Dec 5, 2015

Resurrection

Maggi noodles returns to shop shelves. But getting its mojo back could be a long haul.

Lijiye, mooh Maggi kijiye." With these words, a variation of the traditional Indian exhortation to partake of sweets on auspicious occasions, Suresh Narayanan, Managing Director, Nestle India, welcomed guests at the re-launch of Maggi noodles on Dhanteras day, November 9. Commercial sale began three days later, on November 12, with Maggi noodles hitting a limited number of outlets in 100 cities and towns across the country. The same day, in a tie-up with Nestle India, e-commerce giant Snapdeal held a flash sale of the product that settled any doubts about whether its enforced absence from shop shelves for over five months had impacted its popularity. Within five minutes, 60,000 Maggi noodles 'kits' - each kit containing 12 packets - were sold out. Snapdeal held a second flash sale on November 16 - which was just as successful.
Nestle's troubles, however, are not yet entirely over. Maggi noodles disappeared from the market following a nationwide ban on it imposed by the Food Safety and Standards Authority of India (FSSAI) on June 5. The ban came after a number of laboratories to which Maggi noodles samples were sent for testing found unduly high levels of lead in them - in one case 17.2 parts per million (ppm) against the permissible level of 2.5 ppm - as well as the presence of monosodium glutamate, even though the packaging claimed there was none. Nestle challenged the ban in the Bombay High Court, which, on August 5, ruled decisively in its favour, maintaining that the FSSAI had been unable to substantiate its charges against the product and that its order was "arbitrary, unjust and violative of Article 14 of the Constitution". It permitted Nestle to restart selling once old as well as fresh Maggi noodles samples had been tested by laboratories certified by the National Accreditation Board for Testing and Calibration Laboratories (NABL).
Nestle accordingly submitted such samples of all the nine variants of Maggi noodles and all of them passed the safety tests. But the FSSAI has now approached the Supreme Court challenging the High Court order on several counts, but primarily maintaining that Maggi noodles samples chosen at random by an independent body should have been tested in laboratories, and not those provided by Nestle. "It was like asking a person under suspicion for a crime to provide evidence against himself," says an FSSAI official. But, with Supreme Court hearings yet to start, Nestle has not deviated from its roll-out plans.
The instant noodles market in India amounted to Rs 5,300 crore in 2014, according to Euromonitor, with Maggi, the market leader, having 63 per cent market share. Its temporary disappearance was thus bound to have major repercussions. Nestle India, to whose revenue Maggi contributed around 26 per cent, certainly suffered, recording a net loss of 3.29 per cent or Rs 64.4 crore in its April to June quarter (its first ever loss in 15 years) and a shrunken profit of Rs 124.2 crore in the July to September quarter, down by over 60 per cent from the same quarter a year ago when it was Rs 311.29 crore. It had to destroy around 300,000 tonnes of noodles following the ban, taking a hit of around Rs 320 crore.


But the entire instant food and beverages industry also suffered, since it was quality concerns that sparked the ban. According to a recent report by IMRB Kantar Worldpanel, the overall food and beverages segment in India grew only four per cent in the July to September quarter, compared to nine per cent in the same quarter a year ago, while ready-to-eat foods fell by nine per cent in the same quarter, against a five per cent growth a year ago. "The Maggi controversy has had collateral negative impact across the entire fast moving foods industry," says N. Chandramouli, CEO of brands research company Trust Research Advisory (TRA).
Not surprisingly, a number of rivals have sought to fill the vacuum created by Maggi's disappearance with extensive advertising campaigns to push their own products. Following the Maggi controversy, the FSSAI directed other noodles makers as well to get samples tested all over again. ITC, which makes the second biggest instant noodles brand Sunfeast Yippee!, got 800 samples examined at NABL and FSSAI approved laboratories in India, as well as at international ones in Italy, Singapore and Japan, and having received a clean chit, marketed the results widely. "The noodles category had been impacted, and we felt it imperative to clear the air of confusion and reinstate consumer trust," says V.L. Rajesh, who heads the foods business at ITC. "We thus embarked on communicating in an open and transparent manner with a reassurance campaign."
Indo-Nissin Foods' Top Ramen brand initially went the Maggi way and withdrew from the market, after a couple of its samples were also found to possess high levels of lead, and approval was held back by the FSSAI. But it was re-launched in September, accompanied by full-page print ads proclaiming: "Two things are synonymous with us - noodles and trust." Hindustan Unilever, which produces the Knorr brand of noodles, has tied up with online retailers to improve sales. Most curious, however, is the case of Patanjali noodles, a new product launched by the Baba Ramdev backed Patanjali Ayurved Ltd. While the manufacturer claims these atta noodles are much healthier than the maida ones made by rivals and flaunts an FSSAI clearance licence number on its packaging, the FSSAI has maintained that the product was never submitted for testing and, hence, its sale is illegal. Ashish Bahuguna, Chairperson, FSSAI, has directed his officers to take appropriate action.

