RAJAGIRI BUSINESS SCHOOL

KAKKANAD
ERNAKULAM – 682039

PRINCIPLES OF MANAGEMENT

TOPIC - MAGGI CONTROVERSY

DATE - AUGUST 2017

Submitted to, Submitted by,

Dr. Padmanabhan N.S Albey John (p17165)
PGDM B

INTRODUCTION
Maggi was originated in Switzerland in 1885, when Julius Maggi took over his father’s
business, later in 1947 Nestle acquired Maggi. The main products offered by Maggi are
seasonings, instant noodles and instant soups. Maggi instant noodles arrived in India in
1983. Maggi was launched in India with the ‘two minute noodles’ advertising campaign on
state run television which turned out to be instant attraction because of its liberating
message to women. Maggi is a well-known brand to all Indians. Maggi was proudly enjoying
the superiority in the instant noodles segment with a market share of 77% in January 2015.

CONTROVERSY
Food Safety Standard Authority of India (FSSAI) tested the Maggi instant noodles in Kolkata
and Gorakhpur laboratory and was found that there were huge amounts of lead that is
about 7 times more than the permitted range. Lead is a naturally occurring poisonous metal.
The permitted amount of lead according to FSSAI for instant noodles was ranging from .01
ppm to 2.5 ppm. In Maggi it was found 17.2 ppm were the permissible limit was 2.5 ppm. It
was also found that the ingredients contain MSG Monosodium Glutamate popularly known
as Ajinomoto.

Though the Maggi advertisement claim that they do not add MSG in their ingredients it was
found to be wrong when laboratory results came out. The extreme levels of lead can cause
eye damage, head ache, fatigue, if ingested it damages important organs, cause
accumulation of blood, muscle, and bones. Extreme levels of MSG can cause sluggishness in
the body, head ache, increased thirst and a twitching sensation in the mouth, nausea.

Delhi government banned Maggi on 3rd June 2015 for a period of 15 days but Nestle
relaunch Maggi noodles on November 2015. About 38000 tonnes of Maggi noodles were
collected from retail stores, and then destroyed them by first crushing the noodles and then
mixing them with fuel and burning in incinerators at 11 cement plants across the country.
The stock was worth 320 crores and paid an extra 20 crores to cement factory to burn the
product.

IMPACT
After the ban on instant noodles in India, sales crashed by nearly 50% that is from 3400
crores to 2000 crores. Rivals ITC’s YIPPE noodles is nearing to become a 1000 crore brand
and targeted a long term increase in the market share. Baba Ramdev launched Pantanjali
Ayuved’s instant noodles for Rs 15 to grab the market share that the Maggi had lost.

After the ban Nestlé’s share price has crashed. After three days of the Pan-India ban Nestle
India's share price was decreased to Rs 5539 from Rs 7200. It was the lowest price in one
year.
In the second quarter of 2015, Nestlé’s Indian arm had posted its first net loss after 30 years.
Nestle has posted a net loss of Rs 64.40 crores for the second quarter. The company has
posted a profit of Rs 287.86 crore in the same quarter last year. Sales were down by 20% in
which Maggi contributed nearly 30% of the company’s revenue.

FSSAI had increased focus on companies producing packed food products. FSSAI strict the
quality standards on packed food products, HUL had withdrawn its knorr noodles from the
market and Indo Nissin’s Top ramen noodles had to get approval from food regulator FSSAI.
The controversy on Maggi noodles had a severe effect on the all packed food industry.

INFERENSE
Maggi is one of the biggest food company in the world which renamed the word ‘Noodles’
in India. Maggi was doing good for the past 25 years, there is something suspicious behind
the controversy. When a lab outside India tested Maggi the quantity of Lead and MSG was
in permissible limit. There is no need for them to add Lead and MSG to increase their sales,
it may be some cheap tricks done by their competitors to ruin the goodwill of Maggi and
gain market share, earlier this was not possible for them by advertisements and campaigns.

CONCLUTION
Nestle failed to handle the Maggi noodles crisis systematically. They had faith in their own
particular testing techniques rather than finding a way to clear of the issue from the very
first moment of the controversy. They waited for long period and then only reacted because
of that they got a ban and lost their trust and market share in the instant noodles segment.
This situation was utilised by the rivals of Maggi noodles. They grab a long term market
share of Maggi noodles. Nestle regained their market share by strategic planning,
advertisements, packaging, campaigning and marketing. After a five-month ban, when
Maggi was relaunched it a had 10.9% market share in the instant noodles segment now it
increased to 58%.