Assignment Nestle Refrigerated Foods Case Analysis Muhzeen N

CASE ANALYSIS QUESTIONS
1. Using the BASES model described in Exhibit 9, forecast the

estimated demand (trial and repeat) for the two Pizza options
under consideration: Pizza and Topping and Pizza Only. Most of
the data needed for the forecasting exercise is available on
pages 15 34 (Exhibit 21).
Helpful Hints:
In Exhibit 21, there is a big difference between Contadina
users and non- users on the “top two box” scores. This will
obviously affect the forecast depending on what proportions
are used for Contadina users versus non- users in the
population.
On page 14 (2nd to last paragraph), Nestlé’s marketing
research department cautions us that parent brand usage
could vary from 5% to 25%. It would be worthwhile to judge
the sensitivity of the forecast under 5%, 15%, and 25% parent
brand penetration scenarios.
Ans: (A.)
PIZZA + Toppings PIZZA Only
Contadina Contadina
Contadina Contadina
CONCEPT PURCHASE INTENT NON- NON-
USERS USERS
USERS USERS
Sample size (Numbers) 181 318 78 155
Target Households (Mn) 95.5 22.92 72.58 22.92 72.58
USERS 24%
NON-USERS 76%
Research Results
Definitely will buy 30% 15% 22% 12%
Probably will buy 57% 59% 48% 42%
Adjusted Trial, as per industry
thumb rule
Definitely will buy 80% 24.0% 12.0% 17.6% 9.6%
Probably will buy 30% 17.1% 17.7% 14.4% 12.6%
Weighted total 41.1% 29.7% 32.0% 22.2%
Marketing plan adjustment (from
Table D)
ACV 58% 58% 58% 58%
Awareness 60% 30% 60% 30%
Trial rate after adjustments 14.3% 5.2% 11.1% 3.9%
Trial Household (Mn) 3.28 3.75 2.55 2.80
Unit /trial 1.2 1.2 1.1 1.1
Trial Volume (Mn) 3.93 4.50 2.81 3.08
REPEAT VOLUME (Refer:TableD)
Repeat Rate 22.0% 22.0% 22.0% 22.0%
Repeat Purchase Units 1.00 1.00 1.00 1.00
Repeat Purchase occasions 2.00 2.00 2.00 2.00
REPEAT VOLUME (Mn) units 1.44 1.65 1.12 1.23
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TOTAL ESTIMATED PIZZA
VOLUME(Mn) 5.38 6.15 3.93 4.31
TOPPINGS VOLUME ESTIMATE USERS Non-USERS

Trial Pizza Units (Mn) 3.93 4.50
Trial Rate=(0.5 x 1) + (0.25x5) 62.50% 62.50%
Trial Unit with Toppings 2.46 2.81
Transaction Size 1.50 1.50
TOTAL Trial Unit with Toppings 3.69 4.22
REPEAT VOLUME
Repeat Units 1.44 1.65
Trial Rate=(0.5 x 1) + (0.25x5) 62.50% 62.50%
Repeat Transaction Size 1.00 1.00
Repeat Topping units 0.90 1.03
Total Topping units (Trial +Repeat) 4.59 5.25
FEASIBILITY ANALYSIS PIZZA + Toppings PIZZA Only

TOTAL MARKET VOLUME Unit USERS Non-USERS USERS Non-USERS
Pizza Million 5.38 6.15 3.93 4.31
Toppings Million 4.59 5.25
TOTAL MARKET ($) Price/Unit

