Im Project

7/23/2019 Im Project

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INTRODUCTION

Why Organizations Focus on Customer Satisfaction?

Businesses monitor customer satisfaction in order to determine how to increase their customer

base,customer loyalty, revenue, profits, market share and survival. Although greater profit is

the primary driver,exemplary businesses focus on the customer and his/her experience with

the organization. They work tomake their customers happy and see customer satisfaction as

the key to survival and profit. ustomersatisfaction in turn hinges on the !uality and effects of

their experiences and the goods or services they receive.

Customer Satisfaction

The definition of customer satisfaction has been widely debated as organizations increasingly

attempt tomeasure it. ustomer satisfaction can be experienced in a variety of situations and

connected to both goodsand services. "t is a highly personal assessment that is greatly affected

by customer expectations. #atisfactionalso is based on the customer$s experience of bothcontact with the organization %the &moment of truth' as itis called in business literature( and

personal outcomes. #ome researchers define a satisfied customer withinthe private sector as

&one who receives significant added value' to his/her bottom line)a definition that mayapply

*ust as well to public services. ustomer satisfaction differs depending on the situation and the

productor service. A customer may be satisfied with a product or service, an experience, a

purchase decision, asalesperson, store, service provider, or an attribute or any of these. #ome

researchers completely avoid&satisfaction' as a measurement ob*ective because it is &too

fuzzy an idea to serve as a meaningfulbenchmark.'+ "nstead, they focus on the customer$s

entire experience with an organization or service contactand the detailed assessment of that

experience.

or example, reporting methods developed for health care patient surveys often ask customers

to ratetheir providers and experiences in response to detailed !uestions such as, &-ow well did

your physicians keep you informed' These surveys provide &actionable' data that reveal



ustomer satisfaction is a highly personal assessment that is greatly influenced by individual

expectations#ome definitions are based on the observation that customer satisfaction or

dissatisfaction results fromeither the confirmation or disconfirmation of individual

expectations regarding a service or product. To avoiddifficulties stemming from the

kaleidoscope of customer expectations and differences, some experts urgecompanies to&concentrate on a goal that$s more closely linked to customer e!uity.' "nstead of

askingwhether customers are satisfied, they encourage companies to determine how customers

hold themaccountable ustomer satisfaction, a business term, is a measure of how products

and services supplied by acompany meet or surpass customer expectation. "t is seen as a key

performance indicator within businessustomer satisfaction depends on the product$s

performance relative to a buyer$s expectation, thecustomer is dissatisfied. "f preference

matches expectations, the customer is satisfied.

"f preference isexceeds expectation, the customer is highly satisfied or delighted outstanding

marketing insurance companiesgo out of their way to keep their customer satisfied. #atisfied

customers make repeat purchases insuranceproducts and tell other about their good

experiences with the product. The key is to match customerexpectations with company

performance. #mart insurance company$s aim to delight customers by promisingonly what

they can deliver, then delivering more than the promise. onsumers usually face a broad array

ofproducts and services that might satisfy a given need. -ow do they choose among these

many marketingmakers offers

onsumers make choices based on their perception of the value and satisfaction that

variousproducts and services deliver.

ustomer value is the difference between the values the customer gains from owning and

using a productand the costs of obtaining the products customers from expectations about the

value of various marketingoffers and buy accordingly. -ow do buyers from their

expectations ustomer expectations are based onpast buying experiences, the opinion of

friends and marketer and competitor information and promises.ustomer satisfaction with a

purchase depends on how well the product$s performance lives up to thecustomers$

expectations. ustomer satisfaction is a key influence on future buying behaviour. #atisfied

customers buy again and tell others about their good experiences diessatisfied customer$s of

ten switches to competitors and disparage the products to others An insurance provider open



therefore not included in the rankings,achieved a satisfaction ranking e!ual to that any

insurance company.

"n general, customer satisfaction with auto insurance providers decreased significantly, with

01 of the02 companies surveyed decreasing in satisfaction from the previous year. "nsurance is

the only carrier thatdid not experience a decline in satisfaction. Though consumers report theirinsurance carriers are resolvingtheir claims and problems faster. Businesses survive because

they have customers who are willing to buytheir products or services. -owever, many

businesses fails to &check in' with their customers to determinewhether they are happy or not

and what it will make to make or keep them happy.According to 3.# consumers$ affairs

department, it costs five times more to gain a new customer thanto retain an existing one.

4ther studies have repeated that with *ust a five percent increase in ustomerretention$s a firm

can raise its profitability customers spend salary at first, but with succeeding years of

goodexperience, they will spend increasingly more.5epending on the industry and the nature

of the bad experience, dissatisfied customers will complainto 21 to 01 friends and

ac!uaintances, which is three times more than those with good experiences are.-ence, the

negative information is influential, and consumers generally place significant weight on it

whenmaking a decision. "f that is not the reason enough, fierce competitor is needed more and

more todifferentiate firms from one another. 6ith technology available to virtually every one

today, the traditionalfeatures and cost advantages are no longer relevant. #till product and

service !uality provides an enormousopportunity to distinguish a firm from the rest. The

7apanese have recognized this and have though us toexpect !uality. Today$s consumers do,

and they know more about products and services than they ever did. ustomers are the best

source of information. 6hether to improve an existing product or service orwhether firms are

planning to launch something new. There is no substitution for &getting it from horse$smouth'

6hen you talk to your customer directly, to increase your odds for achieving success you

&mistakeproof'your decisions and work on what really matters. 6hen you routinely ask the

customers for feedbackand involve them in business they, in turn, become committed to the

success of your business.



Customer Satisfaction Measurement:

A basic and effective base line customer satisfaction survey program should focus on

measuring

customer perceptions of how will the company delivers on the critical success factors anddimensions of thebusiness as defined by the customers8

For e!am"#e:

• #ervice 9romptness

• ourtesy of #taff

• :esponsiveness• 3nderstanding the customer problem, etc.

