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

BY RAVI BALAKRISHNAN & AMIT BAPNA, ET BUREAU | UPDATED: JUN 10, 2015, Post a Comment
07.52 AM 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 Nestle 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.
The 2-minute noodle, Maggi, got its goose cooked in
While starting off life as a snack for children, Maggi is widely consumed by students and as much time, when Nestle decided to stay mum
young professionals, and is available even in the most inaccessible parts of the country; during a crisis of mammoth proportions.
the Maggi Points on the Leh-Kargil highway for instance. By some reckonings, Maggi has
declined 70 per cent in sales since the crisis. EXPAND
RELATED COMPANIES

Amid allegations of higher than permissible levels of lead and the presence of MSG Nestle 43.50 (0.41%)
(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, Big Change:
The end of Five-Year Plans: All you need to know
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."

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.

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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 well-defined 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 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."

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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 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 not transferring 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.

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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 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.

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!

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