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"MAGGI" NESTLÉ's SUSTAINABLE BRAND -A CASE STUDY "MAGGI" NESTLÉ's


SUSTAINABLE BRAND -A CASE STUDY "MAGGI" NESTLÉ's SUSTAINABLE
BRAND -A Case Study

Conference Paper · November 2014

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“MAGGI” NESTLÉ’s SUSTAINABLE BRAND – A CASE STUDY

Submitted by:

Mr. Ganesh Kumar. R


Asst. Professor
Department of Management Studies and Research Centre
BMS College of Engineering
Email: [email protected], [email protected],
Phone: +919591988151

and

Dr. A. Satya Nandini


Professor and Head
Department of Management Studies and Research Centre
BMS College of Engineering
Email: [email protected]
Phone: +919844071921
1

“MAGGI” NESTLÉ’s SUSTAINABLE BRAND – A CASE STUDY

Abstract
Today “Maggi” being the flagship brand of Nestlé has come through a path of thorns and
stones. It had to undergo turmoil and struggle to emerge into a sustainable brand. The brand as
a product noodles had a humble beginning by Julius Maggi way back in 1872 in Switzerland
focused to enable employed women to manage their dual role. Today Maggi is a symbol of
Nestlé in every household, in every continent across the globe serving millions of satisfied
customers. A transnational company, Nestlé introduced Maggi in India in 1982, when the
concept of packed food itself was not known to the country. The brand faced initial problems of
acceptance as the concept and the product were new to the market. The Indian customers were
not able to accept the product itself as well as the masala. The product periodically brought in
glocalization step by step. Glocalization (Globalization + Localization) is a strategy where the
company has its standardization with a certain degree of localization suiting the cultural needs
of the country. Maggi launched noodles as the first product in India and later launched Soups,
Sauces and Ketchups and Cooking Aids. Through its constant innovation Maggi introduces new
products according to the regional taste, culture and preferences of the customers. Maggi
became the flagship brand of Nestlé replacing Nescafé, which showed the way for expanding the
brand to different products. Maggi today is a symbol of international existence through
glocalization. In this article we discuss the history of Nestlé, launch of Maggi in India,
Glocalization, Branded Affordability, Competition and problems faced by Maggi, Critical
Success Strategies, uniqueness, Innovation, Sustainability and Growth Plans.

Key words: Glocalization, Branded Affordability, Innovation


2

“MAGGI” NESTLÉ’s SUSTAINABLE BRAND – A Case Study

1. Introduction

The purpose of this work is to present a detailed insight into the success of Maggi in
India, its path of defining and retaining a permanent place in the traditional Indian Household.
Nestlé launched Maggi as early as 1982 in India when the country was still not exposed to
international brands and was more satisfied with traditional and conservative ways. The concept
of packed food itself was not prominent in the Indian households and adding to that it was a new
food category of readymade noodles. Nestlé had the huge task of creating the acceptance of this
new food category as well as the new food concept of “2 Minute Noodles” or “Instant Noodles
Product”. The journey was not smooth for Nestlé, there were lots of hindrances which it had to
overcome to be successful in India, first among them was the intended target market which was
focused on working women, which was not successful, later the strategy was changed and focus
was made on children. Maggi tried changing its formulation in 1997, which was not accepted by
the customers. Indian customers were not able to accept the product itself as well as the masala.
Maggi launched macaroni in 1997 which also was not received well by the customers. Maggi
could see success due to its strategy of Glocalization. Maggi though started with noodles as the
first product in India, later launched Soups, Sauces and Ketchups and Cooking Aids. It is a
market leader in the noodles and soup segment in spite of competitive pressure from Top Ramen,
Wei Wei, Foodles etc. Maggi through innovating constantly diversified in new products
according to the taste, culture and preferences of the customers. Maggi became the flagship
brand of Nestlé replacing Nescafé.

Maggi today is a symbol of international existence through glocalization. Maggi is a


symbol of Nestlé in every household, in every continent across the globe serving millions of
satisfied customers.

