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Nestle Case Study: How Nestle’s Marketing Strategy Helped Them Grow as a Brand-2023
How many of you can answer this?
What is one common thing among Nescafe, Caregrow, KitKat, and Maggi?
Any guesses?
Yes, they are world-renowned brands, are familiar names in every household, and are products you must have consumed in your life at one point.
Anything other than these?
Yes. All these belong to one and only Nestle.
Be it in the fresh smell of hot coffee, a short break, or a bowl of tasty noodles- we cannot deny that all of us have enjoyed the awesomeness of Nestle’s products.
The brand has come a long way, crossing so many hurdles and achieving success, and it keeps growing.
Today, nestle is a brand that everyone is familiar with and uses in their day-to-day life.
Curious to know how?
In this Nestle case study, we are discussing everything about Nestle company, the marketing mix of Nestle, nestle competitors in India, marketing sales promotion techniques of nestle, and much more.
Nestle owns more than 2000 brands, from global stars to local ones.
How did Nestle achieve this level of success?
The brand has been in the market for more than 150 years, but many companies got this opportunity but failed. Nestle survived.
What is the secret of Nestle’s success?
This Nestle case study shows you a glimpse of nestle strategy and what digital marketing and social media strategies they followed that led to achieving this success.
So, let’s start by understanding a bit more about Nestle as a company.
Nestle had come a long way from when it entered the market by selling infant food in the 1860s with a motto to reduce child mortality rates.
Gradually, it became a renowned name in the wellness, healthy food, and pet care industry with its evergreen tagline, “Good Food, Good Life.”
Now, you must be thinking that how did Nestle reach this position? How can a company build a legacy which is so powerful that it has stood still since its birth?
The answer to this may lie in Nestle’s digital marketing and functional strategy.
Nestle Case study: Introduction of Nestle company
Nestle is a world-renowned manufacturer of packaged foods and beverages. It is the world’s largest food manufacturer operating in more than 186 countries and with over 2000 product brands.
The brand came to India in 1956. Since that time, from selling its first milk product in the 1960s to selling a wide variety of Nestle products in India, Nestle has grown exponentially in India.
With such exponential growth, Nestle’s umbrella keeps widening day by day. They are not only the largest food and beverage company in the world but also one of the best companies that have effortlessly collaborated with the online world and achieved immense success.
Gradually, Nestle India started making its presence felt in the FMCG sector, and now the brand enjoys a good market share in the food and beverage industry.
Being the most extensive food and beverage brand in terms of revenue, the pricing strategy of Nestle company, along with its targeting and positioning system, has played a vital role in reaching the position where it is currently.
Let us find out how it has served the Indian market with its products and services.
Nestle offers products in breakfast cereals, beverages, dairy, chocolates, nutritious foods like vending, and food services.
Popular food products like Kit Kat, Maggi, Milkmaid, Polo, and Nescafe come under Nestle’s products sold in India.
For more than 150 years, this iconic brand has been applying its expertise in Health, Nutrition, and Wellness to help its customers, pets, and families live a healthier and happier life.
However, they believe what is good today might not be suitable for tomorrow.
So, they keep exploring and focusing on pushing the boundaries to find more to experiment with foods, nutrition, and beverages.
Nestle unlocks the power of food to improve the quality of life for everyone, not just today but for generations to come.
The brand focuses on bringing more pleasure and enjoyment to the customers, how they can enable better health, and how they can make the best nutrition affordable to everyone.
Not just these, but the brand tries new ways to protect and improve natural resources.
History & Founder
Nestle was founded in 1905 by the union of the Anglo-Swiss Milk Company, set up in 1866 by brothers Charles and George Page and Farine Lactee Henri Nestle, founded by Henri Nestle in 1866.
Nestle originated in 1860 when two separate Swiss enterprises later created Nestle.
In the following decades, the two rival companies grew their businesses throughout the United States and Europe.
In 1866, George Page and Charles Page, brothers from Lee County, Illinois, USA, formed the Anglo-Swiss Condensed Milk Company in Cham, Switzerland. The company’s British operation started in 1873 at Chippenham, Wiltshire.
It was during the First World War when the organization grew significantly, and again during the Second World War, the company increased its offerings beyond its initial condensed milk and infant food products.
Nestle Case Study : Facts & Figures
Here are a few interesting numbers about Nestle that sets it apart from others.
- Nestlé is the world’s largest food and beverage company.
- The brand has 276000 employees
- Nestle has acquired 30 companies
Nestle Case Study: Nestle competitors in India
Nestle has many major customer brands like Carnation, Kit Kat, Nestle-water, and Stouffers, among others.
Thirty of its brands netted more than $1 billion in earnings in the year 2010, which makes the company a vital force in the worldwide food and beverage industry.
With around 42 % of its sales being in North America, Nestle is one of the most geographically distinct companies in the food and beverage industry. It places it in a position that helps it edge over its competitors.
Its brands are well established in a considerable market share in leading economies like U.S. and Europe.
Danone and Unilever are important competitors for Nestle. These two are giants in the food and beverage industry, like Nestle.
In 2010, Unilever posted around 26% growth in yearly profits because of its accelerated sales in the food and beverage industry, especially ice cream, frozen food, tea-based beverages, and cooking products.
On the other hand, Danone stated around a 38 percent increase because of its improved share prices. In addition, a rise in its yogurt sales also enhanced the growth in earnings.
However, nestle handles positioned itself in the market by adopting a new accounting method which aided a decline in its cost of sales.
The company could also incorporate discounts, allowances, and promotions for its retailers through sales profits rather than the marketing line.
Though its sale was lesser for a year, nestle pricing strategy helped them match its peers, which in turn, made it a famous manufacturer even though the competition was so high.
Being the world’s most popular food manufacturer, nestle has intense competition with its rival company, Unilever.
Unilever has around 1,49,000 employees and operates in 160 countries, with its headquarters in London for food, home, and personal care.
The company is trying hard to beat Nestle in terms of the quality of their product, which has made Unilever the second company in the Western European ready meals market with a market share of around 8.6%, i.e., 0.3 points behind the iconic Nestle.
Nestle’s Target Audience and Products for Each Segment
The unique thing about Nestle is that it offers a wide range of products that covers audiences of different ages, from 2-year-old to working professionals.
Here’s a breakdown of Nestle’s Target Audience and the products meant for them.
- Target Audience
- Working Professionals
- General Audiences
- Koko Krunch, Caregrow, Lactogrow
- Sunrise, Nescafe
- Maggi, KitKat, Milkmaid
Everyone, especially coffee lovers, will know how Nescafe is a big hit among working professionals.
Nestle guarantees that Nescafe is the only coffee that would keep professionals fresh throughout the day, and who does not want to feel fresh?
Regarding kids, parents blindly trust the product “Caregrow” by Nestle. The product consists of cereals to keep young kids healthy.
However, nestle has several other products like KitKat, Milkmaid, and Maggi for the general audience.
It is how Nestle has designed something for everyone in India. In the coming section, we will dig into how Nestle has advertised itself and its products in the digital world.
Nestle’s Digital Marketing Strategies
By now, you must have understood that Nestle is the world’s largest food and beverage company in terms of revenue. So, it might be basic information for many of you.
But what if we say Nestle always tries to be one step ahead regarding marketing strategies and policies?
It has always focused on the most updated marketing ways no matter, whether it is digital marketing strategies or offline strategies.
Nestle’s marketing strategies will teach you to build marketing strategies that work and get a positive response from customers.
Let us start with Nestle’s Digital Marketing Strategies that must follow if they want to succeed as a brand.
Partner with influential celebrities
Nescafe, a product of Nestle, collaborates with celebrities to put forward their message and create more noise around their brand.
A few years ago, they announced Bollywood actress Disha Patani as their brand ambassador.
Recently, they launched a campaign with famous content creators called “Karne Se Hi Hona Hai,” which means “Only doing will make it happen.”
They created this campaign during the Covid Pandemic to inspire people and encourage them to keep working hard towards their dreams no matter their situation.
Through this campaign, they targeted the youth of India and asked them to dream, act, and achieve success.
- Run campaigns that foster connections and bring customers together
An ordinary 37-year-old guy named Arnaud, with 1,2000 Facebook friends, was challenged by the company to catch up with his friends over a cup of coffee.
So, he filmed these meetings and turned them into a 42-minute online video documentary. During the sessions, Arnaud enjoyed a cup of Nescafe with his pals.
The documentary was a big hit on social media. It got almost 8 million views on Facebook, around 63,050 likes, 4,850 comments, and 5,550 shares.
The Facebook Page of Nescafe saw an increase in the number of fans by 400%.
Fans were excited by the documentary and wanted to know how to turn their online friendships into real-life relationships.
As a reaction, it created the “le Defi Nescafe,” a Facebook campaign to allow winners to reinvent the same experience.
More than 26,000 people applied, around 19,000 liked it, and nearly 1,725 shared.
Instantly, Nescafe became an online sensation by marketing itself as an item that stimulates connections and friendships.
2. Localization of Products
Localization is adapting an organization’s products to the local market. Nestle has gone huge on localization in various markets where it now manages.
For example, consider Japan, where the organization’s primary foray was through coffee-flavored chocolates.
Japan is traditionally a tea-drinking country, and the company established these candies so that kids could also get to know the taste of coffee.
Later, it introduced Nescafe and KitKat, and what happened is history.
3. Content Marketing
Nestle has created many video content on every brand’s YouTube channels. The content ranges from informative “how-to” videos to cooking tips to better insights on using the right products.
For example, the “Meri Maggi” has more than 530 videos with more than 5,71,000 subscribers.
Though video content is an expanding channel in Nestle’s marketing strategy, it has recognized other avenues to share relevant information with its consumers.
4. Out-of-Home Advertising
Nestle’s brands, including Maggi, Milo, KitKat, and Nescafe, use different ways to grab customers’ attention.
Whether benches, hoardings, or banners, Nestle’s brands have made it to the limelight for their contextuality and creativity.
What are the advantages of using OOH ads? First, most people correctly receive these ads. They are worth sharing.
People can take photos online, send them to their friends or relatives, and even marketers discuss them.
In addition, with the help of OTT, they can reach many people at a low cost.
Also, Nestle’s marketing strategies are exceptional and generate some customers.
5. Co-branding
Have you ever heard about Android KitKat?
A few years back, Google and Nestle united and invented an Android KitKat operating system.
Nestle was facing a new scandal with their pet product and wanted to capitalize on the image of Google. This movie created a buzz and surpassed the crisis.
Lately, nestle signed another deal with Starbucks to kill two different birds at a time.
