Maggi, the brand or just let’s talk about the word only, makes us nostalgic about our childhood where after coming from school, playground we would tell our mommy “I am hungry” and she would come out of the kitchen in 2 minutes carrying a bowl of Maggi. It makes me nostalgic, hoping it does the same to all.
Maggi, the name synonymous and interchangeably used with instant noodles in India, recently is in news due to the lead and MSG composition in its taste-maker. The brand known in India especially among the housewives and the youth for being able to be ready in 2 minutes and by the same making our lives easier got into negative news few days ago.
Everybody is well acquainted with the fiasco brand has come into, but the same has not been able to affect the stock prices of the Nestle as predicted. The thought was that the stock prices would come down drastically as the consumers felt betrayed.
Facts of the Case:
- On 26th of March, the Government Regional Public Analyst Laboratory on the Baba Raghav Das Medical College campus in Gorakhpur took some samples and conducted a test.
- The tests showed the presence of lead and MSG in quantity which three times more than the permitted. And the presence itself was contrary to its labeling saying “No added MSG”.
- The junior analysts at the lab told that if it had not insisted for further tests then Maggi would have gotten away with just a fine of around ₹ 10,000 only. Further tests were conducted at Central Food Laboratory, Kolkata.
- This whole test led to the ban of Maggi in the country. The retailers and wholesalers were asked to throw away the stock and people went on to burn the packets.
Despite all of this fiasco, the stock prices of the company Nestle have not fallen down instead they have been rising at a good pace. The opening price of the stocks on Wednesday i.e. 17th June 2015 were ₹5711.27 and over the week they went up-to ₹6127. In the following week, starting from 22nd June 2015 opening price was ₹ 6320 and the till 25th June 2015 where it started falling and the closing price being ₹5845.35
The reasons could be many behind the rising stock prices. Some of the prominent reasons:
- Major one could be the customer loyalty towards the brand. The brand has been a savior for bachelors and students, especially among the MBA students who are living away from homes and don’t like the food or doesn’t have time to cook to satisfy their hunger.
- Coming to the housewives and Moms after having a tiresome day some are not in a position to cook, so here comes Maggi to avoid ordering food. The quality of making our lives easy and being convenient to cook calls for the loyalty towards the brand.
- Then the half of the population in India and people trading consider Nestle and Maggi as two different brands, despite the fact that Maggi is a brand from the house of Nestle. The population is not at fault but it is their inability to differentiate between a brand and a company. People trading in securities and stocks doesn’t mean that they are well acquainted with the market.
- And lastly, the faith among the investors that the brand would come back with more focused strategies and vision. This process may take some time to recover the losses and bounce back into the market as regaining consumer confidence built over decades would take more than a few quarters.
This rise in stock prices show that there is trust and patient among the investors about the brand that it will come back and with a bang. The brand has already started working on the re-positioning by bringing in a new snack product.
The prices are rising now and may start falling gradually but the faith in our heart says Maggi Maggi Maggi….