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Maggi Under Pressure

In late 1997, global FMCG major Nestlé SA's Indian subsidiary Nestlé India (Nestlé) launched a 'new, improved,' formulation of its noodles brand, Maggi (a snack food cooked in water along with a flavoring agent called the 'tastemaker.') This change was the first since the brand's launch in India in the 1980s.

The new formulation had thinner noodles and a different flavor. The company reportedly wanted to infuse fresh life into the brand to deal with stagnating sales. Nestlé was in for a major shock. Maggi lovers all over the country rejected the new formulation. Sales started declining alarmingly and even maintaining the previous year's sales level of 13,000 tonnes seemed very difficult. Around the same time, Maggi Macaroni, launched in mid-1997 with a Rs 10 million1 ad spend, was also faring badly. Against

To add to the company's woes, Maggi lost its leadership status in the soup segment to a new entrant, Knorr, in the same year. Knorr cornered a 55% market share of the 425 tonne soup market -around 75% of which came by eating into the customer base of Maggi soups. Competition had intensified in the ketchup segment as well. Background Note

Established in 1866, the Switzerland based Nestlé S A was a wholly owned subsidiary of Nestlé Holdings Ltd., Nassau, and Bahama Islands. The Group produced, among other things, beverages, milk products, processed foods, cooking aids, bakery products, chocolates, confectioneries, and pharmaceutical products. Nestlé Holdings had a presence in 83 countries worldwide with 509 factories spread across Europe, America, Africa, Asia, and Oceania. Nestlé S A was the world leader in many product categories like coffee, mineral water, snack foods, beverages, and chocolates.

In 2001, the company earned revenues of $ 50.2 billion and a net profit of $ 3.9 billion, and was ranked 55 in the 2002 Fortune 500 list.

With a workforce of around 229,765 people, Nestlé had established itself as one of the...