Organisation behaviour of nestle

NAME – RAHUL SURENDRA JAIN
STD – M.COM-2 (BUSINESS MANAGEMENT)
ROLL NO- 38
SUB- Organisational Behaviour
Organisational Behaviour
of Nestle
1

DECLARATION
I RAHUL SURENDRA JAIN, the student of
N.G.BEDEKAR COLLEGE OF COMMERCE, studying in
M.Com part-II (BUSINESS MANAGEMENT) here by
declaring that I have completed this project “Organisational
behaviour of nestle” during the academic year 2016-17. The
information submitted is true and original of best of my
knowledge.
Date: _____________
Place: Thane
(RAHUL.S.JAIN)
2

Vidya Prasarak Mandal, Thane
N. G Bedekar College of Commerce
Certificate of Project work
This is to certify that Mr. RAHUL SURENDRA JAIN, Roll
No. 38 of M.Com-2 (Business Management) has undertaken
and completed the project work of 3rd
Semester titled
“Organisational Behavior of Nestle” for academic year 2016-
17 under the guidance of Mrs. Archana Prabhudesai and
have submitted the same to University in fulfillment of the
curriculum for 3rd
Semester of M.com-II (Business
Management) . This is Bonafide project work and information
presented is true and original in best of our knowledge.
Internal Guide External Guide
(Prof. Archana Prabhudesai)
3

Project Report on
Organizational Behaviour of Nestle
Submitted by
RAHUL SURENDRA JAIN
MASTERS IN COMMERCE SEM-3 (BUSINESS
MANAGEMENT)
ACADEMIC YEAR 2016-2017
Roll No.38
Project Guide
Prof. MRS. ARCHANA PRABHUDESAI MAM
Submitted to
UNIVERSITY OF MUMBAI
N.G. BEDEKAR COLLEGE OF COMMERCE
4

Index
5
SR.
NO.
TOPIC PAGE
NO.
1 Executive Summary 6
2 Company Overview 7
3 Organization Strategies 8
a) Vision & Mission 8
b) Porter’s Competitive Force & Strategies 10
c) Miles & Show’s Strategy Typology 13
4 Organization Chart 16
5 External Environment 17
6 Internal Environment 19
7 Organization Size, Life cycle & Possible decline 25
8 Organization Culture 28
9 Corporate Ethical Value 29
10 Decision Making Process 32
11 Conflicts Power & Politics 33
12 Recommendation & Conclusion 59
13 Bibliography 62

Executive Summary
Nestlé is widely known as the world’s largest multinational food and beverage
company, with a 148-year history and operations in virtually every country in the
world. Nestlé was founded in the year 1866 by Swiss pharmacist Henri Nestlé in
Vevey, Switzerland. With successful product expansion and business strategies,
Nestlé now employs roughly 339000 people and has factories or operations in almost
every region. Nestlé owns a variety of major consumer brands such as Nescafe, Kit-
Kat, Carnation, PowerBar and so forth that has a dominant position in a variety of
markets. The industry leadership of Nestlé largely depends on the company’s
Research and Development (R&D) networks and activities. This enables Nestlé to
provide high quality, safe and healthy food and beverage categories for worldwide
consumers on a continuous basis.
Aiming to become the food industry leader in nutrition, health and wellness,
Nestlé is committed to promote corporate common goals and create shared values
within a decentralized organizational model. The company typically implements
differentiation and low-cost leadership strategies to occupy or retain the target
markets. They also established a global hybrid or mixed structure that empower
regional managers, who report back to the headquarters, to have autonomy for their
specific business operations and decision-making processes. Although Nestlé has
certain competitive advantages for persevering in the market, the company still faces
challenges due to external environments and internal factors in today’s dynamic and
high velocity global markets.
With a general understanding of Daft’s (2009) concepts, this report attempts to
discuss the organizational theory and design through the business stories of Nestlé.
We will start with the company overview, followed by a thorough analysis of
organizational strategies and structure, as well as the external and internal
environments that will affect Nestlé’s business operations. We will also examine
what and how Nestlé is doing in the area of product portfolio, technology and
innovation, control systems, corporate cultures and politics.
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Company Overview
Nestlé S.A., headquartered in Vesey, Switzerland, is the largest global food and
beverage company in the world. It is well recognized for its efforts in becoming a
world leader in Nutrition, Health and Wellness.
Founded in 1866 by Henri Nestlé, the company developed significantly during
the First and Second World Wars, and expanded its offerings beyond its early
condensed milk and infant formula products. In order to enlarge its product portfolio
and business scope, the company has made a number of corporate acquisitions
through the years of 1950 to 2007.
Nestlé owns a wide range of brands and manufactures abundant products in a
number of markets, including coffee, bottled water, milkshakes and other beverages,
breakfast cereals, infant foods, performance and healthcare nutrition, seasonings,
soups and sauces, frozen and refrigerated foods, and petcare. Among these products,
Nestlé's best-known brands, for instance Nespresso, Nescafé, Kit Kat, Smarties,
Nesquik, Stouffer's, Vittel, and Maggi, generate annual sales of over 1 billion Swiss
francs (about $1.1 billion). Each year, the company invests around CHF 1.5 billion in
Research and Development, aiming to continuously provide better quality products to
shrewd customers in global markets.
As the world’s largest food and Beverage Company, Nestlé has 465 factories
operating in over 150 countries, and employs around 339,000 people worldwide.
Based on the statistics of Financial Times, Nestlé was listed No. 1 in the Fortune
Global 500 as the most profitable corporation in the world in 2011. And with a market
capitalization of $233 billion, Nestlé ranked No. 9 in the FT Global 500 2013.
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Organizational Strategies
 Vision
Since its inception, Nestlé has been increasingly aware that food and beverage
choices can impact quality of life, so they are committed to make their
products tastier and healthier and to provide more options for global
consumers. The backbone of a diverse product portfolio is Nestlé’s
unmatched R&D capability, nutrition science and innovation, as well as high
standard of food quality. With this in mind, we can see that Nestlé employs a
team of scientists, engineers, nutritionists, designers, regulatory specialists
and consumer care representatives. This group of talented individuals makes
every effort to earn consumers’ trust by creating and delivering safe products
of the highest quality. Thus, thanks to the corporate financial health and solid
trust from all its stakeholders, Nestlé can reach its goals of becoming the
world leader in Nutrition, Health and Wellness.
 Mission – Good Food, Good Life
Clearly, the objective of Nestlé is to become a leading Nutrition, Health and
Wellness company in the world, while promoting a common value in nutrition and
protecting the environment in which their businesses operate. Nestlé believes that size
and behavior contribute to leadership in the industry. They acknowledged that trust is
built over time through continuous promises. The company’s mission and conduct are
embedded in the term "Good Food, Good Life", which summarizes the corporate
ambitions. In order to support these goals, Nestlé is committed to encourage their
people to deliver a high level of performance, and to build the far-reaching and short-
term entrepreneurial action by constant inspiration.
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Competitive Advantage Growth Drivers Operational Pillars
• Unmatched product and • Nutrition, Health and • Innovation &
brand portfolio Wellness Renovation
• Unmatched R&D • Emerging markets and • Wherever, whenever,
capability Popularly Positioned however
• Unmatched geographic Products • Consumer engagement
presence • Out-of-home • Operational efficiency
• People, culture, values • Premiumisation
and attitude
The above chart derived from Nestlé’s official website is the company’s Road
Map, which has clearly shown the driving forces of Nestlé’s growth and
development. Nestlé firmly believes that it takes decades to build real competitive
advantage. This largely comes from a blend of irreplaceable strengths throughout
the product value chain, strong R&D, the broadest geographic coverage and
entrepreneurship, great people and strong corporate values. In alignment of the
mission of Good Food, Good Life, Nestlé aims to provide consumers with the best
nutritional product categories, to guarantee the sustainable development of their
financial and environmental operations and behaviors.
9

The Threat of New
Entrants
The Power of Suppliers
The Power of Buyers
The Threat of Substitutes
Rivalry among Existing
Competitors
create pressure for established organizations
hold down prices or increase investment level
charge higher price
limit service or quality
shift costs to customers
force down prices
demand better quality or service
drive up costs for the supplying organization
affected by changes in cost, new technologies,
social trends
influenced by the preceding four forces, cost &
product&differentiation
10
Porter’s Competitive Forces and Strategies
Studying a number of business organizations, Michael E. Porter
(1979) found five forces that determine a company’s position vis-à-vis
competitors in the industry. He suggested that “managers can formulate
a strategy that makes the organization more profitable and less
vulnerable in the industry environment”

According to Porter, a company can adopt one of three strategies to cope with the
competitive edges within five forces. The three strategies include differentiation, low-
cost leadership and focus. In the case of Nestlé’s business principles and strategies,
the analysis reveals that the company typically uses differentiation and low-cost
leadership strategy to set itself apart from the competition in the industry.
A differentiation strategy focuses on marketing its products in a way that is
clearly distinguishable from others in the marketplace (Daft, 2009). Nestlé creates
solid customer value by offering various and high-quality products at a premium price.
As the largest food and beverage producer in the world, Nestlé has adequate
capabilities and resources to support its R&D to deliver innovative, good quality and
nutritious products. Nestlé also distinguishes its products from others in the industry
by taking advantage of its creative employees, advertising campaigns, distinctive
product features, exceptional services and new technology. For example, when
entering Chinese markets in the early 1990s, Nestlé took advantages of blister light
box, sidewall, bodywork and subway advertising to target customers who are at the
age group of 13-34 for Nescafe instant coffee. In the past decades, Nestlé’s customer
base has been increased by three times, while the promotion expenditure has only
been doubled. These various kinds of advertising campaigns have proved to be very
successful in Chinese market. Moreover, the differentiation strategy helps Nestlé
reduce the rivalry with competitors and fight off the threat of substitute products,
because customers are loyal to the company’s brands.
It is reported by a management consulting firm that Nestlé acquires competitive
advantages through the low-cost leadership strategy. The company tries to produce
and to market its products by keeping costs low compared to competitors. This can be
achieved simply because Nestlé is able to achieve economies of scale in raw materials,
production and marketing. In many developing countries, Nestlé promotes a wide
range of products at affordable lower prices to grasp the market share and build
consumers’ loyalty. For instance, Nestlé learnt that people in Brazil prefer shopping on
a daily basis but are less willing to buy food or beverage in supermarkets because of
the high price. Taking this local consuming pattern into consideration, Nestlé
employed over 8000 women to distribute the company’s products to local
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neighborhoods, from which Nestlé boosted its sales dramatically.
12