First, the brand entered the new product development stage-i.e., roasted beans- and improved its brand by discovering a wide range of Starbucks Nespresso Capsules.
Did you understand how co-branding helped Nestle?
Co-branding is great for stepping into a new market and widening your reach. This marketing benefits startup that wants to create brand awareness or launch a new item.
It would help if you found companies that complement your products and collaborated with them to run co-branding promotional ads.
Nestle – Challenges Faced
Undoubtedly, Maggi was the most popular instant noodles brand in India. The brand had established its presence in India’s food industry, but suddenly it became controversial.
State food regulators stated that Maggi contains Monosodium Glutamate and lead above the recommended limits, which were dangerous, especially for kids.
When nestle encountered lab results, it said that they had a world-class quality control procedure and that their products were safe for consumption.
Ultimately, the National Food Regulator FSSAI ordered to ban on the selling of Maggi, including product recall.
Consequently, various state governments imposed a temporary ban on selling Maggi noodles in a few states. As a result, the future of the company suddenly started looking dark.
Another acquisition of Nestle by the critics was they accused that the brand discouraged mothers from breastfeeding.
They showed that their baby formula is much healthier than breastfeeding, although they didn’t have any proof to support this.
It resulted in a boycott of Maggi for the first time after its launch in 1977 in the United States and slowly spread to Europe.
Several reports have acknowledged the widespread use of child labor in Cocoa production, slavery, and child trafficking, throughout the Western African plantations on which Nestle and other important chocolate companies depend.
As per the 2010 documentary, The Dark Side of Chocolate, the kids working are usually 12 to 15 years old. Nestle faced criticism from The Fair Labour Association for not properly checking.
Different Campaigns by Nestle
- Ask Nestle Campaign
In this campaign, Nestle India launched a digital tool, NINA, which stands for Nestle India Nutrition Assistant on AskNestle, which used Artificial Intelligence to offer real-time nutritional information on the foods we consume.
In addition, it assisted Indian parents in designing a nutritious customized meal plan for their kids below 12.
This campaign by Nestle was India’s first artificially intelligent assistant that permits one to find nutritional information for kids.
So, this is how Nestle India set its foot on digital fronts and started driving organic traffic and improved overall engagement compared to competitors.
2. #WeMissYouToo Maggi Campaign
Maggi suffered a massive loss after it got banned as Maggi contained a high amount of Monosodium Glutamate (MSG) and lead content- more than what is allowed.
It was hard for them to hope for a comeback, but Maggi did their best and experienced huge sales. As a result, the price and volume of Maggi are now much more significant than before.
How did they do so?
They did so through their different marketing campaigns. One among them was the #WeMissYouToo campaign.
In addition, they published a few videos showing how people are kissing Maggi and how their life was better with Maggi.
Videos showed how Maggi has been a staple food for many and how its absence had affected their lives.
In campaigns, characters addressed Maggi as “yaar” or a “close friend” who is always there for them when in need.
Therefore, they considered Maggi’s return as a huge celebration that brought people’s life to normalcy.
3. A Campaign for kids: Poora Poshan Poori Tasalli
Nestle Caregrow started this campaign in 2019. The campaign targeted couples living in the cities who had kids between the age of 2 to 5 years.
India is where parents are very concerned about their child’s health and nutrition right from birth. Nestle kept this in mind and decided to portray this care through its campaign.
The brand portrayed how Indian mothers worry about their kids’ proper nourishment.
The brand came up with a new product, Caregrow, which controls a child’s hunger and offers all the essential nutrients for enhancing the child’s immunity and overall development.
4. Celebrate the Breakers- KitKat campaign
Across the world, people consume around 12 billion KitKat chocolates every year.
It is one of Nestle’s most famous chocolate products available in India. The company also released “KitKat Senses, a premium “slow-whipped” chocolate.
Nestle sought to influence Instagram to support its “Celebrate the Breakers” campaign by raising awareness and message association among enthusiastic 15- to 34-year-old Instagram followers.
Nestle came up with a new worldwide advertising campaign that takes a different approach altogether with a famous slogan, “Enjoy a break, enjoy a KitKat.”
“Celebrate the Breakers” was a new idea that identified the different forms of breaks that generally “breakers” take.
The animated movies showed KitKat chocolates are the best for enjoying a break in life.
Instagram was the appropriate platform for Nestle to showcase this idea graphically.
The brand posted a series of pictures with the hashtag “# mybreak over seven weeks ,” showing how people enjoy different types of breaks, like sleeping at their workplace, enjoying a party, or listening to their favorite music.
The images of KitKat match efficiently with its customers, as Instagram is a place where people share their daily moments and experiences.
Future Plans of Nestle
Nestle planned to invest Rs. 5,000 crores in India in the coming 3 ½ years, as per Mark Schneider, the company’s CEO.
The FMCG company, which has nearly 2,000 brands across the globe, believes that this initiative will help Nestle to improve its core business in India and enjoy new growth opportunities.
It marks the brand’s most significant investment in India since the year it started manufacturing.
Nestle is renowned in food, nutrition, health, and wellness.
Its competitive strategies mainly focus on overseas direct investment in ready-to-eat, dairy, and other food businesses.
Though there is rising competition, Nestle has remained on top for a long.
It maintains its dominance by balancing sales between high-risk and low-risk nations.
Over the years, Nestle has proven itself as a leader in the food and beverage industry with product innovation and innovative marketing strategies.
It creates campaigns that are memorable, relatable, and share-worthy.
As it is moving toward developing a solid presence in the future, digital marketing will play an essential role in the future growth of Nestle.
As Nestle continues to follow its values, mission, vision, and purpose, it will continue to grow.
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Financial Highlights of Nestle India Limited
Income statement.
| 19,126 | 16,897 | 14,709 | |
| 19,248 | 16,998 | 14,830 | |
| 15,204 | 13,742 | 11,709 | |
| 4,038 | 3,256 | 2,884 | |
| 2,999 | 2,391 | 2,145 |
Balance Sheet
| 6,500 | 5,489 | 5,471 | |
| 3,594 | 3,490 | 2,739 | |
| 3,093 | 2,459 | 2,084 | |
| 3,211 | 3,440 | 3,522 | |
| 3,791 | 3,080 | 2,603 |
Cash Flow Statement
| 3,392 | 2,737 | 2,271 | |
| -926 | -391 | -1,957 | |
| -2,436 | -2,122 | -2,018 |
Key Performance Indicators (KPIs)
| 21.76 | 20.18 | 22.58 | |
| 15.67 | 14.14 | 14.58 | |
| 96.95 | 97.20 | 102.89 | |
| 66.04 | 57.81 | 59.24 | |
| 0.95 | 1.13 | 1.05 | |
| 0.01 | 0.01 | 0.02 |
SWOT Analysis of Nestle India Limited
- Global Presence – With a significant presence in more than 190 countries, the company is regarded as the most well-known firm in the FMCG sector .
- Variety:- Nestle is not dependent on one product as it has numerous brands with billions of dollars in annual sales.
- Research – The business makes significant investments in product R&D, enabling it to adjust to the shifting customer preferences.
- Product Pricing – The company could lose market share because it caters to a higher-end consumer base.
- Supply Chain – Due to the intricate nature of the company’s distribution system, any disruption in the supply chain may affect the company’s earnings.
- Product Criticism – The company’s product has been criticized for quality issues recently.
Opportunities
- Technological Advancement – The corporation will be able to lower production costs by integrating digital technologies into the business processes.
- Product Diversification – Since consumers are becoming health conscious, the corporation can add healthier products to its lineup.
- E-Commerce – E-commerce platforms allow the business to boost digital or online sales.
- Competition – The price war between businesses can lower the company’s profit margin.
- Economic Downturn – Any downturn in the economy will result in less demand for their products, which will immediately affect the company’s sales and earnings.
- Changing Consumer Preferences – Consumer preferences are ever-evolving; therefore, if a business cannot adapt, it will lose customers.
In summary, Nestle India is a leading fast-moving consumer goods (FMCG) company in India that provides a wide range of products to meet the demands of its clients. The business is present in more than 190 countries worldwide. NESTLE is working to enhance its product line, but it has already experienced some negative feedback from customers regarding the quality of its products. Even if the company has a bright future, you should speak with your investment advisor before investing.
Frequently Asked Questions (FAQs)
Who is the chairman and managing director of nestle india ltd..
Suresh Narayanan is the company’s current Chairman and Managing Director (CMD).
Is Nestle India a good stock to buy?
Nestle India’s global presence and diverse product range give it a competitive edge, but investing in this stock involves a number of other risks, including changing customer preferences, price competition, etc. Investors should carefully assess their risk tolerance and speak to a financial advisor before making any decisions.
Where is Nestle India headquartered?
The headquarters of Nestle India is situated in Gurgaon.
Is Nestle India a profitable company?
The business has been consistently profitable for the previous three years, and its profits are consistently rising.
In what ratio is the share of Nestle India split?
In 2024, the management of Nestle India approved a stock split in a 1:10 ratio, meaning that one share with a face value of INR 10 would be divided into ten shares with a face value of INR 1 for each equity share.
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20 What Went Wrong? A Case Study on Nestle Maggi Noodles
- Published: June 2022
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Nestle’s ‘Maggi brand noodles’ the trusted and valuable food brand in India is the favourite among all the children in the country. It was considered as snacks in many households and a basic diet in many other homes. But in the recent past, the ban on Maggi has created a negative impact of Nestle. The favourite and most preferred instant food product of children, Maggi Noodles, got entangled in its ethical issues of the ingredients being used. The corporate social responsibility of Nestle India was tremendously cross-questioned with its after-test results, by food regulatory authorities. The case study is an effort to explore the various issues, possibilities, and opportunities for Maggi. The study focuses on need and scope brand image and brand repositioning, brand extension, etc.
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Nestlé’s Half-Billion-Dollar Noodle Debacle in India
Nestlé spent three decades building a beloved noodle brand in India. Then the world’s biggest food and beverage company stumbled into a public relations debacle that cost it half a billion dollars. A cautionary tale of mangled crisis management on an epic scale.
It was the middle of the night when the jangle of his cellphone woke Sanjay Khajuria from a deep sleep. In the few seconds it took him to get his bearings—to remember he was in a Manhattan hotel room and not at home in his bed in Delhi—the Nestlé executive had an unsettling thought: Could this be about Maggi?
Khajuria is not accustomed to receiving urgent, late-night phone calls. As head of corporate affairs for Nestlé India, he typically divides his time between handling routine regulatory issues and trumpeting the company’s achievements in “creating shared value”—the approach to corporate social responsibility that Nestlé espouses. In fact, Khajuria, 51, was in New York to represent his company in a shared value leadership summit, for which Nestlé was a sponsor.