The findings of the company performance should be analyzed both with all customers and by

key segmentsof the customer population. The essential starting point for ustomer

#atisfaction ;easurement %;#( isexploratory research. #ince satisfaction is about an

organization$s ability. To meet customer re!uirement onehas to start by clarifying withcustomers exactly what those re!uirements are. This is done throughexploratory research

using focus groups or one to one depth interviews.

Two main factors determine the accuracy of ;#. The first is the asking the right !uestion

and thesecond is the asking them to the right people sample of customers which accurately

reflects the customerbase.

Three things decide the accuracy of a sample. They are8.

• "t must be representative.

• "t must be randomly selected.

• "t must be ade!uate enough.



4rganizations need to retain existing customers while targeting noncustomers. ;easuring

customer satisfaction provides an indication of how successful the organization is at providing

products and/or services to the marketplace.

ustomer satisfaction is an abstract concept and the actual manifestation of the state ofsatisfaction will vary from person to person and product/service to product/service. The state

of satisfaction depends on a number of both psychological and physical variables which

correlate with satisfaction behaviors such as return and recommend rate. The level of

satisfaction can also vary depending on other factors the customer, such as other products

against which the customer can compare the organization<s products. 6ork done by

9arasuraman, =eithaml and Berry %>eonard >( between 2?@ and 2?@@ delivered #:CD3A>

which provides the basis for the measurement of customer satisfaction with a service by using

the gap between the customer<s expectation of performance and their perceived experience of

performance. This provides the researcher with a satisfaction EgapE which is semi!uantitative

in nature. ronin and Taylor extended the disconfirmation theory by combining the EgapE

described by 9arasuraman, =enithal and Berry as two different measures %perception and

expectation( into a single measurement of performance relative to expectation.

The usual measures of customer satisfaction involve a survey with a set of statements using a

>inker Techni!ue or scale. The customer is asked to evaluate each statement in terms of their

perception and expectation of performance of the service being measured.

Metho$o#ogies

American ustomer #atisfaction "ndex %A#"( is a scientific standard of customer

satisfaction.

Academic research has shown that the national A#" score is a strong predictor of Fross

5omestic 9roduct %F59( growth, and an even stronger predictor of 9ersonal onsumption

xpenditure %9( growth. 4n the microeconomic level, research has shown that A#" data

predicts stock market performance, both for market indices and for individually traded

companies "ncreasing A#" scores has been shown to predict loyalty wordofmouth



for more than 011 companies in +G industries and 21 economic sectors. in addition to !uarterly

reports, the A#" methodology can be applied to private sector companies and government

agencies in order to improve loyalty and purchase intent. Two companies have been licensed

to apply the methodology of the A#" for both the private and public sector8 " Froup, "nc.

applies the methodology of the A#" offline, and oresee :esults applies the A#" towebsites and other online initiatives. A#" scores have also been calculated by independent

researchers, for example, for the mobile phones sector, higher education, and electronic mail.

The Hano model is a theory of product development and customer satisfaction developed in

the 2?@1s by 9rofessor Ioriaki Hano that classifies customer preferences into five categories8

Attractive, 4ne5imensional, ;ust Be, "ndifferent, :everse. The Hano model offers some

insight into the product attributes which are perceived to be important to customers. Hano also

produced a methodology for mapping consumer responses to !uestionnaires onto his model

#:CD3A> or :AT: is a service!uality framework that has been incorporated into

customersatisfaction surveys %e.g., the revised Iorwegian ustomer #atisfaction Barometer(

to indicate the gap between customer expectations and experience.

7.5. 9ower and Associates provides another measure of customer satisfaction, known for its

topbox approach and automotive industry rankings. 7.5. 9ower and Associates< marketing

research consists primarily of consumer surveys and is publicly known for the value of its

product awards.

4ther research and consulting firms have customer satisfaction solutions as well. These

include A.T. Hearney<s ustomer #atisfaction Audit process, which incorporates the #tages of

xcellence framework and which helps define a company$s status against eight critically

identified dimensions. or Business to Business %B0B( surveys there is the "nfo Duest box.

This has been used internationally since 2?@? on more than 221,111 surveys %Iov <1?( with an

average response rate of J0.J+K. The box is targeted at Ethe most "mportantE customers and

avoids the need for a blanket survey.



Im"ro%ing Customer Satisfaction

9ublished standards exist to help organizations develop their current levels of customer

satisfaction.

The Internationa# Customer Ser%ice Institute &TICSI' has released The "nternationalustomer #ervice #tandard %T"##(. T"## enables organizations to focus their attention on

delivering excellence in the management of customer service, whilst at the same time

providing recognition of success through a Grd 9arty registration scheme. T"## focuses an

organization$s attention on delivering increased customer satisfaction by helping the

organization through a #ervice Duality ;odel.

T"## #ervice Duality ;odel uses8The ( )*s L

)o#icy+

)rocesses )eo"#e+

)remises+

)ro$uct,Ser%ices+ as -e## as

⇒ "erformance measurement.

The implementation of a customer service standard should lead to higher levels of customer

satisfaction, which in turn influences customer retention and customer loyalty.

Customer Satisfaction Sur%eys:

#urveys and !uestionnaires are the most common marketing research methods. Typically, they

are used to8

• Assess the level of customer satisfaction with a particular product, service or

experience

• "dentify factors that contribute to customer satisfaction and dissatisfactionM

• 5etermine the current status or situation of a product or serviceM

• ompare and rank providersM

• stimate the distribution of characteristics in a potential customer populationM or

• -elp establish customer service standards.

