Nestlé’s Half-Billion-Dollar Noodle Debacle in India
Nestlé’s Half-Billion-Dollar Noodle Debacle in India
Nestlé spent three decades building a beloved noodle brand in India. Then the world’s biggest food and beverage company stumbled into a public relations debacle that cost it half a billion dollars. A cautionary tale of mangled crisis management on an epic scale.
It was the middle of the night when the jangle of his cellphone woke Sanjay Khajuria from a deep sleep. In the few seconds it took him to get his bearings—to remember he was in a Manhattan hotel room and not at home in his bed in Delhi—the Nestlé executive had an unsettling thought: Could this be about Maggi?
Khajuria is not accustomed to receiving urgent, late-night phone calls. As head of corporate affairs for Nestlé India, he typically divides his time between handling routine regulatory issues and trumpeting the company’s achievements in “creating shared value”—the approach to corporate social responsibility that Nestlé espouses. In fact, Khajuria, 51, was in New York to represent his company in a shared value leadership summit, for which Nestlé was a sponsor.
Virtually everything in his world had appeared to be in order when he boarded his flight to New York. There was just one pesky issue to clear up. Health officials in one of India’s 29 states had raised questions after testing a sample of one of Nestlé India’s bestselling products: Maggi 2-Minute Noodles.
Nestlé, the world’s largest food and beverage company, has sold Maggi (pronounced “MAG-ee”) in India for more than 30 years, and the brand’s ubiquity and cultural resonance on the subcontinent is something akin to Coca-Cola’s (KO) in the U.S. In 2014, Indians consumed more than 400,000 tons of the instant noodles—marketed in 10 varieties, from Thrillin’ Curry to Cuppa Mania Masala Yo!—and Maggi accounted for roughly a quarter of the company’s $1.6 billion in revenue in the country. That year Maggi was named one of India’s five most trusted brands.
Photo: Vivek Singh—Getty Images Assignment for Fortune
Khajuria’s team had received the regulatory notice about Maggi 10 days earlier. The food-safety commissioner of Uttar Pradesh, India’s most populous state, with 205 million people, was claiming that a package of the noodles had been found to contain seven times the permissible level of lead and had recalled the batch. Nestlé India had quickly responded with test results of its own showing that its noodles were absolutely safe. Khajuria expected that officials would find his company’s response compelling and that the issue would soon be resolved. But why was someone trying to reach him at such a late hour?
He reached for his phone and answered the call. It wasn’t good news. Khajuria’s colleagues back at home informed him that a widely read Hindi language newspaper had reported the news about the health notice. More alarming: The article suggested that state officials would soon recommend that the Food Safety and Standards Authority of India (FSSAI), the country’s central regulator, should ban Maggi nationwide.
Khajuria spent the next hour on the phone formulating a game plan. Nestlé would respond to media requests but not yet issue a public statement. And it would send a three-person delegation to meet directly with the health officials in Uttar Pradesh the following day. At this point, allows Khajuria, he was starting to get worried.
When he hung up, he couldn’t get back to sleep. It was May 11, 2015.
What had at first seemed like a minor regulatory annoyance was about to spiral into a crisis of epic proportions for Nestlé. Within a week the first national news story about a Maggi health scare appeared in the Times of India. A couple of days later the hashtag #MaggiBan surfaced on Twitter. Then things got worse.
On June 5, 2015, less than a month after Khajuria’s phone rang in the middle of the night, India’s central food regulator announced a temporary ban on the manufacture, sale, and distribution of Maggi noodles. In its order the FSSAI pronounced Maggi “unsafe and hazardous for human consumption,” a designation supported by 30 government lab tests showing Nestlé’s noodles contained excess amounts of lead.
Photo: Kuni Takahashi—Bloomberg via Getty Images
Enraged consumers wasted no time venting their anger. In some cities protesters in the street smashed and set fire to packs of noodles and photos of Bollywood stars who were paid Maggi endorsers. One prominent newscaster compared the situation to Bhopal, the worst industrial accident of all time, in which a toxic gas leak at a Union Carbide pesticide plant in central India killed thousands of people.
The Maggi meltdown would prove costly. Nestlé lost at least $277 million in missed sales. Another $70 million was spent to execute one of the largest food recalls in history. Add the damage to its brand value—which one consultancy pegged at $200 million—and the total price tag for the debacle could easily be more than half a billion dollars. And the fallout continues.
Nearly a year after the ban, Maggi noodles are back on shelves in India, but somewhat precariously so. The product’s future depends on two legal cases that are working their way through the Indian court system. Both pit Nestlé against the Indian government.
Nestlé, meanwhile, is still struggling to make sense of what exactly transpired. To counter the accusations of Indian health officials, Nestlé has produced voluminous tests—on more than 3,500 samples—that it says show its instant noodles are perfectly safe, with lead counts well below the legal limit. For a 150-year-old Swiss business that brands itself as the “world’s leading nutrition, health, and wellness company,” the idea that it fell short on quality control—especially regarding a substance with such dire health effects—is anathema. But where, then, did things go so terribly wrong?