Virtually everything in his world had appeared to be in order when he boarded his flight to New York. There was just one pesky issue to clear up. Health officials in one of India’s 29 states had raised questions after testing a sample of one of Nestlé India’s bestselling products: Maggi 2-Minute Noodles.
Nestlé, the world’s largest food and beverage company, has sold Maggi (pronounced “MAG-ee”) in India for more than 30 years, and the brand’s ubiquity and cultural resonance on the subcontinent is something akin to Coca-Cola’s (KO) in the U.S. In 2014, Indians consumed more than 400,000 tons of the instant noodles—marketed in 10 varieties, from Thrillin’ Curry to Cuppa Mania Masala Yo!—and Maggi accounted for roughly a quarter of the company’s $1.6 billion in revenue in the country. That year Maggi was named one of India’s five most trusted brands.
Khajuria’s team had received the regulatory notice about Maggi 10 days earlier. The food-safety commissioner of Uttar Pradesh, India’s most populous state, with 205 million people, was claiming that a package of the noodles had been found to contain seven times the permissible level of lead and had recalled the batch. Nestlé India had quickly responded with test results of its own showing that its noodles were absolutely safe. Khajuria expected that officials would find his company’s response compelling and that the issue would soon be resolved. But why was someone trying to reach him at such a late hour?
He reached for his phone and answered the call. It wasn’t good news. Khajuria’s colleagues back at home informed him that a widely read Hindi language newspaper had reported the news about the health notice. More alarming: The article suggested that state officials would soon recommend that the Food Safety and Standards Authority of India (FSSAI), the country’s central regulator, should ban Maggi nationwide.
Khajuria spent the next hour on the phone formulating a game plan. Nestlé would respond to media requests but not yet issue a public statement. And it would send a three-person delegation to meet directly with the health officials in Uttar Pradesh the following day. At this point, allows Khajuria, he was starting to get worried.
When he hung up, he couldn’t get back to sleep. It was May 11, 2015.
What had at first seemed like a minor regulatory annoyance was about to spiral into a crisis of epic proportions for Nestlé. Within a week the first national news story about a Maggi health scare appeared in the Times of India . A couple of days later the hashtag #MaggiBan surfaced on Twitter . Then things got worse.
On June 5, 2015, less than a month after Khajuria’s phone rang in the middle of the night, India’s central food regulator announced a temporary ban on the manufacture, sale, and distribution of Maggi noodles. In its order the FSSAI pronounced Maggi “unsafe and hazardous for human consumption,” a designation supported by 30 government lab tests showing Nestlé’s noodles contained excess amounts of lead.
Enraged consumers wasted no time venting their anger. In some cities protesters in the street smashed and set fire to packs of noodles and photos of Bollywood stars who were paid Maggi endorsers. One prominent newscaster compared the situation to Bhopal, the worst industrial accident of all time, in which a toxic gas leak at a Union Carbide pesticide plant in central India killed thousands of people.
The Maggi meltdown would prove costly. Nestlé lost at least $277 million in missed sales. Another $70 million was spent to execute one of the largest food recalls in history. Add the damage to its brand value—which one consultancy pegged at $200 million—and the total price tag for the debacle could easily be more than half a billion dollars. And the fallout continues.
Nearly a year after the ban, Maggi noodles are back on shelves in India, but somewhat precariously so. The product’s future depends on two legal cases that are working their way through the Indian court system. Both pit Nestlé against the Indian government.
Nestlé, meanwhile, is still struggling to make sense of what exactly transpired. To counter the accusations of Indian health officials, Nestlé has produced voluminous tests—on more than 3,500 samples—that it says show its instant noodles are perfectly safe, with lead counts well below the legal limit. For a 150-year-old Swiss business that brands itself as the “world’s leading nutrition, health, and wellness company,” the idea that it fell short on quality control—especially regarding a substance with such dire health effects—is anathema. But where, then, did things go so terribly wrong?
This is a story about precisely that: What happens when a $100 billion global giant suddenly finds itself in a crisis—and everything it does to get out of it only sinks the company further into the morass? It’s an epic narrative of a powerful corporation brought low by an obscure food-safety agency in India and a handful of local government functionaries. And it’s a case study in irony about a company that, after a humiliating and existential scandal over infant formula, tried to reinvent itself as a paragon of corporate do-gooding and transparency—only to discover that no matter what positive, world-bettering things it did, it couldn’t quite escape its tainted past.
It’s also a cautionary tale about a towering multinational utterly losing its way in one of the world’s most sought-after markets—India—which, as it happens, has chewed up and spit out a number of mighty names in the past. Coca-Cola left the country in 1977 after being asked to hand over its secret formula—only to return decades later and get banned again, briefly, when pesticides were found in its soda. Walmart (WMT) scaled back its ambitious plans in India in 2013 when it realized it couldn’t possibly comply with regulations requiring 30% of its products to be sourced from small Indian businesses. Just recently Facebook tasted its own frustration when, in February, Indian regulators rejected its Free Basics web access program. This is the regulatory thicket that pro-business Prime Minister Narendra Modi has promised to untangle—and that still seems as impenetrable as ever.
Despite Nestlé’s long history in India, the company’s executives managed to misread a fast-moving situation at every point. And in that sense the Maggi episode is certain to be studied by MBA students and public relations executives looking for lessons for years to come.
“This is a case where you can be so right and yet so wrong,” says Nestlé CEO Paul Bulcke. “We were right on factual arguments and yet so wrong on arguing. It’s not a matter of being right. It’s a matter of engaging the right way and finding a solution.” He adds: “We live in an ambiguous world. We have to be able to cope with that.”
To understand why Nestlé failed so spectacularly in this instance, it helps to go back to where the saga started.
A Surprising Test Result
Sanjay Singh bent down and plucked a four-pack of masala-flavored Maggi noodles from a low shelf at Easyday, a well-maintained mini-mart on the western edge of Barabanki. It was a Monday morning in March 2014. As one of five food inspectors in Barabanki, a rough-and-tumble town of 150,000 in central Uttar Pradesh, Singh, 40, typically spends most of his time cracking down on street and festival vendors, like the biryani rice peddler who was spiking his product with an illegal yellow coloring.
But on this day he was following orders from the top: The food-safety commissioner of Uttar Pradesh had called on officers to spend the week raiding supermarkets. The exercise was in preparation for Holi, a spring celebration in which revelers throw colored powders and gorge on snacks. The Easyday, just across the road from Singh’s office and one outlet in a chain that had originally been co-owned by Walmart, was the inspector’s first stop that morning. Singh was intrigued by the no added msg label on the bright-yellow package of noodles.
Like most Indians, Singh was familiar with Maggi. His daughter liked to eat the instant noodles, which are sold in a plastic bag containing two components: a patty of deep-fried noodles, plus the “tastemaker” packet of spices (the same basic components as the ramen noodle packs that are a staple of the diet of college kids in the U.S.). Per standard procedure, Singh sent off one of the four Maggi packages to a laboratory across the state in Gorakhpur for testing.
The results, which arrived a few weeks later, surprised the inspector. The Maggi sample had tested positive for MSG, or monosodium glutamate, a controversial ingredient that’s legal in India but requires disclosure and a warning that the product is not recommended for children under 12 months old. A flavor enhancer often associated with Chinese food, MSG has for decades been blamed for everything from bad dreams to cancer—all claims that research has failed to substantiate.
The fact that the Maggi sample contained MSG when its packaging said it didn’t was a violation punishable with a fine of up to 300,000 rupees—or about $4,500. Had Nestlé paid the penalty, this story might have ended there.
But when Nestlé India was notified, the company denied adding MSG and appealed the finding. As a result, in June 2014, a second Maggi sample was sent to a different government laboratory more than 600 miles away in Kolkata. After a bizarrely long delay—one that has helped fuel conspiracy theories—the narrative would take a more serious turn.
An Earthshaking Development
Nearly a year later, in April 2015, Singh was at the office when the lab report on the second sample finally came back from Kolkata. In a very Indian twist, it had somehow gotten lost in the mail on its way to Kolkata for a period of months—in the process taking a 1,200-mile detour through the Himalayas—and once at the lab, it had apparently ended up at the bottom of a pile.
Singh skimmed the first page of the report and noted that despite the long time gap, everything appeared to be in order. The sample had arrived with the packet seals intact, and the test results were signed and stamped by the director of the lab. He flipped ahead to see whether MSG had shown up again. And, yes, there it was. “MSG: Present.”
This report was far more comprehensive than the first one. Singh, an organic chemistry Ph.D., continued methodically down the page until his eye landed on “Lead: 17.2 ppm.” Could it really be 17.2 parts per million?
He read it again, stunned. According to the report, the Maggi sample contained more than seven times the permissible level of lead—over 1,000 times more than the company claimed was in the product.
Lead is naturally present in small concentrations in air, water, and soil, and so it’s expected that trace amounts show up in the food supply. But this was not a trace amount. And significant exposure to lead causes wide-ranging and serious health effects, particularly in children.
Two days later Singh and his colleagues made another morning raid at the Easyday. This time the purpose was to suspend the store’s license for selling substandard food and to collect any tainted noodles. But there was no stock to seize. The Maggi sample that tested positive for lead was from a batch that was long gone from shelves.
As the food officers spoke with the store manager, the earth started to shake violently. They all scrambled for cover as packages tumbled from the shelves. When the shaking stopped, they joked that the earthquake—which they would later discover had killed thousands of people in neighboring Nepal—was the “Boom!” of giant Nestlé falling to the ground.
Nestlé’s Polite Superiority
The headquarters of Nestlé India is a five-story, glass-walled building that sits along an eight-lane expressway in Gurgaon, a commercial district about 30 minutes outside central Delhi. Though it’s situated in the middle of a sleek, urban area, cows still occasionally meander across Nestlé House’s front lawn.
Nestlé began doing business in India in 1912. Today the Swiss parent company owns 63% of Nestlé India, which trades separately on the Indian stock exchange. Nestlé’s operations in India encompass eight factories, an R&D facility focused on developing products for the Indian palate, and more than 7,000 employees.
The Kolkata lab report arrived in the mail at Nestlé House on May 1, 2015, along with a notice from the food-safety commissioner of Uttar Pradesh, and landed on the desk of technical director Aris Protonotarios, the man in charge of quality and safety at Nestlé India. A soft-spoken Greek, Protonotarios has spent more than a quarter of a century with Nestlé. His confidence in his company’s quality assurance systems is such that, he says, he didn’t consider for a minute that any packages of Maggi could have left a factory with lead in them. “To anyone at Nestlé, being told your product is unsafe and hazardous is an insult,” he says. “To me it felt personal.”
