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The Great Battle of Instant Noodles in India: Case Study

*Shelendra K. Tyagi*

Background:

Nestle has been in India for a hundred years now. It began life in the country in 1912 as The Nestle

Anglo-Swiss Condensed Milk Company (Export) Limited, importing and selling finished products in

the Indian market. It has now grown as India's largest food company with seven manufacturing

facilities: Moga in Punjab (in 1961), Choladi in Tamil Nadu (1967), Nanjangud in Karnataka (1989),

Samalkha in Haryana (1993), Ponda and Bicholim in Goa (1995 and 1997, respectively) and

Pantnagar in Uttarakhand (2006).

The brands in its portfolio are: Maggi (instant noodles, sauces, soups and spices), KitKat, Bar One,

Munch, Nescafe, Milkmaid, Nestea and Polo. Nestle is also the largest maker of milk substitutes and

infant foods, though it does not advertise or promote these products. The biggest brand in Nestle's

portfolio is Maggi (it overtook Nescafe about ten years ago): its market share is almost 75 per cent.1

Class of Goods Gross Sales (FY 2012)

Quantity (in MT) (in millions)

Milk Products and Nutrition 140,386 38,593.90

Beverages 25,353 11,227.30

Prepared dishes and cooking aids 236,554 24,301.50

Chocolates and confectionery 47,745 11,691.10 (Source: Nestle India Ltd Annual Report 2012)

Nestl India Ltd. (NIL), the Indian subsidiary of the global FMCG major, Nestl SA, introduced the

Maggi brand in India in 1982, with its launch of Maggi 2 Minute Noodles, an instant noodles product.

With the launch of Maggi noodles, Nestle created an entirely new food category - instant noodles -

in the Indian packaged food market. Because of its first-mover advantage, Nestle successfully

managed to retain its leadership in the instant noodles category even until the early 2000s.

Over the years, Nestle extended the Maggi brand to a variety of culinary products like soups, sauces

and ketchups, and cooking aids among others. However, these product extensions were not as

successful as the instant noodles. In 2005, Nestle started offering a range of new 'healthy' products

under the Maggi brand, in a bid to attract health-conscious consumers.

*Prof Shelendra K. Tyagi is Associate Professor in the area of marketing at Lal Bahadur Shastri Institute of Management, New Delhi 2013 by the Lal Bahadur Shastri Institute of Management, Delhi. Cases are developed solely as the basis for

class discussion. Cases are not intended to serve as endorsements, source of primary data or illustration of

effective or ineffective management.

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Packaged Food Industry:

Are two-minute noodles your idea of breakfast when in a hurry? Do you buy ready-to-eat paneer

curry for dinner because your cook is absent?

If yes, you are a part of Indias 82% workforce from metro cities which prefers to eat packaged food

to eating outside, as per a survey done by Association of Chamber of Commerce and Industry of

India (Assocham).2The survey, which was conducted in 2,000 households of Mumbai, Delhi, Kolkata,

Chennai, Bangalore and other tier A cities, shows that ready-to-eat (RTE) food is preferred by nuclear

families, where both husband and wife are working professionals, bachelors who want to avoid hotel

food, and people who do not have the time, patience or expertise to cook at home.

At present, the market size of the packaged food sector in India stands at $15 billion and is likely to

double to $30 billion by 2015 on the back of arrival of multinationals in the sector and modern retail

trade, as per industry body Assocham. Indian packaged food industry is growing at a CAGR of about

15 to 20 per cent annually. 2

The main categories of packaged food are bakery products, canned/dried processed food, processed

dairy products, frozen ready-to-eat foods (RTE), diet snacks, processed meat and pro-biotic drinks.

Some key players in this industry are Hindustan Unilever, Nestle, PepsiCo and Haldiram. Strong

desire among consumers to maintain a healthy lifestyle is driving the functional foods and beverages

market. Consumption of such products is much higher in the urban areas, especially metros, where

life is fast-paced and stressful. The report says urban areas contribute to almost 72% sale of such

products, with the North and West responsible for 2/3 of the sale.

Region-wise sale of packaged foods in 2011

(Source: Workforce in metros prefers packaged food to eating outside)

Further, according to another survey named, 'Rising prices of fruits and vegetables', [conducted by

the Associated Chambers of Commerce and Industry of India (Assocham) under the aegis of

Assocham Social Development Foundation (ASDF)] 3 over 58% of middle and low income group have

switched over to pre-cooked and ready-to-eat (RTE) food items due to steep rise in prices of fruits

and vegetables in order to keep the kitchen budget intact. The survey polled 5,000 people to

21%

28% 21%

30% East and Northeast

North

South

West

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evaluate the impact of rise in price of fruits and vegetables. Published in the first week of July 2013,

the survey was conducted in major cities such as Pune, Mumbai, Delhi-NCR, Kolkata, Chennai,

Ahmedabad, Hyderabad, Chandigarh, Dehradun and Bengaluru. The maximum impact was felt in

Delhi, followed by Mumbai, Ahmedabad, Kolkata, Chennai, Hyderabad and Pune.

