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Case Study: The Maggi Ban - Principles of Management, Assignments of Principles of Marketing

Alliance UniversityPrinciples of Marketing

Case Studies, Principle Of Management, EPDGM 2021

Typology: Assignments

2020/2021

Uploaded on 11/07/2021

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Assignment
Term I
Principles of Management
Max marks : 40
**************************************************************************************
Read the case given below and answer the questions that follow
giving justifications for each answer
**************************************************************************************
Case Study
The Maggi Ban
It was Sanjay Singh, a food inspector at the Uttar Pradesh government’s Food Safety and Drug
Administration, who spotted the label that claimed “no added MSG (monosodium glutamate)"
on the bright-yellow packets of Maggi noodles in March 2014 during one of his routine raids on
retail outlets. A PhD in organic chemistry, Singh picked up a sample and sent it to the state
laboratory at Gorakhpur for testing. The result that came a few weeks later was positive—that
particular sample of Maggi noodles had MSG. Samples of Maggi noodles were then sent to the
Central Food Laboratory in Kolkata in June 2014. The results that came after almost one year in
April 2015 read: “MSG: Present and Lead: 17.2ppm (parts per million)". The amount of lead
found was over 1,000 times more than what Nestle India Ltd had claimed.
The Uttar Pradesh food safety commissioner sent a formal notice to Nestle seeking clarification
on presence of MSG and lead in Maggi samples. The company did mail its response along with its
internal monitoring documents on 5 May 2015, but did not take any proactive step to counter
any possible aftershock. On 7 May, there was a small news item on the episode in one of the
Hindi newspapers in Uttar Pradesh.
Still, Nestle did not react. It never thought the news could lead to an estimated half a billion-
dollar loss for the company (including erosion of brand value) that would shake the Swiss
multinational and that the subject would be debated at length in television studios.
Nestle failed to gauge the depth of the crisis even after national newspapers started writing
about it. It did not issue any statement till 21 May. And in its first official statement, it said there
was “no order to recall Maggi noodles being sold" and the popular instant noodle was “safe to
eat".
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Assignment

Term I Principles of Management Max marks : 40

Read the case given below and answer the questions that follow

giving justifications for each answer

Case Study

The Maggi Ban

It was Sanjay Singh, a food inspector at the Uttar Pradesh government’s Food Safety and Drug Administration, who spotted the label that claimed “no added MSG (monosodium glutamate)" on the bright-yellow packets of Maggi noodles in March 2014 during one of his routine raids on retail outlets. A PhD in organic chemistry, Singh picked up a sample and sent it to the state laboratory at Gorakhpur for testing. The result that came a few weeks later was positive—that particular sample of Maggi noodles had MSG. Samples of Maggi noodles were then sent to the Central Food Laboratory in Kolkata in June 2014. The results that came after almost one year in April 2015 read: “MSG: Present and Lead: 17.2ppm (parts per million)". The amount of lead found was over 1,000 times more than what Nestle India Ltd had claimed. The Uttar Pradesh food safety commissioner sent a formal notice to Nestle seeking clarification on presence of MSG and lead in Maggi samples. The company did mail its response along with its internal monitoring documents on 5 May 2015, but did not take any proactive step to counter any possible aftershock. On 7 May, there was a small news item on the episode in one of the Hindi newspapers in Uttar Pradesh. Still, Nestle did not react. It never thought the news could lead to an estimated half a billion- dollar loss for the company (including erosion of brand value) that would shake the Swiss multinational and that the subject would be debated at length in television studios. Nestle failed to gauge the depth of the crisis even after national newspapers started writing about it. It did not issue any statement till 21 May. And in its first official statement, it said there was “no order to recall Maggi noodles being sold" and the popular instant noodle was “safe to eat".

