Nestlé Refrigerated Foods Company

Marketing Research
Begum Abad Hanuman Nicole Erard-Coupé Naveen

Background
‡1987- Nestle¶ enters the refrigerated food market by acquiring Contadina Pasta and Sauces.

‡Non²commodity refrigerated foods was a relatively undeveloped category in U.S in 1987 ‡Refrigerated foods were responsible for 7% of Nestlé's global sales despite little contribution from the potentially large U.S. Market

Market Summary: Refrigerated Foods ‡ Based on market research. Nestlé's decided to launch Contadina ‡ Contadina Fresh Past & Sauces rolled out nationally in 2nd half of 1988 ‡ Product launch was very successful: ± $75 mil. Retail sales in 1988 ± $150 mil. Retail sales by 1990 ± Pasta line accounted for nearly 80% of sales volume .

the NRFC began a product development process for a refrigerated pizza concept ‡ The pizza market was an $18. heat and eat Pizza .4 billion market ‡ By 1989 NRFC developed 2 new pizza concepts ± Pizza Kit ± Preassembled.Market Summary: Refrigerated Foods ‡ Given Contadina¶s success.

in past 6 months ± Pizza consumption strongest in northern and eastern parts of U. ± 10.000 pizza outlets ± frozen pizza market more fragmented w/o clear market leader es 's es rc o a o eP tl ea h f t m izza o s m tio nu p n delivered/take-out 5% 4% 16% frozen pizza (supermarkets) 75% fresh pizza (grocery stores) homemade pizza .Market Summary: Pizza ‡ Pizza market Statistics: ± 88% of all pizzas sold by restaurants ± 60% of pizzas eaten at home ± 76% of all U.S.000(+) franchised pizza restaurants ± 25. families had eaten restaurant pizza w.S.

Product Development: Pizza Kit ‡ Kit included: ± 12´ crust ± Sauce ± Cheese ‡ Sauce: Tomato or Pesto ‡ Additional Toppings: Pepperoni. 3-Cheese. Mushrooms & Bell Peppers (Sold Separately) ‡ Serve 2-3 people . Sausage.

Market Research: Concept Test ‡ Preliminary Concept test (200 Interviews) ± Positive purchase intent was 58% (49% among males. 60 said they would buy Contadina instead of another product) . 66% among females) ± Results: ‡ 128 Heavy Take-out users(once every 2-3 weeks(+)) ‡ 115 favorable to concept (out of which.

Market Research: Bases II Line Extension Study ‡ Involved both Concept & in-home product use test: ± Pizza Kit w/ Toppings Sold Separately ± Pizza Kit only (No Toppings Sold Separately) ‡ Determine the impact on trial kit by availability of separate toppings ‡ Analyze Strengths and Weaknesses of both concepts .

29 for each additional Topping Place ± National distribution possible.Pizza Kit Product ± Support either Pizza Kit with or without toppings Pricing (NRFC expected factory pricing to be 2/3 of retail prices) ± $6. Trade Promotions .39 for Kit ± $1. Consumer Promotions $4 mil. Advertising $5 mil.) ‡ ‡ ‡ $9 mil. could install a pizza line @ the Danville factory Promotion (Total $18 mil.

24% ± MRD felt Parent Brand Penetration could range btw. 5%25% (recommended volume projections be sensitive to this range) ‡ Based on Promotion Plan.Target Market ‡ 95. NRFC projected 37% overall awareness ± Parent Brand Users likely to be more aware of Contadina name .5 Mil. Households ± Contadina Pasta Users would Represent approx.

NRFC Data on Consumer Awareness & Purchase Assumptions Pizza Kit & Toppings Awareness Users Non-Users Overall 60% 30% 37% 58% 1.1 Kits 22% 1 Kits 2 Pizza Only ACV Purchase Assumptions Units @ Trial Repeat rate Repeat Purchase Units Repeat Purchase Occasions .2 Kits 22% 1 Kits 2 60% 30% 37% 58% 1.

3% share retail pizza market ‡ Should NRFC launch a pizza product ± Which option ± How large market would they find ± What market share could be achieved .Pizza Kit ‡ Favorable to Pizza Toppings ± 50% would purchase toppings every time purchased kit ± 25% would purchase toppings ½ the time ‡ Business Requirements for Pizza ± $45 mil factory dollar sales ± $12 mil project Investment costs ± .

1 3083982 80% 30% 8 .8 9 1 .7 8 9 5 .2 3933842 76% 72580000 15% 12% 59% 18% 30% 30% 58% 5% 3750789.24 1.Analysis: Volume Estimation ie Pizza Calculations U House ol s ial enet ation [%] ial Unit House ol s e initely Buy A justm 80% ent obably Buy A justm 30% ent Weighted Trial A justm ents o : A a eness ist ibution (A V ) Adjusted Trial Rate ial House ol s ial ansa tion i e Trial Units ata Option A: Pizza Kit & Toppings Contadina Users Non-Users Option B: Pizza only Contadina Users Non-Users 95.76 1.1 2807608 76% 72580000 12% 10% 42% 13% 22% 30% 58% 4% 2803620.000 24% 22920000 30% 24% 57% 17% 41% 60% 58% 14% 3278201.24 1.20 1.2 4500947 24% 22920000 22% 18% 48% 14% 32% 60% 58% 11% 2552371.5 9 0 .500.4 3 4 .