MAGGI Brand:

(Source: http://www.nestle.in/brands/pdca)

It's the last man standing, a survivor, and a brand that created and dominated a category throughout

its existence. Along the way, it lost a few of its launch flavours like Capsica, and even made a few

disastrous missteps like the 'sweet' noodles and the change of flavour in the flagship for a brief

period in the mid-90s. But in the near two decades of its existence, Maggi has been the only show in

town when it comes to noodles. Even today, it leads the pack with >75% share.1The brand has now

been successfully extended into sauces, soups and pasta. It has built its brand equity on the bas do

minute promise, which actually meant riding on the convenience factor and became the generic

name to define the category in the absence of competition for years.

In 2005, Nestle came out with Maggi atta (whole-wheat flour) instant noodles. All over the country,

atta is considered healthier than maida or refined flour which the company was using from day one.

This helped the company take the health platform. It was then that it added the tagline, 'health bhi,

taste bhi' (health as well as taste). Maggi's properties were expanded from convenience alone to

include taste and health as well. That was also the time when Nestle was repositioning itself

worldwide as a health and wellness company.

Through its long history, Maggi has burnt through a wide range of positioning lines and statements.

When Maggi entered the country, Nestle used TV heavily to familiarise consumers with the brand.

Its initial campaign 'Fast to Cook, Good to Eat' became a catchphrase and '2 Minutes' gesture of the

Maggi mom was widely imitated. The 25th anniversary campaign around the theme 'Mein aur Meri

Maggi' acknowledged a generation that has grown up on the brand and which is now poised to

include it in the diet of its children.

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Brand Journey over the Years:

1997: changes the formulation of Maggi noodles, which proves to be a mistake as consumers do not like the taste of new

noodles

1999: Maggi reintroduces the old formulation, which helps revive sales

2000: In early 2000s, Maggi is the leader in instant noodles space

2009: Maggi celebrates 25 years of Maggi Noodles with 'Me and Meri Maggi' interactive campaign. Launch of Maggi Pazzta

2012: Amitabh Bachchan is the new brand ambassador for Maggi4

2012: For the second year in a row MAGGI in 2012 was rated amongst Indias Top 10 ''Most trusted Brands'' by Economic

Times Brand Equity5

2012:MAGGI Masala-ae-Magic was recognised as one of the ''Most trusted Brands of 2012'' in the Readers Digest awards5

2012: In the annual ICMR study on Indias most valuable brands, MAGGI was ranked No.1 amongst FMCG Food Products,

and a separate ranking by Nielsen for Social Media Brand Equity ranked MAGGI as No.1 Food Brand. 5

(Source: http://articles.economictimes.indiatimes.com/2012-11-07/news/34970808)

Moreover, as per a new survey from industry analysts Kantar Worldpanel,6 published on May 2,

2013, Nestls Maggi is the food brand purchased most regularly around the world. It gives a brand's

"consumer reach points", which measures for the first time how many households around the world

are buying a brand (its penetration) and how often (the number of times shoppers acquire the

brand). Kantar Worldpanel analysed data from 32 markets. Maggi was sixth on the list, chosen

1.58bn times a year. Unilever's Knorr was the next highest food brand at eight, with households

purchasing the brand 1.29bn times a year. PepsiCo's Lay's brand was in at nine. Some 1.14bn

households put that brand in their baskets a year.

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Nestls Maggi has been synonymous with instant noodles in India for a long time now. So despite

the entry of Hindustan Unilever (Knorr Soupy Noodles), IndoNissin (Top Ramen), GlaxoSmithKline

(Horlicks Foodles)and ITC (Sunfeast Yippie), the Swiss major has remained the undisputed king with

around >75 per cent share in the Rs 2,500 crore branded noodles market that is growing at 20-25

per cent annually1. Category penetration of 40%+ indicates noodles widespread acceptance as a

regular grocery item for many Indians. Noodles per se have become accepted by Indians it can be

seen in its various avatars as street food and food you serve to guests, give your children to take to

school.

Competition:

Late 2009 Now

The market has seen more activity in three years than it has seen in the previous twenty. All of a

sudden companies have figured out that noodles is 'the' market to be in. Horlicks launched Foodles,

then Hindustan Unilever brought Knorr Soupy Noodles, then ITC came up with Sunfeast Yippee!