This is a story about precisely that: What happens when a $100 billion global giant suddenly finds itself in a crisis—and everything it does to get out of it only sinks the company further into the morass? It’s an epic narrative of a powerful corporation brought low by an obscure food-safety agency in India and a handful of local government functionaries. And it’s a case study in irony about a company that, after a humiliating and existential scandal over infant formula, tried to reinvent itself as a paragon of corporate do-gooding and transparency—only to discover that no matter what positive, world-bettering things it did, it couldn’t quite escape its tainted past.
It’s also a cautionary tale about a towering multinational utterly losing its way in one of the world’s most sought-after markets—India—which, as it happens, has chewed up and spit out a number of mighty names in the past. Coca-Cola left the country in 1977 after being asked to hand over its secret formula—only to return decades later and get banned again, briefly, when pesticides were found in its soda. Walmart (WMT) scaled back its ambitious plans in India in 2013 when it realized it couldn’t possibly comply with regulations requiring 30% of its products to be sourced from small Indian businesses. Just recently Facebook tasted its own frustration when, in February, Indian regulators rejected its Free Basics web access program. This is the regulatory thicket that pro-business Prime Minister Narendra Modi has promised to untangle—and that still seems as impenetrable as ever.
Despite Nestlé’s long history in India, the company’s executives managed to misread a fast-moving situation at every point. And in that sense the Maggi episode is certain to be studied by MBA students and public relations executives looking for lessons for years to come.
“This is a case where you can be so right and yet so wrong,” says Nestlé CEO Paul Bulcke. “We were right on factual arguments and yet so wrong on arguing. It’s not a matter of being right. It’s a matter of engaging the right way and finding a solution.” He adds: “We live in an ambiguous world. We have to be able to cope with that.”
To understand why Nestlé failed so spectacularly in this instance, it helps to go back to where the saga started.
A Surprising Test Result
Sanjay Singh bent down and plucked a four-pack of masala-flavored Maggi noodles from a low shelf at Easyday, a well-maintained mini-mart on the western edge of Barabanki. It was a Monday morning in March 2014. As one of five food inspectors in Barabanki, a rough-and-tumble town of 150,000 in central Uttar Pradesh, Singh, 40, typically spends most of his time cracking down on street and festival vendors, like the biryani rice peddler who was spiking his product with an illegal yellow coloring.
But on this day he was following orders from the top: The food-safety commissioner of Uttar Pradesh had called on officers to spend the week raiding supermarkets. The exercise was in preparation for Holi, a spring celebration in which revelers throw colored powders and gorge on snacks. The Easyday, just across the road from Singh’s office and one outlet in a chain that had originally been co-owned by Walmart, was the inspector’s first stop that morning. Singh was intrigued by the no added msg label on the bright-yellow package of noodles.
Photograph by Vivek Singh—Getty Images Assignment for Fortune
Like most Indians, Singh was familiar with Maggi. His daughter liked to eat the instant noodles, which are sold in a plastic bag containing two components: a patty of deep-fried noodles, plus the “tastemaker” packet of spices (the same basic components as the ramen noodle packs that are a staple of the diet of college kids in the U.S.). Per standard procedure, Singh sent off one of the four Maggi packages to a laboratory across the state in Gorakhpur for testing.
The results, which arrived a few weeks later, surprised the inspector. The Maggi sample had tested positive for MSG, or monosodium glutamate, a controversial ingredient that’s legal in India but requires disclosure and a warning that the product is not recommended for children under 12 months old. A flavor enhancer often associated with Chinese food, MSG has for decades been blamed for everything from bad dreams to cancer—all claims that research has failed to substantiate.
The fact that the Maggi sample contained MSG when its packaging said it didn’t was a violation punishable with a fine of up to 300,000 rupees—or about $4,500. Had Nestlé paid the penalty, this story might have ended there.
But when Nestlé India was notified, the company denied adding MSG and appealed the finding. As a result, in June 2014, a second Maggi sample was sent to a different government laboratory more than 600 miles away in Kolkata. After a bizarrely long delay—one that has helped fuel conspiracy theories—the narrative would take a more serious turn.
An Earthshaking Development
Nearly a year later, in April 2015, Singh was at the office when the lab report on the second sample finally came back from Kolkata. In a very Indian twist, it had somehow gotten lost in the mail on its way to Kolkata for a period of months—in the process taking a 1,200-mile detour through the Himalayas—and once at the lab, it had apparently ended up at the bottom of a pile.
Singh skimmed the first page of the report and noted that despite the long time gap, everything appeared to be in order. The sample had arrived with the packet seals intact, and the test results were signed and stamped by the director of the lab. He flipped ahead to see whether MSG had shown up again. And, yes, there it was. “MSG: Present.”