Prospector
• innovate, take risks, seek out new
opportunities and growth
• suited to a dynamic, growing
environment with a strong focus
on creativity
Defender
• concerned with stability,
internal efficiency and control,
hold on current customers,
• suited to a declining industry or a
stable environment
Analyzer
• maintain a stable business
& innovate on periphery
• balance efficient production for
current product lines with creative
development of new products
Reactor
• respond to environmental threats
and opportunities in ad hoc fashion
• meet immediate needs
Miles and Snow’s Strategy Typology
Based on Miles and Snow’s strategic typology, organizations try to adapt by
applying internal organization characteristics and, corporate strategy, as well as
realignment to the external environment by four strategies – the prospector, the
defender, the analyzer and the reactor. Each strategy has different characteristics as
above
Upon study and research, we found that Nestlé fits the characteristics of an analyzer
strategy. In worldwide markets, some of Nestlé’s products, for example Nestlé Water
and Coffee, are targeted toward stable markets in which Nestlé designs an efficiency
strategy to keep the current customers. On the other hand, some newly-developed
products, such as advanced formula cereals and healthcare nutrition products, are
targeted toward new and more dynamic markets, where huge growth is possible.
Apparently, Nestlé balances efficient production of their current product portfolio
with the creative development of new product lines.
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Organizational Design and Structure
“Organization effectiveness is a totality of organizational goodness, and a sum of
elements such as production, cost performance, turnover, quality of output,
profitability and efficiency”. (Katz and Kahn, 1966). It is the ability of an
organization to achieve its objectives and to meet the needs of its various
stakeholders (Khandwalla, 1995). According to the official website of Nestlé, the
company’s stakeholders include its employees, customers, suppliers and distributors,
partners, Organization Structure
“In today’s global business environment, many international firms apply a
global hybrid or mixed structure, in which two or more different structures or
elements of different structures are used” Generally, Nestlé presents distinct
characteristics of a global matrix structure.
On the one hand, Nestlé has its own local companies in most countries.
The Group is managed by geographies (Zones Europe; Americas; Asia, Oceania
and Africa) for most of its food and beverage business, except for globally
managed businesses, which includes Nestlé Waters, Nestlé Nutrition,
Nespresso, Nestlé Professional and Nestlé Health Science.
As the largest branded food company in the world, Nestlé rejects the idea of a
single market and uses a geographic structure to focus on the local needs and
competition in each country. Nestlé puts great emphasis on the autonomy of
regional managers who know the local culture. Local managers have the authority to
decide a product’s flavoring, packaging, portion size, or other elements. Many of the
company’s 8000 brands are registered in only one country.
As a result of the company’s well-established product lines and advanced
technologies, Nestlé uses global geographic structure to divide the world into
geographic markets, wherein they can seek low-cost manufacturing within diverse
countries, and meet different needs across regions for marketing and sales. With a
full control of functional activities, each regional division is accountable for reporting
to the CEO.
Typically, the headquarters in Switzerland work together with each geographic
division, and sets an overall strategy that directs Zone Management and the Strategic
14

Business Units (SBUs). Geographically, Nestlé’s three Zones work closely with the
local markets and the SBUs. Their primary role as business enablers is the liaison
between the market and the business centers. With a shared vision, Nestlé’s global
employees understand the direction, and how to fulfill the collaboration with common
tools, strategies and values. In addition, the SBUs who specialize in a particular
category, for example Coffee and Beverages, Pet Care, or Chocolate, work with
Research and Development (R&D) so that every food or beverage produced by the
company meets consumer expectations and latest innovation. They also help the
markets to achieve the business and brand objectives.
On the other hand, Nestlé has established joint ventures such as Cereal Partners
Worldwide and Beverage Partners Worldwide, while owning Alcon, a pharmaceutical
company that is the world leader in eye care. The company also has a significant share
of L’Oreal, the world leader in cosmetics.
Based on the above facts, Nestlé’s global matrix/hybrid organizational
structure allows the company to work effectively and efficiently. This is best
exhibited when product standardization and geographic localization are balanced
and when effective coordination of resource allocation is achieved.
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Organization Chart
Similar to most global companies, Nestlé’s management is the Annual General
Meeting of Shareholders (AGM).
According to the official website of Nestlé, the company’s executives are the Board
of Directors. The Chairman of the Board and Chief Executive Officer lead the
company’s operations. There are four committees that support the Board of Directors
in corporate governance, including Chairman’s and Corporate Governance
Committee, Compensation and Nomination Committee, Audit Committee, and
Finance Committee. Led by Chairman Peter Brabeck-Letmathe, the Board has 14
members to handle different parts of the global business. Nestlé Executive Board
consists of company executives and department heads that manage the company’s
business operations and implement strategies and policies initiated by the Board of
Directors. Below, the chart gives an overview of Nestlé’s management structure.

External Environment
An organization’s strategic analysis usually starts with an external environment
analysis. The purpose is to identify the possible opportunities and threats to the whole
industry. PEST analysis is one of the macro environment analyses that investigate the
external environment in political, economic, socio-cultural and technological aspects.
 Political
Political issues are one of the major concerns for global companies to operate
internationally. Political stability, bureaucratic regulations and taxation policies play a
vital role in international business operations. In one aspect, with the political stability
in one country, Nestlé can generate steady sales in targeted markets. In another aspect,
government laws and regulation in certifying natural and safe raw materials, public
financial disclosure, bribery or fraud highly influence every phase of Nestlé’s
organizational life and strategic planning. As far as Chinese market is concerned,
Nestlé has greatly enjoyed the preferential policies and treatment that are given to
large multinational companies by central or municipal government, for example lower
corporate tax rates. This helps to explain why Nestlé has grown and expanded so
quickly in the region of Greater China in the past 20 years.
 Economical
Economic condition varies from country to country. The economic component is
related to policies, regulations and changes in a wider economy, such as economic
growth, interest rate, exchange rate, and inflation rate, which will impact the business
strategies and decision-making processes. For one, Nestlé is greatly benefited from
the rapid economic development and the improvement of investment environment
especially in developing countries. For another, Nestlé has taken consumers’ income
level and purchasing power into consideration when entering a new market or
launching a new product in a specific region. With operations around the globe,
Nestlé has adjusted for variations in consumer’s demand and price sensitivities.
According to a recent study of global food industries, Nestlé is gradually shifting the
company’s business emphasis from America and Europe to Asia-Pacific and Middle
East markets, in view of the growing numbers of the middle-class and an increasingly

higher level of disposable income in these economies.
 Socio-cultural
Generally, there are lots of issues that need to be considered by the company
when doing international business out of the home country. These issues include
demographics, language and education, tradition, religion and aesthetics, consumer
living and diet habit, preference, and consumption patterns. Nowadays, the change in
life style, urbanization and globalization have increased people’s acceptance of new
different products. Therefore, with a clear picture of socio-cultural environment,
Nestlé can capture the consumer behavior in order to plan out good and effective
business strategies in worldwide markets. Here is an example of Nestlé’s success of
respecting the socio-culture in African countries. The chicken bouillon cube produced
by Nestlé is widely used to increase dish flavor in developed countries, however,
people directly mix the cube with rice to eat in low-income countries in Africa.
Therefore, in accordance with local consumption habits and storage conditions, Nestlé
has introduced small package of bouillon cube that people can easily have one piece
for an individual in a meal.
 Technological
Greatly benefiting from the availability and capacity of strong research centers
and associations, Nestlé owns the largest R&D network of any food company in the
world. This enables the company to continuously produce nutritious and healthy food.
Advanced technologies also create opportunities for new product lines, current
product improvement, and new marketing promotion strategies, such as e-commerce
and online stores. By gathering all the research and development resource available in
the countries where it operates, Nestlé expects to use this competitive advantage to
become a world-class leader in food and beverage industry.
Internal Environment

Nestlé’s effective performance in terms of R&D, learning and growth serves as a
foundation to help achieve excellent internal business processes. “Excellent business
processes enable the organization to achieve product diversity, high customer service
and satisfaction, and thus to realize its financial goals and optimize its values to all
stakeholders” (Daft, 2009, p207).
 Strong brands recognition
Nestlé is one of the most recognized and renowned brands in the world. Nestlé’s
logo depicts a loving mother feeding and nurturing her young with rich and healthy
nutrition. The company emphasizes this message through communicating with
consumers, launching promotions and marketing campaigns, and building and
improving public relations. For instance, Nestlé carried out a project of "Nestlé
Healthy Kids Global Plan" in China, which covered five cities and four rural areas
with about 60 primary schools. More than 60,000 students and their parents, teachers,
and Public Health Administration have proactively involved in the project. This
social activity significantly improved the brand recognition of Nestlé in Chinese
market.
 Organizational decentralization, differentiation and localization
Nestlé’s decentralized structure makes it possible for each business unit to
become decision-makers for their specific business operations. The fact that Nestlé’s
products are diverse and can satisfy customers’ need will prevent competitors from
entering the unoccupied markets. Nestlé perseveres in learning about local customers
through market research. This enables the company to develop new product lines with
local adaptation and distinct features. Business units are also able to evaluate any
possible market opportunities and to try to make successful long-term projects in local
contexts.
 Large investment in R&D and innovation
It is estimated that approximately 98% of Nestlé sales come from international
markets.18
All these achievements are derived from continuous innovation in new
product lines, R&D development and marketing strategies. As a result, Nestlé gains
tremendous competitive advantages. The company claims that carefully planned

brands will allow the company to stay competitive in the market. For instance, Nestlé
invented the manufacturing method of instant coffee in the year of 1938. This
unprecedented innovation made coffee open a broader market in the world. Product
innovation and diversification equip Nestlé to capture as much of the market share as
possible.
 Corporate shared mission and values
Nestlé is conscious of the fact that corporation success is a reflection of the
professionalism, the ethical conduct and the responsible attitude of its management
and employees. 19
Nestlé's objective is to become the industry leader in health,
nutrition and wellness by competitively and innovatively manufacturing and
marketing its products in global markets. The corporate values ensure that Nestlé
employees around the world know how to act, and have a very strong sense of values
and a clear framework for fast decision-making.
In regards to ethical values, Nestlé continues to maintain its commitment to
follow and respect all applicable local laws in each of its markets.20
While ensuring
the highest standards are met throughout the organization, Nestlé is also an active
advocate for environmental sustainability. They firmly believe that organizations have
heavy responsibilities for the environment and ecosystem protection, and that modern
development should not sacrifice the resources and environment for future
generations.
 Strong financial performance
In 2013, Nestlé achieved outstanding performance, and shareholders received a
satisfactory dividend. Nestlé is expected to continue to be disciplined in driving its
performance in line with the company’s model of profitable growth and resource
efficiency.22
Nestlé is committed to make its 2014 performance similar to 2013.
Compared to the second half of 2013, Nestlé outperformed the market, with a growth
of around 5% and improvements in margins, underlying earnings per share in constant
currencies and capital efficiency. Below two graphs showed that Nestlé has reached
excellent performance in the past few years. The stable and healthy financial
performance will provide strong assurance for Nestlé’s development in the future.