Seeing the buzz, Top Ramen has also re-branded itself last year by getting a new pack and a new

brand ambassador (Saina Nehwal). Maggi, which has dominated the instant noodles market for

nearly three decades, is now being challenged by aggressive new entrants such as ITC's Sunfeast

Yippee, GlaxoSmithKline's Horlicks Foodles and Hindustan Unilever's Knorr Soupy Noodles. Other

brands that may not have the huge money power of the multinational giants but which are

piggybacking on the opportunity afforded by modern trade are Ching's Secret and Smith & Jones

from Capital Foods and the Future Group's private label brand Tasty Treat. Also present in certain

pockets for nearly a decade are the likes of Wai Wai and Top Ramen.

Many experts still believe that none of the other players are yet a real threat to Maggi, though

collectively, they would have chipped away some share from it. Thats reason enough for Nestle

executives to be supremely confident. A Nestle India spokesperson says, exact market shares are

irrelevant because Maggi virtually denotes the instant noodles category.7That might be so till now.

But Maggi is all set to face its toughest challenge yet from Sunfeast Yippie, which has already

grabbed around 10 per cent (Double Digit) market share in just a few years of its launch. In the

process, Yippie has become the second largest player ahead of Top Ramans 5 per cent1. Though,

others are still scraping the bottom of the barrel.

Horlick Foodles: 'Noodles' without the NO

(Source: http://themarkmanager.blogspot.in/2011/11/brand-story-horlicks-foodles.html)

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Since Foodles is endorsed by Horlicks, it was launched in South (where mother brand Horlicks is

strong) in late 2009. It was extended to East India in March 2010 (East is also Horlicks stronghold)

and finally rolled out to the rest of India by July 2010. Foodles was launched with an aim to gain 6-

10% share in one year. Explaining the decision, Shubhajit Sen, VP - marketing, GSK says, "Horlicks

was always sweet, even the biscuits and cereal bar. We wanted to extend the brand into a savoury

or salty kind of product and Foodles was an opportunity to do that."8

First year sales stood at 32 crores and they ended the year with 4% share. The launch ad created a

lot of awareness in the market.

The launch advertisement shows a mother who is not happy with her son eating noodles. The tug of

war is a continuous clash of interests between the mother and her son. This is the situation all

mothers are in, and there appears Foodles. A healthy noodle made of four grain. So the mother can

now let her son eat and enjoy noodles freely.

Positioning

The company positioned Foodles on the health, taste and convenience plank. In the case of Foodles,

nutrition is the differentiator, remaining consistent with the plank already occupied by Horlicks. "We

are targeting those consumers who may have hesitated from participating in this category because

of any lingering doubts. We have positioned Foodles as the more nutritious noodles," says Sen. 8 So

besides the regular flavour, Foodles is also available in a multi-grain option. While health is a big

concern, Nestle's own Dal Atta variant was not well accepted due to the difference in taste.

Advertisement Round II

After one year of launch, Foodles broke its second campaign. 'Bhaskar ki kahani'. This ad talks about

why Foodles is more nourishing. The same reason to believe the claim - four grain noodles. The

packaging and story are different but the message is the same.

(Source: http://themarkmanager.blogspot.in/2011/11/brand-story-horlicks-foodles.html)

Foodles did also try to get trials by tying up with the movie 'Kung Fu Panda 2'. Initially Foodles was

available only in single-pack sizes which account for 28-29 per cent of the market. Later on it rolled

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out the larger family packs of eight and four strips. It is also priced at a premium, in line with the

mid-premium image of its mother brand Horlicks. Its multigrain variant costs Rs 15 for 80 gm

compared to Maggis Rs 10 for 80 gm.

Ching's Secret has a long, hoary history trying to take on the might of Maggi nearly a decade and a

half ago with a more traditional Chinese noodle offering. While this found no takers, it is still part of

the arsenal at Capital Foods. The company is fielding both Ching's Secret as well as Smith & Jones,

with the former aimed at a more youthful demographic. The masala flavour is being keenly

contested by Captial Foods as well via its Smith & Jones brand. Ching's Secret is aimed at youth

between ages 16-25, where there is a demand for something spicier.

Ajay Gupta, CEO, Capital Foods suggests there's enough room for everybody: "Maggi has not just

established the category, but grown the market as well. There are a lot of consumers entering the

category, which is seeing a 20-25% growth year on year." "Maggi was the leader for kids, but as they

grow up their needs change and that is the space we have tried to occupy with Ching's Secret," says

Gupta8.

Sunfeast Yippee! instant noodles

Yippee! Magic Masala

Yippee! Classic Masala

Yippee! Chinese Masala

(Source: www.itcportal.com)

ITC launched Sunfeast Yippee! instant noodles in December 2010, and differentiated it on product

attributes. In the branding of noodles, Sunfeast has adopted an endorsing structure where Sunfeast

brand will endorse the Noodle brand "Yippee ". The look of the brand says that it is positioned as a

happy, vibrant, fun loving brand. ITC Foods Divisional Chief Executive Chitranjan Dar says, "It has

taken us a while to launch but we wanted to ensure we had a differentiated product.9 ITC started

working on instant noodles a couple of years back. Pasta preceded noodles as it gave the brand a

head start with hardly any competition around. It continues to be a small section of the instant foods

market as pasta is yet to establish itself as a mainstream food option in India.