This report was far more comprehensive than the first one. Singh, an organic chemistry Ph.D., continued methodically down the page until his eye landed on “Lead: 17.2 ppm.” Could it really be 17.2 parts per million?
He read it again, stunned. According to the report, the Maggi sample contained more than seven times the permissible level of lead—over 1,000 times more than the company claimed was in the product.
Lead is naturally present in small concentrations in air, water, and soil, and so it’s expected that trace amounts show up in the food supply. But this was not a trace amount. And significant exposure to lead causes wide-ranging and serious health effects, particularly in children.
Two days later Singh and his colleagues made another morning raid at the Easyday. This time the purpose was to suspend the store’s license for selling substandard food and to collect any tainted noodles. But there was no stock to seize. The Maggi sample that tested positive for lead was from a batch that was long gone from shelves.
As the food officers spoke with the store manager, the earth started to shake violently. They all scrambled for cover as packages tumbled from the shelves. When the shaking stopped, they joked that the earthquake—which they would later discover had killed thousands of people in neighboring Nepal—was the “Boom!” of giant Nestlé falling to the ground.
Photograph by The Voorhes for Fortune
Nestlé’s Polite Superiority
The headquarters of Nestlé India is a five-story, glass-walled building that sits along an eight-lane expressway in Gurgaon, a commercial district about 30 minutes outside central Delhi. Though it’s situated in the middle of a sleek, urban area, cows still occasionally meander across Nestlé House’s front lawn.
Nestlé began doing business in India in 1912. Today the Swiss parent company owns 63% of Nestlé India, which trades separately on the Indian stock exchange. Nestlé’s operations in India encompass eight factories, an R&D facility focused on developing products for the Indian palate, and more than 7,000 employees.
The Kolkata lab report arrived in the mail at Nestlé House on May 1, 2015, along with a notice from the food-safety commissioner of Uttar Pradesh, and landed on the desk of technical director Aris Protonotarios, the man in charge of quality and safety at Nestlé India. A soft-spoken Greek, Protonotarios has spent more than a quarter of a century with Nestlé. His confidence in his company’s quality assurance systems is such that, he says, he didn’t consider for a minute that any packages of Maggi could have left a factory with lead in them. “To anyone at Nestlé, being told your product is unsafe and hazardous is an insult,” he says. “To me it felt personal.”
Nestlé can trace that attitude all the way back to founder Henri Nestlé, a self-described “merchant chemist” who started a company bearing his name in 1866 and was said to obsess over quality. Today Nestlé is one of the world’s biggest and most profitable corporations, with some 335,000 employees, and products sold in every country around the world. Last year it ranked No. 70 on Fortune’s Global 500 list. The multinational has a deep roster of potent brands—including Kit Kat, Nescafé, Stouffer’s, and, of course, Maggi.
Photo: Courtesy of Nestle India
Maggi is actually one of Nestlé’s oldest and largest global brands. It originated in 1863 when Julius Maggi, a Swiss industrialist looking to improve the nutrition of the nation’s workforce, developed condensed pea and bean soups. Maggi’s seasonings, soups, and noodles are now sold in 101 countries.
People hardly even ate noodles in India when Nestlé introduced Maggi in 1983. But the masala spice mix made the taste familiar, and the two-rupee price point made it widely affordable. Marketed to time-pressed mothers—“Mummy, I’m hungry” went the product’s popular jingle—Maggi soared to popularity as a children’s snack. Soon it was mainstream comfort food and “Maggi points”—stands at which vendors cook up noodles to order—proliferated.
By 2015, Nestlé was manufacturing Maggi at five of its eight Indian factories. Protonotarios says that lead is among the many safety hazards around which Nestlé designs its quality assurance system: Each factory regularly checks raw materials, its water supply, and packaging for lead. Nestlé India also tests its finished product at each factory every six months, as required by India’s regulations. “The monitoring process would have picked up something if it wasn’t okay,” says Protonotarios matter-of-factly. “And if it had, we would have done something about it.”
A check of its records showed no irregularities. So Nestlé India prepared a stack of its internal monitoring documents and mailed a response to the Uttar Pradesh food-safety officials on May 5. The company advised the state regulator that, based on its review, no further action should be taken in the case.
In retrospect, it was a stunningly dismissive reaction—and one that would provide a blueprint for more drama to come. Because of Nestlé’s inherent confidence in its own processes and data, it couldn’t imagine that it might have a problem on its hands. That attitude of detached if polite superiority would irritate officials and exacerbate Nestlé’s problems, especially when the Indian press got wind of the story.
“We Just Had No Control”
If the media environment in the U.S. seems overhyped at times, it is downright somnambulant compared with the round-the-clock free-for-all on the subcontinent. India has nearly 400 news networks, and the country’s news debate programs often feature up to eight talking heads on a screen at once. The Maggi controversy would soon became fodder for hours of lively, breathless punditry.
