Maggi's turned 25 and it is still going strong, but there are challenges ahead.
Few ad jingles have survived 25 years. Some long-playing ones like Lifebuoy have been discontinued, while others like Titan are yet to celebrate their silver jubilee. Nestlé’s Maggi has stuck to the jingle that marked its entry in the country 25 years ago with instant noodles.
The jingle has indeed helped in creating a formidable brand. Maggi’s market share is well above 90 per cent. It has seen no serious rival in the years it has been around, though some FMCG companies like ITC have tried to attack its flanks by launching ready-to-eat pasta. A survey carried out by the National Council of Applied Economic Research named Maggi the country’s most valued FMCG brand. Only briefly in 25 years has the brand taken on board a celebrity (actress Preity Zinta). Maggi is the biggest brand in the Nestlé portfolio in the country, having overtaken Nescafé in the earlier part of the decade. So, why kill the jingle.
In fact, the campaign designed by Nestlé for Maggi’s silver jubilee hopes to work on the brand’s strong consumer connect through television, the Internet and print. The jingle gets a prominent play in the television campaign. Nestlé, India’s largest food products company, has decided not to litter the sky with hoardings on the occasion. Instead, the ads will play on nostalgia. Consumers who first sampled the brand as kids now run households. The campaign seeks to strengthen the association.
Thus, customers will be invited to share their “Maggi moments” with the company. If the company likes the way you prepare Maggi, you could find your photo on Maggi packs. A new website called www.meandmerimaggi.com is also in the works.
Convenience was the unique selling proposition of Maggi when it was launched 25 years ago. For the first time, consumers got something that was hygienically packed and convenient to prepare. It was also the first fusion experiment on food in India. Instant noodles was an entirely new category in the country, but it was given an Indian twist. Maggi came in four variants: Masala, chicken, sweet & sour and capsicum. Of these, only two have survived — masala and chicken which sells largely in the eastern states. Masala continues to be the flagship flavour. In the days that followed, it experimented with more variants, like a garlic- and onion-free one for Gujarat. Some of these still exist, others were discontinued.
The turning point came in 2005, when Nestlé 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, though Nestlé General Manager (food business) Shivani Hegde insists that the product never ran the danger of being classified junk food. 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. “It is an ally to the mother in the kitchen to make tasty and healthy food with convenience,” says she.
That was also the time when Nestlé was repositioning itself worldwide as a health and wellness company. At the grassroots level, Maggi started associating with quiz contests and other such events connected to mental and physical wellbeing.
This positioning gave Nestlé the platform to launch more products under the Maggi brand. It already had Maggi soups, sauces and coconut milk in the market, but given the strong equity of the brand, Nestlé could now extend it to newer categories. Thus, it recently came out with fried masala paste. More categories could follow, though Hegde is tight-lipped about it. But these could be distinctly Indian products. At the moment, over 90 per cent of the Maggi products in the country cannot be found elsewhere in the world.
Not that all Maggi brand extensions have met with success in the past. Nestlé had launched its Maggi range of pickles some years back. But the product was withdrawn. It has also experimented with Maggi soup cubes, the sales of which are now restricted to a handful of markets in the country.
Two reports recently put out by investment analysts, one by IDFC-SSKI Securities and the other by Citi Investment Research, say that the slowdown in the urban markets could impact adversely Nestlé’s prepared dishes and cooking aids business which accounts for 21 per cent of the company’s annual revenue. Maggi, in other words, could become a victim of down-trading. “Nestlé may not gain significantly in an economic recovery led by the rural sector given its high urban exposure,” says the Citi report released early-March.
Hegde says that there is no evidence of down-trading so far.
Still, the company is taking no chances and is extending its distribution reach to smaller towns and cities. Maggi happens to be Nestlé’s most widely distributed brand in the country. Through independent channels, it reaches those villages where the company has no presence, according to Hegde. This is also the time that Maggi’s value-for-money pack priced at Rs 5 is expected to come handy. (The regular pack comes for Rs 10.) “It is no longer an aspirational product for any socio-economic category of consumers,” says Hegde.
The IDFC-SSKI report says that almost 60 per cent of the FMCG volumes in the country come from price points below Rs 10. The share of such products for Nestlé has improved from 21 per cent some years ago to 30 per cent now and is expected to rise further. This is a clear indication of the company’s pricing strategy.
In the recent past, Nestlé has moved fast to plug any flank that could be attacked by rivals. It first launched Maggi rice noodles targeted at consumers in the east and south, where rice for the staple meal. Next, it came out with instant noodles in a cup which is ready to eat after pouring some hot water in it. This was meant for consumption on the go, including offices. It was a product for the urban markets. The volumes might be low but it has a wide lead over any company which might target these categories.
But some challenges remain. Large retailers like Vishal Retail have decided to launch instant noodles under their own private label. These are priced 25 per cent below Maggi, yet give the retailers a profit margin of up to 30 per cent. FMCG companies, in contrast, offer retailers margins between 12 per cent and 15 per cent. Hence, they have decided to push their own labels to improve their profit margins.
The same retailers, to be sure, had driven Nestlé’s growth in the last two years, the IDFC-SSKI report says. “Nestlé’s product portfolio is best suited to the Indian consumerism story and rides piggyback the organised retail platform. However, organised retail is seeing a slowdown…in metro markets it is also seeing a decline.” These are issues that Hegde, a veteran of over 20 years at Nestlé, and her team need to address in the days to come.
Analysts and sector experts admit that Maggi is no longer an impulse purchase like a chocolate or an aerated beverage. “It is now on the shopping list of most people,” says Technopak Advisors Associate Vice-president Purnendu Kumar. But some of them say the brand has got straitjacketed as an evening snack eaten by children. Indeed, much of Maggi’s promotion is centred on kids.
Hegde says instant noodles are now consumed right through the day by all members of the family, young and old. Some Maggi ads clearly show that it is targeted at all family members. Nowhere in the world does Nestlé sell such large volumes of instant noodles as in India. Hegde hopes to grow, notwithstanding the urban slowdown.