Nestlé can trace that attitude all the way back to founder Henri Nestlé, a self-described “merchant chemist” who started a company bearing his name in 1866 and was said to obsess over quality. Today Nestlé is one of the world’s biggest and most profitable corporations, with some 335,000 employees, and products sold in every country around the world. Last year it ranked No. 70 on Fortune’ s Global 500 list. The multinational has a deep roster of potent brands—including Kit Kat, Nescafé, Stouffer’s, and, of course, Maggi.
Maggi is actually one of Nestlé’s oldest and largest global brands. It originated in 1863 when Julius Maggi, a Swiss industrialist looking to improve the nutrition of the nation’s workforce, developed condensed pea and bean soups. Maggi’s seasonings, soups, and noodles are now sold in 101 countries.
People hardly even ate noodles in India when Nestlé introduced Maggi in 1983. But the masala spice mix made the taste familiar, and the two-rupee price point made it widely affordable. Marketed to time-pressed mothers—“Mummy, I’m hungry” went the product’s popular jingle—Maggi soared to popularity as a children’s snack. Soon it was mainstream comfort food and “Maggi points”—stands at which vendors cook up noodles to order—proliferated.
By 2015, Nestlé was manufacturing Maggi at five of its eight Indian factories. Protonotarios says that lead is among the many safety hazards around which Nestlé designs its quality assurance system: Each factory regularly checks raw materials, its water supply, and packaging for lead. Nestlé India also tests its finished product at each factory every six months, as required by India’s regulations. “The monitoring process would have picked up something if it wasn’t okay,” says Protonotarios matter-of-factly. “And if it had, we would have done something about it.”
A check of its records showed no irregularities. So Nestlé India prepared a stack of its internal monitoring documents and mailed a response to the Uttar Pradesh food-safety officials on May 5. The company advised the state regulator that, based on its review, no further action should be taken in the case.
In retrospect, it was a stunningly dismissive reaction—and one that would provide a blueprint for more drama to come. Because of Nestlé’s inherent confidence in its own processes and data, it couldn’t imagine that it might have a problem on its hands. That attitude of detached if polite superiority would irritate officials and exacerbate Nestlé’s problems, especially when the Indian press got wind of the story.
“We Just Had No Control”
If the media environment in the U.S. seems overhyped at times, it is downright somnambulant compared with the round-the-clock free-for-all on the subcontinent. India has nearly 400 news networks, and the country’s news debate programs often feature up to eight talking heads on a screen at once. The Maggi controversy would soon became fodder for hours of lively, breathless punditry.
The evolution from local issue to national debate was blindingly fast. On May 7, two days after Nestlé India sent its response to the health officials, the first stories about problems with Maggi noodles began to appear in Hindi language news coverage in Uttar Pradesh. Shortly after that, employees in Nestlé India’s social media command center began to notice comments about tainted noodles on Twitter and Maggi’s Facebook page. Khajuria received his late-night phone call in New York on May 11. Within a week speculation about a Maggi ban was everywhere. Yet Nestlé didn’t issue a statement on the matter until May 21, when it asserted that there was “no order to recall Maggi Noodles being sold” and that the product was “safe to eat.”
Why wasn’t Nestlé more proactive? Partly because, as a general rule, the Nestlé way is to deal with authorities directly rather than through the press. Nestlé India execs also say they were still gathering facts and doing as much testing of their own as possible. But what’s the use of data if you don’t explain yourself?
While Nestlé stayed mostly quiet, the story metastasized. One of the first days Maggi made news, Maarten Geraets, Nestlé India’s head of foods, sat down in front of a TV in the company’s boardroom to see what was being said. It was nonstop and not kind; as he flipped channels, he was seized with horror and utter frustration. The Maggi news was on every channel. “We just had no control.”
To outsiders, too, Nestlé appeared paralyzed—or worse, guilty. Many Indians took the company’s silence as a sign of wrongdoing. The bigger the story got, the more scattered the coverage became. Some reports focused on “dangerous” MSG, while others focused on lead. Rumors spread in the hinterlands that Maggi contained glass particles—a mix-up due to the linguistic similarity of the words “lead” and “glass” in Hindi.
The escalating media attention also put pressure on another entity: the FSSAI, India’s national food regulator. That put a spotlight on Yudhvir Singh Malik, a career civil servant and the FSSAI’s CEO for just half a year when the Maggi scandal broke. In his short tenure he had already tangled with multinationals over labeling and quality issues. However, Nestlé was a reputable global company, and the evidence against it was limited to two samples, one of which had taken an unusually long journey to the lab. He decided that more investigation was needed.
On May 25, Malik wrote to the state food-safety commissioners—each of India’s 29 states and seven union territories has its own fully empowered food and drug regulator—asking that they test Maggi and submit findings to the FSSAI by June 1. Officials across the nation dispatched inspectors to grab Maggi packets.
By this time Nestlé’s leadership team in Switzerland was beginning to grasp that something in India was not unfolding as the team’s data said it should.
From “Technical Matter” to Crisis
For one of the world’s largest consumer-facing companies, Nestlé operates at a surprising remove, beginning with its geography. “The Centre”—as its global headquarters is known—is not near a major hub but in Vevey, a sleepy town of 18,000 on the northern shore of Lake Geneva.
Other than through its marketing, Nestlé hasn’t traditionally engaged much with the wider world. It doesn’t generally seek media attention, and its communications department is tiny relative to its size. Until three years ago, Nestlé didn’t have a centralized PR team in the U.S., its largest market.
Chalk it up partly to a natural Swiss reserve, but Nestlé’s aloofness also has to do with the long shadow cast by the company’s notorious baby formula scandal. In 1974 a non-profit called War on Want published a 12-page pamphlet called The Baby Killer that excoriated the formula industry for its marketing tactics. In pushing their products over breast-feeding, the document alleged, companies like Nestlé had led to the malnourishment and deaths of countless “third world babies.” The entire industry was targeted, but Nestlé, as the largest formula company, took the biggest hit. A high-profile boycott of Nestlé’s products ensued. The company tried many things to stem the criticism, to little avail.
Nestlé’s executives lost their appetite for broad public engagement. “They felt very quickly attacked,” says Albert Pfiffner, the company’s historian. “It has taken a generation to overcome this feeling.”
During the past decade Nestlé has embraced a version of corporate civic duty that is in keeping with its reserved culture: creating shared value, or CSV. The philosophy is that building a sustainable business naturally generates positive social by-products. Why bother with one-off charitable initiatives when you can simply invest for the long term? Today Nestlé execs talk about their business almost exclusively through the prism of CSV. The company’s 2015 CSV report, which tracks the company’s 39 societal commitments, from “delivering nutrition information and advice on all our labels” to “working against corruption and bribery,” was 351 pages; its annual financial report was 176.
From his spare, elegant office in the Centre, Bulcke presides over his global business empire with a sort of mathematical laissez-faire, trusting his company’s chain of command. A lanky, blue-eyed Belgian fluent in six languages, the 61-year-old joined Nestlé in 1979 and became CEO in 2008. (He was a surprise pick over Paul Polman, who is now Unilever’s (UL) CEO.) Bulcke knows that a company the size of Nestlé is bound to run into controversy now and again. That explains his favorite aphorism: Tall trees catch more wind.
When he first heard about the Maggi case, says Bulcke, it struck him as a straightforward technical matter involving testing methods that could be judged and handled by his capable people in the field. “It was a ‘What is your spectrometer setting?’ sort of thing,” Bulcke tells me. He says now he was “too Cartesian” in his thinking.
By the end of May, his communications team was sounding the alarm that the story was exploding. As he listened to a Maggi crisis conference call on June 2, a couple of things became clear to Bulcke: He had badly miscalculated, and it was time for him to jump in.
“You feel it,” he says. “For the morale of the troops, you’ve got to show your nose.” He left for India the next day.
The CEO’s Terrible 24 Hours
When Bulcke arrived in India on June 4, he found his top managers preparing to visit the FSSAI. The regulator had called at 10:30 that morning and asked them to come to a meeting at 1 p.m. The executives were unclear on the agenda, but they didn’t think that Bulcke should go. They feared he was “too senior.”
Bulcke has a breezy, authoritative demeanor, and he dismissed any such notion. “Come on, that’s what I’m here for,” he said.
“This is a case where you can be so right and yet so wrong. We were right on factual arguments and yet so wrong on arguing.” — Paul Bulcke
Bulcke and his team arrived and sat down across a conference room table from Malik and another FSSAI official. The mood was tense. Nestlé India’s team complained it had not received test reports from the states and argued that tests were being done improperly. Malik fired back that Nestlé would have to ask the states for their test results and that their procedures were proper.
As he listened, Bulcke realized how far apart the two sides were. Looking back, he compares the meeting to watching a house burn down while two firefighters argue over the fire’s cause.
Sensing the regulator might do something drastic, Bulcke says he decided what to do almost on the spot: Nestlé needed to launch a voluntary recall and pull every variety of Maggi off the shelves.
His resolve was bolstered that afternoon when states began to ban the noodles. The first ban came from Uttarakhand, a state in northern India, where Nestlé had one of its five Maggi factories. Bans in five other states and territories quickly followed—including Delhi, the one that contains the national capital.
Bulcke gathered his management team in Nestlé House’s fifth-floor boardroom and explained his thinking. Nestlé had lost the regulators and had lost the media. The only way to regain control of the narrative—and win back consumers’ trust—would be to pull Maggi and relaunch.
Executing the recall would be a gargantuan task. The product they were recalling was in 3.5 million outlets. Plus, it was India, with all its red tape. Each of the 29 states is like its own country, meaning that trucks have to stop at each border for inspection. Vehicles can enter cities only during certain hours, and to do so they must be a certain size. Even with 38 distribution centers across the country, some of Nestlé India’s products take 13 days to get to market. The company would need to reverse-engineer this process. And it would have to do something with all those noodles. Nevertheless, Bulcke was determined about the course of action.
Nestlé set a press conference for noon the next day to announce the news, and at 12:30 a.m. the company sent a short statement to the Indian stock exchange: “In spite of Maggi noodles being safe, Nestlé India decides to take the product off shelves.”
Khajuria notified Malik a short while later by text: “We have decided to take Maggi noodles off shelves.” Bulcke went to his hotel and, he says, “got a good night’s sleep.”
An Uphill Journey Begins
The head of the FSSAI was not satisfied with the developments. Though Maggi would be pulled from the market, Nestlé’s press statement insisted on the product’s safety. Meanwhile, he had mounting evidence from labs around the country indicating otherwise.
So the regulator countered Nestlé’s move by implementing a temporary national ban of Maggi.
