Marketing and Consumer Behavior: Nestle's Strategies Post Lead Crisis

This report examines consumer behavior in relation to Nestle's lead-noodle crisis in India. It begins with an overview of the Indian food and beverage industry and Nestle's product offerings, followed by a detailed account of the lead-noodle issue and its impact on Nestle's brand image. A literature review explores factors influencing consumer choices for Nestle's noodles and strategies for improvement. Netnography research using three sources validates findings from the literature review. The report concludes by recommending corporate social responsibility activities and advertisements to enhance Nestle's prospects in India post-crisis, emphasizing the importance of rebuilding trust and brand image.

Running head: MARKETING CONSUMER BEHAVIOR
Marketing Consumer Behavior
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Executive Summary
The report intends to shed light on the notion of consumer behavior and its various related
aspects in the particular light of the lead- noodle issue that the organization Nestle faced in
the Indian nation. The report begins by providing an overview of the Indian food and
beverage industry to which the organization Nestle is related. The report next provides a brief
overview of the organization Nestle and the various products that it offers to the customers.
The report also sheds light on the lead noodle issue that the organization faced in India in
2015 and also the manner in which this affected the brand image and the prospects of the
organization. The report next undertakes a literature review to understand the factors which
motivated the customers to opt for the noodles offered by Nestle and also the manner in
which the fortunes of the organization can be improved. The report through the help of
netnography research analyses three different sources to test the validity of the results that
have been derived from the literature review. The report finally concludes by recommending
the effective use of corporate social responsibility activities and advertisements for the
enhancement of the prospects of the concerned organization in India post the lead issue.

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Table of Contents
Introduction................................................................................................................................3
Food and Beverage Industry in India.........................................................................................3
Nestle India................................................................................................................................5
Issue faced by Nestle Maggie Noodle in India..........................................................................6
Research Question......................................................................................................................7
Research Objectives...................................................................................................................7
Literature Review.......................................................................................................................7
Methodology............................................................................................................................10
Findings and Discussion..........................................................................................................11
Conclusion and Recommendations..........................................................................................15
References................................................................................................................................16
Appendix 1...............................................................................................................................18

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Introduction
As opined by Bailey and Burch (2017), consumers or the end users of the services or
products offered by the organizations form an integral part of the entire business process of
the organizations and it is on them that the business prospects of a business enterprise
depends to greatly. The organizations are thus required to take into effective consideration the
needs or the demands of the customers and integrate them in an effective within the domain
of the products or services offered by them (Kumar et al. 2016). However, in the recent times
it is seen that the buying behavior of the customers have changed greatly and this behavior of
the customers depends significantly on the brand image of the organizations. Han et al.
(2016) are of the viewpoint that this change in the behavior of the customers has made it
imperative for the organizations to take into effective consideration the entity of brand or
market image. The net result of this is the fact that even one small incident can substantial
affect the business prospects of a business enterprises as becomes evident from the case of
Nestle’s Maggie in India which lost 80% of its market share because of an allegation. This
report will discuss the notion of consumer behavior in the particular light of the issue that
Nestle’s Maggie faced in India.
Food and Beverage Industry in India
Thomason (2018) is of the viewpoint that the food and beverage industry in the nation
of India within a very short span of time has become one of the major spokes in the economic
wheel of the nation and contribute more than $400 billion towards the national economy.
More importantly, out of this $400 billion, more than $130 billion is being contributed by
food processing sector itself (Dhanesh and Sriramesh 2018). Two of the major industries
operational in India in this regard are Nestle and Unilever. The below given graph indicates
the growth rate of this industry of the nation from 2015 onwards-

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Figure 1: Growth rate of the Indian food and beverage industry from 2015 to 2015
Source: Ibef.org 2018
The growth rate of the Indian food and beverage industry which is currently 11.4% is
one of the highest ones of the world (Dhanesh and Sriramesh 2018). More importantly, with
the food industry of the concerned nation noodles are one of the most preferred choices of the
people and this is perhaps one of the main reasons for the unprecedented success attained by
the organization Nestle, whose main product is the Maggie noodle, in India (Desai 2016).
Figure 2: Brand share of top noodle providing organizations in India

