MAGGI – NESTLE’S PROBLEM CHILD?

1. Discuss the marketing strategies adopted by Nestle initially to popularize Maggi

noodles. Critically comment on the way the company handled the stagnation in the

sales in the early 1990s.

Some of the strategies adopted by Nestle were :

Nestle immensely concentrated on promotional and advertising strategies to create strong

brand awareness and to occupy a firm position in the minds of the consumers.

The company provided its consumers with more variants of line extensions through

innovation and research.

Nestle cashed on the buyer roles by attracting mothers who acted as’ buyer’ based on

convenience plank, and children who acted as ‘influencers and users’ based on the fun

plank,

Nestle followed push strategy to market its products through sales promotional activities

which later turned out to be a necessary evil

They concentrated clearly on target segments which mainly included kids and hence

adopted means to influence them through tag lines which kept on changing and

influencing new users to adopt the product.

Nestle maggi cut down on costs innovatively by reducing the thickness of packaging and

hence reduced its price, it also introduced different pack sizes according to consumption

patterns which boost up sales.

During the early 1990’s since sales was stagnating and hence Maggi Noodles was forced

to work out innovative approaches i.e. they launched a sweeter version of maggi, the

blunder what nestle committed was lack of market information, they had no clue about

the consumer preferences and behavior.

Since Indian consumers love spicy food the original version of maggi noodle was

successful but with the sweeter version the expectations turned turtle. The initiative to cut

down prices and cost, and providing different pack sizes did help the company to boost

up sales by more than 75%.

During 1997 the operational costs increased forcing Maggi to reformulate. The motive

was to infuse fresh life into the brand and work out a cost effective method, by altering

the process and using new technology.

1. As a brand manager, critically analyse the launch of ‘new’ Maggi followed by the

relaunch of ‘old’ Maggi? Was Nestle’s decision to withdraw the new version an

appropriate response to the situation? Support your answer with reasons.

During 1997 the operational costs increased forcing Maggi to reformulate. The motive

was to infuse fresh life into the brand and work out a cost effective method, by altering

the process and using new technology.

The new formulation of maggi noodles was a drastic failure, since it had a significant

difference in the taste, taste was the most prominent attribute which was responsible for

the success of the Maggi noodle. The change in the formulation had a negative influence

on the product. The process of manufacturing was altered both of the Noodle and the

tastemaker.

The consumers had a certain image and positioning in their minds, the reformulation of

the product had an adverse influence and was not in accordance with their expectations,

this triggered out costumer complaints followed by decreasing sales figures.

Yes, Nestle’s decision to relaunch was absolutely appropriate, if Nestle had not initiated

this action:

Competitors would have eaten out market share

Maggi noodles would not have had its loyalists anymore due to brand switching and

decreased consumption.

Regaining loyal consumer once again from scratch would have been a huge task for

Nestle

Lot of costs involved would have gone in vain.

They were market leaders in this segment which prevented a lot of new entrants.

2. Evaluate Nestle’s attempts at brand and line extensions under the Maggie brand

and analyse the reasons for their failures. In light of your evaluation, discuss the

pros and cons of using an umbrella brand and making brand/line extensions.

Nestle once established its name in the Maggi brand it spotted opportunities for further potential

and decided to bring in brand extensions under the Maggi umbrella

In 1988, Maggi soups were launched. Since there was no organized packaged soup market in

India at this stage. Nestle had planned to create a market for packaged soups. But Nestle never

took soups as seriously as noodles and hence did not pay much attention to the product, this led

to the failure of the soups. Not much investment was made for promotions, and product variants

were limited to 4 flavours when compared to competitions 11 flavourings.

In 1993, the first variant of Maggi noodles ‘Sweet Maggi’ was launched. This was advertised on

a large scale which included about 75% of the advertising budget for the year. But this product

again failed as it was brought into the market without any research.

in 1995, Nestle had tie-ups with 2 houses to produce and market pickles under the Maggi brand,

the other house aimed at sambhar, dosa and vada batter and spices in consumer packs. Later

these businesses also became non profitable due to non-expertise in traditional food Indian

product

In 1996 , Maggi Tonite’s Special, a range of cooking sauces aimed at providing ‘restaurant-

like- taste’ to food cooked at home failed in the market.

In 1997, Nestle realised that its target segment had grown and moved onto a different level of

cluster who were teens, to tap on this potential it launched Maggi Macaroni. Nestle was aware

that Macaroni would cannibalise the share of noodles, the taste differed from that of noodles for

the simple reason it was thicker than noodle and consumed more time though taste differed too.

Higher pricing without differentiation was a major factor that took down its equity. It was

launched to compete with the noodle brand Top Ramen.

Finally came in the reformulation which was triggered due to high operational costs and failed to

capture the target audience because of the change in its taste and technology.

Pros and cons of using an umbrella brand.

Pros

Individual brands enjoy more value with less efforts

The total cost for promotional activities is cheaper per unit as it gets distributed,

Advertising, promotion can be combined for all the different products and services.

Since the brand name already enjoys a huge equity lauching of new products under the same

umbrella becomes easier, as consumers already have the trust and loyalty toward the brand.

Cons

If any one product does not do well in the market then it can affect the overall brand.

Different brands will have different qualities which will vary and this can be an obstacle for

smooth functioning of brand as well as the firm.

If there is any negative publicity for any product it can affect the other brands under umbrella

branding.

Brand extensions may lead to less awareness.