2. Objectives:

 Discuss the history of Nestlé in India

 To trace the launch of Maggi in India


3

 To analyze the problems faced by Maggi in India

 To understand the measures taken by Nestlé to revamp Maggi

 To understand the future of Maggi

3. About Nestlé
Nestlé is a Switzerland based company; it is the largest food company in the world in
terms of the revenue earned. Today majority of its brands sell more than a US $ 1.1 Billion every
year. Nestlé operates more than 447 factories operating in 194 countries employing 3, 30,000
employees. Major brands of the company are Nespresso, Nescafé, Kit
Kat, Smarties, Nesquik, Stouffer’s, Vittel, and Maggi.

Nestlé formed in 1905, by merging the Anglo-Swiss Milk Company and Farine Lactée,
grew significantly during both the world wars and expanded its offering from just condensed
milk and infant formula products to chocolates, Energy Drink and Coffee. The company made a
number of corporate tieups and acquisitions and Merger with Peter, Cailler, Kohler Chocolats
Suisses S.A. in 1929 and later Crosse & Blackwell in 1950, Findus in 1963, Libby’s in 1971,
Rowntree Mackintosh in 1988, and Gerber in 2007. In 2011, Nestlé was listed No. 1 in the
Fortune Global 500 as the world’s most profitable corporation. With a market capitalization of
US$233 billion, Nestlé ranked No. 9 in the FT Global 500 in 2013.

3.1 Company History

Nestlé was formed in the year 1905 by merging Farine Lactée and Anglo-Swiss
Condensed Milk Company. Both the world wars though had their effect on the Company but
proved to be the major factor for the growth of the Company. Nestlé recorded its first loss in the
year 1921 after which Louis Dapples took over the Company and streamlined the production
with sales which helped the Company recover. This reorganization also saw the Company
expand first time into a new area, Chocolates, which became the second most important product.
New products were added to the product portfolio, malted milk, “Milo” a powdered beverage
and powdered buttermilk for infants. In 1938 “Nescafé” was launched this revolutionized the
coffee drinking habits worldwide. Nescafé was an instant hit with the customers. Nestea was also
launched.
4

After the world wars, Nestlé entered a very dynamic phase of growth. It started
diversifying within the food sector. Many new products were added and dozens of new
companies were acquired. One such major acquisition was “Alimentana SA”, which was the
manufacturer of Maggi seasonings and soups leading to Nestlé Alimentana Company. “Nesquik”
the instant chocolate drink was developed. Nestlé also acquired Cross & Blackwell manufacturer
of frozen and canned food in 1950, Findus frozen foods in 1963, Libby’s fruit juices in 1971 and
Stouffer’s frozen foods in 1973. Meanwhile, Nescafé sales rose drastically and almost increased
more than 7 times between 1950 to 1974. Introduction of the new process of Freeze drying led to
the addition of Taster’s Choice Instant Coffee as a product in 1966.

Nestlé’s Management decided to diversify outside the food industry, by acquiring a major
stake in L’Oréal. Nestlé also acquired Alcon Laboratories Inc., a US based Pharmaceutical and
Ophthalmic Company. There was a boycott of Nestlé products due to concern that Nestlé
products were being chosen over breastfeeding to infants. WHO intervened and developed a
code for marketing breast-milk substitute products, which was adopted immediately by Nestlé. In
1984, Nestlé made the largest acquisition in the food industry acquiring Carnation, an American
food giant. By 1984, Nestlé had divested a number of non-strategic and unprofitable businesses.

During 1990’s Nestlé entered developing markets as trade barriers crumbled and FDI was
promoted. In 1997 Nestlé acquired San Pellegrino, an Italian Mineral Water Concern, Spillers
Petfoods was acquired in 1998 and Ralston Purina was acquired in 2002. Nestlé also merged the
US Ice Creams business with Dreyer’s and it also acquired Chef America.

