Latest SC ruling won't hit Maggi's brand value significantly, say experts

'Supreme Court's comments have caused confusion among consumers but are unlikely to carry sufficient weight going forward'

e4m by exchange4media Staff
Updated: Jan 7, 2019 9:02 AM
maggi

The latest Supreme Court order against Maggi won't create much of a dent in the brand's image, several industry experts have said, thanks to its parent company Nestle promptly going into damage-control mode and launching a print ad campaign.

The ad, printed on January 5 and 7, is in response to the Supreme Court’s decision to revive the class-action suit against the company in the National Consumer Disputes Redressal Commission (NCDRC). 

A statement released by Nestle India said: “Our approach as a credible, trustworthy and responsible company is to always communicate with consumers on facts, in a simple, clear and transparent tone and manner. What you will see in the print ads to be released over the next few days is just that.” It reiterated its campaign from 2015 when the company was in a similar situation. 

The ad highlighting the safety of Maggi, boldly reassures consumers. It says, “Your Maggi is Safe, Has Always Been.” It also mentions that “safety has been confirmed and reaffirmed many times through rigorous testing laboratories accredited by NABL (National Accreditation Board for Testing and Calibration Laboratories)”. 

Based on the results of tests of Maggi noodle samples conducted by the Central Food Technological Research Institute (CFTRI) in Mysuru, the NCDRC can now continue proceedings against Nestle India. In December 2015, the top court had stayed NCDRC proceedings against Nestle India and directed testing of the noodles by CFTRI. In April next year, Nestle cleared all tests and Maggi was declared safe for consumption. 

The government had approached the consumer court, alleging unfair trade practices, false labelling and misleading advertisements by Nestle, and sought a compensation of Rs 640 crore under provisions of the Consumer Protection Act, 1986. 

The apex court’s ruling on January 3 means Nestle may have to review its packaging and change the way it advertises the noodles brand.
Nestlé India had earlier issued a statement welcoming the orders passed by the Supreme Court in the Maggi Noodles issue. It had challenged two interim orders of NCDRC before the Supreme Court in 2015.  As per the latter’s direction, samples were sent to Central Food Technological Research Institute (CFTRI) and the analysis results in 2016 showed the samples were compliant for lead and other relevant parameters. 

What do brand experts say

Brand experts are confident that the new development is unlikely to affect ‘Brand Maggi’ unlike last time. Harish Bijoor, brand expert and CEO of Harish Bijoor Consults, says, “This is a re-opening of the case, which signifies a Govt. Of India versus Brand Maggi issue. It is about re-opening a set of issues that were settled by the CFTRI clean chit. I do believe this will be an issue that will remain B2B and not become a B2C issue with Brand Maggi pitted against consumers of India.” 

Saurabh Uboweja, International Brand Expert and CEO Brands of Desire, puts it simply, “The court has simply reiterated the fact that there is lead as per the CFTRI tests which has been duly agreed to by the Nestle lawyers. However, the comments have been blown out of proportion as this acknowledgement doesn't imply that the lead content is beyond the permissible limits, which it is not and has already been proven before. The comments have caused significant confusion among consumers but are unlikely to carry sufficient weight going forward.” 

Uboweja is quite impressed with Nestle’s tactics of coming out with a counter statement, ‘learning from its past mistakes’. He says, “The counter statement that actually claims a partial victory in this case as the Supreme Court has accepted Maggi's stance that the analysis done by CFTRI is sufficient to help decide the lawsuit filed by the Ministry of Consumer Affairs. As per the CFTRI analysis, the lead was in permissible limits.” 

How the Maggi crisis began

The instant noodles, which accounted for about 30 per cent of Nestle India’s revenue in 2014, was pulled out of the markets on 5th June after the country’s food regulator, Food Safety and Standards Authority of India (FSSAI), ordered the company to withdraw all nine variants of Maggi, calling them unsafe and hazardous for human consumption. The food regulator cited excess lead content and traces of monosodium glutamate, a flavour enhancer, as reasons for the order. 

From a 78 per cent market share in the Rs 38 billion branded noodles market, the Maggi crisis allowed aggressive players like Patanjali to enter the space with cheaper products in late 2015. 

The crisis led Nestle India to take a hit of more than Rs 500 crore as it recalled and destroyed more than 35,000 tonnes of noodles from 3.5 million retail outlets in June 2015. 

How Maggi overcame the hurdle 

The blow to the brand’s trust was worse than what its market share suffered. Suresh Narayanan, now Chairman and Managing Director of Nestle’s India business, took charge in August 2015. Since then, the company has shed its nature of being a ‘closed company’ when it came to revealing its business activities beyond regulatory filings. 

It also started taking confidence-building measures, including regularly calling for press conferences, posting recent developments on its website and building customer relationships through customer service helpline and its social media accounts. It also approached the Bombay High Court for relief, following which the court permitted export of Maggi to other countries. 

In November 2015, Maggi was re-launched at retail outlets with high decibel dedicated campaigns across print, television, YouTube and social media platforms. But television got the lion’s share. The campaign, consisting of three TVCs #LetYourMomKnow, reassured mothers about the safety of Maggi noodles. According to an industry source, the campaign was created by McCann India under the leadership of Prasoon Joshi. To further the cause of improving food safety standards in the country, in September 2017 Nestle partnered with FSSAI to open the first food safety institute in Manesar. 

Since then it has launched over a dozen products under the brand that have helped it regain much lost ground, and in 2017 contributed over Rs 26 billion to its topline with over 60 per cent value share (at present) of the instant noodles market.

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