Course: Consumer Behaviour
December 2021 Examination

Read the case below and refer books and news articles to answer the
questions below the case from the consumer behaviour perspective
Nestles Maggi: The consumer warfare
In early June 2015, Paul Bulcke, Nestlé S.A.’s global chief executive officer,
took an urgent flight to India, having been advised that one of the company’s highly
popular brands, Maggi, was banned from its second- largest market. The issue
was further aggravated when the ban spread to India’s neighboring countries,
Singapore and Nepal. Food safety agencies of various developed countries,
including the United Kingdom, soon became concerned. India’s food regulatory
body, the Food Safety and Standards Authority of India (FSSAI), labelled Maggi as
unsafe to human health after samples showed excess levels of lead and
monosodium glutamate (MSG). Following considerable outrage over food
safety fears in India, Nestlé withdrew the entire stock of the product that had been
distributed at retail channels across the country. Nestlé persistently claimed that
the product was safe. However, the decision to recall the product was made to
retain consumer confidence, as noted in a press release issued by the company:
The trust of our consumers and the safety of our products is our first priority.
Unfortunately, recent developments and unfounded concerns about the product have
led to an environment of confusion for the consumer, to such an extent that
we have decided to withdraw the product off the shelves, despite the product being
safe.
The stock recalled from the market was worth ₹2.1 billion, with an additional cost
for materials valued at ₹1.1 billion, affecting various stages of the supply chain. In
terms of business share and potential, Nestlé had no way of avoiding the product
line’s impact on its portfolio in the Indian market. Nestlé’s management team was
busy drafting a new business strategy to relaunch its highly popular Maggi brand.
Etienne Benet, then managing director of Nestlé India, stated, “We are determined
to resolve the Maggi noodles issue in the best possible way. We will return Maggi
to its rightful position as ‘the most trusted food brand in India.’” The management
team was grappling with an improved re-positioning strategy to help retain its
market share in India. Nestlé also wondered what critical role pricing would play
in influencing consumer purchase decisions during Maggi’s proposed
relaunch. THE MAGGI CRISIS
In India’s largest state, Uttar Pradesh, standard testing of Maggi samples
revealed excess quantities of lead and MSG. The state directed the inquiry to the
FSSAI and they confirmed the allegation. The FSSAI stated, “We have tested
Maggi samples at Kolkata’s referral laboratory. The test results show that there are
added monosodium glutamate and excess of lead. We have ordered further
sampling.”7 The product was found to contain 17 parts per million (ppm) of lead,
which exceeded the permissible limit of 0.01 ppm. Nestlé refuted all claims,
asserting that the lead content in the product was actually less than 1 per cent of
the allowed limit. The Nestlé spokesperson said, We do not add MSG to Maggi
Noodles, and glutamate, if present, may come from naturally occurring sources.
Food regulators in India also do not specify any limit for the presence of MSG
[and/or] glutamate. We are surprised with the lead content supposedly found in the
sample. We monitor the lead content regularly as part of regulatory
requirements, and tests at our own accredited laboratories as well as those by
independent, external-accredited laboratories have consistently shown the results to
be well within the permissible limit.
Losses
The controversy caused both tangible and intangible losses for the company.
Nestlé India incurred a direct loss of 20 per cent revenue due to the Maggi ban and
nationwide recall. According to Brand Finance, the brand value of Maggi was
anticipated to fall by approximately ₹13 billion. Nestlé’s stock fell by 15 per cent,
resulting in a market capitalization loss of ₹100 billion. However, analysts
anticipated that the company would rebound very strongly with full volume
recovery within a year. In addition, brokerage firms also predicted a sharp
comeback on stock values. One analyst suggested, “Nestlé stock is a good longterm
buy for investors as fundamentally the company has some great brands that
give earnings growth visibility and cash flows.”
The recall had an impact on the entire value chain. It affected all direct and indirect
stakeholders. The 1,500 permanent employees directly involved with Maggi
production were temporarily shifted to training activities and trade building
exercises. Suppliers who had strong dependence on Nestlé were exploring the
prospect of new customers. One supplier stated: “We were supplying around
200 tons of spices per month to Nestlé. That has been affected. Now, we are
trying to find new customers, and in future we would try to reduce large dependence
on a single client.”