Nestle started the 20th Century by merging with Aglo-Swiss Condensed Milk Company
to enhance its product range. At the end of 20th Century, Nestlé became the undisputed leader in
the food industry.

3.2 Product Line

Currently Nestlé has a wide product line covering Baby Foods, Bottled water, Cereals, Chocolate
& confectionery, Coffee, Culinary, chilled & frozen food, Dairy, Drinks, Food service,
Healthcare nutrition, Ice cream, Pet care and Weight management products
5

3.3 Geographical Existence

Nestlé operates across the globe. Being a Transnational Company, one of the significant
advantages is that they are able to maintain a greater degree of responsiveness to the local
markets where they maintain facilities”. Nestlé has 114 production facilities and offices all
across the globe spread in Americas, Africa, Europe, Asia and Australia employing the local
people and utilizing the locally available resources thereby saving on costs as well. Nestlé has
the World's largest food and nutrition research organization, with around 5000 people involved
in R&D. Nestlé has their in-house research across the globe with four major Centre’s and 34
Product Technology Centre’s.

4. Launch of Brand Maggi

The brand Maggi apart from noodles has a product portfolio consisting of instant soups,
stocks, bouillon cubes, ketchups, sauces and seasonings. The Company originally founded in
Switzerland was later acquired by Nestlé in 1947. Among all it products, the brand is well known
for its revolutionary products Maggi noodles, Maggi cube, and Maggi-Würze (seasoning sauce).

4.1 Tracing the roadmap of Maggi

Maggi was the answer to the growing need of nutritious food cooked in less time as
women were engaged in work during the industrial revolution and did not have time to cook a
nutritious meal. Combining convenience and nutrition, Julius Maggi with the help of physician
Fridolin Schuler developed solutions to meet the need of the working class. Maggi’s focus was
on the attributes of health and quality for every product it has introduced.

Maggi was launched in India in 1982 by Nestlé India Limited, a wholly owned subsidiary
of Nestlé SA. “2 Minute Noodles” was the first product of the brand. The food habits of Indian
population were still traditional and they were not open to canned or packaged food. Nestlé was
trying to bring in an entire new food category of “Instant Noodles” into the eating habits of
Indian people. Maggi was targeted towards working women in Europe to help them cook faster,
healthier and better food. The same strategy was adopted to launch in India too, based on
convenience for working women. However, this approach was not successful despite wide
publicity. But results were not encouraging. To reboot and bounce back Nestlé conducted a
6

research, which showed that children liked and consumed Maggi more than women. Further to
the research, Nestlé shifted its focus to children from working women. Nestlé marketed and
positioned the noodles as a ‘fun’ product for children ‘Convenience Product’ for mothers. The
‘Noodles’ tagline and ‘Fast to cook, good to eat’ used by Nestlé to promote Maggi Noodles
helped it become an integral part of Indian Eating Habit. Nestlé came up with aggressive
promotional schemes such as distributing samples, gifts for empty packs etc. along with heavy
advertisements communicating the benefits of this product, which helped a lot in Maggi being
accepted by the target market. Taglines like ‘Mummy, bhookh lagi hai’ (Mom, I am Hungry),
‘Fast to cook, good to eat’ and ‘Bas 2 minute’ (Just 2 minutes), explained the benefits of the
product effectively.

After sometime these advertisements were taken off TV but the tagline ‘Bas 2 Minute’
lingered in the minds of the consumers for a real long time and this helped Maggi to expand its
product line beyond noodles and enter the soups market in 1988 and later to other products like
sauces, cooking aids etc. Nestlé had become the market leader in the packaged soup market in
India.

4.2 Initial Struggles

After the launch of Maggi Noodles, the company was initially focussed on creating
acceptance of the new category and the new product. It took a long time convincing the target
customers to adopt this new food category and new food product into their food habits. Today
Maggi is the market leader in the noodles market and the brand has created an attachment with
the target market. But this journey was not a smooth one for the brand, there were few mistakes
made by Maggi in this journey.

