Amazing rebound by Maggi Noodles
Jan. 19, 2016
It would be difficult to come up with a more advantageous position in grain-based foods than Nestle had gained in India by the middle of 2015 with the popularity of its Maggi brand of Instant Noodles. Similarly, it would be hard to conceive of a more difficult situation for a grain-based foods company than that faced by Nestle when an Indian government agency suddenly termed the noodles “unsafe and hazardous,” in effect forcing removal of the product from retail and manufacturing to halt. Nestle India, which manages that global company’s business in the Asian subcontinent, says the allegations were incorrect and that there was no need to force by mandate such costly actions. Almost affirming this is the speed with which packages of Maggi Instant Noodles reappeared after the five-month hiatus. During that period disaster approached, but did not happen due primarily to how wisely Nestle handled this ghastly episode.
The beginning of this trauma traces back to April of last year when a government laboratory contended it had detected levels of lead above permissible limits in packages of Maggi noodles. The laboratory also claimed it had found traces of monosodium glutamate (MSG) in the samples it had of Maggi noodles, contrary to Nestle’s claim that no MSG was added. Nestle sent its products to accredited independent laboratories that found the products in line with governmental standards. The company pointed to product contents that could be mistakenly credited to added MSG. In early June, India’s Food Safety and Standards Authority ordered a recall of all nine variations of Maggi noodles, the halt of both sales and production, removal of the “No Added MSG” from packages, and withdrawal of Maggi Oats Noodles as a variety lacking official “product approval.”
A week after the June order Nestle India filed a legal brief with the Bombay High Court seeking judicial review of the order on grounds that the laboratories used by the government and several states were not accredited to test for lead content, that accredited laboratories had found the product safe, and that Nestle did not have a proper hearing. The court in August overturned the ban.
The only test ordered by the court ahead of resumption was that three accredited laboratories must find newly-made noodles safe. This positive finding came at the middle of October, and it was early November that Nestle India made the noodles once again.
Nestle faces a class action lawsuit filed by a consumer commission seeking $100 million in damages on behalf of Indian consumers. It asks for damages because of “unfair trade practices, sale of defective goods and sale of goods to the public by selling Maggi Oats Noodles without product approval.” Nestle has pointed out that it launched Maggi Oats Noodles when the approval system was suspended.
Multinational companies historically have had an extremely difficult time in India, often trying to introduce products that run into numerous obstacles. Even American companies that have sought to introduce efficiencies in grain handling and marketing have run into hurdles that have either forced a drastic cutback in original plans or a complete abandonment after large investments. Even if the consumer case costs no more than lawyers’ fees, the Maggi affair meant destruction of 400 million packets of Maggi Instant Noodles at a cost of $67 million.
That expense is only a small part of the final loss. There are suppliers like flour mills that suffered serious setbacks. Within Nestle India, one must consider shutting down five factories, dealing with 7,200 employees and thousands of retail distributors, as well as thousands of Maggi Points throughout India where a single person cooks noodles for sale to consumers in the second most populous nation. Having managed this nightmarish shock, Nestle is making great strides in restoring its position. Without much risk, confidence is voiced in the potential of Maggi Instant Noodles being one of the world’s greatest selling grain-based foods.