Interestingly, Nestle could have settled the issue according to the law under the regulations with the Uttar Pradesh food safety department by paying a penalty of Rs3 lakh as the Maggi sample contained MSG even though the pack said it didn’t, making it a punishable offence. However, Yudhvir Singh Malik, chief executive officer of Food Safety and Standards Authority of India (FSSAI) at that time, stepped in on 25 May. On 5 June 2015, the day FSSAI asked Nestle to recall Maggi noodles, the company’s global chief executive Paul Bulcke met the regulators, and addressed the media in New Delhi. Bulcke said: “This is a matter of clarification and we need to sit down together and clear the air… We will look into the safety concerns. We do not add MSG in Maggi noodles… We apply the same quality standards everywhere. Everything we do is keeping consumers in mind. We will do everything it takes, and are fully engaged with the authorities." But by then, things had spun out of control. Bulcke was left with little choice but to recall the popular noodles from the market. The company got Luca Fichera, then executive vice-president (supply chain) at Nestle India, to lead the recall process. Between 5 June and 1 September 2015, Fichera’s team collected 38,000 tonnes of Maggi noodles from retail stores, and destroyed them by first crushing the noodles and then mixing them with fuel and burning in incinerators at 11 cement plants across the country. “The entire recall process is huge and complex," Fichera told Mint before he moved to become the director (supply chain) for Nestle Philippines. Since the Maggi ban in 2015, Nestle has reworked its strategy and now plans to focus on new product categories such as cereals, healthcare and skincare Maggi Two-Minute Noodles, a brand it built over three decades in India and loved by hikers, hostellers and housewives alike, had crumbled. That June, the national food safety regulator had banned the sale of Maggi noodles and directed Nestle to withdraw the product. As the flagship product went up in flames—38,000 tonnes, literally—Maggi-branded jams, ketchups and beverages too took the heat. From commanding 80% share of India’s noodles market, (as estimated by Nomura Securities in May 2015) Maggi went down to zero in just a month. “Clinically dead", is how the company’s India boss loves to describe the Nestle of those days. It’s June of 2016, a year after the safety crackdown. At the Centre, Nestle SA’s global headquarters in Switzerland’s picturesque Vevey, the global company’s board and management are trying to finalize a three-year strategy for the India market. Maggi, which returned to shelves in November, has since reconquered 57% of the market, a far cry from its heydays, but a major fightback still. From commanding 80% share of India’s noodles market in May 2015, Maggi went down to zero in just a month. “What’s at stake if we don’t take any action?" The question was directed at 56-year-old Suresh Narayanan, chairman and managing director of Nestle India, who was parachuted in from Philippines a year earlier to put out the noodle fire. The question was unusual even for Narayanan, who had attended such strategy sessions for various markets during his two decades at Nestle. But the man, who had just successfully sailed through one of the biggest crises in Nestle’s history globally, knew this was coming. The rest of the day, Narayanan briefed the top management on what Nestle should do in India over the next four years to ensure a safer future.

Questions. (10 x 4 = 40 marks)

1. Explain with reasons was it external environmental change that caused the

problems for Maggi or was there some internal environmental issues?

(Answer in maximum of 150 words).

Answer – It was external environment change.

A) - It was external force/event outside a company that had the potential to

affect it.

B) – It was the Industry Regulation Component of the Specific Environment.

The industry regulation component consists of various regulations and rules

that govern the practices and procedures of specific businesses and

professions to protect consumers, workers, or society as a whole.

FSSAI is one of such regulatory agency which took action and affected the

Maggie as MSG was found in the samples and presence of MSG can be very

much hazardous to health of millions of people in India

C) Media Advocacy was again one of the external factors that ruined the

brand image.

D) Product Boycott was again one of the external factors as people overall

social media started this campaign Hash tag Boycott Maggie.

2. Explain whether adequate plans beforehand could have helped Maggi to

anticipate the problem. Justify your answer.

(Answer in maximum of 150 words).

Answer 2 – The problem occurred majorly due to control loss. If there would

be a proper control system like feedback control, concurrent control and

feedforward control, the issue was simple to handle. First of all, they should

have simply paid the fine and followed the further guidelines by the

regulatory authorities. Else they could have taken below steps-

A) Comparison to standards – They could have done a comparison study of

other companies having similar cases and the resolutions taken by them.

B) Media Management – The Company could have announced about the

matter itself rather than coming it as news to public.

C) Precautionary Step – They could have stopped the production &

distribution process until the final result.

D) Taking responsibility – They could have made an official statement

apologizing and owning their mistake and taking responsibility of all the

medical expenses coming out due to any health issues after consuming

Maggie.