Pizza $6.39 $34.35 $39.32 $25.13 $27.57
Toppings $1.29 $5.92 $6.78
Dollar Sales (TOTAL) $40.27 $46.10 $25.13 $27.57
Total Sales (USERS+ Non USERS) $86.37 $52.70
EX Works-PRICE (A) = 66% $57.00 $34.78
NRFC Min. requirement (B) $45.00 $45.00
PROFIT (A)-(B) $12.00 ($10.22)
(B.)
PIZZA + TOPPINGS PIZZA ONLY
Contadina Contadina
Contadin Contadin
NON- NON-
a USERS a USERS
USERS USERS
Target Households (Mn) 95.5 4.78 90.73 4.78 90.73
USERS 5%
NON-USERS 95%
Research Results
thumb rule
Definite actually will buy 80% 24.0% 12.0% 17.6% 9.6%
Probable actually will buy 30% 17.1% 17.7% 14.4% 12.6%
Weighted total 41.1% 29.7% 32.0% 22.2%
Marketing plan
adjustment(TableD)
ACV 58% 58% 58% 58%
Awareness 60% 30% 60% 30%
Trial House hold(Mn) 0.68 4.69 0.53 3.50
Unit /trial 1.2 1.2 1.1 1.1
Trial Volume(Mn) 0.82 5.63 0.59 3.85
REPEAT VOLUME(Ref:TableD)
Repeat Rate 22.0% 22.0% 22.0% 22.0%
VOLUME(Mn) 1.12 7.69 0.82 5.39
TOPPINGS VOLUME ESTIMATE USERS Non-USERS

Trial Rate=(0.5 x 1) + (0.25x5) 62.50% 62.50%
REPEAT VOLUME
Trial Rate=(0.5 x 1) + (0.25x5) 62.50% 62.50%
Total Topping units (Trial
+Repeat) 0.96 6.57

TOTAL MARKET VOLUME Unit USERS Non-USERS USERS Non-USERS
Pizza Million 1.12 7.69 0.82 5.39

$7.1 $49.1 $5.2 $34.4
Pizza
$6.39 6 5 3 6
$1.2
Toppings
$1.29 3 $8.47
$8.3 $57.6 $5.2 $34.4
Dollar Sales (TOTAL)
9 3 3 6
Total Sales(USERS+ Non USERS) $66.01 $39.70
EX Works-COST (A) 66% $43.57 $26.20
PROFIT (A)-(B) ($1.43) ($18.80)
(C.)
Contadina Contadina
Contadina Contadina
NON- NON-
USERS USERS
USERS USERS
Target Households(Mn) 95.5 14.33 81.18 14.33 81.18
USERS 15%
NON USERS 85%
Research Results
thumb rule
Weighted total 41.1% 29.7% 32.0% 22.2%
Marketing plan adjustment
(Table D)
ACV 58% 58% 58% 58%
Awareness 60% 30% 60% 30%
Unit /trial 1.2 1.2 1.1 1.1
Trial Volume (Mn) 2.46 5.04 1.76 3.45
Repeat Rate 22.0% 22.0% 22.0% 22.0%
VOLUME(Mn) 3.36 6.88 2.46 4.83
Non-
TOPPINGS VOLUME ESTIMATE USERS
USERS
Trial Rate=(0.5 x 1) + (0.25x5) 62.50% 62.50%
REPEAT VOLUME
Trial Rate=(0.5 x 1) + (0.25x5) 62.50% 62.50%
+Repeat) 2.87 5.88

Non- Non-
TOTAL MARKET VOLUME
Unit USERS USERS USERS USERS
Pizza Million 3.36 6.88 2.46 4.83

$21.4 $43.9 $15.7 $30.8
Pizza
$6.39 7 8 0 3
Toppings $1.29 $3.70 $7.58
$25.1 $51.5 $15.7 $30.8
7 6 0 3
EX Works-COST (A) 66% $50.64 $30.71
PROFIT (A)-(B) $5.64 ($14.29)
(D.)
Contadina Contadina
Contadina Contadina
NON- NON-
USERS USERS
USERS USERS
Traget House holds(Mn) 95.5 23.88 71.63 23.88 71.63
USERS 25%
NON USERS 75%
Research Results
thumb rule
Weighted total 41.1% 29.7% 32.0% 22.2%
Marketing plan
adjustment(TableD)
ACV 58% 58% 58% 58%
Awareness 60% 30% 60% 30%
Unit /trial 1.2 1.2 1.1 1.1
Trial Volume(Mn) 4.10 4.44 2.93 3.04
Repeat Rate 22.0% 22.0% 22.0% 22.0%
VOLUME(Mn) 5.60 6.07 4.10 4.26
Non-
TOPPINGS VOLUME ESTIMATE USERS
USERS
Trial Rate=(0.5 x 1) + (0.25x5) 62.50% 62.50%
REPEAT VOLUME
Trial Rate=(0.5 x 1) + (0.25x5) 62.50% 62.50%
+Repeat) 4.78 5.18