Organizational Design for an International Environment
As far as every multinational company is concerned, international markets have
been instrumental in today’s competitive consumer product markets. Given the fact
that 98% of Nestlé’s revenue is generated from outside of Switzerland. Nestlé has
established a global geographic organizational structure to expand rapidly and
proactively be involved in international business. Nestlé has mature product lines and
stable technologies, so they can find low-cost manufacturing within countries, and
meet different needs across countries for marketing and sales. Under this kind of
structure, Nestlé is able to customize their products to meet specific needs and to
develop closer relationships with customers. As noted in previous section, Nestlé has
been strategic in the design of its international business.
Nestlé operates in nearly 150 countries across the globe. Daft (2009) argues that
“inter-organizational linkages provide a safe network that encourages long-term
investment, information sharing, and risk taking”. As early as 1950s, Nestlé merged
with the manufacturer of Maggi seasonings and soups, and acquired Crosse &
Blackwell who is the British manufacturer of preserved and canned foods.25
Throughout the following decades, Nestlé implemented a number of acquisitions and
mergers. In 2001, Nestlé established a joint venture with Coca-Cola or Beverage
Partners Worldwide (BPW global beverage partner company) in 2001. Their strong
alliance planned to develop the black tea and green tea beverage business. Coca-Cola
is mainly responsible for product distribution and production, while Nestlé is in
charge of product planning, design, development and brand support. This

collaboration has already proved to be very successful. In 2002, Nestlé acquired
Chef America, Inc. who was U.S.-based hand-held frozen food product and business,
while establishing a joint venture with Dairy Americas. To a large extent, Nestlé has
been able to achieve a higher level of innovation and excellent performance, since
they learned to shift from an adversarial to a partnership mindset in the industry.
Products
Clearly, Nestlé’s objective is to produce high-quality products with innovation
and first-class technology. The company’s propaganda does not exaggerate that
Nestlé’s products win a high reputation with its consumers. Nestlé’s portfolio covers
almost every food and beverage category that gives consumers tastier and healthier
products. As stated earlier, Nestlé owns nearly 8,000 brands in its target markets and
sells over a billion products every day. Especially, among lower and middle class in
many developing countries and emerging markets, Nestlé is promoting a wide range
of products at reasonable and affordable prices. Although Nestlé tries to keep cost
low, they provide a balanced diet by compensating for local dietary deficiencies, and
combine good taste with convenience and nutrition. Here is a brief overview of
Nestlé’s product and beverage categories and brands.
Information Technology and Control Systems
Under the guidance of the company’s Quality Policy, Nestlé tries to build trust
by offering products and services that appeal to consumer expectation and preference,

and complying with all internal and external food safety, regulatory and quality
requirements. Since quality is a company-wide objective, Nestlé has designed and
established a common technology infrastructure and control systems to integrate all of
its businesses.
According to Daft (2009), Information Technology influences
organizational design and management in four aspects, smaller organizations,
decentralized organization structures, improved horizontal coordination,
improved inter organizational relationships and enhanced network structures.
In the early stage of business operation, Nestlé allowed each local subsidiary to
conduct business independently and separately. However, Nestlé gradually found that
local differences caused inefficiencies and extra costs and prevented Nestlé from
competing effectively in the market due to the lack of standard business processes.
Therefore, Nestlé initiated the company-wide installment of SAP enterprise resource
planning (ERP) software to integrate material, distribution, and accounting
applications. The Enterprise Resource Planning (ERP) system helped Nestlé collect,
process and provides information about the company’s entire operation, including
order processing, product design, purchasing, inventory, manufacturing, distribution,
human resources, receipt of payments, and forecasting of future demand.32
On the basis of Nestlé’s official report, Nestlé has also built five computer
centers to focus on enterprise finance, business planning, and production and supply
chain management to boost the company’s growth and expansion. These integrated
systems not only standardize the entire company’s information systems and business
processes, but also uses advanced IT to enable close coordination with suppliers,
customers, and partners.
Moreover, Nestlé uses a cause-effect control technique, known as strategy map,
to pursue the company’s objectives “a strategy map provides a clear framework of the
driving forces of an organization’s success and shows how to interrelate specific
outcomes in each area. This is a powerful way for managers to see the cause-and-
effect relationships among various performance indicators”. Nestlé 4x4x4 Roadmap
is a fundamental guideline for building a strong alignment within the company and
developing a deep understanding of the company’s strategies and how to execute
them.Furthermore, Nestlé has a very tight, strong and effective internal control

system. For example, behavior control is a commonly used way by large companies
that enable managers to observe employee actions and to see whether or not the
individual follows desired procedures and performs tasks as instructed. Quality
management system is another platform that is adopted by Nestlé to guarantee
globally high quality raw materials, food safety, and compliance with quality
standards. Nestlé also utilizes clan control with strong corporate cultures to
emphasize shared values and trust among its employees with different cultural
background. Under clan control, employees are often hired because they are highly
committed to the organization’s objectives.
Organization Size, Life Cycle, and Possible Decline
 Size
Obviously, Nestlé is a mega-sized organization. By the end of 2013, there are

approximately 465 factories in 150 countries, with about 339,000 employees in the
company. As Mark Hurd, former CEO of Hewlett-Packard put it,
“If you don’t have scale and you don’t have leverage, you won’t be able
to give the customers what the customer wants”.
Companies in all industries strive to acquire the size and resources needed to
compete on a global scale, to invest in new technology, and to control distribution
channels and guarantee access to markets.38
Found by many executives, large size
enables companies to stay economically healthy and to take risks that could ruin
smaller firms. As a marketing-intensive company, greater size makes Nestlé a vibrant
and exciting place that attracts and keeps high quality employees, so as to increase
corporate revenues.
Through over a hundred years of development, Nestlé has grown into the world’s
largest food and Beverage Company, bringing tremendous influence in the industry.
Therefore, huge resources and economies of scale are required for the company to
compete globally. Similar to other large organizations, Nestlé has hundreds of
functional specialties within the organization to perform multifaceted tasks and to
produce varied and diverse products. In addition, the company’s extensive scope
makes Nestlé attract and retain talented employees. When the workforce increases,
Nestlé will be more capable of seizing opportunities for development and
advancement.
According to Jack Welch who is retired Chairman and CEO of General Electric, he
suggested an organization to adopt the “big-company/small-company hybrid” model
that combines a large corporation’s resources and reach with a small company’s
simplicity and flexibility (Daft, 2009, p426). As far as Nestlé is concerned, the
company keeps consistency in product quality, strong R&D capacities and corporate
ethical values. At the same time, the company’s structure is decentralized to empower
each business zone to focus on market specifications and consumers’ needs and
preference in different regions and areas.
In today’s fluid and competitive markets, it is much likely that Nestlé will
expand its business scale in the future. However, the company should put specialized
development a priority, instead of only relying on diversification. With this in mind,

Nestlé is able to penetrate into the market to increase market share and obtain a larger
customer base.
 Life Cycle
Life cycle is a useful way to think about organizational growth and change.
Organizational structure, leadership style, and administrative systems follow a fairly
predictable pattern through each stage in the life cycle. There are four major stages to
describe an organization movement. Nestlé is now in the elaboration stage of the life
cycle. The company is attempting to develop a team orientation within the company,
while focusing on innovation, R&D and corporate reputation.
In Nestlé, power centralization and hierarchy are limited throughout the
organization. Managers are encouraged to develop their skills of problem-solving and
cooperation. Nestlé’s common values and conduct code reduce the need for additional
formal controls. In order to achieve extensive collaboration and to maintain the
autonomy and independent decision-making of regional executives and managers,
Nestlé’s teams are built and organized across functions or divisions of the company.
Nestlé’s challenge at its elaboration stage is the need for revitalization. Daft
(2009) argues that “after the organization reaches maturity, it may enter periods of
temporary decline. The organization shifts out of alignment with the environment or
perhaps of streamlining and innovation”. Therefore, as Nestlé grows and expands its
business in global markets, the company has to be able to refresh the corporate
business principles and strategies, invigorate the organization structure, upgrade the
information networks and R&D infrastructures; otherwise it could restrict the
company’s continuous growth.
 Possible Decline
“Organizational decline is often associated with environmental decline in the
sense that an organizational domain experiences either a reduction in size or a
reduction in shape” (Daft, 2009). Three factors are considered to cause the
organizational decline, which includes organizational atrophy, vulnerability,
environmental decline or competition. As Nestlé grows more mature or the external

environment has less capacity to support the organization in some markets, they have
to either scale down operation or shift to another domain to overcome insufficiencies.
According to Nestlé’s 2013 Annual Report, the traditionally well-established
markets, like the United States and Europe, are becoming saturated and beginning to
shrink. However, emerging markets in Greater China and Southeast Asia have been
growing rapidly. Based on the statistics taken from McKinsey, in some regions,
Nestlé lost some market share to Kraft and Starbucks in coffee market, and the sales
of infant milk powder fell behind its main competitors – Dumex and Abbott.
Therefore, Nestlé has to explore new ideas and implement effective market strategies
to capture the market and get rejuvenated.
Organizational Culture
We found a very strong organizational culture in Nestlé. The same as other
European companies, Nestlé typically adopts a decentralized organization approach in

which international divisions have a high level of independence and decision-making
autonomy. Each division focuses on its local markets to meet diverse needs. Nestlé
also relies on a strong mission, shared values, and informal personal relationships.
Nestlé runs their businesses with strong characteristics of effectiveness,
reliability, diligence and innovation. In compliance with the headquarters’ guidelines
and budget control, regional managers are completely independent in making
respective plans and strategies that fit to local markets. Through systematically
organizing its intellectual properties, Nestlé makes great efforts to foster a corporate
culture of continuous learning and knowledge sharing. For example, every year Nestlé
provides employees with various training programs, and R&D and innovation
programs.
Making human capital a high priority, Nestlé cares about their employees and
focuses on team work. As the Director of Human Resource and Training
Department for Greater China Yunque Chen says that,“Employees are the most
important assets, the soul and carrier of Nestlé’s spirit and the most precious
wealth of Nestlé”(Staffers, 2011).
In Nestlé, there is an open and close working atmosphere existing among top
management and factory-floor employees. People are encouraged for upward
communication and effective coordination and cooperation. Nestlé also addresses the
importance of employee safety and work-life balance.