Launch campaign for Yippee! ITC has depicted a kid questioning conventions based on these

product attributes so that people are compelled to rethink what instant noodles should be. ITC also

went to large format stores and supermarkets with large scale sampling of the cooked noodles. For

instance, it was showcased at Future Group's Big Bazaar, a petri dish for Maggi-challengers such as

Future Group's private label Tasty Treat and Capital Foods' Ching's Secret and Smith & Jones.

The market response for Yippee! was good and ITC, which had hoped that its plant in Pune would be

enough to cater to the demand for the next 15 months, is already running at full capacity. The

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company is not only expanding the capacity in this plant but is setting up two new plants in the north

and east to meet the demand surge.

ITC gains market share

ITC studied the behaviour of consumers of Maggi and other competing products for two to three

years just to understand whether there was some disconnect about the products in consumers

mind. The company found three things: one, some of the noodles in the market become sticky if

they are not consumed early. Two, children prefer to slurp noodles while eating and therefore prefer

a longer noodle than what was available in the market. And three, many kids add sauce to enhance

the taste and look of noodles.

ITC has also leveraged its culinary strengths - chefs from the ITC Welcomgroup hotels to get the right

mix for the product. So one innovation was to offer round-shaped noodles so that the size could be

longer. Secondly, the company decided to have two different flavours within the masala category

Classic Masala and Magic Masala that has a tinge of tomato both in terms of colour and flavour. Kids

who added sauce to the noodles earlier are the obvious target group. The third innovation was

usage of new drying technologies to ensure that the noodles do not go sticky. Research had also

showed that many consumers garnish noodles - so ITC decided to add some vegetable garnishing to

its noodles. In keeping with its policy of not splurging on advertising, Yippie depended on word-of-

mouth and was sampled by over 2 million consumers across the country before its launch. To begin

with, ITC is concentrating on only those towns that have a population of over 100,000. The next

target would be to go to places with a population of 50,000 and above.

Health platform is something Yippie has still not tried. That is because ITC does not want to expand the portfolio too much for the time being. Besides, health-based noodles constitute just 3 per cent of the total market so ITC may look at it later including regional variations in tastes as well. This of course would also mean that Yippie has to go just beyond the two pack sizes which are available for Rs 5 and Rs 10. In the next phase ITC has launched larger pack size like family packs. ITC recently has also launched the third variant of Yippee, called the Chinese Masala in May 2013.10

Knorr Soupy Noodles

(Source: http://www.hul.co.in/brands-in-action/view-brands.aspx)

After GlaxoSmithkline Consumer Healthcares (GSKCHs) entry into the noodles segment, global

FMCG major Hindustan Unilever Ltd (HUL) also entered the category in March 2010. The company

launched Knorr Soupy Noodles in Karnataka, Andhra Pradesh, Kerala and Tamil Nadu. Launching

noodles under the Knorr brand will help the company grab market share faster, as Knorr has strong

brand equity. It is number one in the soup category, followed by Maggi soups. Known only for soups,

which constitute a minuscule category in India, HUL is betting on the soupy noodles to expand the

footprint of the Knorr brand to areas beyond urban markets. "Noodles in India is about 12 times

bigger than soups and everyone who consumes soup also knows about noodles. A typical Indian

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family has 25-30 packs of noodles in a year, whereas soups are not too popular. It is mostly

consumed by the higher SECs," says Sidharth Singh, VP, packaged foods, HUL.8

For its Soupy Noodles, HUL is occupying a plank that's not dissimilar to what Maggi started with: a

mini meal when children return from school and before they leave for play or tuitions. But HUL

hopes to build traction for the soup habit via the already fairly well established noodle habit. Knorr's

Soupy Noodles presents a chance to accomplish several targets with just one product. It comes with

100% real vegetables & carries the Healthy Choice' Stamp. It is currently available in four

variants: Mast Masala, Tomato Chatpata, Chinese Chow and Yummy Chicken. The powder in Knorr

Soupy Noodles is not simply a tastemaker or spices but actual soup powder, with a taste and

consistency similar to Knorr's flagship product. It is a quick hunger filling snack. Just soup is not a

good for that time and nor do kids find it particularly exciting. But when you give noodles with a

combination of soup they like it. This is our position of strength as well as differentiation," explains

Singh. 8 HUL has roped in Kajol to help push Knorr soupy noodles. Knorrs campaign is based on the

insight that when a kid is given something new to eat he is quite fussy about it. So to engage better

with them and to make the experience fun, HUL has used the route of a game play in the TV

Commercial. The 'Thoda Khao, Thoda Piyo' proposition helped the kids understand how to consume

the product and made it fun at the same time.