First, during the launch of Maggi there were many hurdles to gain the confidence of the
target market. The product had to compete with traditional Indian snacks like Samosa, Biscuits,
peanuts which were bought from outside the house and also Maggi had to compete with the large
variety of homemade snacks which usually took longer time to prepare. Maggi overcame by
positioning itself as a ‘hygienic homemade snack’. The initial target market was working
women, which though clicked but did not sustain for long. Research showed that children were
the largest consumers of the product, hence the target market was changed and it was ably
supported by the promotional campaigns. Maggi was positioned as a ‘2 minute noodles’ with a
7

tagline ‘fast to cook, good to eat’ which implied that it was a between the meal snack and not a
meal in itself. Nestlé did not want to position itself as a meal as the eating habits of Indians was
essentially rice or roti as a meal and not anything else.

Second instance was in 1993 when Maggi launched ‘Sweet Maggi’ and heavily promoted
the product incurring high expenditure but it turned out to be a great disaster. Maggi generated a
sales volume of 5000 tonnes that year making a huge loss. To overcome this, Nestlé reduced the
price of the product by reducing the thickness of the packing material and also promoting 2-in-1
and 4-in-1 packs. This boosted the sales to 9700 tonnes in 1994 and further to 13000 tonnes in
1995. But sales stagnated at that level.

Third instance was in 1995, as the sales stagnated and the soup market share had a major
hit due to launch of ‘Knorr’ in India, Nestlé decided to diversify by having a tie up with Cordial
Foods to enter the pickle market and Indian Foods Fermentation to enter the ready to eat south
Indian food preparations such as Dosa, Vada, Idly etc. Both these ventures proved unsuccessful.

Adding on to the woes, Maggi’s ‘Tonite Special’ a range of cooking sauces providing
‘restaurant like taste’ which has Butter Chicken Gravy and Tomato Sauce for pizzas, was also
not successful.

Fourth instance was in 1997; ‘Top Ramen’ the entrant in the market started to gain
popularity and was grabbing more market share from Maggi. To counter this Maggi made an
extension of the brand into ‘Maggi Macaroni’ in July 1997. Tomato, Chicken and Masala
flavours were provided at the start. This was backed by heavy advertising and promotions to
push the products to the target market. This also proved to be an unsuccessful venture due to 3
reasons. First, Pricing of Macaroni was at Rs. 11 for 75 Gms Pack compared to Noodles which
was at Rs. 9 for a 100 Gms Pack. The consumers did not find any value addition in Macaroni and
were not satisfied by the differential pricing. Second, the customers failed to see significant
differences between Maggi Macaroni and cheaper variants of Macaroni provided by unorganized
sector. Third and a major factor was the taste, Macaroni being thicker than noodles didn’t absorb
the Tastemaker provided by Maggi, hence customers started disliking the product. Though
Macaroni created an initial interest in the consumers, it died out soon and Nestlé had it removed
from the market.
8

In the same year, Maggi faced stiff competition and was ousted from No. 1 position in
soup market by Knorr. The ketchups and sauce market was still dominated by Maggi, but Kissan
started heavy promotions in the same year, Maggi responded in return and was able to hold on to
its market share. The operational cost of manufacturing noodles increased hence the retail price
of Noodles was increased.

Due to this increase in operational cost, Nestlé decided to save cost by introducing new
formulation. They used a new noodle processing technology to be able to use air drying instead
of oil frying. The Tastemaker’s manufacturing process was altered. This reduced the cost by 12-
15%. The taste of the new noodles was significantly different from the older one, this was not
accepted by the consumers and there was a huge backlash by the customers. There were many
customer complaints and the sales volume came down drastically, hence Nestlé decided to revert
back to the original formula. This paid off and immediately the sales started growing. By Mid-
1999, Nestlé started promoting ‘Maggi’ heavily as the biggest brand in the portfolio of the
Company. From then on ‘Maggi’ started gaining good market share and good profits.