Corporate Ethical Values
 Corporate Code of Conduct
Since its inception, the Nestlé Corporate Business Principles have been the
basis of the corporate culture, and reflects the ideas of fairness, honesty, and a
general concern for people. Nestlé’s code of conduct specifies certain non-
negotiable minimum standards of behavior in key areas.
 Nestlé’s mission to pursue a leadership position in Nutrition, Health and
Wellness. The
 Corporate slogan 'Good Food, Good Life' shows that the company
encourages a healthy lifestyle by continuously offering tastier and
healthier food and beverage choices to its customers.
 Nestlé has a strict requirement and standard of quality assurance and product
safety guarantee its promise to worldwide consumers.
 Nestlé commits to build and maintain good relations with suppliers and
customers, and
 Creates reliable communication channels wherein everyone is empowered
to express his or her concerns about health and nutrition. For example,
Nestlé has its presence in a variety of mainstream social networks and
utilizes Apps to interact with customers, except for the traditional “Ask
Nestlé” section in the company’s official website.
 Putting a strong emphasis on human rights, Nestlé treats their people with
respect,
 Honesty and fairness. The company encourages employees to promote
a sense of responsibility and provides equal opportunities for their
career development and advancement.
 By using natural and renewable resources efficiently, Nestlé makes
continuous efforts on environment sustainability whenever and
wherever its factories and business operation centers exist.

 Creating Shared Value
Aiming to achieve leadership and satisfy consumers’ expectations, Nestlé
creates
a shared value that the company’s behavior, strategies and operations are key
driving forces to create long-term sustainable value for shareholders, communities,
business partners, and importantly consumers.
To ensure the financial and environmental sustainability, Nestlé makes large
investment in their behaviors and operations of product advancement, R&D and
technologies, people development and brand-building. Without sacrificing for the
sustainable development of future generations, Nestlé’s objectives are to meet
today’s needs and to ensure profitable growth for its shareholders and society over
the long-term.
Innovation and Change
 Research & Development
As part of Nestlé’s culture, innovation and change are the core attributes of
continuous improvement and development in Nestlé. The company used to position
itself as a technological food and beverage company; however, at the beginning of
the 21st century, Nestlé strategically decided to become the world-class leader in
Nutrition, Health and Wellness driven by market, research and development.
As below graph shows, Nestlé has the largest R&D network compared to any food
company in the world, with 34 R&D facilities (3 Science & Research Centers and

31 Product Technology Centers and R&D Centers worldwide), and over 5000
people involved in R&D in Switzerland, France, Germany, the United States and
China. Working with product and technology departments, Nestlé’s research centers
act not only as the catalyst for improving and innovating the main products, but also
as a liaison between local technology and global markets. There are four pillars in
Nestlé’s R & D system: research and development center, product and technology
centers, research centers and application sectors. Complementing each other, these
four pillars continuously promote research and development needs of consumers and
popular products. Each year, Nestlé Group invested approximately CHF 1.5 billion
R & D projects.
According to the official website of Nestlé, the Research Center in Switzerland is a
major idea pool, where new thoughts and scientific knowledge of all Nestlé products
are constantly developed. It covers over 100 different professional areas, to name a
few -- nutritional sciences, ingredients and production processes. The continuous
innovation of new products and renewal of existing products enable Nestlé to
develop and enhance hundreds of its products, particularly in the aspect of the
nutritional benefits.
Nestlé Technology Co., Ltd. is also a special institution of Nestlé that provides
the latest technology in terms of food and nutrition for all operating divisions.
They conduct research work in different research fields of materials research and
the impact of stimulus features. The institution is committed to develop new
products and improve existing products. Nestlé Technology Co., Ltd. is also
widely perceived as one of the world’s largest and most advanced food research

institutions.
Decision Making Processes
According to Daft (2009) theories, today’s dynamic changing environment has
increased the number and complexity of decisions and created a need for new
decision-making processes to large international organizations. The reason why
Nestlé can keep a leading market position is that the company makes decisions
based on the following principles: knowing customers, a long-term vision, product
extension and innovation, production efficiency, quality control, multi-brands, and
the autonomy of regional managers. These principles help Nestlé constitute a
programmed decision-making system.
Nestlé uses management science, for example established rules, procedures and
prior experience, as an excellent device for organizational decision-making when
problems are analyzable to be identified and measured. Programmed decisions can
be made generally based on clear criteria of performance, good information about
current environment, specific alternatives, and relative certainty of a successful
alternative (Daft, 2009). As a food and beverage company, Nestlé is taking
advantage of mathematical formulas to precisely study customer data and make
decisions about which new products to develop and how to market them.
When it comes to non-programmed decisions, a number of factors can affect the
processes by which decisions are made in the organization, especially the
organization’s internal structures and the external environment. Because non-
programmed decisions are specific and poorly defined, and requires bargaining and
conflict resolution. As far as Nestlé is concerned, the company uses a combination
of the incremental and Carnegie Models for decision-making when identifying
problems is uncertain or solving problems is difficult. To overcome individual
biases, Nestlé tracks its organizational information on a daily basis to develop a
deep and intuitive understanding of the business operations and seek advice from
experienced and senior employees during a major decision. In order to integrate the
overall strategic direction of the organization, Nestlé usually brings multiple
alternatives that involve everyone in the decision-making process to reach a

consensus.
Conflict, Power and Politics
In a global organization, there are bound be the common conflicts between
regional managers, or between geographic divisions and headquarters, because of
the complexities of international business. According to Daft (2009) theories,
resources of organizational conflicts mainly include goal incompatibility,
differentiation, task interdependence and limited resources.
Under the global matrix structure, the organizational conflicts are unavoidable
within Nestlé. For example, Nestlé’s marketing and manufacturing departments
may have potential conflicts. This is because marketing tries to extend the product
lines to meet customer tastes, whilst manufacturing has to undertake higher
production costs. In addition, the differences in values, attitudes, and standards of
behavior within the company also lead to conflicts at different levels. In order to
avoid organizational conflicts, Nestlé released three important documents --
“Package Design Manual”, “Labeling Standards” and “Branding Strategy” to
ensure that the organization has consistency in branding, marketing and product
categories. It has also implemented the Business Conduct Code of Ethics to balance
the interests, power and influence in different departments and divisions.
Nestlé has a decentralized organizational structure, wherein the power distribution
reduces the potential uncertainty, increases the cooperation, ensures resource
allocation, and copes with strategic contingency. Nestlé gives a certain level of
authority to its business divisions in different countries. The headquarters usually
expect desired outcomes and great performance for the whole organization. On the
other hand, the use of power in a large organization requires both skills and tactics.
In Nestlé, there are about 5,000 management positions directly controlled by the
headquarters. Many of the middle-top staff are selected by the headquarters to serve
in a number of countries. Nestlé’s top management are often more willing to hire,
transfer, and promote its people who are able to bring the expertise and innovation
to the organization so as to achieve shared goals. The company tries to accumulate
their experience and abilities, enabling them to become the pillars of the company,
helping to achieve company strategies (Business Critics, 2010).

Nestlé spent three decades building a beloved noodle brand in India. Then
the world’s biggest food and beverage company stumbled into a public
relations debacle that cost it half a billion dollars. A cautionary tale of
mangled crisis management on an epic scale.
It was the middle of the night when the jangle of his cellphone woke Sanjay
Khajuria from a deep sleep. In the few seconds it took him to get his bearings—to
remember he was in a Manhattan hotel room and not at home in his bed in Delhi—
the Nestlé executive had an unsettling thought: Could this be about Maggi?
Khajuria is not accustomed to receiving urgent, late-night phone calls. As head of
corporate affairs for Nestlé India, he typically divides his time between handling
routine regulatory issues and trumpeting the company’s achievements in “creating
shared value”—the approach to corporate social responsibility that Nestlé espouses.
In fact, Khajuria, 51, was in New York to represent his company in a shared value
leadership summit, for which Nestlé was a sponsor.
Virtually everything in his world had appeared to be in order when he boarded his
flight to New York. There was just one pesky issue to clear up. Health officials in
one of India’s 29 states had raised questions after testing a sample of one of Nestlé
India’s bestselling products: Maggi 2-Minute Noodles.
Nestlé, the world’s largest food and beverage company, has sold Maggi
(pronounced “MAG-ee”) in India for more than 30 years, and the brand’s ubiquity
and cultural resonance on the subcontinent is something akin to Coca-
Cola’s KO 0.45% in the U.S. In 2014, Indians consumed more than 400,000 tons
of the instant noodles—marketed in 10 varieties, from Thrillin’ Curry to Cuppa
Mania Masala Yo!—and Maggi accounted for roughly a quarter of the company’s
$1.6 billion in revenue in the country. That year Maggi was named one of India’s
five most trusted brands.

