- 2018-12-11
Does Modi "make the final decision"?
In 2014, when Nestlé’s Maggi noodles, along with Colgate, Dettol and Nokia, were awarded the most trusted consumer brand in India, a commentator in Bangalore was in India The Economic Times website retorted: “Now is the time for India and the people of India to remove all foreign brands from this list. India needs to leave its mark in the world.”
Coincidentally, what an Indian minister called the "Inspector Raj" (Inspector Raj) is planning to take action. In January 2015, a food inspector took a pack of Maggi noodles from a store in Uttar Pradesh. Since then, it has caused a series of farce, which eventually led to Nestlé destroying 400 million packs of noodles, which were actually no problem. Only recently (after the decline in global sales of Maggi noodles), the brand was relaunched in India.
The Indian Prime Minister Narendra Modi, who is committed to reform, recently visited the UK and Turkey, promising to reduce barriers to foreign direct investment (FDI), using the slogan "Make in India" Attract multinational companies. But the Maggi noodle incident shows that no matter what the national leaders say, the tax authorities, food inspection agencies, and local bureaucracy are often ignored.
The claim that the noodles produced by Nestlé contained excessive lead (based on controversial evidence, which was not supported by inspection results from other countries) meant that India’s main food inspection agency had disregarded Modi’s welcome posture. This has further strengthened the already growing awareness of multinational companies: emerging markets are not the one-way bets they once expected, but are full of enthusiastic consumers. These are tricky areas, and foreign companies can easily get into trouble.
In a sense, they have always known this. Only truly naive people would think that entering China is as easy as entering Cincinnati. But the risks in the past seem to be manageable, especially when they are attracted by smiling politicians and the rewards of jumping into the unknown are huge. But in reality, they encountered more traps and fewer rewards than expected.
The economic environment is not strong either. The growth rate of China's economy has declined, and the economies of Brazil and Russia are expected to shrink in 2015. Due to poor performance, Goldman Sachs has closed its Brics fund, which aims to benefit from the growth potential of Brazil, Russia, India and China. Foreign investors will no longer be able to ride the fast-growing ride.
At the same time, the setbacks brought about by supervision are increasing. The Nestlé noodle turmoil is exactly the same as that of other foreign multinational companies in India, especially in terms of taxation. Last month, Vodafone won the case in the Mumbai High Court after the Indian tax authorities tried to get the company to pay hundreds of millions of dollars in taxes. In 2014, the Mumbai court ruled in favor of Shell in a similar case.
Foreign multinational companies can at least rely on the Mumbai court to make a fair judgment. In August, the judge of the court ignored the Food Safety and Standards Agency of India (FSSAI), saying that the agency’s decision to ban the sale of 9 types of Maggi noodles based on defective testing violated the principle of natural justice.
Other countries are also tricky. After becoming a public case of China's crackdown on bribery, GlaxoSmithKline was fined 300 million pounds by a Chinese court. Sifiso Dabengwa, CEO of South African mobile communications company MTN (which provides services across Africa and the Middle East), recently announced his resignation after Nigerian regulators fined the group US$5.2 billion.
Foreign multinational companies are not the only target of nosy regulators. They are not only encountering risks in emerging economies, European banks also encounter risks in the United States. Several large Chinese state-owned companies and their executives have suffered severe blows in the country's anti-corruption campaign. But in difficult times, foreign companies are more likely to become targets.
This means that you have to pay an extra price to "enter as you are", not only to adapt the "Big Mac" (Big Mac) to the local culture, and to sell the "Chicken Maharaja Macs" (Chicken Maharaja Macs), but also to become the local economy a part of. "You can't afford the consequences of being considered an imperialist. You have to show how you can benefit your country," said Peter Williamson, professor of international management at Cambridge University.
But Nestlé has not done anything wrong, and certainly will not reduce its sales in India by 20%. Nestlé’s mistake was that it failed to respond quickly and confidently to the allegations after the incident.
By the time Nestlé made a rebuttal, rumors that its noodles were poisonous had spread on social media. Nestlé is not a newcomer trying to get locals to accept a certain global product. It has been operating in India for 103 years and has been produced in India as early as 1961.
Since its launch in 1983, Maggi has been a popular brand-this kind of noodles that can be cooked in a few minutes is cheap enough for most people and suitable for their busy pace of life.
Nestlé India has been listed on the Bombay Exchange since 1968; it directly employs 7,000 people and indirectly provides employment for 500,000 people; it sources from Punjab, Haryana and Rajasthan. (Rajasthan) 100,000 farmers buy milk and dairy products; it conducts global research and development on noodles in India and has 9 health laboratories. In other words, Indians are no strangers to Nestlé.
In such incidents, people often ask how big companies can do better, and Nestlé will learn lessons, especially in terms of communication. But this is the fault of India (not Nestlé). The implication of this incident for growth economies is: If your country's investment returns decline, then you must reduce your risks.