MAGGI NESTLES PROBLEM CHILD?

1. Discuss the marketing strategies adopted by Nestle initially to popularize Maggi noodles. Critically comment on the way the company handled the stagnation in the sales in the early 1990s.

Some of the strategies adopted by Nestle were : Nestle immensely concentrated on promotional and advertising strategies to create strong brand awareness and to occupy a firm position in the minds of the consumers. The company provided its consumers with more variants of line extensions through innovation and research. Nestle cashed on the buyer roles by attracting mothers who acted as buyer based on convenience plank, and children who acted as influencers and users based on the fun plank, Nestle followed push strategy to market its products through sales promotional activities which later turned out to be a necessary evil They concentrated clearly on target segments which mainly included kids and hence adopted means to influence them through tag lines which kept on changing and influencing new users to adopt the product. Nestle maggi cut down on costs innovatively by reducing the thickness of packaging and hence reduced its price, it also introduced different pack sizes according to consumption patterns which boost up sales. During the early 1990s since sales was stagnating and hence Maggi Noodles was forced to work out innovative approaches i.e. they launched a sweeter version of maggi, the blunder what nestle committed was lack of market information, they had no clue about the consumer preferences and behavior.

Since Indian consumers love spicy food the original version of maggi noodle was successful but with the sweeter version the expectations turned turtle. The initiative to cut down prices and cost, and providing different pack sizes did help the company to boost up sales by more than 75%.

During 1997 the operational costs increased forcing Maggi to reformulate. The motive was to infuse fresh life into the brand and work out a cost effective method, by altering the process and using new technology.

1. As a brand manager, critically analyse the launch of new Maggi followed by the relaunch of old Maggi? Was Nestles decision to withdraw the new version an appropriate response to the situation? Support your answer with reasons.

During 1997 the operational costs increased forcing Maggi to reformulate. The motive was to infuse fresh life into the brand and work out a cost effective method, by altering the process and using new technology.

The new formulation of maggi noodles was a drastic failure, since it had a significant difference in the taste, taste was the most prominent attribute which was responsible for the success of the Maggi noodle. The change in the formulation had a negative influence on the product. The process of manufacturing was altered both of the Noodle and the tastemaker.

The consumers had a certain image and positioning in their minds, the reformulation of the product had an adverse influence and was not in accordance with their expectations, this triggered out costumer complaints followed by decreasing sales figures. Yes, Nestles decision to relaunch was absolutely appropriate, if Nestle had not initi ated this action:

Competitors would have eaten out market share Maggi noodles would not have had its loyalists anymore due to brand switching and decreased consumption.

Regaining loyal consumer once again from scratch would have been a huge task for Nestle

Lot of costs involved would have gone in vain. They were market leaders in this segment which prevented a lot of new entrants.

2. Evaluate Nestles attempts at brand and line extensions under the Maggie brand and analyse the reasons for their failures. In light of your evaluation, discuss the pros and cons of using an umbrella brand and making brand/line extensions. Nestle once established its name in the Maggi brand it spotted opportunities for further potential and decided to bring in brand extensions under the Maggi umbrella In 1988, Maggi soups were launched. Since there was no organized packaged soup market in India at this stage. Nestle had planned to create a market for packaged soups. But Nestle never took soups as seriously as noodles and hence did not pay much attention to the product, this led to the failure of the soups. Not much investment was made for promotions, and product variants were limited to 4 flavours when compared to competitions 11 flavourings. In 1993, the first variant of Maggi noodles Sweet Maggi was launched. This was advertised on a large scale which included about 75% of the advertising budget for the year. But this product again failed as it was brought into the market without any research. in 1995, Nestle had tie-ups with 2 houses to produce and market pickles under the Maggi brand, the other house aimed at sambhar, dosa and vada batter and spices in consumer packs. Later these businesses also became non profitable due to non-expertise in traditional food Indian product In 1996 , Maggi Tonites Special, a range of cooking sauces aimed at providing restaurantlike- taste to food cooked at home failed in the market. In 1997, Nestle realised that its target segment had grown and moved onto a different level of cluster who were teens, to tap on this potential it launched Maggi Macaroni. Nestle was aware that Macaroni would cannibalise the share of noodles, the taste differed from that of noodles for the simple reason it was thicker than noodle and consumed more time though taste differed too.

Higher pricing without differentiation was a major factor that took down its equity. It was launched to compete with the noodle brand Top Ramen. Finally came in the reformulation which was triggered due to high operational costs and failed to capture the target audience because of the change in its taste and technology.

Pros and cons of using an umbrella brand. Pros Individual brands enjoy more value with less efforts The total cost for promotional activities is cheaper per unit as it gets distributed, Advertising, promotion can be combined for all the different products and services. Since the brand name already enjoys a huge equity lauching of new products under the same umbrella becomes easier, as consumers already have the trust and loyalty toward the brand.

Cons If any one product does not do well in the market then it can affect the overall brand. Different brands will have different qualities which will vary and this can be an obstacle for smooth functioning of brand as well as the firm. If there is any negative publicity for any product it can affect the other brands under umbrella branding. Brand extensions may lead to less awareness.