The evolution from local issue to national debate was blindingly fast. On May 7, two days after Nestlé India sent its response to the health officials, the first stories about problems with Maggi noodles began to appear in Hindi language news coverage in Uttar Pradesh. Shortly after that, employees in Nestlé India’s social media command center began to notice comments about tainted noodles on Twitter and Maggi’s Facebook page. Khajuria received his late-night phone call in New York on May 11. Within a week speculation about a Maggi ban was everywhere. Yet Nestlé didn’t issue a statement on the matter until May 21, when it asserted that there was “no order to recall Maggi Noodles being sold” and that the product was “safe to eat.”
Photo: Vivek Singh—Getty Images Assignment for Fortune
Why wasn’t Nestlé more proactive? Partly because, as a general rule, the Nestlé way is to deal with authorities directly rather than through the press. Nestlé India execs also say they were still gathering facts and doing as much testing of their own as possible. But what’s the use of data if you don’t explain yourself?
While Nestlé stayed mostly quiet, the story metastasized. One of the first days Maggi made news, Maarten Geraets, Nestlé India’s head of foods, sat down in front of a TV in the company’s boardroom to see what was being said. It was nonstop and not kind; as he flipped channels, he was seized with horror and utter frustration. The Maggi news was on every channel. “We just had no control.”
To outsiders, too, Nestlé appeared paralyzed—or worse, guilty. Many Indians took the company’s silence as a sign of wrongdoing. The bigger the story got, the more scattered the coverage became. Some reports focused on “dangerous” MSG, while others focused on lead. Rumors spread in the hinterlands that Maggi contained glass particles—a mix-up due to the linguistic similarity of the words “lead” and “glass” in Hindi.
The escalating media attention also put pressure on another entity: the FSSAI, India’s national food regulator. That put a spotlight on Yudhvir Singh Malik, a career civil servant and the FSSAI’s CEO for just half a year when the Maggi scandal broke. In his short tenure he had already tangled with multinationals over labeling and quality issues. However, Nestlé was a reputable global company, and the evidence against it was limited to two samples, one of which had taken an unusually long journey to the lab. He decided that more investigation was needed.
Photo: Jyoti Kapoor—Solaris Images
On May 25, Malik wrote to the state food-safety commissioners—each of India’s 29 states and seven union territories has its own fully empowered food and drug regulator—asking that they test Maggi and submit findings to the FSSAI by June 1. Officials across the nation dispatched inspectors to grab Maggi packets.
By this time Nestlé’s leadership team in Switzerland was beginning to grasp that something in India was not unfolding as the team’s data said it should.
From “Technical Matter” to Crisis
For one of the world’s largest consumer-facing companies, Nestlé operates at a surprising remove, beginning with its geography. “The Centre”—as its global headquarters is known—is not near a major hub but in Vevey, a sleepy town of 18,000 on the northern shore of Lake Geneva.
Other than through its marketing, Nestlé hasn’t traditionally engaged much with the wider world. It doesn’t generally seek media attention, and its communications department is tiny relative to its size. Until three years ago, Nestlé didn’t have a centralized PR team in the U.S., its largest market.
Chalk it up partly to a natural Swiss reserve, but Nestlé’s aloofness also has to do with the long shadow cast by the company’s notorious baby formula scandal. In 1974 a non-profit called War on Want published a 12-page pamphlet called The Baby Killer that excoriated the formula industry for its marketing tactics. In pushing their products over breast-feeding, the document alleged, companies like Nestlé had led to the malnourishment and deaths of countless “third world babies.” The entire industry was targeted, but Nestlé, as the largest formula company, took the biggest hit. A high-profile boycott of Nestlé’s products ensued. The company tried many things to stem the criticism, to little avail.
Nestlé’s executives lost their appetite for broad public engagement. “They felt very quickly attacked,” says Albert Pfiffner, the company’s historian. “It has taken a generation to overcome this feeling.”
During the past decade Nestlé has embraced a version of corporate civic duty that is in keeping with its reserved culture: creating shared value, or CSV. The philosophy is that building a sustainable business naturally generates positive social by-products. Why bother with one-off charitable initiatives when you can simply invest for the long term? Today Nestlé execs talk about their business almost exclusively through the prism of CSV. The company’s 2015 CSV report, which tracks the company’s 39 societal commitments, from “delivering nutrition information and advice on all our labels” to “working against corruption and bribery,” was 351 pages; its annual financial report was 176.
Photograph by The Voorhes for Fortune
From his spare, elegant office in the Centre, Bulcke presides over his global business empire with a sort of mathematical laissez-faire, trusting his company’s chain of command. A lanky, blue-eyed Belgian fluent in six languages, the 61-year-old joined Nestlé in 1979 and became CEO in 2008. (He was a surprise pick over Paul Polman, who is now Unilever’s (UL) CEO.) Bulcke knows that a company the size of Nestlé is bound to run into controversy now and again. That explains his favorite aphorism: Tall trees catch more wind.