Analysis: Repeat Purchases Option A: Pizza Kit & Toppings Contadina Users Non-Users Repeat Purchase Calculations R R epeat ate R epeat useh l s R P epeat urchases R Occasi ns epeat R P epeat urchase nits Repeat Units Total Units Option B: Pizza only Contadina Users Non-Users .

Analysis: Pizza Toppings Option A: Pizza Kit & Toppings Contadina Users Non-Users Toppings Calculations Topping Trial Rate Calculation y Topping y Ti y Topping al Ti T ial Pizza ni s T ial ni s i Toppings T ial T ansa ion iz Trial Toppings Units Repeat Toppings Calculations p a ni s p a Topping T ial p a Toppings T ansa ion iz Repeat Toppings Units Total Toppings 63% 63% .

Analysis: Revenue Estimation Revenue Estimation for Nestle's Refrigerated Pizza Launch i e ata otal a et nits i a o in s otal a et at $ /unit i a o in s Revenue [$] otal R etail a et otal a toy a et R usiness R equiem ent Option A: Pizza Kit & Toppings Contadina Users Non-Users Option B: Pizza only Contadina Users Non-Users $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ -$ .

285 ‡ 15% Penetration Pizza & Toppings Total Trial Units Total Retail Market 7.541 Total Factory Market $43.991.994.492.Analysis: Sensitivity Analysis ‡ 5% Penetration Pizza & Toppings Total Trial Units Total Retail Market 6.445.605 $76.529 .719.036.204.439.500 $31.734 $65.333 Total Factory Market $51.554.293 Pizza Only 5.709.312 $26.428 Pizza Only 4.552 $46.896 $39.479.139.

239.Summary ‡ Should launch Pizza Kit with Toppings ‡ Require @ least 7% Market Penetration to meet Basic Business Requirement of $45 million factory dollar sales ($45.023 8.809.334) ‡ Market Size Pizza 5% 15% 24% 8.894 11.741.545 Topping 7.840.423.587 ‡ Market Share .170 10.527.373 9.52.

‡ The product should also be supported heavily with huge advertising outlays. company should use the same distribution network as it did for Pasta.Recommendations ‡ Nestle should first work a lot to refine the taste of it¶s pizza. ‡ It should also lower the prices of its offerings. . ‡ Post launch. ‡ Company should fine tune its manufacturing facilities before the product launch.

What appened? ‡ 1991-Nestle launches Contadina Pizza. . ‡ Positioned as a quick. packed together with separate pouches of cheese and sauce. ‡ Pizza introduced in a kit format composing of a 12 inch refrigerated pizza shell. yet fresh alternative to frozen pizza. convenient.

What happened? ‡ Toppings also were merchandized adjacent to the kit.49 . ‡ Toppings included pepperoni. ‡ Pizza kit was sold for $6. three cheese blend and Italian Sausage.19 ‡ Toppings were priced at 1.

.What happened? ‡ Product launched in selected cities.5 in 1992. ‡ Company faced disappointing results by not meeting any targets ‡ Sold 4 million units in Year 1 that amounted to $13 millions in sales. ‡ Marketing support amounted to $11 million in 1991 and $10.

‡ Company maneuvered with price promotions but failed in this aspect. ‡ All these ads also failed in terms of recall.What happened? ‡ Tried to improve the advertising themes by testing three more ads. ‡ Company had 60% spoilage on the toppings .

What happened? ‡ Abandoned the toppings ‡ Sold pepperoni and cheese kit and a cheese kit at $5. ‡ ³Pizza wars´ also hampered the profits .99 and $5.49 respectively. ‡ Company paid the price for relying on the pasta data that was in the initial stage.

What appened? Marketscan: Americans unger for a More omey Pizza WSJ June 1993 ‡ Kit sold for $5 ‡ Held 15% of the $170 mil-a-year market for refrigerated pizzas & pizza kits ‡ Kraft introduced Boboli Shells ‡ 1997 ± Nestlé sold Contadina to Del Monte ± Excluded from sale was line of refrigerated pasta & sauces ‡ Nestlé s changed name of refrigerated pasta and sauces to Buitoni .

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0 &0!'8 "  0 0 ' # # # ## # "  0  0  ' "" ! 0 0 ' #  ) 0!&0 ' #  ) 0!&0 ' #     £¥¤£  ) &0 #"  ) &0 #" 0 '  0 '  & 0 0 ' " #  0 0 ' # ## ## # " & 0 0' " # 00&'  ! )!0 & 0 '  # # " ) !00'  !) 0 0!'  # # )0  0 ' " "  #" &)  0 !0'  " #  ) 0 0 ' " " " Revenue Estimation for Nestle's Refrigerated Pizza Launch Option A: Pizza Kit & Toppings Option B: Pizza only Fi e ata Contadina U on-U Contadina U on-U a et nits ¦ £¥¤£ £¥¤£ ¦ £¥¤£    © ¨ ¢¡   otal Pi a o in s otal a et at Pi a o in s R v nue [$] "   !   #    #  !   "  & ! &  " "      otal etail a et otal Fa to a et F usiness e ui em ! ) '  !)' ' ( unit © 7 1 6 5 14 § © ¨ 3© 2 1 § © ¨ ¤ ¤ % $$ §  § © ¨ % $$ §  § Volume Estimation .

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