To recover all kinds of losses, it became imperative for Nestlé to design a
comeback strategy. The relaunch strategy would require a focus on re-positioning,
pricing, and other operational issues. It was highly likely that such a crisis could
extend to other product lines or brands and also spread to different continents
at any stage of the business life cycle. Nestlé needed to take various proactive
measures to ensure that this major crisis would not be repeated at any point in the
future.
THE ROLE OF PRICING
In 2014, Nestlé recorded its slowest sales growth in the previous five years. The
Maggi recall had further spread the negative publicity among buyers. Bulcke
admitted that “consumer trust [had] been shaken.” India was the second-largest
market for its Maggi brand. The Swiss food giant confessed that “India is important
to Nestlé,” and that it would strive to sustain its customer share in the Indian market.
With respect to marketing, pricing could directly influence consumer purchase
behaviour. The impact was expected to be even more significant when relaunching a
product that had suffered a major market share loss due to a product recall. To use
pricing as the centre of the comeback strategy, it was essential for Nestlé to achieve
excellence at meeting the ideal product and market level. The strategy required
managing the trade-off between benefits and price. A value map was the ideal tool to
provide a snapshot of how consumers perceived that trade-off. All competing brands
needed to be mapped, including Sunfeast, Bambino, Top Ramen, private labels, and
other local brands. The exercise would provide useful insight for the decision-makers to
formulate a strategy that could achieve ideal pricing at the best product and market level
(see Exhibit 1).
The increased demand-versus-supply gap created by the Maggi incident benefitted
Patanjali Ayurveda Limited (Patanjali), India’s fastest growing Ayurvedic company.
The company had numerous product lines to diversify its business, so it was easily able
to enter the noodles market. The product would be sold through the vast distribution
network of Future Group, India’s major retail chain. The promoters of Patanjali’s Atta
Noodles claimed that the upcoming product would be superior to Maggi, but would be
sold at only
₹15, compared to ₹25 for an equivalent size of Maggi.
Of the many possible strategies at its disposal, Nestlé concentrated on three key options
to re-enter the Indian market: increase value with the same prices, increase value with
lower prices, or increase value with higher prices. Undoubtedly, Maggi would increase
both tangible value (making the product safe for consumption) and intangible value
(promote awareness through effective labelling). As Nestlé prepared to relaunch its
product with enhanced value, management was concerned about the decision over new
pricing. Anticipating the customer’s response to the price change, the core team was
busy pondering various factors that would influence the market’s response to a change
in pricing.
THE URGENCY FOR A COMEBACK
Emerging economies already contributed 43 per cent of Nestlé’s overall revenues and
were expected to further increase that share. Changing consumer lifestyle in emerging
economies had increased demand for packaged food, whereas buyers in developed
countries preferred fresh foods. In 2014, sales in emerging markets were growing at 8.9
per cent as compared to only 1.1 per cent in developed countries. With changing
consumer tastes in Europe and China, Nestlé concentrated more of its focus on India.
In 2014, Nestlé reported US$623 million in sales of Maggi noodles, table sauces, and
other products in India. The brand name Maggi became interchangeably used to refer to
noodles in India. India’s ₹40 billion
noodle market had many players, but Maggi controlled 63 per cent of the industry (see
Exhibit 2). A 2014 consumer survey declared Maggi one of the five most trusted
brands. Future sales forecasts revealed a growth rate of 50 per cent by 2019 against base
figures in 2014 (see Exhibit 3).
Therefore, resolving the current Maggi crisis was of extreme importance to the Nestlé
management team. The senior leadership team was confident that it could regain its
market status as one of the most trusted and preferred brands in India. The relaunch
strategy needed to be both effective and timely to retain control of the market, which
was threatened by Maggi’s main competitors including Patanjali (Patanjali Atta
Noodles), ITC Limited (Sunfeast YiPPee! Noodles), Nissin Foods (Top Ramen), and
Hindustan Unilever Limited (Knorr Soupy Noodles). Nestlé’s international market was
also a concern. Indian-manufactured Maggi products were directly exported to Canada,
the United Kingdom, Singapore, and Kenya, and sold through third parties in the United
States, Australia, and New Zealand. Regaining these markets after a long absence could
become a very difficult task.