Sanjay Khajuria stands near the Maggi display in Nestlé India’s headquarters in
Gurgaon.
Photo: Vivek Singh—Getty Images Assignment for Fortune
Khajuria’s team had received the regulatory notice about Maggi 10 days earlier. The
food-safety commissioner of Uttar Pradesh, India’s most populous state, with 205
million people, was claiming that a package of the noodles had been found to
contain seven times the permissible level of lead and had recalled the batch. Nestlé
India had quickly responded with test results of its own showing that its noodles
were absolutely safe. Khajuria expected that officials would find his company’s
response compelling and that the issue would soon be resolved. But why was
someone trying to reach him at such a late hour?
He reached for his phone and answered the call. It wasn’t good news. Khajuria’s
colleagues back at home informed him that a widely read Hindi language newspaper
had reported the news about the health notice. More alarming: The article suggested
that state officials would soon recommend that the Food Safety and Standards
Authority of India (FSSAI), the country’s central regulator, should ban Maggi
nationwide.
Khajuria spent the next hour on the phone formulating a game plan. Nestlé would
respond to media requests but not yet issue a public statement. And it would send a
three-person delegation to meet directly with the health officials in Uttar Pradesh the
following day. At this point, allows Khajuria, he was starting to get worried.
When he hung up, he couldn’t get back to sleep. It was May 11, 2015.

What had at first seemed like a minor regulatory annoyance was about to spiral into
a crisis of epic proportions for Nestlé. Within a week the first national news story
about a Maggi health scare appeared in the Times of India. A couple of days later
the hashtag #MaggiBan surfaced on Twitter. Then things got worse.
On June 5, 2015, less than a month after Khajuria’s phone rang in the middle of the
night, India’s central food regulator announced a temporary ban on the manufacture,
sale, and distribution of Maggi noodles. In its order the FSSAI pronounced Maggi
“unsafe and hazardous for human consumption,” a designation supported by 30
government lab tests showing Nestlé’s noodles contained excess amounts of lead.
Nestlé’s noodles are often served by vendors at “Maggi points.”
Photo: Kuni Takahashi—Bloomberg via Getty Images
Enraged consumers wasted no time venting their anger. In some cities protesters in
the street smashed and set fire to packs of noodles and photos of Bollywood stars
who were paid Maggi endorsers. One prominent newscaster compared the situation
to Bhopal, the worst industrial accident of all time, in which a toxic gas leak at a
Union Carbide pesticide plant in central India killed thousands of people.
The Maggi meltdown would prove costly. Nestlé lost at least $277 million in missed
sales. Another $70 million was spent to execute one of the largest food recalls in
history. Add the damage to its brand value—which one consultancy pegged at $200
million—and the total price tag for the debacle could easily be more than half a
billion dollars. And the fallout continues.

Nearly a year after the ban, Maggi noodles are back on shelves in India, but
somewhat precariously so. The product’s future depends on two legal cases that are
working their way through the Indian court system. Both pit Nestlé against the
Indian government.
Nestlé, meanwhile, is still struggling to make sense of what exactly transpired. To
counter the accusations of Indian health officials, Nestlé has produced voluminous
tests—on more than 3,500 samples—that it says show its instant noodles are
perfectly safe, with lead counts well below the legal limit. For a 150-year-old Swiss
business that brands itself as the “world’s leading nutrition, health, and wellness
company,” the idea that it fell short on quality control—especially regarding a
substance with such dire health effects—is anathema. But where, then, did things go
so terribly wrong?

This is a story about precisely that: What happens when a $100 billion global giant
suddenly finds itself in a crisis—and everything it does to get out of it only sinks the
company further into the morass? It’s an epic narrative of a powerful corporation
brought low by an obscure food-safety agency in India and a handful of local
government functionaries. And it’s a case study in irony about a company that, after
a humiliating and existential scandal over infant formula, tried to reinvent itself as a
paragon of corporate do-gooding and transparency—only to discover that no matter
what positive, world-bettering things it did, it couldn’t quite escape its tainted past.
It’s also a cautionary tale about a towering multinational utterly losing its way in
one of the world’s most sought-after markets—India—which, as it happens, has
chewed up and spit out a number of mighty names in the past. Coca-Cola left the
country in 1977 after being asked to hand over its secret formula—only to return
decades later and get banned again, briefly, when pesticides were found in its soda.
Walmart WMT 0.31% scaled back its ambitious plans in India in 2013 when it
realized it couldn’t possibly comply with regulations requiring 30% of its products
to be sourced from small Indian businesses. Just recently Facebook tasted its own

frustration when, in February, Indian regulators rejected its Free Basics web access
program. This is the regulatory thicket that pro-business Prime Minister Narendra
Modi has promised to untangle—and that still seems as impenetrable as ever.
In June 2015, after reports of lead contamination, outraged consumers set fire to
packs of Maggi.
Photo: EPA/Corbis
Despite Nestlé’s long history in India, the company’s executives managed to
misread a fast-moving situation at every point. And in that sense the Maggi episode
is certain to be studied by MBA students and public relations executives looking for
lessons for years to come.
“This is a case where you can be so right and yet so wrong,” says Nestlé CEO Paul
Bulcke. “We were right on factual arguments and yet so wrong on arguing. It’s not a
matter of being right. It’s a matter of engaging the right way and finding a solution.”
He adds: “We live in an ambiguous world. We have to be able to cope with that.”
To understand why Nestlé failed so spectacularly in this instance, it helps to go back
to where the saga started.

A Surprising Test Result
Sanjay Singh bent down and plucked a four-pack of masala-flavored Maggi noodles
from a low shelf at Easyday, a well-maintained mini-mart on the western edge of
Barabanki. It was a Monday morning in March 2014. As one of five food inspectors
in Barabanki, a rough-and-tumble town of 150,000 in central Uttar Pradesh, Singh,
40, typically spends most of his time cracking down on street and festival vendors,
like the biryani rice peddler who was spiking his product with an illegal yellow
coloring.
But on this day he was following orders from the top: The food-safety commissioner
of Uttar Pradesh had called on officers to spend the week raiding supermarkets. The
exercise was in preparation for Holi, a spring celebration in which revelers throw
colored powders and gorge on snacks. The Easyday, just across the road from
Singh’s office and one outlet in a chain that had originally been co-owned by
Walmart, was the inspector’s first stop that morning. Singh was intrigued by the no
added msg label on the bright-yellow package of noodles.
Food-safety officer Sanjay Singh in the Easyday store in Barabanki, where he first
collected a Maggi package for testing in March 2014, kicking off a national scandal.
Photograph by Vivek Singh—Getty Images Assignment for Fortune
Like most Indians, Singh was familiar with Maggi. His daughter liked to eat the
instant noodles, which are sold in a plastic bag containing two components: a patty
of deep-fried noodles, plus the “tastemaker” packet of spices (the same basic
components as the ramen noodle packs that are a staple of the diet of college kids in
the U.S.). Per standard procedure, Singh sent off one of the four Maggi packages to
a laboratory across the state in Gorakhpur for testing.

The results, which arrived a few weeks later, surprised the inspector. The Maggi
sample had tested positive for MSG, or monosodium glutamate, a controversial
ingredient that’s legal in India but requires disclosure and a warning that the product
is not recommended for children under 12 months old. A flavor enhancer often
associated with Chinese food, MSG has for decades been blamed for everything
from bad dreams to cancer—all claims that research has failed to substantiate.
The fact that the Maggi sample contained MSG when its packaging said it didn’t
was a violation punishable with a fine of up to 300,000 rupees—or about $4,500.
Had Nestlé paid the penalty, this story might have ended there.
But when Nestlé India was notified, the company denied adding MSG and appealed
the finding. As a result, in June 2014, a second Maggi sample was sent to a different
government laboratory more than 600 miles away in Kolkata. After a bizarrely long
delay—one that has helped fuel conspiracy theories—the narrative would take a
more serious turn.
An Earthshaking Development
Nearly a year later, in April 2015, Singh was at the office when the lab report on the
second sample finally came back from Kolkata. In a very Indian twist, it had
somehow gotten lost in the mail on its way to Kolkata for a period of months—in
the process taking a 1,200-mile detour through the Himalayas—and once at the lab,
it had apparently ended up at the bottom of a pile.
Singh skimmed the first page of the report and noted that despite the long time gap,
everything appeared to be in order. The sample had arrived with the packet seals
intact, and the test results were signed and stamped by the director of the lab. He
flipped ahead to see whether MSG had shown up again. And, yes, there it was.
“MSG: Present.”
This report was far more comprehensive than the first one. Singh, an organic
chemistry Ph.D., continued methodically down the page until his eye landed on
“Lead: 17.2 ppm.” Could it really be 17.2 parts per million?
He read it again, stunned. According to the report, the Maggi sample contained more
than seven times the permissible level of lead—over 1,000 times more than the
company claimed was in the product.
Lead is naturally present in small concentrations in air, water, and soil, and so it’s
expected that trace amounts show up in the food supply. But this was not a trace
amount. And significant exposure to lead causes wide-ranging and serious health
effects, particularly in children.