When he first heard about the Maggi case, says Bulcke, it struck him as a straightforward technical matter involving testing methods that could be judged and handled by his capable people in the field. “It was a ‘What is your spectrometer setting?’ sort of thing,” Bulcke tells me. He says now he was “too Cartesian” in his thinking.
By the end of May, his communications team was sounding the alarm that the story was exploding. As he listened to a Maggi crisis conference call on June 2, a couple of things became clear to Bulcke: He had badly miscalculated, and it was time for him to jump in.
“You feel it,” he says. “For the morale of the troops, you’ve got to show your nose.” He left for India the next day.
The CEO’s Terrible 24 Hours
When Bulcke arrived in India on June 4, he found his top managers preparing to visit the FSSAI. The regulator had called at 10:30 that morning and asked them to come to a meeting at 1 p.m. The executives were unclear on the agenda, but they didn’t think that Bulcke should go. They feared he was “too senior.”
Bulcke has a breezy, authoritative demeanor, and he dismissed any such notion. “Come on, that’s what I’m here for,” he said.
“This is a case where you can be so right and yet so wrong. We were right on factual arguments and yet so wrong on arguing.” —Paul Bulcke
Bulcke and his team arrived and sat down across a conference room table from Malik and another FSSAI official. The mood was tense. Nestlé India’s team complained it had not received test reports from the states and argued that tests were being done improperly. Malik fired back that Nestlé would have to ask the states for their test results and that their procedures were proper.
As he listened, Bulcke realized how far apart the two sides were. Looking back, he compares the meeting to watching a house burn down while two firefighters argue over the fire’s cause.
Sensing the regulator might do something drastic, Bulcke says he decided what to do almost on the spot: Nestlé needed to launch a voluntary recall and pull every variety of Maggi off the shelves.
His resolve was bolstered that afternoon when states began to ban the noodles. The first ban came from Uttarakhand, a state in northern India, where Nestlé had one of its five Maggi factories. Bans in five other states and territories quickly followed—including Delhi, the one that contains the national capital.
Bulcke gathered his management team in Nestlé House’s fifth-floor boardroom and explained his thinking. Nestlé had lost the regulators and had lost the media. The only way to regain control of the narrative—and win back consumers’ trust—would be to pull Maggi and relaunch.
Executing the recall would be a gargantuan task. The product they were recalling was in 3.5 million outlets. Plus, it was India, with all its red tape. Each of the 29 states is like its own country, meaning that trucks have to stop at each border for inspection. Vehicles can enter cities only during certain hours, and to do so they must be a certain size. Even with 38 distribution centers across the country, some of Nestlé India’s products take 13 days to get to market. The company would need to reverse-engineer this process. And it would have to do something with all those noodles. Nevertheless, Bulcke was determined about the course of action.
Nestlé set a press conference for noon the next day to announce the news, and at 12:30 a.m. the company sent a short statement to the Indian stock exchange: “In spite of Maggi noodles being safe, Nestlé India decides to take the product off shelves.”
Khajuria notified Malik a short while later by text: “We have decided to take Maggi noodles off shelves.” Bulcke went to his hotel and, he says, “got a good night’s sleep.”
An Uphill Journey Begins
The head of the FSSAI was not satisfied with the developments. Though Maggi would be pulled from the market, Nestlé’s press statement insisted on the product’s safety. Meanwhile, he had mounting evidence from labs around the country indicating otherwise.
So the regulator countered Nestlé’s move by implementing a temporary national ban of Maggi.
Aware of Nestlé’s 12 p.m. press event, Malik punched out an eight-page order calling on Nestlé to respond within 15 days with a reason that product approval for all varieties of Maggi noodles should not be revoked. He fired it off to Nestlé India by email at 11:15 a.m., and the news broke while Bulcke was meeting the media.
The press conference took place in a high-ceilinged hall in Delhi’s Oberoi Hotel. Despite the short notice, journalists packed the room, and Indian news channels broke into their programming to air the CEO’s remarks.
Photo: Ajay Agarwal—Hindustan Times via Getty Images
Bulcke kept his opening comments to five minutes and a few key points: Maggi is safe; consumer trust has been shaken by unfounded concerns; we’re working with authorities; we are committed to India.
Then the floor was opened up to questions, and the room erupted as the 200 journalists demanded answers from Bulcke: Why had it taken Nestlé two weeks to make a statement? If Maggi was safe, was he saying the government labs were wrong? No, he replied, he wasn’t criticizing the government’s science. For 45 minutes he gulped Perrier from a goblet and managed to keep his cool.
Bulcke flew out later that evening. He had been in India for roughly 24 hours, and things had seemingly gone from bad to worse. But the CEO left the country feeling happy and confident that things were about to turn around: “It was the first step of an uphill journey.”
We’ll Settle This in Court
The next step would be played out in the courts. The FSSAI had given Nestlé India 15 days to respond to its order, which threatened the company with permanent loss of Maggi’s product approvals. Responding with an explanation was one option; suing was another.
Filing suit against the FSSAI, the agency that regulated not just Maggi but also Nestlé India’s many other products, was risky. But six words in the FSSAI order were especially troubling to Nestlé’s executives: “unsafe and hazardous for human consumption.” They felt the phrase exposed them to legal action. Millions of people in India ate Maggi. What was to stop anyone who had health problems from blaming Nestlé’s noodles?
On June 11, six days after the government issued its temporary ban, Nestlé India filed suit against the FSSAI in Bombay High Court.
The Maggi proceedings spanned the summer months and became a media spectacle of their own. At the heart of the case was whether the government order to ban the sale of Maggi was legal.
Nestlé’s case was this: The FSSAI hadn’t given the company a proper hearing and had failed to follow “principles of natural justice” by issuing its order. The order, Nestlé argued, caused the company heavy financial losses and did irreparable damage to its reputation.
Further, Nestlé said, the rationale for the order was bogus, having been based on select findings of unaccredited laboratories that used improper testing methods. The FSSAI based its ban on test results for 72 samples of Maggi done by various state labs, 30 of which were found to have elevated levels of lead, though none nearly as high as the report that kicked off the crisis. But Nestlé argued that the government had ignored overwhelming evidence—the roughly 2,700 lab reports Nestlé had submitted from internal and external labs at that point—that indicated lead levels were under the permissible limit.
The government case asserted that the order for the temporary ban was an urgent matter of public safety and that the regulator did give Nestlé a hearing when Malik met with the company’s officials on June 4.
Moreover, the government argued, the order caused Nestlé no undue harm: The company had already recalled Maggi. The government’s ban was temporary, covering just a 15-day period. All Nestlé had to do was respond satisfactorily—which it couldn’t do because the product wasn’t safe. Nestlé had decided to incinerate the 37,000 tons of Maggi it had collected. Why would a company recall a perfectly safe product and burn it? The government order hadn’t mandated that Nestlé get rid of the noodles. (Though regulators had okayed it.) That act was tantamount to a cover-up. Likewise, Nestlé’s many thousands of test results could have been easily fabricated.
The Big Question
Was there lead in Nestlé’s noodles?
The widest, most puzzling, and most important divide in the Maggi affair is over that seemingly simple question. Several state governments in India tested Maggi samples and reported elevated levels of lead. Nestlé ran its thousands of tests and declared that no problem existed. Who was right?
Testing for lead is straightforward with sophisticated lab equipment, the findings unequivocal and reliable. Government lab analysts, though paid less than corporate colleagues, are a trained and educated group, says Ashwin Bhadri, CEO of Equinox Labs, one of India’s leading private lab companies. That said, he acknowledges the labs are dreadfully underresourced and stuck with antiquated instruments. “Some are 20 years old,” he says. “They don’t have the manpower or the chemicals to run the equipment. It’s really sad.”
A week after the Maggi ban, a former director of Kolkata’s Central Food Laboratory, Satya Prakash, reportedly sent a letter to the Prime Minister’s office and the nation’s health minister expressing concern over the nation’s lack of noodle-testing standards. In 2013, Prakash, who retired in 2009, published a scathing article in which he declared “the working conditions of labs are anything but functional.”
In stark contrast, Nestlé’s Quality Assurance Center in India sits, like a glass jewel, at the center of the company’s well-manicured campus in Moga. The day I visited, a scientist in a crisp white lab coat met me in the building’s foyer. He greeted me warmly before turning quickly, and with discernible bitterness, to the differences between a government lab and the pristine, state-of-the-art space he was about to show me. Government labs are likely to use cheap household blenders to mix food samples, he said; Nestlé has a $5,000 contamination-proof titanium blade. Nestlé uses pricey porcelain bowls to hold substances, whereas the government labs probably use inexpensive ceramic ones that leach, and so on. Standing there, it was hard to imagine contamination happening in such an environment.
Yet Nestlé’s money and its vaunted commitment to quality haven’t prevented other safety-related recalls. In March the company voluntarily recalled 3 million DiGiorno, Stouffer’s, and Lean Cuisine products in the U.S. “because of the potential presence of glass pieces.”
Many Indians, including professionals with knowledge of the food industry, continue to suspect that there was something wrong with Maggi. They find it hard to fathom that so many government tests could be wrong, and they suggest the food giant got a little sloppy in one of its factories, where lead-contaminated water or raw material or old equipment—possibly combined with the lax oversight of contract workers—caused the problem.
In the absence of a definitive answer, the next best thing would be a legal ruling.
Conspiracy Theories Abound
While the High Court of Bombay weighed the facts of the Maggi case, the affair stirred up debate around what was already a hot-button question in India: Is the presence of big foreign companies good or bad for the country?
Enter the yogi.
Suspicion of multinational companies in India is deeply rooted and very much alive—perhaps most prominently in the hulking yet limber form of Baba Ramdev, a colorful yoga guru and the face of India’s fastest-growing consumer goods company. Ramdev, 50, has long hair and a dark, bushy beard; he became famous in the early 2000s by leading TV yoga workouts in a saffron-colored loincloth. He parlayed his celebrity into the launch of Patanjali Ayurved, an ayurvedic medicine company, in 2006. Before long his followers were flocking to his ever-expanding line of all-natural products. (Toothpaste and ghee are his top sellers.) The goods are dirt cheap and marketed as swadeshi, or Indian. Increasingly he is taking market share from global giants like Colgate and Unilever.
Ramdev is vociferously anti–multinational corporations. He rails against the money they drain from the country and the ills they’ve introduced to India, calling Coca-Cola and Western-style processed foods “slow poison.”
As Nestlé’s troubles escalated, the coincidences were too good for many on social media to resist. Twitter and WhatsApp buzzed with giddy speculation that Baba Ramdev himself was behind the scandal or that he would swoop in to the rescue by launching his own Patanjali instant noodles. Finally, in mid-June, Ramdev said that after months of research—wholly unrelated to Maggi—Patanjali planned to launch a line of locally sourced whole-wheat noodles in late 2015.
The guru didn’t miss a chance to get in a shot at Nestlé. “Maggi should apologize,” said Ramdev in early June. “And if the government takes strong measures, the company should be asked to pack up and leave the country. We don’t need a company that serves poison.”
On June 30 the High Court of Bombay offered Nestlé some relief: It allowed the company to resume manufacturing Maggi for export. Singapore and Australia had already pronounced the noodles safe for sale and consumption; Canada, the U.K., and the U.S. would do so as well in the following weeks. For many it raised the question: If Maggi was fine for consumers in those developed nations, why not for the people of India?
Others reached a different conclusion. Of course the exported product was safe, I was told by some people—a few of them Indian officials. Nestlé sells a higher-quality product in other countries, these people claimed; in India, where the population and authorities have traditionally been less discerning, it pushes substandard goods. Not only was Nestlé guilty of selling tainted noodles, these folks asserted, but it did so willfully and then engaged in a cover-up.
“Maggi should apologize, and if the government takes strong measures, the company should be asked to pack up and leave the country. We don’t need a company that serves poison.” —Baba Ramdev
That’s just a single strain of conspiracy theory among many. One of the most common things I was told while in India was some form of this: “There are some politics behind this case.” When I’d push people further on this point, accounts diverged wildly. One person might point to strained diplomatic relations between India and Switzerland over banking secrecy. Another might suggest that Nestlé had been set up after refusing to make “political contributions” to corrupt officials.
The possibilities are endless, and most of them have been debated in some corner of India. But Kilbinder Dosanjh, a director at risk-consulting firm Eurasia Group, says the Maggi case is less a story of unique political dynamics than a classic tale of institutional weakness in India. In that way it is the opposite of conspiracy. It’s about regulatory incoherence. “When it came to tests of these noodles, there were multiple levels of institutions dealing with this,” he says. “You had state and central bodies that complicated who was responsible and what standards they were using.”
Good News at Last
While Nestlé waited for the high court to render its verdict, the company took steps to up its communications game. Though it stayed silent on matters before the court, the company created a Maggi information hub on its website, where visitors could view its lab reports and read up on MSG. It publicized its recall efforts. And it invited journalists to tour its Quality Assurance Center in Moga.
Nestlé India also got a boost in late July from the arrival of Suresh Narayanan as its new top executive. Narayanan, 56, had spent the previous decade covering the globe for Nestlé. In April 2015 he’d been transferred to the Philippines after a lively four-year stint running Nestlé’s businesses in Egypt, Libya, and Sudan. But after the Maggi situation blew up, Narayanan got a call from his boss, Wan Ling Martello, the head of Nestlé Asia, Oceana, and Africa, asking him to move again. “I need you in India,” she told him.
Photo: Vivek Singh—Getty Images Assignment for Fortune
The ebullient Narayanan, an Indian himself, had begun his career with Nestlé in the sales department in Gurgaon, and he still knew many of Nestlé India’s employees and the market. He had also proved to be an expert and versatile crisis manager. In Singapore, for example, he took over just as the financial crisis hit and still managed to grow sales in a mature market.
Narayanan wasted no time signaling that he would be leading Nestlé India in a very different way. He gave an interview to the Indian press the same day he arrived. A week later he spoke for 45 minutes live on CNBC, declaring his first mission was “to bring Maggi back.”
“When you manage an issue in India, you’re dealing with a certain set of known entities but also a much larger set of unknown entities. It’s like being shot at in the dark.” —Suresh Narayanan
His words proved prophetic.