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Source: Mishra 2017
Nestle India
Nestle, founded by Henri Nestlé in 1866 is a Swiss organization which is related to
the food and beverage industry (Nestle.com 2018). The organization is known for the wide
range of products it offers to the customers like Maggie, Kit Kat, Nescafe, Smarties and
others (Nestle.com 2018). More important, the organization is currently the largest food
manufacturing organization of the world with annual revenue of more than CHF89.791
billion (Nestle.com 2018). In addition to this, the organization is currently operational in
more than 189 different nations of the world and recruits roughly around 339,000 from the
different parts of the world (Nestle.com 2018). The organization takes the help of the slogan
of “Good Food, Good Life” for the effective promotion as well as marketing of the food
products offered by the organization to the customers (Nestle.com 2018).
The organization entered into the business market of India in the year 1912 and until
the year 1947 was operational under the brand name of “The Nestle Anglo-Swiss Condensed
Milk Company (Export) Limited” (Nestle.com 2018). The organization initially focused on
the dairy sector of the nation and thus the major factories of the organization were established
in Punjab, Gujarat and others similar states (Nestle.com 2018). The organization under
discussion here in the year 1984 launched the product Maggie Noodles which was to become
the primary food product offered by the organization in a very short time (Nestle.com 2018).
It was for the effective promotion as well as the marketing of this product that the
organization used the “2 minutes” advertisement campaign (Nestle.com 2018). The below
given figure indicates the growth of the sale of this product offered by the organization-

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Figure 3: Growth rate of the sale of Maggie Noodles in India
Source: Mishra 2017
Issue faced by Nestle Maggie Noodle in India
Pandey and Puntambekar (2016) are of the viewpoint that the prospects of an
organization depends to a great extent on the effectiveness as well as efficiency of an
organization depends to a great extent on the manner in which they are being able to resolve
the various business issues or problems that they face during the course of their business
operations. In this regard, it needs to be said that the lead related that the organization Nestle
faced in India regarding its product Maggie Noodles cost the organization more than half
billion dollars in addition to the loss in brand image and reputation. It is pertinent to note that
the organization and its product Maggie has enjoyed a monopoly in the noodles business
market of India for more than 30 years however this monopoly was shattered to a significant
extent by the incident (Mishra 2017). A food-safety commissioner of Uttar Pradesh in 2015
found that the noodles that the organization offered to the customers contained high level of
lead which if consumed can cause serious damage to the health of the people (Taneja 2017).
This rumor soon became viral all the nation and although the organization came up with the
results of its own tests which showed that the percentage of lead that the noodles offered by
the organization was within the permissible level yet that was of no aid (Maurya 2017). Laws
suits were filed against the organization and it had to pay more than $1.6 billion for the

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settlement of different kinds of disputes (Nichols 2017). More importantly, the organization
ended up losing a substantial part of customer base and also its brand image in the nation.
Research Question
 What measures can the organization Nestle adopt to retain its customers post the lead-
noodle issues in India?
Research Objectives
 To find the major motivations of the customers for the purchase of the Nestle Maggie
Noodles
 To analyze the manner in which the lead-noodle issues in India has affected the
customer base of the organization
 To recommend measures through the use of which the organization can enhance its
current customer base
Literature Review
Kumar et al. (2016) are of the viewpoint that the increasing number of organizations
which are offering almost the same kind of products to the customers has increased the
competition within the business world in a substantial manner. More importantly, this has
increased the number of choices that are now available to the customers in the present times.
For example, within the particular Indian noodles market it can be said that earlier the only
option that was available to the customers was Maggie Noodles. However, in the recent times
it is seen that there are various options to the customers like Top Ramen, Wai Wai and others
(Mishra 2017). The net result of this is the fact that the customers often tend to choose the
products that are not only better in terms of quality but at the same time in terms of cost as
well. Furthermore, the brand image and the reviews given by the customers also play a

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significant role in this process. This becomes apparent when the loss in good will that the
organization faced post the lead-noodle issue is taken into consideration. For example, the
organization Nestle from being the market leader (holding more than 63% of the market
share) hit rock-bottom after the incident and the national government even banned the sale of
the Maggie noodles (Sinha, Sinha and Gupta 2015).
Figure 4: Decline in the market share of Maggie Noodles
Source: Fortune.com 2018
The customers at that particular point of point thus resorted to the use of other kinds
of noodles that were available to them. However, after 18 months of the issues the business of
the concerned organization has once again started to flourish and it is expected that within the
next few years the organization is likely to regain its monopoly back. This change in the
customer behavior can be explained on the basis of the benefits that the noodle under
discussion here offered to the customers. The major factors which motivated the customers to
opt for the Maggie Noodles offered by the organization under discussion here are the cost
effectiveness of the product, the taste as well as quality of the product, the ease with which
the customers can cook the noodle and other aspects (Taneja 2017). Bailey and Burch (2017)
have stated that one of the major factors which affect the decision of the customers to opt for
a particular product is the ease with which they can use the concerned product. In this regard,