/enefits an$ Cha##enges:



#urveys allow an organization to !uickly capture vital information with relatively little

expense and effort. A primary advantage of this method is its directness8 &the purpose is clear

and the responses straightforward.' Additionally, the information gathered by surveys can

easily be analyzed and used to identify trends over time. The public views consumer product

polls and pollsters in a generally positive manner compared to political and other polls. 4nestudy found that at least sixty percent of the public feels that market research about products

and services has a positive impact on society. #eventy percent consider the people who

conduct such surveys to have positive impacts on societyA ma*or disadvantage of customer

surveys is that the responses may be influenced by the measurement itself through various

forms of bias. or example, most surveys are voluntary, and some researchers have found

differences between survey respondents and nonrespondents.

Iestle "s The 6orlds >argest ood 9rocessing ompany ;arketing ssay



IestlO #.A. is the world$s largest food processing company and is head!uartered in Cevey

#witzerland. The company was founded by -enri IestlO in 2@PP. IestlO ompany had made

several name changes from 2@PP to 2?+J, and finally adopted IestlO #.A. in 2?JJ as the

company$s name. Iestle #.A. has factories or office in almost every region of the world and

markets a wide range of brands. The company is often described as Ethe most multinational ofthe multinationals.E in the current food industry market.

-enri IestlO, also know as of the main originator of condensed milk. "n 2@PJ, he developed

the first milk food for infants and a baby who could not be breastfed was rescued. IestlO$s

invention responded to the need for a nutritionally safe alternative to breast milk. Thus, IestlO

#.A has targeted to build a business based on sound human values and thoughts.

The key to success of the company is due to its huge :esearch and 5evelopment network

within the food processing industry. 6ith :Q5 as the competitive advantage, IestlO has

become the world$s leading nutrition, health, and wellness company. The company is devoted

in continuing to improve the nutritional value of their products while enhancing the flavor.

IestlO achieves this through its brands and with initiatives like the Iutritional ompass and

P1/+1R. ;illions of people choose to consume IestlO products everyday because the company

sustain the !uality as the fundamental ingredient in all of its brands. onsumers choose to

place their trust in IestlO due to the company$s dedication to achieve distinction and turn to

IestlO brands to preserve nutritional balance in today$s fast paced world.

#witzerlandbased IestlO #.A. has the highest ranking as the largest player throughout the

entire world in the competitive position within the food industry. The rating reflects the

company$s competitiveness and market attractiveness. 6ith combined sales of 221 billion

%#wiss ranc( in 011@, IestlO states a diversified business portfolio, being the market leader in

numerous product categories worldwide including bottled water, instant coffee, milk and

cheese products, nutrition and baby food, ice cream, frozen foods, culinary preparations, and



The vision of IestlO :Q5 is long term, it helps shape the future of foods making consumer

needs into research priorities and convert new technologies into consumer benefits, and

services

• 4B7T"C#

IestlO$s purpose is to offer safe, tasty, convenient and nutritious foods to improve health and

wellbeing of consumers of all ages all over the world. To meet the needs and desires of

today$s and tomorrow$s consumers, IestlO is strongly committed to :esearch and

5evelopment %:Q5( to improve existing products and develop new foods with specific health

benefits.

• Iestle "ndia

→ IestlO "ndia is a public listed company

→ IestlO #A holds P0.JPK share

→ ;arket capitalisation "I: +10 bn



• ;

a

r

k

e

t

#egmentation

or getting the maximum market share and respect of the product in

the minds of the consumer, as per observation it is been concluded that Iestle

segmentation is based on two points.

Feographic #egmentation

5emographic #egmentation

• Feographic #egmentation

The company has divided its geographic segmentation in several regions. irst they

have the segmentation of a whole country and from each provincial capital, they

divided it$s areas into north, east, west, south. #o that it could be easy for the company

k ffi i l i l h i

;ilk products and nutrition

%+K(

9repared 5ishes and

ooking Aids %0?K(

hocolates and

onfectionery %2GK(

Beverages %2GK(



Iestle isn$t a supreme !uality product that only the high class uses. The product is for

all classes. "nfant to seniors. There is no age, sex, income and any other kind of

limitation on use of the product. The product is for all. Anyone can use the product as

per need.

• 9roducts of Iestle ;ilk 9roducts

Iutrition 9roducts

9repared 5ishes and ooking Aids

Beverages

hocolate

onfectionery

nergy 5rinks

"nstant Ioodles

• #64T AIA>N#"# "I I#T>

nvironmental scanning has the management scan internal environment and external



• "nternal nvironment

• #trengths

→ B:AI5 #T:IFT-8 Duality brands and products M Top selling brand8 Iescafe,

;aggi, Hit Hat, -oney #tars, 9epsi and etc.

→ 9:453T "II4CAT"4I8

ontinuously introducing new products Q manufacturing is efficiency. #trengths include

anything a company does well and its resources and capabilities for developing a competitive

advantage. The greatest strength of IestlO is culture that is team focused and an open door

policy. IestlO focuses on collectivism and performance orientation attitude which encourages

employees to work harder.

IestlO achieves broader range of products by improving existing and innovating new

products. onsumer demands are switched to changes of taste, colours and design that have

been undertaken to products such as IestlO$s #marties and Hit Hats. The launch of Hit Hat

hunky has proven that creativity and innovation can extend the life cycle of a product



→ 9arent support

→ ompany "mage

→ -igh Duality 9roducts

→ 6elldeveloped strategy

→ ;arket #hare

→ Food marketing skills and services

→ Brand strength

→ :esearch Q 5evelopment Team

→ 9roduct innovation

→ -: department

→ :#A:- Q 5C>49;IT A9AB">"T"#8 have the largest :Q5 network of

any food company in the world, with G0 :Q5 centres and over ,111 people directly

involved in :Q5→ ;A:HT #-A:8 high level of market share and that people all over the world trust

and recognizes Iestle as a big brand name.

Wea0nesses

The lack of certain strengths and things a company does not do well are viewed as

weaknesses. IestlO is poor in targeting some of its products.