Market response for Knorr Soupy Noodles was also good and again it was a case of demand being

more than supply as HUL could not get into more markets because of capacity constraints. Initially

the product was available only in single packs of Rs 10 when the demand for bigger packs was

getting louder (The bigger pack is being demanded by households with children).

Top Ramen has also re-branded itself last year by getting a new pack and a new brand ambassador

(Saina Nehwal). It is yet another attempt to reposition Top Ramen noodles from Indo Nissin, the

Indian unit of Japans Nissin Food Products. It started its innings in India in a partnership with

Hindustan Unilever, which lasted only a few years. It then inked a deal with Marico, which served it

well for seven years. By then Indo Nissin had achieved a critical turnover mass and was keen to set

up its own distribution network in India.

This is not the first time Top Ramen is going through a brand overhaul. Since it entered India in 1991,

the brands journey has not been smooth. It has been changing its product composition and

marketing pitch regularly to click with Indian consumers. Its debut in India was with a product similar

to the Japanese style soupy noodles with a soya flavour, sold in a pillow pack. Sales remained in the

dumps as Indians were used to the taste of Nestls Maggi, which was dry and mostly eaten from a

plate. In 1992, the brand decided to take on Maggi on its turf and relaunched Top Ramen as an easy-

to-prepare snack food. It also launched new flavours like masala and vegetable. However, this did

little to loosen Maggis stranglehold in the Indian market.

A few years later, the company decided to differentiate the brand through the texture of the

product, and said as much with a new slogan, Dont be a noodle, be a smoodle. The word smoodle,

as the sales graph showed, failed to make the connect and Top Ramen continued to languish in a

market driven by taste, convenience, affordability and availability. Then a little emotional play

seemed to open up the Indian market. Top Ramen changed its positioning once again to smooth

noodles and went on to convey the message through advertising that featured a boy lost in the

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jungle, whose mother prepares Top Ramen noodles as a way to find him. The boy reappears, drawn

by the aroma of the noodles, and Top Ramen, in the process, unites the family. Drawing a parallel

with Mowgli, the much-loved fictional character from Rudyard Kiplings short stories, Top Ramen

seemed to finally build a rapport with Indian kids.

Top Ramens current re-branding Campaign

Top Boy is a playful character who never runs out of energy. As ace

shuttler Sania Nehwal picks up a pack of noodles, the super active

Top Boy flies out of the pack challenging her to a game of badminton.

An exciting game follows. Kids watch the duo play, wondering about

the secret behind the energy. The ad closes on the shot of the new

Top Ramen super noodles fortified with vitamin energy.

(Source: www.business-standard.com/article/management/instant-noodles-instant-energy)

Keeping it healthy - In its latest effort, the company is trying to relaunch the brand as super

noodles. Instead of trumpeting the texture of the noodles, it now wants to focus on its health

benefits. We want consumers to notice that we have improved the taste and fortified the noodles

with vitamins, says MNVV Prasad, general manager, marketing, Indo Nissin.11 This comes at a time

when most food brands have cottoned on to health as a differentiator. Maggi has a healthy atta

variant and has recently launched its four-grain noodles.

From the looks of it, Top Ramen means business and is ready to loosen its purse strings. The brands

focus on health in general and energy in particular is apparent from the brands choice of Saina

Nehwal as ambassador. The makeover, orchestrated by its new advertising agency Dentsu, will ride

on a new slogan, Be the Champion, and a new mascot, the Top Boy. The aim is to appeal to kids,

who account for 80 per cent of instant noodle sales in India. 11 The secondary objective of this

campaign is also to appeal to mothers who play a key role in influencing purchase decisions. To

address the two target segments, the television commercial is being aired on childrens and Hindi

general entertainment channels. The repositioning exercise will also manifest itself through its new

packaging, online initiatives and on-ground activations.

However, the biggest challenge for Indo Nissin will be of improving reach something its

competitors have invested heavily in. Unfortunately, the brand has changed hands several times

since its entry into India. Indo Nissins Top Ramen has now also jumped on to the health

bandwagon; but it would do well to remember that it takes time to win over health-conscious

customers.

Wai Wai - Even before HUL and GSK, the Wai Wai has been very popular across the North East and

the East. Wai Wai is built around the USP of being a genuinely instant noodle that can be eaten

directly from the pack unlike Maggi which requires at least two minutes worth of cooking. Wai Wai

will be rolling out its product across the country soon. It has set up manufacturing plants in Sikkim,

Guwahati and Rudrapur to help keep up with the demand. When it moves beyond the North East

into the rest of the country G P Sah, VP and CEO of Choudhary Group thinks TV would be the best

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medium to give them the recognition. "TV is very important to help our brand be recognised across

kiranas and convenience stores. Just being present in modern trade will not give us sustainable

value," he says.8

Choudhary Group which manufactures Wai Wai claims leadership in the North East (65% market

share in West Bengal and the north east), with Mi Mi a smaller variant of Wai Wai at the second

position, and Maggi a distant third. 1 Choudhary Group also claims that Wai Wai is the second largest

noodles seller in India with a 16% share. Wai Wai sells 20 lakh packs of noodles per day. 1

Private Label Brands

Not to be left behind are retailers like Big Bazaar that launched noodles under the Tasty Treat brand.