Non- Non-
TOTAL MARKET VOLUME
Unit USERS USERS USERS USERS
Pizza Million 5.60 6.07 4.10 4.26

$35.7 $38.8 $26.1 $27.2
Pizza
$6.39 8 1 7 1
Toppings $1.29 $6.17 $6.69
$41.9 $45.4 $26.1 $27.2
4 9 7 1
EX Works-COST (A) 66% $57.71 $35.23
PROFIT (A)-(B) $12.71 ($9.77)
From (B.), (C.) & (D.)
Profit/Loss in Million $ at Different PIZZA + Toppings PIZZA Only
Scenarios of Parent Brand Penetration
5% Parent Brand Penetration ($1.43) ($18.80)
15% Parent Brand Penetration $5.64 ($14.29)
25% Parent Brand Penetration $12.71 ($9.77)
2. What can one learn from Exhibits 13, 14, and 15?
Exhibit 13, 14 and 15 compares and contrasts Contadina pizza- pizza with topping & pizza
only with the substitutes available in the market through relating user experience of the two
forms of Contadina pizzas, users of take-out pizza and frozen pizza. All three exhibits show
that take-out pizzas are most favourable among consumers. There is no change in market of
take-out or delivery pizzas as people like taste and content of these more than frozen pizzas
and figures show a better margin comparatively in taste. Nevertheless, Contadina pizzas will
gain popularity second to take-out pizzas.
3. How does the pizza concept test data (Exhibits 19, 20, and 21)
compare to the pasta concept test data (Exhibit 6)?
Ans: Exhibit 6 talks about the Pasta concept. Pasta in this case was an already existent
product, which acquired by Nestlé sought to reposition itself in the market . The pasta market
already had many competitors of its kind and in this case, Nestlé had a “building” ready with
them which had to be “knocked down”, its “foundation” used to create a completely new
brand. The concept test data clearly even in terms of its parameters like creating uniqueness
in the product, negligence of the pricing and more focus on improvement or change rather
than formation, establishes this fact. Looking at Exhibits 19, 20 and 21 - the predominant
focus on the pricing of the product, the features / characteristics of the pizza kit itself in terms
of taste and delight propositions to the customer, comparison with alternatives (emphasis on
ALTERNATIVES and not competitors, because none existed) clearly proves that Nestlé was
focusing on starting from scratch, creating a market by offering something that till then did
not exist
4. What is your reading of Exhibits 23 and 24 (include Exhibit 18 if you wish)?

Ans: From exhibit 23 it is shown that most people 33% show unfavorable interest in frozen
pizzas or do not prefer frozen pizza in home test use respondents.
Respondents have preferred fresh pizza, also the quantity of topping or size of pizza is
compromised that they require of higher quality.
Also, both favorable and unfavorable respondents have mentioned prices of pizza are too
high compared to what they are read to pay, so it is not competitively positioned.
5. In general, how would you compare the pizza opportunity to the

pasta opportunity? What are the similarities? Differences?
Ans: Pizza opportunity was greater to that of pasta market opportunity but
most of the people who would go for pasta would like refrigerated but not in
the case of pizza. But unlike pasta the crust or topping options available were
various in pizzas. The Contadina pizza-only buying probability was lower
compared to Contadina pastas & Contadina Pizza with toppings. Pasta
opportunity was used with proper positioning and concept testing. Also pricing
played a very important role for test users to become lower in the case of
pizzas. Pasta had an advantage of first in the market gain by Nestle whereas
pizzas were delayed and probably Kraft foods would flood in market at the
same time.
Comparing the concept test data for Contadina Pastas and Pizzas, ratings for
‘Likability’ and ‘Concept uniqueness’ is same. Respondents have rated
availability of variety, easiness & quickness in preparation, freshness, general
taste and flavor as the major attributes in refrigerated pasta and pizza. Pizza
and pasta shared a same parent brand so the consumer awareness was more or
less the same as that of pasta and they could relate to it.
6. Why was the pasta product so successful?

Ans: Pastas were already having high demand by consumers with 90% cooking
at home and 17% buying frozen pastas. So easy to cook pasta was a good
option. Nestle had leaped over the competition by acquiring Lambert’s which is
a local pasta and sauces production, thereby saving much time for research and
development. Also their nitrogen packaging helped improve shelf life of pastas
from two day to 40 days which consequently gave them time for production
and distribution.Unlike traditional sales workforce, brokers were used to sell
the product.
Pizza opportunity was greater to that of pasta market opportunity but most of
the people who would go for pasta would like refrigerated but not in the case of
pizza. But unlike pasta the crust or topping options available were various in
pizzas. The Contadina pizza-only buying probability was lower compared to
Contadina pastas & Contadina Pizza with toppings. Pasta opportunity was used
with proper positioning and concept testing. Also pricing played a very
important role for test users to become lower in the case of pizzas. Pasta had an
advantage of first in the market gain by Nestle whereas pizzas were delayed
and probably Kraft foods would flood in market at the same time.
At the time of product development itself they had positioned it well

7. How do you like Nestlé’s new product development process? For
pasta? For pizza?
Ans:New product development process of Nestle seems like a very useful
method in modern times as the tools used are proof of a systematic
organization.
For pasta, they had step by step gone into a 7 stage process of generation of
individual ideas/ brainstorming etc and refined it with ideas of highest potential
giving emphasis on design/ positioning/target market. In next stage, protos by
R&D team developed to get an idea of how the product tastes and done quality
tests. Quantification is done with BASES method of different accuracies and
test market is also created for the purpose of finding how many customers
would actually buy it. Study was done on the basis of market research where
pasta was in demand for consumers, therefore easy to cook pasta option was a
break-in point for Nestle. Also, they had tried their best to be first in market by
acquiring local brand which has already flourished instead of researching and
developing for 2 years in order to leap over competition.
For pizza, US market was huge with a $18.4 billion pizza market and was
already dominated by pizzerias which consisted 88% of all sales and most of
the consumers wanted to dine at home or take-away. Nestle had introduced a
concept test in which they tried two different types of pizzas – one with kit and
another pre-heat pizza in which they found pre-heated to be infeasible from a
production viewpoint and dropped further development after a concept test for
assessing market interest and around 400 interviews were conducted in malls
and looking at figures /results. This was done to understand the strength and
weaknesses of launching the product. But the BASES test was done on a
limited set of people and in order to draw conclusion and make a decision it
may or may not work out which was exactly what happened by having a
dilemma of which type of pizza had to be sold in the market.
Pizza had an advantage because the parent company Contadina, people were
aware and could relate to the brand.
8. Would you launch the pizza?
Ans: Yes, I would launch refrigerated pizza because from a U.S. consumer
perspective, the useage of Italian pasta & pizza is generally accountable on a
large population especially families ,ie, more than 80% consume pizza from
pizzerias. So there is an opportunity for refrigerated pizza to be started by
FMCG giants and become a competition on the long run. With a growing
refrigerated food product market we have to try new unique ideas which may
or may not click but take our chances nevertheless.
-With less manufacturing costs for pizza and topping as compared to the ones
readily prepared or available in pizzerias, it could attract consumers with size
and quantity produced comparatively.
-A tiny fraction of market share penetration could obtain very positive results
as the target audience is huge.
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CASE ANALYSIS QUESTIONS

1. Using the BASES model described in Exhibit 9, forecast the

TOPPINGS VOLUME ESTIMATE USERS Non-USERS

FEASIBILITY ANALYSIS PIZZA + Toppings PIZZA Only

TOTAL MARKET ($) Price/Unit

TOPPINGS VOLUME ESTIMATE USERS Non-USERS

FEASIBILITY ANALYSIS PIZZA + Toppings PIZZA Only

TOTAL MARKET ($) Price/Unit

FEASIBILITY ANALYSIS PIZZA + Toppings PIZZA Only

TOTAL MARKET ($) Price/Unit

FEASIBILITY ANALYSIS PIZZA + Toppings PIZZA Only

TOTAL MARKET ($) Price/Unit

From (B.), (C.) & (D.)

4. What is your reading of Exhibits 23 and 24 (include Exhibit 18 if you wish)?

5. In general, how would you compare the pizza opportunity to the

6. Why was the pasta product so successful?

At the time of product development itself they had positioned it well

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