Nestl India Ltd.

(NIL), the Indian subsidiary of the global FMCG major, Nestl SA, introduced the Maggi brand in India in 1982, with its launch of Maggi 2 Minute N oodles, an instant noodles product. With the launch of Maggi noodles, NIL created an entirely new food category - in stant noodles - in the Indian packaged food market. Because of its first-mover a dvantage, NIL successfully managed to retain its leadership in the instant noodl es category even until the early 2000s. Over the years, NIL extended the Maggi brand to a variety of culinary products l ike soups, sauces and ketchups, and cooking aids among others. However, these pr oduct extensions were not as successful as the instant noodles. In 2005, NIL sta rted offering a range of new 'healthy' products under the Maggi brand, in a bid to attract health-conscious consumers. This case looks at the various phases in the product life cycle of Maggi noodles in India. It talks about the various measures taken by NIL to keep the Maggi br and fresh in the minds of Indian consumers. The case also talks about the variou s extensions of the Maggi brand and tries to analyze why only the sauces and ket chups category, among all the other product extensions, managed to succeed. It further discusses the measures taken by NIL to reposition Maggi as a 'health product'. The case ends with a discussion whether NIL would be successful in sus taining this new image for Maggi in the market. Issues: To understand the strategies undertaken by a major FMCG company to create and es tablish a new product category. To understand the issues involved in sustaining the image of a popular brand. To study the issues involved in brand extensions To understand the strategies adopted by an FMCG major in repositioning a popular brand.

"What Xerox is to photocopier and Colgate to toothpaste, Maggi is to noodles in India."1 - The Economic Times, a prominent newspaper in India, in 2003. "Maggi is the leader in the Instant Noodles category because it is constantly im proving its understanding of the consumer to give them excellent and tasty produ cts that provide nutrition, health, and wellness."2 - Martial Rolland, chairman and managing director, Nestl India Ltd., in 2006. "Maggi has managed to enter Indian homes to change the traditional food habits o f Indian children on their promise of convenience. This brand has understood the psychology of Indian mothers and positioned itself for mother-child indulgence. "3 - Business Week, a prominent business magazine, in 2006. Maggi takes the Health Route In May 2006, Nestl India Ltd. (NIL), a major FMCG company in the country and a su

bsidiary of the Switzerland-based Nestl Group, launched a new instant noodles pro duct called Maggi Dal Atta Noodles (Dal Atta Noodles) under the popular Maggi br and (Refer to Exhibit I for a brief profile of NIL). The Dal Atta Noodles were m ade of whole wheat and contained pulses, and positioned as a 'healthy'instant no odles product that provided 20 percent of the daily RDA of dietary fiber and pro tein for a child aged between 7 and 9. This was the latest addition to the range of 'healthy' products NIL had been launching over the early 2000s.

NIL offered a variety of culinary products such as instant noodles, soups, sauce s and ketchups, cooking aids (seasonings), etc., under the Maggi brand (Refer to Exhibit II for Maggi's product portfolio as of mid-2006). Of these, instant noo dles had been NIL's main product category in the culinary segment since the laun ch of Maggi 2 Minute Noodles (Maggi noodles) in 1982. Over the years, Maggi nood les became a popular snack food product in India.

During the 1990s, the sales of Maggi noodles declined, and this was attributed p artly to the growing popularity of Top Ramen , another instant noodles product. In order to improve sales and attract more consumers, NIL changed the formulatio n of Maggi noodles in 1997. However, this proved to be a mistake, as consumers d id not like the taste of the new noodles. In March 1999, NIL reintroduced the ol d formulation of the noodles, after which the sales revived. Over the years, NIL also introduced several other products like soups and cooking aids under the Ma ggi brand. However, these products were not as successful as the instant noodles.In the ear ly 2000s, Maggi was the leader in the branded instant noodles segment, and the c ompany faced little serious competition in this segment. In the early 2000s, NIL started introducing new 'healthy' products in accordance with the Nestl Group's global strategy to transform itself into a health and wellness company. NIL also adopted the same strategy for the Maggi brand with the launch of the Ma ggi Vegetable Atta Noodles (Vegetable Atta Noodles), a 'healthy' instant noodles product made of whole wheat flour and vegetables (instead of refined flour), in 2005. The Dal Atta Noodles were another variant of Maggi's healthy instant nood les. proved to be a mistake, as consumers did not like the taste of the new nood les. In March 1999, NIL reintroduced the old formulation of the noodles, after w hich the sales revived. Over the years, NIL also introduced several other products like soups and cookin g aids under the Maggi brand. However, these products were not as successful as the instant noodles. In the early 2000s, Maggi was the leader in the branded ins tant noodles segment, and the company faced little serious competition in this s egment. In the early 2000s, NIL started introducing new 'healthy' products in accordance with the Nestl Group's global strategy to transform itself into a health and wel lness company. NIL also adopted the same strategy for the Maggi brand with the l aunch of the Maggi Vegetable Atta Noodles (Vegetable Atta Noodles), a 'healthy' instant noodles product made of whole wheat flour and vegetables (instead of ref ined flour), in 2005. The Dal Atta Noodles were another variant of Maggi's healt hy instant noodles.