Aware of Nestlé’s 12 p.m. press event, Malik punched out an eight-page order calling on Nestlé to respond within 15 days with a reason that product approval for all varieties of Maggi noodles should not be revoked. He fired it off to Nestlé India by email at 11:15 a.m., and the news broke while Bulcke was meeting the media.
The press conference took place in a high-ceilinged hall in Delhi’s Oberoi Hotel. Despite the short notice, journalists packed the room, and Indian news channels broke into their programming to air the CEO’s remarks.
Bulcke kept his opening comments to five minutes and a few key points: Maggi is safe; consumer trust has been shaken by unfounded concerns; we’re working with authorities; we are committed to India.
Then the floor was opened up to questions, and the room erupted as the 200 journalists demanded answers from Bulcke: Why had it taken Nestlé two weeks to make a statement? If Maggi was safe, was he saying the government labs were wrong? No, he replied, he wasn’t criticizing the government’s science. For 45 minutes he gulped Perrier from a goblet and managed to keep his cool.
Bulcke flew out later that evening. He had been in India for roughly 24 hours, and things had seemingly gone from bad to worse. But the CEO left the country feeling happy and confident that things were about to turn around: “It was the first step of an uphill journey.”
We’ll Settle This in Court
The next step would be played out in the courts. The FSSAI had given Nestlé India 15 days to respond to its order, which threatened the company with permanent loss of Maggi’s product approvals. Responding with an explanation was one option; suing was another.
Filing suit against the FSSAI, the agency that regulated not just Maggi but also Nestlé India’s many other products, was risky. But six words in the FSSAI order were especially troubling to Nestlé’s executives: “unsafe and hazardous for human consumption.” They felt the phrase exposed them to legal action. Millions of people in India ate Maggi. What was to stop anyone who had health problems from blaming Nestlé’s noodles?
On June 11, six days after the government issued its temporary ban, Nestlé India filed suit against the FSSAI in Bombay High Court.
The Maggi proceedings spanned the summer months and became a media spectacle of their own. At the heart of the case was whether the government order to ban the sale of Maggi was legal.
Nestlé’s case was this: The FSSAI hadn’t given the company a proper hearing and had failed to follow “principles of natural justice” by issuing its order. The order, Nestlé argued, caused the company heavy financial losses and did irreparable damage to its reputation.
Further, Nestlé said, the rationale for the order was bogus, having been based on select findings of unaccredited laboratories that used improper testing methods. The FSSAI based its ban on test results for 72 samples of Maggi done by various state labs, 30 of which were found to have elevated levels of lead, though none nearly as high as the report that kicked off the crisis. But Nestlé argued that the government had ignored overwhelming evidence—the roughly 2,700 lab reports Nestlé had submitted from internal and external labs at that point—that indicated lead levels were under the permissible limit.
The government case asserted that the order for the temporary ban was an urgent matter of public safety and that the regulator did give Nestlé a hearing when Malik met with the company’s officials on June 4.
Moreover, the government argued, the order caused Nestlé no undue harm: The company had already recalled Maggi. The government’s ban was temporary, covering just a 15-day period. All Nestlé had to do was respond satisfactorily—which it couldn’t do because the product wasn’t safe. Nestlé had decided to incinerate the 37,000 tons of Maggi it had collected. Why would a company recall a perfectly safe product and burn it? The government order hadn’t mandated that Nestlé get rid of the noodles. (Though regulators had okayed it.) That act was tantamount to a cover-up. Likewise, Nestlé’s many thousands of test results could have been easily fabricated.
The Big Question
Was there lead in Nestlé’s noodles?
The widest, most puzzling, and most important divide in the Maggi affair is over that seemingly simple question. Several state governments in India tested Maggi samples and reported elevated levels of lead. Nestlé ran its thousands of tests and declared that no problem existed. Who was right?
Testing for lead is straightforward with sophisticated lab equipment, the findings unequivocal and reliable. Government lab analysts, though paid less than corporate colleagues, are a trained and educated group, says Ashwin Bhadri, CEO of Equinox Labs, one of India’s leading private lab companies. That said, he acknowledges the labs are dreadfully underresourced and stuck with antiquated instruments. “Some are 20 years old,” he says. “They don’t have the manpower or the chemicals to run the equipment. It’s really sad.”
A week after the Maggi ban, a former director of Kolkata’s Central Food Laboratory, Satya Prakash, reportedly sent a letter to the Prime Minister’s office and the nation’s health minister expressing concern over the nation’s lack of noodle-testing standards. In 2013, Prakash, who retired in 2009, published a scathing article in which he declared “the working conditions of labs are anything but functional.”
In stark contrast, Nestlé’s Quality Assurance Center in India sits, like a glass jewel, at the center of the company’s well-manicured campus in Moga. The day I visited, a scientist in a crisp white lab coat met me in the building’s foyer. He greeted me warmly before turning quickly, and with discernible bitterness, to the differences between a government lab and the pristine, state-of-the-art space he was about to show me. Government labs are likely to use cheap household blenders to mix food samples, he said; Nestlé has a $5,000 contamination-proof titanium blade. Nestlé uses pricey porcelain bowls to hold substances, whereas the government labs probably use inexpensive ceramic ones that leach, and so on. Standing there, it was hard to imagine contamination happening in such an environment.
Yet Nestlé’s money and its vaunted commitment to quality haven’t prevented other safety-related recalls. In March the company voluntarily recalled 3 million DiGiorno, Stouffer’s, and Lean Cuisine products in the U.S. “because of the potential presence of glass pieces.”
Many Indians, including professionals with knowledge of the food industry, continue to suspect that there was something wrong with Maggi. They find it hard to fathom that so many government tests could be wrong, and they suggest the food giant got a little sloppy in one of its factories, where lead-contaminated water or raw material or old equipment—possibly combined with the lax oversight of contract workers—caused the problem.
In the absence of a definitive answer, the next best thing would be a legal ruling.
Conspiracy Theories Abound
While the High Court of Bombay weighed the facts of the Maggi case, the affair stirred up debate around what was already a hot-button question in India: Is the presence of big foreign companies good or bad for the country?
Enter the yogi.
Suspicion of multinational companies in India is deeply rooted and very much alive—perhaps most prominently in the hulking yet limber form of Baba Ramdev, a colorful yoga guru and the face of India’s fastest-growing consumer goods company. Ramdev, 50, has long hair and a dark, bushy beard; he became famous in the early 2000s by leading TV yoga workouts in a saffron-colored loincloth. He parlayed his celebrity into the launch of Patanjali Ayurved, an ayurvedic medicine company, in 2006. Before long his followers were flocking to his ever-expanding line of all-natural products. (Toothpaste and ghee are his top sellers.) The goods are dirt cheap and marketed as swadeshi , or Indian. Increasingly he is taking market share from global giants like Colgate and Unilever.
Ramdev is vociferously anti–multinational corporations. He rails against the money they drain from the country and the ills they’ve introduced to India, calling Coca-Cola and Western-style processed foods “slow poison.”
As Nestlé’s troubles escalated, the coincidences were too good for many on social media to resist. Twitter and WhatsApp buzzed with giddy speculation that Baba Ramdev himself was behind the scandal or that he would swoop in to the rescue by launching his own Patanjali instant noodles. Finally, in mid-June, Ramdev said that after months of research—wholly unrelated to Maggi—Patanjali planned to launch a line of locally sourced whole-wheat noodles in late 2015.
The guru didn’t miss a chance to get in a shot at Nestlé. “Maggi should apologize,” said Ramdev in early June. “And if the government takes strong measures, the company should be asked to pack up and leave the country. We don’t need a company that serves poison.”
On June 30 the High Court of Bombay offered Nestlé some relief: It allowed the company to resume manufacturing Maggi for export. Singapore and Australia had already pronounced the noodles safe for sale and consumption; Canada, the U.K., and the U.S. would do so as well in the following weeks. For many it raised the question: If Maggi was fine for consumers in those developed nations, why not for the people of India?
Others reached a different conclusion. Of course the exported product was safe, I was told by some people—a few of them Indian officials. Nestlé sells a higher-quality product in other countries, these people claimed; in India, where the population and authorities have traditionally been less discerning, it pushes substandard goods. Not only was Nestlé guilty of selling tainted noodles, these folks asserted, but it did so willfully and then engaged in a cover-up.
“Maggi should apologize, and if the government takes strong measures, the company should be asked to pack up and leave the country. We don’t need a company that serves poison.” — Baba Ramdev
That’s just a single strain of conspiracy theory among many. One of the most common things I was told while in India was some form of this: “There are some politics behind this case.” When I’d push people further on this point, accounts diverged wildly. One person might point to strained diplomatic relations between India and Switzerland over banking secrecy. Another might suggest that Nestlé had been set up after refusing to make “political contributions” to corrupt officials.
The possibilities are endless, and most of them have been debated in some corner of India. But Kilbinder Dosanjh, a director at risk-consulting firm Eurasia Group, says the Maggi case is less a story of unique political dynamics than a classic tale of institutional weakness in India. In that way it is the opposite of conspiracy. It’s about regulatory incoherence. “When it came to tests of these noodles, there were multiple levels of institutions dealing with this,” he says. “You had state and central bodies that complicated who was responsible and what standards they were using.”
Good News at Last
While Nestlé waited for the high court to render its verdict, the company took steps to up its communications game. Though it stayed silent on matters before the court, the company created a Maggi information hub on its website, where visitors could view its lab reports and read up on MSG. It publicized its recall efforts. And it invited journalists to tour its Quality Assurance Center in Moga.
Nestlé India also got a boost in late July from the arrival of Suresh Narayanan as its new top executive. Narayanan, 56, had spent the previous decade covering the globe for Nestlé. In April 2015 he’d been transferred to the Philippines after a lively four-year stint running Nestlé’s businesses in Egypt, Libya, and Sudan. But after the Maggi situation blew up, Narayanan got a call from his boss, Wan Ling Martello, the head of Nestlé Asia, Oceana, and Africa, asking him to move again. “I need you in India,” she told him.
The ebullient Narayanan, an Indian himself, had begun his career with Nestlé in the sales department in Gurgaon, and he still knew many of Nestlé India’s employees and the market. He had also proved to be an expert and versatile crisis manager. In Singapore, for example, he took over just as the financial crisis hit and still managed to grow sales in a mature market.
Narayanan wasted no time signaling that he would be leading Nestlé India in a very different way. He gave an interview to the Indian press the same day he arrived. A week later he spoke for 45 minutes live on CNBC, declaring his first mission was “to bring Maggi back.”
“When you manage an issue in India, you’re dealing with a certain set of known entities but also a much larger set of unknown entities. It’s like being shot at in the dark.” — Suresh Narayanan
His words proved prophetic.