IestlO ;ilk9ak is a premium product targeted to upper middle and high class consumers.

;ost consumers in "ndia are from lower middle and poor class. They are not afford to

purchase it due to the premium price.

IestlO has a complex supply chain configuration too and traceability is a critical issue for

IestlO "ndia. -igh standards of hygiene, !uality of edible inputs and workforce are re!uired in

the food industry. ragmented nature of the "ndian market will cause more problems.

>ess 9roactive 8 Iestle being a company is less proactive they create changes

but usually unless competitor doesn$t change they doesn$t adopt a change.

>imited 5istribution hannel 8 Iestle$s ma*or Q bad factor is the limited distribution channel

because they distributes their products to whole seller in their own factory vehicles as compare

to their ma*or competitor they have limited distribution channel but they are maintaining to

penetrate the market as far



;ature markets 8 Iestle is entering into markets that are already mature and can give a tough

competition to new entrants

#upply hain 8 complex chain management

• xternal nvironment

O""ortunities

The external environmental analysis a firm$s new opportunities for profit and growth. IestlO

has a great opportunity for expanding its milk products because "ndia is the seventh ma*or

milk producer in the world with annual output more than 00 billion litres.

#upport from oreign "nvestors 8 Fovernment support foreign investors to invest in "ndia

which eventually is the opportunity for Iestle.

nhance 5istribution hannel 8 Iestle should be working on the distribution network to

enhance the company$s network against its competitor.

hanging #ocial Trend 8 onsumers in urban areas now adopt 6estern lifestyles, especially

the younger generation which is hugely influenced by the 6estern media. Nounger consumers

tend to follow 6estern life style. There was an increase in demand for Iestle products over

the review period.

-ealth conscious 8 "ncreasing health and hygiene awareness among people has greatly

increased sales of nestle products. Both the government and the media have started health

awareness campaigns to make "ndians realizes that consumption of Iestle$s hygienic products

is as essential as eating food. ruit/ *uices Q eatable products are doing very well in both

urban and rural areas.



;arket growth 8 Iestle market expands very fast. A new research proves that in future every

person use @. liters *uices per years Q uses more hygienic products because of the low

hygienic conditions of the environment.

-ealthbased products transition to Iutrition ompany

Threats

Ad*ustments in the external environment present threats to a firm. or an example, shifts in

consumer$s preferences. The ma*or threats to IestlO$s products is 3nilever$s 6alls, a famous

icecream brand. "t is distributed nationwide and has total control within the local market.

Besides, economic slowdown can reduce demand, and inflation is getting higher and higher

causing the purchasing power of consumers is decreasing day by day.

Fovernment :egulation 8 They face problem if government employ taxes on them

which force them to raise the price of their product.

"ncrease in ompetition among ompetitor 8 ompetition among competitors is ma*or

threat to Iestle which can be controlled by the help to retaining more customers Q

making more loyal ones.

Io ntry Barrier 8 There are no many entry barriers so a large numbers of local

companies enter in various Iestle$s product market.

3nfavorable hanges in onsumer 5emand 8 6ith the increase in the competitors

there will be a increase in the number of related products which eventually harm the

Iestle$s market. 5ue to which the consumers demand pattern fluctuate.

>oss of ;arket #hare 8 6hen the market saturates the loss of the market share of

Iestle$s products is there ma*or threat to Iestle.

"nternational ;arketing #tandardsM hanging onsumer Trends

#ector 6oes 8 :ising prices of raw materials and fuelsM "ncreasing packaging and

manufacturing costs



.

12O/32 COMMITM4NT

IestlO firmly supports the principles of the 3nited Iations Flobal ompact and is committed

to reflecting these in its business principles and practices. #earch for trust

IestlO is the world<s leading food and beverage company, with sales of about - J0 billion"t has 0G1,111 employees worldwide and operates 01 factories in @0 countries. "ts products

are available universally, including such remote markets as Iorth Horea, and they are sold

under a number of brands such as IestlO, Iescafe, Iestea, ;aggie, Buitoni, 9errier and

riskies. ompany belongs to more than 011,111 shareholders, todayM IestlO is about twice

the size of its nearest competitor in the food and beverage sector. The company is in business

for over 2G1 years. #ince the days of its founder, brands have been a mainstay of company$s

development and its management strongly believes that is one of the key elements of company

success. A basic reason company has grown to be the world<s largest food company is that

consumers have learned to trust its brands. The IestlO$s challenge was the establishment of a

clear hierarchy of very few corporate strategic global brands that now cover almost all

products, as well as the parallel usage of regional and local product brands and product

denominations.

Additionally company introduced the IestlO #eal of Fuarantee and emphasized corporate



this corporation. "n order to be able to give this !uality and safety assurance, company

developed a IestlO Duality ;anagement #ystem, which collects the experience of our

:esearch Q 5evelopment, on which we spend - @11 million a year.

or a company such as IestlO, economic success depends on winning the public<s approval

every day in every country where our products are sold.

They have always believed strongly that tobacco should never be marketed to youth. "t should

only be marketed to adult smokers, in an appropriate way that takes account of the risks posed

to health. They also believe adults who have chosen to smoke should be able to receive

information about what they buy, and should be able to communicate responsibly with them

about their brands.

Iestle company$s #uccess is built on !uality 8

5ua#ity is the cornerstone of com"any6s success.:veryday, millions of people all over the

world show their confidence in company by choosing IestlO products. This confidence is

based on our !uality image and a reputation for high standards that has been built up over

many years.

very product on the shelf, every service and every customer contact helps to shape this

image. A IestlO brand name on a product is a promise to the customer that it is safe to

consume, that it complies with all regulations and that it meets high standards of !uality.

ustomers expect company to keep this promise every time.