THE EXISTING POSITIONING
All previous promotional campaigns for Maggi had consistently communicated a sense
of happiness. Some of Maggi’s most successful projects in India included the following
three marketing campaigns.
Me and Meri Maggi
In 2009, Nestlé India launched the highly successful “Me and Meri Maggi” campaign.
It was launched to celebrate 25 years of Maggi’s presence in India. The rationale was to
bring consumers closer to the Maggi brand. Children who had grown up with Maggi as
a regular food were now adults, and some of them had unique stories to tell. People
were asked to share their memorable stories on any topic involving Maggi, such as
“Maggi on a Road trip.” The campaign was a resounding success with over 40,000
stories submitted by devoted Maggi customers. The heartfelt stories included some
emotional and private moments involving Maggi (see Exhibit 4), and the 50 best stories
were printed on Maggi packaging. The project also asked customers to submit filmed
stories, of which three were chosen to be featured in Maggi advertising commercials.
The marketing group that managed the project for Nestlé was overwhelmed by the
response, as they noted:
We realized that there [was] a huge cluster of Maggi stories that were adventurous,
naughty, and romantic. This gave birth to the three flavours: the adventurous stories
inspired a spicy flavour that we named “Thrillin’ Curry,” the naughty stories inspired a
khatta meetha tomato flavour that we named “Tricky Tomato,” and the romantic Maggi
stories inspired an aromatic capsicum flavour that we called “Romantic Capsica.” The
television commercials were consumer stories, one picked from every respective cluster
that best represented the mood.
Meri Maggi: Two Minute Mein Khushiyan
In 2012, Maggi extended the earlier stories campaign and positioned Maggi as a source
of happiness for its customers. The idea behind the extended campaign, named “Meri
Maggi—two-minute mein khushiyan,” was explained by the marketing group as
follows:
The idea really came from the simple insight of how Maggi noodles delivers joy to
consumers across India and the love that they have for the brand. Whenever you think
“two minutes,” you think of Maggi. And Maggi is all about “khushiyan” [happiness].
Put the two together and you have a simple, relevant- to-the-brand idea of “two minutes
mein khushiyan.” With this idea, we re-emphasized the brand’s evolution from a
functional two-minute proposition to an emotional two-minute proposition.
#HealthyIsEnjoyable
The launch of Maggi’s new product variation “Oats Noodles” brought together “brities”
(celebrities) with Maggi in selected advertisements. Madhuri Dixit Nene, a famous
Bollywood star, positioned the new variant as a morning breakfast alternative. The
campaign leveraged the power of social media to reach to its potential buyers. The
campaign ran a selfie contest using the Twitter hashtag #HealthyIsEnjoyable (see
Exhibit 4).
Questions:
A New Positioning Strategy for changed consumer behaviour
Maggi’s recent safety controversy required a complete overhaul of the value
communication strategy in an attempt to regain the market position that Maggi had
enjoyed for many years in India. Health and safety had become the key values to
communicate to its customers.
1. How would Nestlé convince its stakeholders that the relaunched Maggi was completely
safe for consumption and healthy for all consumers? What strengths, including media
sources and celebrity endorsements, could Nestlé draw from to effectively motivate
customer behaviour? (10 Marks)
2. Reading the case above suggests the segmentation, targeting, and positioning Nestle
Maggi is trying to achieve. (10 Marks)
3. Given the growth potential of the industry, changing consumer preferences towards
healthy products
a. Discuss the traditional / modern day advertising strategies should Nestle Maggi use as a
brand be following to remain a market leader (5 Marks)
b. Discuss how the use of the traditional or modern-day advertising strategies can help
build the motivational factors of buying different variants of Maggi be persuaded by the
tweens lifestyle (5 Marks)

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