2-minute troubles

(Company, product and employee names have been modified to maintain confidentiality)

Introduction
Mr Raul Truckle, the CEO of Pestl was very pensive as he stared out of the window of
his India HQ. He had been with the company for the past 15 years in various capacities
and never before had he faced a crisis of the magnitude of that which he was now
facing. After all, it wasn't everyday that the integrity of a 100+ year old company was
called into question. While in India integrity of the company was called into question due
to the presence of harmful chemicals in the product, in New Zealand there was general
public outrage at Pestl for having changed the taste of one of its much beloved
products. "The need of the hour is damage control" he mused to himself as he
thoughtfully twirled a spoon in his coffee. "We must salvage the reputation of the
company" he thought.

Iconic Pestl Brands

Pestl is a French multinational company started in the year 1905. Originally a
manufacturer of condensed milk and milk products, over the years and through the two
world wars, they had diversified their product offering to chocolates and eventually
instant noodles.
"Bit-Bat", their brand of chocolate coated wafers were renowned across the world for
their taste and quirky marketing. Bit-Bat had a unique blend of smooth cocoa and
crispy wafers which made it an ideal mid-day snack. Each finger-sized bite had the rich
chocolaty goodness (as the marketers claimed) of South American cocoa. The
company had augmented its basic product with several variants depending on local
consumption patterns and by all accounts, Bit-Bat was doing well globally.
Their chocolate milk-powder Silos was one of the most popular brands in its segment,
with some consumers even claiming to have weaned their children with it. The formula
for the same was a closely guarded secret. This product was especially popular in NewZealand and Australia.
Their instant noodles brand "Benny" was a household name with generations of students
swearing by it as the ideal any-time snack. This product had dominated Asian and
European markets for several decades and was exhibiting all signs of dominating
several more.

Pestl India Operations

Pestl in India recently celebrated a century of deep engagement in a country which
over that period had proven its potential to be one of Asias economic superpowers.
Their first sales agents in India began work in Chennai and Kolkata in 1912.Today, the
company directly employs 6,000 people in India and more than half a million indirectly.
Its products are sold in more than 3.5 million outlets across the country.

The Indian processed food market has always been enigmatic, largely because India
faces significant nutritional issues. The majority of Indian women and children suffer
from basic micronutrient deficiencies such as vitamin A, iron, iodine and zinc. At the
same time a large proportion of the population also suffers from non-communicable
diseases such as obesity and diabetes.
The challenge therefore was to win over a market with rigid traditional food habits and
yet maintain a delicate nutritional balance, which was achieved through an agile and
responsive manufacturing network coupled with sustained excellence in product
development and research into the nuances of the Indian market.
Pestl India has invested USD 500 million to increase its capacities over the last two
years. This includes USD 70 million in a new manufacturing site in Nanjangud to
produce Benny products. The construction of Pestls eighth factory in Tahliwal,
Himachal Pradesh, is progressing rapidly. Existing factory sites in Moga, Samalkha,
Ponda and Bicholim are also being expanded. Pestl S.A. is investing CHF 50 million in
a new research and development centre in Manesar, Haryana, which will become
operational towards the end of 2016.

Winning Over the Indian Consumer

In 1983, India won the Cricket World Cup; then, another seminal event took place.
Pestl debuted its latest creation, Benny 2 Minute Noodles to the country. And the rest,
as they say, is History. What the hot dog is to America, Benny is to India; for we belong
to the generation of ubiquitous lovers of this 2 minute wonder. So much so, that India
has now emerged as the largest consumer of Benny noodles
However, this was not an easy journey, as the brand faced its fair share of hurdles in the
beginning. For one, they had a myriad cultural variables working against them. The
concept of packaged/instant foods was not popular at the time and there was still no
(minutely close even) match to Moms haath ka khaana.
In essence, Pestl adopted a two pronged positioning strategy- based on Convenience
for mothers and of course fun & good taste for children. This enabled Benny to become
instantly relatable and helped it build a name for itself. And voila, the market for instant
noodles began to grow! Benny went on to reap their rewards, capturing 65% of the
market share in the instant noodles segment, almost double the size of its nearest
competitors.

Comfort Cooking or Chemical Concoction?

The love story between Benny and the Indian market however turned sour one Monday
in the month of May, 2015 when routine tests on samples returned with results indicating
that it had nearly 3x the permissible quantity of lead and MSG.
Following an uncharacteristically poor response from the company management, the
issue exploded with state governments across the country taking up the issue. Some
state governments even went so far as to ban sales of the product. The product was
pulled from shelves across the country as various NGOs joined the clamor of people
demanding an explanation from the company. All this happened even as the company

was vehemently denying the accusations and claiming that independent tests had
revealed the product to be perfectly safe.

More Trouble- The New Zealand Silos Crisis

Across the Indian Ocean, unrest was brewing in New-Zealand, where customers were in
uproar over Pestl having changed the flavor and composition of its much beloved
Silos. Recently, Pestl had removed the vanilla essence which was an essential
component of its Silos drink and replaced it with more mineral rich ingredients. This was
a conscious move by the company to move to produce a more healthy drink. They also
felt that this product was operationally more sustainable (in terms of materials used and
method of production). They had cautioned their customers prior to release that there
may be a mild difference in taste. Customers however disagreed. Customers claimed
that what was once a chocolaty treat, had now been reduced to a mildly synthetic tasting
chemical mess. The problem was further complicated by 2 more factors: Firstly, NewZealands neighbours and rivals Australia had no such product change, with Silos still
available there with its classic chocolaty taste. Secondly, Pestl had declared that it was
unwilling to change the taste of its product, despite customer complaints.