Future Group too is "betting big" on this category. It has increased the number of Tasty Treat instant

noodles variants from two to five in the past 12 months and is planning to further increase the

number to seven. Tasty Treat is also banking on masala, that offers spicy masala and have flavours

like Punjabi masala and Mumbai masala waiting in the wings to cater to local tastes. According to

Devendra Chawla, head, private brands, Future Group, "In our country where taste and food

preference changes every 200 km, instant noodles has crossed this journey most effectively breaking

the barrier."8

Changing Social Trends:

The growing interest and action in the instant noodles market is not an isolated phenomenon, but is

in fact reflective of a deeper change in the Indian social ethos. Powdered soups, cooking pastes and

purees, instant pasta and ready-to-eat (RTE) foods are recent examples. Whats more, its not just

food habits within Indian homes that are changing. It is estimated that from a single meal eaten in

restaurant in a month a decade ago, the average urban Indian in top eight metros is now consuming

7.8 meals a month in restaurants.12

Many in the younger generation today are facing busier lifestyles, are continuously on-the-go and

need products which offer taste, nutrition and convenience. With changing lifestyles, responsibilities

are increasing and mothers and housewives want to reduce their time in the kitchen, but without

compromising on their role as providers of tasty and wholesome food for their familys wellbeing.

There are several reasons for this change in Indian food habits: the countrys young demographic

profile, increasing family income, accelerating urbanization, the cosmopolitization of major urban

centers, unprecedented interstate migrations, increasing number of working couples, time

constraints, shortage of household help, global travel, and increasing exposure to global cuisine and

so on.

Busier lifestyles resulting in the demand for convenience products are persistently providing a major

thrust to the growth in the packaged food sector in India. The Indian cooking styles have undergone

considerable changes over the past few years owing to the advent of modern technology and several

other changes such as urbanization, busier lifestyles, increase in female work population and

augmenting nuclear families. People have been increasingly shifting to ready to eat (RTE) food items

in order to save time involved in preparing meals.

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MAGGIs response to competition:

At the first sign of competition heating up, Nestle launched rice noodles targeted at consumers in

the east and south, where rice is a staple food. To outfox rivals, Nestle extended Maggi's distribution

to smaller towns and cities, simultaneously launching Maggi's value-for-money pack (Chottu Maggi)

priced at Rs 5. When Nestle launched the Chottu Maggi the intent was wider reach, company

wanted more consumers to have access to the product and enjoy the Maggi experience. While

Nestle took this step based on insight and market research, other brands today, know the

importance of a smaller SKU in pushing the brand. Wai Wai's variant Mi Mi is in the Rs 5 space. While

the product was largely targeted towards kids, it also helped get more people to sample the product.

Almost 60 per cent of the FMCG volumes in the country currently come from price points below Rs

10. The share of such products for Nestle has improved from 21 per cent some years ago to over 30

per cent now. Maggi, meantime, shows few signs of faltering, launching new variants, one of the

newer ones is Maggi Masala Damdaar and pulling out all stops to cement itself in the consumer

mind space. Maggi is growing consumption by upsizing packs with various combo & multi packs.

It has in its portfolio no fewer than three products and five variants in the instant noodles category

[Exhibit 1]. Most may not contribute much to sales, but they block out several entry points for rivals.

Meanwhile, Nestl strengthened Maggi's position last year [2012] by signing tinsel town superstar

Amitabh Bachchan as brand ambassador and launched an interactive advertising campaign, which

sought to build emotional bonds with consumers.

Customer Engagement

It is to celebrate the unique bond that the brand shares with its ardent users that MAGGI Noodles

has launched its newest campaign: Meri MAGGI 2- minute Mein Khushiyan, thereby

acknowledging that Meri MAGGI gives you the power to create happiness in 2 minutes! The new

Meri Maggi 2 Minutes Main Khushiyan advertising campaign that had Amitabh Bacchan as the

story teller of consumer stories further strengthened the emotional connect MAGGI already had

with customers. The campaign gives MAGGI Noodles fans, the great opportunity to share their

stories & stand a chance to feature in TV commercials & packs. Meri Maggi page is the largest

MAGGI Facebook community with over 1.2 million fans. Share your story and get famous has gained

traction on the digital media. "While masala is still the most popular, the thrilling moments that

people shared with us as part of the 'Mein aur Meri Maggi' campaign has given us ideas to launch a

number of new variants in the coming months," says Hegde.8

While the new entrants sweat it out, Nestle isn't sitting tight. Continuing its efforts of engagement, it

organised a nutrition awareness drive in the largest slum in Asia, Dharavi a few months back. "We

spoke to people about the importance of health, hygiene, micronutrients and gave them an

opportunity to understand the product," explains Shivani Hegde, GM - foods, Nestle India.8 Nestle

also does trade activities involving education of shopkeepers, direct contact programs and initiatives

like the Nestle Minithon to engage with consumers.

