Nestle Write Up | Nestlé | Pasta

REPORT ON NESTLE REFRIGERATED FOODS: CONTADINA PASTA & PIZZA

SUBMITTED BY: RICHA MAHECHA (SMBA10105) MANISHA DAS (SMBA10099) PANKHURI PRADHAN (SMBA10098)

founded by Henry Nestle in 1866.S market. NEW PRODUCT DEVELOPMENT PROCESS 1. growing to over $100 million in sales by 1990. The original business was based on milk and infant formula products for children. ice cream.A. Refine the idea into preliminary concept 2. CASE FACTS In 1987. NRFC. TIME LINE      1866 – Founded by Henry nestle 1985 – Nestle became major food force with its $3 billion purchase of Carnation company 1987 – Nestle decided to enter refrigerated food category. instant coffee.A is the largest food and nutrition company in the world. California. Founded and headquartered in Vevey. Switzerland. numerous other food products were added including chocolate. Concept screening / idea refinement a. market with Contadina Pasta and sauces. Purchased small New York based pasta company “Lambert‟s Pasta and Cheese” 1988 – Contadina fresh pasta and sauces were rolled out nationally in second half of 1988. Nestle originated in 1905 merger of the Anglo-Swiss Milk Company. positioning and target market section. In 1990. Product testing at a central location or in homes 4. Quantification of Volume a. S.A. The company has to decide whether the introducing of refrigerated pizza into the market is feasible or not. located in Glendale. was one of the world‟s largest food companies with sales of over $37 billion. The product had been very successful. was world‟s largest food company with sales over $37 billion. MRD conducted a survey b. In 1987 Nestle entered into refrigerated food market. culinary.A. 3. Idea Generation a.S market.S. mineral water and pet foods. Product Development a.HISTORY Nestle S. S. Diagnostic information on product design. In 1993. Bases I . 1993 – Nestle S. refrigerated and frozen food products. Company plans its product line into pizzas. Nestle entered U.. with sales with sales of $50 million in first year. the Nestle refrigerated food company contemplated the introduction of a refrigerated pizza product to the U. Over time. Nestle. Several market research studies and test have been conducted for the introduction of refrigerated pizza in U. Prototype product were developed b. was a wholly owned subsidiary of Nestle. Secondary research and focus group b.

Gourmet stores in New York city selling freshly made and imported cheese. Bases II line extension 5. Developed process which extended shelf life from usual 2-3 days to 40 days by a series of technical innovation. Test Market a. Using mall intercepts of 200 potential purchasers in three geographically dispersed cities. Nestle decided to launch refrigerated pasta and sauces. NRFC needed to identify a brand name for its product that would be accepted in all regions of the United States. General food and Kraft tried to replicate the same in US market but was unsuccessful due to distribution limitation. Bases II c.b. usage studies and household panel data. Creating brand awareness c. Refrigerated food product had been successful market in U. Stored at temperature of 33 – 40 Fahrenheit degree. Performance is tracked through awareness. A relatively undeveloped category in the United States in 1987. Extension was accompanied without impairing product quality. but it was pre-empted by Jell-O. Television advertising b.e fresh pasta and dry pasta. BRANDING In 1987. Convenience and perceived quality attract consumer to refrigerated food.K. pasta was available in two forms in the United States i. non-commodity refrigerated foods were a fixture in European grocery stores. Nestle refrigerated food found that Contadina fresh Classics was a strong candidate with 70% of respondents ranking it first or second among eight potential names. . Recommended when little capital investment is required b. Purchased at $ 56 million by Nestle. Nestle entered the refrigerated food category with pudding desert product. Purchase interest 7. Refrigerated foods require little planning and preparation. High quality manufacturing is required to ensure that the customer purchase a safe product. attitude. they have shorter shelf lives of 12 – 90 days. Carnation‟s Contadina brand seemed an ideal as it had an image of authentic Italian cooking. which allows rapid cooking or reheating by the consumer. Commercial Evaluation a. 38 day extension allowed for creation of feasible distribution system. Due to strong growth in Italian food segment. In the final outcome product range was branded “Contadina Fresh”. Introductory tracking a. REFRIGERATED FOOD: BACKGROUND Refrigerated food are kept cool but not frozen. NESTLE BUYS LAMBERT’S PASTA & CHEESES Lambert‟s pasta & cheese had been established in the early 1980‟s by a real estate developer. Perceived high risk in the product itself or its marketing 6. In developing a national pasta product line.