On Aug. 13, a couple of weeks after Narayanan’s arrival, the High Court of Bombay delivered its judgment in the case. In a ruling that was unusually long—145 pages—the court sided with Nestlé. It overturned the ban, declaring that the FSSAI had acted arbitrarily. The judgment allowed Nestlé India to resume sales of Maggi, on the condition that another round of samples—90 in all—be tested for lead and cleared in the following six weeks by three labs accredited by the National Accreditation Board for Testing and Calibration Laboratories.
Nestlé India’s executives had crowded into the boardroom to watch TV coverage of the decision. Narayanan was texting updates to Martello back in Vevey until it became clear to him that it was good news. Then he sent her one more message: “ WE WON WE WON WE WON WE WON, ” and added smiley emoticons.
A Nation Gets Its Noodles Back
The relaunch of Maggi was scheduled for Monday, Nov. 9—five months and four days after the government ban, and an auspicious day in India known as Dhanteras. The first day of Diwali, the Hindu festival of lights, it carries associations of well-being and prosperity.
Nestlé had gotten official clearance from the Bombay High Court in October and spent weeks preparing. Nestlé India was eager to build demand after the product’s months-long absence from shelves. The company’s marketers began with young people, who had proved a forgiving and fiercely loyal fan base; they had been clamoring for Maggi’s return practically since the trouble began, and for them Nestlé launched a #WeMissYouToo campaign on YouTube—a series of minute-long spots starring handsome bachelors who are forlorn without their instant noodles. To court mothers, it got real moms to give video testimonials about why they still trusted Maggi.
For symbolic reasons Nestlé delivered the product as widely as possible on day one. Trucks loaded with instant noodles and festooned Indian-style with colorful tassels and decals rolled out just after midnight. The no added msg label on the packages had been replaced by a new logo reading “Our commitment to goodness you can always trust.” Narayanan gave dozens of interviews repeating some version of a simple message: “Maggi is safe, was safe, and always will be safe.” There were Maggi-eating celebrations at Nestlé sites across the country.
They celebrated in Vevey too. Maggi was served at an executive board meeting. The instant-noodle dish was the second of four courses, between Terrine Saint-Hubert and fried sturgeon served with crème de caviar d’Aquitaine.
Taking the Long View
Maggi noodles may be back on shelves, but the Maggi saga is far from over. The Monday after the big relaunch, the FSSAI filed an appeal of the Bombay court decision in India’s Supreme Court. There is another legal case pending. On Aug. 12, 2015, the day before the ban was lifted, the government had sued Nestlé India for $99 million. The complaint, lodged on behalf of consumers by the National Consumer Disputes Redressal Commission, alleged the same basic things the FSSAI’s order had: that the company had sold unsafe products and misled consumers through its advertising practices. Both cases continue to work their way through the Indian courts.
Meanwhile, Nestlé has a wily new competitor in the noodle market. A week after the Maggi relaunch, Baba Ramdev introduced his new Patanjali noodles. They’re made from atta, a “healthier” whole-wheat flour, and cost 10 rupees less than Nestlé’s Maggi equivalent. As the robed guru whipped up a batch for media onlookers in a Delhi mall, he noted that Patanjali’s product was lead- and MSG-free. Then, for the cameras, he enthusiastically slurped some down, noodles tangling in his beard.
The fates of the other characters in the Maggi drama have diverged. Sanjay Singh, the inspector whose curiosity about MSG kicked off the whole crisis, received a public service award in Barabanki in January for his good work. Malik, the CEO of the FSSAI, was shifted out of his position a month after the Bombay High Court decision and transferred to India’s central planning commission, where he was given a job as an “additional secretary.” Meanwhile, some government officials remain incensed with Nestlé, particularly over the arrogance of its recent marketing efforts—the “Maggi is safe, was safe, and always will be safe” language irks them. For those burnishing Brand India, the episode can’t go away fast enough.
As for Nestlé, Bulcke and his team acknowledge that they didn’t play the Maggi crisis perfectly. But they defend their decision-making generally—particularly the choice to privilege communication with regulators over reaction to the media. They talk about how they managed the crisis with long-term rather than short-term outcomes in mind. Nestlé has been in India for 100 years, Bulcke stresses, and it wants to be there 100 more. You can’t achieve that in a country if you blow up your relationship with the regulators.
In any case, the global giant was given an important lesson in the unpredictability of one its most promising growth markets. “When you manage an issue in India, you’re dealing with a certain set of known entities but also a much larger set of unknown entities,” says Narayanan, the Nestlé India managing director. “Who is going to set off what bullet at you is what you have to keep anticipating. Where the hell is this next bullet going to come from? It’s like being shot at in the dark.”
The next time Nestlé hears gunfire, maybe it will be ready to duck.
A version of this article appears in the May 1, 2016 issue of Fortune with the headline “Nestlé’s Hot Mess.”
Maggi Noodles in India: Creating and growing the category
Nestlé launched MAGGI instant noodles in India in 1983. At that time MAGGI was not a power brand in the Indian market and noodles were fairly alien to the Indian consumer. Nestlé grew MAGGI to become one of the top food brands in India and built the instant noodles from nothing to `15.8 billion by 2010, a category that was highly profitable and growing at 22% a year. The case describes the four-part approach that Nestlé used to accomplish this: adapting its product from a soupy noodle to a dry cake and formulating a taste that would appeal to the Indian palate across the entire country; strengthening its competitive position by attending to each element of the value chain – R&D, manufacturing, supply chain, sales and marketing; growing the category through product innovation and go-to-market innovation; and retaining a leadership position in the face of competition from other MNCs by continuous innovation and willingness to cannibalize its own products. The case illustrates how multinational corporations (MNCs) can capitalize on the huge opportunities available in the Indian market. While the market is potentially huge, the challenges in developing it are also daunting. Success requires persistence and entrepreneurship at multiple levels of the corporation. In the case of Nestlé, top management at its Swiss headquarters, the country head in India and the front line product champion in India all played their parts in an aligned manner. The case illustrates how an MNC can blend local responsiveness with its global strengths to create a winning position in the Indian market.
The main learning objective of this case is to support mid-level and senior executives (senior executives, country managers in emerging markets, supply chain professionals, product development teams) as well as MBA participants in exploring how MNCs can best leverage the India opportunity. The case focuses particularly on the following issues: exploring how an MNC can successfully enter the India market; what an MNC must do to consolidate its gains and grow a market category; and how an MNC can maintain market share and continue to innovate in the face of increased competition. It also provides a useful vehicle to discuss the multi-level (top management, country manager and front line managers) leadership that is needed and how sustained support from top management and persistence at the country level are both essential to building a winning presence in the Indian market.
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Nestle 'unhealthy' food controversy: Looking back at the Maggi Noodles crisis in India
The maggi noodles crisis in 2015 emerged as one of the biggest public relation hurdles for nestle india, which came under fire after laboratory tests found the popular two-minute instant noodles were unsafe and hazardous for human consumption..
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The world’s largest consumer food and beverages company Nestle has been facing criticism after an internal presentation revealed that a majority of its mainstream food and beverages portfolio is unhealthy.
In the internal document, the company said that 60 per cent of its food and drinks portfolio — barring categories such as pet food, baby formula and coffee — do not meet the recognised definition of health. It also acknowledged the fact that some of its food products will “never be healthy”.
Read | Nestle’s ‘unhealthy’ food portfolio controversy: All you need to know
The main reason behind the criticism this time revolves around how healthy are the mainstream products manufactured by the company. The company is now in damage control mode .
THE MAGGI NOODLES CRISIS IN INDIA
The crisis involving Maggi Noodles in India was so bad that several case studies have been made on it . It nearly threatened the existence of Nestle India as Maggi sales contributed to over 25 per cent revenues of the Swiss company’s India unit.
It was in 2014 when food safety regulators from the Barabanki district of Uttar Pradesh reported that samples of Maggi Noodles had high levels of monosodium glutamate (MSG) apart from high lead content above the permissible level. At the time, the labelling on packets of Maggi Noodles indicated that it had no added MSG.
A livemint.com report from 2017 recounted that an individual named Sanjay Singh, who was a food inspector in Uttar Pradesh government’s Food Safety and Drug Administration, spotted the label on the bright yellow Maggi packet that claimed “no added MSG” in March 2014 during one of his routine raids on retail outlets.
When it was sent to a state laboratory in Gorakhpur for testing, it was found that the instant noodle packets had MSG. The samples were then sent to the Central Food Laboratory (CFL) in Kolkata a few months later.
Almost a year later in April 2015, the CFL confirmed the Gorakhpur lab report and also confirmed that the amount of lead found was over 1,000 times more than what Nestle India Ltd had claimed.
However, Nestle in its first official statement after the report claimed that there was no order to recall Maggi Noodles being sold and that it was safe to eat. However, the controversy grew when the Food Safety and Standards Authority of India (FSSAI) asked Nestle to recall Maggi Noodles.
Nestle was left with no choice but to recall the popular snack from the market. Between June 5 and September 1, 2015, nearly 38,000 tonnes of Maggi Noodles were recalled from retail stores across the country and destroyed. Maggi’s share in the Indian market went down from 80 per cent to zero.
Also Read | Maggi row: Nestle India decides to take noodles off the shelves
Five months after the brand was forced to pull out of the market over safety concerns, Nestle India’s Maggi Noodles returned to shelves in November 2015. However, local bans continued in some states even after Maggi returned to the markets. It took almost another year for Maggi to return to shops across all states in the country.
Nestle India, Chairman & MD, Suresh Narayanan, in a 2017 interview to BusinessToday.in said how the Maggi Noodles crisis was the most challenging and dramatic situation in his entire professional career .
“Maggi is the worst crisis that we have faced in the 104 years of our existence in this country, also the worst crisis the company has faced globally in a long time,” he said at the time.
NEW CONCERN UNLIKELY TO AFFECT INDIA UNIT
The new controversy over ‘unhealthy’ food and drinks is unlikely to impact Nestle India as its portfolio is different from the parent company. It may be noted that India is one of the few countries where Nestle has a local research and development facility for a long time.
Abneesh Roy, Executive Director (Institutional Equities), Edelweiss Securities, told BusinessToday.in that Nestle India has only nine brands out of 35 billionaire brands of the parent. Roy also said that he does not expect the global row to significantly impact Nestle India’s business.
One of the reason is that over 45 per cent of Nestle India’s products comprise health and nutrition products such as baby food, dairy products and coffee, which were not classified as “unhealthy” in the internal document.
