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—
· Only 40% of them serve Maggi to their children now.
· 26.7% cook and serve Maggi as frequently as before.
· 16% has stopped cooking and eating any instant noodles.
· Many of them switched to competitive brands like Yippee (ITC brand), Patanjali Noodles (Baba Ramdev), Top Ramen (Indo Nissin Food) and some private brands introduced by giant retailers like More or Big Bazar.
· 44 out of 60 women said that they are still hesitant to use Maggi and only 16 said they use as before. A hypothesis testing is done to verify whether majority are hesitant using Maggi.
Null Hypothesis is that the proportion of hesitant consumers is 50%, i.e., H0: P=0.5,
Alternate Hypothesis, H1: P>0.5, proportion of hesitant customers is more that 50%.
Using sample proportion,
Observed value (p) = 44/60= 0.733, Expected value (P0) = 0.5
Standard Error of p = √(0.5×0.5)/ 60 = 0.0645
The test statistic is
Observed value – Expected value
Z = ——————————————— = 3.612
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.”
1. Sharmistha Mukherjee(2015). “Nestlé’s Maggi makes a comeback without major brand ambassadors. Indian Express, 12th Nov 2015
2. Neha Garg (2015). Impact of Maggi Row in India. International Journal of Management and Social Sciences Research (IJMSSR). Volume 4, No. 7, pp. 46-52
3. Binoo Gupta (2015) Maggi Noodles: The Rise and Stumble Saga of the Two-Minute Delicacy. The international journal of Business & Management Vol 3 Issue 6.
4. Nitin J. Maniyal, Dr. M. M. Munshi (2015). Impact of Maggi noodles on the youth. International Journal of Retailing & Rural Business Perspectives © Pezzottaite Journals. Volume 4, Number 3.