RSM 332 Marketing Research

Fall 2011 Thursday 1:00 pm - 3:00 pm WO 20 Professor: Mengze Shi

Project: TruEarth Healthy foods case

Chernenko Kirill 998581510

TruEarth it is the" strong player" company, offering healthy and gourmet whole grain products consisting of only highest-quality ingredients. After the huge success in making fresh and tasty pasta in 2006, TruEarth is planning to extend the product line introducing fresher than frozen and healthier than delivered pizza. Unfortunately, consumers have too many choices by powerful giants like Kraft and Nestle. The question is launching this Italian-American product into market or not. In the first place, we have to focus on 3 things - how favorable is the market (dynamics and volume) - how favorable is the product in market (demand and return) - how to launch it (competition and recommendations) People need healthy and tasty pizza, which will be easy to prepare and made of only high-quality ingredients (no dried spices and sweeteners). Therefore, the demand for healthy pizza will be growing in US together with popularity of diets and products targeting authenticity and quality. To predict the demand for a new TruEarth's product we have to make simple calculations. Table A. Whole wheat pizza Purchase Volume Estimate, Year 1 Trial Purchase intent (Pizza Survey) Definitely would buy % of "definites" who actually buy "Definite" purchases Probably would buy % of "Probabels" who actually buy "Probabels" purchase Trial Rate Target households Trial households(MM) Repeat purchase occasions Repeat purchases Total purchases Marketing Plan Adjustment 18% 80% 14.4% 43% 30% 12.9% Customers of Cucina Fresca Customer awareness Non-customers of Cucina Fresca Non-customer awareness Projected Customer Awareness ACV 11% 50% 89% 12% 11x0,5+89x0,12= 16.2% 40% (from table B) 27.3%x16.2%x40%= 1.8%(rounded)

12.9+14.4= Marketing27.3% Adjusted Trial Rate 58.8MM (from table B) 58.8x1.8 %=1.1(MM) 2.0 (from Table B) 2x0.49(excellent product) = 1 (1+1.1)x12.38(retail)=26MM

So, there is $26 million of revenue. As Eckstein estimated that 12million is needed to meet company's return requirements. Therefore profit will be $26MM -12MM = $14MM. Conclusion: launch the product as soon as possible before competitors! Unfortunately, this is only the prediction, assuming that customers will find the product excellent. What if the penetration will not be exactly 11%? TruErth's evaluation is the range between 5% and 15%. Let's show the link between 3 types of pizza's volume (Mediocre 21%, Average 37%, Excellent 49%) and 3 types of penetration (5%, 10% and 15%) 1st case. Cucina Fresca Pasta Customers 5%, Mediocre 21% Projected Customer Awareness MarketingAdjusted Trial Rate Trial households(MM) Repeat purchases 5x0,5+95x0,12= 13.9% 27.3%x13.9%x40%= 1.5%(rounded) 58.8x1.5 %=0.88(MM) 2x0.21(mediocre product) = 0.42 Total purchases (0.88+0.42)x12.38(r etail)= 16.1 MM This is the worst case scenario when the product is below average in quality and number of customers who is aware of TruEarth is only 5%. But still there is 4MM profit. 2nd case. Cucina Fresca Pasta Customers 5%, Average 37% Projected Customer Awareness MarketingAdjusted Trial Rate Trial households(MM) Repeat purchases 5x0,5+95x0,12= 13.9% 27.3%x13.9%x40%= 1.5%(rounded) 58.8x1.5 %=0.88(MM) 2x0.37(average product) = 0.74 Total purchases (0.88+0.74)x12.38(r etail)= 20 MM 3rd case. Cucina Fresca Pasta Customers 5%, Excellent 49% Projected Customer Awareness MarketingAdjusted Trial Rate Trial households(MM) 5x0,5+95x0,12= 13.9% 27.3%x13.9%x40%= 1.5%(rounded) 58.8x1.5 %=0.88(MM)

Repeat purchases Total purchases

2x0.49(excellent product) = 0.98 (0.88+0.98)x12.38(r etail)= 23 MM

4th case. Cucina Fresca Pasta Customers 10%, Mediocre 21% Projected Customer Awareness MarketingAdjusted Trial Rate Trial households(MM) Repeat purchases Total purchases 10x0,5+90x0,12= 15.8% 27.3%x15.8%x40%= 1.7%(rounded) 58.8x1.7 %=1(MM) 2x0.21(mediocre product) = 0.42 (1+0.42)x12.38(reta il)= 17.5 MM