4.3 Growth Path of Maggi

Maggi as a brand of Nestlé went through various ups and downs. The Product Life Cycle
of Maggi is discussed below:

Introduction

Nestlé launched Maggi in 1982 through 2 Minute Noodles. Nestlé created an entirely new
food category and also new product into a country with traditional eating habits. High Promotion
was carried out by the company to inform the target market about the product which included
distribution of free samples, advertising etc. Maggi had the first mover advantage because of
which it could be the pioneer and a market leader in the noodles market

Growth

Maggi enjoyed leadership in the noodles segment until ‘Top Ramen’ started gaining
popularity during the late 1990’s. To counter this Maggi tried to change over to a new
formulation, which backfired. The old formulation was reintroduced in 1999 again. Promotional
focus was to persuade the consumers of Maggi to be associated with the brand and not move on
9

to newer brand. New flavours, options and sizes were made available which led to more growth
of the brand.

Maturity

A strategy which aligned with the overall vision of Nestlé was the ‘health and wellness’
angle. Maggi was aggressively promoted in early 2000’s and was made the flagship brand of
Nestlé over Nescafé. In early 2000’s Maggi became market leader in instant noodles category,
there was less competition in this category. In March 2005 Maggi Vegetable Atta noodles was
launched, later Dal Atta noodles was also launched. Maggi also brought Rice Mania and Cuppa
Mania as other variants. Maggi is still in the Maturity stage due to the constant innovations
brought out by the brand.

The SWOT analysis of Maggi is presented below

Strengths

 Established brand
 Strong Global Presence
 Pioneer in noodles, sauces and soup market
 Strong Research and Development
 Strong distribution channel
 Adaptive to the Indian Flavour

Weakness

 Single Brand for all product categories


 Single flavour dependent
 Other variants not successful as original Maggi
 Low rural market presence

Opportunities

 Growing packed and canned foods demand


 Brand preferences increasing among Indian Customers
 New product categories like biscuits, chips and ready to eat market still unexplored
10

 Rural Market concentration

Threat

 Competitive pricing by competitors


 Unbranded products at cheaper prices
 Regional players in local markets
 Heavy competition from International competitors like Heinz, Nissin, HUL and GSK
 Less entry barriers in the market segment

4.4 Glocalization

A new word Glocalization is coined to combine global standards adopted by Maggi but
still bringing in a degree of localization. The company follows global standards across the globe
in all processes but its strength in in bringing in localization through innovation for its success in
every country it operates.

Initially India being a very traditional market with highly conservative consumers has seen a
tremendous change later. The Indian consumption patterns are slowly converging with the
impact of globalization. Today India has the youngest population profile very significant when
compared with other world countries. It is the young people who are influencing their parents
spending or spending their own money. Entertainment, clothing and restaurant dining are
categories that are witnessing maximum rise in consumer spending. A nation of savers now the
country is altering itself into a nation of spenders. With increase in disposable income there is an
active shift towards consumerism. Ready to eat food has become popular.

As Maggi started entering into other countries each country posed a new challenge for the
company in maintaining and improving its position. The biggest challenge for the company in
India was to address the strong customs and culture. Think Global Act Local strategy was
adopted by the company to customize their marketing strategies based on cultural, economic and
socio political factors in India. Adaption and execution of this strategy made the company
capable of adjusting their products according to the preference of the local customers in India.
This is how Maggi re-engineered its operations in India to address the local taste.
11

4.5 Branded Affordability

Maggi further reinforced is existence through the branded affordability mantra by the
introduction of small packets at Rs. 10/- only. And it survived only due to the complete
understanding of the Indian economy.

Initially when the company commenced operations in India Maggi was perceived as an
expensive foreign product. The company had to go in for appropriate pricing strategy for each of
its products. India is considered as a price sensitive economy and a major portion of the Indian
Consumers belong to the lower and middle income groups and Maggi had to formulate a suitable
pricing strategy that can facilitate a high volume of consumers. Customers prefer products that
are more talked about and they also have their own perception of what a product is worth.

