Nestlé’s Half-Billion-Dollar Noodle Debacle in India

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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. 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. 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. And the fallout continues. Nearly a year after the ban, Maggi noodles are back on shelves in India, but somewhat precariously so. 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, samples—that it says show its instant noodles are perfectly safe, with lead counts well below the legal limit. But where, then, did things go so terribly wrong? This is a story about precisely that: Coca-Cola left the country in 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.

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 , after reports of lead contamination, outraged consumers set fire to packs of Maggi. 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.

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. 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 As one of five food inspectors in Barabanki, a rough-and-tumble town of , 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. 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 , kicking off a national scandal.

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: 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. 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.

Had Nestlé paid the penalty, this story might have ended there. As a result, in June , a second Maggi sample was sent to a different government laboratory more than miles away in Kolkata. After a bizarrely long delay—one that has helped fuel conspiracy theories—the narrative would take a more serious turn. Nearly a year later, in April , 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,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. This report was far more comprehensive than the first one. Singh, an organic chemistry Ph.

He read it again, stunned. According to the report, the Maggi sample contained more than seven times the permissible level of lead—over 1, times more than the company claimed was in the product.

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.

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. Photograph by The Voorhes for Fortune. 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.

Nestlé began doing business in India in The Kolkata lab report arrived in the mail at Nestlé House on May 1, , 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. Last year it ranked No.

Courtesy of Nestle India. People hardly even ate noodles in India when Nestlé introduced Maggi in But the masala spice mix made the taste familiar, and the two-rupee price point made it widely affordable.

By , 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.

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. If the media environment in the U. 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.

Khajuria received his late-night phone call in New York on May Within a week speculation about a Maggi ban was everywhere. 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. While Nestlé stayed mostly quiet, the story metastasized. 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. To outsiders, too, Nestlé appeared paralyzed—or worse, guilty.

The bigger the story got, the more scattered the coverage became. The escalating media attention also put pressure on another entity: 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. Officials across the nation dispatched inspectors to grab Maggi packets. In a non-profit called War on Want published a page pamphlet called The Baby Killer that excoriated the formula industry for its marketing tactics.

The company tried many things to stem the criticism, to little avail. During the past decade Nestlé has embraced a version of corporate civic duty that is in keeping with its reserved culture: 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.

A lanky, blue-eyed Belgian fluent in six languages, the year-old joined Nestlé in and became CEO in 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.

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. The regulator had called at Bulcke has a breezy, authoritative demeanor, and he dismissed any such notion. We were right on factual arguments and yet so wrong on arguing. The mood was tense. 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. 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.

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.

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