5th case Cucina Fresca Pasta Customers 10%, Average 37% Projected Customer Awareness MarketingAdjusted Trial Rate Trial households(MM) Repeat purchases Total purchases 10x0,5+90x0,12= 15.8% 27.3%x15.8%x40%= 1.7%(rounded) 58.8x1.7 %=1(MM) 2x0.37(average product) = 0.74 (1+0.74)x12.38(reta il)= 21.5 MM

6th case Cucina Fresca Pasta Customers 10%, Excellent 49% Projected Customer Awareness MarketingAdjusted Trial Rate Trial households(MM) 10x0,5+90x0,12= 15.8% 27.3%x15.8%x40%= 1.7%(rounded) 58.8x1.7 %=1(MM)

Repeat purchases Total purchases

2x0.49(excellent product) = 0.98 (1+0.98)x12.38(reta il)= 24.5 MM

7th case. Cucina Fresca Pasta Customers 15%, Mediocre 21% Projected Customer Awareness MarketingAdjusted Trial Rate Trial households(MM) Repeat purchases Total purchases 15x0,5+85x0,12= 17.7% 27.3%x17.7%x40%= 1.93%(rounded) 58.8x1.93 %=1.13(MM) 2x0.21(mediocre product) = 0.42 (1.13+0.42)x12.38(r etail)= 19.2 MM

8th case Cucina Fresca Pasta Customers 15%, Average 37% Projected Customer Awareness MarketingAdjusted Trial Rate Trial households(MM) Repeat purchases Total purchases 15x0,5+85x0,12= 17.7% 27.3%x17.7%x40%= 1.93%(rounded) 58.8x1.93 %=1.13(MM) 2x0.37(average product) = 0.74 (1.13+0.74)x12.38(r etail)= 23.15 MM

9th case Cucina Fresca Pasta Customers 15%, Excellent 49% Projected Customer Awareness MarketingAdjusted Trial Rate 15x0,5+85x0,12= 17.7% 27.3%x17.7%x40%= 1.93%(rounded)

Trial households(MM) Repeat purchases

58.8x1.93 %=1.13(MM) 2x0.21(excellent product) = 0.98 Total purchases (1.13+0.98)x12.38(r etail)= 26.12 MM This case is the best but it requires best product and best prices. Nevertheless, in any case total revenue exceeds total cost, which means that the world must see healthy and tasty TruEarth pizza. To determine the consumer's point of view on whole grain pizza Truearth team conducted 300 mall intercept interviews comparing takeout, refrigerated and Truearth Pizza. No doubt that these product categories are slightly different from each other; in spite of this, interviewees generally consider pizza as easy-to-prepare and conveniently accessed product for the whole family. Past experience of consumers shows us that takeout pizza is most convenient and accessible, which gives it the competitive advantage. Moreover, takeout pizza earned the highest consumers' evaluation in freshness and variety choices. In terms of quality attributes, consumers rated the highest both takeout and TruEarth pizza because of high-quality ingredients. In addition, TruEarth pizza scored 9.1 out of 10 (even higher than takeout) for the healthy ingredients. This fact can be influenced buy the brand image of TruEarth, the company focused on food made of superior ingredients offering greater quality and authenticity. Exhibit 6 is showing that 17% of interviewed principal grocery shoppers would switch to TruEarth, if it were launched. Unfortunately, those customers who prefer to make pizza at home or order from restaurant are less likely to change their purchase behavior if TruEarth pizza is available on shelves. All things considered, to satisfy the needs of customers and increase the chances of success TruEarth has to concentrate on freshness, convenience and easy-to-prepare concept. Furthermore, to take and keep the competitive advantage over delivered, refrigerated and frozen pizzas TruEarth team should maintain mind-catching price*(see Table B) as "consumers have so many options we need to compete against" (Rose Carlton, the director of business development). However, before taking for credit the suggestions above TruEarth have to launch product first (before Rigazzi!). If TruEarth is first in market (3-6 months before Rigazzi), it will earn the competitive advantage, collecting the essential experience and getting into scale production with lowering prices in the future. Positioning product is also very important part. TruEarth has to say "No" to remorse and "Yes" to providing pleasure and satisfaction. Introducing "guilt-free gourmet pizza with healthy, whole wheat crust and high-quality ingredients" TruEarth will be unbeatable (Eckstein, brand manager)

*Table B. Recommendations in terms of quality and prices by competitors Quality/Prices by competitors' pizza Lower Quality Same Price Same Reduce the price Reduce the price

Lower Do not change price Do not change quality

Higher

Do not change price, Increase the variety of ingredients, Make more precise positioning

Higher Increase the quality, Make analysis of the prospects within the market Make a product of higher quality in the competitors' segment