Superior : “A complete line of fresh pastas and sauces that are superior to any pasta or sauces you have tried before”  300 concept test were conducted on the basis of „key concept measures‟ „demographic population‟ and „key likes.MARKET POTENTIAL NRFC wanted to estimate first year trial volume for pasta and sauces. and understand the likely sales effects of alternate positioning.  NRFC wanted to estimate  1st year Trial volume for pasta and sauces  Simulate total year 1 sales volume  Understand the sales effects of alternate positioning  Bases I study was conducted  To assess the current level of awareness  To determine the usage of fresh pasta and fresh pasta sauces  To understand customer perception of three possible Contadina positioning statement POSITIONING STATEMENTS 1. dislikes & uniqueness‟  Superior was the favoured alternative EXHIBIT 4 MEASURE DEFINITELY WOULD BUY PROBABLY WOULD BUY TOP TWO BOX CONTADINA (N=301) 24% 51% 75% INDUSTRY MEDIAN 20% 41% 61% . Homemade : “ A complete line of fresh pastas and sauces with the taste and quality of authentic homemade recipes” 2. Pasta Dinner : “Fresh pasta dinner so good they will make a meat and potatoes man smile” 3. simulate total year1 sales volume.

EXHIBIT 8 PURCHASE INTENT DEFINITELY WOULD BUY PROBABLY WOULD BUY TOP TWO BOX HOMEMADE (N=97) PASTA DINNER (N=102) 19% SUPERIOR (N=102) INDUSTRY MEDIAN 27% 24% 20% 43% 70% 56% 75% 54% 78% 41% 61% VOLUME ESTMATE OF PASTA .

.  Moreover.  Stephen Cunliffe decided to build a single factory in Danville. BASES utilized a technique called PASS (Positioning Analysis and Segmentation Summary)  NRFC supplied BASES with 27 attribute statements which were drawn from qualitative research.S within 10 days.  Later a multivariate research technique called FACTOR ANALYSIS was used to reduce the 27 attributes to 3 major criteria. to roll out perishable product nationally from a single location requires a highly efficient distribution system. Virginia.(Refer exhibit 10) 1.REPEAT PURCHASE POSITIONING  To understand Brand positioning issues. Light meal/ slight dish (20%) MANUFACTURING AND DISTRIBUTION  Existing facilities were not top class so a considerable change was required. Ordinary main meal (41%) 2.  Product shelf life was 40 days  The customer and retailer demand delivery of the product with 30 days of remaining shelf life  Goal was to produce ship and deliver product throughout the U. Quality (39%) 3.

 NRFC supported its launch with  $7 million advertising campaign (85% television advertising &15% print media)  $5 million consumer promotion  $4 million trade promotions.  Brokers‟ organization was developed to gain a larger “share of sales time” because dollar values were high on the Contadina‟s products.  Became market leader.65/case to $0.  Cunliffe was concerned with “share of voice” that Contadina would receive from sales forces as they had limited experience in new refrigerated category.  The pasta line accounted for nearly 80% of the sales volume. CONTADINA LAUNCH  NRFC‟s main strategy was to capitalize on Lambert‟s major assets (high quality product recipes and packing technology) and distribute the first nationally branded refrigerated pasta and sauces products.38/case SALES  Traditionally.  12 Contadina sales managers managed 50 brokers who had 1200 sales people calling on food retailers. Truck were unloaded and crossed docked with other Nestle products Optimization of weight and volume carrying capacity of the trucks Reduction of distribution cost from $0.  It would be stocked in grocery store and each product is tagged with an expiry date.Requires 3 days to complete the consignment Distributed through trucks to 6 pooling locations. with $75 million in retail sales in 1988 and $150 million by 1990. sales by Carnation were handled by 700 person direct sales force.  Other option was to utilize outside brokers who had significant experience in perishable/ refrigerated foods.  NRFC decided to sell its products using a “Component” approach with pasta and sauces packaged separately and sold. DI GIORNO  Kraft‟s Di Giorno pasta and sauces entered the market in 1989  They had developed a product with 90 day shelf life .

