The Manipulation Game

I learnt this a part of economics- The Circular Flow of Income.

Industry produces goods: people buy the goods with their wages :: People work for the industry making the goods: Industry pays people wages.

This was simple and pretty basic. Then there was the government which taxed the people and industry to provide for the infrastructure for both. The next layer was financial institutions which gathered surplus from the wages and loaded it to the governments and industry to bridge gaps and grow larger. In return, people earned interest and bought more goods…. And so the cycle grew larger with a global perspective and international trade come in.  

In an ideal world, we have actually set in motion a perpetual growth system that is worldwide and self- sustained. But somehow this never happens. There is always a rouge element which tries to play folly and break the complete cycle. In most cases globally, a government- industry- financial institution nexus has often played havoc and has left communities, countries and even entire financial structure around the world jeopardised. Enron, the crash of 2008 are just a few examples which have left a mark on global economy.

Living in a world where nothing seems to be robust leaves a lot of gaps for me to think in all the places where greed and instant profits are linked to a scenario that seems a calamity but seems like a cover- up for a larger plot. I can’t help but speculate that sometimes it almost seems like a crisis is being created to manage the financial bearings. When companies issue stocks, they are borrowing from people with the idea of mutual ownership and sharing of profits. When the company buys back their shares; dividend is no longer a liability to be paid. A recent article by Jayant Vidhvauns in a Marath daily drew my attention that this is actually a big possibility. (http://epaper.loksatta.com/521248/indian-express/15-06-2015#page/13/2)

Let’s take the recent case of Maggi in India. A legendry brand that’s almost 30 years in existence and stands to take 70% of the instant noodles market. It contributes in the range of 20% of Nestle India’s revenues and is almost a habit for most people who have grown with the brand. We always knew it was not healthy, had MSG and other flavouring agents. So why all of a sudden did one fine morning in June we got alerted? How did this happen to a company that was over exceeding analyst expectations? Why all of a sudden did the share prices fall for a few days and bounce back? Its hard to imagine how many shares might have been bought back by Nestle within the sessions it was running low and how much money was lost by the investors in the process. 

I can’t help but question, is this a planned move to buy back shares in a bid to retain profitability? The company has recovered its shares in the few sessions of panic sale and now the stock is back on track. People have lost money- the company lost nothing. As for its reputation: the entire set of packaged food market with all its competition has gone sluggish; so no loss of market share. The losses in sales are going to be far less as compared to the dividend to be spread amongst shareholders.

Now wait a minute… How did Cadbury’s get worm infested in 2003? Never happened before or after? But that was the time Cadbury got "Delisted" and there was an active buy back. How come Coke had pesticide residues one year and is sharing happiness ever since with no issues? Not to mention the pesticides later got bottles from all the brands and no one lost anything in the market. 

I don’t have enough evidence, study and the understanding to put my finger on things. But one thing is for sure; there are more ways to manipulate and control the business outcomes- especially when big numbers exchange across over a matter of few days. Shares have often been subject to allegations of insider trading, bubbles and scams- but this seems to be a new way that even the regulators might find tough to manage and distinguish as a rouge activity. No matter if you agree or call me a skeptic-  Business today is not just a PnL statement- it is an entire manipulation game. 

The two minute magic of Maggi

A few days back, I was driving down listening to a radio spot quiz, where two participants answer a question and the winner is decided by how many of the ten pre-recorded respondents answered the same as the contestants. On the face of it, this seems like a very ordinary game; but if studied well, it has insights much to the order of a market trend spotting conducted through a research. So the question was: ‘What is the first thing people learn to prepare in a kitchen?’ The contestants chose option which even by my opinion are very basic- bread butter and tea. But what came from the respondents was pretty stunning. While an omelette and dal-rice stood as two individuals; the remaining eight unanimously voted for Maggi.

It is a formality to mention that the name Maggi is synonymous with ready-to-cook noodles in India and has stormed into the 5^th position (and a first time in the Top 10) as per the recent Brand Equity Most Trusted Brands in India list for 2014. (http://articles.economictimes.indiatimes.com/2014-10-22/news/55318723_1_trusted-brands-survey-brand-equity-dettol) What is worth noticing is that Maggi is leagues ahead of other Nestle brands like Kit Kat (61), Milk Chocolate (72) or even Nescafe (95).