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Dealer Engagement

Nestle has started offering aggressive discounts and incentives to retailers on its flagship Maggi

instant noodles, perhaps for the first time in a decade in order to protect its market share against

increasing competition. Nestle is offering incentives to buy company products in bulk in order to

reduces the trade's options of stocking rival brands. Nestle's discount scheme for Maggi noodles is

possibly the first in 10-15 years.

A Nestle India spokesman said Nestle also runs a dealer engagement programme as part of its '2

Minutes Mein Khushiyan' campaign. This Khushiyan campaign includes a unique 'Khushiyon ka

Badshah' engagement program with dealers and the company is running this campaign among all its

stakeholders-consumers, trade, business partners and employees. The idea is to bring all our

partners to be a part of the campaign.13Analysts say Nestle's trade incentive scheme for Maggi

noodles is aimed at reviving its sales volumes, which declined 2% year-on-year in April-June quarter

(2013) as the company focused more on pricing than volumes.13

Distribution Reach

(Source: Nestle Indias Investor Seminar in Shanghai, September 25, 2012)

At present, Nestle reaches around 3.7 million retail stores as it is expanding its distribution network

rapidly (It added approx. 0.5 million outlets in last financial year) in order to grow its share through

market penetration. HUL is also ramping up its retail presence for Knorr Soupy Noodles from the 0.2

million outlets it started with. For its part, ITC targeted a total of 0.5 million outlets initially. While

none of the new players have reached their full distribution strength, Nestle would have to look out

for HUL and ITC's potential spread. HUL covers up to 6.5 million outlets out of a total 7.5 million

outlets in India, according to analysts, while ITC's FMCG arm reaches 2.5 million. Whereas GSK

(makers of Foodles) reaches 1 million (direct plus indirect through wholesale) outlets, with Foodles,

GSK reaches 0.2 million outlets of its total 1 million outlet.

The other players too are pulling up their socks. In case of Indo Nissin, its earlier tie-ups did help the

company establish a loyal consumer base, but it remains confined to the south and the east of the

country. The brand currently reaches 0.3 million outlets. However, unlike pillow pack noodles, Indo

Nissin is the leader in cup noodles with 65 per cent share of the Rs 36-crore market.11 Nepal-based

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CG Foods, the makers of Wai-Wai, is extending beyond the 0.15 million outlets it reaches now. Over

the next 2-3 years, it is planning to expand in states like Punjab, Jammu & Kashmir and Delhi.

Way Forward:

Maggi so far have dominated the estimated Rs 2,500-crore instant noodles category in the country

with >75% share, 1 but it has been losing share to rivals in recent times, having slipped from more

than 90% market share three years ago.14 The Nestle spokesman said Maggi has anywhere between

80%-90% share and it is growing the size of the market and gaining market share. "When new

products enter the market, they will have a trial phase and create temporary fluctuations in market

shares," he said.13 Maggi now faces not only brand competition but also industry competition from

similar products like Pizzas. Even fast food joints are taking away consumers from the brand. At this

point, the brand needs to stay relevant to the consumers since consumers have a wider choice of

indulgence.

From a snack food targeted at children, instant noodles category has evolved as a mainstay meal

even for grown-ups. Noodles are no longer considered a processed food; it has become mainstream,

a choice rather than a last alternative and has come to be accepted as a part of the regular

household menu. Instant Noodles can be a staple food. An IMRB report says 45 per cent of all

households consume instant noodles.15 At Rs.10 for 75/80g; its a cup of wholesome soup or a meal

for someone. Even two cups of tea will cost more than Rs.10 today. Therefore, Noodles as a product

category measure up well in context of value for money proposition. While it is still early days for the

category, the action in this space promises to get louder. Japan and South Korea are among the

highest consumers, devouring 70 packs per person per year. Thailand's consumption stands at 50

packs per person. In Nepal, thanks to Wai Wai, the consumption is 30 packets per capita, whereas

India's is only four.16There is potential for tremendous growth. The opportunity is indeed huge, what

with instant noodles ceasing to be just a metro phenomenon and become popular in semi-urban and

even rural markets. While the main plank in urban areas is still convenience, people across small

towns are hooked because of the sheer variety available. Single pack sizes are important for

acceptance of the brand in non-urban cities. The aspirations are same, there is a lot more money in

non-urban areas and most of it is going into foods. For a category that is growing at 20% annually,

and in a country in which instant foods are beginning to catch on with India's burgeoning middle

class, you'd expect plenty of action in noodles. As income levels rise and packaged food finds more

takers, experimental users will fragment the instant noodles market further.

