Wednesday, June 17, 2015

After the ban, what can help Maggi regain its brand value

Regaining customer confidence isn’t easy once consumers have a negative perception of a brand. Crisis management requires more than a hurriedly called press conference.

In today’s world of citizen journalism, news goes viral in a flash. And if it is bad news, it acquires a spin and speed that is virtually impossible to stop. Brands, therefore, are more susceptible to a tarnished image today, than in any other day and age. The cocktail of the online and offline world, consumer and shareholder activism, random decisions by government bodies, volatile social groups, and hatchet jobs by competing firms make it all too easy to fall from grace. And the loss of goodwill can play out in the form of decreased revenue, loss of clients or suppliers and loss of market share.
The latest brand to find itself in this quagmire is Maggi, the instant noodles brand from food and beverage company Nestle. One of India’s most trusted brands and perhaps the country’s most favoured comfort food, it has taken a huge knock in terms of brand value and sales ever since the recent controversy broke over allegations that it had lead and monosodium glutamate (MSG) in excess of permissible limits and was, therefore, unsafe to consume. The controversy arose after the Uttar Pradesh Food Safety and Drug Administration ordered the recall of a batch of 200,000 Maggi noodle packs. With more and more states deciding to randomly test samples and banning sales in the interim, coupled with retail chains removing it from their shelves, the company has had no other choice but to retract the product.
Maggi was ranked number 18 in the BrandZ Top 50 Most Valuable Indian Brands study, conducted by Millward Brown and commissioned by WPP last year, with a valuation of $1,127 million. It is expected to have eroded in brand value by at least 30-40%, say brand specialists. Sales have dropped by at least 60-70%, say retail analysts.
Ramanujam Sridhar, founder at consultancy Brandcomm says that he is astounded by the rapid snowballing of the situation. “A recall of some batches of noodles from Uttar Pradesh has assumed nationwide form, leading to complete brand erosion for Maggi, in a matter of days. Nestle India took over 30 years to build this brand in the country,” says Sridhar.
Brands in trouble
Maggi isn’t the first brand to find itself in the dock. Many a brand in India and elsewhere have seen their reputations sullied after one single incident, sometimes for no fault of theirs. Fast food chain McDonald’s has been battling its “unhealthy” image and has seen its share of obesity lawsuits in the US, on account of its unhealthy food. It has seen a 2.3% decrease in global sales in the first quarter of 2015. Sales fell dramatically in Asia (8.3% decrease) after reports of expired meat in China and other quality related problems in Japan. Closer home, a Kalyan Jewellers ad earlier this year invited the fury of activists, who labelled it “racist” and “promoting child labour”. The ad projected Bollywood actor Aishwarya RaiBachchan as royalty, with a dark skinned child holding a red parasol over her head. The jewellery brand had to then clarify that the advertisement was intended to portray “royalty, timeless beauty and elegance”. It expressed regret for any inadvertent hurt caused. This situation is not unlike the Ford Figo ads controversy which displayed images of bondage and brutality, forcing Ford’s global management to issue an apology.
While cola brands Pepsi and Coca-Cola were being investigated for pesticides in their drinks, chocolate brand Cadbury had to face flak because of a worm infestation controversy.
Ambi Parameswaran, chief executive and executive director, FCB Ulka said that all national and global brands have well-laid down guidelines to adhere to. But sometimes they do get caught in a sudden change of laws, consumer activism, or even plain mischief. “The most famous brand crisis and best response is the J&J Tylenol tampering case in the US. No B School education is complete without discussing the Tylenol case and the way the company responded and recovered in six months to an even better place. In India, too, brands have faced such challenges in the past and have managed to recover, be it the brominated vegetable oil (BVO) issue, the pesticide issue or the worm infestation issue. The lessons from Tylenol are clear: do not point fingers, act quickly, put in new safeguards and be frank and open in your response. We should remember the fact that the Tylenol crisis happened before the advent of social media and its own brand of citizen journalism. But still, the lessons are the same.” In 1982, seven people in Chicago died after ingesting Tylenol capsules which had been laced with cyanide by a mentally challenged person. Johnson & Johnson recalled all of its products. The quick response by the company saved the day, and restored  trust. Tylenol was re-launched with a revolutionary tamper proof packaging seal.
Parmeswaran adds that while all the debate on packaged foods and quality standards rolls on, let’s not forget all the food items that are consumed on a daily basis, on the dusty roads of India. “Probably the packaged branded goods are still the safest,” he remarks.
In the wake of the Maggi controversy, all packaged food brands may just come under the radar now. Shailendra Singh, joint managing director of advertising conglomerate Percept, says that the Maggi case could invite attention for 200-plus brands in the packed foods category. “If the Food and Drug Administration (FDA) is serious about cleaning up the foods business, this is an opportunity for it to go after several other brands. Why single out Maggi, or rather, Nestle India alone? That said, this generation thrives on snack foods. Despite many damaging videos on Youtube on the ill effects of colas, they still sell,” he says. There could be more brands in trouble as the Food Safety and Standards Authority of India (FSSAI) plans to test protein powders and energy drinks from across the country for their quality and ingredients. The regulator has already written to many other companies raising concerns and queries on labelling and branding of some of their popular packaged food products.