The trust factor is something built upon time and for Maggi- it has been a journey that started over 25 years ago, when it was introduced to kids like myself as an instant snack option. The communication was done apt to position it in that space showing kids in school uniforms swinging across on gates and urging their mom’s for a quick snack. Apart building that connect of an after school snack- the concept of noodles was alien to the Indians palette. Not to forget the, it was seeking to intrude the traditional Indian kitchen space enriched by pulses and cereals with a white flour (Maida) based product.

But the mid-80’s was a time actually witnessing a lot of fresh ideas and changes coming through with the middle class eager to latch on to any new product the market was willing to offer. It was the youth making its way into the driver’s seat and Maggi latched on to this wave. A stall serving Maggi at a college festival was often seen attracting the maximum crowd and at a point in time when the red cart serving Chinese food (or Chow mein in Northern India) was yet to become a familiar sight, masala noodles were gaining rapid popularity. Collect 5 empty packs of Maggi and redeem it for one pack free was a craze for the 5 to 25 age group.

Typically in the mid-80 and 90’s; time, place and nutrition wrote some of the unwritten rules of the Indian food: omelette bread, sandwich, poha-upma, idli- dosa, poori-bhajji were the staple breakfast foods, lunch or dinner was rice and roti’s with vegetables and daal. This used to be a kind of predefined food regimen rigorously followed across homes, office canteens and hostel mess and movement of breakfast items into lunch or dinner was equal to gastric blasphemy. Eating out was considered both expensive and unhealthy. The concept of packaged food or fun food was yet to develop and was mostly limited to biscuits.

It is difficult to establish when Maggi managed to break these rules and changed our food habits, but there can be some reasons sighted to know why it happened. Though technically, Maggi noodles do take more than 2-minutes to get ready, it was possibly the first instant food available in India with a long shelf-life, no oil and a spicy taste to suit the Indian palette. Secondly, how difficult was it to boil water, break the cake into four pieces and add a taste maker for a perfect little snack? By itself, one pack of Maggi was filling enough for one person. While the nutritional value was still being debated, the consumers innovated to fill this void. Adding vegetables like tomato, onions, peas, capsicum, cheese and even eggs to the basic Maggi, we had a new dish added to the dining table. Leaving back some excess water meant the noodles were also soupy.

Maggi also triggered a new phase of satisfaction. Dual income parents chose Maggi over any other street food as their children went home after school.  Students found it as an affordable option to restaurant menu. A Maggi stall at any IIT or other residential college campus is usually the place running well past mess hours into the night. For those at home, cooking Maggi with friends over a sleepover for midnight hunger pangs was like an unwritten rule. Till about two years back, the Maggi stall at the Chennai Airport was a popular choice of an economic and filling snack. With smaller packaging at an affordable price, it has also percolated into the rural pockets in India.

On a personal level, a few packs subconsciously enter my bags for a tour beyond 3 days in India or abroad. Not to mention, me and my friend had a Maggi on Vagator beach in Goa. While he championed it as the food that kept him going while reporting about the environmental disaster in Uttaranchal last year, I take a bow for mastering the art to make noodles in a hot water kettle.

As a product, Maggi in Indian is a winner, but not without failures like the New Maggi (aping Top Ramen’s flat noodles), Dal and Atta noodles or the tomato flavouring taste maker. But there has been no stiff competitor who has challenged Maggi in the market in a bid to take over the lead. So even the complete with a foon and hot water dispensers at the retail outlets idea in 1989 by Bisca (Parle) , or the later ones like Nissin Foods' Top Ramen (flat and with veggies added), GSK's Foodles, Sunfeast's Yippie (round shaped cake), Ching's range of noodles, Knorr's Soupy Noodles, Future Group's Tasty Treat, the cup noodles Wai Wai are still nowhere even close to the Maggi legacy. It still enjoys 70% market share of a market it has built and ruled for over 25 years. (http://articles.economictimes.indiatimes.com/2014-10-29/news/55559123_1_maggi-knorr-soupy-noodles-wai-wai)

One thing is for sure, if there is a brand today in India which has carved out a category, changed consumer habits in doing so and is still unchallenged in its leadership position; it deserves its space in the sphere of trust as a brand. Maggi- the magic woven over years but just in two minutes in our kitchens.