Two days later Singh and his colleagues made another morning raid at the Easyday.
This time the purpose was to suspend the store’s license for selling substandard food
and to collect any tainted noodles. But there was no stock to seize. The Maggi
sample that tested positive for lead was from a batch that was long gone from
shelves.
As the food officers spoke with the store manager, the earth started to shake
violently. They all scrambled for cover as packages tumbled from the shelves. When
the shaking stopped, they joked that the earthquake—which they would later
discover had killed thousands of people in neighboring Nepal—was the “Boom!” of
giant Nestlé falling to the ground.
The headquarters of Nestlé India is a five-story, glass-walled building that sits along
an eight-lane expressway in Gurgaon, a commercial district about 30 minutes
outside central Delhi. Though it’s situated in the middle of a sleek, urban area, cows
still occasionally meander across Nestlé House’s front lawn.
Nestlé began doing business in India in 1912. Today the Swiss parent company
owns 63% of Nestlé India, which trades separately on the Indian stock exchange.
Nestlé’s operations in India encompass eight factories, an R&D facility focused on
developing products for the Indian palate, and more than 7,000 employees.
The Kolkata lab report arrived in the mail at Nestlé House on May 1, 2015, along
with a notice from the food-safety commissioner of Uttar Pradesh, and landed on the
desk of technical director Aris Protonotarios, the man in charge of quality and safety
at Nestlé India. A soft-spoken Greek, Protonotarios has spent more than a quarter of
a century with Nestlé. His confidence in his company’s quality assurance systems is
such that, he says, he didn’t consider for a minute that any packages of Maggi could
have left a factory with lead in them. “To anyone at Nestlé, being told your product
is unsafe and hazardous is an insult,” he says. “To me it felt personal.”
Nestlé can trace that attitude all the way back to founder Henri Nestlé, a self-

described “merchant chemist” who started a company bearing his name in 1866 and
was said to obsess over quality. Today Nestlé is one of the world’s biggest and most
profitable corporations, with some 335,000 employees, and products sold in every
country around the world. Last year it ranked No. 70 on Fortune’s Global 500 list.
The multinational has a deep roster of potent brands—including Kit Kat, Nescafé,
Stouffer’s, and, of course, Maggi.
Ne
stle chemists analyze Maggi samples at their Quality Assurance Center in Moga,
India.
Photo: Courtesy of Nestle India
Maggi is actually one of Nestlé’s oldest and largest global brands. It originated in
1863 when Julius Maggi, a Swiss industrialist looking to improve the nutrition of
the nation’s workforce, developed condensed pea and bean soups. Maggi’s
seasonings, soups, and noodles are now sold in 101 countries.
People hardly even ate noodles in India when Nestlé introduced Maggi in 1983. But
the masala spice mix made the taste familiar, and the two-rupee price point made it
widely affordable. Marketed to time-pressed mothers—“Mummy, I’m hungry” went
the product’s popular jingle—Maggi soared to popularity as a children’s snack.
Soon it was mainstream comfort food and “Maggi points”—stands at which vendors
cook up noodles to order—proliferated.
By 2015, Nestlé was manufacturing Maggi at five of its eight Indian factories.
Protonotarios says that lead is among the many safety hazards around which Nestlé
designs its quality assurance system: Each factory regularly checks raw materials, its
water supply, and packaging for lead. Nestlé India also tests its finished product at
each factory every six months, as required by India’s regulations. “The monitoring
process would have picked up something if it wasn’t okay,” says Protonotarios
matter-of-factly. “And if it had, we would have done something about it.”
A check of its records showed no irregularities. So Nestlé India prepared a stack of

its internal monitoring documents and mailed a response to the Uttar Pradesh food-
safety officials on May 5. The company advised the state regulator that, based on its
review, no further action should be taken in the case.
In retrospect, it was a stunningly dismissive reaction—and one that would provide a
blueprint for more drama to come. Because of Nestlé’s inherent confidence in its
own processes and data, it couldn’t imagine that it might have a problem on its
hands. That attitude of detached if polite superiority would irritate officials and
exacerbate Nestlé’s problems, especially when the Indian press got wind of the
story.
“We Just Had No Control”
If the media environment in the U.S. seems overhyped at times, it is downright
somnambulant compared with the round-the-clock free-for-all on the subcontinent.
India has nearly 400 news networks, and the country’s news debate programs often
feature up to eight talking heads on a screen at once. The Maggi controversy would
soon became fodder for hours of lively, breathless punditry.
The evolution from local issue to national debate was blindingly fast. On May 7,
two days after Nestlé India sent its response to the health officials, the first stories
about problems with Maggi noodles began to appear in Hindi language news
coverage in Uttar Pradesh. Shortly after that, employees in Nestlé India’s social
media command center began to notice comments about tainted noodles on Twitter
and Maggi’s Facebook page. Khajuria received his late-night phone call in New
York on May 11. Within a week speculation about a Maggi ban was everywhere.
Yet Nestlé didn’t issue a statement on the matter until May 21, when it asserted that
there was “no order to recall Maggi Noodles being sold” and that the product was
“safe to eat.”
Employees in Nestlé India’s “digital acceleration” room monitor social media.
Why wasn’t Nestlé more proactive? Partly because, as a general rule, the Nestlé way
is to deal with authorities directly rather than through the press. Nestlé India execs
also say they were still gathering facts and doing as much testing of their own as

possible. But what’s the use of data if you don’t explain yourself?
While Nestlé stayed mostly quiet, the story metastasized. One of the first days
Maggi made news, Maarten Geraets, Nestlé India’s head of foods, sat down in front
of a TV in the company’s boardroom to see what was being said. It was nonstop and
not kind; as he flipped channels, he was seized with horror and utter frustration. The
Maggi news was on every channel. “We just had no control.”
To outsiders, too, Nestlé appeared paralyzed—or worse, guilty. Many Indians took
the company’s silence as a sign of wrongdoing. The bigger the story got, the more
scattered the coverage became. Some reports focused on “dangerous” MSG, while
others focused on lead. Rumors spread in the hinterlands that Maggi contained glass
particles—a mix-up due to the linguistic similarity of the words “lead” and “glass”
in Hindi.
The escalating media attention also put pressure on another entity: the FSSAI,
India’s national food regulator. That put a spotlight on Yudhvir Singh Malik, a
career civil servant and the FSSAI’s CEO for just half a year when the Maggi
scandal broke. In his short tenure he had already tangled with multinationals over
labeling and quality issues. However, Nestlé was a reputable global company, and
the evidence against it was limited to two samples, one of which had taken an
unusually long journey to the lab. He decided that more investigation was needed.
š
Yudhvir Singh Malik, then CEO of India’s central food regulator, the day before he
temporarily banned Maggi from shelves in June 2015
Photo: Jyoti Kapoor—Solaris Images
On May 25, Malik wrote to the state food-safety commissioners—each of India’s 29
states and seven union territories has its own fully empowered food and drug
regulator—asking that they test Maggi and submit findings to the FSSAI by June 1.
Officials across the nation dispatched inspectors to grab Maggi packets.
By this time Nestlé’s leadership team in Switzerland was beginning to grasp that

something in India was not unfolding as the team’s data said it should.
From “Technical Matter” to Crisis
For one of the world’s largest consumer-facing companies, Nestlé operates at a
surprising remove, beginning with its geography. “The Centre”—as its global
headquarters is known—is not near a major hub but in Vevey, a sleepy town of
18,000 on the northern shore of Lake Geneva.
Other than through its marketing, Nestlé hasn’t traditionally engaged much with the
wider world. It doesn’t generally seek media attention, and its communications
department is tiny relative to its size. Until three years ago, Nestlé didn’t have a
centralized PR team in the U.S., its largest market.
Chalk it up partly to a natural Swiss reserve, but Nestlé’s aloofness also has to do
with the long shadow cast by the company’s notorious baby formula scandal. In
1974 a non-profit called War on Want published a 12-page pamphlet called The
Baby Killer that excoriated the formula industry for its marketing tactics. In pushing
their products over breast-feeding, the document alleged, companies like Nestlé had
led to the malnourishment and deaths of countless “third world babies.” The entire
industry was targeted, but Nestlé, as the largest formula company, took the biggest
hit. A high-profile boycott of Nestlé’s products ensued. The company tried many
things to stem the criticism, to little avail.
Nestlé’s executives lost their appetite for broad public engagement. “They felt very
quickly attacked,” says Albert Pfiffner, the company’s historian. “It has taken a
generation to overcome this feeling.”
During the past decade Nestlé has embraced a version of corporate civic duty that is
in keeping with its reserved culture: creating shared value, or CSV. The philosophy
is that building a sustainable business naturally generates positive social by-
products. Why bother with one-off charitable initiatives when you can simply invest
for the long term? Today Nestlé execs talk about their business almost exclusively
through the prism of CSV. The company’s 2015 CSV report, which tracks the
company’s 39 societal commitments, from “delivering nutrition information and
advice on all our labels” to “working against corruption and bribery,” was 351
pages; its annual financial report was 176.
Photograph by The Voorhes for Fortune

From his spare, elegant office in the Centre, Bulcke presides over his global
business empire with a sort of mathematical laissez-faire, trusting his company’s
chain of command. A lanky, blue-eyed Belgian fluent in six languages, the 61-year-
old joined Nestlé in 1979 and became CEO in 2008. (He was a surprise pick over
Paul Polman, who is now Unilever’s UL 0.04% CEO.) Bulcke knows that a
company the size of Nestlé is bound to run into controversy now and again. That
explains his favorite aphorism: Tall trees catch more wind.
When he first heard about the Maggi case, says Bulcke, it struck him as a
straightforward technical matter involving testing methods that could be judged and
handled by his capable people in the field. “It was a ‘What is your spectrometer
setting?’ sort of thing,” Bulcke tells me. He says now he was “too Cartesian” in his
thinking.
By the end of May, his communications team was sounding the alarm that the story
was exploding. As he listened to a Maggi crisis conference call on June 2, a couple
of things became clear to Bulcke: He had badly miscalculated, and it was time for
him to jump in.
“You feel it,” he says. “For the morale of the troops, you’ve got to show your nose.”
He left for India the next day.
The CEO’s Terrible 24 Hours
When Bulcke arrived in India on June 4, he found his top managers preparing to
visit the FSSAI. The regulator had called at 10:30 that morning and asked them to
come to a meeting at 1 p.m. The executives were unclear on the agenda, but they
didn’t think that Bulcke should go. They feared he was “too senior.”
Bulcke has a breezy, authoritative demeanor, and he dismissed any such notion.
“Come on, that’s what I’m here for,” he said.
“This is a case where you can be so right and yet so wrong. We were
right on factual arguments and yet so wrong on arguing.”—Paul Bulcke
Bulcke and his team arrived and sat down across a conference room table from
Malik and another FSSAI official. The mood was tense. Nestlé India’s team
complained it had not received test reports from the states and argued that tests were
being done improperly. Malik fired back that Nestlé would have to ask the states for
their test results and that their procedures were proper.
As he listened, Bulcke realized how far apart the two sides were. Looking back, he
compares the meeting to watching a house burn down while two firefighters argue
over the fire’s cause.