Mayank Shah, group product manager at the country’s biggest biscuit maker Parle Products, said that the packaged foods business is seeing healthy growth, and the Maggi episode is unlikely to make a dent on sales of other companies. “The ready-to-eat segment is only set to grow and this is a minor blip. The government is very vigilant and is updating standards for packaged foods companies which are a welcome step. Companies must obviously comply with these standards.
There is a need for ongoing conversation with consumers on the safety and quality of products and complete transparency as far as production is concerned,” he asserted.
The ITC Group owns the Sunfeast Yippee brand of instant noodles. An ITC spokesperson said, “It is too early to gauge the impact on the industry as a whole. But ITC’s food products are manufactured in state of the art, world-class facilities. Strict quality and hygiene norms are followed in the manufacture of all products. Stringent checks are undertaken for these products at ITC’s internationally benchmarked Life Sciences & Technology Centre as well as at reputed external laboratories. In all these tests, our food products have consistently been found to be completely safe for consumption and in compliance with all regulations.”
At the same time, both ITC and HUL are voluntarily going in for additional tests on their respective instant noodles brands—Sunfeast Yippee and Knorr respectively—as a means to reassure customers about the quality of their products. HUL is also withdrawing its Chinese instant noodles range from the market. “The discontinuance of manufacturing and sale of Chinese instant noodles is not on account of any safety or quality concerns. The Chinese instant noodle range uses ingredients which are permitted under the FSS Regulation, 2011/Codex and safety of these ingredients is well established. Details of the same have been shared with FSSAI as part of the product approval application. HUL continues to engage with FSSAI to secure the approval of this range so as to make these products available at the earliest for its consumers,” said a HUL statement.
Denial versus acceptance
A statement from Nestle India said that the company will take the product off the shelves, and yet insisted that the quality standards had been met. Speaking at a press conference in New Delhi, Paul Bulcke, global chief executive, Nestle said, “The trust of our consumers and the safety and quality of our products is our foremost priority everywhere in the world. Unfortunately, recent developments and unfounded concerns about the product have led to an environment of confusion for the consumer, to such an extent that we have decided to withdraw the product off the shelves, despite the product being safe. We promise that the trusted Maggi Noodles will be back in the market as soon as the current situation is clarified.”
Regaining customer confidence isn’t easy once consumers have a negative perception of a brand. Crisis management requires more than a hurriedly called press conference. In 2004, Cadbury India, had roped in superstar Amitabh Bachchan announce new packaging for its flagship Cadbury Dairy Milk, following a tenacious worm infestation controversy. Abhijit Avasthi, former national creative director at Ogilvy & Mather who was involved with the campaign, said Cadbury was honest in its approach. “The brand first admitted that there was a problem with some of the packs. It then revamped its entire packaging. They signed up a credible star — Amitabh Bachchan — to communicate that there was a quality issue which it had addressed. It was done with a lot of sincerity and openness, and that greatly helped the brand reclaim its lost ground. One thing that Cadbury enjoyed, which Maggi also shares, is that it was absolutely loved by the people…they wanted to forgive it”. Avasthi said Bachchan had done his share of due diligence before he took up the task of re-assuring the public. “He visited the factory and was assured of the quality standards. Only then, did he agree to be a part of it,” he said.
Nabankur Gupta, founder of Nobby Brand Architects & Strategic Marketing Consultants says that Nestle India needs to get its product right before it goes into damage control. “It’s not enough to say that it’s the same formulation for Maggi globally. Nestle needs to re-formulate Maggi as per Indian standards and regulations, and replace them in stores. The cost could be considerable, but it is not an impossible task. Once you do that, you can build the brand up slowly by investing in corporate social responsibility activities, signing up a credible endorser, effective public relations etc.”
Other brand custodians advocate honestly and reassurance, in the face of sticky situations. HDFC Life senior executive vice president Sanjay Tripathy says in a scenario where there has been a lapse or error on the company’s part, then acknowledgment is the best way out. “During the time of a crisis of such a magnitude, it is imperative for a brand to communicate. Connecting with your stakeholders in order to share a message that helps ease them emotionally is the key to good reputation management. The lapse may or may not be intentional but humility at such a juncture is the least that the consumers expect. Acknowledging the lapse, taking corrective, timely and stringent actions and making a pledge to ensure that no such incidence would ever be repeated is the best way forward.”
Agrees Indranil Das Blah, chief operating officer at Kwan Entertainment and Marketing Solutions, who says, “The only response to an image crisis should be transparency and accountability. If you don’t have something to hide, then don’t. But if you do, come clean with it.”

Winning back the trust of consumers and investors is key to reviving the brand image. The business performance of the company originates from the consumer performance. Nestle certainly recognizes this, as evidenced by the emphasis on rebuilding trust and consumer confidence at Bulcke’s press meet. “With the consumer I mind, we will do everything it takes, are fully engaged with the authorities to clarify the situation,” Bulcke said, adding: “Our priority now is to engage all stakeholders to clear the confusion. Maggi will be back on store shelves soon.” But staging a comeback will be a formidable task.

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