3nder no circumstances company compromise on the safety of a product and every effort

must be made to avoid hazards to health. 9eople, e!uipment and instruments are made

available to ensure safety and conformity of IestlO products at all times.

The customer comes first:

ompany does want to win and keep customers, distributors, supermarkets, hotels,

shopkeepers and the final consumers. They have very different re!uirements. Trade customers

expect excellent service, correct information and timely delivery. onsumers consider taste,

appearance and price when they make their choice. ompany$s task is to understand what



ompany serves various groups of consumers and there is demand for products at different

levels of perceived !uality and price. All customers expect good !uality at a reasonable price.

ustomers are central to company$s business and company always respects their needs and

preferences.

5ua#ity is a com"etiti%e a$%antage:

ompany lives in a competitive world and must never forget that their customers have a

choice. "f they are not satisfied with a IestlO product, they will switch to another brand

ompany$s goal is to provide superior value in every product category and market sector in

which it competes

The pursuit of highest !uality at any price is no guarantee for success, nor is a singleminded

costcutting approach. >asting competitive advantage is gainedfrom a balanced search for

optimal value to customers, by simultaneous improvement of !uality and reduction cost

Duality units at different levels of the organization provide specific support, promote !uality

awareness, assume guardianship and audit the system. Duality departments monitor operations

against agreed standards and must intervene in case of nonconformity.Training and teamwork

are crucial to the successful implementation of high !uality standards. ontinuous trainingensures that everyone understands his tasks and has the necessary skills to carry them out.

Teamwork allows us to achieve results that are greater than the sum of individual efforts.

6e motivate employees by demonstrating management commitment to Duality, by setting

challenging goals and by giving them responsibility and recognition.

9rogress is followed by listening to our customers and by measuring our performance

IestlO<s 9osition on Fene Technology8 rom its inception more than 2G1 years ago, IestlO has

built its business on successfully applying scientific breakthroughs and technological

innovations while taking full responsibility for the !uality and the safety of its products.

Throughout these years IestlO has been manufacturing and marketing products tailored to

meet the diverse needs and preferences of consumers all over the world. IestlO has always

strived to respect these differences and to take them into account in its activities..

Consumer information an$ #a7e#ing8



Fovernance :eport, Articles of Association, ommittee charters etc. "t is also visible in

IestlO<s daytoday business behavior.

The orporate Fovernance :eport covers the following areas8

Froup structure and shareholders

apital structureBoard of 5irectors

xecutive Board

ompensations, shareholdings and loans

#hareholders$ participation

hanges of control and defence measures

Auditors

"nformation policy

Nestle, How Consumer Insights Can Lead Product Development

Nour first association with the uropeanbased Iestle brand may be hot chocolate, but this

ma*or food and agribusiness company holds a portfolio of products that include8

• IescafO %coffee(

• #marties, HitHat %confectionery(

• 9errier, Buxton %water(

• Buitoni %pasta(

• #hredded 6heat %cereal(

;any of these subbrands may resonate with you as delicious, but they may not signal &health

conscious.' The ma*or trend today in the nutrition space is a focus on health and weight loss.

Iestle, with its consumerled product development process, immediately began to develop

products in its verticals that would meet these changes and keep the company$s customer

global base loyal.

http://www.nestle.com/

http://www.nestle.com/



Ask yourself the following !uestions8

• -as anything changed about the way customers consume your products or example,

authors and publishers are now confronted with the realities of electronic publishing.

• -ave expectations about what is acceptable changed in your niche The demand for

increasingly environmentally healthy products has changed the cleaning products

industry forever.

• 5o your customers have access to resources that could turn them into better customers

for your business ;any content publishers are now reaching subscribers in print, via

the web, and on mobile devices L often in the same day.

Maggi Ste-s in 2ea$ an$ MS1 )ot: Contro%ersy o%er In$ia6s fa%ourite instant Noo$#es

Abstract Maggi Ste-s in 2ea$ an$ MS1 )ot: Contro%ersy o%er In$ia6s fa%ourite instant

Noo$#es

The Maggi imbroglio escalated to an unprecedented level with India's food regulator Food

Safety and Standards Authority of India (FSSAI) ordering a total recall of all nine variants of

the bestselling instant noodles brand! This is the first ever recall of a popular food product in

India! The transformation of Maggi from being staple food for students and bachelors to

being declared unfit for consumption has been "uite instant! The #estl$%s maggi noodles were

banned across states after samples of it were found to contain e&cess amounts of lead and

MS a flavor enhancer! The recent controversy around Maggi noodles that has every



The dispute has placed the processed food industry regulators government and even

consumers in uncharted territory!This dispute has raised serious "uestions about processed

food industry *hat caused such a vehement reaction against what was ad+udged as the Most

,owerful -rand in recent times and to answer this "uestions the research cum case study

paper would li.e to e&plore the controversy surrounding around #estl$%s maggi in particularand food industry in general and highlight the shortcomings of food safety apparatus at

central and state level and suggest the strategies to revamp the same

Key Words- Food Safety and Standards Authority of India (FSSAI) Maggi!

Intro$uction

;any fast food items have flooded the markets but noodles remained as the most popular item

of all of them. 3rban and semiurban markets are controlled by ;aggi and other players are

Top :amen and other brands. ;aggi has revolutionized the concept and this product has

gone to ma*ority of the urban households. As an offshoot of this development, noodles have

become very popular in "ndia.

The current version of noodles has been around for over half a century on the global menu

card. acing intense food shortages after world war "", 7apan was forced to import bread from

the 3#, the move didn t sit well the Taiwanese 7apanese business man ;omofuku Ando who‟

after months of flashfrying experiments, finally invented instant noodles, the founder of

Iissin ood 9roducts in 2?@ in 7apan. 9ackaged under the brand name hikin :amen, they

were priced around six times that of traditional 7apanese noodles and were considered a luxury

item %The Times of "ndia, 012(. -owever, in 011 an evidence of the oldest noodles is

believed to be found, which were discovered inside an overturned sealed bowl buried under

three meters of sediment in Dinghai, northwest hina. #cientists determined the +,111 year

old, long, thin yellow noodles were made from broomcorn millet and foxtail millet and show a

fairly high level of food processing and culinary sophistication.