As we re-launch, I would like to reiterate that the reason consumers choose Nestle is quality.
Suresh Narayanan
MD, Nestle India Meanwhile, Nestle India has taken a number of steps towards damage control. Even before the favourable High Court verdict, it replaced its then MD in India, Etienne Bennet, with Suresh Narayanan, the first Indian to hold the position in 16 years. Nestle spokespersons insist that Narayanan's choice has nothing to do with his nationality - and indeed he has an impressive record of growing Nestle's business in Singapore, despite the 2008 global financial crisis, and thereafter in Egypt, despite the political upheaval there - but that can hardly be taken at face value. With his extensive Indian experience - Narayanan joined Nestle in India and was moved overseas for the first time only in 2003 - he was able to reach out much more easily to stakeholders and reassure them. "The love for our traditional Maggi Masala Noodles has been immense," he told Business Today. "I respect that and am determined to deliver on that."
To keep a tighter check on quality in future, Nestle also seems to have decided to manufacture all its Maggi noodles in house. In end-September, it terminated a 12-year-old contract with its sole third party producer, Kolkata-based SAJ Food Products. Production of Maggi noodles has begun at three of its five facilities - Nanjangud (Karnataka), Moga (Punjab) and Bicholim (Goa). Simultaneously, a high-powered advertising campaign to announce the return of Maggi noodles is being turned on. Even while the product was off the shelves, Nestle kept Maggi alive in customers' memories with a number of ads bearing twee taglines: 'We miss you too' and 'Kab wapas aaogey' (When will you return). The thrust in the new ads will be: "Your Maggi is safe, has always been". While Publicis India, which handled the Maggi account for Nestle, will continue to do so, McCann Erickson India, headed by the high profile Prasoon Joshi, has also been roped in.
Apart from the Supreme Court worry, Nestle has also to deal with the fact that, apart from the FSSAI, seven state governments - Uttarakhand, Himachal Pradesh, Bihar, Orissa, Manipur, Nagaland and Tripura - had separately banned Maggi noodles, and these bans are still in force. It is due to this that two Maggi production units, at Pantnagar in Uttarakhand and Tahliwal in Himachal Pradesh, have yet to restart functioning. The company also faces a class action suit for Rs 640 crore filed against it by the Ministry for Consumer Affairs in the National Consumer Disputes Redressal Commission, charging it with unfair trade practices, false labelling and putting out misleading ads.
The response to Maggi noodles' return is no doubt heartening for Nestle. Yet, the TRA's 2015 report on India's Most Attractive Brands, based on research across 16 cities between June and August - when Maggi noodles had disappeared from shop shelves - shows Maggi's overall attractiveness ranking having fallen from 44th in 2013 to100th in 2015, a 56-rank drop. In the fast moving foods category, Maggi was in first place in 2013, but is now second, yielding to MTR Foods. "My feeling is that Maggi may not be able to stem this fall simply with some clever advertising," says Chandramouli.
Abheek Singhi, Partner at Boston Consulting Group, feels the packaged fast foods industry was in any case slowing down in keeping with falling consumer demand all over. "Players are trying to create excitement through innovations and usage occasions, and specifically in the food category, trying to provide reassurance about safety - not only functionally, but also at an emotional level," he says. But will it work? "Anyone who thinks Maggi will emerge without much damage is living in a fool's paradise," says Chandramouli.

Suresh Narayanan, MD, Nestle India.
"OUR PRODUCTS HAVE BEEN, AND WILL ALWAYS BE, SAFE FOR CONSUMERS"
On August 1, at the height of the Maggi crisis, Suresh Narayanan, head of Nestle's Philippines operations, was shifted to India to take charge. Edited excerpts from an interview:
Q. What are your re-launch plans for Maggi noodles?
A. Rebuilding consumer trust and reassuring them of the quality and safety of our products will be the focus. The impact of the Maggi noodles issue is not restricted to Nestle only. It has had a much larger impact bringing the entire supply-chain mechanism to a standstill. I need to look at that.
For Nestle, quality is trust. Our products have been and will always be safe for consumers. As we re-launch, I would like to reiterate that the reason consumers choose Nestle is quality. I would also like to emphasise Nestle's bonds of consumer relationship and friendship extending to millions of Indian consumers over 100 years. I am completely committed to the idea and the dream of 'Make in India'.
Q. What are your marketing and advertising plans to revive the sale of Maggi?A. Nurturing a relationship over long years requires you to stay true to values through thick and thin, and never take things for granted. I am proud that Nestle has lived up to the world's best quality standards and will continue to make sure that only the best of our products reach our consumers every day. This is the message that I wish to drive through our marketing and advertising campaigns.
Q. Are you looking at innovative options for Maggi and your other brands?
A. The mandate currently is to bring back Maggi noodles to all our consumers. While I will be looking into innovative options, it is a fact that the love for our traditional Maggi Masala Noodles has been immense, and I respect that affinity which our consumers have. I am determined to deliver on that.
(The author is a freelance journalist based in Mumbai)

2 comments: