Maggi Brand Extension And Repositioning

Maggi Brand Extension And Repositioning This research paper deals with the study of Maggi brand which made its footprint in India in the year 1983. Maggi is a brand originated in India by Nestle India Limited. It has over the years become synonymous with noodles. This research paper tries to find out the new areas and the market where Maggi can enter. Also, Maggi has always tried to play on the platform of a Healthy Product. This paper analyses its success and the gives a picture of Maggi as in the eyes of the consumer. The introduction provides the company background, operational other important information provided by the company which would assist in taking the decision for the right brand extension strategy for Maggi. The industrial revolution in Switzerland in the late 1800s created factory jobs for women, who were therefore left with very little time to prepare meals. This wide spread problem grew to be an object of intense study by the Swiss Public Welfare Society. As a part of its activities, the Society asked Julius Maggi miller to create a vegetable food product that would be quick to prepare and easy to digest. Born on October 9, 1846 in Frauenfeld, Switzerland, Julius Michael Johannes Maggi was the oldest son of an immigrant from Italy who took Swiss citizenship. Julius Maggi became a miller and took on the reputation as an inventive and capable businessman. In 1863, Julius Maggi came up with a formula to bring added taste to meals. Soon after he was commissioned by the Swiss Public Welfare Society, he came up with two instant pea soups and a bean soup the first launch of the Maggi brand of instant foods in 1882 83. Towards the end of the century, Maggi Company was producing not just po wdered soups, but bouillon cubes, sauces and other flavorings. The Maggi Company merged with Nestlà © in 1947. Today, Maggi is a leading culinary brand and part of the NESTLÉ family of fine foods and beverages. Under the Maggi brand, which is today known worldwide for quality and innovation, Nestle offers a whole range of products, such as packaged soups, frozen meals, prepared sauces and flavorings. MAGGI BRAND IN INDIA Maggi Comes to India teething troubles Maggi noodles was launched in India in the early1980s. Carlo M. Donati, the present Chairman and Managing Director of Nestle India Ltd, brought the instant noodle brand to India during his short stint here in the early eighties. At that time, there was no direct competition. The first competition came from the ready-to-eat snack segment which included snacks like samosas, biscuits or maybe peanuts, that were usually the bought out type. The second competition came from the homemade snacks like pakoras or sandwiches. So there were no specific buy and make snack! Moreover both competitors had certain drawbacks in comparison. Snacks like samosas are usually bought out, and outside food is generally considered unhygienic and unhealthy. The other competitor, homemade snacks overcame both these problems but had the disadvantage of extended preparation time at home. Maggi was positioned as the only hygienic homemade snack! Despite this, Nestlà © face d difficulties with their sales after the initial phase. The reason being, the positioning of the product with the wrong target group. Nestle had positioned Maggi as a convenience food product aimed at the target group of working women who hardly found any time for cooking. Unfortunately this could not hold the product for very long. In the course of many market researches and surveys, the firm found that children were the biggest consumers of Maggi noodles. Quickly they repositioned it towards the kids segment with various tools of sales promotion like color pencils, sketch pens, fun books, Maggi clubs which worked wonders for the brand. Why the specific Brand positioning? Maggi was positioned as 2-minute noodles with a punch line that said Fast to cook! Good to eat! And this gave the implied understanding to the consumer that it was a between meals snack. The company could have easily positioned the product as a meal, either lunch or dinner. But, it chose not to do so, because the Indian consumer mindset did not accept anything other than rice or roti as a meal. Hence trying to substitute it with noodles would have been futile. The firm did not position it as a ready-to-eat meal either, as the housewife prefers to make a meal for her kids rather than buy it for them. And if she can make it in two minutes with very little effort, then obviously its a hit with her! Whats more, if kids also love the taste, the product is as good as sold! So the 2-minute funda coupled with the yummy taste worked! BRAND STORY Launched in 5 flavors initially Masala, chicken, Capsicum, sweet sour, and Lasagna Maggi had to fight hard to be accepted by Indian consumers with their hard-to-change eating habits. The packaged food market was very small at this time, Nestle had to promote noodles as a concept, before it could promote Maggi as a brand. It therefore devised a two-pronged strategy to attract mothers on the convenience plank and lure kids on the fun plank. Gradually, the market for instant noodles began to grow. The company also decided to focus on promotions to increase the brand awareness. In the initial years, Nestle promotional activities for Maggi included schemes offering gifts (such as toys and utensils) in return for empty noodles pack. According to analysts, the focus on promotion turned out to be the single largest factor responsible for Maggis rapid acceptance. Nestlà ©s managers utilized promotions as measured to meet their sales target. Gradually, sales promotion became a crutch for Maggi noodles sales. Later many of the Maggis extensions also made considerable use of promotional schemes. The focus of all Maggis extensions was more on below the line activities rather than direct communication. In addition to promotional activities, Maggi associated itself with main stream television programs and advertised heavily on kids program and channels. After its advertisements with taglines like mummi bhookh lagi hai, bas do minute and fast to cook good to eat Maggis popularity became highly attributed to its extremely high appeal to children. As a result, Maggis annual growth reportedly touched 15% during its initial years. Maggis Brand Extension In 1998, Nestle launched Maggis first brand extension, Maggi soup. At this stage, there was no organized packaged soup market in India. Nestle planned to create a market for packaged soup as it felt the category had a lot of potential. However, according to analyst, the company had introduced soups only to cash in on the Maggis brand name, and was never very serious about the segment. In 1993, Sweet Maggi, the first variant of Maggi noodles was launched. The company supported the launch with a huge advertisement outlay that amounted to 75% of the total yearly expenditure on the Maggi brand. However, the product failed to generate the desired sales volume and Nestle was forced to withdraw it. At the end of the year, Maggi noodles was generating sales volume of around 5000 tons and remained a loss making proposition for Nestle. To boost sales, Nestle decided to reduce the price of Maggi noodles. This was made possible by using thinner and cheaper packaging material, the company also introduced money saver multi packs in the form of 2-in-1 pack and 4-in-1 packs. As a result volume increases phenomenally to 9700 tonnes in 1994 and further to 13000 tonnes in 1995. Maggis euphoria was, however, short lived, as sales stagnated in 1995 at the previous years level. With soup business being threatened by a new entrant Knorr soups launched in 1995, offering 10 flavors against Maggis 4 the company started rethinking its strategies towards the soup market. In order to stretch Maggis brand to include Indian ethenic foods the company tied up with a Pune based Chordia foods to launch pickles under the year 1995. The company also tied up with Indian foods fermentation (IFF), a Chennai based Food Company to market popular south Indian food preparation such as sambher, dosa, vada and spices in consumer packs in Dec 1995. The company reportedly saw a lot of untapped potential in the market for ready to use south Indian market. In 1996, products from these two ventures received lukewarm response from the market; sales were rather poor in the regions in which they were launched. Analysts attributed the failure of these Maggi extensions to the fact that Nestlà © seemed to be particularly bad at dealing with traditional Indian product categories. Maggi noodles performed badly in 1996. Despite slow sales in the previous two years, Nestlà © had set a sales target of 25,000 tonnes for the year. However, Maggi couldnt cross even 14,000 tonnes. Adding to the company woes was the failure of Maggi Tonites Special, a range of cooking sauces aimed at providing restaurant-like-taste to food cooked at home. The range included offerings such as Butter Chicken gravy and tomato sauce for pizzas. Understanding these failures, and buoyed by the fact that the Maggi brand finally broke even in 1997, Nestlà © continued to explore new options for leveraging on the brand equity of Maggi noodles. The company realized that the kids who had grown up on Maggi noodles had become teenagers by the late 1990s. As they associated the product with their childhood, they seemed to be moving away from it. To lure back these customers and to explore new product avenues, Nestlà © launched Maggi Macaroni in July 1997. According to analysts, Maggi Macaroni was launched partly to deal with the growing popularity of competing noodles brand Top Ramen. Maggi Macaroni was made available in three flavors, Tomato, Chicken, and Masala. The company expected to repeat the success of Maggi noodles with Maggi Macaroni. As with most of its product launches, Maggi Macaronis launch was backed by a multi-media advertisement campaign including radio, television, outdoors and print media. The products pricing, however, proved to be a major hurdle. A 75-gm Maggi Macaroni pack was priced at Rs 11, while a 100-gm noodles pack was available at Rs 9. According to analysts, Nestlà © failed to justify this price-value anomaly to customers, who failed to see any noted value addition in Maggi Macaroni (packaging and flavor variants were similar to those of Maggi noodles). In addition, customers failed to see any significant difference between Maggi Macaroni and the much cheaper macaroni that was sold by the unorganized sector players. The biggest problem however was the taste of the new product. Since macaroni is thicker than noodles, Maggi Macaroni did not absorb the tastemaker well and consequently did not taste very good. The interest generated by the novelty of the product soon died out and sales began tapering off. Eventually, Nestlà © had to withdraw Maggi Macaroni completely from the market. Nestlà © had not even recovered from Macaronis dismal performance, when it learnt to its horror that Knorr had dethroned Maggi as the leader in the soup segment (end of 1997). The only saving grace for Maggi seemed to its ketchups and sauces, which were turning out to the rare successful extensions of Maggi. These products were supported by a popular advertisement campaign for the Maggi Hot Sweet sauce brand. These humorous advertisements, featuring actors Pankaj Kapoor and Javed Jafri, used the tagline, Its different. However, during mid-1997, HUL began promoting its Kissan range of sauces aggressively and launched various innovative variants in the category. Nestlà © responded with a higher thrust on advertising and different size packs at different price points. Though Kissan gained market share over the next few years, Maggi was able to hold on to its own market share. Meanwhile the operational costs of Maggi noodles had increased considerably, forcing the company to increase the retail price. By early 1997, the price of a single pack had reached Rs 10. Volumes were still languishing between 13,000-14,000 tonnes. Pricing and Product Development It was at this point in time that Nestlà © decided to change the formulation of Maggi noodles. The purpose was not only to infuse fresh life into the brand, but also to save money through this new formulation. The company used new noodle-processing technology, so that it could air-dry instead of oil-fry the noodles. The tastemakers manufacturing process was also altered. As a result of the above initiatives, costs reportedly came down by 12-14%. To cook the new product, consumers had to add two cups of water instead of one-and-a-half cups. The taste of the noodles was significantly different from what it used to be. The customer backlash that followed the launch of the new noodles took Nestlà © by surprise. With volumes declining and customer complaints increasing, the company began to work on plans to relaunch old Maggi to win back customers. In addition, in 1998, Nestlà © began working out a strategy to regain Maggis position in the soup segment. To counter the Knorr threat, the company relaunched Maggi soups under the Maggi Rich brand in May 1998. The soups were not only thicker in consistency than those produced earlier, the pricing was also kept competitive and the packaging was made much more attractive. However, Knorr took Nestlà © by surprise by launching one-serving soup sachets priced as low as Rs 4. HLL too launched two-serving sachets of Kissan soup priced at Rs 7. As Maggi did not have any offerings in this price-range, it lost a huge portion of its market share to Knorr. The relaunch prompted market observers to compare Nestlà ©s move with US soft drinks major Coca-Colas New Coke fiasco. However, the company disagreed, Its a hard-5 nosed strategy, that mixes nostalgia with the consumers voiced preference for the product it has been bred and rought up on. The reintroduction is Nestlà ©s acknowledgement of the loyalty of the Indian mother and the child to the original product. By May 1999, Nestlà ©s decision to bring back the old Maggi seemed to have paid off. Two months after the relaunch, the monthly average sales of Maggi noodles n the northern region rose 50% in comparison to the previous year. In July 1999, Maggi the brand, was promoted as the biggest brand in Nestlà ©s portfolio of brands in India, overtaking brands such as Nestum and Cerelac. Nestlà © believed that Maggi had immense potential as it was a very flexible brand under which regional variants could be introduced to meet various market needs. Company sources claimed that with reas onable price points and innovative products, Maggi could emerge as a top brand and a major growth driver for the company. To further support the brand, Nestlà © carried out various promotional activities as well. These included the August 1999 Fun-Dooz campaign and Jungle Jackpot campaigns. 6 As a result of the above initiatives, Nestlà © claimed to have cornered an 81% market share of the 20,000 tonnes noodles market by the end of 1999. Nestlà © sources claimed that Maggi noodles outsold the competition four times over and that more than four Maggi noodle cakes were consumed every second in the country. PRODUCT VARIENTS The product mix of Maggi is divided into various categories defined below. The company has launched various products under each category as mentioned below. RESEARCH METHODOLOGY OBJECTIVES à ¢Ã… ¾Ã‚ ¢ To understand the influence of Maggi as a brand on consumers mind set. à ¢Ã… ¾Ã‚ ¢ Sources of Brand equity of Maggi like Brand awareness, Brand image, Brand association, Brand recall à ¢Ã… ¾Ã‚ ¢ To understand the Brand performance of Maggi products. à ¢Ã… ¾Ã‚ ¢ To understand Brand Imagery, Brand Quality perceived by customers, Brand credibility, consideration, superiority and feelings. à ¢Ã… ¾Ã‚ ¢ Brand Extension of Maggi in terms of product diversity. à ¢Ã… ¾Ã‚ ¢ Analyse the repositioning of Maggi brand as a Healthy product and the consumers perseverance towards the same. RESEARCH PLAN Research Design: The research will be carried out in the form of a survey which will be done in areas near to Delhi (NCR region). The population has been segmented on the basis of salary Group and Age Group. Sample Design: The target population for our study is households. The sample will be selected by a simple random sampling method . Sample Size: The sampling unit is 150 which are divided as follows: |Number of respondents |150 | |Age-group |10 45 | |Monthly Household Income |25000 75000 INR | |Survey Locations |Delhi, Faridabad,Gurgoan,Noida,Greater Noida | |Salary Group |No income |25K 40K |40K 60K |60K 75K | |Number of Respondents |30 |50 |70 | |Age Group |10 25 |25 35 |35 45 | |Number of Respondents |50 |50 |50 | DATA COLLECTION PLAN Data Gathering: This study involves data collection (primary research) from different households in four different areas Delhi, Faridabad, Gurgoan, and Noida. Literature Review The research conducted as a part of our study would include Primary as well as Secondary research. Primary research would include a survey that would be conducted in selected localities of Delhi and nearby areas where the responses of consumers would be recorded through a designed questionair.Secondary research would include various aspects of Brand management through Internet , Journals, company reports , expert views etc. METHOLODOGY The research will be carried out in the form of a survey. This will include primary research in addition to secondary research as stated below. The survey research method will be descriptive research design. Each respondent will be interviewed through a Questionnaire. The sample will be selected by a simple random sampling method. The survey will address the following information area: Information Areas: The objective as spelt out can be elaborated into specific information areas to be studied. à ¢Ã… ¾Ã‚ ¢ How do customers perceive Maggi as a stable brand, their perception of noodles and how do they associate themselves with Maggi? à ¢Ã… ¾Ã‚ ¢ Are the consumers aware of Maggi Brand or they associate noodles with some other brand? à ¢Ã… ¾Ã‚ ¢ Do they consider noodle as a healthy product or they are aware of the companys strategy of repositioning it to a healthy product by the launch of some of the new products? à ¢Ã… ¾Ã‚ ¢ Which product from the entire basket of Maggi products do the consumers consider as the best selling product for Maggi and to which the consumers frequently buy? à ¢Ã… ¾Ã‚ ¢ Are the consumers willing to accept Maggi brand extensions to some other products like chocolate, juices, chips etc? SURVEY RESULTS: 1. Brand Associations: Sources of Brand equity like brand association of Maggi as a Brand was found highest with the age group of 10-25 and the product category associated with it was the noodles category ( see exhibit 1). Consumers in the age segment of 10-25 could easily relate Maggi to noodles. In the income wise category the brand association was highest with the income group of 25k-40k were more than 40 respondents associated Maggi with noodles ( see exhibit 2). The implications from the findings discussed above seem that Maggi has good brand association in terms of noodles. Consumers presume Maggi as Noodles and the companys philosophy of projecting the brand as noodles brand seem to be viable in this regard. 2. Brand Recall: From the Exhibit 3 4 given below it seems a clear trend that Maggi has a good brand recall as compared to its competitors like Top Ramen, Surya noodles etc. Consumers could easily associate Maggi with noodles. In the Age wise category, the respondents of the age group of 25-45 were highly cautious of Maggi brand and seemed to be consuming Maggi more as compared to other age segments. In the gender wise category the companys strategy of positioning of Maggi brand for working women seems to be adaptive and gaining shape as women respondents had a brand recall more than male. 3. Brand Awareness: From the responses of the respondents in the conducted survey it was evident than Maggis Brand awareness was very high in terms of noodles were around 65 %of the respondents associated maggi as noodles and only 20 % of the respondents knew ,Maggi as a Ketchup, 9% as soup etc. The trend indicated that Maggis brand extension strategy to increase its basket has not been quite successful in other food segments .This might be because of the larger share of market captured by the competitors hence Maggi has a high potential in markets like ketchup, soups etc. 4. Repositioning Maggi as a healthy product: The companys strategy to reposition Maggi as a Healthy product was not found conducive as per the survey results. The survey showed that consumers did not perceived Maggi as a healthy product with 53% of them consumed Maggis traditional products as compared to the rest who consumed other variants of Maggis brand that were positioned as Healthy products. From the pie chart given below it can be clearly seen that Maggi is still perceived as a non healthy products by the consumers and in spite of the efforts to position Maggi as a healthy product by the company the brand is still perceived as a ready to eat food brand that has a high market share in the noodle category in India. SWOT ANALYSIS OF MAGGI BRAND The SWOT analysis of Maggi brand clearly indicates the strengths of Maggi as a Brand in Indian market. The Brand was found to be a leader in its category of Noodles, with strong customer loyalty. Intensive distribution of Maggi as a Brand was seen in urban areas of the country. The major threats of the brand as shown in the figure below indicates that Maggi has made several attempts to revamp itself as a Healthy Product but till date its perseverance towards the tag line is low by the consumers. The brand is in the growth stage of product life cycle with a strong inclination towards the maturity stage. [pic] STPD ANALYSIS OF MAGGI BRAND Segmentation: Market Segmentation divides the heterogenous market into homogenous groups of customers who share a similar set of needs/wants and could be satisfied by specific products. Maggi Brand have segmented the market on the basis of lifestyle and habits of URBAN FAMILIES. Target: Market Targeting refers to evaluating and deciding from amongst the various alternatives, which segment can be satisfied best by the company. The Maggi Brand have mainly targeted the Kids, Youth, Office Goers Working Woman which falls into the category of convenience-savvy time misers who would like to get something instant and be over with it quickly. Positioning: Market Positioning is the act of designing the companys offerings and image to occupy a distinctive place in the minds of the target market. The goal of positioning is to locate the brand in the minds of consumers to maximise the potential benefit to the firm. Maggi has positioned itself in the SNACKS category and not in the meal category since Indians do not consider noodles as a proper food item. Therefore Maggi have developed its brand image of instant food products with positioning statements such as 2 minutes noodles and Easy to cook, good to eat. Differentiations: Points-of-difference (PODs) are attributes or benefits consumers strongly associate with a brand, positively evaluate and believe they could not find to the same extent with a competitive brand. The Maggi Brand have also differentiated its brand image from its competitors in terms of taste, flavours and packaging. Maggi have launched wide varieties of products in different flavours which can attract larger set of customers. Maggi products are also available in different sizes catering to different customer needs. CUSTOMER BASED BRAND EQUITY PYRAMID (CBBE) Maggis customer based brand equity pyramid seems to be equally strong on left hand side and right hand side, it is also strong from bottom to top enjoying the highest brand awareness of any fast food noodle brand in India as well as repeat purchase rate and high customer loyality. BRAND PRISM OF MAGGI CONCLUSION The food processing business in India is at a nascent stage. Currently, only about 10% of the output is processed and consumed in packaged form thus highlighting huge potential for expansion and growth. Traditionally, Indians believe in consuming fresh stuff rather then packaged or frozen, but the trend is changing and the new fast food generation is slowly changing. Riding on the success of noodles, Nestle India, tried to make extensions of the Maggi brand to a number of products like, sauces, ketchups, pickles, soups, tastemakers and macaroni in the mid-1990s. Unfortunately, the macaroni and pickles didnt pick up as expected. The soups and sauces did somewhat fine, gathering considerable sales volumes and have a satisfactory presence even today. Maggi Noodles itself faced a bit of difficulty with respect to taste, and nearly lost its position in the minds of Indian consumers in the late 1990s. When Nestle changed the formulation of its tastemaker, the ominous packet that came along with Maggi Noodles, a major chunk of consumers were put-off and sales started dropping. Also, Maggis competitor TopRamen took advantage of the situation and started a parallel aggressive campaign to eat into Maggis market share. But the company quickly realised this and went back into making the original formula coupled with a free sampling campaign. This helped Magg i to win back its lost consumers and pushed up its sales volumes again! Maggi Today The year 2008 saw India leading in world wide Maggi sales. The brand has grown to an estimated value of Rs 160-170 crore and contributes at least 8-9% to Nestle Indias top line. All the same, some FMCG analysts feel that the brand has not done much to expand the noodles category. Even after 25 years of its launch, the size of the instant noodles market is yet quite small at Rs 300 crore. But yes, the parent company, Nestle India Limited has certainly encouraged the brand to enter into other culinary products. RECOMMENDATION After the conducted study following recommendations could be sited for Maggi Brand. To gain maximum leverage in terms of profit the company should pay emphasis on segments with age groups 25-35 and above .Advertising is the key to success. Targeting these segments will not only enhance the companys profit margins but also it will leverage the brand image of Maggi. The company should advertise its products by depicting attributes related to Health like Nutrition values, % of Vitamins, Proteins etc.This would help in customers perceiving the product as Healthy. Foray into other food products like chips, chocolates etc under its sole brand name would not only help in Brand extension but will also enhance Maggis market share. FUTURE PLANS Nestlà © Indias objective is to manufacture and market the companys products in such a way so as to create value that can be sustained over the long term for consumers, shareholders, employees and business partners. Maggis aims to create value for consumers that can be sustained over the long term by offering a wide variety of high quality, safe food products at affordable prices. The company continuously focuses its efforts to better understand the changing lifestyles of modern India and anticipate consumer needs in order to provide convenience, taste, nutrition and wellness through its product offerings. LIMITATIONS: The present study is confined to a minimal sample size and may not reflect the opinion or response of the entire population in general. The results of our study are entirely confined to the responses of the Delhi consumers and might deviate in terms of actual population as a whole.Recomendations given after the study are entirely dependent on the survey and the secondary analysis done in the report.