Maggi creates ripples: Lessons abound from Nestle’s noodles crisis
This Diwali, Nestlé re-launched its instant noodle brand Maggi five months after it was forced to withdraw the popular product from the Indian market when tests by various states found lead in the product beyond permissible limits.columns Updated: Nov 16, 2015 07:23 IST
Multinational corporations are no saints deserving of hagiography. Corporate history is littered with instances of blunders, misrepresentations and violations by MNCs in markets across the world.
Some of these are harmless, titter-inducing bloopers such as when US package delivery company UPS expanded into Germany in the mid-1970s and realised that the colour of its staff uniforms had to be changed because, er, brown shirts were not really popular in that country after World War II.
And Coors beer found to its chagrin that when its slogan ‘Turn it loose’ was translated into Spanish, it could mean ‘Get diarrhoea’. Or when a British-licensed Iranian razor brand tried to market its shaving products in Qatar and found that its brandname in Arabic slang meant ‘buttocks’.
But MNCs also get embroiled in not so harmless controversies. In India, in recent memory, one such roiled Cadbury when worms emerged from its chocolates; and Pepsi and Coca Cola, traditional archrivals, were both at the receiving end of accusations that their beverages contained very high levels of pesticides.
In the end, all three, Cadbury, Pepsi and Coke, paid dearly for what had happened, losing out with their consumers, slipping in the marketplace, and taking hefty financial hits. But sometimes such hits can be uncalled for. As in the case of Switzerland’s Nestlé, the world’s largest food company measured in terms of revenue. This Diwali, Nestlé re-launched its instant noodle brand Maggi five months after it was forced to withdraw the popular product from the Indian market when tests by various states found lead in the product beyond permissible limits.
The Maggi controversy began in March 2014 when a district food inspector in Uttar Pradesh routinely sent samples of the noodles to a state food-testing lab. The lab found presence of monosodium glutamate (MSG), which enhances the flavour of food by adding an umami taste. MSG was not listed as an ingredient on Maggi packs and Nestlé was served a notice.
After the company appealed, samples were sent for testing to the Central Food Laboratory in Kolkata where the analysis not only confirmed the presence of MSG but also lead in quantities that surpassed “safe” levels.
That’s when things started falling over like a row of dominoes, at least for Nestlé: This summer, various states started testing Maggi, some giving it a clean chit but others blacklisting it and asking for a ban on its sales.
In early June, based on reports from various states, India’s apex food regulator Food Safety and Standards Authority of India (FSSAI) banned Maggi and ordered Nestlé to stop making, selling or exporting the product and all its variants.
The company withdrew Maggi and had to burn 30,000 tonnes of the noodles. Nestlé took a hit of Rs 450 crore; its quarterly profits fell 60%; sales 32%; and it went to court insisting that its noodles were safe, but so did India’s food ministry, which filed a class action suit against Nestlé on behalf of consumers, seeking damages of nearly Rs 640 crore. Two months ago, the Bombay High Court lifted the ban on Maggi noodles. And, after mandatory re-testing, Maggi is now on the way back to shop shelves.
The Maggi case has created ripples. And raised questions: Did the Indian food regulator act in haste when it ordered the ban? How good are India’s food labs, several of which blacklisted Maggi even though food regulators in Britain, Canada and Singapore tested and found Indian samples of Maggi to be fit for consumption?
And, what about the curious instance of a government department filing a class action suit, which is normally filed by consumers seeking damages? Answers to these questions could provide important lessons from the Maggi imbroglio.
As Nestlé readies to re-introduce its popular noodles in India and launch an accompanying marketing blitz that will try and rebuild Maggi’s brand equity, the fate of the class action suit — the first of its kind in India — that is in court will be watched keenly.
Besides, Maggi’s may become a celebrated affair: The Harvard Business School is believed to be working on a case study — one that they may like to name (and I borrow liberally from Lemony Snicket), A Series of Unfortunate Events.
Sanjoy Narayan is the editor-in-chief of Hindustan Times. He tweets as @sanjoynarayan