Sensing the regulator might do something drastic, Bulcke says he decided what to
do almost on the spot: Nestlé needed to launch a voluntary recall and pull every
variety of Maggi off the shelves.
Nestlé CEO Paul Bulcke
His resolve was bolstered that afternoon when states began to ban the noodles. The
first ban came from Uttarakhand, a state in northern India, where Nestlé had one of
its five Maggi factories. Bans in five other states and territories quickly followed—
including Delhi, the one that contains the national capital.
Bulcke gathered his management team in Nestlé House’s fifth-floor boardroom and
explained his thinking. Nestlé had lost the regulators and had lost the media. The
only way to regain control of the narrative—and win back consumers’ trust—would
be to pull Maggi and relaunch.
Executing the recall would be a gargantuan task. The product they were recalling
was in 3.5 million outlets. Plus, it was India, with all its red tape. Each of the 29
states is like its own country, meaning that trucks have to stop at each border for
inspection. Vehicles can enter cities only during certain hours, and to do so they
must be a certain size. Even with 38 distribution centers across the country, some of
Nestlé India’s products take 13 days to get to market. The company would need to
reverse-engineer this process. And it would have to do something with all those
noodles. Nevertheless, Bulcke was determined about the course of action.
Nestlé set a press conference for noon the next day to announce the news, and at
12:30 a.m. the company sent a short statement to the Indian stock exchange: “In
spite of Maggi noodles being safe, Nestlé India decides to take the product off

shelves.”
Khajuria notified Malik a short while later by text: “We have decided to take Maggi
noodles off shelves.” Bulcke went to his hotel and, he says, “got a good night’s
sleep.”
An Uphill Journey Begins
The head of the FSSAI was not satisfied with the developments. Though Maggi
would be pulled from the market, Nestlé’s press statement insisted on the product’s
safety. Meanwhile, he had mounting evidence from labs around the country
indicating otherwise.
So the regulator countered Nestlé’s move by implementing a temporary national ban
of Maggi.
Aware of Nestlé’s 12 p.m. press event, Malik punched out an eight-page order
calling on Nestlé to respond within 15 days with a reason that product approval for
all varieties of Maggi noodles should not be revoked. He fired it off to Nestlé India
by email at 11:15 a.m., and the news broke while Bulcke was meeting the media.
The press conference took place in a high-ceilinged hall in Delhi’s Oberoi Hotel.
Despite the short notice, journalists packed the room, and Indian news channels
broke into their programming to air the CEO’s remarks.
At a tense press conference in Delhi on June 5, 2015, Nestle CEO Paul Bulcke
explained the decision to recall Maggi.
Photo: Ajay Agarwal—Hindustan Times via Getty Images
Bulcke kept his opening comments to five minutes and a few key points: Maggi is
safe; consumer trust has been shaken by unfounded concerns; we’re working with
authorities; we are committed to India.
Then the floor was opened up to questions, and the room erupted as the 200
journalists demanded answers from Bulcke: Why had it taken Nestlé two weeks to
make a statement? If Maggi was safe, was he saying the government labs were
wrong? No, he replied, he wasn’t criticizing the government’s science. For 45
minutes he gulped Perrier from a goblet and managed to keep his cool.

Bulcke flew out later that evening. He had been in India for roughly 24 hours, and
things had seemingly gone from bad to worse. But the CEO left the country feeling
happy and confident that things were about to turn around: “It was the first step of
an uphill journey.”
We’ll Settle This in Court
The next step would be played out in the courts. The FSSAI had given Nestlé India
15 days to respond to its order, which threatened the company with permanent loss
of Maggi’s product approvals. Responding with an explanation was one option;
suing was another.
Filing suit against the FSSAI, the agency that regulated not just Maggi but also
Nestlé India’s many other products, was risky. But six words in the FSSAI order
were especially troubling to Nestlé’s executives: “unsafe and hazardous for human
consumption.” They felt the phrase exposed them to legal action. Millions of people
in India ate Maggi. What was to stop anyone who had health problems from
blaming Nestlé’s noodles?
On June 11, six days after the government issued its temporary ban, Nestlé India
filed suit against the FSSAI in Bombay High Court.
The Maggi proceedings spanned the summer months and became a media spectacle
of their own. At the heart of the case was whether the government order to ban the
sale of Maggi was legal.

Nestlé’s case was this: The FSSAI hadn’t given the company a proper hearing and
had failed to follow “principles of natural justice” by issuing its order. The order,
Nestlé argued, caused the company heavy financial losses and did irreparable
damage to its reputation.
Further, Nestlé said, the rationale for the order was bogus, having been based on
select findings of unaccredited laboratories that used improper testing methods. The
FSSAI based its ban on test results for 72 samples of Maggi done by various state
labs, 30 of which were found to have elevated levels of lead, though none nearly as
high as the report that kicked off the crisis. But Nestlé argued that the government
had ignored overwhelming evidence—the roughly 2,700 lab reports Nestlé had
submitted from internal and external labs at that point—that indicated lead levels
were under the permissible limit.
The government case asserted that the order for the temporary ban was an urgent
matter of public safety and that the regulator did give Nestlé a hearing when Malik
met with the company’s officials on June 4.
Moreover, the government argued, the order caused Nestlé no undue harm: The
company had already recalled Maggi. The government’s ban was temporary,
covering just a 15-day period. All Nestlé had to do was respond satisfactorily—

which it couldn’t do because the product wasn’t safe. Nestlé had decided to
incinerate the 37,000 tons of Maggi it had collected. Why would a company recall a
perfectly safe product and burn it? The government order hadn’t mandated that
Nestlé get rid of the noodles. (Though regulators had okayed it.) That act was
tantamount to a cover-up. Likewise, Nestlé’s many thousands of test results could
have been easily fabricated.
The Big Question
Was there lead in Nestlé’s noodles?
The widest, most puzzling, and most important divide in the Maggi affair is over
that seemingly simple question. Several state governments in India tested Maggi
samples and reported elevated levels of lead. Nestlé ran its thousands of tests and
declared that no problem existed. Who was right?
Testing for lead is straightforward with sophisticated lab equipment, the findings
unequivocal and reliable. Government lab analysts, though paid less than corporate
colleagues, are a trained and educated group, says Ashwin Bhadri, CEO of Equinox
Labs, one of India’s leading private lab companies. That said, he acknowledges the
labs are dreadfully underresourced and stuck with antiquated instruments. “Some
are 20 years old,” he says. “They don’t have the manpower or the chemicals to run
the equipment. It’s really sad.”
A week after the Maggi ban, a former director of Kolkata’s Central Food
Laboratory, Satya Prakash, reportedly sent a letter to the Prime Minister’s office and
the nation’s health minister expressing concern over the nation’s lack of noodle-
testing standards. In 2013, Prakash, who retired in 2009, published a scathing article
in which he declared “the working conditions of labs are anything but functional.”
In stark contrast, Nestlé’s Quality Assurance Center in India sits, like a glass jewel,
at the center of the company’s well-manicured campus in Moga. The day I visited, a
scientist in a crisp white lab coat met me in the building’s foyer. He greeted me
warmly before turning quickly, and with discernible bitterness, to the differences
between a government lab and the pristine, state-of-the-art space he was about to
show me. Government labs are likely to use cheap household blenders to mix food
samples, he said; Nestlé has a $5,000 contamination-proof titanium blade. Nestlé
uses pricey porcelain bowls to hold substances, whereas the government labs
probably use inexpensive ceramic ones that leach, and so on. Standing there, it was
hard to imagine contamination happening in such an environment.
Yet Nestlé’s money and its vaunted commitment to quality haven’t prevented other
safety-related recalls. In March the company voluntarily recalled 3 million
DiGiorno, Stouffer’s, and Lean Cuisine products in the U.S. “because of the
potential presence of glass pieces.”

Many Indians, including professionals with knowledge of the food industry,
continue to suspect that there was something wrong with Maggi. They find it hard to
fathom that so many government tests could be wrong, and they suggest the food
giant got a little sloppy in one of its factories, where lead-contaminated water or raw
material or old equipment—possibly combined with the lax oversight of contract
workers—caused the problem.
In the absence of a definitive answer, the next best thing would be a legal ruling.
Conspiracy Theories Abound
While the High Court of Bombay weighed the facts of the Maggi case, the affair
stirred up debate around what was already a hot-button question in India: Is the
presence of big foreign companies good or bad for the country?
Enter the yogi.
Suspicion of multinational companies in India is deeply rooted and very much alive
—perhaps most prominently in the hulking yet limber form of Baba Ramdev, a
colorful yoga guru and the face of India’s fastest-growing consumer goods
company. Ramdev, 50, has long hair and a dark, bushy beard; he became famous in
the early 2000s by leading TV yoga workouts in a saffron-colored loincloth. He
parlayed his celebrity into the launch of Patanjali Ayurved, an ayurvedic medicine
company, in 2006. Before long his followers were flocking to his ever-expanding
line of all-natural products. (Toothpaste and ghee are his top sellers.) The goods are
dirt cheap and marketed as swadeshi, or Indian. Increasingly he is taking market
share from global giants like Colgate and Unilever.
Ramdev is vociferously anti–multinational corporations. He rails against the money
they drain from the country and the ills they’ve introduced to India, calling Coca-
Cola and Western-style processed foods “slow poison.”
As Nestlé’s troubles escalated, the coincidences were too good for many on social
media to resist. Twitter and WhatsApp buzzed with giddy speculation that Baba
Ramdev himself was behind the scandal or that he would swoop in to the rescue by
launching his own Patanjali instant noodles. Finally, in mid-June, Ramdev said that
after months of research—wholly unrelated to Maggi—Patanjali planned to launch a
line of locally sourced whole-wheat noodles in late 2015.

