit trust. Where is the reassurance to the mother?" Anindya
Banerjee,
executive creative director at Scarecrow who has previously worked on the brand points out, "Nestle is
a quiet
company. It doesn't like to tomtom itself. Understandably, they are taking it one step at a time. They
don't
want
to
make the mess larger, especially when many of their other food products like milk, curd, soya milk, etc
are
gold

Prepared by Dr. Kapil Kumar

standard."
A common complaint is how clinical Nestle's reaction has been.While the brand ambassadors are
obviously
scared of talking given the possibility of being dragged into a legal imbroglio, there's literally no face to
the
campaign at the time of going to print. Sourav Ray, chief strategy officer, Havas observes, "I would
have expected the leadership team to have come out and taken ownership of this problem."
There have been several recent examples from Flipkart's Big BillionDay Sale to the Air Asia crash
where
a
quick
response from the men in charge made a lot of difference. Says Dheeraj Sinha, chief strategy officer,
Grey,
"Nestle may not be at fault but where's the evidence from the company? Responsibility needs a
human
face,
not a press release or an automated tweet. Remember the recent Air Asia plane crash, where the
airline
chief,
Tony Fernandes was at the forefront of rescue work, supervising everything, talking to press the
airline
suffered
much less backlash than, say, Malaysia Airlines did in a similar situation. The difference was
transparency
and
responsibility."
Noodles Unravelling
However, as of now, Maggi is going down and taking the category and its company with it.Nestle's
stock rose by
25.7 per cent over the last year. It fell a staggering 11.7 per cent last week. Marketing experts believe
it's a
watershed moment for Indian consumers and processed food. Says the cola industry veteran, "First of
all
it's
a
very unhealthy snack fried maida noodles. What this incident will do is take it in a different direction:
how

Prepared by Dr. Kapil Kumar

healthy is it? Once the lead and MSG stories die down, that focus will remain." Nair believes, "The
controversy will impact the brand more in the metros and urban centres. Business may recover but the
brand can never straddle the taste and health platform again." A prominent retailer says the slack from
the loss of Maggi sales is nottransferring to other brands implying a distrust of the entire category. Prof
Dwarika Prasad Uniyal, associate professor of marketing & retailing, IIM Kashipur views it as "A huge
wake-up call. Parents will check all health indicators in the other brands too and will try to avoid the
category in the next few months. If these brands too lag in safety standards they better start preparing
to rectify the mistakes and come up with better products, promises and testimonials, else the whole
category faces extinction." When the dust has settled, the much ignored back of the pack will perhaps
be read with even more attention than the front.
Nestle's own response at the time of going to print was, "Our Maggi Noodle products in India and
elsewhere are absolutely safe for consumption. We are currently engaging with different authorities in
India
to
clarify
the
situation. We understand how unsettling some of the current confusion is for our consumers and we
are working hard to resolve this matter."
In a world where consumer and marketer alike are talking about product withdrawals, independent lab
tests and personal apologies from CEOs, that's perhaps the very definition of too little too late.
BEST SERVED HOT
Speed of response determines whether you have a winner or leave a bad taste in the mouth when it
comes to food related crises:
Messing With Food at Domino's
The crisis: Kristy Hammonds and Michael Setzer, two Domino's employees in North Carolina with a
horrific
sense of humour filmed what they'd later claim was just a prank. The footage which was uploaded by
Hammonds to YouTube showed Setzer breaking wind over food, sticking cheese up his nose, all on an
order that supposedly went out to a customer. It was among the first big controversies in a post social
media
world,
with
the
video
clocking over a million views and inspiring outraged discussion on Twitter.
The solution: Domino's waited 48 hours, something the brand got pilloried for, hoping the crisis would
blow
over.
It then went into damage control mode with President Patrick Doyle uploading a video apology to
YouTube,
the
same site on which the offensive video was posted in the first place. He reaffirmed his commitment to
the
pizza
brand's customers, apologised and asked that the company and its employees not be judged by the
behaviour
of
the offensive duo (who were, of course, fired and at the receiving end of legal action). And a year down
the
line,
Domino's went in for a comprehensive revamp of its menu and its image, inviting the people who hated
it to
engage with the brand.
Crying Horse
The crisis: In 2013, Findus, a European frozen food brand was was accused of serving horse-meat
masquerading as beef in ready-meals for chains like Tesco, Aldi amongst others. The UK government

Prepared by Dr. Kapil Kumar

went
into
immediate action and consumers were advised to return the ready-meals to the shops and claim full
refund.
The solution: The entire productline went in for a full recall in parts of Europe. Post the controversy,
the chief
executive of Food Standards Agency (FSA), the UK made it mandatory for every company to test
every
product
line. (Incidentally, Findus has a Nestle connection: it was a part of the Swiss major from 1962 to the
2000 when it was sold off to a Swedish private equity firm.)
Pork or Not
The crisis: The UK based confectionary giant Mondelez was put on the back foot in 2014 when some
of its
chocolates were found to have traces of pork in Malaysia, a pre-dominantly Muslim country. As per
Islamic
standards, Halal-certified food products must not contain any pork. Tests were conducted in Indonesia
and Saudi Arabia, amongst other markets.

