LOVELY PROFESSIONAL UNIVERSITY

MITTAL SCHOOL OF BUSINESS

ACADEMIC TASK -2

NAME OF THE FACULTY MEMBER: Dr. Pretty Bhalla

COURSE CODE: MGN581

COURSE TITLE: MANAGEMENT AND ORGANIZATIONAL BEHAVIOR

DYNAMICS

TASK TITLE: Nestlé’s Maggi Pricing and Repositioning a Recalled Product

CLASS: MBA

SECTION: Q1959

BATCH: 2019 -2021

DATE OF SUBMISSION: 8th SEPT 2019

SUBMITTED BY: R.Gowtham

ROLL NO: RQ1959B42

REGISTRATION NO: 11915079

CLASS: MBA

SECTION: Q1959
 INTRODUCTION

Maggi was found as a quick-to-do recipe by a Swiss entrepreneur Julius

Maggi in the early 1880’s. It was the mid period of the industrialization and the
majority of the populations of Swiss were first time workers in the industry, it had
large contribution of women. They had time constraints for work, especially
women. They found it very difficult to manage their professional and personal life,
especially cooking. Julius Maggi was given a task to find a new recipe that
wouldn’t take much time to cook.

He did it successfully and the product was named after him. The business
grew rapidly. The business grew up holding a good market share. Later Nestle
acquired Maggi in the year 1947. Then the company expanded its operations across
the globe as there was a high demand for such food products. The company also
introduced new products like soups and sauces along with Maggi.

After 100 years of its existence in the world, in the early 1980’s Maggi was
introduced by Nestle in India. Over the years in the Indian market Maggi proved its
sight and became the leader in the noodles industry with 63% brand share.

Maggi was welcomed by the households of India as it became a part of their

daily meal. Children were the ultimate target or the large consumers for the
product, found after a nationwide survey to build new strategy and increase the
business by the company.

Though Nestle had few competitors, it was tension free and running its
business successfully as there were no strong competition found for the brand for a
longer time in the market.
 OBSTACLE ARISES

As a threat to the business there arose an allegation on the brand in 2015,

that Maggi is not suitable for consumption as it crossed the permissible limit of
artificial flavoring agents like lead and MSG which adds taste to Maggi by
Government of Tamilnadu. Upon several lab tests, FSSAI (a centre governmental
organization to regulate and ensure the people eat the right thing) confirmed the
allegation and put a temporary ban on the product. On the very next day the
Government of India upon confirmations from FSSAI called in for a nationwide
ban of the product.

The news spread to the neighboring countries like Nepal and Singapore as
the countries proved that the allegation was true and banned Maggi in their
respective countries.

In a couple of days, Nestle India incurred a direct loss of 20% revenue due
to the ban. Its brand value fell thus resulted in a market capitalization loss of
Rs.100 billion. Soon after this, the company’s production was put to an end
withdrawing its employees from production plants and transferring them to
training hubs.
VISIBLE PROBLEMS

 The communication was not so effective: The Company did not give
a platform for the media or its consumers to prove themselves that
nothing had gone wrong from their side. Even the employees of the
company were not sure of what is the company’s next move is? It
spoke for the first time when Mr.Bulcke came up in front of the press
and addressed the issue.

 It stood only by its pride: Indians felt to their heart that the company
was doing something unlawful. The Company denied all the
allegations and stood by its own decision that nothing like that would
have occurred with arrogance and failed to react and think from a
common man’s perspective. The lack of empathy is clearly visible in
the company’s behavior.

 B2B gets largely affected: From the case we can see that a company
supplying raw materials to Maggi was largely affected as the company
stopped its production for a few weeks. The supplier now has to find a
potential customer to run his business. This shows at the time of crisis
not only one entity gets affected but also a chain a entities like
suppliers, transportation company and other outsourced functions get
stuck and is unable to come out of the problem quickly.
 The company did not think the other way: Nestle couldn’t control
anything that was hurting its brand name. Nestle was silent when the
media kept accusing and did not react to it at all. Nestle had decided
and implemented the talks only with the officials. It didn’t think what
happens if the talks are not favorable. It had no plan “B”.

 It did not have a taught for people (Consumers, Shareholders and

media): The scene was not just of an allegation. Indian market is not
as like other markets in terms of behavior. It’s all about the emotion
that had deep rooted into the minds of people that “Maggi is an
adulterated product”. The company only considered that the case
raised against maggi is because of the technical error due to social and
political reasons and pressures.
 RECOMMENDATIONS

PRODUCT DIVERSITY

 Nestle should focus on to diversified products to run its business

continuously rather focusing on a single segment industry. Nestle highly
relied on Maggi noodles for running rest of its businesses. In a situation
like this business associated along with Maggi will get affected. It may
create a huge revenue loss when something somewhere goes wrong. One
business should not affect the other business.

BUILDING NEW STRATEGY AND RESTRUCTING OF ORGANIZATION

 In this case the company stated that it was technical errors that lead to
such problems. A well reputed brand like Nestle coming with these
words can be sometimes annoying. Nestle need to work on improving its
production safety and relevant sections to ensure right quality products
are made and ensure customer safety.
 The company should also take utmost care in handling a situation like
this if it arises in the future. We can see no immediate communication
was given at the needed time. So the company should restructure its
organization in such a way that one person should be given a
responsibility to face the crowd.

THE COMPANY CAN SEEK FOR OTHER POTENTIAL MARKETS

 Any multinational company should not rely on one particular market for
its business. Doing so at the time of crisis will affect businesses on the
 other countries too. In this case the problem was reflected in Nepal and
Singapore markets. So, Nestle can have its business focused on other
potential and emerging markets to safeguard its brand equity thus
ensuring brand value and employee job security. When the company
follows this method it can be ahead of its competitors and have a strong
foot before the competitor catches the market.

SEGMENT DIVERSIFICATION AND PROPER PROMOTIONS

 The allegation on one product must not affect the brand as a whole. So
the company can have multiple subsidiaries and segments to ensure that
the brand value and brand equity is preserved even at tougher times. The
statement made by GOI/FSSAI will obviously take years to vanish from
people’s mind and bring back the old trust on the brand.
 Causalities may be a surprise in the business field. Nobody can predict
what can happen in any business. So soon after such happenings
comeback strategy through proper channels may increase market value.
This can be done by proper promotions with a broad sense rather than the
narrow one. As a comeback strategy the company may contact the local
authorities and clarify them nothing wrong is happening and seeking for
their support help building trust among customers because people are
bound to agree to what government or authorities say since they hold a
powerful position in the society.
 CONCLUSION

Time is priceless in this era of 21st century. Nestle has now slowly
regained its position in the market. The price it paid for it was 1100 days i.e., 3
long years.

If it had planned and handled the situation well the reaction time for the
consumers must have been minimal.

Lack of understanding the problem and not knowing the inner of the
market pulled the company’s growth down. Timely reaction of the organization
heads would have ended up the problem quickly.

Even though the company tries at its best to regain the full trust of the
consumers and stake holders by launching new products into the market and
promote the brand heavily running through awareness campaigns it is still a
dilemma for consumers and stake holders whether to go for Maggi or not.

For any company once if it loses its trust it is really hard to come back
and stand in its old position. Indian market is sensitive and filled with emotions.
 REFERENCES

1. www.wikipedia.com
2. www.forbes.com
3. www.economictimes.com
4. www.food.ndtv.com
5. www.livemint.com