Asia9acific represents the largest regional market for noodles worldwide, as stated by the

new market research report on Ioodles. The region is portended to continue its dominance

FrowthwiseM ;iddle ast/Africa is pro*ected to be the fastest growing regional market for



association in its report 1#o7a# Deman$ for Instant Noo$#es provides a comprehensive

review of the noodles markets, per capital annual consumption Q packs eaten in the world in

a year. %The Times of "ndia, 012(.

The continent<s history of eating noodles is part of the reason why it is more popular here.The world today chomps through some 210.J billion servings of noodles %led by hina Q

-H who contribute to about half of that( a year. 3nlike in other parts of the world, noodles

are a mainstream food category in Asia9acific, making it the single largest producer and

consumer in the world, The region, led by relentless demand from the hinese and -ong

Hong markets, is portended to continue its dominance over the coming years. merging over

the Asian horizon is hina that is recording massive production and consumption figures.

6ith relatively low annual per capita consumption levels compared to other Asian

counterparts, hina represents a potential market for noodles. Ioodles in ;iddle ast/Africa

are experiencing a growth in the demand, with the introduction of newer products into the

market and are poised to grow at a strong compounded annual growth rate %AF:( over the

longterm.



Im"act Factor ;.(<= Case Stu$ies >ourna# ISSN &=;((@A' B 8o#ume + Issue

B >u#y=E(

Figure No.E 1#o7a# Deman$ for Instant Noo$#es

Source: Wor#$

Instant Noo$#es

3ssociation

lobal /emand

means pac.s

eaten in the

world in a year

Figure in million

pac.s

igure Io.2 shows

the Flobal demand

for "nstant Ioodles

hina Q -H is one

the largest consumer

for instant noodles 210.J billion servings of instant noodles were eaten in 012+. 4n average,

everyone on this planet ate 2+ servings in a year. :egardless of the area, age and gender,

instant noodles are loved as U1#o7a# foo$6. "n "ndia it s a‟ comfort foo$6.

=. /ac0groun$

Global Demand of Instant

Noodles(Figures in Million

Packs)5000

0

4500

0

44400

4000

0

3500

0

3000

0

500

0

000

0

!500

0

!3430

!000

05500 5340 5000 4"0

35#0 30$0 "005000 3%0

0



trading as The IestlO Anglo#wiss ondensed ;ilk ompany %xport( >imited, importing

and selling finished products in the "ndian market.

Beginning with its first investment in ;oga in 2?P2, IestlO s regular and substantial‟

investments established that it was here to stay. "n 2?PJ, IestlO set up its next factory atholadi %Tamil Iadu( as a pilot plant to process the tea grown in the area into soluble tea.

The Ian*angud factory %Harnataka(, became operational in 2?@?, the #amalkha factory

%-aryana(, in 2??G and in 2?? and 2??J, IestlO commissioned two factories in Foa at

9onda and Bicholim respectively. IestlO "ndia has commissioned in 011P its Jth factory at

9ant Iagar in 3ttarakhand.

;. Nest#e6s Maggi Noo$#es in In$ian Mar0et

;any fast food items have flooded the markets but noodles remained as the most popular

item of all of them, . ;aggi has revolutionized the concept and this product has gone to

ma*ority of the urban households. As an offshoot of this development, noodles have

become very popular in "ndia.

"t is a far cry from the initial launch days when ;aggi was distributed free in schools to

promote trialM in 2?@1s during the launch period. The company made an attempt in the mid

?1s to change the formulation of the product, which was outright re*ected by the consumers

and the company had to go back to it old formulation and the company had to do a massive

communication campaign. Today "ndia is the largest market for ;aggi noodles. ;aggi

pioneered the concept of packaged instant noodles in "ndia three decades back and despite

several brands entering the fray, dominates the space."T oods< #unfeast Nippee has

garnered 2@01K of the market. -industan 3nilever, which markets Hnorr soupy noodles,

holds the balance share with other brands.




B >u#y=E(

"n 012+, the instant noodles category added on average 2J,111 outlets a month. Ioodles

were among the most widely distributed products in the country, in addition to biscuits,soaps and detergents. According to Iielsen, products in the fast moving consumer goods

%;F( space are sold at close to @. million outlets.

Before the controversy over lead and monosodium glutamate found in ;aggi<s twominute

snack, "ndia was the world<s fifthlargest instant noodles market, valued at :s G,@11 crores

Table Io.2 Nest#e6s mar0et share in In$ia G Maggi6s com"etitors

#ource8

delweiss

research

Table Io

2 shows the

Iestle s‟

market

share in

"ndia in

various

product

categories

Q;aggi s competitors, Iestle has captured @1 per cent of the Ioodles market share, and‟

M311I6S

COM)4TIT

ORS

N4ST246S M3RH4T S93R4

IN INDI3

-orlicks

foodles

F#H

consumer C3T41OR

M3RH4

T R3NH

S93R4in

Hnor

r -3> "nfant ;ilk ereals ?P 2

#unfeast

Nippee "T Noo$#es <.= E

Top :amen "ndo Iissin 6afers And 6hites P@. 2

Maggi /ran$ )ro$ucts 9asta P.J 2V "nstant noodles "nstant offee 2.@ 2

V

"nstant

9asta Tea ream +?.? 2

V Hetchup and #auce

"nfant ;ilk

Iutrition +2 0

V "nstant ;asala Hetchup 0P.? 2

V #oups

4verall hocolate 2@.@ 0



. Contro%ersy o%er 2ea$ an$ Monoso$ium 1#utamate &MS1'

The ood #tandards and #afety Authority of "ndia %##A"( which is entrusted with ensuring

that all food in "ndia is safe, issued an eight page statement pointing out three &ma*or&

violations by Iestle, and kept its options open for prosecution on these counts under the

ood #afety and #tandards Act 011P.

