Maggi’s comeback and consumers’ dilemma—an empirical study.

Maggi’s
comeback and consumers’ dilemma—an empirical study.

On
June 5th, 2015 a ban was imposed by FSSAI (Food Safety and Standard
Authority of India) on Nestle India’s popular Maggi noodles calling it unsafe
and hazardous for consumption and it went off the shelves. After five months,
in November 2015, it had made a comeback, initially with one variant, Maggi
Masala flavour and gradually the other formats had been re-launched in Indian
market.   

Maggi,
an instant snack with good taste has made its entry a few decades back in 1983,
a memorable year in which India won its first Cricket world cup. Maggi, easily
pronounced by a small child to buy from a shop became very popular name among
Indian children. The original company was set up by Julius Maggi in Switzerland
in 1872 and merged with Nestle family in 1947. Though initially it targeted
Indian working women but later the company focussed on children after a survey
which reported its popularity among children. Within 32 years “Maggi” became a
generic brand name for instant noodles with almost 80-90% share in instant
noodle market.

In
April 2014, during a rigorous inspection in Barabanki, UP, some samples of
Maggi was sent to Gorakhpur, UP lab which declared the sample having MSG (Mono
Sodium Glutamate) violating the labelling “no added MSG” in its package.   Nestle didn’t take it seriously and appealed
against the report. So a few more samples were sent to Kolkata lab referred by
Government of India. After a year Kolkata Lab has sent a report confirming the
violation of labelling. Along with that it was found in the sample that there
is excessive level of lead content (17.2 parts per million (ppm), compared with
a legal limit of 2.5 parts per million (ppm)). Nestlé’s woes began after this
declaration as media made a huge campaign and discussions with all levels of government
officials, company executives as well as with social activists. After
conducting several meetings with Nestlé’s superior authorities FSSAI (Food
Safety and Standards Authority of India) on June 5, 2015 had circulated a legal
notice to Nestle India Ltd ordering the company to withdraw all Maggi Noodles packets
from the stores

This
is a major food scandal in India after the pesticide scandal in soft drinks in
2006. Different section of the society got affected which includes parents,
children, suppliers, retailers, workers, brand ambassadors and definitely the
Nestle brand itself. It gave negative publicity to Nestle India Ltd causing a
loss of Maggi brand value of $2.2billion (According to Brand Finance). Maggi had
to destroy $50 million worth of noodles labelled as ‘unsafe and hazardous’
after imposition of ban by FSSAI.

In October, 2015 in a filing with stock exchanges, the
company has reported that the test results from all three laboratories mandated
by the Bombay High Court to test Maggi noodles samples are clear, with lead
much below the permissible limits. Maggi, India’s most popular instant noodles
has made a comeback getting a clean chit from FSSAI. Company has spent a lot on
promotions at different levels to connect with its target customers. Suresh Narayanan,
chairman and managing director, Nestle India, said, “Our promotional strategy
will be across three platforms. We will use traditional media to reassure our
consumers regarding the safety of our product. We will connect digitally with
our target group. Besides, there will be a lot of events for brand activation.”

The question arises here. Did the company get back its earlier
brand reputation? All those controversies have created a dilemma among the
consumers whether Maggi should be consumed or no. The Maggi row has impacted a
lot in India even after six months and lead into Nestlé’s worst public
relations crisis. Though Maggi has gained its market share to a certain extent,
do the Indian mothers gain their confidence back to serve Maggi to their
children, or they would prefer some other brand. The present study has made an
attempt to assess, up to what extent this Maggi has gained its brand reputation
and confidence back. In order to gain insight about consumers’ opinion
regarding Maggi a small online survey is done through What’s App group with a
sample size 60. The questions were asked mainly on
their usage of Maggi noodles.

The result is found as follows—

As
per standard normal distribution, the critical region is at z ≥ 2.33, at 99%
confidence level. Since the calculated value lies in the critical region, null
hypothesis is rejected. Therefore, we can conclude majority of the customers
are still hesitant to serve Maggi and their confidence on this brand is still
not back.

The
result is further supported by another survey done among local retailers. All
of them have given a feedback that the overall sales of instant noodles have
gone down as compared to the sales prior to the Maggi scandal. During Dec 2015
and beginning of 2016, the competitive brands of Maggi, like Yippe (From ITC),
Patanjali and some private brands from reputed retailers have done relatively
well. But since February 2016, Maggi again has picked up sales. As per current
market scenario Maggi is holding the leading position. The rate of repeat
purchase of Patanjai noodles is relatively low. The second brand purchased next
to Maggi is Yippe. 

Overall
it has been observed after Maggi row, that the Consumers have become more
conscious of their food eating habits and competitive brands gained market
share, where as many Indian consumers still have doubts on overall clearance of
the lab results. Nestle India is trying to get back its brand reputation and Mr.
Narayanan, chairman and managing director, Nestle India, said, “We have been
through arguably a very big crisis in the last couple of months. I am glad that
we have been able to vindicate once again, the quality, safety and credentials
as we reintroduce Maggi selectively.”

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