Prepared by Dr. Kapil Kumar

The solution: Fearing a huge backlash, Cadbury Malaysia proactively recalled product even as
enquiries and tests were underway. Possibly to sacrifice immediate sales/profit and protect longer term
sales!

Prepared by Dr. Kapil Kumar

Maggi: A case study for BPSMV MBA Students

Maggi is a name which no one Indian household could say have not heard about. It has become top most eaten noodles
in India. Nestle started it in 1987 with the famous tagline 2 minutes noodles which still the same. In India Maggi has a
market share of around 60% and stands undisputed for so many years. It all started when traces of lead and
Monosodium Glutamate (MSG) were found in excess in Maggi. The Food Safety Regulators in Uttar Pradesh, found that
samples of Maggi noodles contained excess of MSG. The tests revealed that Maggi contained around 17 parts per
million (PPM) of lead as against the permissible limit of 0.01 PPM. With the discovery of excess of lead many state
banned Maggi and all its related products. The states include Delhi, Kerala, Punjab, Haryana, and Madhya Pradesh.
Bollywood stars who endorsed the product were also booked for promoting it.
How does consuming lead and MSG affect the body?
Excess of lead intake could damage the nervous system and cause brain disorders. Monosodium Glutamate or MSG is
naturally present in various food items such as mushrooms, tomatoes, Parmesan cheese and soy sauce. It has a unique
taste which is different from salty, sweet, sour or bitter. The taste is described as meaty and termed as Umami. Excess
consumption of MSG promotes sluggishness in the body. It may also cause headache, nausea, increased thirst and a
twitching sensation in the mouth. In some cases one may feel numbness, skin rashes and excessive sweating too.
There is mainly a technicality issue between Nestle and Indias food authority (the FSSAI. Both Nestle and FSSAI agree
that the level of lead found in single packet lies within the permissible limit but the issue is about the tastemaker.
Tastemaker is the seasoning that is added to the noodles and FSSAI argues that it breaches 2.5 parts per million
permissible limit when tasted. In defence Nestle argues that tastemaker is never meant to be eaten alone and
instruction on Maggi packets also states the same, therefore the two should be taken as single product instead of
considering tastemaker as a single one.
Though Maggi noodles are pulled off shelves in India there are other nations that have passed it in testing and consider
them safe. Canada and Singapore have tested them and pronounced them safe. The main reason is that Singapore
cares less about hygiene as compared to India and Canadian inspectors are quite relaxed about food safety. It is also
worth mentioning that Maggi Noodles along with it lead content had 4 ppm or 5 ppm so it would require around 200
Kilograms of those noodles to match some of the so called ayurvedic medicine had around 70,000 ppm. Then there was
the issue of MSG (monosodium glutamate) which was found in noodles despite Nestle claiming they have not used any.
Glutamate or glutamic acid is occurring naturally in our body and naturally in various foods such as cheese, walnuts,
tomatoes and mushrooms. The taste enhancer has become important part of the diet of the Asian people but in recent
year people of the west are creating lot of scare-mongering connected to it. As of now no ill effects of MSG have been
reported till now.
The only ill effect that was when a scientific study was carried out on a rat that too when enormous quantities of the
substance were injected, such large amount could damage or cause ill effect to anyone and expected to produce an
adverse reaction. There are various other substances cinnamon which cause ill effects even at low level still it is
consumes everywhere is households. Ban of Maggi have helped brands such as Yippee Noodles and Bambino a lot a
huge increase in their shares signifies this fact. Currently the current share ITC Yippee share is around 18-20% and
could rise even more.
Problems that have arisen with the ban of Maggi (on a lighter note)
1) Huge problems especially for bachelors who dont know how to cook.
2) Now mother have to be prepared in advance with some food in the evening for their children who came running
after playing asking for food as now the food cant be prepared in 2 minutes. (Though we all know Maggi takes more
than 2 minutes to cook but let us not spoil their tagline).
3) Cooking scientist have lost their jobs as they dont any more Maggi to experiment on with their ideas like adding chilli
sauce , mayo, ketchup, onions ,capsicum , rice . Dal Makhni, Shahi paneer no matter what the product is all has went
into it.
4) Late night talks have come to standstill as there is nothing left to feed the hunger that arises during night.

Prepared by Dr. Kapil Kumar

Give solution to the problems:
1. What can Nestle do at this point of time to stop further sale downfall before it becomes
too late.
2. What strategies can be adopted by Nestle to revive the sale of Maggi.
3. How can Nestle convince Indian consumers about maggi as a safe and healthy product.