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it can be said that the noodles offered by the concerned organization requires only a couple of
minutes to cook the noodles and at the same time it is very easy to consume. This is one of
the major reasons for the extreme popularity that the noodles holds among the travelers and
also among the people related to the working class.
As opined by Sinha, Sinha and Gupta (2015), the decision of a customer whether to
opt for a particular product or not depend on a plethora of factors like the cost, quality, brand
image of the organization which is offering the product and others. More importantly, the
precepts of Martin Fishbein and Icek Ajzen’s “Theory of Reasoned Action” are important to
note in this regard. As per this theory of customer buying behavior, the customers can be seen
as the rational actors who opt for the kind of services which are likely to provide the
maximum amount of benefit (Sinha, Sinha and Gupta 2015). In this regard, it needs to be said
that the motivation of the customers to buy a particular product or service is an important
factor which guides their buying behavior. In the particular context of the organization under
discussion here it can be said that the organization offers noodles which are not only easy to
cook but consume as well. Furthermore, the taste or quality of noodles, which are being
offered by the organization are way better than the ones offered by the other organizations
operational in the same sector. However, the issue that the organization faced in India in 2015
had adversely affected its brand image. This is perhaps one of the major reasons for the
drastic drop in the market share held by the concerned organization in India post the lead-
noodle issue. Pandey and Puntambekar (2016) are of the viewpoint that in the contemporary
times it is seen that the different business enterprises are utilizing the construct of corporate
social responsibility not only for the enhancement of their brand image and also for the
attainment of sustainability as well. These two notions are important since they are not only
related to the sale of the products or the services that are being offered by the organization to

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the customers but also help in the enhancement of the profit earned by the organization as
well.
Methodology
The researcher for the purpose of this research work has used the method of
netnography, which is a new qualitative research methodology. This method which analysis
the information provided by the online users over the online media channels to understand the
nature of the factors that influence them and also the decision making process used by them
(Bailey and Burch 2017). Furthermore, the use of this method offers various kinds of benefits
to the researchers. Firstly, compared to the other research methods which are being used by
the researchers this is a far less obstructive method (Bailey and Burch 2017). In addition to
this, it offers a far better tool or framework to the researchers through which they can analyze
the comments or the opinions of the users which they have offered over the various online
platforms. The primary reason why the researcher has opted for the method of netnography is
the fact that this method allows the opportunity to the researchers to analyze the present
context of the topic which has been selected by the researcher in the light of the present
discussion that is being carried out in the media and related sources. For example, the use of
this method will enable the researcher to understand the opinion of the people regarding the
leas-issue that the organisation Nestle Maggie faced in India and also the manner in which
they reacted to this allegation. The researcher has thus collected information from seven
credible sources which are likely to shed insightful information on the issue under discussion
here and also the opinion of the customers regarding the incident-
1. https://www.nestle.in/media/statements/maggi-india-noodles-lead-recall-ban
2. https://www.downtoearth.org.in/news/health/maggi-gate-why-india-must-face-up-to-
a-bigger-problem-than-instant-noodles-50279

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3. https://www.independent.co.uk/news/business/news/maggi-noodles-go-back-on-sale-
in-india-after-lead-recall-a6726961.html
4. https://blogs.wsj.com/indiarealtime/2015/06/02/nestle-tells-indias-maggi-lovers-lead-
levels-in-our-noodles-are-safe/
5. https://www.mouthshut.com/product-reviews/Maggi-Noodles-reviews-925042346
6. http://www.socialsoup.com/review/MaggiNoodles/?title=Maggi+Noodles
7. https://www.consumercomplaints.in/maggi-b100477
The researcher for the analysis of the above information related to the issue under
discussion and also to find relevant answers to the research objectives and research question
has taken the help of the method of thematic analysis and netnography. The use of this
method will require the researcher to analyze the theme of each of these sources of
information or reviews given by the customers in the particular context of the issue under
discussion and then relate these findings with the case or issue under discussion here.
Findings and Discussion
Source 1: https://www.nestle.in/media/statements/maggi-india-noodles-lead-recall-ban
This was the official justification offered by the organisation Nestle for the issue
which under discussion here that overnight changed the prospects of the organisation in the
nation of India. The organisation after the allegations made by the food investigation officer
had conducted its test related to the issue and found that the percentage of lead in the noodles
that it offered to the customers of India was 2.5% which was the permissible level in India
(Nestle.com 2018). The representatives of the organisation thus state that the allegations
made by the food investigation officer are completely baseless and should not be taken
seriously. The source at the same time reveals the manner in which the decisions as well as
the perceptions of the customers change drastically overnight because of misrepresentation of