49 $2. Bolognese 3.S  77.50 to $1.  PLACE  U. Strand pasta(linguine. Pesto $1.S market o Easy to prepare o Efficient distribution through brokers o Component approach Weakness o Shorter Shelf life Opportunity o Brand awareness o Market leaders Threats o Increasing competition o It is a market leading to a cash cows    .79 $2.99 $2. fettucine. agnolotti)  Sauce Variety. Alfredo 4.90  Di Giorno entry resulted in considerable growth in pasta category  Both the companies sales volume increased simultaneously  The first mover advantage in the new product helped NRFC to sustain the threat MARKETING MIX  Pasta Varieties.99 $2.  $4 million for trade promotions.79  PROMOTION  $7 million for advertising campaign (85% for television advertising and 15% in print media. Filled Pastas (ravioli. 1. and angel‟s hair) 2. tortellini..4M households which represent 89% of U. White clam 5.20 to $0. totelloni.49 $2.. 1. Plum tomato 2.80  Contadina responded with low value coupons ranging from $0.S households SWOT ANALYSIS  Strength o Good quality o Greater market share o Pioneer in the U.99 $1. To win a competitive battle against Kraft. Contadina sets a goal of maintaining a 2:1 share ratio nationally  Di Giorno entered the market with high value coupons ranging from $0.)  $5 million for consumer promotion.

CONSUMER BUYING BEHAVIOUR BCG MATRIX .

o In 1988. the kit product was consistent with NRFC component approach. refrigerated pre-assembled concept was infeasible from a production stand point.  Moreover. Additional topping $1.  Findings from the study indicated (Exhibit 13 & 14) –  Positive purchase intent for the pizza kit – 58%  Positive purchase intent for pre-assembled pizza – 52%  R&D found that the flavours of the sauces and toppings migrated into one another resulting in a poor quality product.  Hence.30. PRE-ASSEMBLED Available in 4 varieties. Price $6.  Hence it was feasible to launch pizza kit. . 2. NRFC develop two new concept 1.ANSOFF MATRIX LAUNCH OF PIZZA o NRFC decided to extend its product line into refrigerated pizza.60 ACCEPTANCE OF PIZZA KIT  MRD conducted preliminary concept test to assess market interest in its new offerings. Price $7.40. Size available 12”. PIZZA KIT: Crust packed together with separate packets of cheese and sauces. Size available was 12”.

PIZZA KIT CONCEPT  NRFC conducted another market research study on pizza product  Pizza Kit with topping sold separately (Pizza & Toppings)  Pizza Kit with no additional toppings sold separately (Pizza only)  It conducted Bases II Line Extension Study to analyze strength and weakness of both the concept BASE II LINE EXTENSION STUDY VOLUME ESTIMATE OF PIZZA ONLY .

REPEAT PURCHASE VOLUME ESTIMATE OF PIZZA & TOPPINGS .

cheese and sauce)  PROMOTION  Approximate .$18M PRICE $ 6.REPEAT PURCHASE MARKETING MIX  PRODUCT  Pizza and Toppings  Pizza kit with the option of Available toppings sold separately.  For Toppings  Pizza only  (crust.39 .39 $ 1.39 $6.

 Though the product is not yet been launched it is impossible to anticipate the reaction of the market. .5M target households SWOT ANALYSIS      Strength Good quality Large variety Convenient to prepare Established brand  Weakness  Present competitors  Poor quality of pre.S 95. PLACE U.      $ 9M in advertisement $ 5M in consumer promotion $ 4M in trade promotion.assembled pizza  Opportunity  Brand awareness  New source of income  Threats  Possibility that the competitors could launch the same product in the recent future.

 Out of 198 respondents for Pizza only. 116 were in favor of this concept. Attributes are: Soggy Crust  Product Variety  Freshness  Appropriate for special meals  Taste  There is slight difference between the two Contadina's offerings as more people are in favor of the Pizza kit as compared to Assembled Pizza. Contadina Pizza offering is favored more than the current frozen pizza in the market.  Out of 399 respondents for Pizza & Topping. EXHIBIT 15 % of Last Pizza Eating Occasions (n=60) Contadina Pizza Takeout Pizza Frozen Pizza from Supermarket Fresh Pizza from Supermarket Homemade Pizza 75% 16% 5% 4% % of Next 10 Pizza Eating Occasions (n=60) 28% 58% 9% 1% 4%  Future Pizza Kit sales would come from customers who prefer Takeout Pizza.  Large differences were found in some of the attributes of Takeout Pizza & Pizza Kit. 304 respondents were in favor of this concept. Frozen & Fresh Pizza from supermarket. .  The largest segment of customers comes from Takeout Pizza followed by Frozen Pizza from supermarket. 76 understood that Pizza comes with just sauce & cheese.  Both the concepts (Pizza Kit & Assembled Pizza) measure slightly behind the Takeout Pizza.  Among these 116 respondents. EXHIBIT 19 & 20  Bases II study was conducted to determine likes & dislikes of Pizza & Toppings and Pizza only.