The violations are presence of lead in the product in excess of the maximum permissible

levels of 0. parts per million %ppm(, misleading consumers by printing &Io added ;#F& on

the ;aggi packets and release of ;aggi 4ats ;asala Ioodles in the market without risk

assessment and grant of product approval. #imultaneously, ;aggi producer Iestle "ndia,

which controls over @1K of the instant noodles market in the country , announced a

withdrawal of ;aggi from the shelves because of &unfounded concerns& and &an

environment of confusion for the consumer&. A highlevel Iestle delegation, led by its global

4, met ##A" officials at their 5elhi head!uarters and disputed the claims about lead

being found in the product, the ;#F content and the ;aggi oats noodles issue.

The ##A" rebutted each of these arguments in detail.

According to Iestle, ;aggi noodles packs contain a tastemaker sachet and the noodles cake.

Both parts put together should be tested for lead levels, not separately . ##A" has re*ected

this and said that they will test the product as it is soldin two partsnot as it is processed by

the consumer.

&#tandards have to be applied in respect of each of these two components independently and

have no linkage with the processing of the end product as it is consumed,& it said.

xperts believe this is a grey zone with no clear law A higher lead content of the tastemaker



##A" argued that consumers are going to add water while making ;aggi, so should they

start taking the water also into consideration Fiving details of lead tests from various states,

##A" said that in 5elhi, Fu*arat and Tamil Iadu, lead levels were found to be higher than

permissible levels. "t said that Iestle had claimed in 0120 that lead levels were *ust

1.12Gppm in its noodles. Iow tests were indicating levels as high as 2J.0ppm which isdangerously high. The ##A" also said reports from certain other states were not in the

desired format and hence they had been sent back for clarification.

5ismissing Iestle<s claim regarding the advisory &Io added ;#F& printed on ;aggi packs,

the ##A" said that rules re!uire tha t no additional information than re!uired by law should

be given on packages so that consumers are not confused. "t !uoted from the 3# ood and

5rug Administration %5A( document saying that many food items contain glutamate in

natural form %like cereals( and it is not correct to declare that there is no added ;#F when

such products are being added. This, according to ##A", is misleading the consumers. 4n

the ;aggi oats noodles issue, the ##A" strongly came down on Iestle, saying they

launched a new product without going through the due process of risk assessment and

approval, violating the law.

#o, what happens now The ##A" has called upon Iestle to &reascertain the safety of its

products&as per the law and issued show cause as to why permission to produce ;aggi

noodles should not be withdrawn. Iestle has been asked to report to the




B >u#y=E(

##A" on a daily basis. As indicated by the regulator, food safety commissioners in states are

free to launch prosecutions against Iestle for violation of the law.

(. Causes for concern in "rocesse$ foo$ in$ustry

The dispute has placed the processed food industry, regulators, government, and even

consumers in uncharted territory.

5ata collected by ##A" gathered from all states and union territories clearly shows a pattern

in rise in adulteration over the last few years. 6hile less than 2G per cent of the samples

collected by all states were found to be not conforming to the standards in 012220, the

percentage rose to 2+.@ per cent in 01202G and further *umped to 2@.@ per cent in 012G2+

Also this has resulted into a rise in conviction/ penalties and amount collected in penalties

*umped five times from JP+ in 012220 to G@+ in 012G2+. 6ith rising instances of

adulteration, the government is looking to sensitize its officials to check on the same.

Ta7#e No. = Foo$ stan$ar$s an$ safety 3uthority of In$ia &FSS3I' 4nforcement

Near #amples Ion 9rosecution onvictions/ 9enalties

examined conforming launched 9enalties %:s r(

012220 P+,?G @,0+J P,@+ JP+ IA

01202G P?,?+? 21,G@1 ,@+1 G,2J .0

012G2+ J0,011 2G,J2 21,0G G,@+ J.G

012+2 +?,0?1 @,+P? J,1?@ 0,J12 P.?

#ource8

FSS3I

Table Io. 0 shows the scenario of food adulteration in "ndia, and the action taken by ood

standards and safety Authority of "ndia %##A"( nforcement.



;aharashtra, ;9, Herala and Andra 9radesh account for more than ?1 percent of the total

penalties levied in the year 012+2 and @+ per cent of the total amount raised in penalties.

A recent "ndia #pend report mentions "ndia has only 2+@ food testing laboratories. or a

nation of 2.0P billion people, and millions of independent, largely unorganized retail pointofsale outlets for food products %including grocers, street vendors, restaurants, dhabas, road

side eateries, and mithai shops etc.(, it translates to *ust about 2 lab for about @. million

population and thereby severely *eopardizing the health and wellbeing of millions of

unsuspecting "ndians.

ood adulteration comes under the ood adulteration Act, which is administered entirely by

the states and therefore the power for seizure, for conducting inspections, for seizing

samples, filing cases etcM lie with the state governments. The regulator, however, is the ood

standards and safety Authority of "ndia %##A"( which falls under the ;inistry of health so

the standards set by the ##A" have to be enforce and implemented essentially by the #tate

governments. 3nlike other sector regulators, this is one such case where the regulator does

not have enforcement powers and it has to rely on the states for the same.

"n light of this incident, it is crucial to examine the implications this can have on various

other products. There are also other similar categories such as instant soups, vermicelli, and

oats. 6hat about roadside eateries that source their noodles and sauces from local

manufacturers The ##A" should take a key role in getting such eateries registered and

ensure compliance and monitoring is done.