Y
oga guru and entrepreneur Baba Ramdev capitalized on the Maggi crisis to launch
his own line of “lead and MSG-free” instant noodles last November.
The guru didn’t miss a chance to get in a shot at Nestlé. “Maggi should apologize,”
said Ramdev in early June. “And if the government takes strong measures, the
company should be asked to pack up and leave the country. We don’t need a
company that serves poison.”
On June 30 the High Court of Bombay offered Nestlé some relief: It allowed the
company to resume manufacturing Maggi for export. Singapore and Australia had
already pronounced the noodles safe for sale and consumption; Canada, the U.K.,
and the U.S. would do so as well in the following weeks. For many it raised the
question: If Maggi was fine for consumers in those developed nations, why not for
the people of India?
Others reached a different conclusion. Of course the exported product was safe, I
was told by some people—a few of them Indian officials. Nestlé sells a higher-
quality product in other countries, these people claimed; in India, where the
population and authorities have traditionally been less discerning, it pushes
substandard goods. Not only was Nestlé guilty of selling tainted noodles, these folks
asserted, but it did so willfully and then engaged in a cover-up.
“Maggi should apologize, and if the government takes strong measures,
the company should be asked to pack up and leave the country. We don’t
need a company that serves poison.”—Baba Ramdev
That’s just a single strain of conspiracy theory among many. One of the most

common things I was told while in India was some form of this: “There are some
politics behind this case.” When I’d push people further on this point, accounts
diverged wildly. One person might point to strained diplomatic relations between
India and Switzerland over banking secrecy. Another might suggest that Nestlé had
been set up after refusing to make “political contributions” to corrupt officials.
The possibilities are endless, and most of them have been debated in some corner of
India. But Kilbinder Dosanjh, a director at risk-consulting firm Eurasia Group, says
the Maggi case is less a story of unique political dynamics than a classic tale of
institutional weakness in India. In that way it is the opposite of conspiracy. It’s
about regulatory incoherence. “When it came to tests of these noodles, there were
multiple levels of institutions dealing with this,” he says. “You had state and central
bodies that complicated who was responsible and what standards they were using.”
Good News at Last
While Nestlé waited for the high court to render its verdict, the company took steps
to up its communications game. Though it stayed silent on matters before the court,
the company created a Maggi information hub on its website, where visitors could
view its lab reports and read up on MSG. It publicized its recall efforts. And it
invited journalists to tour its Quality Assurance Center in Moga.
Nestlé India also got a boost in late July from the arrival of Suresh Narayanan as its
new top executive. Narayanan, 56, had spent the previous decade covering the globe
for Nestlé. In April 2015 he’d been transferred to the Philippines after a lively four-
year stint running Nestlé’s businesses in Egypt, Libya, and Sudan. But after the
Maggi situation blew up, Narayanan got a call from his boss, Wan Ling Martello,
the head of Nestlé Asia, Oceana, and Africa, asking him to move again. “I need you
in India,” she told him.
Suresh Narayanan in his office at Nestle’ House in Gurgaon, outside New Delhi,
India.

The ebullient Narayanan, an Indian himself, had begun his career with Nestlé in the
sales department in Gurgaon, and he still knew many of Nestlé India’s employees
and the market. He had also proved to be an expert and versatile crisis manager. In
Singapore, for example, he took over just as the financial crisis hit and still managed
to grow sales in a mature market.
Narayanan wasted no time signaling that he would be leading Nestlé India in a very
different way. He gave an interview to the Indian press the same day he arrived. A
week later he spoke for 45 minutes live on CNBC, declaring his first mission was
“to bring Maggi back.”
“When you manage an issue in India, you’re dealing with a certain set of
known entities but also a much larger set of unknown entities. It’s like
being shot at in the dark.” —Suresh Narayanan
His words proved prophetic.
On Aug. 13, a couple of weeks after Narayanan’s arrival, the High Court of Bombay
delivered its judgment in the case. In a ruling that was unusually long—145 pages—
the court sided with Nestlé. It overturned the ban, declaring that the FSSAI had
acted arbitrarily. The judgment allowed Nestlé India to resume sales of Maggi, on
the condition that another round of samples—90 in all—be tested for lead and
cleared in the following six weeks by three labs accredited by the National
Accreditation Board for Testing and Calibration Laboratories.
Nestlé India’s executives had crowded into the boardroom to watch TV coverage of
the decision. Narayanan was texting updates to Martello back in Vevey until it
became clear to him that it was good news. Then he sent her one more message:
“WE WON WE WON WE WON WE WON,” and added smiley emoticons.
A Nation Gets Its Noodles Back
The relaunch of Maggi was scheduled for Monday, Nov. 9—five months and four
days after the government ban, and an auspicious day in India known as Dhanteras.
The first day of Diwali, the Hindu festival of lights, it carries associations of well-
being and prosperity.
Nestlé had gotten official clearance from the Bombay High Court in October and
spent weeks preparing. Nestlé India was eager to build demand after the product’s
months-long absence from shelves. The company’s marketers began with young
people, who had proved a forgiving and fiercely loyal fan base; they had been
clamoring for Maggi’s return practically since the trouble began, and for them
Nestlé launched a #WeMissYouToo campaign on YouTube—a series of minute-
long spots starring handsome bachelors who are forlorn without their instant
noodles. To court mothers, it got real moms to give video testimonials about why
they still trusted Maggi.

Maggi Noodles come off the manufacturing line after the ban lifted in one of
Nestle’s 5 Indian factories.
Photo: Courtesy of Nestle India
For symbolic reasons Nestlé delivered the product as widely as possible on day one.
Trucks loaded with instant noodles and festooned Indian-style with colorful tassels
and decals rolled out just after midnight. The no added msg label on the packages
had been replaced by a new logo reading “Our commitment to goodness you can
always trust.” Narayanan gave dozens of interviews repeating some version of a
simple message: “Maggi is safe, was safe, and always will be safe.” There were
Maggi-eating celebrations at Nestlé sites across the country.
They celebrated in Vevey too. Maggi was served at an executive board meeting. The
instant-noodle dish was the second of four courses, between Terrine Saint-Hubert
and fried sturgeon served with crème de caviar d’Aquitaine.
Taking the Long View
Maggi noodles may be back on shelves, but the Maggi saga is far from over. The
Monday after the big relaunch, the FSSAI filed an appeal of the Bombay court
decision in India’s Supreme Court. There is another legal case pending. On Aug. 12,
2015, the day before the ban was lifted, the government had sued Nestlé India for
$99 million. The complaint, lodged on behalf of consumers by the National
Consumer Disputes Redressal Commission, alleged the same basic things the
FSSAI’s order had: that the company had sold unsafe products and misled
consumers through its advertising practices. Both cases continue to work their way
through the Indian courts.
Meanwhile, Nestlé has a wily new competitor in the noodle market. A week after
the Maggi relaunch, Baba Ramdev introduced his new Patanjali noodles. They’re

made from atta, a “healthier” whole-wheat flour, and cost 10 rupees less than
Nestlé’s Maggi equivalent. As the robed guru whipped up a batch for media
onlookers in a Delhi mall, he noted that Patanjali’s product was lead- and MSG-free.
Then, for the cameras, he enthusiastically slurped some down, noodles tangling in
his beard.
Maggie noodles return to Bhopal, India in November 2015.
Photo: Sanjeev Gupta—EPA/Corbis
The fates of the other characters in the Maggi drama have diverged. Sanjay Singh,
the inspector whose curiosity about MSG kicked off the whole crisis, received a
public service award in Barabanki in January for his good work. Malik, the CEO of
the FSSAI, was shifted out of his position a month after the Bombay High Court
decision and transferred to India’s central planning commission, where he was given
a job as an “additional secretary.” Meanwhile, some government officials remain
incensed with Nestlé, particularly over the arrogance of its recent marketing efforts
—the “Maggi is safe, was safe, and always will be safe” language irks them. For
those burnishing Brand India, the episode can’t go away fast enough.
As for Nestlé, Bulcke and his team acknowledge that they didn’t play the Maggi
crisis perfectly. But they defend their decision-making generally—particularly the
choice to privilege communication with regulators over reaction to the media. They
talk about how they managed the crisis with long-term rather than short-term
outcomes in mind. Nestlé has been in India for 100 years, Bulcke stresses, and it
wants to be there 100 more. You can’t achieve that in a country if you blow up your
relationship with the regulators.
In any case, the global giant was given an important lesson in the unpredictability of
one its most promising growth markets. “When you manage an issue in India,
you’re dealing with a certain set of known entities but also a much larger set of
unknown entities,” says Narayanan, the Nestlé India managing director. “Who is
going to set off what bullet at you is what you have to keep anticipating. Where the
hell is this next bullet going to come from? It’s like being shot at in the dark.”

Recommendations and Conclusion
 Strategic expansion in big emerging markets
With the rapid economic development and increasing purchasing power of big
emerging markets, for example BRICS, Nestlé should keep seeking its competitive
advantages with differentiation to satisfy targeted customers. Nestlé official
website shows that the company’s sales from Asia, Oceania and Africa only
amounted to 28% of its 2013 annual revenue, while 28% came from Europe, and
44% from America. Obviously, there is big market potential in developing
countries, especially China and India. Announced by Nestlé’s CEO Paul Bulcke,
China is the 2nd
largest market to Nestlé as of 2013, and will be given great
attention in the company’s strategic planning. In doing so, Nestlé can grasp a larger
market share in these big emerging markets and stay ahead of its competitors. It is
highly suggested that Nestlé’s top management allocate more professional and
experienced middle-level managers or senior executives to support the function of
product localization and innovation, marketing promotions, staff training and
quality control. Meanwhile, Nestlé should also put more priority on business
expansion by launching innovative products with local preference and recruiting
local talented candidates who are familiar with the specific markets.
 Organizational revitalization in strategy and structure
Through developing functional departments, Nestlé needs to stress stringent
control on product quality, production technology and purchasing of raw material.
As stated earlier, Nestlé adopts a global matrix structure in which business units and
corporate headquarters contact each other by special modes, instead of
administrative channels. Sometimes, the individual business might be out of control
in product quality or ethic compliance because of profit-seeking in the short-term.
Nestlé should invest in replenishing, augmenting and upgrading the
company’s resource base. It is suggested that Nestlé identify and classify its
resources within the three primary categories: physical capital, human capital and
organizational capital.
Compared to its key competitors -- Unilever, Kraft, Group Danone and General
Mills, the management team has to evaluate and select a strategy or collection of
strategies which best exploits the firm’s resources and capabilities related to
external environment. This situation is especially evident in developing countries
where government policies or economic situations are ambiguous and uncertain.

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