5. Current Situation

According to an article in Economic Times, Maggi still is the leader in the noodles
category with over 75% of the Rs. 2500 Crore market in India. Maggi has extended its product
lines into various categories to sustain its market share and to counter any new threat from
competitors.

Maggi has today the following products under its sleeve

 Noodles
o Maggi 2 minute noodles (Masala, Chicken, Curry and Tomato)
o Maggi Dal Atta noodles (Sambhar Taste)
o Maggi Vegetable Atta noodles
o Maggi Rice Atta noodles (Lemon Masala, Chilly Chow and Shahi Pulao)
o Maggi Cuppa Mania (Masala yo, Chilly Chow yo)
o Maggi Multigrainz noodles
 Sauces
 Pichkoo
 Soups
 Bhuna Masala
 Magic Cubes
12

 Coconut Milk Powder


 Pasta and Pizza Sauce
 Pazzta
 Masala-ae-magic

5.1 Reasons for Sustainability of Maggi

 Adapting to the Changing Consumer preferences: Indian Consumers taste and


preferences was very conservative and has grown to be more liberal at present. Maggi has
adapted itself to the changing tastes of the consumers. Maggi has created the
‘Tastemaker’ which was unique to our country. Also speaking on the pricing part, Maggi
in order to reach out to maximum customers created Branded Affordability by
introducing packets are low prices. It was Rs. 10 initially and now it is available at Rs. 5
variant as well.
 Growing Consumer Base: The noodles consumption is not restricted by age and is being
consumed across all age groups. It has also come out from being a home snack and is
being consumed in offices, colleges etc. Even looking at market penetration, the noodles
market has just 20-25% penetration which actually shows a lot of scope to grow.
 Better Variants and Choices: Maggi launched Chinese and Tomato flavours in addition to
Masala and Chicken. Health focussed variants like Vegetable Atta noodles, Dal Atta
noodles and Rice Atta noodles were also launched. More packing variants were also
introduced, Rs. 5/- packs till packs of 8 were made available. Cup Noodles was a great
choice for working people who could just add hot water and consume the product.
 Changing Consumer Preferences and Lifestyles: Today’s consumers are more exposed to
global lifestyles, along with this reason the growth of the middle class, increasing
younger population, more nuclear families and growing time-poverty has led to the
increase in demand of convenience foods. Maggi has made itself available, affordable,
anytime-anywhere consumable and convenient to cook which matches with the
requirement of today’s generation. Apart from this Noodles have emerged from being a
snack to a mainstream food item.
13

6. Future

Maggi is still the market leader in the Noodles segment but the share is rapidly declining
due to competition from brands like Tasty Treat, Feasters, Foodles, Top Ramen, Wei Wei etc.
The pasta market is still in the nascent stage; Maggi should focus and create another success
story in this field as well. The target market has been evolving since the launch of Maggi, it
focused on children first, now working people and college students, Maggi should try and
include other segments of the market to increase its profits and market share. Unexplored
products like Biscuits, Chips and Ready-to-eat market could be explored to enhance the brand
image in the market.

Maggi has focused on understanding the consumers’ changing preferences, tastes, and
lifestyles through innovating and renovating to create delight among customers.

7. Maggi as a Sustainable Brand

The reasons for Maggi’s sustainability are as follows:

Glocalization: The Company follows global standards across the globe in all processes but its
strength in in bringing in localization through innovation is critical for its success in every
country it operates.

Extended Product Line: Today Maggi has extended its product lines into Sauces, Cooking Aids,
and Soups which has helped it to retain its Brand Equity.

Branded Affordability: Maggi has brought about changes in its target market and has addressed
Bottom of Pyramid Markets as well. They have introduced value packs of Rs.5/- to reach out to
markets which were not accessible previously.

Innovation: Maggi has constantly innovated its process and products always matched itself to the
changes in the customers’ needs and preferences.
14

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