The Way Ahead

There was no question that the issue was escalating with every passing day. Across the
world, various countries were watching the proceedings in India and conducting
independent tests of their own. The campaign in New Zealand to bring back their old and
familiar product was gaining momentum. Amidst the chaos, the CEO now had to take a
stand to protect the reputation of their century old company.
In India, should he continue to confront accusations or issue an unconditional apology?
If so, should the company proceed to pull the product from its shelves? How should he
go about repairing the brand name of the company? Should he question the testing
procedure used? Were there vested interests which were trying to sabotage the brand?
What should his approach be in New Zealand? Should the product be withdrawn and
shelved? Should they continue to push the product? How do they address customer
complaints? Should the product be rolled out across the world?
How to address the damage to the reputation of Pestl as a whole? How might the
brand bounce back? Was there an integrated strategy which they could follow to solve
both their problems? Was there a radical and as-yet-unexplored 3rd option?
As he closed his eyes, Raul recollected the words of his mentor. The professor had
quoted Richard Brandon, when he had said "Your name is only as good as your
reputation". Raul decided that he would need to meditate deeply on these words to get
out of the soup he was in right now. He got out of his seat to present the matter to the
board over a Video Conference. He would have 2 minutes before the call was set up.
What course of action should he recommend?
Design an Integrated Ad campaign for Pestl for it to respond to this crisis, with special
focus on the nature of communication between Pestl and the various forms of mass
media. Recommend what stance Corporate HQ of Pestl should take. How can Pestl

leverage Technology (specifically mobile and app based channels of communication) to

deliver the intended message?

Appendix A- Understanding MSG Poisoning

Mono Sodium Glutamate (MSG) is one of the prevalent food additives on the market and
is used in canned soups, crackers, meats, salad dressings, frozen dinners and many
more processed foods. Chemically speaking, MSG is approximately 78 percent free
glutamic acid, 21 percent sodium, and up to 1 percent contaminants.
In 1959, the U.S. Food and Drug Administration labeled MSG as Generally Recognized
as Safe (GRAS), and it has remained that way ever since. Yet, it was a telling sign
when just 10 years later a condition known as Chinese Restaurant Syndrome entered
the medical literature, describing the numerous side effects, from numbness to heart
palpitations that people experienced after eating MSG.
Today that syndrome is more appropriately called MSG Symptom Complex, which the
Food and Drug Administration (FDA) identifies as "short-term reactions" to MSG.
One of the best overviews of the very real dangers of MSG comes from Dr. Russell
Blaylock, a board-certified neurosurgeon and author of Excitotoxins: The Taste that
Kills. In it he explains that MSG is an excitotoxin, which means it overexcites your cells
to the point of damage or death, causing brain damage to varying degrees -- and
potentially even triggering or worsening learning disabilities, Alzheimers disease,
Parkinsons disease, Lou Gehrigs disease and more.
Part of the problem also is that free glutamic acid is the same neurotransmitter that your
brain, nervous system, eyes, pancreas and other organs use to initiate certain processes
in your body.4 Even the FDA states:
Studies have shown that the body uses glutamate, an amino acid, as a nerve impulse
transmitter in the brain and that there are glutamate-responsive tissues in other parts of
the body, as well.
Abnormal function of glutamate receptors has been linked with certain neurological
diseases, such as Alzheimer's disease and Huntington's chorea. Injections of glutamate
in laboratory animals have resulted in damage to nerve cells in the brain.
Although the FDA continues to claim that consuming MSG in food does not cause these
ill effects, many other experts say otherwise.
According to Dr. Blaylock, numerous glutamate receptors have been found both within
your heart's electrical conduction system and the heart muscle itself. This can be
damaging to your heart, and may even explain the sudden deaths sometimes seen
among young athletes.
When an excess of food-borne excitotoxins, such as MSG, hydrolyzed protein soy
protein isolate and concentrate, natural flavoring, sodium caseinate and aspartate from
aspartame, are consumed, these glutamate receptors are over-stimulated, producing
cardiac arrhythmias.
When magnesium stores are low, as we see in athletes, the glutamate receptors are so
sensitive that even low levels of these excitotoxins can result in cardiac arrhythmias and
death.

Many other adverse effects have also been linked to regular consumption of MSG,
including:

Obesity

Eye damage

Headaches

Fatigue and disorientation

Depression
Further, even the FDA admits that short-term reactions known as MSG Symptom
Complex can occur in certain groups of people, namely those who have eaten large
doses of MSG or those who have asthma.
According to the FDA, MSG Symptom Complex can involve symptoms such as:

Numbness

Burning sensation

Tingling

Facial pressure or tightness

Chest pain or difficulty breathing

Headache

Nausea

Rapid heartbeat

Drowsiness

Weakness

Appendix 2: Pestl Income statement1

(All figures in INR Mil.)
Sr No

Description

2014

2013

Revenue from Operations

99,057

90,025

COGS

48,231

42,982

Depreciation

3,375

3,224

Employee Benefit expenses

7,511

6,824

Other Expenses

24,011

22,189

CSR

80

Exceptional Items

72

138

Profit before tax (1-2-3-4-5-6+7)

15,921

14,944

Tax expense

5,441

4,995

10

Profit after tax (8-9)

10,480

9,949

Company Financial statements