$10 In the unfavorable category.  69% of respondents are in favor of repeat purchase of the product  In the Favorable Category.EXHIBIT 21  Purchase intent for Pizza & Topping – 76%  Purchase intent for Pizza Only – 58%  According to the Bases II Line extension study: 87% of Contadina Pasta Users are likely to purchase Contadina Pizza & Toppings.  34% believe that pizza should be quick & easy to prepare  33% believe that no improvements are needed  23% believe that the price should be lowered  In the Unfavorable Category.  Pasta Concept Test was bases on volume estimates within 25% accuracy range whereas the Pizza Concept Test involved a concept test in combination with a product taste test and was reliable within 20%. respondents are willing to pay between $4 . 21 WITH EXHIBIT 6  Pasta Concept Test was performed with BASES I approach whereas Pizza Concept Test was performed with BASES II approach. 20. COMPARISION OF EXHIBIT 19.  This shows that Pizza & Toppings is the popular choice.  Purchase intent for Pasta – 75%  Purchase intent for Pizza & Topping – 76%  Purchase intent for Pizza Only – 58%  Pizza only option did not have same luck as compared to Pizza & Topping. In the favorable category.  This shows that Nestle should launch Pizza & Toppings Concept. EXHIBIT 23  It shows how the product will be perceived by the respondents after its consumption.$7 Consumers are willing to pay more for refrigerated pizza rather than frozen pizza because of it convenience to prepare & freshness . respondents are willing to pay between $3 .  Only 70% of Contadina Pasta Users are likely to purchase Contadina Pizza only.  33% believe that it is too expensive & the price should be lowered  22% believe that the overall taste should be improved EXHIBIT 24     It shows the price which the consumers are willing to pay for 12” pizza.

Thorough market research and analysis. . PIZZA  All the steps were followed except Introductory Tracking  Decision to launch Pizza is Pending.  Acquisition of Lambert‟s Pasta & Cheese  Test Market could not be conducted because huge capital investment was required.  Timing of launch: Pasta – First Mover Advantage Pizza – critical to launch as Kraft‟s had already tested its Pizza product REASONS FOR SUCCESS OF PASTA         Acquisition of Lambert‟s Pasta & Cheese Extended shelf life from 2-3 days to 40 days. Effective and Efficient distribution system. “Contadina Fresh” as a brand name.COMPARISION OF PIZZA AND PASTA OPPORTUNITY SIMILARITIES  Focuses on growing trend of Ethnic Italian Food  Aim at Providing Convenience & Freshness  First mover advantage  No market leader  Targeting similar customer segment DIFFERENCES  Market Potential Varies  Major threat for Pasta – Dry Pasta (90%) whereas for Pizza – Fresh Pizza (88%)  Improving the existing product of LPC in case of Pasta whereas complete in-house development for Pizza. First mover advantage NEW PRODUCT DEVELOPMENT PROCESS  Well structured & Systematic  Flexible PASTA  All the steps were followed except Product Development & Test Market. Utilization of brokers for distribution of product. High Quality Positioning as a Light meal/Side Dish.

They should also consider volume projections sensitive to range between 5% .S  No Major Player in Refrigerated Pizza Market so NRFC can enjoy the First Mover Advantage. RECOMMENDATION  Lower the price (Exhibit 23)  Improve the overall taste (Exhibit 23)  Bases random sample study was conducted only in high potential market. .  Bases II study indicates purchase intent is 76%.25%.  Market Leader of Refrigerated Pasta Product in U.  Leverage existing manufacturing technologies and distribution capabilities to effectively get the product to market.  Use of Brokers for distribution of Pizza & Toppings product.  Launch the product in a specific area before launching it nationally to know the customer reaction towards the product.WHETHER TO LAUNCH PIZZA OR NOT??  Exceeds basic business requirement of $45 M.

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