The Case of Maggi – Nestle and Reputation Management – Strategy with RS

A case has been lodged against Nestle India in a local court over safety standards of its Maggi product. FSDA had found monosodium glutamate and lead in excess of the prescribed limit in samples tested by it. If this was not bad enough another  set of cases have been filed against actors Amitabh Bachchan, Madhuri Dixit and Preity Zinta for promoting the brand which is been found to be harmful for public health. With the cine stars drawn into the arena the spotlight on the controversy will be more intense & protracted.

The issue faced by Nestle falls under the realm of Reputation Management. For a brand two things are of critical importance – trust & reputation it enjoys with its customers. This controversy threatens to damage both these elements.

Nestle response to the controversy has been tepid. An official statement said, ‘We do not add Monosodium Glutamate (MSG) to Maggi Noodles. We use raw materials that may contain naturally occurring Glutamate which could be confused with commercially produced MSG. Glutamate is safe and is found in everyday and high protein foods including tomatoes, peas, paneer, onions, milk…. the company does not agree with the order and is filing the requisite representations with the authorities.’

In absence of a strong defence from Nestle a perception will gain credence in customer’s mind that it has taken a surreptitious route to ‘add’ glutamate – to overcome legal hurdles – instead of adding it directly they have used raw materials & ingredients which contains glutamate. Legally they cannot be prosecuted & presence of these elements will enhance the flavour which will get customers to consume more.

In addition, more collateral damage is likely to be caused to Nestle – perceptions will gain ground in customer’s mind that
– Nestle is not sure of what it does & therefore every claim it makes should be taken with a pinch of salt.
– To achieve its business objective it can adopt surreptitious means keeping its interest ahead of customers.

Result – customer will stop trusting the brand & its reputation will may be tarnished. Sooner than later it will impact their business.

If you were the decision maker at Nestle, how would you handle this controversy?

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rajesh-srivastava-insideiim

 

 

In this series, Rajesh Srivastava, Business Strategist and Visiting Faculty at IIM Indore gives you a regular dose of strategy case studies to help you think and keep you one step ahead as a professional as compared to your peers. Rajesh is an alumnus of IIM Bangalore and IIT Kanpur and has over 2 decades of experience in the FMCG industry. All previous Strategy with RS posts can be found here

Comments

3 comments

iop

Looking at the latest developments in the case I might come in better prepared but now we can say that govts on maharashtra, Kerala and Goa have not found any problem with our product.. We can go to a third person authority that could provide a mark of quality control. Find out if there is one batch in a particular state that has gone wrong or the problem is more deep rooted! Until then a firm deniance of foul play is sagacious

Singh Gaurav

My priority would be in the following order:
1) Prevent the brand image from getting tarnished any further- For this, I will focus on communicating with the customer using Below The Line activities like nutrition charts/ placards/ information handouts at all the kirana stores as well as malls with details of ingredients and certified test reports of all other Nestle products like chocolates/ ketchups/ dairy products etc. This will help to reinforce the trust on brand ‘Nestle’ and prevent a huge drop in the topline.
2) ‘MAGGI’ conundrum: The present crisis on brand ‘Maggi’ is because of media hullabaloo as FDA certified report is not yet endorsing the claim of UP FDA claims of high MSG and lead content. Being an international player, it is obvious that ‘Nestle’ would not be taking ‘Quality Control’ lightly. Hence there is every chance that the case may be a stray incident. Assuming so, once the truth comes out in a few days, Nestle should initiate a widespread campaign projecting its product quality and overall brand excellence. The current competitors of ‘Maggi’ i.e. Top Ramen and Yippee!! have not yet come out with any aggressive marketing campaign targeting ‘Maggi’. ‘Maggi’ should act proactively by sharing all the test reports, and admitting truth if at fault (at some places). However, it should be in a similar way like when BMW/ AUDI recall their vehicles for small refits/ quality issues even after being iconic car brands.
3) Target its biggest market: The biggest market of ‘Maggi’ are the students in hostels, bachelors in cities and other such urban highly-mobile people. These customers are generally an intelligent lot who will not blindly fall for the TRP hogging news of the visual media. Also, they are highly active on social media like Twitter and Facebook. ‘Maggi’ brand should concentrate on them for its rebound strategy. ‘Maggi’ should come out with hard facts, certified by reliable agencies, which should then be spread virally on social media. This generation (especially the 1985-2000 born people) being its biggest consumer, will help the brand to grow again from its nadir.

Do give your review on my idea 🙂

Rajesh Srivastava

Gaurav thanks for sharing your thought in such great depth & detail.
My apology for delay in responding …
Your points are valid provided Maggi is in the right. But as you can see that even the courts have upheld the ban & Maggi has offered to stop putting the ‘No added MSG’ on its pack.
If Maggi was in the right then:
Your Point 1: Agree. It is a good idea
Your Point 2: Agree.
Your Point 3: Agree. Just for your information, generation born between 1985 – 2000 are referred to as Millennial.