Other prominent products in Nestle India’s portfolio are Maggi Noodles and chocolates — both of which may be hard to renovate in case they do not meet the healthy criteria. Even then, the “unhealthy” food portfolio is unlikely to impact sales of Nestle India products. Published By: Koustav Das Published On: Jun 2, 2021 --- ENDS ---
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Nestle India and its Revival:A Case study on Maggi Brand
The favorite and most preferred instant food product of children, Maggi Noodles, got entangled in its ethical issues of the ingredients being used. The safety of the consumers was found to be hazardous inclining us to give its detailed study with certain facts and figures. The study focuses on the causes of destructive positioning and its aftermath. The corporate social responsibility of Nestle India was tremendously cross-questioned with its after test results, by food regulatory authorities.The public relations of the Company got worsely affected with the issues stated. It made us to further focus on its repositioning state as well as its policies of managing the crisis period.
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Nestlé India: Adopting a Regional Approach in its Distribution Strategy
| Case Code: OPER148 Case Length: 12 Pages Period: 1959-2020 Pub Date: 2021 Teaching Note: Available | Price: Rs.300 Organization : Industry : Countries : India Themes: |
The case “Nestlé India: Adopting a Regional Approach in its Distribution Strategy” discusses the logistics and distribution strategy of Nestlé India Limited (NIL), the Indian subsidiary of the world’s largest food and beverage company, Nestlé SA. The case gives a brief insight into the distribution structure of Nestlé, and the terms of operations it employed for its intermediaries. It then provides details about how technology helped NIL’s outbound logistics system at NIL. The case moves on to discuss the possibilities of channel conflicts and stresses upon the need for NIL to strengthen its own distribution channel in order to avoid differences between prices of its products in different regions, product positioning, and promotional campaigns. The hyper local cluster approach of NIL is dealt with as well – wherein it divided India into various clusters and then crafted product placements, distribution, marketing, and promotions for each cluster. Suresh Narayanan, Chairman and Managing Director of NIL, was hopeful that NIL would continue to improve its distribution strategies to serve the Indian markets better.
- Understand the importance of an efficient distribution and logistics management system in reducing costs and creating value for customers.
- Get insights into the distribution operations and the distribution channels utilized by a leading FMCG company.
- Devise ways to manage relationships with intermediaries.
- Recognize the most common reasons for channel conflict.
- Examine the role played by technology in the outbound logistics of a retail company.
- Scrutinize how a company can alter its distribution strategy to cater to the varied tastes and preferences of customers in different regions.
Managing Distribution; Distribution Strategy; Relationships with Intermediaries; Hyper Local Cluster Approach; Stock Policy; Sales Forecasting; Target Setting; Technology in Outbound Logistics; Channel Conflict; Holt-Winters model; Demand Forecasting; and Supply Chain Management; Sales force Management; Retail Management; Production & Materials Management; FMCG
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Extensive SWOT Analysis of Nestle
By Aditya Shastri
We are pretty sure that you already know about Nestle. This year marks the completion of 60 years of Nestle in India. 60 years of consistently providing nothing but quality food products to the country. Nestle has successfully managed to earn the trust and respect of every stratum of society in this country.
In this case study, we will go through the SWOT Analysis of Nestle. The areas where the company can improve in the future and where the company should improve.
We are pretty sure that by the end of this insightful blog you will have a different perspective about Nestle as a company. You may also read our other blog about the Marketing Strategy Of Nestle .
Let us now learn further about Nestle as a company.
About Nestle
Nestle SA is a global food and beverage firm based in Switzerland that operates in India as Nestle India. It arrived in India for the first time in 1956. Nestle has developed dramatically in India since then, from introducing its first milk product in the 1960s to delivering a wide selection of high-quality products in the Indian market. Among other things, it sells beverages, breakfast cereals, chocolates & confectionery, dairy, nutrition foods, vending, and food services. Nestle India’s portfolio includes well-known brands such as Maggi, Kit Kat, Polo, Milkmaid, and Nescafe.
Today, Nestle is one of the biggest food and beverage companies in the world. Nestle boasts a remarkable 96.5% market share in Infant Cereals, an impressive 62.5% market share in Pasta & 59.5% in Instant Noodles and the list goes on. These strong sales percentages have reflected themselves in the company’s financial statements. Nestle recorded around 1.92 billion dollars in revenue in 2020.
Now, let us look into the SWOT analysis of Nestle
SWOT ANALYSIS OF NESTLE
SWOT stands for strengths, weaknesses, opportunities, and threats. It is a tool commonly used to analyze things in a simplified manner.
SWOT analysis is an excellent tool to determine the strengths of the company so that it can continue to work on those strengths, find out its weaknesses so that it can put extra efforts into those areas, its opportunities which shows where it can grow and its threats so that it can develop a plan and act proactively.
1. Strengths of Nestle
Strengths indicate what a business excels at and what sets it apart from the competition, such as a strong brand, a dedicated client base, a strong balance sheet, or distinctive technology.
- People, culture, values, and attitude
According to Harvard University, the main reason behind Nestle’s unparalleled success is its multi-cultural attitude. This multi-cultural attitude helps to add value to its product and value chain.
- Unmatched geographical presence
With a history of more than 160 years, this company offers a wide range of food and beverage options to its customers. Nestle operates in 190 countries worldwide and has around 500 factories, and has around 400,000 people working under them.
- Unmatched research & development capability
Nestle invests 1.6bn $ every year in R&D and has the most advanced science and innovation network in the food industry. Nestle has a team of 4000 scientists and specialists leading them towards success through scientific research and fast innovation.
- Unmatched product & brand portfolio
Nestle has the largest range of food & beverage products in the world. The consumer of nestle products includes everyone from an infant to an old person. Nestle products have been successful at creating remarkable customer loyalty.
- Decentralization
Nestle is a strong advocate of buying raw materials for its products from local areas. It not only helps the local farmers in the region but also boosts the economy resulting in the overall development of the place.
2. Weaknesses of Nestle
A company’s weaknesses keep it from realizing its greatest potential. A bad brand, higher-than-average turnover, high levels of debt, an inadequate supply chain, or a lack of capital are examples of areas where the company has to improve to stay competitive.
- Has faced criticism over selling contaminated food, high water usage, and other unethical practices
Nestle has faced a lot of negative media coverage of late. Most recently they were heavily criticized for using lead in the production of Maggi. Some of the allegations that nestle faced are as follows :
- Unfair marketing of baby formula;
- Supports privatization of water;
- Demanding debt repayment from a famine struck country;
- Misleading labeling;
- Sourcing materials from suppliers practicing child and forced labor;
- Anti-unionism.
- Contaminated food recalls
Even after taking strict measures to ensure the best quality of food, Nestle has instances of contaminated food being sold. This does not help the company with its public image and has suffered some backlash from the public in the past.
3. Opportunities for Nestle
Opportunities are windows of opportunity or possibilities for something good to happen, but the company must seize them!
- Clear and accurate labeling indicating any harmful products
Almost 62% of consumers are more likely to choose products that are free of any harmful products. Today the consumers have become conscious of their health and nestle can use this opportunity by branding itself as the most healthy option in the market.
- Transparency in material sourcing
Consumers today make buying decisions on whether the product is sustainable and if the product has adverse effects on the environment. Being transparent in material sourcing can help nestle build a good brand image.
- Ready-to-drink (RTD) tea and RTD coffee markets
Nestle does not have any RTD tea/coffee products. This sector is dominated by small companies. Nestle can use its resources to capture this untapped market.
4. Threats to Nestle
Anything that potentially harms your firm from the outside, such as supply chain issues, market shifts, or a shortage of recruitment, is considered a threat. It’s critical to foresee threats and take action before becoming a victim and stagnating your growth.
- Cut-throat competition in the beverage and food industries
The increased competition in the food and beverage industry has posed a threat to Nestle. This industry is one of the most profitable as well as competitive industries.
- Changing climate conditions will affect the production of coffee
Due to the changing climate and global warming, the production of coffee has taken a toll and Nestle has to find a way out of this. In addition to those factors, cut-throat competition for prices has aggravated the problem even more.
With this, we come to the end of the SWOT Analysis of Nestle. Let’s conclude what we have learned.
Nestle has come a long way it has become one of the most recognizable brands in the world. Nestle has been successful in creating brand loyalty and building trust in the consumer’s minds. Nestle has continuously changed with the ever-changing choices and preferences of people all over the world. Nestle still has some obstacles to pass and has a lot of opportunities to grow. We are sure that Nestle will overcome these obstacles and maintain its position as one of the best companies in the world.
Did you enjoy our research? Are you curious to learn more? For additional information, please visit our website . If you’re interested in Digital Marketing, you may also take Karan Shah’s Free Digital Marketing Masterclass .
We appreciate you taking the time to read this.! We hope you learned something new about Nestle’s SWOT Analysis from this blog. If you liked it, please share it and leave a comment, and read more of our Case Studies !
Author's Note: My name is Aditya Shastri and I have written this case study with the help of my students from IIDE's online digital marketing courses in India . Practical assignments, case studies & simulations helped the students from this course present this analysis. Building on this practical approach, we are now introducing a new dimension for our online digital marketing course learners - the Campus Immersion Experience. If you found this case study helpful, please feel free to leave a comment below.
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Home » Management Case Studies » Case Study: Nestle’s Growth Strategy
Case Study: Nestle’s Growth Strategy
Nestle is one of the oldest of all multinational businesses. The company was founded in Switzerland in 1866 by Heinrich Nestle, who established Nestle to distribute “milk food,” a type of infant food he had invented that was made from powdered milk, baked food, and sugar. From its very early days, the company looked to other countries for growth opportunities, establishing its first foreign offices in London in 1868. In 1905, the company merged with the Anglo-Swiss Condensed Milk, thereby broadening the company’s product line to include both condensed milk and infant formulas. Forced by Switzer land’s small size to look outside’ its borders for growth opportunities, Nestle established condensed milk and infant food processing plants in the United States and Britain in the late 19th century and in Australia, South America, Africa, and Asia in the first three decades of the 20th century. In 1929, Nestle moved into the chocolate business when it acquired a Swiss chocolate maker. This was fol lowed in 1938 by the development of Nestle’s most rev olutionary product, Nescafe, the world’s first soluble coffee drink. After World War 11, Nestle continued to expand into other areas of the food business, primarily through a series of acquisitions that included Maggi (1947), Cross & Blackwell (1960), Findus (1962), Libby’s (1970), Stouffer’s (1973), Carnation (1985), Rowntree (1988), and Perrier (1992). By the late 1990s, Nestle had 500 factories in 76 countries and sold its products in a staggering 193 nations-almost every country in the world. In 1998, the company generated sales of close to SWF 72 billion ($51 billion), only 1 percent of which occurred in its home country. Similarly, only 3 percent of its- 210,000 employees were located in Switzerland. Nestle was the world’s biggest maker of infant formula, powdered milk, chocolates, instant coffee, soups, and mineral waters. It was number two in ice cream, breakfast cereals, and pet food. Roughly 38 percent of its food sales were made in Europe, 32 percent in the Americas, and 20 percent in Africa and Asia.