NIL introduced the Maggi brand to Indian consumers when it launched Maggi 2 Minu te Noodles, an instant food product, in 1982 (Refer to Exhibit III for the histo ry of the Maggi brand). At that time, Indian consumers were rather conservative in their food habits, preferring to eat traditional Indian dishes rather than ca nned or packaged food. In fact, NIL was trying to create an entirely new food ca tegory, instant noodles, in India. Initially, the company targeted working women on the premise that Maggi noodles were fast to cook and hence offered convenien ce. However, this approach failed as was evident from the fact that the sales of Mag gi noodles were not picking up despite heavy media advertising. To get to the ro ot of the problem, NIL conducted a research, which revealed that it was children who liked the taste of Maggi noodles and who were the largest consumers of the product. After this, NIL shifted its focus from working women and targeted child ren and their mothers through its marketing. NIL's promotions positioned the noo dles as a 'convenience product', for mothers and as a 'fun' product for children . The noodles' tagline, 'Fast to Cook Good to Eat' was also in keeping with this positioning.

NIL aggressively promoted Maggi noodles through several schemes like distributin g free samples, giving gifts on the return of empty packs, etc. NIL's advertisin g too played a great role in communicating the benefits of the product to target consumers. Through its ads, NIL positioned Maggi as a 'fun' food for kids which mothers cou ld prepare easily. Taglines like 'Mummy, bhookh lagi hai' (Mom, I'm hungry), 'Ba s 2-Minute,' (Only 2 minutes) and 'Fast to Cook Good to Eat' effectively communi cated the product's benefits to target consumers. These ads had become so popular that the tagline 'Bas 2-Minute' immediately remi nded Indian consumers of Maggi noodles even several years after the ads were tak en off the TV. Maggi's first product extension was Maggi instant soups launched in 1988. With the launch of Maggi soups, NIL had become a pioneer in the organiz ed packaged soup market in India...

In July 2001, Maggi replaced Nescaf (NIL's coffee products brand) as the company' s core brand. Nescaf had been NIL's core brand since 1998. Commenting NIL, said, d over the he same in on the shift, Carlo Donati (Donati), chairman and managing director, "The focused approach on Nescaf, which was the company's flagship bran last few years, has yielded rich dividends and we plan to replicate t case of Maggi as well."

According to Donati, the new focus for the Maggi brand was to provide 'the much needed impetus' for the culinary segment as it had been lagging behind some of N IL's other product segments like milk and milk products and coffee products... The Health Angle

In the early 2000s, the Nestl Group had been taking measures to transform itself into a 'health and wellness' company. The company had also set up new research a nd development facilities with a view to improving the attributes of the existin g Nestl products to make them healthier, and to develop new health and wellness p roducts. Since the early 2000s, the Nestl Group had been introducing 'health and wellness' products all over the world. In India, NIL introduced new 'healthier' weaning and milk products in 2004. In March 2005, the Maggi brand too took to the health route with the launch of V egetable Atta Noodles. NIL made use of the group's extensive research and develo pment facilities in developing this new 'healthy' product. According to NIL, Veg etable Atta Noodles were healthier as they were made of whole wheat flour instea d of maida (refined wheat) and also because they contained real vegetables...

According to the FICCI 'Food and Beverage Survey' published in February 2006, he alth foods, health food supplements, convenience foods and branded foods were th e 'rapidly rising' segments of the food and beverage industry. The survey also r evealed that the market for branded food products was growing at a healthy rate of around 15 percent in the early 2000s. The changing lifestyles and eating habi ts of Indian consumers and the increasing purchasing power of the growing middle income group were thought to be the reasons behind this growth.

Even though the demand for convenience food was increasing in India in the early 2000s, analysts said that most of the Indian consumers were still conservative in their food habits, and gave importance to the perceived health benefits of tr aditional food. Therefore, it remained to be seen whether products like Maggi At ta Noodles, despite their 'health' focus, would prevail in the long run. Competition was also increasing for Maggi in various other product segments (Ref er to Exhibit VI for NIL's competitors in the prepared dishes and cooking aid se gment in mid-2006).