On Aug. 13, a couple of weeks after Narayanan’s arrival, the High Court of Bombay delivered its judgment in the case. In a ruling that was unusually long—145 pages—the court sided with Nestlé. It overturned the ban, declaring that the FSSAI had acted arbitrarily. The judgment allowed Nestlé India to resume sales of Maggi, on the condition that another round of samples—90 in all—be tested for lead and cleared in the following six weeks by three labs accredited by the National Accreditation Board for Testing and Calibration Laboratories.
Nestlé India’s executives had crowded into the boardroom to watch TV coverage of the decision. Narayanan was texting updates to Martello back in Vevey until it became clear to him that it was good news. Then he sent her one more message: “WE WON WE WON WE WON WE WON,” and added smiley emoticons.
A Nation Gets Its Noodles Back
The relaunch of Maggi was scheduled for Monday, Nov. 9—five months and four days after the government ban, and an auspicious day in India known as Dhanteras. The first day of Diwali, the Hindu festival of lights, it carries associations of well-being and prosperity.
Nestlé had gotten official clearance from the Bombay High Court in October and spent weeks preparing. Nestlé India was eager to build demand after the product’s months-long absence from shelves. The company’s marketers began with young people, who had proved a forgiving and fiercely loyal fan base; they had been clamoring for Maggi’s return practically since the trouble began, and for them Nestlé launched a #WeMissYouToo campaign on YouTube—a series of minute-long spots starring handsome bachelors who are forlorn without their instant noodles. To court mothers, it got real moms to give video testimonials about why they still trusted Maggi.
Photo: Courtesy of Nestle India
For symbolic reasons Nestlé delivered the product as widely as possible on day one. Trucks loaded with instant noodles and festooned Indian-style with colorful tassels and decals rolled out just after midnight. The no added msg label on the packages had been replaced by a new logo reading “Our commitment to goodness you can always trust.” Narayanan gave dozens of interviews repeating some version of a simple message: “Maggi is safe, was safe, and always will be safe.” There were Maggi-eating celebrations at Nestlé sites across the country.
They celebrated in Vevey too. Maggi was served at an executive board meeting. The instant-noodle dish was the second of four courses, between Terrine Saint-Hubert and fried sturgeon served with crème de caviar d’Aquitaine.
Taking the Long View
Maggi noodles may be back on shelves, but the Maggi saga is far from over. The Monday after the big relaunch, the FSSAI filed an appeal of the Bombay court decision in India’s Supreme Court. There is another legal case pending. On Aug. 12, 2015, the day before the ban was lifted, the government had sued Nestlé India for $99 million. The complaint, lodged on behalf of consumers by the National Consumer Disputes Redressal Commission, alleged the same basic things the FSSAI’s order had: that the company had sold unsafe products and misled consumers through its advertising practices. Both cases continue to work their way through the Indian courts.
Meanwhile, Nestlé has a wily new competitor in the noodle market. A week after the Maggi relaunch, Baba Ramdev introduced his new Patanjali noodles. They’re made from atta, a “healthier” whole-wheat flour, and cost 10 rupees less than Nestlé’s Maggi equivalent. As the robed guru whipped up a batch for media onlookers in a Delhi mall, he noted that Patanjali’s product was lead- and MSG-free. Then, for the cameras, he enthusiastically slurped some down, noodles tangling in his beard.
Photo: Sanjeev Gupta—EPA/Corbis
The fates of the other characters in the Maggi drama have diverged. Sanjay Singh, the inspector whose curiosity about MSG kicked off the whole crisis, received a public service award in Barabanki in January for his good work. Malik, the CEO of the FSSAI, was shifted out of his position a month after the Bombay High Court decision and transferred to India’s central planning commission, where he was given a job as an “additional secretary.” Meanwhile, some government officials remain incensed with Nestlé, particularly over the arrogance of its recent marketing efforts—the “Maggi is safe, was safe, and always will be safe” language irks them. For those burnishing Brand India, the episode can’t go away fast enough.
As for Nestlé, Bulcke and his team acknowledge that they didn’t play the Maggi crisis perfectly. But they defend their decision-making generally—particularly the choice to privilege communication with regulators over reaction to the media. They talk about how they managed the crisis with long-term rather than short-term outcomes in mind. Nestlé has been in India for 100 years, Bulcke stresses, and it wants to be there 100 more. You can’t achieve that in a country if you blow up your relationship with the regulators.
In any case, the global giant was given an important lesson in the unpredictability of one its most promising growth markets. “When you manage an issue in India, you’re dealing with a certain set of known entities but also a much larger set of unknown entities,” says Narayanan, the Nestlé India managing director. “Who is going to set off what bullet at you is what you have to keep anticipating. Where the hell is this next bullet going to come from? It’s like being shot at in the dark.”
The next time Nestlé hears gunfire, maybe it will be ready to duck.
A version of this article appears in the May 1, 2016 issue of Fortune with the headline “Nestlé’s Hot Mess.”