The collateral damage following the ban on popular instant noodles brand ;aggi, which food

safety regulator ##A" has declared

&unfit' for consumption, is not *ust impacting suppliers, but an estimated 2,11 workers, as

well. These workers are mainly involved in manufacturing ;aggi noodles across Iestle

"ndia s plants.‟



22 workers involved in the production of ;aggi noodles have now been engaged in the

production of other company products. And in plants where only ;aggi noodles were being

made, the workers are being trained in other teambuilding activities.' -owever, workers,

especially temporary ones, in companies that are suppliers to Iestle "ndia are the worst hit.

;ogabased 9aras #pices 9vt >td, the largest supplier of spices to Iestle "ndia, has alreadyasked nearly 011 temporary

mployees not to report to work, or report twice or thrice in a week, following the

ban.9arasBudhira*a, 5irector at the company, said supplies to Iestle "ndia contribute nearly

+ per cent to overall business. &6e are now talking to new clients and getting them on

board. #ince we follow strict !uality standards, we believe we have strong potential to step

up our exports,' he added.

J. Measures to re%am" the foo$ regu#atory structure

onsidering the 9andora s Box that this incident has opened up, what steps do we need to‟

take to uphold food safety Banning is a knee*erk reaction that takes us nowhere. "nstead,

some practical measures re!uire to be taken.

6.1 Increase the Number of private labs::ecently after the incidence of ;aggi imbroglio,

The ##A" has notified @0laboratories accredited by Iational Accreditation Board for

Testing and alibration >aboratories %IAB>( in "ndia for testing food samples taken under

the ood #afety and #tandards Act, 011P and :ules and :egulations made there under on

April 2, 012,& said the ##A" order issued on 7une 2. IAB> is an autonomous body under

the aegis of department of science and technology



Im"act Factor ;.(<= Case Stu$ies >ourna# ISSN &=;((@A' B

8o#ume + Issue B >u#y=E(

and is registered under the #ocieties Act. ood -ygiene and -ealth >aboratory

received the IAB> accreditation in 011P which the laboratory has been

maintaining since then not all state government and 3nion government run food

laboratories are accredited. &Barring a few government run laboratories that have

complied with the stringent accreditation processes and bagged the IAB>

accreditation, most government laboratories are yet to get the IAB>

accreditation,&

6.2Constitute a tas force of e!perts from food technology institutes, such as T:",

apart from renowned food scientistsworking with leading companies such as Amul,

3nilever, IestlO, Tatas and others. "t is necessary to balance theory with practice.

"n addition, ##A" and the processed/ packaged food industries must also work

closely with each other so that appropriate norms and guidelines are in place, and

then are ideally supported by voluntary and proactive compliance by the industry,

so that another fiasco reminiscent of ;aggi does not recur, and that the consumers‟

health is not put to risk at the altar of convenience, taste, or corporate profit.

6."Create clear# uniform $uidelines on how to go about monitoring the industry

6ith a clear timeframe such that such random, arbitrary testing is done away with.

This will ensure transparency. #implify the ##A" guidelines.

6.%&ive a $race period of, say, P to 20 months to all manufacturers to conform to the

new guidelines and correct the packagingdeclarations as well.



6.'(riorities the issues and go about monitoring the same in a systematic, planned

and regular manner with clear timeframes onimplementation. "f we are able to

clean up a couple of categories over the next one year we would have moved

significantly forward. "f going after market leaders like ;aggi and IestlO really

helps clean up the system, it would have achieved some greater good. But the way

" see it is if ;aggi is unsafe, then there are at least a million other things we

shouldn t be eating right now.‟

6.6India needs to embrace structural chan$es to ensure food safety for future

generations. ;y main concern stems from theood #afety #tandards Authority of

"ndia %##A"(, created under the ood #afety and #tandards Act, 011P. This has

been enacted in accordance with international codex guidelines. There are a lot of

provisions in the Act that re!uire revamping, but what we re seeing is a patchwork ‟

implementation of both the old 9A %9revention of ood Adulteration Act(

guidelines as well as the new ##A" laws.

6.)*evampin$ the Central and +tate Authorities:An investigation by "ndian express

had revealed a number of shortcomings inthe country s food safety at central and‟

state authorities including lack of staff, technology and accreditation for most state

labs.

urrently ?? per cent of the food inspection function is with the states, that is why

it is important to revamp the states authorities, but there is also a realization that a

central authority needs to have its own staff on the field to avoid what happen in

the case of maggi noodles. The authority was literally caught napping leaving it to



all states has also ment that re*ected product approval application information that

is routinely made public by the authority is not paid heeds to by the states.

. Conc#usion

The maggi controversy has shattered many hearts, maggi was not merely a product

or a brand in "ndia, "ndian consumer who is not unused to suspect food standards,

feels a deep sense of betrayal by one of the most trusted food brand in "ndia.

The maggi controversy has exposed the pathetic condition of "ndia s processed and‟

packaged food industry. There<s no denying that food safety regulations leave a lot

to be desired. 5espite establishment of the ood #afety and #tandards Authority of

"ndia in 011P and subse!uent promulgation of the ood #afety and #tandards

:egulations, 0122, implementation of rules is haphazard and erratic. ood safety

demands ade!uate oversight and inspection at each step of the food production and

supply chain. -owever, such a principle is rarely followed in "ndia. The

government should completely overhaul the ood #afety and #tandards Authority

of "ndia %##A"( and state authorities. "n fact, most of the states do not even have

the accredited laboratories.

oming to the Iestle "ndia, the company has disclosed having spent :s ++ crore

on Advertising and sales promotion last year while the expenses towards !uality

testing was less than per cent of such amounts that itself explains everything, the

company needs to be more forthcoming in communicating actively and

transparently to the public. #ince IestlO sells similar products across the world, it

means complying with numerous international food safety standards. Therefore,

;aggi and other packaged food products must of course be held accountable for



violating guidelines.

Im Project

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