In 2015, the lives of hostellers, school and college students, and camp goers came to a halt when it was announced that the Maggi was harmful. The delicious food prepared within two minutes can satisfy hunger pangs across all genders and age groups. With this sudden fiasco, Nestle suffered severe blows in terms of sales and reputation. But standing in 2020, all I can say is, Maggi, is again available in all majorities of homes in India, how did that happen? Have the people stopped caring about their health? Let us see the real deal with this FMCG giant.
Nestle India used to dominate the market with the lion’s share. In 2014, Nestle India had a revenue touching Rs 9,854.84 crores. In 2015, before the Maggi ban, the sales were Rs 2,332.6 crores, unfortunately, the picture changed after the ban. From enjoying 80% share in the Indian noodle market, the company touched zero in a month. The company’s officials deemed it to be “clinically dead”. The Food Safety and Standards Authority of India (FSSAI) banned this snack due to the presence of lead and high monosodium glutamate (MSG) content.
A year after the ban, in 2016, Nestle Global headquarters in Switzerland decided to bring the Maggi back in the shelves. From the month of November 2016, Maggi re-appeared but it could conquer only 57% of the market share, much less in comparison to its past glory. Having said this, Nestle has taught us how to turnaround from a major setback. In business, occasional failures and obstacles are eminent, that does not mean the end of the company.
Since the launch of Maggi in India in 1983, it has seen steady growth, no one had any premonition about its decline. Nestle did not think of exploring other product segments as the business was steady. But the sudden block inspired the company to think of business strategies to survive in the changing consumer base of India. With the internet explosion and digitization, people are more connected than ever, they are well aware, educated and health cautious.
In 2015, Nestle had to destroy 38,000 tonnes of Maggi from the millions of retailers across the country. But after one year, the chairman and managing director of Nestle India Suresh Narayanan adopted business strategies to tackle the situation. He said, “Our actions for the next four years would set the tone for the next few decades.”
His strategies included the introduction of products in new segments like healthcare, baby food, skincare etc. Communication via ads and campaigns was used for reaching the highly educated middle class and the women of the house, working women, children. The new steps were for deeper penetration in the top tier cities and towns and most importantly direct communication with consumers.
In August 2016, it entered the baby food sector with Nestle Ceregrow, and some other products like Nespresso (coffee machine), Dolce Gusto (coffee capsule system), health food drink Nestle A+ Pro-Grow, a Greek yoghurt Nestle a+ Grekyo. The newer versions of Maggi and targeted the metro cities. With a hope to reach above 600 cities in India, Narayanan added “That’s clearly an opportunity for a company like ours. With the increasing participation of more women in the workforce, the need of the hour is a marriage between nutrition, health and convenience. And, that is the area Nestle is looking at in terms of product innovation as we go forward.”
Nestle has not attained past glory, but it is working hard to reach the goal. Nestle is trying out new techniques to reach the zenith, something it has not done before. By in-depth market research, it has observed the increasing participation of women in decision making. The social media explosion enable consumers to get first-hand reviews of the products. The ban of Maggi in 2015 affected the sales of other Nestle products like milk, chocolates, Maggi masala etc.
Serious attempts are made by the company to revive the Nestle products and gain the trust of the vast consumer base of the country. Narayanan has high hopes regarding the possibilities of business expansion in a diversely populated country like India. He adds “Selectively seed them (products in new categories) in order to grow other frontiers of business, is what we are looking at. That’s why we are entering new categories and new businesses.”
According to Sunita Sachdev, a senior analyst at UBS Securities India, Nestle India has lost market share in sectors like chocolates, milk, coffee, baby food between 2010 and 2015. The climax reached in the middle of this decade with the banning of the Maggi by FSSAI. She opines that lack of innovations, updating pricing brackets and cut-throat completion has contributed to its gradual decline. But by the end of the decade, Nestle is trying their best to retrieve the lost position. From the story of Nestle, there is a lot to learn. Let us see!
- Innovations and exploring new opportunities help in business growth: Nestle launched several new products within a few years’ times. Though the process is gradual, the company is trying hard by introducing a new range of products and targeting users of metro cities from where the above 55% profit is drawn. Beefing up advertisements and marketing strategies attempt to gain more attention from the consumers.
- Timely action is essential: Unlike that of Foodpanda or Kodak, Nestle did not sit idle when the problems occurred. It took timely action, meetings and discussions were held in the headquarters and the strategies are implemented, under the wise supervision of the chairman Narayanan. Nestle launched newer products and tried regaining the trust within one year of the Maggi ban.
- First market research, then business: Market research and understanding market analytics is the first step of growth of any business. Narayanan understood that the rising middle class is highly educated and health cautious. They are also well aware due to the globalization and digitization. Nestle explored other avenues like curd and coffee machines to hold its position. Nestle is manufacturing food items, and banning on the basis of the quality is harmful to such brand. But Nestle is focussing on quality with some optimistic vision.
Narayanan took the decision wisely and resurrected the brand. Time will tell about the life of this global brand. Nestle did some mistakes for sure, but it’s pulling itself up again. In business, failures and obstacles will be there, but who does not want to avoid it! Vedak is such a platform where you can get all your queries answered. How? Talk to our niche skilled experts now to know the diverse competitive market in greater detail! We at Vedak have an exclusive pool of experienced industry professionals and veterans. They have in-depth knowledge of business nitty-gritty. Contact us to know more.