Apart from variants and positioning, most players acknowledge that trial is the ultimate moment of

truth. HUL have 'food ambassadors' at modern retails outlets to encourage sampling. Ching's Secret

has gone the college route to get closer to its youth demographic. They have sponsored a large

number of college shows in the country last year and are also targeting the youth aggressively

through Facebook. The Ching's Secret community on Facebook has over 118,000 fans following the

brand.

It is a category that is almost evenly spread across all the four zones in India and cannot depend on

modern trade alone. And the likes of ITC, which has made significant inroads into villages, are well

placed to gain more ground. ITC has a very strong distribution network; hence its noodle brand will

play on this strength. However what will determine success is essentially the quality and taste of the

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product. In this category, there is a role for packaging as well, and not just flavour. While Knorr

Soupy Noodles and Horlicks Foodles have opted for the colour green, ITC has differentiated Yippee!

with a generous dollop of red mixed with yellow in its packaging. Yellow (used by Maggi) will

instantly tie Yippee! with the category, the red will hopefully set it apart. Red has been used in the

communication as well as the packaging to communicate vibrancy to a young consumer as well as

differentiate itself from the lead brand. The success of noodles has made way for other ready-to-

cook products like pasta and macaroni. While Maggi has already entered the fray with its offering,

the new entrants are also eyeing this space with great interest. Can homely cooked food ever be

substituted with ready-to-eat meals, only time will tell?

Points of Discussion:

1. For over two decades, Nestle has been able to keep all its competitors behind by a long distance in the noodles market. Can ITC now narrow the gap?

2. How should MAGGI stay relevant to all segments of customers? 3. Critically evaluate MAGGIs choice of Amitabh Bachchan as brand ambassador? 4. Is it time MAGGI should update its positioning and acquire a new micro positioning within

overall health plank?

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References:

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2011 in India Knowledge@Wharton12

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accessed on 12/08/201314

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market-fmcg-companies accessed on 09/05/201315

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04/07/2013 5

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22/05/2013

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demand/articleshow/21471805.cms accessed on 19/08/20133

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25/07/2013

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110032600086_1.html accessed on 27/07/2013

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110080200051_1.html accessed on 05/07/2013

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111071800011_1.html accessed on 14/08/201311

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kantar-worldpanel_id2404.aspx accessed on 09/05/20136

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Nepal.html accessed on 24/08/201316

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Exhibit 1 MAGGI Variants

MAGGI Xtra-delicious Magical Masala This new product has a spicy and delicious taste. Couple that with a new and vibrant color and real vegetable bits that are sure to bring smile on customers face.

MAGGI HUNGROOO We all lead a busy life - a life full of activities and lots of action. After all the action, hunger gets bigger. Customers are not just hungry, they become Hungrooo. So, to answer customers call for a bigger hunger, Masala MAGGI now comes in a bigger pack MAGGI Hungrooo, 50% more of Masala MAGGI Noodles.

MAGGI 2-Minute Noodles MAGGI 2-Minute Noodles is one of the largest & most loved food brands that defines the Instant Noodles category in India.

MAGGI Cuppa Mania MAGGI Cuppa Mania offers the taste of MAGGI combined with the convenience of cup noodles! It is an offering for the new generation pressed hard for time trying to juggle multiple roles all at once & can be enjoyed anytime on the go. Available in two variants- Masala Yo! & Chilly Chow Yo!

MAGGI Masala Dumdaar Noodles MAGGI Masala Dumdaar offers Masala taste, with more Masala, Iron fortification and added vegetable bits making it a Dumdaar proposition.

MAGGI Xtra-delicious Chicken Noodles MAGGI noodles have been combined with real chicken bits to create the new MAGGI Xtra-delicious Chicken Noodles. Fortified with Iron & Calcium, the new & improved taste offers a delightful experience that'll leave customer craving for more.

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MAGGI Vegetable Atta Noodles Vegetable Atta Noodles, an offering that exemplifies the "Taste Bhi Health Bhi" promise of MAGGI. Tasty because it comes packed with everyone's favourite "MAGGI Masala" taste & healthy because it has real vegetables in its garnish and is packed with the goodness of fibre.

MAGGI Vegetable Multigrainz MAGGI Vegetable Multigrainz Noodles offers the multi-'gun' (benefits) of Ragi, Corn, Jowar and Wheat. It is a source of Protein, Calcium and Fibre, and has added vegetables. Available with a delicious "Spice Remix tastemaker.

(Source: http://www.nestle.in/brands/pdca)