Management Structure
Although Nestle makes intensive use of local managers to knit its diverse worldwide operations together, the company relies on its “expatriate army.” This consists of about 700 managers who spend the bulk of their careers on foreign assignments , moving from one country to the next. Selected primarily on the basis of their ability, drive and willingness to live a quasi-nomadic lifestyle, these individuals often work in half-a-dozen nations during their careers. Nestle also uses management development programs as a strategic tool for creating an esprit de corps among managers. At Rive-Reine, the company’s international training center in Switzerland, the company brings together, managers from around the world, at different stages in their careers, for specially targetted development programs of two to three weeks’ duration. The objective of these programs is to give the managers a better understanding of Nestle’s culture and strategy, and to give them access to the company’s top management.
The research and development operation has a special place within Nestle, which is not surprising for a company that was established to commercialize innovative food stuffs. The R&D function comprises 18 different groups that operate in 11 countries throughout the world. Nestle spends approximately 1 percent of its annual sales revenue on R&D and has 3,100 employees dedicated to the function. Around 70 percent of the R&D budget is spent on development initiatives. These initiatives focus on developing products and processes that fulfill market needs, as identified by the SBUs, in concert with regional and local managers. For example, Nestle instant noodle products were originally developed by the R&D group in response to the perceived needs of local operating companies through the Asian region. The company also has longer-term development projects that focus on developing new technological platforms, such as non-animal protein sources or agricultural biotechnology products.
A Growth Strategy for the 21 st Century
At Nestle, one response has been to look toward emerging markets in Eastern Europe, Asia and Latin America for growth possibilities. The logic is simple and obvious – a combination of economic and population growth, when coupled with the widespread adoption of market-oriented economic policies by the governments of many developing nations, makes for attractive business opportunities. Many of these countries are still relatively poor, but their economies are growing rapidly. For example, if current economic growth forecasts occur, by 2010, there will be 700 million people in China and India that have income levels approaching those of Spain in the mid-1990s. As income levels rise, it is increasingly likely that consumers in these nations will start to substitute branded food products for basic foodstuffs, creating a large market opportunity for companies such as Nestle.
In general, Nestle’s growth strategy had been to enter emerging markets early – before competitors – and build a substantial position by selling basic food items that appeal to the local population base, such as infant formula, condensed milk, noodles and tofu. By narrowing its initial market focus to just a handful of strategic brands, Nestle claims it can simplify life, reduce risk, and concentrate its marketing resources and managerial effort on a limited number of key niches. The goal is to build a commanding market position in each of these niches. By pursuing such a strategy, Nestle has taken as much as 85 percent of the market for instant coffee in Mexico, 66 percent of the market for powdered milk in the Philippines, and 70 percent of the markets for soups in Chile. As income levels rise, the company progressively moves out from these niches, introducing more upscale items, such as mineral water, chocolate, cookies, and prepared foodstuffs.
Executing the Strategy
Successful execution of the strategy for developing markets requires a degree of flexibility, an ability to adapt in often unforeseen ways to local conditions, and a long-term perspective that puts building a sustainable business before short-term profitability. In Nigeria, for example, a crumbling road system, aging trucks, and the danger of violence forced the company to re-think its traditional distribution methods. Instead of operating a central warehouse, as is its preference in most nations, the country. For safety reasons, trucks carrying Nestle goods are allowed to travel only during the day and frequently under-armed guard. Marketing also poses challenges in Nigeria. With little opportunity for typical Western-style advertising on television of billboards, the company hired local singers to go to towns and villages offering a mix of entertainment and product demonstrations.
China provides another interesting example of local adaptation and long-term focus. After 13 years of talks, Nestle was formally invited into China in 1987, by the Government of Heilongjiang province. Nestle opened a plant to produce powdered milk and infant formula there in 1990, but quickly realized that the local rail and road infrastructure was inadequate and inhibited the collection of milk and delivery of finished products. Rather than make do with the local infrastructure, Nestle embarked on an ambitious plan to establish its own distribution network, known as milk roads, between 27 villages in the region and factory collection points, called chilling centres. Farmers brought their milk – often on bicycles or carts – to the centres where it was weighed and analysed. Unlike the government, Nestle paid the farmers promptly. Suddenly the farmers had an incentive to produce milk and many bought a second cow, increasing the cow population in the district by 3,000 to 9,000 in 18 months. Area managers then organized a delivery system that used dedicated vans to deliver the milk to Nestle’s factory.
Nestle is pursuing a similar long-term bet in the Middle East, an area in which most multinational food companies have little presence. Collectively, the Middle East accounts for only about 2 percent of Nestle’s worldwide sales and the individual markets are very small. However, Nestle’s long-term strategy is based on the assumption that regional conflicts will subside and intra-regional trade will expand as trade barriers between countries in the region come down. Once that happens, Nestle’s factories in the Middle East should be able to sell throughout the region, thereby realizing scale economies. In anticipation of this development, Nestle has established a network of factories in five countries, in the hope that each will, someday, supply the entire region with different products. The company, currently makes ice-cream in Dubai, soups and cereals in Saudi Arabia, yogurt and bouillon in Egypt, chocolate in Turkey, and ketchup and instant noodles in Syria. For the present, Nestle can survive in these markets by using local materials and focusing on local demand. The Syrian factory, for example, relies on products that use tomatoes, a major local agricultural product. Syria also produces wheat, which is the main ingredient in instant noodles. Even if trade barriers don’t come down soon, Nestle has indicated it will remain committed to the region. By using local inputs and focussing on local consumer needs, it has earned a good rate of return in the region, even though the individual markets are small.
Despite its successes in places such as China and parts of the Middle East, not all of Nestle’s moves have worked out so well. Like several other Western companies, Nestle has had its problems in Japan, where a failure to adapt its coffee brand to local conditions meant the loss of a significant market opportunity to another Western company, Coca Cola. For years, Nestle’s instant coffee brand was the dominant coffee product in Japan. In the 1960s, cold canned coffee (which can be purchased from soda vending machines) started to gain a following in Japan. Nestle dismissed the product as just a coffee-flavoured drink rather than the real thing and declined to enter the market. Nestle’s local partner at the time, Kirin Beer, was so incensed at Nestle’s refusal to enter the canned coffee market that it broke off its relationship with the company. In contrast, Coca Cola entered the market with Georgia, a product developed specifically for this segment of the Japanese market. By leveraging its existing distribution channel, Coca Cola captured a 40 percent share of the $4 billion a year, market for canned coffee in Japan. Nestle, which failed to enter the market until the 1980s, has only a 4 percent share.
Discussions:
- Does it make sense for Nestle to focus its growth efforts on emerging markets? Why?
- What is the company’s strategy with regard to business development in emerging markets? Does this strategy make sense? From an organizational perspective, what is required for this strategy to work effectively?
- Through your own research on NESTLE, identify appropriate performance indicators. Once you have gathered relevant data on these, undertake a performance analysis of the company over the last five years. What does the analysis tell you about the success or otherwise of the strategy adopted by the company?
- How would you describe Nestle’s strategic posture at the corporate level; is it pursuing a global strategy, a multidomestic strategy an international strategy or a transnational strategy?
- Does this overall strategic posture make sense given the markets and countries that Nestle participates in? Why?
- Is Nestle’s management structure and philosophy aligned with its overall strategic posture?
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Nestlé India scales up the Nestlé Case Study Competition
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As part of the continuous engagement with young aspiring talents, Nestlé India conducted a national level Case Study Competition, to bring together and encourage young minds across leading business schools to put their talent into action. Nestlé has across the years consistently interacted and interfaced with the talent on campus and this year with a wide range of activities like guest lectures by Senior Leaders, live product interactions and Nescafé labs experience, enhanced its reach to the Millennials. On the same lines, this decade old initiative of the case study competition, assumed a larger platform. This was the first time all management competitions were being held at the national level. The winners will go through pre placement interviews and will get an opportunity to be able to join Nestlé India as Management Trainees under the campus hiring program.
Nearly 700 students across 16 Business Schools have competed in three case competitions cutting across the streams of Supply Chain (Nestlé Plan – O – Chain), Marketing (Nestlé 4Ps Challenger) and Human Resources (Nestlé Ingenium). The national winners and runner-up were chosen from among more than 200 innovative and thrilling entries. While the team from National Institute of Industrial Engineering (NITIE), Mumbai was declared the winner for Nestlé Plan – O – Chain, SP Jain Institute of Management and Research won the Nestlé 4Ps Challenger. The finale for Nestlé Ingenium is scheduled to be held in the first week of December.
The national qualifying teams were given an opportunity to present their ideas and solutions to the Top Management at Nestlé. In addition, the winners from campus and national rounds were awarded exciting prizes and vouchers to recognize the innovative solutions and creative ideas. Leading Business Schools like IIM (Ahmedabad, Bangalore, Lucknow, Indore, Kozhikode), NITIE, IIT – SJMSOM, SPJIMR, FMS, XLRI, TISS, SIBM, SCMHRD and MDI participated in the competition this year.
Mr. Amit Narain, Vice President Human Resources, Nestlé India said, “The Nestlé Case Study Competition is aimed at presenting challenging business scenarios to the young talent and engage them in a stimulating exercise to apply their knowledge and creativity to live business problems. This also gives them a flavour of brand management as practiced at Nestlé and a sneak peek into our ways of working. It is always exciting to interact with young talented minds and get fresh perspectives. This year to step up the performance bar and increase visibility to Top Management, we increased the scale of the competition to the National level.”
Nestlé India Limited, Head Office: Nestlé House, Jacaranda Marg, M Block, DLF City Phase – II, Gurgaon 122 002 (Haryana) Phone: +91-124-3321275, Fax: +91-124-2389381 Registered Office: M-5A, Connaught Circus, New Delhi – 110 001 Corporate Identity Number: L15202DL1959PLC003786 Email ID: [email protected] ; [email protected] , Website: www.nestle.in
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This year to step up the performance bar and increase visibility to Top Management, we increased the scale of the competition to the National level.". Nestlé India Limited, Head Office: Nestlé House, Jacaranda Marg, M Block, DLF City Phase - II, Gurgaon 122 002 (Haryana) Phone: +91-124-3321275, Fax: +91-124-2389381.
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